• Yesterday's Dystopian Fiction Is Today's New World Order

  Submitted by 'Jeremiah Johnson', retired Green Beret, via SHTFPlan.com,

  Many of the things that are happening this very moment have direct parallels in literature of the past.  Whether it is an account such as the “Gulag Archipelago” by Solzhenitsyn or a work of “fiction” such as “1984” by George Orwell is irrelevant.  Elements of the history or the storyline (regarding the former and the latter works) are now becoming thoroughly inculcated into the fabric of modern reality.

  All of the measures taken by the Soviet Union to crush and control its population are beginning to manifest themselves today in the United States.  The courts are “stacked” to reflect the decision of the regime and not to rule by law.  The Military Industrial Complex contracts are still being shuffled, along with government policies that just happen to substantiate those business interests with kickbacks for all.  Laws serve political and corporate interests, and the lawmakers themselves do not represent any of their constituents: they are self-serving thieves, selling out their country and its populace for money and power.

  The police departments have (for all intents and purposes) been “federalized,” with budgets and marching orders becoming increasingly dependent upon federal and not local or state policies.  Sheriffs who follow their appointed roles as duly-elected law enforcement officials upholding Constitutional guidelines are being “phased out” of existence.  The changed demographics of “forced” insertions of illegal aliens and “refugees” into populations are rapidly negating the remainder of the two-party system to ensure that the Democratic party takes control ad infinitum.

  Orwell envisioned it.  His work is labeled a work of fiction, although all of the measures Oceania pursued are either currently in place in the United States or they’re being developed.  There is mass surveillance, increasing by the day.  The “internet of things,” as coined by former General David Petraeus, is almost primed to allow “telescreens” to watch our every movement, and a camera on every corner to back them up.  Orwell hated totalitarianism, having been exposed to it in his short but accomplished lifetime, and he knew man’s propensity was to move toward the enslavement of his fellow man.

  The development of new weapons by DARPA and the MIC are not toward a foreign enemy so much as the purpose of using them against the citizenry.  Drones, robots, nanotechnology, and every other “gizmo” able to be employed are all being drawn from behind the black curtain to unleash upon the citizens.  Also, the world’s situation is directly paralleling “1984” as three great spheres of influence…Europe, Asia, and North America…are being created by the powers that be.  Global governance in “thirds” is probably the NWO end state, as outlined by Orwell for a very significant reason: control with as much ethnic and cultural homogeneity as possible.

  It stands to reason that an Oriental (“Eastasia,” in “1984”) empire/totalitarian state would control the Oriental nations, rather than split it up between populations that are not as closely related linguistically and culturally.  We are seeing those shifts of influence into the divisions outlined by Orwell now, as the nations jockey for position and power.  Just as in “1984,” where it stated that even two of the super-states in alignment and concerted efforts could not together topple the third, perhaps the same is with our world.

  The shift is toward totalitarianism, and the populations have been (and are being) conditioned to accept, if not embrace, collectivist thought and socialism.  A good example was a film called “the Mutant Chronicles,” in which there were four great super-states that were organized not as nations but as corporations, that made war with one another over resources.  We see the blending of government and corporation today in virtually every facet of life, with the illusion of elections and the illusion of choice upheld to keep the population around the dullard state of consciousness.

  What will save us from this?  Will we be able to save ourselves from it?  The more and more one watches freedoms disappearing by the day, the more one must wonder if there is a way to stem the tide.  Orwell and Solzhenitsyn…visionary and historian…gave us blueprints to follow…checklists with which to use as frameworks of reference for what is befalling us daily.  Someday it may be that the brief period of freedom enjoyed by the American people may be categorized as a “work of fiction” in a future that may not even allow anyone to read it.

  

  

  

  

  

• (Poor) Judgment Matters – Hillary's "Inconsequential" Emails

  Authored by Ben Tanosborn,

  Indications are that the federal probe investigating the possible mishandling of classified materials on Hillary Clinton’s private email server while she served as Secretary of State is winding down.  And so far, neither the FBI nor the prosecutorial staff at the Justice Department has come up with information that point to Hillary or her aides knowingly, or negligently, discussing classified secrets over her non-secure email system… contrary to the hopes and “political prayers” of every soul in the Republican Party.

  Truth be said with logic and candor, Hillary faces little risk, if at all, of being prosecuted for using her private email system to conduct official business; and chances of her being found criminally liable approach the totally-unlikely.  To deny Hillary the brains to handle appropriately classified, or sensitive information that could be “classifiable,” borders on the absurd; accusations of this sort solely sprouting from the usual stinging sources of ultra-right talk radio… the likes of Russ Limbaugh, Glenn Beck et al.

  The lack of an indictment by the Justice Department, or even the lack of a more venial sin – the improper handling of some materials, will surely exonerate Hillary Clinton and put an end to the political controversy; but it does not clear her from a most important indictment of all: one where we, the governed citizens, accuse her of poor judgment; not just Republicans, but Democrats and Independents as well. 

  Hillary’s glass of very questionable judgment seems to have filled to the rim with bad political decisions going back to her support of Husband Bill’s poor decisions on international trade and criminal justice, cupped by her military hawkishness and consent to invade Iraq.  And, as US Secretary of State, a far-from-bright decision to use her private server to conduct government business.  Many would say that her allowable glass of bad judgment has spilled over; and with it, her qualifications to take the helm from Barack Obama.

  As inconsequential as the email issue might seem to most of us, judgment matters!

  And if judgment matters, the text of Hillary Clinton’s speeches should be critical to the Democratic Party faithful when making up their minds whether they would want her to be the party’s nominee.  The DNC’s complicity in failing to denounce the speeches’ secrecy is an affront to the truth, showing the machinations of dirty politics.         

  Damn, Hillary!  Just tell us what you said in those pearly speeches that you gave folks at Goldman Sachs.  Are you afraid that the text in such pricey speeches might give telltales of deceit?  Could the transcripts be so damaging as to throw your campaign in disarray, and give Bernie the upper hand?  And perhaps, just perhaps, deny you and Bill a second tenancy at the White House?

  We might suspect that the speeches only provided soothing assurances that Hillary’s future candidacy to the presidency, or her election, would not be detrimental to Wall Street’s interests, particularly those of Goldman Sachs.  What else can we deduce from the near $700,000 in emoluments given by a savvy investment firm!  It’s no secret to most that the Clintons, both Bill and Hillary, fit center-right in the political spectrum; that’s where they are, and that’s where they have been throughout their political careers.  Bernie Sanders pushing Hillary a short distance to the left, during the pre-nomination period, will not create a problem for her, or concern for Goldman Sachs.

  Ah!  But have Hillary and the establishment in the Democratic Party considered the possible future danger in keeping the text of these speeches hidden?  Wouldn’t it be a total catastrophe if Donald Trump was her Republican match in the general election?  Rest assured that all confidentiality in those speeches would cease, and he would make hay of her deceit; claiming her to be just another politician bought by money.

  Meantime Gentleman Bernie keeps giving Hillary Clinton a pass; first by declaring the email issue as inconsequential; now by not forcefully, yes forcefully, demanding full disclosure of her speeches to the audiences at Goldman Sachs. 

  As much as we like to claim democracy in the US, we constantly find ways to circumvent it.  Take the superdelegate issue in the Democratic Party:  In Washington, my home state, where we just had caucuses on Saturday with an overwhelming victory by Bernie Sanders over Hillary Clinton (73 percent to 27 percent), none of the 17 superdelegates are pledged to Bernie, while two key ones, Sen. Patty Murray and Sen. Maria Cantwell, continue pledged to Hillary Clinton.  Shouldn’t they be pledged to Bernie or at the very least stay uncommitted until the party’s convention?  A funny democracy, ours!

  

  

  

  

  

• This (Crashing) Trend Is Not Your Friend

  Despite Yellen's best efforts today to basically dismiss any and all data as irrelevant going forward in The Fed's decision-making process, we suspect all eyes (and algos) will be firmly glued to this week's payrolls' data. Will it be another record month for Obama to crow about? Will Mark Zandi do the "told you so dance" to all the trump supporters who seem less exuberant about the recovery? One look at this chart  – and the disastrous trend – and we suspect, sooner-rather-than-later, the fecal matter will be striking the rotating object in America…

  As Bloomberg notes, a growing gap is developing between corporate profits and job growth in the U.S.

  Company earnings, a key driver of business spending and employment, tumbled in the fourth quarter and history shows that when they retreat, the economy often follows.

  

  So we wonder just what kind of seasonal-adjustments are being used to ensure this gap remains. Notice the "gap" in 1999… that did not end well.

  BofAML's Michael Contopoulos adds that it is no surprise that falling corporate earnings is a leading indicator for economic recessions – when corporates struggle to grow their bottom lines, they are forced to source liquidity through either the capital markets or cost cutting methods. And when funding either becomes unavailable or too expensive, companies must scale back through capex and/or personnel reductions.

  Although a US recession is not a necessary precondition for a turn in the credit cycle, but matters only so much as its influence on the shape of the next wave of defaults, we still look closely at how macroeconomic factors could affect corporate health. And it becomes concerning to us that after a 2nd consecutive decline in year over year corporate earnings, coupled with a lack of worker productivity and higher wages, that soon the very rosy jobs numbers may begin to disappoint.

  With personal spending increasing by a paltry 0.1% for each of the past 3 months, we believe consumer spending habits are already more conservative than they should be given low gasoline prices and currently favorable employment statistics. Should jobs numbers begin to disappoint, in our opinion consumers would be quick to pull back and save more of their income.

  Even a marginally weaker spender could have a substantial impact on the most vulnerable companies, forcing these weakest links to liquidate, fire and default. The potential for this added labor slack could lead to a further pullback in consumer spending and produce stress within the next weakest links in the chain. This self-perpetuating cycle, should it continue, could create a rolling blackout as defaults migrate from one sector to the next. And while Energy and Materials are currently in the crosshairs, we could envision a number of sectors that could come into focus and prove unable to withstand the added stress of a weaker consumer.

  To this end, we believe more attention should be paid to the current fundamentals of US corporates and the vulnerability of what are now considered ‘healthy’ high yield sectors to a wave of defaults that has the potential to spread into all industries. Although technicals are currently keeping the market afloat, we are not buyers of the market at current levels and believe fundamentals will ultimately force spreads wider.

  

  

  

  

  

• Price Controls May Be On the Way

  Submitted by Paul-Martin Foss via The Mises Institute,

  If you thought negative interest rates were as bad as it could get with central banks, you might be in for a surprise. Central banks have been so spectacularly unsuccessful with their accommodative monetary policies that they are discussing pulling out all the stops to get the results they want. They fail to realize that the reason prices aren’t rising is because they really want and need to fall. Bad debts weren’t liquidated during the last financial crisis, the debtors were merely bailed out. Overpriced assets weren’t allowed to be reduced in price. Central banks pumped trillions of dollars into the economy to attempt to paper over the recession. Market forces want to drive prices down, while central banks attempt to prop them up. So what to do when central banks aren’t getting their way?

  Central bankers may very well recommend price controls in an attempt to “jolt the economy out of its doldrums.” Of course, economies don’t go into doldrums and they can’t be jolted out of them. Recessions are not something endemic to the economy but are rather the result of central bank monetary intervention. Because central banks refuse to acknowledge their culpability for causing recessions, their methods for responding to recessions end up being more of the same thing that caused them in the first place: monetary easing. And now that those methods are proving ineffective, more drastic measures might be on the way. Remember that the last time all-out wage and price controls were implemented in the United States was in the early 1970s, also a time of great monetary turmoil. In fact, the price controls were instituted by President Nixon at the same time as he closed the gold window in 1971.

  As Ludwig von Mises pointed out many decades ago, once you begin to institute price controls, you inevitably lead to socialism.

  It must add to the first decree concerning only the price of milk a second decree fixing the prices of the factors of production necessary for the production of milk at such a low rate that the marginal producers of milk will no longer suffer losses and will therefore abstain from restricting output. But then the same story repeats itself on a remoter plane. The supply of the factors of production required for the production of milk drops, and again the government is back where it started. If it does not want to admit defeat and to abstain from any meddling with prices, it must push further and fix the prices of those factors of production which are needed for the production of the factors necessary for the production of milk. Thus the government is forced to go further and further, fixing step by step the prices of all consumers’ goods and of all factors of production — both human, i.e., labor, and material — and to order every entrepreneur and every worker to continue work at these prices and wages.

  That is why no one should be surprised that the governments of Japan, Europe, and the United States might resort to price controls to try to achieve what monetary policy could not. It follows logically, after all, since central bankers are in the price-setting and price control game to begin with. The interest rates that central bankers target or set are themselves prices, prices of money being loaned overnight or of money being deposited with the central bank. The aim of targeting or setting those interest rates is to influence interest rates and prices in the broader economy. So if that limited price-fixing doesn’t work, governments will expand their efforts to fix even more prices. It may not come directly, at least at first, but rather through some sort of incentivization. Pressure may be brought to bear to raise wages, using tax policy as either a carrot or a stick. The aim and the effect, though, will be to move prices to where the government thinks they ought to be, not what the market can actually bear.

  If price controls are in fact enacted, it will make it all the more obvious that economic planning on the parts of central banks and governments must be firmly opposed. It will separate the wheat from the chaff, those who actually support economic freedom from those who are willing to rationalize central planning. Anyone who claims to stand for free markets, free trade, and limited government but who attempts to defend the existence or importance of the Federal Reserve or central banking is a liar. Either you support free markets and freedom of pricing or you support central bank price-fixing and creeping socialism. There is no third way or middle road — socialism and the free market are mutually incompatible. A little bit of socialism in the form of price-fixing is like a little bit of gangrene, if left unchecked it will eventually infect and kill the whole. Now that governments and central banks may endorse further price controls as a remedy, the monetary policy facade has been torn away to reveal the reality that it is just another tool that leads to intensified central planning. Will enough people rise to the occasion to oppose further transgressions against monetary and economic freedom, or will they shrug their shoulders as our society continues to slouch toward socialism?

  

  

  

  

  

• The Difference Between Capitalism & Communism (Explained To President Obama)

  As President Obama explained in his Townhall in Cuba…

  To make a broader point, so often in the past there’s been a sharp division between left and right, between capitalist and communist or socialist. And especially in the Americas, that’s been a big debate, right? Oh, you know, you’re a capitalist Yankee dog, and oh, you know, you’re some crazy communist that’s going to take away everybody’s property. And I mean, those are interesting intellectual arguments, but I think for your generation, you should be practical and just choose from what works. You don’t have to worry about whether it neatly fits into socialist theory or capitalist theory — you should just decide what works.

   

  And I said this to President Castro in Cuba. I said, look, you’ve made great progress in educating young people. Every child in Cuba gets a basic education — that’s a huge improvement from where it was. Medical care — the life expectancy of Cubans is equivalent to the United States, despite it being a very poor country, because they have access to health care. That’s a huge achievement. They should be congratulated. But you drive around Havana and you say this economy is not working. It looks like it did in the 1950s. And so you have to be practical in asking yourself how can you achieve the goals of equality and inclusion, but also recognize that the market system produces a lot of wealth and goods and services and innovation. And it also gives individuals freedom because they have initiative.

   

  And so you don’t have to be rigid in saying it’s either this or that, you can say — depending on the problem you’re trying to solve, depending on the social issues that you’re trying to address what works. And I think that what you’ll find is that the most successful societies, the most successful economies are ones that are rooted in a market-based system, but also recognize that a market does not work by itself. It has to have a social and moral and ethical and community basis, and there has to be inclusion. Otherwise it’s not stable.

   

  And it’s up to you — whether you’re in business or in academia or the nonprofit sector, whatever you’re doing — to create new forms that are adapted to the new conditions that we live in today.

  Investors.com's Michael Ramirez succinctly explains the difference…

  

   

  And we leave it to RedState.com to rage…

  When I first started listening I was appalled. Communism and capitalism are much more than “interesting intellectual arguments.” They are one facet of how a society views its people, subject versus citizen, and the role of the government, master of the people or servant of the people. Then I thought, maybe I’m being too critical. But as he finished I was truly horrified at what I’d heard.

   

  First, we need to knock away the undergrowth. Let’s ignore the idea that there is a “sharp division” between left and right. That isn’t true and I’m not sure who, other than Obama, believes that. Certainly no one who lived in Latin America in the 1950s and 60s would. And no, Cuba does not have life expectancy comparable to the United States. Infants who die of birth defects and suicides do not count in Cuban statistics. And, ultimately, no one really knows what Cuban life expectancy is because it is not transparent of outside observation.

   

  The real point here would be that fundamentally, Obama is a Marxist. As far as he is concerned the conflict between East and West from the end of World War II until the collapse of the Soviet empire was between competing economic arrangements. That was not the case. It was the conflict between the autonomy of the person and the autonomy of the state. No where is his argument more obviously fallacious than in Argentina which has suffered under differing varieties of Peronism, an amalgamation of socialist and capitalist impulses under the banner of Argentine superiority.

   

  Doing “what works,” absent any guiding principles is dangerous. As far as Obama is concerned, letting Mexican drug cartels buy weapons in the United States is okay because his objective was creating a set of facts that justified more restrictive gun laws. One could actually argue that he was using “capitalism”, that is the sale of firearms, to achieve a “socialist” aim, disarming the American people. This is the same logic that led to the involuntary sterilization of undesirable people in the United States (three generations of imbeciles is enough, after all) and the extermination of undesirables in Nazi Germany. The only difference between the two is the grandiosity of scale and concept. Both are based on “what works.” “What works” is a subsidiary question that government should look at. The primary questions are “what is right” and “what is least intrusive upon the rights of the citizens.”

   

  The scary idea that “inclusion and equality” are core govermental goals is evident in ObamaCare forcing nuns to be provided with contraceptive coverage and in the way the beliefs of religious people are not allowed to be taken outside the church.

   

  Obama is profoundly un-American. Not from the standpoint that he is not an American per se, but because he has consciously rejected the very founding principles of the nation. Life, liberty, and the pursuit of happiness have been sent to the ashcan and we are left with “what works.”

  

  

  

  

  

• MSNBC Host Admits Democratic Primary Rigged, While Station Simultaneously Rigs Coverage

  Submitted byMike Krieger via Liberty Blitzkrieg blog,

  While it might sound strange, a coronation of Hillary Clinton in the Democratic primary will mark the end of the party as we know it. There’s been a lot written about the “Sanders surge,” with much of it revolving around Hillary Clinton’s extreme personal weakness as a candidate. While this is indisputable, it’s also a convenient way for the status quo to exempt itself from fault and discount genuine grassroots anger. I’m of the view that Sanders’ support is more about people liking him than them disliking Hillary, particularly when it comes to registered Democrats. He’s not merely seen as the “least bad choice.” People really do like him.

   

  The Sanders appeal is twofold. He is seen as unusually honest and consistent for someone who’s held elected office for much of his life, plus he advocates a refreshingly anti-establishment view on core issues that matter to an increasing number of Americans. These include militarism, Wall Street bailouts, a two-tiered justice system, the prohibitive cost of college education, healthcare insecurity and a “rigged economy.” While Hillary is being forced to pay lip service to these issues, everybody knows she doesn’t mean a word of it. She means it less than Obama meant it in 2008, and Obama really didn’t mean it.

   

  – From the post: It’s Not Just the GOP – The Democratic Party is Also Imploding

  I just finished watching a surprisingly good and honest 14 minute segment on MSNBC’s Morning Joe which covered how the Democratic National Committee has been rigging the primary in favor of Hillary Clinton. Host Joe Scarborough even went so far as to admit the media’s complicity in the process with regard to superdelegates. He notes:

  “And I know the Republican party wishes they rigged the process as well as the Democratic party did right now, because they could rig it against Trump — but the Democratic party rigs their process so that these superdelegates, which by the way can move any direction they want, actually skew the process and the reporting so badly that the voters actually don’t have their say when it comes to voting.”

  This is a key issue that has been driving me up a wall lately. It is journalistic malpractice for media outlets to include superdelegates in the total tally when these Democratic operatives can switch their support at any point between now and the convention. As we learned in the post Did Hillary Clinton Really Win More New Hampshire Delegates Than Sanders Despite a Landslide Loss?:

  Q: From everything you’ve told me so far, I can’t understand why you’re calling Superdelegate votes “irrelevant.” It seems to me like they have the same voting power as a normal delegate, and this puts Sanders in a tremendous hole from the word “go.”

   

  A: Here’s why it doesn’t matter: Superdelegates have never decided a Democratic nomination. It would be insane, even by the corrupt standards of the Democratic National Committee, if a small group of party elites went against the will of the people to choose the presidential nominee.

   

  This has already been an incredibly tense election, and Sanders voters are already expressing their unwillingness to vote for Clinton in the general election. When you look at the astounding numbers from Iowa and New Hampshire, where more than 80 percent of young voters have chosen Sanders over Clinton, regardless of gender, it’s clear that Clinton already finds herself in a very tenuous position for the general election. It will be tough to motivate young supporters, but any hint that Bernie was screwed by the establishment will result in total abandonment.

   

  Democrats win when turnout is high, and if the DNC decides to go against the will of the people and force Clinton down the electorate’s throat, they’d be committing political suicide.

   

  The important thing to know here is that Superdelegates are merely pledged to a candidate. We know who they support because they’ve stated it publicly, or been asked by journalists. They are not committed, and can change at any time. If Bernie Sanders wins the popular vote, he will be the nominee. End of story.

  I completely agree with this assessment, which is why the media plays the key role in rigging this thing for Hillary Clinton. For example, consider the following “political reporting” published by Bloomberg yesterday: 

  Though Sanders picked up 55 delegates Saturday to Clinton’s 20, she still holds a commanding lead with 1,712 delegates of the 2,383 needed for a first-ballot nomination at the party’s national convention at Philadelphia in July. That includes 469 superdelegates—Democratic office-holders and party officials who aren’t bound by results from primaries and caucuses. Sanders has 1,004 total delegates.

  The truth is she doesn’t actually “have” those superdelegates, and if Sanders wins the delegates people actually vote for, he’ll probably get the nomination. As such, the media invents a number that isn’t actually real, and definitely not set in stone, to demoralize Sanders supporters and make them think the gap is too large to overcome. It’s absolutely disgusting.

  So given that Joe Scarborough alluded to this trick during his segment, you’d think the person in charge of graphics at MSNBC wouldn’t be so shameless. But you’d be wrong. This is how the station portrayed the race on several occasions during the segment:

  

  Here’s another example:

  

  Incredibly, the only graphic shown during the segment that even alluded to the fact that these numbers are inflated by superdelegates is the following:

  

  While better, the above still represents a completely dishonest portrayal of the race. This is the right way to do it, from the New York Times:

  

  If anything, superdelegates should be mentioned as a footnote only. Anything else represents a total lack of ethics, integrity and highlights why the public has nothing but derision for the American mainstream media.

  The clip is still worth watching.

  

  

  

  

• Japanese Industrial Production Crashes Most Since 2011 Tsunami

  While we are sure this will not deter Japanese officialdom from declaring that QQE and NIRP is working and that the deflation-mindset is being beaten, the fact is that when February’s 6.2% collapse in Japanese industrial production is compared to the devastatingly poor plunge aftwer March 2011’s quake, tsusnami, and nuclear ‘event’, something has gone disastrously wrong in Japan.

  Across every sub-sector, it was a total disaster…

  

   

  Find the silver-lining in that – we dare you!

  

  

  

  

  

• Fitch Downgrades Chicago After "Worst Possible Outcome" In State Supreme Court Pension Reform Bid

  Last week, Rahm Emanuel got some bad news. The Illinois Supreme Court agreed with Cook County judge Rita Novak’s ruling that the Chicago mayor’s scheme to put worker pension plans on a sustainable path was unconstitutional.

  “These modifications to pension benefits unquestionably diminish the value of the retirement annuities the members of (the city workers and laborers funds) were promised when they joined the pension system,” the high court wrote in its opinion. “Accordingly, based on the plain language of the act, these annuity reducing provisions contravene the pension protection clause’s absolute prohibition against diminishment of pension benefits, and exceed the General Assembly’s authority.”

  To be sure, the ruling didn’t come as a surprise. Indeed, it would have been next to impossible for the court to decide otherwise, given that the justices had effectively ruled on the exact same set of issues last May. As judge Novak put it in her opinion (delivered last summer), “the principle [that public pensions shall not be diminished or impaired] is particularly compelling where the Supreme Court’s decision is so recent, deals with such closely parallel issues and provides crystal-clear direction on the proper interpretation of the law.”

  That “crystal-clear direction” makes it all but impossible for officials to implement reform measures that will help ensure the city’s pension system doesn’t go belly up in the short span of 10 years. As we noted last week, the good news for taxpayers is that they’ll be off the hook in the short-term as money earmarked to sweeten the deal for pensions that went along with the reform plan will no longer be needed. “The city faces a short-term benefit of about $89 million that’s currently in escrow that can be used to help other areas of the budget,” Civic Federation President Laurence Msall said, before warning that “it will be a very hollow victory for the beneficiaries.” That’s because over the long haul, this is a disaster. “The ruling eases some immediate demands as the overturned law had stepped up the city’s required contributions,” Bloomberg wrote on Monday afternoon. “Without the restructuring, the unfunded liabilities of the municipal and laborers funds will climb by $900 million a year, making them insolvent by 2026 and 2029.”

  Right. Which means that unless city officials can come up with alternative ways to fill the holes, pensions will be more than “diminished and impaired” – they’ll disappear altogether like a Chinese short seller after a market rout.

  

  But the inviolable nature of pension benefits means that no matter how certain insolvency is, the court will never sanction a plan that seeks to alter the “implicit contract” between public sector employees and state and local governments.

  Needless to say, none of the above bodes well for the city’s credit rating.

  Moody’s decided to get out ahead of things last year when, on the heels of the Illinois Supreme Court’s ruling regarding a reform bid for state pensions, the ratings agency cut Chicago to junk. On Monday, Fitch cut the city by two notches to BBB- the lowest investment grade rating. “Last week’s Illinois Supreme Court ruling striking down pension reform legislation for two of the city of Chicago’s four pension plans was among the worst of the possible outcomes for the city’s credit quality,” Fitch said. “Not only did it strike down the pension reform legislation in its entirety, but it made clear that the city bears responsibility to fund the promised pension benefits, even if the pension funds become insolvent.” And make no mistake, they will become insolvent.

  

  Fitch’s decision affects nearly $10 billion in GO debt and nearly a half billion in sales tax revenue obligations.

  For their part, Moody’s calls the ruling “a credit negative setback.”

  “The ruling significantly limits the city’s ability to curb its $20 billion pension shortfall by restructuring benefits,” Moody’s said on Tuesday, before noting that it “expects Chicago to find an alternate plan to address unfunded liabilities” and any delay in doing so will “likely weaken” the city’s credit profile.

  In other words, Emanuel needs to figure out a way to address the underfunded liabilities and he needs to do it fast.

  The problem: there are no good options. Emanuel just raised property taxes (by a record amount no less) and the city has already borrowed $220 million this year. 

  It may be about time to get on the phone with Detroit and ask for pointers on how to efficiently navigate the bankruptcy process.

  *  *  *

  From Fitch

  Fitch Ratings has downgraded to ‘BBB-‘ from ‘BBB+’ the ratings on the following Chicago, Illinois obligations:

  –$9.8 billion unlimited tax general obligation (ULTGO) bonds;

  –$486 million sales tax revenue bonds.

  The Rating Outlook is Negative.

  SECURITY

  The ULTGO bonds are payable from the city’s full faith and credit and its ad valorem tax, without limitation as to rate or amount.

  The sales tax bonds have a first lien on the city’s 1.25% home rule sales and use tax and the city’s local share of state-distributed 6.25% sales and use tax. Additionally, there is a springing debt service reserve, funded over a 12-month period that would be triggered if coverage fell below 2.5x.

  KEY RATING DRIVERS

  PENSION RULING HEIGHTENS PRESSURE: Fitch believes last week’s Illinois Supreme Court ruling striking down pension reform legislation for two of the city of Chicago’s four pension plans was among the worst of the possible outcomes for the city’s credit quality. Not only did it strike down the pension reform legislation in its entirety, but it made clear that the city bears responsibility to fund the promised pension benefits, even if the pension funds become insolvent.

  CITY STRATEGY ANTICIPATED: The city expects to present a strategy to address the increased burden resulting from the ruling in the next several weeks. Given the lack of flexibility to alter the liability, Fitch believes the plan must rely on meaningful use of revenue and expenditure controls to meet much higher annual payments.

  UNDERLYING FUNDAMENTALS REMAIN SOUND: The ‘BBB-‘ rating recognizes the city’s role as an economic hub for the Midwestern region of the United States with a highly educated workforce and improving employment trends. Aside from its pension funding issues, Chicago’s financial profile has markedly improved in recent years, although full structural balance remains a challenge. The city’s independent legal authority to raise revenues remains a key credit strength.

  RATING SENSITIVITIES

  PATH TO PLAN SOLVENCY: The rating could stabilize at ‘BBB-‘ if the city presents a realistic plan that puts the pension funds on an affordable path toward solvency. The lack of such a plan would likely result in a downgrade as it would raise the risk that plan assets will be depleted and pension benefit payments would be made on a paygo basis, severely impairing financial flexibility.

  RATING CAPS: The ULTGO rating serves as a ceiling to the sales tax rating. A change of the ULTGO rating, therefore, would result in a change to the sales tax rating.

  CREDIT PROFILE

  LONGER-TERM LIABILITIES A CHIEF CONCERN

  The city continues to face credit challenges related to critically-underfunded pension obligations and rising associated costs. The Outlook for the city’s credit quality cannot be considered stable until such challenges are met in a sustainable fashion. Since last week’s ruling appears to eliminate the option of reducing the liability, the city will need to rely on its ability to increase revenues and control spending. Fitch will evaluate the direction of the rating and Outlook as their level of ability to do so becomes more apparent.

  The weight of the city’s extremely large unfunded pension liability is compounded by the high (8.7% of market value) debt burden, which is the product of substantial borrowing by the city as well as overlapping jurisdictions. Many of these overlapping governments also maintain underfunded pensions, and Fitch remains concerned that the funding requirements for all of these long-term liabilities will pressure the resource base in the coming years.

  The city maintains four single-employer defined benefit pension plans, all of which are poorly funded due to a statutory funding formula which has fallen far short of actuarial requirements. In fiscal 2014, the combined actual pension contribution amounted to just a quarter of the actuarially determined requirement. The combined unfunded liability for all four plans is reported at approximately $20 billion, yielding a very low funded ratio of 34% or an even lower estimated 32% when adjusted by Fitch to reflect a 7% rate of return assumption.

  PENSION REFORM CHALLENGE DECISION

  Last week’s court ruling struck down pension reform legislation covering two of the city’s four pension plans (Municipal and Laborers). The legislation included some changes to the benefit structure that reduce the liability, as well as a multi-year ramp up in contributions.

  The city contended its reform would preserve and protect benefits, rather than diminishing or impairing them. The basis for this contention was that prior to the pension reform legislation, under Illinois statute the city was not legally responsible for the unfunded liability of the Municipal and Laborers’ pension funds.

  The ruling struck down the benefit changes and confirmed the city’s responsibility for providing promised benefits. If the city does not implement a plan to increase funding, those funds face depletion in 10-13 years. The Municipal plan is the largest of the city’s four pension plans.

  POLICE AND FIRE PLANS REQUIRE INCREASED PAYMENTS

  The Police and Fire pension plans also faced increased funding requirements. The existing formula requires a contribution that would be sufficient to bring both systems to a 90% funding level by 2040. The state legislature passed a bill that would change the amortization period to 40 years and allow for a ramp up period to the 90% actuarially based funding level in 2020.

  Those two changes are estimated to lessen the increase in the first year’s (2016) payment from $550 million to $330 million. The legislature has not sent the bill to the governor for his signature. Once the legislature sends the bill to the governor, if not signed, it would become law 60 days. The city has arranged to fund the full, higher contribution for 2016, using short-term borrowing proceeds to fund the difference.

  PENSION CHALLENGES OVERSHADOW IMPROVED FINANCIAL PERFORMANCE

  Management has made significant progress toward matching ongoing revenues with non-pension annual expenditures. Fitch will not consider the city’s financial operations to be structurally balanced in the absence of a sustainable, actuarially-based pension funding structure. Successful execution of the city’s plan toward financially sustainable practices would be considered a positive rating factor. Remaining plan elements include the elimination of scoop-and-toss refundings by 2019, the use of current funds to pay legal settlements or judgments, and growth of the ‘rainy day fund.’

  The city ended the practice of appropriating reserves beginning with fiscal 2015. The $3.5 billion fiscal 2015 general fund budget was balanced with a reduced but still significant amount of one-time measures, including scoop-and-toss refunding. The city expects to end fiscal 2015 on budget, with no use of fund balance anticipated.

  The $3.6 billion fiscal 2016 general fund budget closed the previously identified budget gap of $232.6 million through a variety of recurring and one-time measures and no appropriation of general fund balance. Fitch believes the budget target is achievable given the city’s recent history of budgetary adherence. Despite the progress made, the city’s budget still requires some non-recurring measures for balance, which is concerning several years into an economic recovery.

  REVENUE CONTROL AND RESERVES KEY

  Fitch views the city’s home rule status as a credit strength, fostering revenue independence and flexibility. The general fund derives support from utility taxes, state sales taxes, transaction taxes, and recreation taxes among others. The general fund does not rely upon property taxes for operations, as they are earmarked for pensions, library expenses and debt service.

  The audited fiscal 2014 unrestricted general fund balance dropped to 3.6% from 4.6% of spending a year prior. Fitch views the approximately $626 million, equivalent to 19.4% of fiscal 2014 general fund spending, in the service concession and reserve fund as an important element of financial flexibility. A draw on reserves would signal an increasing reliance on non-recurring measures and could trigger a rating downgrade.

  

  

  

  

  

• You Probably Want To Go Long Oil Tomorrow (Video)

  By EconMatters

  

  Strong API Report for this time of year, and Equities about to break out means short covering ahead for oil bears. Remember this is quarter end window dressing week as well! Expect some short covering in Oil ahead of the EIA Report on Wednesday.

  

  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle  

  

  

  

  

• Why We Have A Wage-Inequality Problem

  Submitted by Gail Tverberg via Our Finite World blog,

  Wage inequality is a topic in elections around the world. What can be done to provide more income for those without jobs, and those with low wages?

  Wage inequality is really a sign of a deeper problem; basically it reflects an economic system that is not growing rapidly enough to satisfy everyone. In a finite world, it is easy for an economy to grow rapidly at first. In the early days, there are enough resources, such as land, fresh water, and metals, for each person to get a reasonable-sized amount. Each would-be farmer can obtain as much land as he thinks he can work with; fresh water is readily available virtually for free; and goods made with metals, such as cars, are not expensive. There are many jobs available, and wages for most people are fairly similar.

  As population grows, and as resources degrade, the situation changes. It is still possible to grow enough food, but it takes large farms, with expensive equipment (but very few actual workers) to produce that food. It is possible to produce enough water, but it takes high-tech equipment and a handful of workers who know how to use the high-tech equipment. Metals suddenly need to be lighter and stronger and have other characteristics for the high tech industry, thus requiring more advanced products. International trade becomes more important to be able to get the correct mix of materials for the advanced products needed to operate the high-tech economy.

  With these changes, the economic system that previously provided many jobs for those with limited training (often providing on-the-job training, if necessary) gradually became a system that provides a relatively small number of high-paying jobs, together with many low-paying jobs. In the United States, the change started happening in 1981, and has gotten worse recently.

  

  Figure 1. Chart comparing income gains by the top 10% to those of the bottom 90%, by economist Emmanuel Saez. Based on an analysis IRS data; published in Forbes.

  What Happens When An Economy Doesn’t Grow Rapidly Enough?

  If an economy is growing rapidly enough, it is easy for everyone to get close to an adequate amount. The way I think of the problem is that as economic growth slows, the “overhead” grows disproportionately, taking an ever-larger share of the goods and services the economy produces. The ordinary worker (non-supervisory worker, without advanced degrees) tends to get left out. Figure 2 is my representation of the problem, if the current pattern continues into the future.

  

  Figure 2. Author’s depiction of changes to workers share of output of economy, if costs keep rising for other portions of the economy. (Chart is only intended to illustrate the problem; it is not based on a study of the relative amounts involved.)

  The reason for the workers’ declining share of the total is that we live in a finite world. We are using renewable resources faster than they replenish and continue to use non-renewable resources. The workarounds to fix these problems take an increasing share of the total output of the economy, leaving less for what I have called “ordinary workers.” The problems we encounter include the following:

  • Pollution control. Pollution sinks are already full. Continuing to use non-renewable resources (including burning fossil fuels) adds increased pollution. Workarounds have costs, and these take an increasing share of the output of the economy.
  • Energy used in energy production. When we started extracting energy products, the cheapest, easiest-to-extract energy products were chosen first. The energy products that are left are higher-cost to extract, and thus require a larger share of the goods the economy produces for extraction.
  • Water, metals, and soil workarounds. These suffer from deteriorating quantity and quality, leading to the need for workarounds such as desalination plants, deeper mines, and more irrigated land. All of these take an increasingly large share of the output of the economy.
  • Interest and dividends. Capital goods tend to be purchased through debt or sales of stock. Either way, interest payments and dividends must be made, leaving less for workers.
  • Increasing hierarchy. Companies need to be larger in size to purchase and manage all of the capital goods needed to work around shortages. High pay for supervisors reduces funds available to pay lower-ranking employees.
  • Government funding and pensions. Government programs grow in size in good times, but are hard to cut back in hard times. Pensions, both government and private, are a particular problem because the number of elderly people tends to grow.

  It should be no surprise that this type of continuing pattern of eroding wages for ordinary workers leads to great instability. If nothing else, workers become increasingly disillusioned and want to change or overthrow the government.

  It might be noted that globalization also plays a role in this shift toward lower wages for ordinary workers. Part of the reason for globalization is simply to work around the problems listed above. For example, if pollution becomes more of a problem, globalization allows pollution to be shifted to countries that do not try to mitigate the problem. Globalization also allows businesses to work around rising the rising cost of oil production; production can be shifted to countries that instead emphasized coal in their energy mix, with much lower energy used in energy production. With increased globalization, people who are primarily selling the value of their own labor find that wages do not keep up with the rising cost of living.

  Studies of Previous Economies that Experienced Declining Wages of Ordinary Workers

  Researchers Peter Turchin and Surgey Nefedov analyzed eight civilizations that collapsed in detail, and recorded their findings in the book Secular Cycles. According to them, the typical economic growth pattern of civilizations that collapsed was similar to Figure 3, below. Before the civilizations began to collapse (Crisis Stage), they hit a period of Stagflation. During that period of Stagflation, wages of ordinary workers tended to fall. Eventually these lower wages led to the downfall of the system.

  

  Figure 3. Shape of typical Secular Cycle, based on work of Peter Turchin and Sergey Nefedov in Secular Cycles. Chart by Gail Tverberg.

  In many instances, a growth cycle started when a group of individuals discovered a way that they could grow more food for their group. Perhaps they cleared trees from a large plot of land so that they could grow more food, or they found a way to irrigate an area that was dry, again leading to sufficient food for more people. A modern analogy would be discovering how to use fossil fuels to grow more food, thus allowing population to rise.

  At first, population grew rapidly, and incomes tended to grow as  well, as the size of the group expanded to the carrying capacity of the improved land. Once the economy got close to the carrying capacity of the land, a period of Stagflation took place. There no longer was room for more farmers, unless plots of land were subdivided. Would-be farmers were forced to take lower-paying service jobs, or to become farmers’ helpers. In this changing world, debt levels rose, and food prices spiked.

  To try to solve the many issues that arose, there was a need for more elite workers–what we today would call managers and high-level government officials. In some cases, a decision would be made to expand the army, in order to try to invade other countries to obtain more land to solve the problem of inadequate resources for a growing population. All of these changes led to a higher needed tax level and more high-level managers.

  What tended to bring the system down was the growing wage inequality and the resulting low wages for ordinary workers. Governments needed ever-higher taxes to pay for their expanding services, but they had difficulty collecting sufficient tax revenue. If they raised taxes to an adequate level, workers found themselves without sufficient money for food. In their weakened state, workers became subject to epidemics. Governments with inadequate tax revenue tended to collapse.

  Sometimes, rather than collapse, wars were fought. If the wars were successful, the resource shortage that ultimately led to low wages of workers could be addressed. If not, the end of the group might come through military defeat.

  Today’s Fundamental Problem: The World Economy Can No Longer Grow Quickly

  Because of our depleted resources and because of the world’s growing population, the only the way the world economy can now grow is in a strange way that assigns more and more output to various parts of “overhead” (Figure 2), leaving less for workers and for unemployed individuals who want to be workers.

  Automation looks like it would be a solution since it can produce a large amount of goods, cheaply. It doesn’t really work, however, because it doesn’t provide enough employees who can purchase the output of the manufacturing system, so that demand and supply can stay in balance. In theory, companies that automate their operations could be taxed at a very high rate, so that governments could pay would-be workers, but this doesn’t work either. Companies have a choice regarding which country they operate in. If a tax is added, companies can simply move to a lower-tax rate jurisdiction, where no tax is required for automation.

  The world is, in effect, reaching the end of the Stagflation period on Figure 3, and approaching the Crisis period on Figure 3. The catch is that the Crisis period is likely to be shorter and steeper than illustrated on Figure 3, because we live in a much more interconnected world, with more dependence on debt and world trade than in the past. Once the interconnected world economic system starts to fail, we are likely to see a rapid drop in the total amount of goods and services produced, worldwide. This will produce an even worse distribution problem–how does everyone get enough?

  The low oil, natural gas, and coal prices we are now seeing may very well be the catalyst that brings the economy to the “Crisis Period” or collapse. Unless there is a rapid increase in prices, companies will cut back on fossil fuel production, as soon as 2016. With less fossil fuel production, the total quantity of goods and services (in other words, GDP) will drop. Most economists do not understand that there is a physics reason for this problem. The quantity of energy consumed needs to keep rising, or world GDP will decline. Technology gains and energy efficiency improvements provide some uplift to GDP growth, but this generally averages less than 1% per year.

  

  Figure 4. World GDP growth compared to world energy consumption growth for selected time periods since 1820. World real GDP trends for 1975 to present are based on USDA real GDP data in 2010$ for 1975 and subsequent. (Estimated by author for 2015.) GDP estimates for prior to 1975 are based on Maddison project updates as of 2013. Growth in the use of energy products is based on a combination of data from Appendix A data from Vaclav Smil’s Energy Transitions: History, Requirements and Prospects together with BP Statistical Review of World Energy 2015 for 1965 and subsequent.

  Are There Political Strategies to Solve Today’s Wage Inequality Problem?

  Unfortunately, the answer is probably, “No.” While some strategies look like they might have promise, they risk the possibility of pushing the economy further toward financial collapse, or toward war, or toward a major reduction in international trade. Any of these outcomes could eventually bring down the system. There also doesn’t seem to be much time left.

  Our basic problem is that the world economy is growing so slowly that the ordinary workers at the bottom of Figure 2 find themselves with less than an adequate quantity of goods and services. This problem seems to be getting worse rather than better, over time, making the problem a political issue.

  These are a few strategies that have been mentioned for fixing the problem:

  1. Provide a basic income to all citizens. The intent of this strategy is to try to capture a larger share of the world’s goods and services by printing money (or borrowing money), This money would hopefully allow citizens to purchase a larger share of the goods and services available on the world market. If the pool of goods and services is pretty much fixed in total, more goods and services purchased by one country would mean fewer goods and services purchased by other citizens of other countries. I would expect that this strategy would not really work, because of changing currency relativities: the level of the currency of the country issuing the checks would tend to fall relative to the currencies of other countries. The basic problem is that it is possible to print currency, but not goods and services. There is also a possibility that printing checks for everyone will encourage less work on the part of citizens. If citizens do less work, the country as a whole will produce less. Such a change would leave the country worse off than before.
  2. Lower interest rates, even negative interest rates. With lower interest rates, the interest portion of the Interest and Dividend sector shown on Figure 2 can theoretically mostly disappear, leaving more money for wages on Figure 2 and thus tending to “fix” the wage problem this way. Low interest rates also tend to reduce dividends, because companies will choose to buy back part of their stock and issue very low interest rate debt instead. If interest rates become negative, the sector can completely disappear. The ultra-low interest rates will have negative ramifications elsewhere. Banks are likely to have a hard time earning an adequate income. Pension funds will find it impossible to pay people the pensions they have been promised, creating a different problem.
  3. Get jobs back from foreign countries through the use of tariffs. Some jobs might be easier to get back from foreign countries than others. For example, programming, call center operations, and computer tech support are all “service type” jobs that can be done from anywhere, and thus could be transferred back easily. In situations where new factories need to be built, and materials sourced from around the world, the transfer would be more difficult. Businesses will tend to automate operations, rather than hire locally. The countries that we try to get the business from may retaliate by refusing to sell needed devices (for example, computers) and needed raw materials (such as rare earth minerals). Or a collapse may occur in a country we try to get jobs back from, so fewer goods and services are produced worldwide.
  4. Keep out immigrants. The theory is, “If there aren’t enough jobs to go around, why give them to immigrants?” In a world with sagging GDP, job growth will be slow or may not occur at all. There may be a particular point in keeping out well-educated immigrants, if there aren’t enough jobs for college-educated people who already live in a country. Of course, Europe has been doing the opposite–taking in more immigrants, in the hope that they will provide young workers for countries that are rapidly aging. (Another approach to finding more workers would be to raise the retirement age–but such an approach is not politically popular.)
  5. Medicare for all. Medicare is the US healthcare plan for those over 65 or having a disability. It pays a substantial share of healthcare costs. The concern I have with “Medicare for all” is that because of the way the economy now functions, the total amount of goods and services that we can choose to purchase, for all kinds of goods and services in total, is almost a fixed sum. (Some people might say we are dealing with a zero-sum game.) If we make a choice to spend more on medical treatment, we are simultaneously making a choice that citizens will be less able to afford other things that might be worthwhile, such as apartments and transportation. The US healthcare system is already the most expensive in the world, as a percentage of GDP. We need to fix the overall system, not simply add more people to a system that is incredibly expensive.
  6. Free college education for all. As the situation stands today, 45% of recent college graduates are in jobs that do not require a college degree. This suggests that we are already producing far more college graduates than there are jobs for college graduates. If we provide “free college education for all,” this offer needs to be made in the context of entrance exams for a limited number of spaces available (reduced from current enrollment). Otherwise, we sink a huge share of our resources into our education system, to no great benefit for either the students or the overall system. We are back to the zero-sum game problem. If we spend a large share of our resources on college educations that don’t really lead to jobs that pay well, more people of all ages will find themselves unable to afford apartments and cars because of the higher tax levels required to fund the program.
  7. Renewables to replace fossil fuels. Despite the popularity of the idea, I don’t think that adding renewables provides any significant benefit, given the scenario we are facing. Renewables are made using fossil fuels, and they tend to have pollution problems of their own. They don’t extend the life of the electric grid, if we are facing collapse. At most, they might be helpful for a few people living off grid, if the electrical grid is no longer operating. If the economic system is on the edge of collapse already, fossil fuel use will drop quickly, with or without the use of renewables.

  Conclusion

  It would be really nice to “roll back” the world economy to a date back before population rose to its current high level, resources became as depleted as they are, and pollution became as big a problem as it is. Unfortunately, we can’t really do this.

  We are now faced with the question of whether we can do anything to mitigate what may be a near-term crisis. At this point, it may be too late to make any changes at all, before the downward slide into collapse begins. The current low prices of fossil fuels make the current situation particularly worrisome, because the low prices could lead to lower fossil fuel production, and hence reduce world GDP because of the connection between energy consumption and GDP growth. Low oil prices could also push the world economy downward, due to increasing defaults on energy sector loans and adverse impacts on economies of oil exporters.

  In my view, a major reason why fossil fuel prices are now low is because of the low wages of “ordinary workers.” If these wages were higher, workers around the globe could be buying more houses and cars, and indirectly raising demand for fossil fuels. Thus, low fossil fuel prices may be a sign that collapse is near.

  One policy that might be helpful at this late date is increased focus on contraception. In fact, an argument could be made for more permissive abortion policies. Our problem is too little resources per capita–keeping the population count in the denominator as low as possible would be helpful.

  On a temporary basis, it is also possible that new programs that lead to rising debt–whether or not these programs buy anything worthwhile–may be helpful in keeping the world economy from collapsing. This occurs because the economy is funded by a combination of wages and by growing debt. A shortfall in wages can be hidden by more debt, at least for a short time. Of course, this is not a long-term solution. It simply leads to a larger amount of debt that cannot be repaid when collapse does occur.

  

  

  

  

  

• Rail Traffic Volumes Tumble As Coal Stockpiles Soar At Record Rate

  For the first two months of 2016, it seemed as if a modest, if stable, rebound was finally taking place among one of the hardest hit transportation sectors of 2015, rails. Alas, like virtually everything else, this too has proven to be nothing more than a dead cat coming back to life and getting run over by a train.

  As RBC writes in a recent notes, rail traffic volume declines have again intensified. “On a Y/Y basis, traffic slowed by -14% Y/Y for week 11 as all rails posted stiff volume declines and on a segment basis only Motor Vehicles carloads were higher (+7% Y/Y). Since week 7 when volumes grew by +4% Y/Y, the sharpest traffic decline has come in Intermodal carloads (from growth of +17% Y/Y for week 7 to a -12% Y/Y decline last week). Coal headwinds have also intensified in recent weeks and the segment remains the major laggard so far this quarter (-30% Y/Y QTD).”

  Visually:

  

   

  And while we have touched on some of the primary catalysts for the ongoing decline in railroad traffic, chief among which the drop off in global trade and the plunge in oil transportation, a third – just as important factor – has been the situation involving US coal power plants, where as the EIA writes, “coal stockpiles at electric generating facilities totaled 197 million tons at the end of 2015, the highest level since June 2012 and the highest year-end inventories in at least 25 years.”

   

  The full details from EIA’s Today in Energy, by Tim Shear:

  As coal stockpiles at power plants rise, shippers are reducing coal railcar loadings

  

   Source: U.S. Energy Information Administration, Electric Power Monthly and Association of American Railroads

  Coal stockpiles at electric generating facilities totaled 197 million tons at the end of 2015, the highest level since June 2012 and the highest year-end inventories in at least 25 years. More than 40 million tons of coal were added to stockpiles at electric generating facilities from September through December, the largest build during that timespan in at least 15 years. In addition to relatively low overall electricity generation, largely attributable to the warmest winter on record, coal-fired electricity has recently been losing market share to electricity produced using natural gas and renewable resources.

  

  Source: U.S. Energy Information Administration, Electric Power Monthly

  Coal stockpiles typically follow a seasonal pattern in which stocks build during the lower electricity demand periods of the spring and fall and then get drawn down during periods of higher electricity demand in the summer and winter. In 2015, the stockpile build from August to December was 40 million tons, far higher than the 11 million ton average stockpile build for these months over 2001-14. Coal stockpiles typically decrease in December, averaging a roughly 3 million ton decline for the month over 2001-14. However, stockpiles this December increased by more than 8 million tons.

  As stockpiles grew toward the end of 2015, shipments of coal by rail fell. Weekly coal railcar loadings averaged nearly 94,000 carloads per week from September through December 2015, 22% below average loadings for that time of year over the previous five years. Railcar loadings were even lower in the first months of 2016. Through February, weekly coal railcar loadings averaged slightly more than 75,000 carloads, 35% below the previous five-year average.

  

  Source: U.S. Energy Information Administration, Electric Power Monthly

  * * *

  What is most surprising is that the near record high coal stockpile levels at the end of 2015 come despite a reduction in coal-fired generation capacity. From 2010 to 2015, total U.S. coal generating capacity declined 10%, falling by nearly 33 gigawatts (GW) to 285 GW. One way of measuring coal stockpiles while accounting for the overall change in generating capacity is to calculate days of burn. This calculation considers the current stockpile level at each generator and its estimated consumption (burn) rates in coming months, based on the average consumption rates for those months over the past three years. This measure approximates how many days the generator could run at historical levels before depleting its existing stockpile.

  This means that just as oil inventories hit all time highs at the end of 2015 and into 2016, the same was taking place at US power plant coal stockpiles; worse, since much electricity production has been shifted to other, cleaner forms of electric generation, the excess coal capacity in the market is so vast, that it will take pervasive, acute bankruptcies to reset some semblance of equilibrium. It also means that the Peabody bankruptcy will be only the start, and that tens of thousands more hard-working Americans will soon lose their jobs.

  

  

  

  

  

• "It's Worse Than 2008": Toronto's "Condo King" Weighs In On The Death Of Alberta's Housing Market

  Last week, National Bank’s Peter Routledge did some “back of the envelope” calculations and determined that Chinese buyers might well have accounted for one-third of all real estate purchased in Vancouver during 2015. Here’s how he came to that rather startling conclusion:

  “The NAR estimates that buyers from China invested US$28.6 billion in U.S.-domiciled residential real estate properties over the 12 months ending March 31, 2015. The results of a multiple choice survey the Financial Times solicited from 77 high net worth and affluent individuals from China (admittedly not a statistically significant sample size) [show that] of those who had purchased residential real estate outside China, 33.5% had done so in the United States, 11.7% in Vancouver, and 8.3% in Toronto. From this survey data, one could hypothesize that for every three high net worth investors from China who purchase a U.S. residence, one purchases a residence in Vancouver. One can then apply these ratios to the NAR’s estimate of US$28.6 billion in U.S. residential real estate investment made by buyers from China. From this, we hypothesize that, in 2015, homebuyers from China invested ~US$9.9 billion / Cdn$12.7 billion in Vancouver residential real estate; this amounts to 33% of total purchase volume.

  If that’s even close to accurate, it would confirm what we and others have been saying for quite a while: namely that capital flight from China is driving the explosion of housing prices in red hot markets like London, Hong Kong, and yes, Vancouver.

  Persistent CAD weakness made Canadian homes look particularly attractive to Chinese buyers who had traded in their RMB for USD. The same dynamic – combined with the allure of a burgeoning tech industry – also drove outsized gains in Toronto, Waterloo, and other markets across the country.

  But Alberta wasn’t so lucky. Situated at the heart of Canada’s dying oil patch, the province was the only territory where real GDP contracted in 2015. While manufacturing sales across Canada rose 2.3% in January, Y/Y sales plunged 13.2% in Alberta, the sixth decline in seven months and a sure sign that the oil slump has spilled over into the rest of the economy. Provincial manufacturing sales dropped 16% last year.

  The dire outlook for the provincial economy has weighed on the housing market in places like Calgary. Have a look, for instance, at the following chart which we’re fond of presenting.

  

  As you can see, one of those three markets is not like the others.

  Underscoring just how bad things truly are in Alberta, Toronto’s “condo king” Brad Lamb is putting the brakes on two condo projects planned for Alberta. “The 36-storey Jasper House and 45- storey North will be delayed at least a year,” The Calgary Herald reports. Here’s more:

  “The situation in Alberta is worse than 2008,” said Brad Lamb, known as Toronto’s condo king and for his humorous billboard ads depicting his face on a sheep’s body. “This is a unique event that is annihilating anywhere in the world that produces oil.” Executives at Fortress Real Developments Inc., which partnered with Lamb on the projects, declined to comment.

   

  Lamb is pulling back as condo sales in Calgary and Edmonton posted the steepest decline in 2015 since the financial crisis. Sales of condos fell 38 percent in Calgary, Alberta’s biggest city, and declined 56 percent in Edmonton, according to Altus Group Ltd.

   

  
  

   

  Prices for Calgary apartments have been among the hardest hit in the housing market, sliding 8.7 percent to $279,697 in January, while the average Edmonton condo declined 10 percent to $227,052 over the same period, according to the real estate boards for those cities.

  Yes, “it’s worse than 2008,” and any locale where the economy depends at least partly on crude has been “annihilated.”

  Lamb insists that the two postponed projects will eventually be completed. Construction on Jasper House, for instance, will begin in 2017. In the meantime, if you should happen to own a Toronto condo and want to take advantage of the soaring prices made possible by the billions upon billions fleeing China…

  

  …don’t hesitate to give Brad a call…

  

  

  

  

  

  

• Trump Explains His "Women Problems": "I Never Knew I Was Going To Run For President"

  To let CNN tell it, Donald Trump has women problems.

  And we don’t mean in the sense that he has trouble finding an attractive dinner date:

  

  Following a patently absurd spat with Ted Cruz that began when a supposedly unaffiliated anti-Trump group ran an ad featuring a GQ spread of Melania Trump and promptly ended when Trump publicly “schlonged” Cruz by re-tweeting a head-to-head beauty comparison between Melania and Heidi Cruz, some in the media are looking to rekindle the fire Megyn Kelly started last year when, at the first GOP debate, the Fox anchor asked the Republican frontrunner if he thought it was befitting of a presidential candidate to call women “disgusting animals.”

  “Trump’s negatives among female voters are climbing,” Kellyanne Conway, a Republican pollster who runs the pro-Cruz super-PAC “Keep the Promise” says.

  Conway is referring to a CNN poll from last week that shows 73% of women hold an unfavorable view of the billionaire. “The attrition is most striking among married and suburban female Republicans,” she remarked, adding that “They [women] can tolerate a snide remark or witty snark here or there, but draw the line at personal insults in place of policy prescriptions.”

  Yes, “they draw the line at personal insults.” “Insults” like these (note the finale at 0:41):

  That’s an ad bought and paid for by Our Principles PAC, a group run by staffers from Jeb Bush’s miserable failure of a campaign.

  While Trump has thus far shaken off suggestions that comments he’s made in the past are alarmingly misogynistic, he seems to be making an attempt to mend some fences ahead of the Wisconsin primary. “After a week that found Trump launching attacks on Texas Senator Ted Cruz’s wife, Heidi Cruz, and tossing barbs at Fox News anchor Megyn Kelly, the billionaire front-runner on Monday attempted to play down his degrading comments about women, saying they were made in jest,” Bloomberg writes.

  “I never knew I was going to be running for office. And you joke, and you kid and say things, but you’re not a politician so you never think anybody cares,” Trump told Wisconsin’s FOX 11 in a phone interview.

  Needless to say, Trump’s detractors don’t think “I never thought I would be running for President” is a good excuse for disparaging women.

  “[You have problems with] conservative women who are repelled by your attitude and your treatment of females,” Wisconsin-based conservative radio host Charlie Sykes told the frontrunner yesterday. “[I’ve] hired tremendous numbers of women,” Trump responded. “I have been better to women than any of these candidates, frankly.” Here’s what Trump had to say on Twitter:

  The media is so after me on women Wow, this is a tough business. Nobody has more respect for women than Donald Trump!

  — Donald J. Trump (@realDonaldTrump) March 26, 2016

  “@pattiandsammi: @gullakhta99 @realDonaldTrump @Tytan01 @CNN WOMEN LOVE TRUMP. TRUMP’S EXECS PREDOMINANTLY FEMALE. #WOMEN4TRUMP“

  — Donald J. Trump (@realDonaldTrump) March 26, 2016

  Be that as it may, it’s not just CNN whose polls show that Trump may have trouble with women voters – especially if he ends up squaring off against Hillary Clinton in the national election. A recent NBC/WSJ poll shows some 70% of women give Trump a negative rating while a Reuters poll conducted March 1-15 showed half of American women view the billionaire in a “very unfavorable” light (up 10 points from last autumn). In case that’s in any way unclear, NBC made a giant red graphic with a long line of womens’ restroom symbols on the bottom to illustrate the point:

  

  “Some GOP strategists fear Trump would alienate women voters in historic numbers as the nominee, particularly if he faces Democratic front-runner Hillary Clinton, who hopes to become the first female president and hasn’t been shy to call out sexism in her primary battle against Bernie Sanders,” Bloomberg continues.

  “In 2012 Mitt Romney won white women by 14 points according to exit polls – 56% to 42% for President Barack Obama,” NBC goes on to say, reinforcing the supposed threat to the GOP’s chances in the national election. “But in the latest NBC/WSJ poll white women go to Hillary Clinton in a hypothetical general election matchup by 10 points, 48% to 38% [which would be] an enormous 24-point swing in the white women vote between 2012 and 2016.”

  Of course if all of this is completely accurate, one wonders how it is that Trump holds such a commanding lead over the rest of the GOP field. Were there no female Republican voters in Florida? Or in Arizona? Or in New Hampshire?

  In any event, Trump was apparently surprised to learn that anyone still cares about this. “I thought this was actually a dead issue until I just spoke to you,” he told Sykes.

  And it probably was. But the establishment has to do something (anything) to derail this freight train, lest Trump should get to 1,237 before July and dash any hope Republicans had of denying him the nomination. And if you thought Megyn Kelly had “blood coming out of her eyes” at the debate in September, just wait until you see the establishment if Trump becomes the nominee.

  *   *   *

  Bonus: Apparently not all women have an unfavorable view of the billionaire

  

  

  

  

  

  

  

  

  

• Caption Contest: Obama Game Face Edition

  “So there we were, me and John on one side of the table, Putin and Lavrov on the other. Putin says ‘We’re not leaving Syria,’ so I look him right in the eyes and then I make this face!”

  “Michelle was there. Show ’em how I did it Michelle.”

  

  

  

  

  

  

• Is Trump Right About NATO?

  Submitted by Patrick Buchanan via Buchanan.org,

  I am “not isolationist, but I am ‘America First,'” Donald Trump told The New York times last weekend. “I like the expression.”

  Of NATO, where the U.S. underwrites three-fourths of the cost of defending Europe, Trump calls this arrangement “unfair, economically, to us,” and adds, “We will not be ripped off anymore.”

  Beltway media may be transfixed with Twitter wars over wives and alleged infidelities. But the ideas Trump aired should ignite a national debate over U.S. overseas commitments — especially NATO.

  For the Donald’s ideas are not lacking for authoritative support.

  The first NATO supreme commander, Gen. Eisenhower, said in February 1951 of the alliance: “If in 10 years, all American troops stationed in Europe for national defense purposes have not been returned to the United States, then this whole project will have failed.”

  As JFK biographer Richard Reeves relates, President Eisenhower, a decade later, admonished the president-elect on NATO.

  “Eisenhower told his successor it was time to start bringing the troops home from Europe. ‘America is carrying far more than her share of free world defense,’ he said. It was time for other nations of NATO to take on more of the costs of their own defense.”

  No Cold War president followed Ike’s counsel.

  But when the Cold War ended with the collapse of the Soviet Empire, the dissolution of the Warsaw Pact, and the breakup of the Soviet Union into 15 nations, a new debate erupted.

  The conservative coalition that had united in the Cold War fractured. Some of us argued that when the Russian troops went home from Europe, the American troops should come home from Europe.

  Time for a populous prosperous Europe to start defending itself.

  Instead, Bill Clinton and George W. Bush began handing out NATO memberships, i.e., war guarantees, to all ex-Warsaw Pact nations and even Baltic republics that had been part of the Soviet Union.

  In a historically provocative act, the U.S. moved its “red line” for war with Russia from the Elbe River in Germany to the Estonian-Russian border, a few miles from St. Petersburg.

  We declared to the world that should Russia seek to restore its hegemony over any part of its old empire in Europe, she would be at war with the United States.

  No Cold War president ever considered issuing a war guarantee of this magnitude, putting our homeland at risk of nuclear war, to defend Latvia and Estonia.

  Recall. Ike did not intervene to save the Hungarian freedom fighters in 1956. Lyndon Johnson did not lift a hand to save the Czechs, when Warsaw Pact armies crushed “Prague Spring” in 1968. Reagan refused to intervene when Gen. Wojciech Jaruzelski, on Moscow’s orders, smashed Solidarity in 1981.

  These presidents put America first. All would have rejoiced in the liberation of Eastern Europe. But none would have committed us to war with a nuclear-armed nation like Russia to guarantee it.

  Yet, here was George W. Bush declaring that any Russian move against Latvia or Estonia meant war with the United States. John McCain wanted to extend U.S. war guarantees to Georgia and Ukraine.

  This was madness born of hubris. And among those who warned against moving NATO onto Russia’s front porch was America’s greatest geostrategist, the author of containment, George Kennan:

  “Expanding NATO would be the most fateful error of American policy in the post-Cold War era. Such a decision may be expected to impel Russian foreign policy in directions decidedly not to our liking.”

  Kennan was proven right. By refusing to treat Russia as we treated other nations that repudiated Leninism, we created the Russia we feared, a rearming nation bristling with resentment.

  The Russian people, having extended a hand in friendship and seen it slapped away, cheered the ouster of the accommodating Boris Yeltsin and the arrival of an autocratic strong man who would make Russia respected again. We ourselves prepared the path for Vladimir Putin.

  While Trump is focusing on how America is bearing too much of the cost of defending Europe, it is the risks we are taking that are paramount, risks no Cold War president ever dared to take.

  Why should America fight Russia over who rules in the Baltic States or Romania and Bulgaria? When did the sovereignty of these nations become interests so vital we would risk a military clash with Moscow that could escalate into nuclear war? Why are we still committed to fight for scores of nations on five continents?

  Trump is challenging the mindset of a foreign policy elite whose thinking is frozen in a world that disappeared around 1991.

  He is suggesting a new foreign policy where the United States is committed to war only when are attacked or U.S. vital interests are imperiled. And when we agree to defend other nations, they will bear a full share of the cost of their own defense. The era of the free rider is over.

  Trump’s phrase, “America First!” has a nice ring to it.

  

  

  

  

  

• Crushed By The Record Oil Squeeze, This Is How Energy Bears Are Shorting Crude Now

  The “short energy” trade worked great for a while and then, as we first warned in late January, just as everyone jumped onboard leading to record WTI (and oil and gas equity) shorts, it very suddenly stopped working in early February when oil proceeded to soar by 50% in the month ahead, leading to the biggest short squeeze on record and crushing all those who had recently gotten on the short bandwagon (as well as most other shorts).

  The result of this mega-squeeze has been a significant revulsion to shorting oil directly or indirectly, either by way of the underlying commodity or energy stocks, many of which have soared in tandem.

  And yet the shorts remain, and continue to press their bets on the troubled energy sector. However, instead of directly shorting crude and various first-derivative oil and gas companies, short sellers – burned by the recent squeeze – have changed their strategy and shifted their sights to secondary exposure, namely those regional banks that do business with the industry. These are the same banks which, as we laid out previously, have the highest exposure to the very troubled energy sector, as laid out either by S&P:

  

   

  … Or Raymond James:

  

   

  It is these regional banks that Bloomberg finds are the object of shorts’ latest affection, as bearish bets have shot up 35% on average this year among the 10 most-shorted stocks in the KBW Regional Banking Index, and nowhere more so than at Cullen/Frost Bankers Inc. and Prosperity Bancshares Inc. in Texas, which have seen short interest surge about 60 percent.

  

  The reason why shorts’ attention has been redirected to energy banks is well-known to our readers as we have been covering the banks’ exposure to energy since January: “as oil prices plunged, concern over energy companies’ ability to pay back loans drove investors to unload or bet against financial stocks judged to have the most at stake in the sector. So far, the rebound that pushed oil to around $40 a barrel has done little to dilute that speculation. Stubbornly low interest rates are also squeezing profits in a group that trades at a premium of almost 40 percent to their larger brethren.”

  “It’s generally a very tough environment,” said Stephen Moss, a New York-based analyst at Evercore ISI. “Beyond oil and the yield curve, we have seen signs of credit softening overall. So going forward, it feels like you are going to have incrementally higher credit costs, which obviously will pressure earnings.”

  The details are also mostly familiar, but here is a quick recap from Bloomberg:

  Energy loans account for 15 percent of Cullen/Frost’s portfolio, while they make up 4 percent of Prosperity’s, according to Moss. Of the 10 most shorted regional banks, the majority do business in states like Texas, Oklahoma and Arkansas, centers of the drilling industry. Banks that have exposure higher than 4 percent to energy in their loan portfolios have slumped 22 percent since late 2014, Morgan Stanley’s Ken Zerbe wrote in a report earlier this month.

   

  Bigger banks have also increasingly lured bears this year. Short interest makes up 6.2 percent of Zions Bancorporation’s shares outstanding and 4.5 percent percent of Comerica Inc. Seven percent of Zions’ loan portfolio is exposed to energy companies, and 6 percent of Comerica’s, according to Zerbe.

  Being a smaller, regional bank instead of a TBTF, money-center bank means just that: “regional banks are more sensitive to the trajectory of interest rates, as a bigger proportion of their revenue stems from deposits and lending. The Federal Reserve scaled back its forecast for tighter policy on March 16, citing weaker global growth. That translates to lower-for-longer short-term rates, which crimp what local banks can charge on loans.”

  But more so than the flat yield curve, the immediate catalyst are questions about the banks’ solvency if and when client O&G companies file bankruptcy, straddling the lenders with billions in bad debt.

  Evercore ISI’s Moss said even if the Fed speeds up interest rates increases, a stronger dollar would hurt manufacturers, which in turns affects lenders. “You’ve seen hints from banks signaling that things are getting tough on that front,” he said. Alternatively, if the Fed remains dovish, it means yields on the long end will remain painfully low and make it next to impossible for energy companies to generate profits, leading to a lose-lose outcome, which is precisely what the shorts are betting on.

  Not everyone is as concerned, however. While shorts are boosting bearish bets, other investors are taking the opposite view and loading up on shares. Gary Bradshaw, a Dallas-based fund manager for Hodges Capital Management said his firm recently increased its position in Cullen/Frost.

  “I am looking at low price-to-book, good earnings and what I think will be a higher energy price,” said Bradshaw. “I don’t think interest rates are going to go up dramatically, and that will be the headwind for banks. But at the same time, some of the regional players will benefit more from higher energy prices.”

  Still, with little updated information on bank exposure ahead of the spring borrowing base redetermination season, many would rather not risk it: “There is some uncertainty on how significant these oil credits are going to mean to the credit costs for these banks going forward,” said Daniel Werner, an analyst at Chicago-based Morningstar Inc. “Investors are right to be cautious with names in the Texas and Oklahoma area. That’s a fair assessment by investors until we figure out what’s going on with oil.”

  What is going on is nothing good, and we expect fundamental impairments, charges and reserve increases to continue for the conceivable future. However, the right trade here is not to pile on in what is becoming the next bandwagon trade, but to think one step ahead, the same step which we said is inevitable in the oil trade in late January – the imminent, and massive, short covering squeeze, which has the added benefit that forced buyers are completely price indiscriminate when the market is ripping in their face, and will pay any price beyond the moment of max pain just to get out of a trades which, at least in theory, have unlimited downside.

  As such we sit back and look forward to the inevitable regional bank “rip your face off” short squeeze, one which is inevitable especially since as Yellen showed today, the Fed will do anything and everything to reflate asset prices, consequences and most certainly credibility be damned.

  

  

  

  

  

• "When Hawks Die" – Yellen-nado Sends Bonds, Stocks, & Bullion Soaring

  Bwuahahahaha….

   

  Another day in the "markets… Silver & Gold the big winners post-Yellen – oops!

  

   

  As we have said before – there is one simple rule…

   

  The "Market" Explained…

  

   

  The machines ran the stops…

  

   

  On the day it was Small Caps that won yuuge – as investors panic-bought the worst of the worst…The Dow surged 220 points off the pre-Yellen lows…

  

   

  Nasdaq and Russell remain red Year-to-Date but S&P and Dow once again rejoined Trannies in the green…

  

   

  Stocks decoupled from FX Carry and Oil…

  

   

  VIX was instantly slammed on Yellen's speech and pushed back to a 13 handle….

  

   

  Bonds were also bid as yields utterly collapsed across the entire complex…sending yields to one-month lows…

  

   

  This was the 2nd biggest drop in 2y yields since The Fed folded in September…

  

   

  The USDollar was monkey-hammered as Yellen unleashed her dovish-ness…

  

   

  EURUSD spiked to 1.13 crushing the hopes and dreams of Draghi's devaluation…

  

   

  and commodity currencies surged (weak USD) decoupling from Oil…

  

   

  It appears the rush for crude is over as despite USD weakness, WTI tumbled 3% as Gold surged 2%…

  

   

  So to sum it all up…

  Stocks higher because the Fed is "less confident it can normalize rates" and sees "weaker global growth environment"

  — zerohedge (@zerohedge) March 29, 2016

   

  So it appears Janet saw this and panicced… so when do stocks catch down again?

  

   

  Charts: Bloomberg

  Bonus Chart: Yellen's Dilemma (h/t Alex via @SoberLook)

  

  

  

  

  

• Crude Rises After Gasoline Draw, Crude Build

  Following last week’s major surge in crude inventories, API reported a 2.6mm build (against expectations of a 3.1mm build) – 7th week in a row – which briefly jumped crude prices higher. A 319k draw at Cushing combined with draws in Gasoline (6th week in a row) and Distillates left oil pushing back to late-day highs.

   

  API Details:

  • Crude +2.5mm (+3.1mm exp.)
  • Cushing -319k (confirming Genscape
  • Gasoline -1.94m
  • Distillates -95k

  

  For now, it seems the market is being driven by gasoline so tomorrow’s DOE report on implied demand will be critical

   

  The reaction in crude – after a volatile day..

  

   

  Charts: Bloomberg

  

  

  

  

  

• Top Silicon Valley VC Laments: Startups Being Funded Are "Mostly Crap & Largely Worthless"

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Wall Street is counting its winnings from seven years of easy money.

   

  The results represent a clear victory for Wall Street over Main Street, according to the team of Michael Hartnett, BofA’s chief investment strategist.

   

  “Zero rates and asset purchases of central banks have, thus far, proved much more favorable to Wall Street, capitalists, shadow banks, ‘unicorns,’ and so on than it has for Main Street, workers, savers, banks and the jobs market,” the BofA team wrote.

   

  – From the post: Bank of America Admits – Central Bank Policy Enriched Wall Street While “Steamrolling” Main Street

  Recently, Vanity Fair sat down with well known venture capitalist Chamath Palihapitiya to get his take on the state of affairs in unicorn land.

  Here’s some of what he had to say:

  Palihapitiya’s firm, Social Capital, has backed numerous tech companies with valuations in the billions, such as Slack, Box, and SurveyMonkey. But that doesn’t mean that he is bullish on unicorn culture. Here, Palihapitiya speaks about Mark Zuckerberg’s secret sauce, which start-ups are going to make it, and the saga between Apple and the F.B.I., among other topics.

   

  Funding is slowing down, both in seed rounds and mega-rounds. There have been fewer tech I.P.O.s recently, more companies are raising down rounds. Are we in a downturn?

   

  I think we’re in a phase where we’re realizing that the people who have been allocating capital thus far have done a horrendous job. Most people’s inherent reaction is to make sure they never lose their job, and so they become risk-averse. I think what we’ve had is a handful of investors who have extreme vision who make great investments in things that are amazing businesses: Facebook, Google, Uber.

   

  And then everybody else reacts to that success by trying to do the thing that most approximates the thing that’s working. As a result, most of those businesses are fundamentally not good, they’re poorly run, and they never should have been invested in in the first place. But the capital came in because the person who had control of the capital was able to justify it intellectually to themselves versus something else that could have become the next Facebook or Google.

   

  The reality is, great companies can go public in any market. When we talk about the I.P.O. slowdowns what we’re really saying is that there really just aren’t that many good companies being built. We need to divorce ourselves from venture capital as an occupation and focus on using capital as a way to take really big bets on things that just seem totally audacious. Right now we haven’t done enough of that, and the result is that most of the things we’ve funded are mostly crap and largely worthless.

   

  What advice are you giving Social Capital’s portfolio companies in the event of a tech bubble burst or correction?

   

  We’re trying to coach our C.E.O.s that the window dressing is both expensive from a cash perspective and tremendously expensive from a culture perspective. It distracts the team from building what they need to build. Don’t waste money on things that get away from your mission, which confuse employees about why they’re actually there. Meaning, the quality of the office and the quality of the food are all part and parcel of a lack of discipline, which speaks to the fact that the mission isn’t compelling enough. Because I can tell you what it was like at early Facebook: the food was terrible; we’d ship in lunch and probably two to three times a week the lunch had maggots in it. But we were there because we believed, and it didn’t matter.

   

  A number of V.C.s have been calling on mature, late-stage companies to go public. There’s even been somewhat of a quiet rally in the public tech stocks recently. Is now the time for big, late-stage companies to go public, or does it make sense for companies to stay private longer?

   

  Any company that is making its decision based on external timing is probably not in control of their own destiny and should probably not go public. Facebook could have gone public whenever it wanted. We decided the right time was 2012. It could have easily been 2010 or 2014. When you hear the call for these companies to go public and there’s pushback and they don’t, what’s really happening is the realization that the structural strength of their business is not yet in place. So they’re worried about how the public market will react once they have to transparently demonstrate what their business will look like. The great companies can always go public whenever they want; every other company is trying for some window of time where there’s essentially some combination of intellectual laziness and greed in the public markets that will allow them to exploit a window.

  Not that any of this is particularly surprising, but it’s noteworthy nonetheless. It’s also why…

  The New “Middle Class” – Making $250,000 a Year in Palo Alto Qualifies for Housing Subsidies

  For related articles, see:

  Bank of America Admits – Central Bank Policy Enriched Wall Street While “Steamrolling” Main Street

  The Military Industrial Complex Unicorn – Former NSA Chief Raises $32.5 Million for Startup Company

  Meet “Groundwork” – Google Chairman Eric Schmidt’s Stealth Startup Working to Make Hillary Clinton President

  

  

  

  

  

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• Top German Journalist Admits Mainstream Media Is Completely Fake: "We All Lie For The CIA"

  With the increasing propaganda wars, we thought a reminder of just how naive many Westerners are when it comes to their news-feed. As Arjun Walia, of GlobalResearch.ca, notes,  Dr. Ulfakatte went on public television stating that he was forced to publish the works of intelligence agents under his own name, also adding that noncompliance with these orders would result in him losing his job.

  He recently made an appearance on RT news to share these facts:

  I’ve been a journalist for about 25 years, and I was educated to lie, to betray, and not to tell the truth to the public.

   

  But seeing right now within the last months how the German and American media tries to bring war to the people in Europe, to bring war to Russia — this is a point of no return and I’m going to stand up and say it is not right what I have done in the past, to manipulate people, to make propaganda against Russia, and it is not right what my colleagues do and have done in the past because they are bribed to betray the people, not only in Germany, all over Europe.

  It’s important to keep in mind that Dr. Ulfakatte is not the only person making these claims; multiple reporters have done the same and this kind of truthfulness is something the world needs more of.

  One (out of many) great examples of a whistleblowing reporter is investigative journalist and former CBC News reporter Sharyl Attkisson.

  She delivered a hard-hitting TEDx talk showing how fake grassroots movements funded by political, corporate, or other special interests very effectively manipulate and distort media messages.

  Another great example is Amber Lyon, a three-time Emmy award winning journalist at CC, who said that they are routinely paid by the US government and foreign governments to selectively report and even distort information on certain events. She has also indicated that the government has editorial control over content.

  Ever since Operation Mockingbird, a CIA-based initiative to control mainstream media, more and more people are expressing their concern that what we see in the media is nothing short of brainwashing.

  This is also evident by blatant lies that continue to spam the TV screen, especially when it comes to topics such as health, food, war (‘terrorism‘), poverty, and more.

  Things have not changed, in fact, when in comes to mainstream media distorting information and telling lies. They have gotten much worse in recent years, in fact, so it is highly encouraging that more people are starting to see through these lies, even without the help of whistleblowers like Dr. Ulfakatte.

  One great example is the supposed ‘war on terror,’ or ‘false flag terrorism.’ There are evenWikileaks documents alluding to the fact that the United States government planned to “retaliate and cause pain” to countries refusing GMOs.

  Mainstream media’s continual support of GMOs rages on, despite the fact that a number of countries are now banning these products.

  The list of lies goes on and on. It’s time to turn off your T.V. and do your own research if you are curious about what is happening on our planet. It’s time to wake up.

  

  

  

  

  

• One Third Of UK Children Spend Less Time Outdoors Than US Prison Inmates

  Over the course of his campaign, Bernie Sanders has made it clear that criminal justice reform is something he cares quite a lot about.

  “I consider reforming our criminal justice system one of the most important things that a president of the United States can do,” the Vermont senator told a Chicago crowd in December. Sanders has called the incarceration rate in America “an international embarrassment,” and earlier this month, he said the following during a debate with Hillary Clinton:

  “Where we are right now, is having more than 2.2 million people in jail — more than any other country on Earth. This is a campaign promise: At the end of my first term, we will not have more people in jail than any other country.”

  Given the high rate of incarceration in the US, it’s important that Americans don’t take their freedom for granted because, well, because the government won’t hesitate to throw you in jail. Once there, UN guidelines only require that you get to breathe fresh air for one hour a day – the standard minimum guidelines call for “at least one hour of suitable exercise in open air daily.”

  You can believe that inmates cherish that hour and you can imagine how shocked the residents of Indiana’s Wabash maximum security prison were to find out from researchers that one third of all children aged 5 to 12 in the UK play outdoors for less than 30 minutes each day, while a fifth of parents surveyed said their children don’t go outside at all.

  “Outdoor play isn’t happening,” the “Dirt Is Good” initiative found in a survey of 12,000 parents. “Almost a third of children play outside for 30 minutes or less a day and one in five don’t plan outside at all on an average day.” Watch below as inmates react to the study.  

  So what are kids in the UK doing instead? Why, staring at screens of course. “Children spend twice as much time on screens inside as they do playing outside,” the same study found. 

  But it’s not all bad news. Children in the UK are far more likely to be able to make up for lost time outdoors later in life than are kids in the US. The incarceration rate in the UK is around five times lower than it is in America.

  

  

  

  

  

• These Energy Companies Are Most At Risk From The "Spring Redetermination"

  In late September, during the peak of fall borrowing base redetermination , many oil and gas companies got their first glimpse of just how bad their liquidity would get when as a result of collapsing commodity prices, the value of their collateral crashed when PV-10s plunged by up to 80% Y/Y as of December 2015…

  

   

  … and resulted in plunging access to secured liquidity as borrowings bases were eviscerated as much as 38% (for those unfamiliar with the basics of the semiannual redetermination process, the WSJ has a handy and brief 101).

  

   

  Incidentally, it would have been far worse if the Dallas Fed and OCC had not stepped in and told lender banks to take it as easy on the debtors as possible, and in some cases, even suspend market-based calculations for price decks. The reason for this kid glove treatment was that many banks were unprepared to reserve and write down the value of their energy loans down to fair values as of the fall. 

  Now, six months later, neither the OCC nor the (Dallas) Fed will be quite as generous and demand that banks act as a benevolent cartel. In fact, from what we have heard, it will be quite the opposite which explains the urgent scramble by many banks to force their debtor clients to issue equity and use the proceeds to repay secured loans.

  As such, the imminent spring redetermination may prove to be just the catalyst to push the recently latent energy crisis to the next level.

  So which companies are most at risk of a suddenly air pocket in liquidity? For the answer we go to a recent Bloomberg Intelligence slide deck prepared precisely for the purpose of showcasing the companies with maxed out credit lines. These are as follows:

  

   

  However, while these companies certainly have pulled the short stick, ironically they may not be the first to go: after all, at least they had the foresight of using up their entire available revolvers (and in the odd case of PostRock, more than 100% of it) – it doesn’t matter if now the banks decide to collapse their borrowing base – the funds have already been wired and good luck getting a refund.

  No, the companies most at risk may actually be those with that currently have some of the most highly utilized borrowing bases, ranging anywhere from 62% for Contango to 94% for Vanguard. It is these companies that will suddenly find themselves with zero incremental sources of liquidity as the banks proceed to whack anywhere from 30 to 50% of their borrowing base, leaving them scrambling to preserve liquidity and ultimately leading to bankruptcy court, in no small part under the pressure of secured and soon to be DIP lenders (and in most cases, the post reorg equity) who will demand the least amount of Enterprise Value be wiped out in the months before bankruptcy. Here are the names.

  

   

  We would be most worried about the near-term viability of the companies shown above: in our humble opinion these are the companies most at risk from the upcoming spring redetermination period.

  As for the companies shown below, we would not be quite as worried about them, although we are confident that in a few weeks time these “largest borrowing bases” will be substantially smaller.

  

   

  Finally, courtesy of Haynes and Boone, here is a less impartial perspective thanks to a poll of banks, PE firms, and oil service companies who were asked to share their thoughts on the upcoming spring redetermination. Among the key findings:

  • Overall respondents expect 79% of the borrowers to see a decrease in their borrowing base in spring 2016
  • Overall respondents, on average, expect to see borrowing bases to decrease by 38% compared to what they were in fall 2015
  • As to the most likely path to be taken by lenders and borrowers who face a borrowing base deficiency this spring: 36% of respondents said the would negotiate an amendment or extension with the lender; 31% said they would sell non-core assets; 15% said they would seek capital from a hedge fund or private equity fund; 4% said sell the company; 13% said restructure or declare bankruptcy

  Haynes and Boone slideshow:

   

  

  

  

  

  

• Lessons From Brussels – America Should Get Out Of The Middle East

  Submitted by Justin Raimondo via AntiWar.com,

  The vicious attack on the Brussels airport and metro underscores the futility of focusing on the Syrian “Caliphate” as the epicenter of terrorism: as I’ve been saying in this space since 2001, the snake has no head. Both al-Qaeda and now ISIS are protean entities with a vast geographical spread, and what the Brussels attack – and, before it, the Paris attack – show is that they have successfully colonized Europe.

  If the “Islamic State” proclaimed by ISIS was defeated and eliminated tomorrow, the terrorist and criminal networks that pulled off the Brussels attacks would still exist.

  The population of Brussels is nearly 25 percent immigrants from Muslim countries, primarily Morocco and Algeria. And as it turns out the two brothers who were the core of the ISIS cell were habitués of the now notorious Molenbeek neighborhood, which consists primarily of the descendants of immigrants who settled there decades ago. Poor, and beset by petty crime, it is a pool in which terrorist recruiters fish with much success. The Syrian civil war has become a cause that attracts young toughs with no prospects, who are looking for some sense of meaning – and a way to express their alienation from the larger society in which they live. Molenbeek was also the base for those who planned and carried out the Paris attacks – it is, in effect, a general headquarters for ISIS to carry out its European operations. Salah Abdeslam, the chief planner of the Paris attacks, fled there and found sanctuary for four months before being caught.

  In short, the problem of terrorism in Europe is an internal phenomenon, not something that comes from the outside. The Europeans imported it – and, as Germany’s welcoming of hundreds of thousands of refugees from the war-torn Middle East dramatizes, they are continuing to import it. Now they are living with the consequences.

  In response, various right-wing populist parties have emerged in Europe that focus on stopping immigration from Muslim countries: in France, Britain, and Germany the rise of the anti-immigration movement has liberal elites in a panic. And yet these movements are for the most part exercises in futility, because that horse is already out of the barn. France, for example, is not going to deport the millions of North African Muslims who have lived in the country for a generation and more: they are French citizens. The same goes for Britain, and all the former empires of Europe whose colonial adventures brought in large numbers of the colonized. Now they are learning – too late – that colonialism is a two-way street.

  What Brussels also showed is that the universal surveillance championed by the War Party as a necessary corollary of the “war on terrorism” would not have stopped the attacks: the ISIS cell consisted of two brothers, which not only ensured against infiltration but also made it next to impossible for any but the most intrusive surveillance to have had any effect. Indeed, the key to stopping the attacks was intelligence – which the Belgian authorities ignored. It turns out that Brahim el-Bakraoui had been deported from Turkey and the Belgians had been warned he was dangerous. They ignored the warning.

  The Israeli newspaper Ha’aretz claims that the Belgian authorities had “advance and precise intelligence warnings” about the attack on the airport and the subway but failed to take sufficient action to prevent them. This highlights another lesson of the Brussels attacks: the European authorities are utterly incompetent and unprepared for the challenge they face.

  Beyond that, however, is a larger problem: the ISIS phenomenon is largely a creation of the Western powers and its allies in the Gulf. The Saudis, the Qataris, and the Kuwaitis have long been funding Wahabist extremism, and they are the real progenitors of the ideology that inspired the creation of al-Qaeda and ISIS. Furthermore, regime change in Syria has long been on the American-European agenda, with funding for ‘moderate” Islamist head-choppers flowing from the US Treasury directly into the pockets of extremist gangs in the region. The same enabling action took place in Libya, where – led by Hillary Clinton – the Obama administration sided with “pro-democracy” rebels who turned out to be terrorists.

  With the Syrian civil war as their training ground, the ISIS recruits of Molenbeek and other similar ghettos underwent the transformation from petty criminals to battle-hardened jihadists. And now they are swarming all over Europe, with reportedly thousands of them traveling back to Belgium, France, Britain, and elsewhere to wreak havoc in the name of their newfound cause.

  For us here in America, the lessons of the European tragedy are there to be learned. There is only one solution to the problem of terrorism and it doesn’t involve going abroad in search of monsters to destroy. The point is to make sure those monsters never reach our shores.

  Furthermore, we must withdraw from the Middle East – a possibility that doesn’t bear the economic consequences it once did, given the creation of new technologies that make domestic oil production far easier.

  We are spending billions defending and sustaining the Saudi monarchy and the Gulf states – some of the most repressive regimes in the world. And for what? The interventionists declare that America’s role as a “global leader” represents the defense of our values. But does a regime that beheads “infidels” represent American values? Indeed, there is no operative difference between the internal rule of the ISIS “caliphate” and the Saudi Kingdom. Yet we are obsessed with destroying the former and cuddling up to the latter.

  It’s too late for the Europeans, who are now forced to sleep in the bed they so assiduously made. It isn’t too late for America: we can learn the lesson of Brussels if only we have the will to do so.

  

  

  

  

  

• With Hillary Clinton's Email Lies Unravelling, 147 FBI Agents Are On Her Heels

  Earlier this month, conservative legal advocacy group Judicial Watch released a series of documents obtained via an FOIA request which appear to prove that Hillary Clinton knew her BlackBerry wasn’t secure when she and her staff moved into Mahogany Row (the nickname given to the set of offices reserved for senior officials in the Department of State).

  E-mail exchanges between Senior Coordinator for Security Infrastructure Donald Reid and the NSA show Clinton was intent on obtaining a secure BlackBerry that she could use in restricted areas.

  Although Clinton would of course be given a desktop computer on which she could safely conduct state business, Reid said the Secretary had become “addicted” to her BlackBerry during her ill-fated 2008 Presidential campaign. “The issue here is one of personal comfort,” an e-mail from Reid reads. “S [Secretary Clinton] does not use a personal computer so our view of someone wedded to their email (why doesn’t she use her desktop when in SCIF?) doesn’t fit this scenario … during the campaign she was urged to keep in contact with thousands via a BB … once she got the hang of it she was hooked … now everyday [sic], she feels hamstrung because she has to lock her BB up.”

  When the NSA wasn’t receptive, long-time Clinton aid and BlackRock crony Cheryl Mills tried her hand at convincing security officials to find a work around for Clinton’s BlackBerry but she too was rebuffed. “The department’s designated NSA liaison, whose name was redacted from the documents, expressed concerns about security vulnerabilities inherent with using BlackBerry devices for secure communications or in secure areas,” AP recounts, adding that “Clinton began sending work-related emails through private accounts soon after, in March 2009.”

  Or so the story goes. In fact, however, Clinton may have begun using the private server housed in her basement before March. And while there’s some ambiguity, that would seem to contradict statements she made under oath.

  “Conservative legal watchdogs have discovered new emails from Hillary Clinton’s private email server dating back to the first days of her tenure as secretary of State,” The Hill reports, referencing newly released messages turned up by Judicial Watch. “The previously undisclosed February 2009 emails between Clinton from her then-chief of staff, Cheryl Mills, raise new questions about the scope of emails from Clinton’s early days in office that were not handed over to the State Department for recordkeeping and may have been lost entirely.” Here, for instance, is a message dated February 13 that appears to reference the meeting Mills had with the NSA:

  

  Just to clarify, this is a problem because Clinton’s campaign has contended that she did not use the personal account prior to March and the publicly released e-mails begin on March 18. 

  Again, there’s some ambiguity here. “[Clinton] has previously acknowledged that she emailed with department officials before March 18, 2009, the date of the first email in the collection that former Secretary Clinton provided to the Department in December 2014,” a State Department official said last week. “Former Secretary Clinton has also indicated that she does not have access to work-related emails beyond those she turned over to the Department.”

  So essentially, the argument is that although there were indeed work related e-mails sent prior to March 18, Clinton could not access them to turn them over – or something. The story keeps changing. And indeed that’s the whole problem. At this point it’s abundantly clear that Clinton would have been far better off telling the truth from the very beginning and the fact that incremental information continues to surface certainly seems to suggest that the former First Lady fully intends to admit only what someone else can prove. That doesn’t exactly inspire much trust.

  “So now we know that, contrary to her statement under oath suggesting otherwise, Hillary Clinton did not turn over all her government emails,” Tom Fitton, the head of Judicial Watch said in a statement. “We also know why Hillary Clinton falsely suggests she didn’t use clintonemail.com account prior to March, 18, 2009 — because she didn’t want Americans to know about her February 13, 2009, email that shows that she knew her Blackberry and email use was not secure.”

  While we would note that there’s a bit of confirmation bias going on there (i.e. Fitton said the messages he uncovered earlier this month were proof that Clinton knew her BlackBerry wasn’t secure and now he says the new e-mails are proof that that proof was indeed proof), Fitton is probably right. Clinton most likely would rather not have been forced to admit that she and Cheryl Mills essentially tried to browbeat the NSA into figuring out how to accommodate the BlackBerrys because the very fact that they had the conversation in the first place suggests Clinton and Mills knew the devices weren’t secure.

  But more importantly, it seems exceedingly unlikely that Clinton couldn’t have turned over the messages from February had she wanted to. That is, how is it that she had access to mail on her private sever from March 18 but not from the beginning of February? Did she permanently delete the messages? And if so, why? 

  Well the FBI intends to find out, because as a new Washington Post piece (which you’re encouraged to read in its entirety) details, the Bureau now has 147 agents on the case. “One hundred forty-seven FBI agents have been deployed to run down leads” WaPo writes, adding that “the FBI has accelerated the investigation because officials want to avoid the possibility of announcing any action too close to the election.”

  While we can always hold out some hope that Clinton will one day be held accountable and that someone, somewhere will dispel with the notion that America’s political aristocracy is above the law, we can’t help but suspect that we’ll never see Hillary Clinton in black and white stripes – unless it’s a pantsuit. 

  

  

  

  

  

• Saudis To "Modernize" Economy As Interbank Rates Surge & Money Supply Collapses At Record Pace

  For the first time since January 2009, 12-month Saudi interbank rates have breached 2.00% – double the 1% lows of August.

  

   

  This 'stress' is also evident in the record pace of collapse of Saudi money-supply.

  

   

   While Riyal forwards have rallied back from extreme bets on devaluation, they remain concerning for Saudi officials who to undertake some deep and fundamental changes to their economy, reforms that no amount of browbeating from organizations like the IMF could induce.

  

  As OilPrice.com's Nick Cunningham details, a new report from The Atlantic Council finds that the extensive decline in oil revenues is focusing minds in Riyadh. The fiscal pressure is forcing “the kingdom’s leadership to modernize the economy,” the report concludes.

  Saudi Arabia ran a fiscal deficit of about $98 billion in 2015, a figure that will decline only slightly to $87 billion this year. That deficit total is also probably closer to $120 billion in reality though, given that the costs from the war in Yemen were not included.

  The fiscal squeeze is forcing some changes. First, the Saudi government is looking at new taxes, including a 5 percent value added tax (VAT). That may seem like a run-of-the-mill austerity measure, but for Saudi Arabia it is a novel proposal: it will be the first tax imposed in the country.

  More to the point, the VAT is illustrative of where Saudi Arabia is heading. The Atlantic Council argues that the kingdom is starting to reform its economy in fundamentally positive ways. Low oil prices are forcing it to rely more upon taxes and less on oil revenues. That would start to make Saudi Arabia less of a “rentier state,” a country that has no need to build much of an economy because resource extraction is so lucrative. Rentier states often suffer from greater corruption and a deeper lack of responsiveness to the needs of the public, since abundant oil revenues mean that the government does not need revenue from its populace.

  Another major shift in Saudi Arabia could be the partial privatization of Saudi Aramco. Prince Mohammed bin Salman made news in early January when he told The Economist that the government was mulling over such a step. There has been a lot of speculation about why an IPO would be staged. Transparency appears to be a top concern. While Aramco routinely publishes operational data, detailing production figures, shipments, and downstream activity, the company reveals very little about its finances. “The most likely explanation for Saudi Aramco’s lack of financial transparency is that it wants to hide how much money is siphoned off to the royal family,” The Atlantic Council report suggests.

  By privatizing some Aramco assets (likely downstream) and cleaning up and publishing data from the company’s books, the Saudi government apparently is showing some recognition that its relationship with the public must change. “Naturally, the royal family is unlikely to find itself cut off from any of the oil benefits to which it is accustomed. However, what is likely to change is that the family will no longer see itself as able to access funds without being held responsible by the Saudi public.”

  Obviously, the downturn in oil prices is not exactly something that the Saudi government is happy about. Although it has about $616 billion in cash reserves, enough to finance its large fiscal deficits for years, Saudi Arabia is burning through those reserves at a rapid clip. In 2014, Saudi Arabia had $746 billion in reserves at its highest point.

  Also, the government’s perennial top concern is social stability. Having to introduce new austerity measures, reduce subsidies, raise some taxes, and generally acknowledge that the country’s luxurious days could be coming to an end, the fall in oil prices presents some new risks. As The Atlantic Council notes in its report, any instability in a country that accounts for 10 percent of the world’s oil production would be felt across the globe.

  Still, the reforms underway are long overdue, and in that sense, there is a silver lining in the crude price crash. In recent years, Saudi Arabia has succeeded in starting to build a more diversified industrial economy, with new facilities producing chemicals, fertilizers, aluminum, cement, and other industrial products. Up until now, however, economic diversification has not gone as far as it could. Part of the reason is that Saudi Arabia, as a “rentier state,” does not tax manufacturing, and thus, has had little incentive to promote its growth. For that matter, it has had little incentive to promote the growth of any non-oil sector of its economy.

  Now, the reforms underway – new taxes, subsidy cuts, and the partial privatization of Saudi Aramco – are making Saudi Arabia “increasingly resemble most modern economic states.”

  However, it is still early days and the reforms are far from assured. “Admittedly, complete change will not come overnight, but it is nonetheless being prodded on by the decline in income,” the report concludes.

  

  

  

  

  

• The US Election 'Shame' Of Thrones

  It appears George R.R. Martin’s best-selling book series has a lot of similarities to the ‘ice’ and ‘fire’ of the current election campaign. Two powerful families (the establishment vs Bernie and Trump) of liars and honest men (and women) playing a deadly game for control of the ‘kingdom’…

   

  

  h/t @g_mastropavlos

  

  

  

  

• Ron Paul: A European PATRIOT Act Will Not Keep People Safe

  Submitted by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

  It was not long after last week’s horrifying bombings in Brussels that the so-called security experts were out warning that Europeans must give up more of their liberty so government can keep them secure from terrorism. I guess people are not supposed to notice that every terrorist attack represents a major government failure and that rewarding failure with more of the same policies only invites more failure.

  I am sure a frightened population will find government promises of perfect security attractive and may be willing to allow more surveillance of their personal lives. They should pause a little beforehand and consider what their governments have done so far to keep them “safe.”

  The government of France, for example, has been particularly aggressive in its Middle East policy. Then-French President Sarkozy was among the most determined proponents of “regime change” in Libya. That operation has left the country in chaos, with much of the territory controlled by an ISIS and al-Qaeda that were not there before the “liberation.” As we learned last week from Hillary Clinton’s emails, Sarkozy and British Prime Minister David Cameron were much more concerned with getting their hands on Libya’s oil after the overthrow of Gaddafi. The creation of a hotbed of terrorism that could easily make its way to Europe was not important. They wanted to secure enormously profitable deals for well-connected French and English energy companies.

  Likewise, European governments have been very active in the five-year, US-led effort to overthrow the Assad government in Syria. This foolish move has boosted both ISIS and al-Qaeda in Syria to the point where they nearly over-ran the country late last year. It has also led millions to flee their war-torn country for a Europe that has opened its doors with the promise of generous benefits to anyone who can make it there. Is it any surprise that so many hundreds of thousands took them up on the offer? Is it any surprise that in this incredible flood of people there may be more than a few who are interested in more than just free housing and a welfare check?

  Europeans should be demanding to know why their governments provoke people in the Middle East with aggressive foreign policies, and then open the door to millions of them. Do their leaders just lack basic common sense?

  Usually the so-called security experts who advise more government surveillance after a terrorist attack have a conflict of interest. They often benefit when the security state is given a bigger budget. Insecurity is the bread-and-butter of the security “experts.” But why is it that after a terrorist attack, governments are rewarded with bigger budgets and more power over people? Shouldn’t failure be punished instead of rewarded?

  As in the United States, the security crisis in Europe is directly tied to bad policy. Until bad policy is changed, no amount of surveillance, racial profiling, and police harassment can make the population safer. Europeans already seem to understand this, and as we have seen in recent German elections they are abandoning the parties that promise that the same old bad policies will this time produce different results. Hopefully Americans will also stand up and demand a change in our foreign policy before bad policy leads to more terrorist violence on our shores.

  

  

  

  

  

• Japanese Retail Sales Plunge Most Since 2010

  Just one more cut in rates more negative and just a little more ETF buying and bond purchases and we are sure the Japanese will start spending as wages rise…

   

  4th monthly decline in a row and absent the tsunami and tax-hike reaction, this is the worst drop since Dec 2010…

  

   

  At what point do you just admit failure?

  

  

  

  

  

• Full Metal Retard Part Deux: CIA-Backed Rebels Now At War With Pentagon-Armed Fighters In Syria's Aleppo

  It would be difficult to find a program that better exemplifies the word “failure” than the Pentagon’s “train and equip” effort in Syria.

  Last May, US Central Command issued a hilariously absurd press release outlining what was quite obviously going to be a disastrous effort to arm rebel fighters. “The US military and partner forces have begun training the initial class of appropriately vetted Syrian opposition recruits this week to support the effort to degrade and ultimately defeat ISIL in Syria,” the PR read.

  The idea was to field a contingent of more than 5,000 fearsome warriors by the end of the year.

  

  (File photo: Dec. 17, 2012 Syrian rebels attend a training session in Maaret Ikhwan near Idlib, Syria)

  Long story short, the effort was a fiasco – a complete debacle – a hilarious screwup. First, Colonel Nadim al-Hassan and an unknown number of other fighters from “Division 30” were kidnapped in the Aleppo countryside in July. “A senior U.S. defense official confirmed the snatched fighters had gone through the initial vetting process to receive training in Turkey,” The Daily Beast wrote at the time. “But then, for reasons that remain unclear, they traveled to Syria before they were ready to do battle with ISIS.” Subsequently, al-Nusra simply arrested them at a checkpoint near Zahart al-Malkia.

  “We warn soldiers of (Division 30) against proceeding in the American project,” the al-Qaeda affiliate said in a statement distributed online. “We, and the Sunni people in Syria, will not allow their sacrifices to be offered on a golden platter to the American side.

  As humiliating as that most certainly was, it got far, far worse. In late September, rumors circulated that Division 30 commander Anas Ibrahim Obaid had defected to al-Nusra after he disappeared in Aleppo.

  Reports since yesterday claim US-backed leader Anas Obaid has betrayed US & handed weapons to Jabhat al-Nusra #Syria pic.twitter.com/yTZqVT3CI0

  — Charles Lister (@Charles_Lister) September 22, 2015

  Apparently, Obaid entered Syria from Turkey the day before with some 70 new graduates of the US program and a dozen or so four-wheel vehicles equipped with machine guns and ammunition. Although there are competing accounts as to what exactly happened next, Division 30 ultimately handed over all of the ammunition and the pickup trucks to al-Nusra in exchange for “safe passage.”

  “They handed over a very large amount of ammunition and medium weaponry and a number of pick-ups,” one Abu Fahd al-Tunisi, an al-Nusra member, said on Twitter. “A strong slap for America… the new group from Division 30 that entered yesterday hands over all of its weapons to Jabhat al-Nusra after being granted safe passage,” he added.

  Yes, “a strong slap for America” that came just days after “a strong slap” for taxpayers who on September 16 learned that only “four or five” graduates of the $500 million program were still fighting in Syria.

  The program was understandably mothballed a few weeks later, but that doesn’t mean US-trained forces didn’t continue to rack up embarrassing battlefield losses to al-Nusra. In fact, it was exactly two weeks ago that al-Nusra took over Maarat Numan from Division 13 (one of the first rebel groups to receive US-made TOWs), confiscating anti-tank missiles, armored vehicles, a tank, and other arms in the process. “We congratulate [al-Nusra chief Mohammad] al-Jolani on this conquest!” Division 13’s leadership exclaimed, sarcastically on Twitter.  

  ????? #????_?????? ???? ??????? ????? ?????? ???????
  ????? ?? ???????? ??? ?????? ?? ????? ??? ???? ???
  ?????? ???????? ??? ????? !

  — ?????? 13 (@13alferqa13) March 13, 2016

  Throw in the fact that the FSA – not to mention all the other “moderate” rebels fighting in and around Aleppo – just got finished having their proverbial asses handed to them by Russia and Hezbollah and you’d think things couldn’t get much sillier for the Pentagon.

  But you’d be wrong. 

  As The LA Times reports, Pentagon-armed Kurdish units (so these are different fighters from those involved in “train and equip”) are now engaging in firefights with CIA-armed forces in what is surely the most ridiculous example of US strategy gone horriby (and hilariously) awry to date. 

  “Syrian militias armed by different parts of the U.S. war machine have begun to fight each other on the plains between the besieged city of Aleppo and the Turkish border, highlighting how little control U.S. intelligence officers and military planners have over the groups they have financed and trained in the bitter five-year-old civil war,” the Times writes. “The fighting has intensified over the last two months, as CIA-armed units and Pentagon-armed ones have repeatedly shot at each other while maneuvering through contested territory on the northern outskirts of Aleppo, U.S. officials and rebel leaders have confirmed.” Here’s more: 

  In mid-February, a CIA-armed militia called Fursan al Haq, or Knights of Righteousness, was run out of the town of Marea, about 20 miles north of Aleppo, by Pentagon-backed Syrian Democratic Forces moving in from Kurdish-controlled areas to the east.

   

  “Any faction that attacks us, regardless from where it gets its support, we will fight it,” Maj. Fares Bayoush, a leader of Fursan al Haq, said in an interview.

   

  Rebel fighters described similar clashes in the town of Azaz, a key transit point for fighters and supplies between Aleppo and the Turkish border, and on March 3 in the Aleppo neighborhood of Sheikh Maqsud.

   

  The attacks by one U.S.-backed group against another come amid continued heavy fighting in Syria and illustrate the difficulty facing U.S. efforts to coordinate among dozens of armed groups that are trying to overthrow the government of President Bashar Assad, fight the Islamic State militant group and battle one another all at the same time.

   

  At first, the two different sets of fighters were primarily operating in widely separated areas of Syria — the Pentagon-backed Syrian Democratic Forces in the northeastern part of the country and the CIA-backed groups farther west. But over the last several months, Russian airstrikes against anti-Assad fighters in northwestern Syria have weakened them. That created an opening which allowed the Kurdish-led groups to expand their zone of control to the outskirts of Aleppo, bringing them into more frequent conflict with the CIA-backed outfits.

  The reference to “Kurdish-led” groups is a nod to the Syrian Democratic Forces (SDF), a make-believe alliance between the YPG and “Syrian Arabs.” As we noted last autumn in our classic post “Full Metal Retard: US Launches ‘Performance-Based’ Ammo Paradrop Program For Make-Believe ‘Syrian Arabs’“, there is no such thing as the SDF. The US was looking for a way to arm the YPG without enraging Erdogan, and so Washington tried to say that the Kurds had in fact joined forces with moderate Arabs in an ad hoc anti-Assad coalition. The Pentagon then promptly dropped 50 tons of ammo into the middle of the desert on pallets for the Kurds to retrieve (Erdogan saw right through the ruse, but that’s another story). “The group is dominated by Kurdish outfits known as People’s Protection Units or YPG,” the Times goes on to note. “A few Arab units have joined the force in order to prevent it from looking like an invading Kurdish army, and it has received air-drops of weapons and supplies and assistance from U.S. Special Forces.”

  Of course none of this should surprise anyone. The Kurds are looking to bridge the territory they control east of the Euphrates along the Syrian-Turkish border with that which they control in Aleppo and that means moving into the Azaz corridor (i.e. the grey area between the purple areas on the map below).

  

  The Kurd’s recent move to declare federalism will only make the push to unite their territory in northern Syria more urgent. 

  What makes this especially absurd is that Erdogan is firing on the YPG in and around Azaz. And by “YPG” we mean the Pentagon-backed “SDF.” So summing up, you have the Pentagon-backed Kurds fighting CIA-backed Islamists in an area where US-ally Erdogan is firing on the same Pentagon-backed Kurds.

  And believe it or not, that’s not the punchline. The punchline is that Obama is considering restarting the train and equip program which would mean that in addition to the Pentagon-backed Kurds fighting in close proximity to and sometimes against CIA-backed rebels, you’d have a separate group of Pentagon-backed fighters operating in the very same area and everyone would be dodging artillery fire from the Turkish army. 

  Perhaps an unnamed US official who spoke to the LA Times summed it up best: “This is complicated.”

  *  *  *

  

  

  

  

• Is Trump Wrong About A Border Wall? One Stunning Chart Has The Answer

  Submitted by Jacob Bojesson via DailyCaller.com,

  Several European countries have erected fences to keep migrants out, and, according to the numbers, every case appears to have a large impact.

  Hungary was a popular pathway for refugees on their way to Germany during the fall. When the daily illegal border crossings were at 7,000 per day, Prime Minister Viktor Orban decided to erect a fence along the border to Serbia and Croatia.

  The result speaks for itself:

  

   

  Illegal border crossings in Hungary in October, 2015. (Hungarian Police/The Daily Caller News Foundation)

   

  When the fence went up Oct. 17, the influx went down to 870 from 6,353 only a day earlier. Illegal border crossing were steadily below 40 per day throughout the rest of the month. The number picked up slightly in February, after migrants destroyed part of the fence, but it remains in the low hundreds.

   

  Another successful example is Macedonia — the first step on the Balkan route, which separates Greece from the rest of the EU. Macedonia had more than 60,000 migrants enter the country in January. The migrant influx was cut significantly, leaving tens of thousands stranded in Greece. The desperation among refugees led to clashes with Macedonian military in late February.

   

  

  Germany’s rising anti-immigration party, Alternative fur Deutschland (AfD), proposed a fence along its border in March.

  AfD leader Joerg Meuthen mentioned several examples where fences work, particularly in Spain, where it forces North African migrants to take a long detour to get to Europe.

  “They have to go around the Mediterranean” to find a way in, Meuthen said at a rally, according to news agency AFP. “Yes, fences have an impact.”

  *  *  *

  Of course, as we previously noted that it wasn't just the fence that kept them out of Hungary… it was the tear gas, water cannons, and baton beatings AT the fence.

  

  

  

  

  

• 2016 US Presidential Election Voter's Guide

  in this day-and-age of infinitesimally short attention spans, we thought the following flowchart would provide today’s Millennial voter a quick-and-dirty solution for making their decision come November…

   

  

   

  Source: The Burning Platform h/t Joe

  

  

  

  

• US Drops Case Against Apple After FBI Successfully Hacks Terrorist's iPhone

  Dear Tim Cook, the DoJ and FBI will no longer require your assistance in unlocking the iPhone of Syed Farook who, along with his wife Tashfeen Malik, murdered more than a dozen people at an employee holiday party in San Bernardino last December. 

  • U.S. DROPS APPLE CASE AFTER SUCCESSFULLY ACCESSING IPHONE DATA

  As we outlined last week, Israel’s Cellebrite, a provider of mobile forensic software, was set to assist the Feds in their attempt to unlock the iPhone. “The government has now successfully accessed the data stored on Farook’s iPhone and therefore no longer requires the assistance from Apple,” the Justice Department said in a filing (embedded below). Here’s the mainstream media line from The New York Times:

  Yet law enforcement’s ability to unlock an iPhone through an alternative method raises new uncertainties, including questions about the strength of Apple’s security on its devices. The development also creates potential for new conflicts between the government and Apple. Lawyers for Apple have previously said that the company would want to know the method used to crack open the device. The government may make that method classified.

   

  “From a legal standpoint, what happened in the San Bernardino case doesn’t mean the fight is over,” said Esha Bhandari, a staff attorney at the American Civil Liberties Union. She noted that the government generally goes through a process whereby it decides whether to disclose information about certain vulnerabilities so that manufacturers can patch them.

   

  “I would hope they would give that information to Apple so that it can patch any weaknesses,” she said, “but if the government classifies the tool, that suggests it may not.”

  Right. Or this could all be nonsense. That is, Apple may have just made America an unwitting participant in an iPublicity stunt, as it were. As we suggested just five days ago, “the entire Apple ‘stand’ for privacy and consumer rights might be one big theatrical spectacle as both parties involved clearly were aware the iPhone can be penetrated with the right tools.” Here’s AP: 

  The FBI says it successfully used a mysterious technique without Apple’s help to break into an iPhone linked to the gunman in a California mass shooting.

   

  The surprise development effectively ends a pitched court battle between Apple and the Obama administration.

   

  The government told a federal court Monday without any details that it accessed data on gunman Syed Farook’s iPhone and no longer requires Apple’s assistance. Farook and his wife died in a gun battle with police after killing 14 people in San Bernardino, California, in December.

  Apple did not immediately comment on the development.

   

  A U.S. magistrate last month ordered Apple to provide the FBI with software to help it hack into Farook’s work-issued iPhone. The order touched off a debate pitting digital privacy rights against national security concerns.

  So just like that, it’s all over. No hard feelings. And all of this on the heels of what is almost sure to go down as one of the biggest product launch flops in company history. The timing of it all certainly leaves us with more questions than answers.

  306201341 DOJ Requests SB iPhone Order Vacated

  

  

  

  

  

• Deutsche Bank: "We Expect The S&P To Be Between 1925 To 2100 Until The Election"

  Deutsche Bank may have gotten the corporate bond QE from the ECB that it so desired (even if it means another drop in negative rates) even if that did not help its stock rebound anywhere near to pre-crash levels, and its economist department may be gripped by a bout of raging schizhophrenia as erstwile permabull Joa LaVorgna is now one of the market’s bigger bears contrasted with super optimistic DB strategist Torsten Slok (who is seemingly unaware of what his year end bonus was) but that doesn’t prevent the bank from having a very outlook of where the market will be come the November general election, namely “range bound between 1925 to 2100.”

  Here is the latest outlook from DB’s strategist David Bianco

  We expect the S&P 500 to be range bound between 1925 to 2100 until after the US general election. We do not expect the S&P to fall back into correction territory as a double-dip correction already happened and it would likely take clear signs of an impending US recession or a new global shock to cause renewed investor panic.

   

  While April into May is usually a strong period for S&P 500 performance, we think upside is capped given that 1Q S&P EPS will be down y/y and likely sequentially, Fed speak is likely to be more hawkish especially upon further market gains, Brexit vote risk, and the usual summer softness especially given Presidential campaign headline and geopolitical risks.

   

  We are more comfortable that the dollar will not surge nea -term given the Fed lowered its 2016-2017 rate forecasts and the ECB and others acknowledge the limited benefits of negative interest rates and currency devaluation. However, we do not expect the dollar to fall as nothing like the Plaza Accord of 1985 has occurred. Moreover, we doubt a strong rebound in commodity prices.

   

  If the S&P 500 doesn’t reach a new low, then Feb 11 2016 marks the trough of this market correction. During this double dip correction, S&P was sold off -14.2% from May 21 2015 to Feb 11 2016 (183 trading days). It has been 28 trading days since the market trough, this compares to 119 average trading days between 5%+ S&P dips since 1960. This is supportive, but summer and fall are often weaker than usual in election years.

  
  

  * * *

  What is unsaid is that if DB’s forecast is just a little too optimistic, and if stocks indeed proceed to tumble, guess which European bank will be scrambling to get a bailout by a very unhappy German taxpayer…

  

  

  

  

  

• Next Came Death: What The Moment Before A Bombing Looks Like

  Belgium. Iraq. Pakistan.

  Each of those countries was rocked by at least one horrific suicide blast last week. In Belgium, it was a crowded airport and metro. In Iraq, a soccer field. In Pakistan, a park popular with women and children.

  The combined death toll from those attacks alone: more than 130.

  Terrorism, by its very nature, is meant to instill fear. That means terrorists must be unpredictable, and to a certain extent indiscriminate in who and what they target. But today’s terror is in some ways fundamentally different in character than that which the world has witnessed in the past. Al-Qaeda, for instance, did not target the World Trade Center because they hated tall buildings and if their sole purpose was to kill 4,000 people, they could have figured out a far simpler way to do it.

  In Bin Laden’s eyes, the towers were an ostentatious symbol of capitalism – a monument to everything the “infidels” stood for, cherished, and sought to force upon the Muslim world. For him, more important than the number of people killed were the indelible images that will forever remain seared in America’s collective consciousness. Although civilized society likes to pretend that the victims will remain in the public’s thoughts and prayers for all eternity, Bin Laden knew that wasn’t true. Rather, he wanted to make sure that the phrase which is so often repeated after a tragedy – i.e. “we will never forget” – actually meant something when it came to his legacy. That necessitated the destruction of symbols, not people. Sure, you can’t make an omelette without breaking a few eggs so “some” (maybe even several thousand) people would have to die, but the final number didn’t matter. It could have been 30, 300, 3,000, or 30,000. The point was to send a message. Does that make it any less horrific or in any way excuse it? Obviously not, but that isn’t the point.

  Many of the attacks we see today cannot be justified by an appeal to the kind of perverse, psychopathic logic that Bin Laden and his ilk so often employed. Bombing women and children at a crowded park in Lahore, killing fans at a soccer match, and targeting civilians standing in line at an airport Starbucks are senseless acts of violence – meaningless even in the minds of the murderous. Consider for instance that before his death, Bin Laden himself derided the brutal, indiscriminate violence employed by Abu Musab al-Zarqawi, the leader of al-Qaeda in Iraq which was the precursor to ISIS.

  None of this is to say that one terrorist is “better” than another, or that the world should long for the days when terrorism “made sense.” Rather, it’s simply to say that now more than ever, tragedy can strike anytime, anywhere. The term “targets” is now meaningless. The question isn’t “who or what should we hit?”, it is “who or what can we hit?”

  With that as the backdrop, consider the following collection of visuals from artist Simon Menner who, after combing through hours of footage from suicide bombs, car bombs and attacks, captured the following images of the very last frame before tragedy struck.

  

  

  

  

  

  

  

  

  

  

  

  

  From The Washington Post:

  “It is very absurd, but apparently the war needs a PR department to function,” artist Simon Menner said. Many new battlefields and weapons of war — drones, surveillance, snipers, cyberterrorism — are invisible and rely even more on media to affirm their existence and threat.

   

  Menner’s ongoing project, “Last Frame Before Blast,” dwells in invisible warfare. In combing through hours of found footage from suicide bombs, car bombs and attacks around the world, what he found most striking was the moment before a blast. A Russian street scene–the white car is about to blow up. A government office in Sri Lanka–a woman reaches into her sari to detonate her explosive vest.

   

  A photograph takes a split second in time, and stretches it into eternity. For those caught in Tuesday’s horrific attacks in Belgium, many would probably like nothing more than to return to that last moment of normalcy before the bombs shredded the Brussels airport.

   

  Menner’s frames captures a bit of this wistfulness. But they are also heavily pregnant with anxiety about where the blast will come from, and the knowledge that everything is about to change. “Once you perceive the threat it is almost indistinguishable from the real threat,” Menner said via email.

  

  

  

  

• U.S. Lifted The Crude Oil Export Ban, And Exports Went… Down

  Submitted by Charles Kennedy via OilPrice.com,

  Just over three months after the authorities lifted the four-decade ban on crude oil exports, the U.S. has actually exported less this year than it did over the same period the year before, when the ban was still in place.

  According to Clipper Data market intelligence cited by the Financial Times, we’ve seen a 5 percent decline in U.S. crude oil export volumes since the beginning of this year. The data suggests that on average we are exporting (waterborne) 325,000 barrels per day now, compared to 342,000 barrels per day during the first months of 2015.

  And there’s no official data yet—not since the beginning of this year, when the U.S. Energy Information Administration (EIA) noted that during the week ending 22 January, the U.S. had exported just shy of 400,000 barrels of oil, which again was 25 percent less than what was exported for the same week in 2014.

  An oil tanker that reached a French port in January was the first post-ban delivery of U.S. crude oil, but things haven’t really picked up pace since then.

  January’s cargoes, totaling about 11.3 million barrels, marked a 7 percent decline from U.S. crude exports in December, according to data by the U.S. Census Bureau. Shipments during January went to Curacao and France, in addition to Canada, the primary destination. The total number of tankers that have set sail with U.S. crude oil will not be known until comprehensive data on February’s shipments is released by the U.S. Census Bureau.

  The immediate beneficiaries of the ban suspension are gas and oil companies such as Chevron and Exxon Mobil—among the most tireless lobbyers against the ban—and oil trading giants such as Vitol Group BV and Trafigura Ltd Pet.

  Europe and Asia are flooded with oil from Russia and the Middle East, though the first two shipments to leave the U.S. post-export ban went to Europe: one to Germany and the other to France, to be used in a refinery in Switzerland. Dutch media outlets reported in January that a tanker from Houston had reached Rotterdam port, but this remains just a drop in the global export bucket.

  In Asia, even China’s state-run Sinopec—the world’s second-largest refiner—has imported a consignment of U.S. oil, according to a Reuters source. Japan's Cosmo Oil was the first Asian buyer of U.S. oil, purchasing some 300,000 barrels of U.S. crude in mid-January, which will be delivered to its refineries in mid-April.

  The very first South American country that will import U.S. crude oil is Venezuela. In early February, Venezuela’s state-run oil company PDVSA imported a 550,000-barrel cargo of West Texas Intermediate (WTI) through its U.S.-based Citgo Petroleum affiliate. Venezuela started importing foreign crudes in 2014 amid a fall in its own production – buying mostly Angolan and Nigerian light grades.

  WTI is also expected to be exported to Israel, where Swiss commodities house Trafigura will ship some 700,000 barrels. Atlantic Trading & Marketing, the U.S. trading unit of French Total SA, has been planning an export cargo of U.S. crude from Cushing.

  Also, earlier this month, Exxon became the first U.S. oil company to export U.S. crude, sending a tanker from Texas to a refinery it owns in Italy.

  However, storage is now at the highest level in at least a decade. U.S., crude storage levels hit 487 million barrels in early November, closing in on the 80-year high of 518 million barrels in the last week of February. According to the EIA, about 60 percent of the U.S. working storage capacity is filled.

  Globally, the picture isn’t much better, with the International Energy Agency (IEA) saying that 1 billion barrels were added to storage in 2015 alone. OPEC has reported that crude oil stockpiles in OECD countries currently exceed the running five-year average by 210 million barrels.

  

  

  

  

  

• It's Official: The Oil Surge Was Driven By The Biggest Short-Squeeze Ever

  Two months ago, just before crude dropped to 13 year lows, we warned oil traders that there is “a constant short squeeze threat” because “oil shorts are at all-time highs“, adding that “we have seen extreme short positioning building up in the oil futures market. The quantity of short positions opened is at an all-time high for Brent, and still high for WTI futures.”

  We also warned that “a positive surprise could happen quite sharply, as short positions are likely to be squeezed by a profit-taking move. On WTI, the in-the-money short positions are really dominating at the front end of the curve while out-of-the-money long positions are dominating at the long end of the curve: the front end of oil curve could thus be more exposed to some profit-taking.”

  It was, and just a few days later, the algos took this warning to heart and, courtesy of the most recurring headline (that of a “farcical” oil production freeze) as a recurring catalyst, unleashed an historic short squeeze. Actually make that a record short squeeze.

  Wait, that’s impossible: surely it was more than just shorts covering and oil rose because actual longs were piling in, one could say.

  One would be wrong, and it is now official: as crude soared 50% since Feb. 11, Bloomberg writes, the number of bets on increased prices has barely budged. “Instead, the upward pressure on prices appears to have come from traders cashing out of bearish wagers at an unprecedented pace. The liquidation of short positions during the last seven weeks covered by data from the U.S. Commodity Futures Trading Commission was the largest on record.“

  “The rally has come from shorts getting scared out of their positions, and you’re not seeing a lot of money coming in on the long side,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. “It really calls into question the fortitude and staying power of the rally.”

  The details: “short positions on West Texas Intermediate crude, or bets that prices will fall, have dropped by 131,617 contracts since Feb. 2, the biggest liquidation in CFTC data going back a decade. To close out a bearish position, traders buy back futures and options, putting upward pressure on prices. In the same period, bullish wagers fell by 971. In the past 10 years, there have been only two other seven-week short-covering streaks, CFTC data show. The first started in September 2009 and the second in December 2012. Both were much smaller than the recent one and were accompanied by oil rallies.”

  

   

  It gets better: as we showed previously, the irony is that as oil futures shorts were squeezed out, ETF longs actually declined instead of growing as absolutely nobody – except those who have to buy-in – believes this quote-unquote rally.

  

   

  Bloomberg notes that the rebound faltered a day after WTI prices touched a four-month high of $41.45 a barrel on March 22, tumbling 4 percent in New York after government data showed U.S. crude supplies surged the prior week to the highest level since 1930.

  Perhaps there are no more shorts left to squeeze, in which case watch out to the downside: “When energy markets get loaded to one side of the boat like that, you can have vicious reversals,” said Kilduff. And vice versa.

  

  

  

  

  

• Dallas Fed Respondent Sums It Up: "Anyone Saying We're Not In Recession Is Peddling Fiction"

  Headlines will crow of the seasonally-adjusted 'beat' of expectations for the Dallas Fed survey (-13.6 vs -25.8 exp) but this is the 15th month in contraction (below 0) – something only seen in recession. Scratching below the surface we see employees, workweek, and capex all in contraction and forward expectations for new orders and employment tumbled. Perhaps that reality is what drove one respondent to rage, "anyone who says the economy is not in recession is peddling fiction."

   

   

  

   

  The Respondents…

  The instability of the domestic oil and gas exploration and production activity continues to wreak havoc on demand for our products. 

   

  Uncertainty is the main issue regarding oil pricing and refining cash flows.

   

  The positive March versus February comparison (as well as the six-months-ahead view) is due entirely to an extremely poor February. Volume remains well below monthly volume in the fourth quarter. Headcount was reduced in February, allowing remaining staff to return to a 40-hour workweek.

   

  We are expanding due to longer-term strategy. While we are spread among a plethora of general manufacturing nationwide, we are experiencing a major falloff of inquiries and orders in Texas directly related to the restricted price of oil.

   

  As a long-lead-time capital equipment manufacturer, we are working off backlog. Anyone who says the economy is not in recession is peddling fiction.

   

  It appears the oil and gas business won't be back for 12–18 months. We are actively pursuing other industries, with varying degrees of success depending on the industry. We may very well survive.
  We are looking into new markets as the deepwater drilling is pretty slow.

   

  We are generally just bumping along in a weak macro environment.

   

  Again, the dollar is too high affecting several of our customers, therefore creating a significant impact on our business. The uncertainty in business is huge, and everyone is holding cash including ourselves. We are not making investments on growth or capital expenditures at this time. Oil prices are also creating a major problem in the oil and gas industry, with consolidations and layoffs happening very frequently.

   

  We expect the weakening in the energy sector to ripple through to our primary end users in Texas. So far activity statewide has maintained some strength, but we are cautious that it will start to have a broader impact later in the year and into 2017. The degree to which the Texas economy holds up to the trouble in energy will be a testament to the alleged diversification in the state. We are preparing for the worst and hoping for better.

   

  Our export business continues to be our biggest challenge. The strong dollar will be an obstacle to growth for the foreseeable future. We are simply growing less competitive to our European challengers.

   

  One of our customers has changed its terms, which has caused us to lose coolers at the front of the store. The coolers are really the only place in the store where our gross margin exceeds our cost of service. Couple this giant hit with a general 1–3 percent long-term decline in soft drink sales, and the next year looks bleak.

   

  We have been told that companies are cutting their advertising budgets that affect printing. We are getting more phone calls from press and bindery operators looking for work. I am hoping this slowdown is short lived and that the economy improves in the next few months.

   

  Our turnover in the past year has been triple of the previous nine years: competitors poaching employees, retirements, people we put a ton of training into for two or three years moving out of state for family reasons, and other reasons. We're trying to build staff for new customers coming on board but can’t seem to hold our gains. It is very frustrating. I'm more optimistic about the year than I was in January.

   

  We have picked up in March but only because February was so dismal. We were super slow with many 3.5 to four-day workweeks in the plant. Activity is trying to pick up, and it appears we will be busier in the coming months than we have been.

  But apart from that, everything is awesome.

  

  

  

  

  

• 2015 Ends With a Stratospheric P/E Multiple Of 23x

  The Q4 earnings season is over and the numbers are in the bag. The GAAP numbers that is, not the non-GAAP garbage that lately everyone from Warren Buffett, to Factset, even to the SEC (and of course this site since 2013) has been bashing.

  We wonder if they will continue bashing the GAAP numbers once they learn what they are, because as the charts below show, the earnings carnage on a real, unadjusted is simply unprecedented. Case in point: Q4 GAAP EPS just dropped even more from our previous estimate, and using IBES data, it is now down from 21 to 19.7, the lowest quarterly print since Q1 2010 when GAAP earnings were just 19.4 (and when the S&P was roughly half where it is now).

  

   

  What about on an LTM and full year basis? As the chart below shows, the growing trailing 12 month divergence in the past few quarters between GAAP and non-GAAP has grown to proportions not seen since the financial crisis. What one can say with absolute certainty is that unless oil rebounds, and does so fast, all those “one-time, non-recurring” pro forma addbacks which have kept the non-GAAP EPS of the S&P500 flat while GAAP has plunged, will very soon be revised sharply lower.

  

   

  Which brings us to the full year snapshot: what if Buffett, and Factset, and the SEC (and of course this website) are right and GAAP is the proper way of looking at earnings? Then we have a big problem, because instead of the 118.0 in 2015 non-GAAP S&P earnings, which translate into a P/E multiple of 17.3x as of today’s 2037 market close, the real, GAAP EPS of just 88.9 for the full year 2015 means the P/E multiple is now a gargantuan 22.9x!

  

  It also means that GAAP earnings for the broader market are at a level last seen in 2010 when, as noted earlier, the S&P 500 was trading at about half where it closed today.

  

  

  

  

  

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• Does The United States Still Exist?

  Authored by Paul Craig Roberts,

  An address delivered to the Libertarian Party of Florida on March 23, 2016 in Destin, Florida

  To answer the question that is the title, we have to know of what the US consists. Is it an ethnic group, a collection of buildings and resources, a land mass with boundaries, or is it the Constitution. Clearly what differentiates the US from other countries is the US Constitution. The Constitution defines us as a people. Without the Constitution we would be a different country. Therefore, to lose the Constitution is to lose the country.

  Does the Constitution still exist? Let us examine the document and come to a conclusion.

  The Constitution consists of a description of a republic with three independent branches, legislative, executive, and judicial, each with its own powers, and the Bill of Rights incorporated as constitutional amendments. The Bill of Rights describes the civil liberties of citizens that cannot be violated by the government.

  Article I of the Constitution describes legislative powers. Article II describes executive powers, and Article III describes the power of the judiciary. For example, Article I, Section 1 gives all legislative powers to Congress. Article I, Section 8 gives Congress the power to declare war.

  The Bill of Rights protects citizens from the government by making law a shield of the people rather than a weapon in the hands of the government.

  The First Amendment protects the freedom of speech, the press, and assembly or public protest.

  The Second Amendment gives the people the right “to keep and bear arms.”

  The Third Amendment has to do with quartering of soldiers on civilians, a large complaint against King George III, but not a practice of present-day armies.?

  The Fourth Amendment grants “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures” and prevents the issue of warrants except “upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” The Fourth Amendment prevents police and prosecutors from going on “fishing expeditions” in an effort to find some offense with which to charge a targeted individual.

  The Fifth Amendment prohibits double jeopardy, self-incrimination, the taking of life, liberty, or property without due process and the prohibition of seizing property without just compensation.

  The Sixth Amendment guarantees speedy and public trial, requires that a defendent be informed of the charge against him and to be confronted with the witnesses, to present witnesses in his favor, and to have the assistance of an attorney.

  The Seventh Amendment gives the right of trial by jury to civil suits.

  The Eighth Amendment prevents excessive bail and cruel and unusual punishments.

  The Ninth Amendment says that the enumeration of certain rights in the Constitution does not deny or disparage others retained by the people. In other words, people have rights in addition to the those listed in the proscriptions against the government’s use of abusive power.

  The Tenth Amendment reserves the rights not delegated to the federal government to the states.

  The Tenth Amendment is a dead letter amendment. The Third Amendment protects against an abandoned abusive practice of government. The Seventh Amendment is still relevant as it allows damages in civil suits to be determined by a jury, once a protection against unfairness and today not always the case.

  The other seven amendments comprise the major protections of civil liberty. I will examine them in turn, but first let’s look at Section 1 and Section 8 of Article I. These two articles describe the major powers of Congress, and both articles have been breached. The Constitution’s grant of “all legislative powers” to Congress has been overturned by executive orders and signing statements. The president can use executive orders to legislate, and he can use signing statements to render sections of laws passed by Congress and signed by the president into non-enforced status. Legislative authority has also been lost by delegating to executive branch officials the power to write the regulations that implement the laws that are passed. The right that Section 8 gives to Congress to declare war has been usurped by the executive branch. Thus, major powers given to Congress have been lost to the executive branch.

  The First Amendment has been compromised by executive branch claims of “national security” and by extensive classification. Whistleblowers are relentlessly prosecuted despite federal laws protecting them. The right of assembly and public protest are overturned by arrests, tear gas, clubs, rubber bullets, water cannons, and jail terms. Free speech is also limited by political correctness and taboo topics. Dissent shows signs of gradually becoming criminalized.

  The Fourth Amendment is a dead letter amendment. In its place we have warrantless searches, SWAT team home invasions, strip and cavity searches, warrantless seizures of computers and cell phones, and the loss of all privacy to warrantless universal spying.

  The Fifth Amendment is a dead letter amendment. The criminal justice system relies on self-incrimination as plea bargains are self-incrimination produced by psychological torture, and plea bargains are the basis of conviction in 97% of all felony cases. Moreover, physical torture is a feature of the “war on terror” despite its illegality under both US statute and international law and is also experienced by inmates in the US prison system.

  The Fifth Amendment’s protection against deprivation of life, liberty, and property without due process of law has been lost to indefinite detention, executive assassination, and property takings without compensation. The Racketer Influenced Corrupt Organizations Act (RICO) passed in 1970. The act permits asset freezes, which are takings. The Comprehensive Forfeiture Act passed in 1984 and permits police to confiscate property on “probable cause,” which often means merely the presence of cash.

  The Sixth Amendment is a dead letter amendment. Prosecutors routinely withhold exculpatory evidence, and judges at prosecutors’ requests have limited attorneys’ ability to defend clients.The “war on terror” has introduced secret evidence and secret witnesses, making it impossible for a defendant and his attorney to defend against the evidence.

  The Eighth Amendment’s prohibition of excessive bail and torture are routinely violated. It is another dead letter amendment.

  It is paradoxical that every civil liberty in the Bill of Rights has been lost to a police state except for the Second Amendment, the gun rights of citizens. An armed citizenry is inconsistent with a police state, which the US now is.

  Other aspects of our legal protections have been overturned, such as the long standing rule that crime requires intent. William Blackstone wrote: “An unwarrantable act without a vicious will is no crime at all.” But today we have crimes without intent. You can commit a crime and not even know it. See for example, Harvey Silverglate, Three Felonies A Day: How the Feds Target the Innocent.

  Attorney-client privilege has been lost. The indictment, prosecution, and imprisonment of defense attorney Lynne Stewart is a good example. The DOJ prevailed on her to defend a blind Muslim regarded by the DOJ as a “terrorist.” She was informed that “special administrative measures” had been applied to her client. She received a letter from the federal prosecutor informing her that she and her client would not be permitted attorney-client privilege, and that she was required to permit the government to listen to her conversations with her client. She was told that she could not carry any communications from her client to the outside world. She regarded all this as illegal nonsense and proceeded to defend her client in accordance with attorney-client privilege. Lynne Stewart was convicted of violating a letter written by a prosecutor as if the prosecutor’s letter were a law passed by Congress and present in the US code. Based on a prosecutor’s letter, Lynne Stewart was sentenced to prison. No law exists that upholds her imprisonment.

  Our civil liberties are often said to be “natural rights” to which we are entitled. However, in historical fact civil liberty is a human achievement that required centuries of struggle. The long struggle for accountable law that culminated in the Glorious Revolution in England in the late 17th century can be traced back to Alfred the Great’s codification of English common law in the 9th century and to the Magna Carta in the early 13th century. Instead of issuing kingly edicts, Alfred based law on the traditional customs and behavior of the people. The Glorious Revolution established the supremacy of the people over the law and held the king and government accountable to law. The United States and other former British colonies inherited this accomplishment, an accomplishment that makes law a shield of the people and not a weapon in the hands of the state.

  Today law as a shield of the people has been lost. The loss was gradual over time and culminated in the George W. Bush and Obama regime assaults on habeas corpus and due process. Lawrence Stratton and I explain how the law was lost in our book, The Tyranny of Good Intentions. Beginning with Jeremy Bentham in the late 18th century, liberals saw the protective shield of law as a constraint on the government’s ability to do good. Bentham redefined liberty as the freedom of government from restraint, not the freedom of people from government. Bentham’s influence grew over time until in our own day, to use the words of Sir Thomas More in A man for All Seasons, the law was cut down so as to better chase after devils.

  • We cut down the law so that we could better chase after the Mafia.
  • We cut down the law so that we could better chase after drug users.
  • We cut down the law so that we could better chase after child abusers.
  • We cut down the law so that we could better chase after “terrorists.”
  • We cut down the law so that we could better chase after whistleblowers.
  • We cut down the law so that we could better cover up the government’s crimes.

  Today the law is cut down. Any one of us can be arrested on bogus charges and be helpless to do anything about it.

  There is very little concern in legal circles about this. The American Civil Liberties Union (ACLU) does attempt to defend civil liberty. However, just as often the ACLU is not defending the civil liberties in the Bill of Rights that protect us from the abuse of government power, but newly invented “civil rights” that are not in the Constitution, such as “abortion rights,” the right to homosexual marriage, and rights to preferential treatment for preferred minorities.

  An attack on abortion rights, for example, produces a far greater outcry and resistance than the successful attack on habeas corpus and due process. President Obama was able to declare his power to execute citizens by executive branch decision alone without due process and conviction in court, and it produced barely audible protest.

  Historically, a government that can, without due process, throw a citizen into a dungeon or summarily execute him is considered to be a tyranny, not a democracy. By any historical definition, the United States today is a tyranny.

  

  

  

  

  

• Something Just Snapped In The VIX ETF Complex

  As TVIX, the double-levered long VIX ETF unleashed in Nov 2010, decays to record low prices…

  

   

  An unusual (and almost unprecedented) event has occurred. Just as we saw in Gold ETFs, and Oil ETFs, TVIX Shares Outstanding have exploded by a stunning 225% in the last 4 weeks… [the last 3 times TVIX has undeergone such an epic surge in demand marked a major turning point and led a violent surge in VIX]

  

   

  with the largest inflows (bearish bets) on record in the last week…

  

   

  The entire VIX complex is perturbed as the huge bearish TVIX flows contrast with the complacency of the steepest term structure since Nov 2014 (post Bullard-Bounce)…

  

   

  And net speculative positioning at its shortest VIX (most bullish) in 2016…

  

   

  We saw this kind of manic ETF creation recently in Blackrock's Gold ETF, which forced them to halt creation – for lack of supply…

  

   

   

  In the case of the current scramble for TVIX units, forced buying of VIX futures (which explains the steepness of the futures curve) suggests VIX buying pressure is building…

  

  As Barron's adds, volatility is back, but too few investors even know it.

  Most are too focused on the CBOE Volatility Index's extraordinary collapse in recent weeks to 15 from about 28. When the VIX is low, as it is now, it tends to be interpreted as a green light to buy stocks. . .or a sign of investor complacency.

   

  Not enough people realize that the VIX is just a 30-day snapshot of expected returns for the Standard & Poor's 500 index. A more meaningful, if esoteric, indicator is the VIX futures curve, which offers a long-term view of the stock market's perceived risk.

   

  The curve has lately been flat, indicating little risk to owning stocks between now and more distant months. But the futures curve is now "upward sloping," as if sophisticated investors have suddenly regained visibility into what was an opaque stock market.

   

  Nothing bores people more than nerdy derivatives measures, including VIX futures curves. But you should add this volatility gauge to your arsenal of indicators if you trade options or want to be a smarter stock investor.

  Once again it appears the ETF tail is wagging the underlying market 'dog' as hedging with the 'cheapest' instrument – no matter how bad the basis – is the new normal. Remember, options markets are already medium term complacent and longer-term terrified.

  

   

  As detailed previously, the VXV has been around only since 2007. Over that time, the VIX/VXV ratio has dropped to 78% on 4 prior distinct occasions:

  • March 12-20, 2012 – The S&P 500 chopped sideways for a few weeks before falling some 9% over the next 2 months
  • August 13-22, 2012 – The S&P 500 chopped sideways for a few weeks before rallying by as much as some 4% over the next few weeks. 2 months later, the index had lost that entire gain, and another 4%.
  • December 5, 2014 – The S&P 500 immediately dropped 5% over the next 2 weeks before chopping sideways for several months.
  • March 20, 2015 – The S&P 500 dropped 2.5% over the next week before moving sideways for several months.

  Now there is no guarantee that stocks are about to hit an air pocket. However, given the (albeit limited) precedents, the track record in the short to intermediate-term following such readings has not been a positive one. In fact, following the prior 15 days with VIX/VXV readings below 79%, the S&P 500 was lower 3 months later 14 of the days by a median of -3.7%. The only positive return was the 1 point gain following the March 2015 occurrence.

  All in all, this may not be a Defcon 5 level red flag for the market. However, for a rally that has seen scant evidence of exuberance, this is at least one of the first indications of complacency.

  

  

  

  

  

• Condaleeza Rice To Struggling Ukrainians: "Be Thankful You're Not In Liberia"

  Via OrientalReview.org,

  Earlier this month while delivering a public lecture in Kiev, “The Challenges of an Ever-Changing World,” former US Secretary of State Condoleezza Rice made an inspiring remark for anyone who might have been thinking that life in Ukraine was bad:

  “You should go to Liberia where the standard of living is much lower, and then you will be thankful.”

  Ironically, Forbes Ukraine reacted to this with a slightly perplexed analysis that nonetheless led to a conclusion of flawless logic: “Although Liberia has one of the weakest economies in the world, it lags only slightly behind Ukraine with respect to a number of macroeconomic parameters,” and the magazine supported its argument with some anemic statistics (failing however to mention that Liberia’s 85% unemployment rate is far worse than Ukraine’s, even today).

  The rapid deterioration of the Ukrainian economy over the past two post-Maidan years is no longer a taboo topic in the international press (the prominent US academic and former diplomat Nicolai Petro’s recent article in the Guardian made that crystal clear). But to make a long story short, the full picture looks even more depressing:

  People are scrambling to get out of Ukraine. A Kiev-based headhunting agency claims that according to their polls, 70% of the population does not see any future in Ukraine. Ten out of eleven (!!!) Ukrainians are ready to leave the country if offered a job abroad. Forty percent of Kiev’s white-collar workers do not see a secure future for themselves nowadays. Another opinion poll shows that compared to the pre-Maidan period, public pessimism is on the rise. Only 19% of the respondents expected 2016 to bring positive changes for Ukraine (down from 42% in 2013).

  These sentiments are quite understandable if we look at average incomes in Ukraine. According to official data from the finance ministry (as of March 2, 2016), the average salary in Ukraine is only 4,362 hryvnas per month (approximately 145 Euros). The minimum monthly wage is currently set at 1,378 hryvnas (46 Euros). Therefore, the vast majority of working people in Ukraine have to get by on a salary of 2,000-3,000 hryvnas (70-100 Euros) each month. And the number of employed is declining every day. In September 2015, Ukrainian Minister of Social Politics Valery Yaroshenko acknowledged that the unemployment rate had reached its highest point in the history of Ukraine as an independent country, with 23% of young Ukrainians unable to find work (in the parts of the Donetsk region that are controlled by Kiev the jobless rate does approach that of Liberia – 50%!).

   

  

  Flag of Northern Liberia

  Low wages and high unemployment are not the only challenges an ordinary Ukrainian has to cope with. To meet the requirements of the IMF, the Ukrainian government must increase the rates it charges for housing and public utility services at least twice per year. As a result, in January 2016 the average bill per household jumped to 1,250 hryvnas – an 80% increase from 695 hryvnas a year ago. Thus, theoretically (and often factually) a family supported by only one working member and living in a modest apartment might need to survive on the beggarly 128 hryvnas – barely more than 4 Euros (!) – that is left each month after housing and utility costs have been paid! Indeed, taking into account some difference in its latitude (and climate) today’s Ukraine might rightly be called a Northern Liberia!

  Meanwhile the index of commodities prices in Ukraine rose 40.3% in 2015. And since this crisis coincided with a 15% cut in the pensions of retirees who work a side job (this “cost-saving measure” was announced by PM Yatsenyuk in January 2015), clearly the majority of elderly Ukrainians are now facing a disaster. So far they have managed to survive thanks to their personal savings, but that resource is drying up: according to the National Bank, in 2015 Ukrainians sold 2,233 billion USD and bought only 0.684 billion USD. Local experts estimate that Ukrainian citizens will exhaust their personal savings by the end of 2016.

  So it’s no wonder that Ukrainians are leaving their country en masse for Europe, mostly headed to Poland (around 400,000 crossed that border last year), in a desperate attempt to find any paid job. There they are cheated, abused, and cynically exploited, but they prefer to stomach such treatment rather than trying to eke out a miserable existence at home:

  Ukraine’s rapid deindustrialization is picking up speed. The abrupt severing of the traditional ties between Russian and Ukrainian businesses, due to suicidal Kiev-imposed regulations, resulted in a 10.7% decline in GDP in 2014 and another 13.4% drop in 2015. Foreign trade, both imports and exports, decreased by one-third. The naive expectations of the incumbent government in Kiev – that Ukrainian products could obtain access to European markets – have been torn to shreds (Nicolai Petro offers one anecdotal fact: Kiev’s biggest European export, under the agricultural quotas established by the EU-Ukraine Association Agreement, is honey).

  This situation of social and economic degeneration, along with the ready availability of weapons smuggled out of what is known as the “ATO Zone,” has led to an unprecedented tsunami of criminal activity in Ukraine. In the two years since Maidan, the number of recorded criminal offenses has doubled there. In reality, marauding crowds, armed robberies, and street killings are becoming an everyday event and many incidents go unreported. According to the latest findings from the Hague Institute of Innovating Justice, 44% of Ukrainians do not trust their national judicial system or law-enforcement agencies. A number of nationalist gangs (volunteer battalions) seem to operate out of reach of the law and ignore any attempts by the public authorities to rein them in. The most recent scandals (amber-smuggling in the Rovno region, the blockade of Crimea, and the barriers set up to bar Russian transit trucks) are just the tip of the iceberg of the criminal activities of radical groups in Ukraine that have received media attention. Most criminal incidents do not make the headlines. For example there are around 100 cases currently languishing within the legal system against members of the Aidar battalion who have committed criminal offenses, including charges of serious war crimes in the Donbass, all of which are gathering dust in Ukrainian courts.

  Dutch football fans who used to visit Euro-2012 in Ukraine and now thoughtlessly sharing #TakIsJa hashtag, should understand that the country they saw 4 years ago does not exist anymore.

  There is effectively no state in Ukraine. The authorities are busy ingratiating themselves with every available power figure — the US Embassy, local oligarchs, Right Sector, and various Mafia groups — seeing in those the only keys to the government’s own legitimacy and ability to hold on to power. But one point that they apparently do not understand is that any government lacking public support on the ground and dependent on exterior agents is more vulnerable than they could ever imagine. Did the Liberian dictator Samuel Doe, who took power as a result of a US-backed coup d’etat in 1980, ever dream that in ten years he would be forced to eat his own ear and then be publicly executed by a rival tribe? The leaders of “Northern Liberia” may have their own political tracks, but not the final destiny…

  *“The love of liberty brought us here” is the national motto of Liberia.

  

  

  

  

  

• Marc Faber Warns "Gold Will Be The Most Desirable Currency" As 'Terror' Spreads

  “Overall, I’d be rather cautious about investments in equities…”  the editor and publisher of the Gloom, Boom & Doom report told CNBC’s “Fast Money” traders this week.

  However, “over the last 12 to 24 months, many sectors have had huge declines,…And I see here, there are some opportunities.”

  “…US markets are over-valued.”

  Faber also added that “I still think the mining sector has embarked on a new bull market.”

  “[The U.S. dollar] is not a desirable currency,” Faber explains, “I think the most desirable currency will be gold, silver, platinum and palladium.”

  “I don’t understand why the world is so enthusiastic about the US Dollar…in the long-run the US dollar will be a weak currency.”
  

  Full interview below:

  

  

  

  

  

• Mysterious Tombstone For Donald Trump Appears In Central Park

  As part of Trump’s blistering, unconventional and very unexpected rise to the top of the Republican presidential nominee ranks, he has seen his share of threats – some serious, most in jest – to both his person, and in some cases his life. Apocryphally, some commentators have predicted that a Trump presidency would be such a shock to the status quo that if successful in winning the presidency, he would never make to inauguration day alive.

  Today, such concerns were once again inflamed when a mysterious tombstone on behalf of Donald J. Trump (the date of death is blank: 1946 – …) was erected in Central Park.

  

   

  As Gothamist first reported, “someone erected a very classy Trump tombstone in the middle of Central Park this weekend, and were kind enough to leave his expiration date open to the fates.”

  

  Gothamist adds that “tipster Annie Reiss came upon the beautiful tribute to the presumptive GOP presidential candidate this morning near Sheep’s Meadow. “There were people taking pictures which is why I stopped,” she told us. “It was definitely provocative, strange for Easter morning.”

  The tombstone has the inscription, “Made America Hate Again.”

  As Mashable adds, plenty of people shared photos of the tombstone on social media, but no one seems to know what it means, other than “being a prank of questionable taste.”

  By evening, the tombstone had been removed by park officials. 

  According to Trump’s latest Tweets, he is either unaware, or doesn’t seem too worried about this implicit threat or poorly made joke; instead he is focusing his energy on the previously noted lawsuit which the real estate billionaire threatens to file against Ted Cruz for “stealing” delegates…

  Just to show you how unfair Republican primary politics can be, I won the State of Louisiana and get less delegates than Cruz-Lawsuit coming

  — Donald J. Trump (@realDonaldTrump) March 27, 2016

   

  … as well as the ongoing “wife-gate” involving Heidi Cruz and Melania Trump:

  See Lyin’ Ted, even the @DailyBeast (no fan of mine) says this story came from Rubio, not Trump! pic.twitter.com/Okc8XajVnz

  — Donald J. Trump (@realDonaldTrump) March 27, 2016

  Once again, we can only imagine the shocked media reaction if a tombstone mysteriously emerged in one of the world’s busiest venues for any of the other presidential candidates.

  

  

  

  

  

• The End of America's Two-Party System May Be Upon Us

  Submitted by Chris Perrin via TheAntiMedia.org,

  There’s a reason most parliamentary and presidential democracies have more than two political parties, and both Trump and Sanders are examples of why. Both nominee-hopefuls have increasingly come to represent polar opposites of the singular problem that the American two-party political system is suffering from: Stagnation.

  With only two parties, what this presidential race is showing is that there has been a tendency for those parties to become static and unbending in their policy, stance, and platform. Historically, one or both of the parties must then break, either because the progressive edges within the party force it apart, or voters start to see the party as inflexible and obsolete.

  It has happened before in the U.S., and it looks like it is happening again. The recent increase of voters registering as independent, as well as the parallel growth in independent candidates, is a good example of the level of dissatisfaction people and politicians now have with the GOP and Democratic Party. It is also an indication that American democracy is changing. Again.

  The inclusion of Sanders in the Democratic Party, Trump in the Republican, and the cataclysmic portrayal of them both in the media, has only confused the issue. This is particularly noticeable as Trump is often blamed for the imminent demise of the GOP as a relevant institution. With both candidates running for the nomination of their respective parties, the GOP and the Democratic Party appear internally fractured, split on major issues and confused as to their directions. This can only be the case in a two-party system.

  As a country with a long history of a two-party system, these internal party divisions can feel like a breakdown of sorts. In a multi-party system, however, the issue would not be so destabilizing. Although a multi-party democracy does have the down side of sometimes appearing to have too many parties and politicians to choose from, space exists within the system to have the centre-left (Democratic Party) and centre-right (GOP) represented, while far-left and -right candidates don’t tear the centrist parties apart from within.

  Whatever the new face of democracy in America, and whatever the future implications of the 2016 election, what is clear is that Americans are no longer content to be represented by parties too close together at the center of the political spectrum. At the very least, the fact that Trump and Sanders have gained so much traction throughout their respective nomination bids is a clear indication that the U.S. will not become a single-party state any time soon. That is at least something to be happy about.

  

  

  

  

  

• The World Has 6 Options To Avoid Japan's Fate, And According To HSBC, They Are All Very Depressing

  Last week, when looking back at consensus economist forecasts for Japanese growth as of 1995, we compared what the pundits thought would happen, and what actually did happen: the result was what may have been the worst forecast of all time, leading to a 25% error rate in just five years later. It also unleashed the start of Japan’s three lost decades.

  

  But while laughably wrong economist forecasts are nothing new, a more troubling observation emerges when comparing the evolution of Japan’s 10Y yields start in the 1990s…

  

   

  …with those in the rest of the western world, which are slowly converging with Japan and the Y-axis.

  

  Looking at Japan’s miserable fate ever since the bursting of the 1980 asset bubble, HSBC’s Stephen Major recently said that “finding an explanation for Japan’s ongoing economic weakness is a bit of a ‘chicken and egg’ problem. Was the high level of debt associated with the bubble the key constraint on subsequent economic expansion? Or was the unexpectedly-weak economic expansion a key reason why debt was so indigestible? In truth, the causality ran in both directions, suggesting that Japan – at least in nominal terms – found itself caught in a ‘doom loop’, a world in which policy stimulus did little to help Japan return to the dynamism seen in earlier decades.“

  King then extrapolates the case study of Japan’s “deflationary stagnation” to the “slow puncture” he observes in the rest of the developed world, and provides several ways of previewing of what may lie in store for the world if using Japan as the canary in the coalmine.

  As he says, the world economy’s slow puncture reflects five factors:

  • Ineffective monetary policy, most likely at the zero rate bound.
  • An absence of economic strength in other parts of the world, reducing the efficacy of exchange rate devaluation.
  • High levels of debt in both the private and public sectors implying (i) ongoing private sector deleveraging; (ii) limited room for fiscal action; and (iii) low fiscal multipliers as a result of Ricardian behaviour.
  • Low rates of nominal expansion and flat yield curves, both of which place downward pressure on bank profitability, thereby limiting the ability and willingness of banks to extend credit, particularly to more risky borrowers.
  • Persistent downward pressure on bank share prices, thanks in part to overly-optimistic revenue projections that, in turn, leave costs too high. Put another way, weak nominal growth is likely to leave the industry excessively large.

  In Japan’s case, escape from stagnation has proved difficult. Admittedly, the Japanese authorities were slow to recognise the nature of the problem in the early-1990s, cutting interest rates only slowly, offering little in the way of fiscal stimulus and dragging their feet on bank restructuring.

  In the late-1990s, however, the Japanese banking system was restructured, removing some of its initial ‘doom loop’ problems. Two decades later, the Bank of Japan, under Haruhiko Kuroda, has done exactly what many thought would eventually deliver results: massive balance sheet expansion, a clearly-articulated ambition to raise the inflation rate and a substantial currency devaluation. Yet, despite all this, the path for nominal GDP has barely changed. Perhaps those policies would have worked in a world where Japan was the only country facing deflationary stagnation. As deflationary stagnation has spread, however, the efficacy of these policies appears to have declined.

  This leads us to King’s rhetorical question du jout: “Given this disappointment, what options are available for the rest of the industrialised world?”

  This is his extended answer:
  

  Ultimately, policy has to deal with one of two variables. Either debt has to come down or income has to rise. Otherwise deleveraging is likely to persist and the air will continue to escape from the global economy. Low interest rates should, in theory, help on both counts. By reducing debt service costs, they should make it easier to reduce the outstanding stock of debt and, by making saving less attractive, they should encourage people to spend more. Yet if nominal economic activity still remains weak at the zero rate bound – as, indeed, it  has in recent years – other options may need to be pursued.

  Both quantitative easing and negative nominal interest rates can provide more support. Both, however, have their limitations.

  Quantitative easing may have lifted asset prices and stopped a 1930s-style meltdown but households and companies have mostly been unwilling to spend freely. Meanwhile, the main beneficiaries financially are those already asset rich who, typically, have a low marginal propensity to consume.

  If, for political, social and reputational reasons, banks find it difficult to impose negative interest rates on their depositors, negative interest rates in effect become a tax on banks.

  As a result, the banks’ willingness to take on more deposits will be lowered, limiting their role as financial intermediaries. Other things equal, if banks turn depositors away, the money will end up under the mattress (in which case, the velocity of circulation of money will decline, limiting the impact of negative rates on nominal GDP)

  So what else can be done?

  The fiscal option

  Central to Larry Summers’ argument in favour of ‘secular stagnation’ is the idea that weak demand will, in time, damage supply potential. It’s an old argument, based on the idea that under-utilised resources eventually decay thanks to ‘hysteresis’. Far better, therefore, to  deliver a boost to demand that will prevent resources from standing idly by. Higher demand will prevent supply from atrophying. Put simply, demand safeguards its own supply.

  It’s an attractive idea, partly because it offers a narrative of hope. Yet it has its weaknesses. Fiscal stimulus in Japan led to accusations of ‘bridges to nowhere’: in other words, infrastructure projects that had poor private and social returns and, on occasion, led to accusations of ‘pork barrel’ politics. Before the onset of the global financial crisis, Spain invested very heavily in infrastructure, yet the returns have been paltry at best given the shortfall in nominal GDP in recent years. Government debt levels across the developed world are already very high, suggesting that any attempt to increase government borrowing could be associated with Ricardian equivalence problems.

  Its biggest weakness, however, is that the policy prescription was tried before yet ultimately only brought instability in its wake.

  In 2000, the tech bubble burst. For a while, it looked as though the US was heading towards another Great Depression. Certainly, the fall in stock prices was on a similar scale to 1929. The recession that followed, however, was remarkably mild and recovery was soon underway, helped along by aggressive interest rate cuts and huge tax cuts – precisely the combination that supposedly brings secular stagnation to an end. For a while, the policies seemed to work. In hindsight, however, they merely masked early aspects of deflationary stagnation: the housing boom may have led to an acceleration in growth but the pace of economic expansion was weaker than in the 1980s and 1990s. And it all came to a sorry end in 2008. Asset price gains that cannot be validated through a sustained period of economic growth tend, ultimately, to be asset price bubbles.

  Put another way, if secular stagnation reflects weak growth, the problem began in the US in the early years of the 21st Century, before the global financial crisis. Yet proponents of secular stagnation argue that it began only with the onset of the financial crisis. The story looks good, but the dates don’t fit.

  The helicopter option

  The helicopter option is simple, easily implemented and, for some, offers the closest thing to a free lunch. It can easily be explained – if that’s the right word – using the identity found on the first page of a standard monetary textbook, namely MV?PT, where M is the stock of money, V is its velocity of circulation, P is the price level and T is the volume of transactions. In modern-day parlance, PT might best be labelled nominal GDP.

  Money doesn’t literally drop from helicopters but the effects are roughly the same. The government sells newly-issued debt to the central bank which, in return, provides newly-created money to the government. This newly-created money is either given away in the form of tax cuts or spent on, for example, infrastructure projects. The newly-created money boosts M while the tax cuts or spending increases more or less guarantee an increase in V. Put the two together and nominal GDP simply has to accelerate. Assuming – consistent with secular stagnation – that there is a sizeable output gap, there’s a good chance that the increase in nominal GDP will be reflected more through an increase in output than an increase in inflation.

  If this sounds too good to be true, that’s because it is. Output gaps are notoriously difficult to estimate in real time. The permanent output losses associated with the financial crisis are now considered to be far bigger than had been assumed in its immediate aftermath, suggesting that helicopter money could come with sizeable inflationary risks. Those would be amplified via the foreign exchanges, which  would doubtless deliver a ‘crash-landing’ for any currency subject to the helicopter treatment.

  In truth, helicopter money is likely to work only if it leads to higher inflation. Its success crucially depends on policymakers committing to being ‘irresponsible’. In the mid-1930s, countries managed to raise both inflation and inflationary expectations even in the depths of depression thanks to their departures from the Gold Standard, freeing them to loosen both monetary and fiscal policy in unprecedented fashion. Higher inflation, in turn, reduced the real value of nominal debts. Deleveraging faded, credit risks shrank, banks’ bad debts became less problematic, lending increased and, before long, recovery was on the way.

  Repeating the process today would not be easy. Abandoning – or raising – inflation targets would be no easy task: ageing populations typically are repulsed by inflation, largely because of its effects on fixed nominal incomes. Fear of higher inflation could also lead to panic buying, triggering an uncontrollable rise in V and, hence, a severe inflationary overshoot: it’s no coincidence that helicopter money and hyperinflation are mentioned in the same breath. And, ultimately, higher inflation would only work by penalising savers to benefit borrowers.

  Put another way, the pursuit of higher inflation through helicopter money is not much more than a re-distributional fiscal policy dressed up in monetary clothes. It is effectively a tax on wealth – mostly on forms of wealth that come with little in the way of inflation protection. It is therefore more likely to hit small savers and pensioners than property tycoons and those with large equity portfolios (both real estate and equities tend to outperform liquid assets during periods of relatively high inflation). In other words, helicopter money is a stealthy form of organised default, taking money away from creditors in the hope that debtors – faced with now-lower real debts – will spend more freely. Given the maturity of its slow puncture problems, Japan might be more willing than others to fly its monetary helicopters but, given the politics of its demographic situation, it would surely be a reluctant pilot.

  The default option

  In truth, this is not so different from the helicopter option. It is more relevant, however, for those countries which lack helicopter pilots. Specifically, default is an option for those national governments in the Eurozone that lack a printing press and are unable to prevent government debt from rising ever higher.

  To be fair, quantitative easing has, to a degree, reduced pressure on individual sovereigns. The risk hasn’t completely gone, however. At the time of writing, Greek and Portuguese 10 year bond yields were 9.6% and 3.0% respectively, compared with German yields at a remarkably low 0.17%. And the default option may become more pressing in coming years if, as seems likely, government debt levels continue to rise.

  Like inflation, default passes the problem from debtor to creditor. In doing so, it raises a whole series of new financial threats, most obviously the danger of a renewed erosion of trust within the financial system. As a result, it would further limit the power of monetary policy. Savers would seek to hide their money under the proverbial mattress and, as a result, velocity might fall further.

  Another option might be simply to cancel government debt held on central banks’ balance sheets rather than selling it back to the market. That sounds like a free lunch but it would presumably lead to expectations of higher inflation associated with a reduction in fiscal discipline over the long term: in that sense, the policy would be remarkably similar to helicopter money, particularly in terms of its exchange rate implications.

  The ‘liquidate’ option

  One of the undoubted triumphs of the post-financial crisis world has been the extent to which unemployment has declined in the US, the UK and Germany. Admittedly, not everyone has shared their good fortune: the increase in Greek unemployment in recent years, for example, is nothing short of scandalous: the lessons of the 1930s were clearly not learnt. Nevertheless, for some of the largest economies in the industrialised world, the employment consequences stemming from the financial crisis have been considerably better than was originally feared.

  However, given the slow pace of economic expansion in recent years, good news on unemployment implies bad news for productivity. Perhaps deflationary stagnation partly reflects an absence of supply.

  The standard dismissive response to this argument is to note that weaker supply, other things equal, implies a smaller output gap and, hence, higher inflation. And yet, in recent years, inflation has drifted lower. So the explanation for persistently weak growth cannot lie with supply.

  At this point, it’s worth coming back to Japan. If supply is weaker than expected, claims on future economic activity need to be reduced. One way to do this is indeed via inflation. The other is via declines in nominal asset values. The 1970s economic slowdown – in response to multiple oil shocks – was associated with inflation. Japan’s lost decades were associated with falling asset prices, deflation and weak nominal GDP growth. Weaker supply potential can thus be associated with both inflation and deflation: it all depends on how claims on future economic activity are reduced.

  In an era of rapid technological gains, why has productivity growth been so weak? Of the competing explanations – from mis-measurement through to an innovation shortfall – one is directly related to the amount of stimulus on offer since the financial crisis. Quantitative easing worked domestically through its effect on the value of real estate and financial assets, most obviously corporate bonds and equities. Higher values for financial assets meant that companies which, in other circumstances, would have been under pressure to reduce their costs could carry on with business as usual. Put another way, they could happily employ people who might otherwise have lost their jobs. Capital markets were thus no longer able easily to perform their central function, namely the efficient allocation of capital. Too much capital stayed in bloated and inefficient companies leaving too little to support the growth of smaller, more dynamic, enterprises. It was, perhaps, a western version of the Japanese ‘zombie company’ problem.

  At the beginning of the Great Depression, Andrew Mellon, the US Treasury Secretary, famously urged Herbert Hoover to ‘liquidate labour, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.’ To say the least, it probably wasn’t the best strategy. Nevertheless, Mellon still had a point. Zombie companies preserve inefficiencies and dampen enterprise. Their preservation limits the ‘creative destruction’ that Joseph Schumpeter famously described in his ‘Capitalism, Socialism and Democracy’.

  Acting on zombie companies may be one way of ending deflationary stagnation but, if badly managed, the situation could become even worse. Imagine, for example, that all companies within a particular industry suddenly recognised that the pace of nominal economic expansion would not be sufficient to support their current cost base. Imagine, as a result, that there was a prolonged wave of restructuring, associated with mass layoffs. The result would be an even lower level of nominal output, triggering a further wave of restructuring – unless, that is, the restructuring led to significant productivity spillovers.

  It might, therefore, be better to act on both supply and demand, forcing a greater degree of restructuring while, at the same time, offering a fiscal cushion, perhaps through a range of public works programmes. Put another way, neither supply-side reform nor demand-side stimulus will work unless they operate in conjunction with each other.

  The trade option

  One of the striking features of the post-financial crisis world has been the slowdown and then shrinkage in world trade. This is highly unusual. Although the pace of economic recovery has been soft, it is typically the case that world trade expands more quickly than world GDP in the recovery phase.

  Possible reasons for the weakness in world trade include (i) the attenuation of global supply chains either to reduce their fragility (following, most obviously, the Fukushima nuclear disaster in Japan) or in response to new technologies (3D printing may have led to renewed onshoring) (ii) an increase in ‘hidden’ protectionism associated with the aggressive imposition of ‘standards’ (iii) a reduction in trade finance in the post-financial crisis era; and (iv) an increase in uncertainty associated with the impact of currency wars.

  Openness matters. We have surely learnt over the last few decades that economies that trade with one another are more likely to enjoy increases in living standards. We have also found, disappointingly, that global trade deals have become more or less impossible: the Doha trade round is dead in the water and there is nothing waiting in the wings to replace it.

  Still, there is hope. The Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership and the Regional Comprehensive Economic Partnership could lead to more integrated regional economies and, perhaps, greater cooperation between those regions. Over the long term, openness matters more than any variety of monetary or fiscal stimulus. The world needs to be protected from  protectionism. Sadly, it’s not obvious that it will be.

  The ‘wall’ option

  Should all else fail, the political narrative will shift. Indeed, it already is. If economies cannot easily be kick-started, nationalism is in danger of spreading. Whether it’s building a wall to prevent Mexicans from entering the US or passively watching as the Schengen  arrangements in Europe slowly crumble, trouble is brewing. Global markets are under threat precisely because policymakers have been unable to deliver the outcomes they had previously promised. Protectionism in all its many forms is never far away: under current conditions, it threatens to make an unwelcome return.

  * * *

  Which brings us to Stephen King’s rather pessimistic conclusions:

  The economic slow puncture was once associated with Japan alone. Persistent undershoots in nominal economic activity since the onset of the global financial crisis suggest that the problem has spread. As more and more countries succumb, so the ability to escape declines – as, indeed, Japan itself has discovered in the light of disappointments associated with Abenomics.  

  Devaluations simply pass deflationary pressures from one part of the world to another. What was once seen as monetary stimulus is now more typically described as the latest salvo in a protracted currency war. Central banks have seemingly lost the ability to bring inflation back to target.

  The good news is that much of the rest of the world does not share Japan’s cross-shareholding problem, reducing the threat from a ‘doom-loop’ intrinsically linked to the banking system. Still, continuous nominal GDP undershoots still create problems for bank profitability, leading to relative share price under-performance and, eventually, to downward pressure on equity markets as a whole, particularly where QE drugs are no longer freely available.

  The escape options are a mixture of the ineffectual, the limited, the risky, the foolhardy or the excessively slow. As Japan’s recent experiments have demonstrated, upping the monetary dosage alone is not enough to cure the affliction. Indeed, to the extent that monetary stimulus only encourages a further wave of risk-taking within financial markets – often outside of the mainstream banking system – it may only perpetuate unstable deflationary stagnation. A more sustained recovery is possible but to believe that central banks, on their own, can deliver such an outcome is surely a triumph of false hope over bitter reality.

  

  

  

  

  

• Mexicans Burn Donald Trump Effigies To Celebrate Easter

  While The Donald may proclaim that "Hispanics love me," it appears some – that is to say hundreds – are not yuuge fans.

   

  As Reuters reports, Mexicans celebrating an Easter ritual late on Saturday burnt effigies of U.S. Republican presidential hopeful Donald Trump, as hundreds of cheering residents yelled "death" and various insults as they watched the explosion of the grinning papier-mâché mock-up of the real estate tycoon…

  

   

  Media reported that Trump effigies burned across Mexico, from Puebla to Mexico's industrial hub Monterrey.

  The burning is part of a widespread Mexican Holy Week tradition where neighborhoods burn effigies to represent Judas Iscariot, who betrayed Jesus Christ according to the Bible. The effigies are often modeled on unpopular political figures.

   

  

   

  "Since he started his campaign and began talking about immigrants, Mexico, and Mexicans, I said 'I've got to get this guy,'" said Felipe Linares, the artisan who crafted Trump and whose family has been making Judases for more than 50 years.

   

  

   

  Trump, the front-runner to win the Republican nomination for the Nov. 8 election, has drawn fire in Mexico with his campaign vow to build a wall along the southern U.S. border to keep out illegal immigrants and drugs, and to make Mexico pay for it.

   

  

  Mexican President Enrique Pena Nieto has said his country will not pay for the wall and likened Trump's "strident tone" to the ascent of dictators like Adolf Hitler and Benito Mussolini.

  

  

  

  

  

• Trump Slams Cruz For "Stealing Delegates," Says American Politics "Is A Broken System"

  In the escalating war between "Lyin'" Ted Cruz and "Snivelling Coward" Donald Trump, reports that Cruz could end up with more delegates than Trump from Louisiana – despite The Donald's victory – have incensed the New York businessman. As Politico reports, Trump raged that Ted Cruz is trying to "steal" delegates, "because that's the way Ted works."

  GOP presidential front-runner Donald Trump on Sunday said Sen. Ted Cruz is trying to "steal" delegates the New York businessman needs to become the presidential nominee of the Republican Party, which he called "a disgrace." As DailyCaller details,

  Appearing on ABC’s “This Week” on Sunday, guest host Jonathan Karl asked Trump if Cruz was “trying to steal” the nomination from Trump because he might be leaving Louisiana with “as many as 10 more delegates… on the key committees that will write the rules for the Republican convention.”

   

  “Well, it tells you what a crooked system we have and what a rotten political system we have. And frankly, I’m so — I’m millions of votes more than — I have millions of votes more than ‘Lying Ted.’ I have millions — millions of votes more.”

   

  “I have so many millions of votes more,” Trump argued. “I’ve brought people into this party by the millions. You understand that. They voted by the millions more. It’s one of the biggest stories in all of politics.”

   

  “And what do I have,” Trump rhetorically asked. “I have a guy going around trying to steal people’s delegates. This is supposed to be America, a free America. This is supposed to be a system of votes where you go out, you have elections, free elections.”

  Continuing his rant, Trump claimed,

  “I won Louisiana and now I hear he’s trying to steal delegates. You know, welcome to, uh, the Republican Party.”

  “What’s going on in the Republican Party is a disgrace,” Trump claimed. “I have so many more votes and so many more delegates. And, frankly, whoever at the end, whoever has the most votes and the most delegates should be the nominee.”

  Full ABC Interview below (Fwd to 13:00 for "stealing" rant)…

  "He's trying to steal things because that's the way Ted works," Trump said. "The system is a broken system. The Republican tabulation system is a broken system. It's not fair."

  

  

  

  

  

• "It's An Attack On Higher Education": Connecticut Seeks To Tax Yale Endowment As Plug To Surging Deficit

  One week ago, we observed an unexpected spike in the yield spread of Connecticut bonds over AAA-rate munis:

  

   

  There were two specific catalysts for the spike in yield:

  • First was last week’s disappointing bond auction, as a result of which CT bond risk has spiked to 65bps over the benchmark,  a record spread demanded by investors to take CT repayment risk. In the process CT, one of the states historically most preferred by the wealthy hedge fund community, became the 4th riskiest US state after NJ, IL, and PA. As Bloomberg noted at the time, the state’s $550 million general-obligation sale on March 17, which included debt due in 2026, priced to yield 2.52 percent, compared with an expected 2.37 percent based on Bloomberg’s Connecticut index.  
  • The second, and more troublesome, reason was that the state’s office of policy and management said two weeks ago that the budget deficit for the current fiscal year is $131 million, an increase of $111 million from the prior month’s estimate. Moody’s Investors Service dropped its outlook on the state to negative earlier in March. Worse, the state is facing a $266 million shortfall for fiscal 2016, according to the state Office of Fiscal Analysis.

  One week later, we find that the state with the ballooning budget deficit has taken proactive measures to fill said gap, even if the proposed measures are not particularly enticing for one of the highest profile tenants of the state: Yale University.

  According to Bloomberg, a proposed Connecticut bill would seek a share of Yale’s endowment gains as a source of state tax revenue. According to the introduced legislature, schools with funds of $10 billion or more, which is clearly aimed at Yale as that is the only university to fit the criteria. Yale’s record $25.6 billion fund is the second largest in U.S. higher education, behind Harvard University’s $37.6 billion.

  

  It’s not just the state which is seeking to collect a share of these generous returns: the richest college endowments, many at their highest values ever, also have drawn scrutiny from federal lawmakers. Last month, the U.S. Senate Finance and House Ways and Means committees sent a joint inquiry to the richest 56 private schools about endowments, seeking to understand the impact of their tax-exempt status on the price tag of higher education, among other issues.

  But back to CT, where legislators believe that taxing the endowment’s earnings could help close the state’s budget gap. “Supporters of the bill want Yale to spend more money to expand access to higher education and “create innovative, high-paying jobs,” Martin Looney, a Democrat who presides over the Senate and whose district includes Yale’s campus in New Haven, said in written testimony submitted for a committee hearing on March 22.”

  “It is our hope that these rich schools can use their wealth to create job opportunities, rather than simply to get richer,” Looney said, adding that Yale “possesses the resources to have an even greater impact on our economy.”

  To be sure, Yale and the Greater New Haven Chamber of Commerce urged legislators to reject the bill. Yale currently makes a voluntary payment to New Haven of more than $8.2 million annually, according to the school.

  Yale was particularly distressed, and Richard Jacob, the school’s associate vice president for federal and state relations, said in written testimony that the bill and a second one that would tax college property are a “specific attack on higher education.”

  Yale does have a point:

  “The proposed taxes on Yale would diminish the university’s ability to carry out its charitable mission and to enable and support growth in New Haven,” Jacob wrote. “Yale’s generous financial aid policies, which enable Yale College students to avoid any loans, and which waive any parent contribution for low-income students, exist because of the endowment.”

  Unfortunately, in a time when only the 1% are swimming, while the rest are sinking, any profitable entity becomes a target.

  Bloomberg adds that Yale’s endowment allocated $1.1 billion to the operating budget for the year ended June 30, according to the school’s annual report. The fund earned a return of 11.5% in the period, among the top performers of endowments. It returned an annualized 10 percent over the last decade.

  The school’s annual budget is $3.2 billion, including $2 billion in wages and benefits, and almost a third of Yale’s 13,000 employees live in New Haven, according to the school.

  The budget will promptly change if first the State, followed shortly by the Federal government, decide that it is only fair that well-endowed colleges such as Yale can double down as piggybanks for cash-strapped and money-losing entities, of which there are many within the government apparatus.

  

  

  

  

  

• Has The Biggest Of All Bubbles Popped: Central Bank Omnipotence?

  Authored by Mark St.Cyr,

  Since the initial turmoil began with the onset of what is now referred to as “The great financial crisis,” one strategy has proven more profitable than any other. That strategy? BTFD (buy the f___n’ dip.)

  Regardless of what proprietary advice (short of insider trading,) nothing, as well as, nobody has had a track record worthy of comparison. All one has needed to do is, whenever a selloff occurred (as rare as they had been,) when “the dip” presented itself, the only thing to do was to “buy, buy, buy!”

  Forget 2/20 management. Forget stock picking. Forget listening to experts, economists, fund managers, et al. You would beat them all over the last 6+ years if you just BTFD, then bought some more. It had been that easy. However, if it was that easy – why didn’t everyone “just do it?” Easy…

  A great many (and I put myself squarely in this camp) still believed that the fundamental laws governing free markets and stocks were still at play. No one, and I do mean that as in nobody with a modicum of business acumen thought, let alone believed the extent, as well as, the vast amounts of money printed ex nihilo by the Fed. would go on not only for as long, but also, in the amounts to which it has.

  Now, today, some $4,000,000,000,000.00+ (i.e., over 4 TRILLION) later what has all this balance sheet accrual bought? Probably the bubble of all bubbles. The irony? That “bubble” is in the only true asset the Fed. had left. e.g., Confidence in their omnipotence. And it’s beginning to look more like it’s already popped with every passing FOMC meeting. And just as the name “bubble” implies – all it needed was the tiniest of pins to bring it crashing down. And it now appears a 25 basis point rate hike was just tiny enough.

  Since the ending of QE in late 2014 one thing about the “markets” has been crystallizing more and more for everyone to see. Even if they try to turn their heads, it can no longer be avoided: without central bank (and now that includes all CB’s) continuous intervention – there is no market. It all falls apart like the house-of-cards that it is.

  Again, without central bankers in one form or fashion continuously interjecting their willingness, as well as, openness as to do “whatever it takes” the markets will at first vacillate in place until they relent and plummet in unison causing conciliatory panicked responses from one central banker after another.

  However, the responses to these actions or statements as of late have been in a way I believe these monetary bodies not only never considered, but rather, never thought possible.

  Not only have they been creating doubt (as in saying one thing then doing the opposite) in their credibility, rather – their dictates are now having the complete opposite responses of their desired market reaction. i.e., Deliver a weaker currency inspired directive?  That currency actually spikes upward and running ever higher!

  This phenom first presented itself with the grandest of foolish monetary policies brought forth by central banking Keynesian devotees: Negative interest rates. e.g, NIRP.

  First it was the European Central Bank (ECB.) Then the Bank of Japan (BoJ.) Sure there have been others, but these are by far the “big players.” The result? Exactly the opposite of what had been anticipated.

  “Big bazooka” commentary from Mr. Draghi at the ECB along with “Banzai” styled implementation as witnessed via Mr. Kuroda at the BoJ saying one thing, than doing the exact opposite only a week later, has pushed not only confusion further into the financial markets, but also, sent global currency trades on a roller-coaster ride worthy of having its own theme park.

  Both the €uro as well as the ¥en strengthened. And not by little amounts either. The resulting spikes were so sudden, and with such ferocity, the resulting margin calls for those caught within its death grip suddenly found themselves sharing the same experience as those on the fictional planet Alderaan, “as if millions of voices suddenly cried out in terror – then were silenced.”

  You know who was more caught off guard with this move than those with positions on? The central banks themselves. All one needed for proof was the subsequent jawboning from one official after another to state emphatically: “Don’t worry, we got this!” (we think) As they tried desperately to reassure their “markets.”

  Again, for proof: all one needs is to remember Mario Draghi’s now infamous mea culpa when replying to whether or not his newest remarks were in reaction to the market’s response, e.g., “No not really. But not—well, of course. (Laughter.) And, It’s been pretty much the same only in different languages from one central banker after the next these past few months.

  Yet, the one central bank that has been near impervious to this “credibility” or “omnipotent” issue has been the Federal Reserve. That is to say – until now.

  Since the beginning of what is now considered “the zenith of unabashed central bank interventionism” few were willing to speculate, let alone admit, that without the Federal Reserve continuously pumping money in one form or another, while simultaneously keeping interest rates at the zero bound – the markets had no fundamental reason whatsoever to be at these current levels. Period. It was, and still is, a bubble created and encouraged by the central bank. Again – period. End of discussion.

  And nowhere has this phenom become more visible and undeniable as made manifest over the last 14+ months with “market” volatility and price movement. Currently, the only direction the “markets” have shown a propensity to go in both momentum, as well as, fury during this period has been – down.

  Currently up seems to only happen in response after some jawboning or implied immediate implementation. Where the theme is more mea culpa in nature. Rather, than fortitude or conviction of policy.

  In other words: the moment we get up to levels I coined “fortitude central” (i.e., 2050ish SPX) where the policy members begin to show backbone and imply: “Yep, we’re going to start withdrawing accommodation.”  The markets begin to reverse in unison. And as soon as it appears the level of 1800ish SPX is about to be breached? A reversal, or better said “capitulation of error” begins to show up (in unison) as one Fed. official after another begins touting backpedaling statements in one form after another. The real issue here?

  The “markets” and it’s real players (i.e., HFT’s along with their headline reading algo’s and stop running programs etc., etc.) not only know this. I believe – they now know how to front run it with deadly efficiency. Exacerbating the issue of credibility as well as omnipotence for the Fed. Or, stated differently – the “market” now not only can push the Fed’s hand – It now knows at what level it needs to exert the desired response at will.

  This phenom has now become so glaringly obvious even Fed. friendly publications such as Barron’s™ can’t avert from the obvious any longer as shown by their latest article titled, When The Fed’s Bullard Speaks, the Market Listens. All I’ll say is this: If the main stream financial press has finally figured it out – that’s usually your first sign that what ever bubble there was – has either already popped. Or, about too.

  But not too worry, after all, I didn’t even mention China and their forthcoming central bank omnipotent policies. Remember, they know how to control and manipulate a market and currency better than anyone. Just ask them. And if you don’t like what they state today? Don’t worry – they’ll change it again any day or minute from now. Again.

  But why be of concern? After all, it was the Fed. itself that just reiterated “international developments” is their first cause. So don’t worry. I’m sure they got this. Until 1800ish SPX that is. Then we’ll see just how much confidence to BTFD truly remains.

  

  

  

  

  

• "Forgotten Sandlot" Or "The Next Dubai"? This Tiny African Nation Is Now A Geopolitical Hot Spot

  When last we checked in on Djibouti, the tiny east African nation of 900,000 people that shares a border with lawless Somalia to the south, and is separated from war-torn Yemen by just 13 miles of water across the Bab el-Mandeb Strait, China had just announced that the country would play host to Beijing’s first overseas military outpost.

  Nearly 5,000 miles from the Chinese capital, Djibouti is situated in a highly strategic, if exceedingly dangerous part of the world.

  The Bab el-Mandeb Strait is one of the planet’s most important oil chokepoints and thus there are any number of nations that have an interest in keeping it open and secure. Additionally, Djibouti’s location on the horn of Africa makes it an attractive base from which to conduct anti-terror operations in both Africa and the Mid-East.

  

  While some observers view China’s establishment of a military base in the country as a reflection of Xi’s efforts to i) project Beijing’s growing military prowess, and ii) serve notice that in the wake of the PLA’s unexpected visit to the besieged Yemeni port of Aden last year, China isn’t afraid to get involved in the region’s affairs, it’s worth noting that the Chinese are no strangers to Djibouti. China has been investing in the country’s infrastructure for years, most notably in the form of a $4 billion railroad connecting the country to the Ethiopian capital of Addis Ababa.

  And that’s not all.

  “China is financing a railroad, as well as an expansion of port terminals, fuel and water pipelines, a natural gas liquefaction plant, highway upgrades, two proposed airports, and several government buildings,” Bloomberg writes, adding that “the new military installation will be a sort of insurance policy, a security station to protect its investments and extend its economic reach.”

  China is pitching its involvement in the country’s development as an extension of Xi’s ambitious “One Belt, One Road” initiative, which is essentially an expansive initiative that i) gives China an excuse to take a stake in any country that’s willing to accept FDI, and ii) creates a kind of pressure valve for Beijing’s excess industrial capacity.

  “China is explaining it as part of the ‘one road, one belt’ strategy, to help link Ethiopia to the sea,” one Western diplomat who has been briefed by Chinese officials on the Djibouti base, told Reuters this week. “China does not want to be seen as a threat.”

  And frankly, they probably aren’t. Or at least not any more of a threat than all of the other countries that have military outposts in Djibouti. Countries like the US, which unsurprisingly has the largest military presence of any nation and which uses its bases there as a launching pad for drone missions. “Djibouti is also the U.S. military’s regional hub for drones, and it sends thousands of Predators and Reapers across the region each year,” Bloomberg notes, before recounting a hilarious string of drone and spy plane mishaps that eventually led Washington to move the unmanned killing machines away from the country’s airport. Here are a few additional excerpts from Bloomberg’s latest on the country:

  [In the late seventies] Djibouti, a country about the size of New Jersey, had one paved road and less than a square mile of arable land. The Associated Press deemed it perfectly devoid of resources, “except for sand, salt, and 20,000 camels.” The New York Times guessed the new nation might get swallowed up by one of its neighbors—Ethiopia or Somalia, maybe—because it was “so impoverished that it cannot stand on its own.”

   

  Years passed, and those neighbors were too preoccupied with wars, famine, and civil anarchy to pay much attention to it. Such upheavals, and almost everything else, skirted Djibouti. Then the new century rolled around and, seemingly overnight, the country’s sleepiness became a valuable commodity.

   

  After Sept. 11, the U.S. military rushed to establish its first base dedicated to counterterrorism, and Djibouti was about the only country in the neighborhood that wasn’t on fire. Sitting beside the narrow Bab el-Mandeb strait—a gateway to the Suez Canal at the mouth of the Red Sea, and one of the most trafficked shipping lanes in the world—it provided easy access to hot spots in both Africa and the Middle East. A few years later, when Somali pirates started threatening the global shipping industry, the militaries of Germany, Italy, and Spain joined France, which has maintained a base since colonial times, by moving troops to Djibouti. Japan arrived in 2011, opening its first military base on foreign soil since World War II.

   

  

   

  U.S. soldiers can’t go anywhere without being reminded of the People’s Republic. On the drive to the clinic, I’d noticed lengths of black tubing lying by the side of the road. “That’s a new water pipeline to Ethiopia,” the driver said, “built by the Chinese.” Nobody knows how the new Chinese base will change things, mostly because its scale isn’t yet known, but traces of anticipatory tension are palpable. Several diplomatic officials and members of U.S. Congress have publicly fretted over China’s growing influence in Djibouti, speculating that it might signal an era of increased Chinese military engagement around the world. Kelly, the U.S. ambassador, told me that “snooping,” electronic or otherwise, will be an obvious concern around Camp Lemonnier.

   

  The Americans still have the largest foreign military presence in the country, but China’s intensifying interest in Djibouti is shifting the balance of influence.

   

  With a lineup of natural resources—along with a port on one of the most geopolitically significant straits in the world—[some] believe that in the next 20 years or so, Djibouti will become the next Dubai, a magnet for capital and free trade. To hear them talk, making billions by selling the world’s militaries on the country’s lack of incident was just the first step.

   

  “And why not?” asks Foreign Minister Mahamoud Ali Youssouf. “We have some assets that Dubai never had.”

   

  

  (Djibouti City)

   

  First, there’s that shipping lane. It’s busier than Dubai’s. Second, there are all those landlocked African countries stacked up behind it; they’re desperate for a portal to the wider world. Third, there’s the infrastructure. Not traditional infrastructure, which, China notwithstanding, is still in short supply, but rather digital infrastructure. Seven submarine fiber-optic cables, the kind that carry the vast majority of the world’s digital information, come ashore in Djibouti, making it the most important hub of connectivity in East Africa. “Forget gigabytes,” says Finance Minister Ilyas Moussa Dawaleh. “We offer terabytes.”

   

  The scouring Khamsin winds, which blow through the country from June to August, are being harnessed to power a 60-megawatt wind farm, and the pitiless sun, which beats down with near-kinetic force, will power solar energy developments and more than quadruple the country’s total domestic energy output. Within a decade, the government hopes to be the first country in Africa to be powered solely by renewable energy.

  One country that isn’t likely to be particularly enamored with China’s new military outpost is India. “If I were Indian I would be very worried about what China is up to in Djibouti,” a Western official told Reuters. “Djibouti enables China to base its long-range naval air assets there and these are capable of maintaining surveillance over the Arabian Sea as well as India’s island territories off the Western coast,” Indian army brigadier Mandip Singh says.

  Underscoring the point we made above (i.e. that the new base is an extension of the PLA’s move to dock in Aden last year when the Iran-backed Houthis set upon the city creating a humanitarian crisis) a diplomatic source in China says Beijing got the idea for the outpost when the Chinese ship that showed up across the Strait in Yemen ran out of supplies. “It’s a supply facility pure and simple,” the source remarked.

  Whatever the case, it will be interesting to watch Djibouti’s development in the years ahead. With al-Shabaab operating out of Somalia and Islamic State (not to mention al-Qaeda) maintaining a notable presence just across the Bab al-Mandeb as well as to the north and northeast in Africa, there are certainly a number of security concerns. Additionally, the contention that solar and wind power will help transform the country into “the next Dubai,” assumes alternative energy can create the same kind of prosperity the Emirates enjoy thanks to their vast stores of crude. That may be wishful thinking. If nothing else, it does appear that this “forgotten sandlot” (as Bloomberg calls Djibouti) will play a key geopolitical role going forward as a kind of regional hub where world powers jostle for influence – and that alone makes it worth paying attention to.

  

  

  

  

  

• Bad – But Better Than What's Coming

  Submitted by John Rubino via DollarCollapse.com,

  Talk about diminished expectations. Friday morning’s estimate of 1.4% Q4 GDP growth is being hailed as a pleasant surprise. Which is odd, considering that for most of the past century a number this low would have been seen as weak enough to require emergency action.

  And that’s just the headline number. Dig a little deeper and the picture — at least when viewed through a non-Keynesian lens — is of a system in crisis. Consider:

  Corporate profits are, as today’s Bloomberg puts it, sliding.

  

  Meanwhile (also from Bloomberg),

  A firm labor market and low inflation encourage households to keep shopping. Today’s fourth-quarter growth figure reflected more spending on services, particularly on recreation and transportation. “It’s really U.S. consumers who are powering the global economy forward at this point,” said Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh.

  But if companies are earning less money, how likely is it that they’ll step up hiring going forward? Not very. And since today fewer Americans have full time jobs than in 2007 (making the current stellar 4.9% unemployment rate look like a cruel joke) a new round of mass layoffs will make the job market even more dire for anyone hoping to support a family with full-time work.

  “If profits remain depressed, the prospects for capex and hiring will come under greater pressure,” Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, wrote in a research note.

  What are the chances of profits remaining depressed? Pretty good, considering that two of the big growth drivers of the past few years have been student debt and car loans. The former is, as everyone by now knows, at levels that consign a whole generation of kids to life in their parents’ basements — not a recipe for robust consumption.

  Car loans, meanwhile, are starting to look like subprime mortgages circa 2006:

  Unpaid subprime car loans hit 20-year high

  (CNN Money) – Americans with lower credit scores are falling behind on auto payments at an alarming pace.

  The rate of seriously delinquent subprime car loans soared above 5% in February, according to Fitch Ratings. That’s worse than during the Great Recession and the highest level since 1996.

   

  It’s a surprising development given the relative health of the overall economy. Fitch blames it on a dramatic rise in loans with lax borrowing standards that have helped fuel the recent boom in auto sales. More Americans bought new cars last year than ever before and the amount of auto loans soared beyond $1 trillion.

   

  Fitch points out that the subprime end of the market is where there’s increased competition to peddle loans. The ratings firm flagged an increase in loans to “borrowers with no FICO scores,” lower downpayments, and extended term lending.

  Toss in contracting global trade, turmoil in Europe and Latin America, and a grinding multi-month decline in US manufacturing output and the year ahead doesn’t look any better. Here’s the Atlanta Fed’s GDPNow measure of current growth, which shows a huge drop in just the past month:

  

  What does all this mean?

  Very simply, if you borrow too much money life gets harder and the things that used to work stop working. For a country, lower interest rates no longer induce businesses and individuals to borrow and spend, and government deficits no longer translate directly into more full-time private sector jobs. Growth slows, voters get mad, politics gets crazy, and generally bad times ensue.

  The only question is why this is a surprise to the people whose choices brought us to the edge of the abyss.

  

  

  

  

  

• Five Years After Fukushima, 16 U.S. Cleanup Ships Are Still Contaminated With Radiation

  The Fukushima disaster was over five years ago, and may have been largely forgotten by the general public and the media (perhaps because the Japanese olympics are just four years from now), but its effects still linger. Perhaps nowhere more so than for those who took pare in the Fukushima clean up effort: as Starts and Stripes reports, sixteen U.S. ships that participated in relief efforts after Japan’s nuclear disaster five years ago remain contaminated with low levels of radiation from the crippled Fukushima Dai-ichi nuclear power plant.

  In all, 25 ships took part in Operation Tomadachi, the name given for the U.S. humanitarian aid operations after the magnitude-9.0 earthquake and subsequent tsunami on March 11, 2011. In the years since the crisis, the ships have undergone cleanup efforts, the Navy said, and 13 Navy and three Military Sealift Command vessels still have some signs of contamination, mostly to ventilation systems, main engines and generators.

  

  That’s the bad news.

  The good news is that the “normally accessible” areas have been largely cleaned. “The low levels of radioactivity that remain are in normally inaccessible areas that are controlled in accordance with stringent procedures,” the Navy said in an email to Stars and Stripes. “Work in these areas occurs mainly during major maintenance availabilities and requires workers to follow strict safety procedures.”

  All normally accessible spaces and equipment aboard the ships have been surveyed and decontaminated, Vice Adm. William Hilarides, commander of Naval Sea Systems Command, wrote to Stars and Stripes.

  “The radioactive contamination found on the ships involved in Operation Tomodachi is at such low levels that it does not pose a health concern to the crews, their families, or maintenance personnel,” Hilarides said.

  One may be allowed to be skeptical: after all Tepco and the Japanese government lied for years about the “safety” of the Fukushima aftermath, and only 5 years later was the severity of the situation finally revealed.

  The largest U.S. ship to take part in the relief operation was the USS Ronald Reagan aircraft carrier, which normally carries a crew of more than 5,000 sailors. In 2014, three years after the disaster, the Reagan’s ventilation system was contaminated with 0.01 millirems of radiation per hour, according to the Navy. Nuclear Regulatory Commission guidelines advise no more than 2 millirems of radiation in one hour in any unrestricted area, and 100 millirems total in a calendar year from external and internal sources in unrestricted and controlled areas, so full-time exposure on the Reagan would be below that.

  In the days after the tsunami hit the Fukushima complex, the plant suffered multiple explosions and reactors began to melt down. Officials from the NRC told Congress that extremely high levels of radiation were being emitted from the impaired plant. Japanese nuclear experts said winds forced a radioactive plume out to sea, and efforts to keep fuel rods cool using sea water caused tons of radiated water to be dumped into the ocean.

  The Reagan was dispatched to take part in relief efforts, arriving the next day. Navy officials say the Nimitz-class nuclear-powered supercarrier stayed at least 100 nautical miles away from the damaged plant, but many sailors have disputed the Navy’s accounting, saying they were so close that they could see the plant.

  The Navy has acknowledged that the Reagan passed through a plume of radiation. Navy images showed sailors with their faces covered, scrubbing the deck of the Reagan with soap and water as a precautionary measure afterward. The Reagan and sailors stayed off the coast of Japan for several weeks to aid their Japanese allies.

  The multibillion-dollar ship, projected to last at least 50 years after its launch in 2001, then was taken offline for more than a year for “deep maintenance and modernization” at the Puget Sound Naval Shipyard and Intermediate Maintenance Facility in Bremerton, Wash., according to Navy officials.

  “Procedures were in place to survey, control and remove any low-level residual contamination,” the Navy said. “Personnel working on potentially contaminated systems were monitored with sensitive dosimeters, and no abnormal radiation exposures were identified.” Upgrades and cleaning also took place at the ship’s next stop in San Diego.

  Sailors who performed the work said it entailed entering spaces deep within the ship, testing for high levels of radiation, and if it was found, sanding, priming and painting the areas. They say there were given little to no protective gear, a claim that the Navy denies.

  Of the 1,360 individuals aboard the Reagan who were monitored by the Navy following the incident, more than 96 percent were found not to have detectable internal contamination, the Navy said. The highest measured dose was less than 10 percent of the average annual exposure to someone living in the United States.

  Experts differ on the effects of radiation in general and, specifically, for those involved in Operation Tomodachi.

  Eight Reagan sailors, claiming a host of medical conditions they say are related to radiation exposure, filed suit in 2012 against the nuclear plant’s operator, the Tokyo Electric Power Co. The suit asserts that TEPCO lied, coaxing the Navy closer to the plant even though it knew the situation was dire. General Electric, EBASCO, Toshiba Corp. and Hitachi were later added as defendants for allegations of faulty parts for the reactors.

  A spokesman for TEPCO declined to comment for this story because of the sailors’ lawsuit, which was slated to go forward pending appeals in the U.S. 9th Circuit Court of Appeals.

  The illnesses listed in the lawsuit include genetic immune system diseases, headaches, difficulty concentrating, thyroid problems, bloody noses, rectal and gynecological bleeding, weakness in sides of the body accompanied by the shrinking of muscle mass, memory loss, leukemia, testicular cancer, problems with vision, high-pitch ringing in the ears and anxiety.

  The list of sailors who have joined the lawsuit, which is making its way through the courts, has grown to 370.

  In early 2014, Congress ordered Assistant Secretary of Defense for Health Affairs Dr. Jonathan Woodson to investigate the claims.

  After a peer-reviewed study into the levels of exposure, Woodson reported back to Congress, defending the military’s response and safeguards. Any illnesses that sailors have developed since the operation are not a result of the relief campaign, he said.

  “There is no objective evidence that the sailors … experienced radiation exposures that would result in an increase in the expected number of radiogenic diseases over time,” Woodson wrote. “The estimated radiation doses for all individuals in the Operation Tomodachi registry, including sailors on the USS Ronald Reagan, were very small and well below levels associated with adverse medical conditions.”

  Furthermore, Woodson said, more sailors would have been sick if the levels were high enough to cause the illnesses cited. There were upward of 5,000 sailors aboard the Reagan at the time of the operation. He also said symptoms developed too early to be associated with the operation.

  Perhaps the assumption here is that the US government would not lie.

  But Shinzo Kimura — a professor at Dokkyo Medical University in Japan who has studied radiation exposure from Hiroshima and Nagasaki to Chernobyl and, now, Fukushima — said it wasn’t too early for sailors to show symptoms of exposure-related conditions. Doctors have seen conditions in children living near the plant that surfaced earlier than would normally be expected.

  Kimura, hired by the Nihonmatsu city government for his expertise in the field, was the first scientist on the ground taking readings in the wake of the Fukushima disaster. He said each person and the way their body is affected by radiation is different.

  While unable to definitively say if the sailors were sickened by the radiation, Kimura reasoned that the levels aboard the Reagan were high enough to cause illnesses. Otherwise, he said, why go through the bother of repeated cleanings to lower radiation levels?

  “It is impossible to speculate or calculate how much the doses were before the two decontamination works,” he said. “The U.S. military is very good at risk-management. Considering that, it is assumed that decontaminations were conducted twice because the levels were not favorable.”

  

  

  

  

  

• Why America May Not Be Considered A "First World Country" Much Longer

  Submitted by Chris Perrin via TheAntiMedia.org,

  Before George Manuel published The Fourth World: An Indian Reality, the idea that any real differences existed among population groups in fully developed countries was still taboo. At the time, Indigenous rights were still something of a political non-issue, a blemish on a relatively clean looking statistical sheet that First World countries paid lip service to all too infrequently. Since then, an increasing amount of scholarship seeks to understand the differences between Fourth World populations living inside First World countries.

  The Fourth World, basically, are populations living within a state who have little or no representation by that state. These populations, from the standpoint of the First World, are generally impoverished and would not fit the criteria for a “First World” country. They are, essentially and literally, the oppressed. It is what we see as the Third World when we are looking at Africa and South America, hidden within the First World just outside our doors. Unfortunately, the Fourth World is growing.

  As Anthony J. Hall points out in his book The American Empire and the Fourth World, Indigenous populations are not the only peoples who are finding themselves marginalized within the North American Fourth World (p. 283). The ongoing Flint Water Crisis is just the most recent example of the state-sponsored expansion of the Fourth World, particularly as it looks so similar to something that might happen in the Third World.

  For African-Americans and Hispanic Americans, the Fourth World is an old reality with a new name. Since the economic collapse of 2008, Black and Hispanic populations have been increasingly marginalized, and the way the government once spoke about Indigenous populations must now be applied to other racial and ethnic groups. Where Indigenous peoples are confined to racially segregated Reservations, Black Americans are finding themselves increasingly limited to urban ghettos where First World opportunities are equally non-existent. Moreover, as Flint and the #BlackLivesMatter movement indicate, African-Americans and Hispanics are less and less represented by the state, clearly placing them within the boundaries of the Fourth World — boundaries that are quickly moving beyond the typical racial norm.

  The Occupy Movement represented a clear indication that the working poor, or precariat, is no longer feeling represented by the First World state. With this massive inclusion of a working-class, poor, ethnically diverse group, to the already and obviously marginalized, the population of Fourth World America at the very least rivals the population of First World America. And while the American government continues to nominally supply aid to the Third World, the Fourth World inside the U.S. is slowly being forgotten.

  While the First World criticises various governments in traditionally Third World continents as being unfair and corrupt — calling them out for their ongoing human rights abuses — the abuses being perpetrated on the Fourth World are constantly ignored, no matter how similar the two start to appear. Meanwhile, as the Governor of Michigan, Rick Snyder, defines the Flint issue as “a failure of government at all levels,” those governments still claim to represent the citizens of Flint and their best interests.

  If this is the representation a growing majority of people are subject to in America, then the way the First and Fourth World are understood needs to be reevaluated. More importantly, where the United States fits within the list must be reconsidered. Only when we begin to see our own situation from a new perspective can we learn how to fix it, or find a solution.

  

  

  

  

  

• New Legislation Permits Authorities to Freeze Accounts and Use Them For Bail-ins

  The world will soon be facing a tsunami of defaults on bad debts. This will include municipal or local government defaults, governments “defaulting” on promises they’ve made to the people (Social Security, Medicaid), a default on the social contract between society and politicians such as the one in Cyprus (a default on the notions of private property and Democracy), stealth defaults on debts in the form of inflation and finally, of course, outright sovereign defaults.

   

  The sovereign defaults will come last; all other options will be tried first.

   

  The reason for this is that sovereign bonds (think of US Treasuries, German Bunds or Japanese Government bonds) are the senior most collateral posted by banks for the hundreds of trillions of Dollars worth of derivatives bets they’ve made with each other.

   

  The minute an actual sovereign default occurs in Europe, Asia or the US, then the large global banks will all be vaporized. End of story.  As is now clear, the Central banks do not care about ordinary citizens. They only care about propping up the big banks.

   

  This is why Cyprus decided to default on the social contract with its people and steal their funds rather than simply instigating a formal default. And it’s why in general we’re going to see Governments implementing more and more theft in the form of “taxes” (Cyprus called its theft a tax) in the future.

   

  Make no mistake, the words “wealth tax” mean freezing of assets and then taking some of your savings. Anyone with more than $100,000 in a bank account should be prepared for this.

   

  This will be sold to the public as either an attempt to tax those with a lot of money because it’s only fair that they put in more to bailout the nation OR as a form of financial terrorism e.g. “either you take a 7% cut on your deposits and the bank stays afloat or the bank crashes and you lose everything.”

   

  This will be spreading throughout the world, GUARANTEED.

   

  Spain, Canada (which allegedly has the safest banks in the world), New Zealand and now even Germany are implementing confiscation schemes for depositors in the event of a banking crisis.

   

  It can happen in the UK and the US as well. I am not writing that to simply scare people. The FDIC, working with the Bank of England published a paper proposing precisely these methods to deal with Systemically Important Financial Entities (SIFIs). The paper was published in December 2012. Below are some excerpts worth your attention:

   

  This paper focuses on the application of “top-down” resolution strategies that involve a single resolution authority applying its powers to the top of a financial group, that is, at the parent company level. The paper discusses how such a top-down strategy could be implemented for a U.S. or a U.K. financial group in a cross-border context…

   

  These strategies have been designed to enable large and complex cross- border firms to be resolved without threatening financial stability and without putting public funds at risk…

  Under the strategies currently being developed by the U.S. and the U.K., the resolution authority could intervene at the top of the group. Culpable senior management of the parent and operating businesses would be removed, and losses would be apportioned to shareholders and unsecured creditors. In all likelihood, shareholders would lose all value and unsecured creditors should thus expect that their claims would be written down to reflect any losses that shareholders did not cover. Under both the U.S. and U.K. approaches, legal safeguards ensure that creditors recover no less than they would under insolvency.

   

  An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution. Throughout, subsidiaries (domestic and foreign) carrying out critical activities would be kept open and operating, thereby limiting contagion effects. Such a resolution strategy would ensure market discipline and maintain financial stability without cost to taxpayers.

   

  Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve SIFIs [systemically important financial institutions] by establishing the orderly liquidation authority (OLA). Under the OLA, the FDIC may be appointed receiver for any U.S. financial company that meets specified criteria, including being in default or in danger of default, and whose resolution under the U.S. Bankruptcy Code (or other relevant insolvency process) would likely create systemic instability.

   

  [In the US] Title II requires that the losses of any financial company placed into receivership will not be borne by taxpayers, but by common and preferred stockholders, debt holders, and other unsecured creditors, and that management responsible for the condition of the financial company will be replaced…

   

  [In the UK] The introduction of a statutory bail-in resolution tool (the power to write down or convert into equity the liabilities of a failing firm) under the RRD is critical to implementing a whole group resolution of U.K… But insofar as a bail-in provides for continuity in operations and preserves value losses to a deposit guarantee scheme in a bail-in should be much lower than in liquidation. Insured depositors themselves would remain unaffected. Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down.

   

  http://www.fdic.gov/about/srac/2012/gsifi.pdf

   

  So… if a large bank fails in the US, the FDIC steps in and takes over, replacing management, and works to shrink the bank by writing-down liabilities and converting debt into equity.

   

  In other words… any liability at the bank is in danger of being written-down should the bank fail. And guess what? Deposits are considered liabilities according to US Banking Law and depositors are creditors.

   

  So… if a large bank fails in the US, your deposits at this bank would either be “written-down” (read: disappear) or converted into equity or stock shares in the company. And once they are converted to equity you are a shareholder not a depositor… so you are no longer insured by the FDIC.

   

  So if the bank then fails (meaning its shares fall)… so does your deposit.

   

  Let’s run through this.

   

  Let’s say ABC bank fails in the US. ABC bank is too big for the FDIC to make hold. So…

   

  1)   The FDIC takes over the bank.

  2)   The bank’s managers are forced out.

  3)   The bank’s debts and liabilities are converted into equity or the bank’s stock. And yes, your deposits are considered a “liability” for the bank.

  4)   Whatever happens to the bank’s stock, affects your wealth. If the bank’s stock falls at this point because everyone has figured out the bank is in major trouble… your wealth falls to.

   

  Let’s say you have $1,000,000 in deposits at financial institutions ABC. When ABC fails, your deposits are converted into $1,000,000 worth of ABC’s stock (let’s say you get 1,000,000 shares valued at $1 each for $1,000,000).

   

  Now let’s say ABC’s shares fall in value from $1.00 to $0.50.

   

  You just lost $500,000 of your wealth.

   

  This is precisely what has happened in Spain during the 2012 banking crisis over there.

  And it is perfectly legal in the US courtesy of a clause in the Dodd-Frank bill.

   

  This is the template for what’s going to be implemented globally in the coming months.  When push comes to shove, it will be taxpayers, NOT Central Banks who are on the hook for the next round of bailouts.

   

  Indeed, we've uncovered a secret document outlining how the Feds plan to take hold of savings during the next round of the crisis to stop individuals from getting their money out.

   

  We detail this paper and outline three investment strategies you can implement right now to protect your capital from this sinister plan in our Special Report

  Survive the Fed's War on Cash.

   

  We are making 1,000 copies available for FREE the general public.

   

  To pick up yours, swing by….

  http://www.phoenixcapitalmarketing.com/cash.html

   

  Best Regards

  Phoenix Capital Research

   

  Our FREE e-letter: http://gainspainscapital.com/

  Follow us on Twitter: http://twitter.com/GainsPainsCapit

   

   

   

   

   

   

   

   

  

  

  

  

• Inflation Is Not Risen – It's The Cheapest Easter "Since Lehman"

  As christians remember the fall and rise of Jesus, there is another – perhaps more important to many – rising-and-falling thing to celebrate: Egg prices are the cheapest for Easter since at least 2008…

   

  While pork prices are soaring in China; in America, egg prices are tumbling…

  

   

  Just in time for Easter…(cheapest Easter for eggs since at least 2008)

  

   

  As Bloomberg notes,

  Wholesale prices at stores in the U.S. Midwest have averaged $1 a dozen since mid-February, or more than 60 percent below the all-time highs seen in mid-2015, when a record bird-flu outbreak led to the death of millions of hens.

   

  The egg industry “continues to rebuild,” and output is forecast to rebound by about 4 percent in 2016, the U.S. Department of Agriculture said March 9.

  Happy Easter everyone.

  

  

  

  

  

• Al Jazeera Presenter Corners Saudi Ambassador – "Why Support Democracy In Syria But Not Saudi Arabia?"

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  This past week, Al Jazeera presenter Mehdi Hasan sat down with Saudi Arabia’s ambassador to the UN. He asked him a very pointed question regarding why he supports democracy in Syria but not in Saudi Arabia.

  It’s a great question, and let’s just say the answer was not at all convincing.

  Too much media these days merely serves as public relations for the status quo. What Mr. Hasan does in this interview is exactly what journalists are supposed to be doing, but very rarely do in these United States:

   

  I asked the Saudi ambassador to the UN why he supports democracy in Syria but not in Saudi Arabia – @AJUpFront clip:https://t.co/bblCAHCdZS

  — Mehdi Hasan (@mehdirhasan) March 25, 2016

   

  Speak truth to power. 

  

  Well done Mr. Hasan. The entire interview can be watched below…

  

  

  

  

  

• Australian Dollar versus United States Dollar Currency Cross Analysis 3 27 2016 (Video)

  By EconMatters

  

  We look at the AUD/USD Currency Cross in this video. Will the AUD get back to parity with the USD? The AUD is off the 2016 lows, will it strengthen or weaken from here for the remainder of the year? This is the big question for currency traders after the rally off the January lows in the AUD.

  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle  

  

  

  

  

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• Paul Craig Roberts On The Real Likelihood Of Nuclear War

  Via SputnikNews' John Harrison,

  Dr. Paul Craig Roberts, who served as an Assistant Secretary of the Treasury for Economic Policy in the Reagan administration, shares his view that there is a real likelihood of a nuclear war breaking out. Below are the main points covered in this radio programme.

  (click image for link to full interview)

  

  "Firstly there is the Wolfowitz doctrine, which basically makes it clear that the United States should prevent the rise of any state that could present sufficient power to threaten American unilateral action. Russia has risen and has displayed such power….This is the reason for the constant demonisation of Russia’s leader. We have the number one candidate for the democratic Nomination Hillary Clinton, who now compares the President of Russia with Hitler….So what has happened is that every American president during my lifetime, especially Nixon and Reagan worked to create trust between the two major nuclear powers. But beginning with Clinton, the trust that had been achieved was progressively destroyed."

  "When you destroy trust between nuclear powers you recreate the possibility of nuclear war, either by intent, or miscalculation. So this is a reckless and irresponsible act on the part of Washington….The information war that is going on now is to prepare the American population and NATO countries allies for military conflict with Russia. This is part of the preparation of that. We now have high level people in the US government and military who go to Congress and say that Russia is an existential threat. This is rubbish!…You have to remember that before the wars started in Afghanistan, Iraq, Syria, it was the constant demonisation of the leaders of the governments, against Gaddafi, Hussein. When you see these kinds of demonisation it fits a pattern."

  "A hot war can come from a new cold war. Another factor is the American military industrial complex, with a turnover of a trillion dollars annually. Their entire revenues come from serving the war capability of US government. They have a huge interest in having a major enemy. They tried to make terrorists that enemy, but that is not serious enough, so this complex has great interest in recreating the Russian threat. From the neo conservative standpoint, they actually regard any country with an independent foreign policy to be a threat to the United States. So that part of the equation means that they can move the cold war into a hot war, it only takes a small amount of miscalculation. I don’t see how the Russian government can believe one word coming out of Washington."

  

  "Some neocons say: what’s the good of nuclear weapons if you can’t use them? They have a theory that the US has sufficient superiority to win a strike against Russia. If the US cannot win against a few thousand Taliban, it will not be able to win  a possible conventional war against the Red Army, it will go nuclear rather lose…. A nuclear war cannot be won."

  "The neoconservatives now have no competition, there is nobody out there apart from Washington wishing to take over the world… As long as the American vassal states that compromise the NATO accept it, they magnify the chance of a new massive war… Republican candidates are competing with each other to see who can treat Russia the most aggressively."

  

  

  

  

  

• Visualizing Why Manufacturing Jobs Aren't Coming Back

  The market for industrial robot installations has been on a skyward trend since 2009, and it is not expected to slow down any time soon. According to the World Robotics 2015 report, the market for industrial robots was approximated at $32 billion in 2014, and in the coming years it is expected to continue to grow at a compound annual growth rate (CAGR) of at least 15%.

  As VisualCapitalist's Jeff Desjardin notes, that means between 2015 and 2018, it’s anticipated that 1.3 million industrial robots will be installed worldwide. This will bring the stock of operational robots up to just over 2.3 million, mostly working in the automotive and electronics sectors.

  For how long can the global robot population continue to grow?

   

  

  Courtesy of: Visual Capitalist

   

  ROBOT DENSITY

  Perhaps the most interesting way to peek into the future of industrial robot installations is to look at potential sales in China.

  Currently, the world’s most populous nation has a density of robots that is about half of the world average, equal to just 36 robots for every 10,000 manufacturing workers in China.

  However, this is changing fast. It’s been the largest market for robots since 2013, and in 2014 the country bought 57,100 robots – the highest quantity ever recorded in a year. By 2018, one in every three robots in operation around the world will be in China.

  What will happen if China’s density approaches that of other robot industrial centers?

  Highly automated countries such as Germany, Japan, and South Korea all have robot densities that are multiples higher. South Korea, for example, has 478 industrial robots for every 10,000 workers – a ratio that is 13x higher than China’s.

  With this kind of potential for growth, it’s clear that this is only the start of the robot story.

  

  

  

  

• The World's Most Famous Economic Hitman Confesses – They're Coming For Your Democracy

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Allen Dulles, the CIA director under presidents Eisenhower and Kennedy, the younger brother of Secretary of State John Foster Dulles, and the architect of a secretive national security apparatus that functioned as essentially an autonomous branch of government. Talbot offers a portrait of a black-and-white Cold War-era world full of spy games and nuclear brinkmanship, in which everyone is either a good guy or a bad guy. Dulles—who deceived American elected leaders and overthrew foreign ones, who backed ex-Nazis and thwarted left-leaning democrats—falls firmly in the latter camp.

   

  But what I was really trying to do was a biography on the American power elite from World War II up to the 60s. That was the key period when the national security state was constructed in this country, and where it begins to overshadow American democracy. It’s almost like Game of Thrones to me, where you have the dynastic struggles between these power groups within the American system for control of the country and the world…

   

  Absolutely. The surveillance state that Snowden and others have exposed is very much a legacy of the Dulles past. I think Dulles would have been delighted by how technology and other developments have allowed the American security state to go much further than he went. He had to build a team of cutthroats and assassins on the ground to go around eliminating the people he wanted to eliminate, who he felt were in the way of American interests. He called them communists. We call them terrorists today. And of course the most controversial part of my book, I’m sure, will be the end, where I say there was blowback from that. Because that killing machine in some way was brought back home.

   

  – From the post: How America’s Modern Shadow Government Can Be Traced Back to One Very Evil Man – Allen Dulles

  Most readers will be familiar with John Perkins and his best-selling novel Confessions of an Economic Hitman. What you may not know, is he’s currently making the rounds warning us that all the corporatist mercenary tactics employed against third-world nations to financially benefit U.S. conglomerates are now being turned inward on American communities.

  He discussed some of this in a recent interview with Yes. Here are a few excerpts:

  Twelve years ago, John Perkins published his book, Confessions of an Economic Hit Man, and it rapidly rose up The New York Times’ best-seller list. In it, Perkins describes his career convincing heads of state to adopt economic policies that impoverished their countries and undermined democratic institutions. These policies helped to enrich tiny, local elite groups while padding the pockets of U.S.-based transnational corporations.

  If economic pressure and threats didn’t work, Perkins says, the jackals were called to either overthrow or assassinate the noncompliant heads of state. That is, indeed, what happened to Allende, with the backing of the CIA.

   

  Perkins has just reissued his book with major updates. The basic premise of the book remains the same, but the update shows how the economic hit man approach has evolved in the last 12 years. Among other things, U.S. cities are now on the target list. The combination of debt, enforced austerity, underinvestment, privatization, and the undermining of democratically elected governments is now happening here.

   

  Sarah van Gelder: What’s changed in our world since you wrote the first Confessions of an Economic Hit Man?

   

  John Perkins: Things have just gotten so much worse in the last 12 years since the first Confessions was written. Economic hit men and jackals have expanded tremendously, including the United States and Europe.

   

  Back in my day we were pretty much limited to what we called the third world, or economically developing countries, but now it’s everywhere.

   

  van Gelder: So how has this switched from us being the beneficiaries of this hit-man economy, perhaps in the past, to us now being more of the victims of it?

   

  Perkins: It’s been interesting because, in the past, the economic hit man economy was being propagated in order to make America wealthier and presumably to make people here better off, but as this whole process has expanded in the U.S. and Europe, what we’ve seen is a tremendous growth in the very wealthy at the expense of everybody else.

   

  On a global basis we now know that 62 individuals have as many assets as half the world’s population.

   

  van Gelder: Is this the same kind of dynamic about debt that leads to emergency managers who then turn over the reins of the economy to private enterprises? The same thing that you are seeing in third-world countries?

   

  Perkins: Yes, when I was an economic hit man, one of the things that we did, we raised these huge loans for these countries, but the money never actually went to the countries, it went to our own corporations to build infrastructure in those countries. And when the countries could not pay off their debt, we insisted that they privatize their water systems, their sewage systems, their electric systems.

   

  van Gelder: I want to ask you about the Trans-Pacific Partnership, and other trade deals. Is there any way that we can beat these things back so they don’t continue supercharging the corporate sphere at the expense of local democracies?

   

  Perkins: They’re devastating; they give sovereignty to corporations over governments. It’s ridiculous.

   

  I was just in Central America and what we talk about in the U.S. as being an immigration problem is really a trade agreement problem.

   

  They’re not allowed to impose tariffs under the trade agreements—NAFTA and CAFTA—but the U.S. is allowed to subsidize its farmers. Those governments can’t afford to subsidize their farmers. So our farmers can undercut theirs, and that’s destroyed the economies, and a number of other things, and that’s why we’ve got immigration problems.

   

  van Gelder: Can you talk about the violence that people are fleeing in Central America, and how that links back to the role the U.S. has had there?

   

  Perkins: Three or four years ago the CIA orchestrated a coup against the democratically elected president of Honduras, President Zelaya, because he stood up to Dole and Chiquita and some other big, global, basically U.S.-based corporations.

   

  He wanted to raise the minimum wage to a reasonable level, and he wanted some land reform that would make sure that his own people were able to make money off their own land, rather than having big international corporations do it.

   

  The big corporations couldn’t stand for this. He wasn’t assassinated but he was overthrown in a coup and sent to another country, and replaced by a terribly brutal dictator, and today Honduras is one of the most violent, homicidal countries in the hemisphere.

   

  It’s frightening what we’ve done. And when that happens to a president, it sends a message to every other president throughout the hemisphere, and in fact throughout the world: Don’t mess with us. Don’t mess with the big corporations. Either cooperate and get rich in the process, and have all your friends and family get rich in the process, or go get overthrown or assassinated. It’s a very strong message.

  That is how a once proud nation gets transformed into a rancid, oligarch-controlled Banana Republic.

  

  

  

  

  

  

• Hugh Hendry: "If China Devalues By 20% The World Is Over, Everything Hits A Wall"

  Once upon a time Hugh Hendry was one of the world’s most prominent financial skeptics, arguing with anyone who would listen that the status quo is doomed and that central planning will never work.

  Most famously, back in 2010 during a BBC round table discussion with Jeffrey Sachs and Gillian Tett when discussing Europe’s crashing experiment with the single currency, he said that we should “purge this system of its rottenness. Let’s take on a recession. It’s going to be tough, people are gonna lose their jobs. They are going to lose their jobs anyway. We can spread this over 20 years, or we can get rid of it over 3 years” before concluding “I recommend you panic.”

  Ultimately everyone did panic, which led to the single biggest episode of global QE and negative rates ever seen, resulting in ever louder speculation even among the most “serious” people that central bankers are now powerless.

  But perhaps most notably, Hendry was one of the biggest China bears, certain that the country’s massive overcapacity, insolvency and bad debt problems will result in disaster (back then China only had about 200% debt/GDP, it has since risen to over 350%). His Chinese skepticism led to his fund generating a 40% profit by late 2011.

  And then after a poor two year performance spell, Hendry had a historic burnout and threw in the towel on bearishness, infamously saying he can no longer “look at himself in the mirror“:

  “I may be providing a public utility here, as the last bear to capitulate. You are well within your rights to say ‘sell’. The S&P 500 is up 30% over the past year: I wish I had thought this last year… Crashing is the least of my concerns. I can deal with that, but I cannot risk my reputation because we are in this virtuous loop where the market is trending.”

  He proceeded to buy momentum stocks and 3D printer companies.

  Fast forward to the present, when countless hedge funds – key among them Kyle Bass’ Hayman Capital and Mark Hart’s Corriente – have become China megabears, expecting the country’s financial collapse and trading it by shorting the Yuan expecting a massive Yuan devaluation.

  It is here that Hugh Hendry has once again proven contrarian, even if it means agreeing with the dominant textbook meme of the day, namely that China can contain its economic hard landing, and in his most recent interview with RealVision’s Raoul Pal, he cautions against a Chinese devaluation 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.”

  What makes this interview doubly ironic is not just that Hendry is wildly contradicting everything he himself believed in a few short years ago, but disagrees with his interview host himself – recall that one month ago, we showed an excerpt from a Raoul Pal interview in which he previewed “the Big Reset” and laid out how the Kondratieff Winter would unwind, one in which China would play a prominent part.

  Whether Hendry is right or wrong remains to be seen: for now he has the powerful People’s Bank of China at his back which has been especially active recently especially after the PBOC stated recently it intends to crush all hedge funds who have shorted the Yuan even if it means slamming Chinese trade and the economy once again (as a reminder, one of the biggest reasons why China needs a weaker Yuan is not just the stronger dollar to which it is pegged but because its exports have been crashing against all of its trading partners making the need for a weak currency paramount).

  For now, as we showed just ten days ago, those short the Yuan have swung to wildly profitable to losing money as both the USD has slid and the Yuan has spiked, although both of these trades appear to be reversing now.

  Needless to say, Hendry disagrees with the China contrarians and believes that the way to fix the Chinese economy is through a stronger currency, even if there is no logical way how that could possibly work when China’s debt load is 350% of GDP while its NPLs are over 10% and rising.

  So, borrowing form a favorite Keynesian trope, one where when the countrfactual to his prevailling – if incorrect – view of the world finally emerges, Hendry is convinced that a 20% devaluation would lead to global devastation; the same way if Paulson did not get Congress to sign off on his three page term sheet that would lead to the “apocalypse.” Only unlike Paulson who only hinted at a Mad Max world, for Hendry the alternative to him being right is a very explicit doomsday scenario, as he explains in the following excerpt from his RealVision interview:

  Tomorrow we wake up and China has devalued 20%, the world is over. The world is over. Euro breaks up. The world is over. The euro breaks up. Everything hits a wall. There’s no euro in that scenario. The US economy, I mean everything hits a wall! Everything hits a wall!

   

  The dollar strength that you imagined is devastation because you just eliminated dollars. They’re a scarce commodity. You’ve wiped them out. And China is a pariah state.

   

  It’s a ‘Mad Max’ movie, right. OK, China gets to be the king in ‘Mad Max’ world. How appealing is that? There is no world after the tomorrow where China devalues by 20%. There is no world. Yeah, it’s looney tunes to believe that, people say, ‘oh wow, they needed to catch a break.’

   

  Their share of world trade has never been higher. They’re facing no pressure, immense terms of trade improvement, and you would destroy world trade. World trade is down 25%. You would probably have passport restrictions, the world is over.

  And while it is clear on which side of the Yuan Hugh is currently positioned (Hendry’s Eclectica is down 2.1% through March 18 and -5.9% YTD) either directly or synthetically, we can’t wait to see who is right in the end: China and its central bank (as well as Hugh Hendry) or reason and common sense (as well as some of the smartest hedge funds in the world).

  The RealVisionTV interview excerpt is below:

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

  

  

  

  

  

• From Marxist To Markets: Why Robber Barons Are "Safer Foes" Than Meddling Bureaucrats

  Authored by Chris Campbell, via LFB.org,

  “Of all tyrannies,” C.S. Lewis once wrote, “a tyranny sincerely exercised for the good of its victims may be the most oppressive.

   

  “It would be better to live under robber barons than under omnipotent moral busybodies.

   

  “The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.”

  There’s a sculpture on display in front of the Federal Trade Commission building in D.C.

  It was erected when Roosevelt was in office, depicting a man holding back a wild horse. It is called “Man Controlling Trade.”

  It, of course, implies that we need institutional protection from the overwhelmingly wild force of grocery lists and car salesmen.

  

  But, we know what you’re thinking. This metaphor is full of plotholes.

  For one: “Since trade is not really a wild horse,” Sheldon Richman points out in Reason, “but rather a peaceful and mutually beneficial activity between people, the Roosevelt administration’s propaganda purpose is clear.

  “A more honest title would be ‘Government Controlling People.’ But that would have sounded a little authoritarian even in New Deal America, hence the wild horse metaphor.”

  The idea that government is necessary to “tame the beast” is not an unpopular one. But, Richmond goes on, “What’s looked over — intentionally or not — is that the alternative to a government-regulated economy is not an unregulated one.

  “The term ‘free market’ does not mean free of regulation. It means free of government interference, that is, legal plunder and other official aggressive force.”

  Rather than having a centralized decision-maker, individuals can (and should) voluntarily participate and create regulatory environments on their own. These voluntary decisions are what make up and regulate the market — not arbitrary and outdated restrictions and barriers.

  And, though a free market will have its bad players, they will be in the minority. The incentive to cheat and defraud, without a centralized power structure, will be lower and far less disastrous. And, better yet, the threat of violence won’t be baked into the cake.

  Rather, rules will be created by consent and not by agenda-driven third-parties with goons with guns and big cages.

  “Bureaucrats,” Richmond writes, “who necessarily have limited knowledge and perverse incentives, regulate by threat of physical force. In contrast, market forces operate peacefully through millions of cooperating participants, each with intimate knowledge of her own personal circumstances and looking out for her own well-being.”

  People, naturally, tend to value order and peace to chaos. And free markets, in the pursuit of self-interest, provide a way for humans to interact, create order and foment peace. But, Richmond goes on, those who forget that “liberty is the mother not the daughter of order, will be tempted to favor state-imposed order. How ironic since the state is the greatest creator of disorder of all.”

  Today, to drive this point home, we turn to Mr. Thomas Sowell.

  Sowell’s here to rap about his transformation from Marxism to the Markets. And show us why a robber baron is a much safer foe than a meddling bureaucrat… or worse, someone who sincerely believes they’re helping.

  Read on…

  From Marxist to the Market

  (by Thomas Sowell, via Capitalism Magazine)

  How and why had I changed from a young leftist to someone with my present views, which are essentially in favor of free markets and traditional values?

  In a sense, it was not so much a change in underlying philosophy, as in my vision of how human beings operate.

  Back in the days when I was a Marxist, my primary concern was that ordinary people deserved better, and that elites were walking all over them.

  That is still my primary concern, but the passing decades have taught me that political elites and cultural elites are doing far more damage than the market elites could ever get away with doing.

  For one thing, the elites of the marketplace have to compete against one another.

  If General Motors doesn’t make the kind of car you want, you can always turn to Ford, Chrysler, Honda, Toyota, and others. But if the Environmental Protection Agency goes off the deep end, there is no alternative agency doing the same thing that you can turn to.

  Even when a particular corporation seems to have a monopoly of its product, as the Aluminum Company of America once did, it must compete with substitute products.

  If Alcoa had jacked up the price of aluminum to exploit its monopoly position, many things that were made of aluminum would have begun to be made of steel, plastic and numerous other materials.

  The net result of market forces was that, half a century after it became a monopoly, Alcoa was charging less for aluminum than it did at the beginning. That was not because the people who ran the company were nice. It was because market competition left them no viable alternative.

  How you look at the free market depends on how you look at human beings. If everyone were sweetness and light, socialism would be the way to go.

  Within the traditional family, for example, resources are often lavished on children, who don’t earn a dime of their own. It is domestic socialism, and even the most hard-bitten capitalists practice it.

  Maybe some day we will discover creatures in some other galaxy who can operate a whole society that way. But the history of human beings shows that a nation with millions of people cannot operate like one big family.

  The rhetoric of socialism may be inspiring, but its actual record is dismal.

  Countries which for centuries exported food have suddenly found themselves forced to import food to stave off starvation, after agriculture was socialized. This has happened all over the world, among people of every race.

  Anyone who saw the contrast between East Berlin and West Berlin, back in the days when half the city was controlled by the Communists, can have no doubts as to which system produces more economic benefits for ordinary people.

  Even though the people in both parts of the city were of the same race, culture and history, those living under the Communists were painfully poorer, in addition to having less freedom.

  Much the same story could be told in Africa, where Ghana relied on
  socialistic programs and the Ivory Coast relied more on the marketplace, after both countries became independent back in the 1960s. Ghana started off with all the advantages.

  Its per capita income was double that of the Ivory Coast. But, after a couple of decades under different economic systems, the bottom 20% of people in the Ivory Coast had higher incomes than 60% of the people in Ghana.

  Economic inefficiency is by no means the worst aspect of socialistic government. Trying to reduce economic inequality by increasing political inequality, which is essentially what Marxism is all about, has cost the lives of millions of innocent people under Stalin, Mao, Pol Pot, and others.

  Politicians cannot be trusted with a monopoly of power over other people’s lives. Thousands of years of history have demonstrated this again and again.

  While my desires for a better life for ordinary people have not changed from the days of my youthful Marxism, experience has taught the bitter lesson that the way to get there is the opposite of what I once thought.

  

  

  

  

  

• Belgian Media Explains What To Do During A Nuclear Disaster

  Electrabel is disgusted with the media. Why? Because in the aftermath of the Brussels attacks, the electric utility thinks journalists have made too much of the alleged threat to the country’s nuclear infrastructure.

  Hours after four attackers detonated explosives-laden belts and luggage in the Brussels airport and metro, reports began to surface that the Tihange and Doel nuclear power plants were being evacuated.

  That would have been alarming enough on its own, but last month it emerged that when Belgian authorities raided a home in Auvelais last November in connection with the Paris attacks, investigators recovered hours of surveillance footage apparently recorded by terrorists at the home of a top nuclear official. There’s now some speculation that the Bakraoui brothers (two of the four Brussels bombers) were involved in covertly monitoring the official’s home.

  Obviously, that suggests that the cell was (and probably still is) interested in either sabotaging a nuclear facility and/or obtaining radioactive material for the purposes of developing a dirty bomb. That’s not an attempt to sow panic, it’s simply the conclusion one comes to when told that terrorists were in possession of video tapes depicting the day-to-day routine of nuclear officials and their families.

  Electrabel would later say the Tihange had actually not been “evacuated” per se. Rather, non essential personnel were told they could go home.

  #Tihange nuclear powerplant – people who are not strictly necessary on site can leave #security measures

  — Electrabel (@Electrabel) March 22, 2016

  On Saturday, the utility became even more exasperated when Derniere Heure reported that a Tihange security guard had been shot in Charleroi and his access badge stolen. That report, Electrabel insists, is “false.”

  Electrabel roept op de grootste voorzichtigheid met betrekking tot artikels die zaterdagochtend verschenen zijn https://t.co/2ux75SPlse

  — Electrabel (@Electrabel) March 26, 2016

  Translation: “Electrabel calls the greatest caution with regard to articles that have appeared Saturday morning.”

  “Electrabel deplores that its sites are being used regularly this week to illustrate articles without any link to the company or its 5,000 workers,” a statement reads. Hopefully the company doesn’t expect this “deplorable” state of affairs to improve any time soon because if you know anything about the history of Tihange and Doel (see here and here for more), you know why Belgians are worried.

  “It’s like talcum powder,” Matthew Bunn, a specialist in nuclear security at Harvard’s John F. Kennedy School of Government, told The New York Times, regarding byproducts of isotopes like Cesium-137. “If you made a dirty bomb out of it, it’s going to provoke fear, you would have to evacuate and you have to spend a lot of money cleaning it up; the economic destruction cost could be very high.”

  Yes, “it’s going to provoke fear,” much like running a story about how to survive a nuclear terrorist attack when the public is already at wit’s end. But better safe than sorry we suppose and on that note, we present the following rather amusing piece from Belgian media which outlines how best to survive a nuclear disaster. Among the things you should do: grab the money and the iodine tablets. Among the things you should not do: help other people – until you’re sure you’re safe that is.

  From HLN.be (translated)

  It is clear from this morning that there is no link between the murdered guard and nuclear terror investigation. But the message has a lot of people have put thinking. What should you do if terrorists indeed endorse a nuclear power plant?

  The government and the managers of nuclear sites work hard to keep safe nuclear plants and if there is an emergency, the operator will be as fast as possible to bring the situation under control at a technical level. The government will also make every effort to protect the population and the environment. But also as an individual you can protect yourself. The most important nuclear risk in our country are Doel and Tihange. The Study Centre for Nuclear Energy in Mol-Dessel and the National Institute for Radio Elements in Fleurus are risk zones. 

  

  To avoid exposure to radioactive material and to prevent exposure and contamination, hiding your best at a nuclear incident. Get to a central area of a building, close windows and doors and turn off ventilation. If possible, collect the most necessary (identity card, money …). Also make sure first that you are safe. If possible, you can help other people, but bring your own safety is not compromised. 

  
  

  If you’ve got to safety, it is important not unnecessarily to call the emergency services, so not inhibited urgent care. Also make sure there is enough food and drink, warm clothes, blankets, flashlight … make sure that you can at any time following the reports about the disaster.

  In a nuclear accident could release radioactive iodine. It can enter the body through the respiratory tract or contaminated food. The thyroid iodine stores until she is satisfied with it and allows that way for irradiation from within. Through this ongoing radiation increases the risk of cancer and other diseases significantly. By saturating the thyroid with non-radioactive iodine in the tablets, you can prevent your body absorbs radioactive iodine. Iodine tablets do not offer protection against other radioactive substances are absorbed by the body. Against these substances can protect your best to take shelter in time. Take the tablets only when the government recommends it. The tablets provide protection for 24 hours. 

  

  

  

  

• I DiD NoT HaVe SeX WiTH THaT…

  

  

  

  

  

• Another Volcker Moment? Guessing The Future Without Say's Law

  Submitted by Alasdair Macleod via GoldMoney.com,

  Some reflections to read over the Easter holidays

  With Japanese and Eurozone interest rates becoming increasingly negative, and the Fed backing off from at least some of the planned increases in the Fed funds rate this year, economists are reassessing the interest rate outlook.

  Economists lack consensus, with some expecting yet more easing, based on the apparent collapse in cross-border trade last year. The fact that the Bank of Japan and the European Central Bank see fit to pursue increasingly aggressive monetary reflation is taken as evidence of underlying difficulties faced in these key economies. And lingering doubts about the sustainability of China’s credit bubble point to a high risk of a credit-induced slump in the world’s growth engine.

  Other economists, citing official US data and relying on the Fed’s statements, point out that unemployment levels have more than satisfied the Fed’s target, and that core inflation has picked up to the point where the Fed would be fully justified to increase interest rates over the course of this year, or risk overheating in 2017.

  These two opposite camps conflict in their forecasts, but where they fundamentally differ is in expectations of future economic growth. Far from displaying the highest levels of macroeconomic discipline, their diversity of opinion should alert us that their forecasts may lack sound theoretical foundation. The purpose of reasoned theory is to reduce uncertainty, not promote it. And the explanation for most of the failures behind modern macroeconomic thinking is the substitution of market-based economics by economic planning.

  The fact that today’s macroeconomics dismisses the laws of the markets, commonly referred to by economists as Say’s law, explains all. Subsequent errors confirm. The many errors are a vast subject, but they boil down to that one fateful step, and that is denying the universal truth of Say’s law.

  Say’s law is about the division of labour. People earn money and make profits from deploying their individual skills in the production of goods and services for the benefit of others. Despite the best attempts of Marxism and Keynesianism along with all the other isms, attempts to override this reality have always failed. The failure is not adequately reflected in government statistics, which have evolved to the point where they actually conceal it. So when an economist talks of economic growth being above or below trend, he is talking about a measure that has no place in sound economic reasoning, and that is gross domestic product.

  GDP

  Gross domestic product in its current form is a relatively recent invention, dating from the 1930s. It was a gift to state-sponsored economists, needing a statistical justification for perfecting their theories of management of the economy. At last, here was a means of measuring the effects of economic policy, and therefore to adjust its future implementation based on evidence. The inconvenience of having to pander to markets had been dealt its final blow. Or so it was thought.

  GDP comes in various guises, but for our purposes, we can define it as the total monetary value of recorded and eligible transactions between two points in time. It tells you nothing more. It does not tell you anything about the reasons for those transactions. It tells you nothing about the future. Economists, politicians and laymen who talk of economic growth miss this point entirely. What GDP does tell you, and only tells you, is how much money has been spent on new products included in the statistics. And, assuming there is no change in the allocation of total spending between qualifying and non-qualifying items, the limitation is simply the total earnings and profits of individuals and businesses applied to the purchase of those products. This is not to be confused with economic progress, which is an entirely different thing.

  So ingrained is the belief that growth in GDP is a desirable objective, that it is akin to heresy to point out its utter meaninglessness. Assume for a moment that the GDP statistic captures all economic activity in a community, conventionally a nation state. Let us also assume that the quantity of money and credit is fixed, neither expanding nor contracting. And let us also assume that the trade balance is always zero. Therefore, all money earned, or made through profits, is spent or saved. Savings are deferred consumption, and through financial intermediaries, invested by businesses in capital goods and working capital. Logically therefore, the following must all be true:

  • All consumption is funded by income, whether it comes from salaries, entrepreneurial profits, income and profits on savings, or government benefits and subsidies.
  • All government spending must be financed by taxes or domestic savings. In other words, if the government increases its spending it must be at the expense of the non-government sectors. Therefore, an increase in government spending does not increase GDP.
  • Imports are paid for by exports.
  • Prices are free to reflect changes in demand for money, and changes in demand between different goods and services.

  It is now be obvious that GDP cannot change from one period to the next. An economy under these conditions is free to evolve, respond to consumer and investment demands, to progress, all with zero “growth”. Therefore, growth in GDP can only be an increase in the quantity of money deployed, and it cannot be anything else.

  This was broadly the situation when gold was money. Broadly, because there was also the cyclical effect of bank credit, which was formalised by the UK’s Bank Charter Act of 1844. At least it evened out over the cycle, and despite the ups and downs of bank credit, the British, European and American economies progressed, as consumers were offered and acquired improved goods throughout the industrial revolution, at least until the disruption of the First World War. This empirical example, which is fully explained by sound economic theory, confirms that the substantial leaps in economic progress at that time could not be quantified by GDP.

  This is not to say that disruption in the rate of economic progress does not cause changes in GDP in a fiat currency environment. But the relationship between changes in GDP and true progress is not predictable and is wholly unsuited as an economic indicator.

  Having established that GDP is simply a measure of the quantity of money spent on goods and services specified in the statistic, and nothing more, the basic goal of modern economists in a world of unlimited fiat currency is exposed as meaningless. This mistake is a source of considerable error, not only among policy-makers, but commentators as well.

  The Fed has accepted this by default, because it does not target GDP. Instead, it operates a dual mandate of price inflation and unemployment, as proxy indications for advance warning of when monetary stimulus should be moderated. And here again, the use of these statistics is no substitute for a proper understanding of price formation and the forces that drive employment. So we shall look at these in turn.

  Inflation

  This term is abused to the point where it is commonly assumed to mean a rise in prices. Rising prices may or may not be a symptom of inflation, which was originally defined by economists as a monetary phenomenon. To point out this confusion is important, because an expansion in the quantity of money and credit in fiat currencies is only one of three main factors that affect the overall price level:

  1. When the quantity of money and credit is increased and that increase is applied to the components of GDP or the consumer price index, it represents the application of new money, which in time devalues the previously existing money employed for the purposes of these statistics. It generates extra demand, which fades and reverses as the purchasing power of the currency falls to accommodate the increased quantity of money introduced. Further increases in the quantity of money are required to negate the tendency for demand to return to the previous level after the effect of the initial increase in the quantity of money wears off.
  2. When money and credit is withdrawn from activities not included in the GDP or CPI statistics, and then applied to goods and services which are included, the effect is to create a temporary increase in recorded demand as in the first case above. This time, the effect of expansion and subsequent contraction of demand can be detected in GDP and CPI statistics, while the effect of the withdrawal of money applied to non-GDP items is ignored.
  3. By far the most important factor driving prices is changes in the overall preference individuals have for holding a reserve of money. It is this factor which can either enhance a fiat money’s purchasing power, or lead to its total collapse, and is independent from changes in the quantity of money and credit in circulation. Changes in preference override the first two cases in a fiat money economy, and should be regarded as the most risk to currency stability.

  In all three cases, the change in prices comes from the money side of transactions and not that of goods. This is the exact opposite of the common belief that money is an unchanging constant behind all transactions, having a valid objective-exchange value, and that inflation is rising prices of goods. We have collectively taken the past attributes of gold as money, and applied them without modification to modern fiat currencies. It is illogical to regard the declining purchasing power of a fiat currency as only a long-term effect.

  The Fed’s open market committee is targeting an inflation rate of 2%, by which the members mean that they will attempt to achieve an outcome, through monetary policy, whereby prices expressed in dollars will rise by that amount. The correct description of their objective is they seek to reduce the dollar’s purchasing power in a controlled fashion. In pursuing this objective, they rely on the quantity theory of money, which was devised when gold was money, and is applied without modification for current fiat monies. In other words, ignoring inter-temporal factors, they assume there is sufficient correlation between changes in the quantity of money and credit, and the overall price level for the purposes of monetary policy. The relationship was broadly true in the days when gold was money, because its common role as money extended beyond national boundaries. Any tendency for changes in preference for or against it, varying its purchasing power in any one location, were therefore restricted by arbitrage.

  This cannot be true of a fiat currency, whose value as money is contained by national boundaries. In this case, changes in the relative preference expressed by consumers between money and goods are potentially the most important variable affecting the purchasing power of money, as described above.

  Attempts to manage the decline in a currency’s purchasing power are sure to fail, if only because it is not consumer preferences that are being targeted. If central bankers have missed this point, so have all the economists and commentators employed by the investment banks and by the media.

  Central bankers and economists fail to appreciate how changes in the general price level arise from the money side. The use of a statistic, such as the consumer price index, for inflation targeting is deceiving, misleading policy makers into believing that they can override Say’s law.

  Unemployment

  So far, we have addressed fallacies behind the concept of GDP, the real objective of monetary policy, and also inflation statistics, which are one of the two proxies for GDP targeting the Fed uses. That leaves unemployment. Unemployment is an unnatural condition, because in accordance with the indisputable theory of the division of labour, people work to acquire from others their needs and wants. This is why without government intervention the unemployment problem tends to resolve itself.

  In the US, even a cursory analysis of the composition of unemployment statistics and the application of seasonal adjustments show them to be wholly unfit for purpose. But to complain about the veracity of unemployment statistics is to miss the more important point, that it is the contribution of the labour force to economic progress that really matters. When intelligent, skilled individuals are working as waiters and barmen, we can say the economy is in transition, because an increase in employment of this nature is probably temporary. When it has a sense of permanency about it and people are not retraining for newly-demanded skills, the economy is not evolving as it should, and progress is being blocked.

  Unemployment, being an unnatural condition, is fundamentally a problem created by the state. The state sets employment legislation, favouring the employee, with the consequence that employers are deterred from taking on staff they would otherwise freely employ. Many states tax employment, raising the cost of it above its use-value. France’s experience is a good example, where high employment taxes and restrictive regulation has resulted in permanently high unemployment rates. Central banks seek to counter these disadvantages by reducing the purchasing power of the currency, in an effort to encourage employers to employ, which has become the basic justification for monetary intervention. It amounts to beating everyone with a stick, then offering a monetary carrot while continuing to weald the stick.

  If the state stopped interfering with the labour market, unemployment would not be anything other than a short-term problem. Even if the state only desisted from further intervention, unemployment would tend to fall, because of the need and desire for people to work. It is natural for the unemployment rate to drift lower over time, so the fact that unemployment statistics, imperfect though they are, have reached the Fed’s target after eight years of zero interest rates, should not be a surprise.

  Conclusion

  The likelihood that some economists will be right about the future course of interest rates should not be taken as evidence of their grasp of economic theory. However, we can conclude that the recent fall in the dollar’s purchasing power, expressed in energy and commodity prices, has reduced the likelihood of negative interest rates. If the dollar’s purchasing power falls much further, the market will expect higher interest rates, so this then becomes the likely outcome.

  The question will then arise as to whether or not the Fed will dare to raise interest rates sufficiently to stabilise the dollar's purchasing power. If the Fed delays, it could find itself facing a difficult choice. The level of interest rates required to stabilise the dollar’s purchasing power would not be consistent with maintaining the record levels of debt in both government and private sectors. Thirty-six years on it could be another Volker moment. It would surely be a mistake to think that Fed officials are unaware of this danger, and would recommend early action to avoid this outcome.

  Alternatively, if the dollar’s purchasing power begins to rise over the rest of this year, the Fed can defer interest rate rises, and perhaps introduce negative rates. It would be the most desired outcome for the Fed, being a continuation of indefinite economic suppression with a lower likelihood of financial crisis.

  It is changes in the dollar’s purchasing power that really matter, and forecasting interest rates based on GDP, consumer prices, or employment levels not only relies on bad, incomplete and misleading statistics, it has no basis in sound economic theory. It’s the course of markets, encapsulated in Say’s law, that should guide economists and commentators alike.

  

  

  

  

  

• Nassim Taleb: "I Prefer Sanders To Trump But Absolutely No Hillary"

  It seems for Nassim "Black Swan" Taleb, less is more. After perfectly summarizing the circus that is the American Presidential election camapaign in 17 words last week, he appears to have gone one step further with a two-word summation: "No SHillary."

  Last week's epic Facebook rant…

  "The *establishment* composed of journos, BS-Vending talking heads with well-formulated verbs, bureaucrato-cronies, lobbyists-in training, New Yorker-reading semi-intellectuals, image-conscious empty suits, Washington rent-seekers and other "well thinking" members of the vocal elites are not getting the point about what is happening and the sterility of their arguments."

  To which he appended the following 17 perfectly succinct words:

  "People are not voting for Trump (or Sanders). People are just voting, finally, to destroy the establishment."

  And today, taking to Twitter, he offered some sane support to Donald Trump:

  Reading Trump all I see is protect your downside (unknown) risks. What's behind the bluster is Fat Tony compatible. pic.twitter.com/6OyroXQ8qc

  — NassimNicholasTaleb (@nntaleb) March 26, 2016

  But followed that up with:

  "I far prefer Bernie Sanders to Trump but absolutely no Hillary."

  To which he appended, so succinctly:

  "No SHillary"

  Which seems to sum it all up perfectly.

  

  

  

  

  

• Europe Is Paying A Heavy Price For Complacency As Existential Crisis Deepens

  Via GEFIRA,

  Europe faces an existential crisis. Current European leadership and European leading elites have manoeuvred Europe into a situation that will spin out of control and result in a vicious circle of violence. History teaches that ethnic minorities can bring about unrest in the long run. The imams in Europe, very often in the payroll of Saudi Arabia or another Gulf country, take care that their fellow Muslims retain their religious integrity and keep themselves away from the infidels. Meanwhile European authorities struggle with a violent group criminals who converted to radical Islam and became even more dangerous. The Dutch jihadist reintegration approach helped, criminal and jihadist El Bakraoui to evade the Belgian justice system, before he blew himself up in Brussels. To understand what happening on the old continent, let us bring up the tree main topics, and then elaborate on them.

  1. The US, NATO, Brussels, Turkey and Saudi Arabia are in alliance to use terrorism in the proxy war against Syria, Russia and China. This policy has come home to roost. It is not Russia, as Hillary Clinton once said, but Turkey and Europe regret their policy in Syria¹⁾.
  2. Leaders from the Gulf countries support European Muslim communities with finance; in many cases Europe-based imams do not even speak any of the European languages. Surprising as it is, European leaders encourage Saudi Arabia, Qatar or Kuwait to meddle with European internal affairs by letting them to have a say in religious matters. Turkey’s government refers to the Turks that immigrate to Europe as the Turkish diaspora. Recep Erdogan, Turkey’s president, promotes Turkish nationalism among Turkish Muslims in Germany.
  3. Authorities fear the revenge of the populous against Muslim minorities. European ruling elites are terrified at the onslaught on minorities by uncontrolled mobs. There have been numerous attacks on mosques and refugee homes.

  1.  The Syrian proxy war comes to the street of the European capitals.

  In 2012,two years before the tragic events in Ukraine unfolded, a document of the Department of Defence obtained by “Judicial Watch” describes the situation in Syria as a proxy war with Russia, China and Iran on one side, and Western countries, the Gulf States and Turkey on the other²⁾. Not only did the “Friends of the Syrian” alliance provide the Jihadists with arms, but NATO also supplied the Patriots air defence system to protect the supply routes into Syria. Christians in Europe already warned from the very beginning for the consequences of the war in Syria for the Christians there. A conservative Christian European newspaper wrote in 2013: “The decision of Qatar, Saudi Arabia, the United Arab Emirates, the United States and some European countries to provide the Syrian opposition with more weapons will also have significant implications for Christians in Syria.” ³⁾

  The European governments were ambivalent in their attitude and approach to Europeans that traveled to Syria in support of the different jihadist groups.
  Peter van Uhm, Commander of the Royal Netherlands Army until 2008, said in 2011: “I have nothing else than respect for the Dutch who go to fight in Syria”⁴⁾ The primary concern voiced by Frans Timmerman, Vice-President of The European Commission, was that these young fighters could die in Syria.⁵⁾ From the very beginning, National Security agencies in Europe were aware of the enormous risk these Jihadists posed to society. Not only did the “respected” European Jihadists spread terror among the poor Syrian and Iraqi population, but they were also a threat to Europeans if they returned to their country of origin.

  The Brussels suicide attacks are a direct consequence of this lenient European approach to the Jihadists. In 2013, a major Dutch newspaper wrote: “Jihad fighters who have come back from the Syrian Civil War are still not prosecuted in the Netherlands.” “According to various sources in the Dutch Muslim communities, Jihadists from Belgium also chose the ‘Netherlands-route, because of the milder approach of the Dutch authorities to such fighters.”⁶⁾  While this is not yet clear for the international mainstream media, Ibrahim El Bakraoui, the jihadist that blew himself in Brussels, wanted to be deported by the Turkish authorities to the Netherlands instead of Belgium, to avoid prosecution in Belgium. The Dutch authorities helped El Bakraoui to evade the Belgian justice system.

  Between 2012 and 2016 European Jihadists paraded in the social media in graphic images, holding cut-off heads while Dutch authorities try to socialize these very same terrorists. According to the Dutch National Television: “The Dutch Jihadists who have returned from Syria so far are not immediately arrested and prosecuted, but get help and support to reintegrate and rebuild their livelihoods. With this approach the authorities hope to prevent the cities to which the fighters have come from being further radicalized.” “The Dutch authorities have taken a range of administrative steps like assistance, helping the Jihad combatants in finding a job and education, and providing them with community activities for the youth. The idea is not to let the returnees alienate themselves from society; it is believed that repressive measures might further radicalize them.“⁷⁾ While the major of Amsterdam keeps on talking with returned jihadist, the city witnessed its first beheading. This month a young Moroccan boy was beheaded and his head was put on display at a busy street in Amsterdam. ⁸⁾

  This approach can only be understood if we assume that European governments warrant the behavior of their citizens in Syria and Iraq. The Dutch authorities are fully aware that the Jihadists from the Netherlands not only fought against the Assad army, they also knew that Dutch terrorist blew themselves up at a market in Baghdad somewhere in 2013. European authorities turn a blind eye to their fellow citizens who committed war crimes in Syria and Iraq. 

  2. Europeans allow foreign governments to meddle in its affairs

  Europe is not only confronted with a violent and cruel enemy that shows little respect for life, but it has also created an environment on the continent where Muslim extremism could blend into Muslim communities. A big part of the European Muslim community supports the Jihad in Syria. It is remarkable that Salah Abdeslam, one of Europe’s most wanted terrorists, could live in Brussels without anybody informing the authorities about him. While European authorities try to integrate minorities into the European society,  governments in Muslim countries try to undo this effort.

  Countries like Turkey, Saudi-Arabia and Qatar blatantly interfere in European domestic affairs. By financing mosques, Muslim foundations and providing the European Muslim community with imams, these countries try to exert their political and religious influence deep into the European heartland. Their political and religious message undermines the integration of the European Muslim community into the European society.

  According to the UK-based website Independent, the Belgium King personally was involved in the policy that leads to current situation in Brussel : “Keen to secure oil contracts, Belgium’s King Baudouin made an offer to Saudi King Faisal, who had visited Brussels in 1967: Belgium would set up a mosque in the capital, and hire Gulf-trained clerics. The 1967 deal gave the Saudis a 99-year, rent-free lease. The pavilion was refashioned by the Saudis, opening in 1978 as the Great Mosque of Brussels, as well as the seat of the Islamic and Cultural Centre of Belgium (ICC).” ⁹⁾

  Moderate Moroccans were handed over to the Saudi Salafists by the European elites. Since 1967, not much has changed. During the opening of a mosque in 2014 in the Dutch port city of Rotterdam, its mayor criticized the mosque for appointing an imam from Qatar instead of one from the Netherlands. Also, the German media reported the involvement of Saudi Arabia in a similar situation: “The Berlin Al-Nur organization is considered as an offshoot of the Lebanese part of the Muslim Brotherhood, which campaigns for an Islamic character of the states in the Middle East.”

  The Al-Nur mosque is influenced by Salafists and is a venue for people of different nationalities with different political and ideological environment. Close relations exist to Saudi Arabia. A Saudi sponsor enabled the purchase of the mosque building and supported the community financially.” Turkey’s government tries to prevent the Turkish population from integrating into the European community. Turkish nationalism is not limited to “Blut und Boden” (blood and soil) but it also includes religion. Erdogan likes to address the Turkish people abroad as the “Turkish diaspora”. While the Europeans are told to become “multi-cultural European,” immigrants get the opposite instruction from the rulers

  Also the Turkey’s government tries to prevent the Turkish population from integrating into the European society. Turkish nationalism is not limited to “Blut und Boden” (blood and soil) but it also includes religion. Erdogan likes to address the Turkish people abroad as the “Turkish diaspora”. While the Europeans are told to become “multi-cultural European”, immigrants get the opposite instruction from Turkey and the Arabic rulers. The Europeans decry France and German nationalism while at the same time extreme Turkish nationalism in Europe is encouraged by Erdogan, the de facto ruler of Turkey.¹⁰⁾

  3. European residents will take matters into their own hands.

  The slaughtering of Theo van Gogh by a radical Muslim in 2004, the eradication of the Charlie Hebdo publishers, are a message to Europe intelligentsia: “do not interfere with our religion.” Especially the murder of Theo van Gogh resembles the Salman Rushdie case. Theo van Gogh was killed for his artistic criticism of the role of woman in Islam. European left oriented intelligentsia are still grappling with the fact that precisely they became the targets while they are most sympathetic towards marginalised Arabic groups. In Europe, no publisher is willing to publish a genuine Islam critic without the consultation of an Islam expert. The publishing of a seemingly innocent book can turn out to become a deadly endeavour. We think it is a matter of time before the next generation of young academics and artist is willing to confront Islam as they have done with Christianity.

  The danger for European states are not only the terror attacks but also the consequences of these attacks. After every terror attack, the number of incidents against mosques increases. The European ruling elite is terrified of their own people. They are extremely sensitive to everything that can incite violence against the Muslim minorities. Two days before the Brussels attacks, Geert Wilders stood trial for chanting “We want fewer Moroccans”. But even Geert Wilders’s party (PVV), is afraid of the populace at large. The party has strong connections with the Israel lobby; it demands of its followers a 100% loyalty to Israel¹¹⁾. The Jewish community is at risk to become itself the victim of angry European mobs. The party does not accept members to such an extent that an attempt by one of its leaders to create a youth movement resulted in him being expelled¹²⁾.

  Groups, like HoGeSa (Hooligans gegen Salafisten, Hooligans against Salafists) are ready to take the “burden” of revenge for the attacks on their shoulders, seeing that the German state structures are not able anymore to ensure the security of their nation. This can result in a carnage of Muslims in German cities, especially if one of the victims of a terror attack would be a far-right group member.

  HoGeSa was losing its popularity among radicals because of internal disputes, but it could be quickly revived amid terror attacks¹³⁾. This group has already proven that it does not renounce violence, during the Cologne rally in October 2014 and during the Essen demonstration last September, they show up with baseball bats.¹⁴⁾. In Germany violent threats are now mainly limited to refugee camps, but this can change overnight. If Germans lose their faith in the ruling establishment (as it is happening slowly with a growing popularity of the AfD party), groups like HoGeSa, or Hoolizei, might gain traction. The harbinger of the threat of violent uprising against Muslims haunts Germany. In Connewitz, near Leipzig, an Arab restaurant was demolished. According to Mail online “The mayor of a German city has spoken of ‘terror on the streets’ of his city after far-right thugs ran riot in scenes reminiscent of the anti-Semitic Kristallnacht attacks in 1938. Burkhard Jung, mayor of Leipzig, has condemned the ‘naked violence that took place’ after doner kebab fast food restaurants- were destroyed, cars were set- ablaze- and shop windows- were smashed- by around 250 hooligans of LEGIDA the local branch of PEGIDA, an anti-migrant, anti-EU organization.”These hooligan groups are not widely supported: the highest attendance of the HoGeSa demonstration was recorded in Cologne in 2014, when about 4000 people took to the streets. The Pegida movement (Patriotic Europeans Against the Islamisation of the West), though not radical, is able to attract even more than 20 thousand people.

  The 2011 proxy war against Russia, China and Syria backfires. The first people have been killed in the streets of Brussels and Paris. Amsterdam and Berlin will follow suit while in Leipzig we saw the first signs of a pogrom. We feel Mogherini, a member of the European ruling elite, and fully responsible for the mess, has all reason to break down in tears.

  

  

  

  

  

  

• Krugman Goes To Japan, Scolds Abe For Worrying About Quadrillion Yen Debt Pile, Leaves

  Much like BoJ governor Haruhiko Kuroda, Paul Krugman thinks that the key for Japan when it comes to overcoming decades of deflation is a positive outlook.

  “Japan needs to reach a point where everyone believes that it has pulled out of deflation. And then if that can be believed, then it may be able to stay out of trouble thereafter,” he told an audience in Tokyo last September.

  That rather ridiculous pronouncement is reminiscent of something Kuroda said last summer: “I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it.’ Yes, what we need is a positive attitude and conviction.”

  In other words, Krugman and Kuroda believe that Japan can wish its way out of deflation. Krugman’s comments in Tokyo came around 10 months after he visited Japan in 2014. On that trip, he’s said to have helped convince PM Shinzo Abe to delay a planned sales tax hike. “That nailed Abe’s decision — Krugman was Krugman, he was so powerful,” Japanese economist Etsuro Honda said, recounting a meeting between the economist and the premier.

  Well, 16 months has passed since that fateful visit and virtually nothing has changed in Japan. In fact, the Japanese have since taken a further plunge down the Keynesian rabbit hole by taking interest rates negative and not only is inflation still languishing at essentially zero, stocks are some 20% off their highs and this month the yen actually hit its highest levels since Kuroda announced the second round of QE two Octobers ago.

  With the entire enterprise now falling apart, and with JGBs yo-yoing around like penny stocks as traders try to game BoJ POMO, Krugman was back in Tokyo this week to attend a panel discussion on the global economy with Abe and senior Japanese policy makers. There, the good professor called for Abe to scrap the sales tax hike and introduce more fiscal stimulus. NIRP, he said, is probably “a good idea.”

  Excerpts from Krugman’s speech can be found below.

  We are now in the world of pervasive economic weakness. In many ways, we are all Japan now. This complicates policy for everyone including Japan.

   

  We are seeing the difficulty in achieving goals through even very bold and unconventional monetary policy. Kuroda-san here, we will clearly need to speak about that. Monetary policy needs help from fiscal and possibly other policies but certainly on the fiscal side, and certainly does not need to be struggling against fiscal policy moving in the opposite direction. That is not just a Japanese issue but very much a global issue at this point.

   

  Despite everything, despite everything that Mr. Kuroda is doing, the rise in the yen, which is a very unfortunate development from Japan’s point of view, is driven by the weakness of other major economies.

   

  Monetary policy has been, in most places, the only game in town. It’s their line because fiscal policy has been politically paralyzed. Here, less so, but still in fact, of the three arrows by far the largest, so far has been monetary. Mr. Kuroda has done most of the lifting here. We are seeing the limits of monetary policy. We are seeing that it becomes difficult when you try the unconventional methods, we can argue this but it seems to be having diminishing effect. Negative interest rates, it is remarkable that that turns out to be possible. I do think it was the right move to make but it is very hard to push it further. The effects are proving to be limited. If we look elsewhere, if we look in Europe, despite another very able essential banker, the ECB seems to be losing traction. Here, as you know better than I, inflation expectation seems to be fading. Wage growth is not what it should be. We are seeing that the policy that has been the principle lever for trying to deal with this global weakness is not as effective as we had hoped and not as effective perhaps as it seems to be recently.

   

  Everything we have seen for the past seven years suggests that fiscal policy remains effective, especially effective in these circumstances. It has been very difficult to apply it, a few years of bad debt, political conflict, the Europe is divided among counties, the United States is divided between parties, but fiscal policy is effective and the global environment right now is one where economies really, really need fiscal support. The idea that one should be prioritizing long-run budget issue over fiscal support now seems to me to be extremely misguided. Obviously I am talking about the consumption tax here. Two points are following on all of that. You notice that I did not say anything about structural reform. That is not because I am against it but because structural reform seems largely beside the point on this crucial issue of boosting demand. Some kind of structural reform might spur private investment, which is good but that is rarely what is emphasized. Some other kinds of reform, the Abenomics, by expanding the future labor force helps to offset the demographic headwinds that the economies face. So all of that is good but I do worry that sometimes the talk of structural reform becomes an excuse not to deal with the primary immediate issue of sufficient demand, of fighting deflation or low-flation, inadequate inflation, which has got to rely on monetary policy. But as I said, that has limits and on fiscal policy which needs to be more focused on that immediate need than it has been.

  Ok, so there’s a whole lot of words to make one overarching point: the exceptional measures central bankers have undertaken in pursuit of boosting inflation and recovering demand lost to the global financial crisis aren’t working.

  As usual, Krugman doesn’t understand why anyone is worried about long-term sustainability when there’s so much room to be completely irresponsible in the myopic pursuit of short-lived surges in aggregate demand and inflation. Fiscal stimulus – i.e. helicopter money, i.e. pay people to dig holes and then pay other people to fill them up again – is what’s needed, Krugman figures. 

  When it came time for the Q&A, Abe gingerly told Krugman that Japan is getting slightly concerned about its debt burden, which, when measured in yen, has so many zeros that it barely fits on a 32” monitor. “About two years ago, I had a pleasure meeting with you, Professor Krugman. At that time, Japan was able to be going out of the deflation then we have set for ourselves the 2% inflation goal,” Abe began. “We were talking during that time that a rocket has to go out of the atmospheric region, which means that an escape velocity has to be earned in order to lift the Japanese economy out of deflation and we were looking for a good speed to do that.,” he continued. And then we got this: “We worry about the accumulated debt. That is a source of another concern. What to do about it?”

  Yes, “what to do about it,” Professor Krugman? Predictably, Krugman’s answer was “spend more”:

  The case for spending now is quite strong despite the debt. It is true for multiple reasons. Fiscal stimulus is very important as an aid to monetary policy in breaking out of deflation. the concerns about the debt, I don’t want to wave away entirely but one thing we have learned from Japan but also from other advanced countries is that stable advanced nations that borrow in their own currencies have a very long road for them to have a fiscal crisis. People have been betting against JGBs since about 2000. All of them have suffered financial disaster. The robustness of the market is very strong. It is even hard to tell a story. If someone says Japan would be like Greece, tell me how that happens. You have your own currency. The worst that could happen would be that the yen would depreciate which would be a good thing from your point of view. I do not think that is a thing to be worried about.

  Whatever you say Professor. But sooner or later this madness has to end. Japan has been kicking the can for decades and demographic shifts would seem to suggest that the tax base will shrink while dependency on the state will rise. Meanwhile, the economy is stuck in what certainly appears to be a perpetual, never-ending recession while the country’s gargantuan debt pile presages a spectacular implosion sometime in the not so distant future.

  When Japan descends into failed state status two years from now, we wonder if Krugman will still be the revered figure he is today among Japanese policy makers. We also wonder whether, once everyone “ceases to believe they can fly,” it will be Kuroda or Abe who gets the blame for turning one of the world’s most “advanced” economies into a banana republic.

  

  

  

  

  

• I Love The Smell Of Napalm In The Market

  Authored by Sean Corrigan, originally posted at TrueSinews.com,

  That usually perceptive and always interesting observer of the financial Zeitgeist, Bloomberg’s estimable Mark Gilbert, recently penned an article entitled: “Milton Friedman’s ‘Helicopter Money’ Is Looking Less Crazy.” In response, I mailed him the comments which follow (with light editing) here.

  After running through the standard complaints of the serial interventionists about how ineffective monetary policy has become (read: how we ordinary people keep frustrating their Olympian schemes), Mark concluded his piece:-

  ‘Zero or negative interest rates are failing to stir consumer prices, while the Fed’s attempt to normalize monetary policy looks likely to backfire embarrassingly. Because the money-machine isn’t doing what the rule book suggests it should, the engines of economic growth continue to splutter and misfire. So the argument that might in the end have the most appeal for Friedman is the one that, intellectually at least, appears to be the weakest: If everything else is failing, why not try helicopter money? ‘

  Why not, indeed? Well, here is a by no means exhaustive list of several reasons for not crossing yet another bridge too far in the mindless pursuit of a specific annual rate of change in a smoothed, filtered, hedonised, sampling of a wholly arbitrary collection of consumer goods and services, to the exclusion of all other goals, the repudiation of the lessons of past experience, and the complete abnegation of common sense.

  Firstly, given that every professional in financial markets would be horrified to suffer a mandatory dilution of their equity holdings, how do you imagine they and everyone else would react if they got similarly diluted in this manner in terms of that much more important element of their property, their money?

  Also, assuming that it were to be done and that when  done it did indeed give rise to an isolated if intense round of buying and consequent price readjustment—as its quack, would-be perpetrators so fervently hope—do you really imagine it would also magically dissolve all the locked-in impediments to the natural adjustment between supply and demand from which we suffer and which are what actually prevent people from making a better living for themselves, or from founding and running more flourishing businesses right now?

  How, too, could you guarantee that the damage done to the inevitable losers from such as crass act of redistribution would not be so extensive—and possibly so non-linear and self-aggravating—as not just to mitigate, but perhaps to entirely negate, the winnings of their luckier fellows?

  Looking at the sorry record of all the ongoing attempts at pushing the rate of change of the CPI index back to the mystical 2% p.a. level, can you also assure us that this phantasmagorical target will indeed be hit this time and that you will not just fuel another wasteful round of property buying, financial market speculation, crude manipulation of corporate balance sheets, public sector profligacy, or currency upheaval?

  Next, once you had undertaken such a far-reaching and—dare I say—Jacobin act of disruption, how could you ensure that trust in money would henceforth be regained so that it could resume its vital function both as medium of exchange and as unit of account? This is a key proviso because, without either, you must be aware that there can be no real hope of encouraging any sustainable economic growth after the initial inflationary impulse subsides.

  In light of all the above and given that the helicopter flight would be a nakedly political undertaking—and hence a thoroughly capricious act of will to power—how would you re-establish the sort of confidence in the continuity of law, of practice, and in the institutional framework that is also sine qua non for putting capital, whether corporate or individual, at risk over the longer horizons required for genuine material progress to be made?

  Respectfully, you can’t. So your helicopters are going to be launched by Admiral Simplificateur-Terrible from the decks of USS Pandora and will return after their mission to land at Fort Regime Uncertainty, accomplishing little which is positive and much which is actively deleterious in the meanwhile.

  ‘Less crazy’? Less crazy-seeming than heretofore, given the craziness already under way, perhaps. But less crazy, per se? No!

  

  

  

  

• This Is What's Happening To People Who Live Near The Worst Gas Leak In US History

  Submitted by Carey Wedler via TheAntiMedia.org,

  On February 18, SoCalGas and the national media declared the “worst methane gas leak in U.S. history” permanently sealed, but just over a month later, hundreds of Porter Ranch residents who evacuated — and are now returning home — are suffering the same symptoms they suffered when the gas leak was active. They are experiencing nausea, dizziness, fatigue, headaches, nosebleeds, and many, including children, are also experiencing a new ailment: irritated skin rashes across their bodies.

  Neither SoCalGas, which owns the Aliso Canyon facility, the Los Angeles County Department of Public Health, nor any other government agency has provided a concrete explanation for these continued symptoms. In fact, one of Los Angeles County’s top medical officials recently told local physicians to refrain from performing tests to determine what is causing the symptoms. Late last week, preliminary lab tests from an independent UCLA study found evidence of benzene, a carcinogen, in at least two Porter Ranch homes. Benzene was reported to have been released in the 100 metric tons of methane that spewed into the Los Angeles basin for four months — a fact SoCalGas previously attempted to downplay and withhold.

  Reemergence of Symptoms

  On March 4, Los Angeles City Councilmember Mitchell Englander issued a press release reporting the Department of Public Health had received at least 150 complaints of reemerging symptoms, including nosebleeds, dizziness headaches, nausea, and skin rashes. Now, the Health Department says it has received 300 complaints since residents began moving home after SoCalGas told them it was safe to do so.

  Many residents have said the rashes, which can be extensive, are new and did not occur during the initial, months-long gas leak from October to February. During that time, thousands of families were evacuated and the Department of Public Health received 700 health complaints. Others reported experiencing skin irritation before they relocated, though it appears to be more widespread now.

  Residents who left Porter Ranch for temporary housing accommodations and recently moved home told Anti-Media about their symptoms (many still have not moved home, fearful it is still unsafe). Helen Ritenour, a Porter Ranch resident who left the area in December, said that within two days of returning to their home, she and her family began feeling sick.

  “The main symptoms are headaches, difficulty breathing, watery eyes, coughing and general fatigue. It feels like I’m in a thick fog of sorts that’s oppressive,” she said. She and her husband were not eager to return home, still concerned about toxins in the area and the health of their newborn baby. But amid long delays receiving reimbursements from SoCalGas — and unable to charge more expenses on their credit card — they moved back to Porter Ranch. Ritenour told Anti-Media that like many other families, she and her husband have had to pay out-of-pocket for relocation services — and have experienced long delays receiving reimbursement checks.

  Gabriel Khanlian, a resident who serves as the Chief Technology Officer for Save Porter Ranch, a group formed in 2014 to fight the massive, aging, and leaking facility before the blowout even happened, also said he and his family have suffered symptoms since moving home.

  “My daughter Tatiana keeps getting large rashes, red welts and bumps all over her body. Her skin is dry and her behavior has changed significantly and she is very cranky. She has a loss of appetite and is sleeping a lot more,” he said. “My sons, Jayden and Mason, have been getting bloody noses, headaches, upset stomachs, burning eyes, runny nose, dry skin.”

  

  He described other troubles they’ve had, noting his sons are experiencing “anxiety, fear, frustration, anger, and stress from not having the ability to play. Their personalities have changed majorly.”

  He said his wife, who experienced symptoms during the initial methane gas leak, is now experiencing them more severely than before.

  Kyoko Habino, a Porter Ranch resident and co-founder of Save Porter Ranch, said:

  “When I go home to pick up stuff or do a few things, within a few minutes, I start having a dull headache and coughing and having palpitations. Nosebleeds follow later on often. My partner has had headaches, fatigue, and a burning sensation in his chest at the same time I have. Our cat has had a nosebleed and vomited. When I am away from home, the headache goes away instantly. The cough and nosebleed stay for a while, and are gone after.”

  Walter Arwood, a Porter Ranch resident, experienced nausea, among other symptoms:

  “I am rolling over sick right now. My stomach has been so upset, I have gotten all the headaches back, my husband has had three nose bleeds in two days, and now a visiting relative was out of breath just walking up the stairs at my home. How is it safe?”

   

  Arwood was evacuated during the methane gas leak and recently returned home. “Since we have moved back the symptoms have immediately returned,” he said. “Itchy skin is the only new thing.  We have all of our air purifiers on and the scrubber running and still it is happening.”

  Residents in surrounding areas, including Chatsworth and Granada Hills, have also reported a reemergence of symptoms.

  Sandy Crawford, a resident of Granada Hills, told CBS News in February — after the methane gas leak was sealed — that within a few hours of returning home, her youngest son had trouble breathing and suffered a nosebleed. Crawford moved her sons back to their hotel, and after trying again to move home and experiencing the same results, she returned to the hotel for a second time. She told Anti-Media they recently tried sleeping at home for a few nights and did not feel symptoms, but she remains afraid they could return. As a result, she is staying at the hotel.

  “Avoid performing any toxicological tests”

  Though these symptoms are pronounced, neither SoCalGas nor the Department of Public Health has offered a definitive explanation of what is causing them. In fact, Dr. Cyrus Rangan, Director of the Bureau of Toxicology and Environmental Assessment at the Los Angeles County Department of Public Health, recently issued a “Health Update” to “primary care, urgent care, internal medicine, and emergency medicine providers” in the area cautioning them against conducting tests on patients with symptoms.

  The advisory, dated Tuesday, March 8, requested that healthcare professionals “look for alternate etiologies other than air contamination,” and “avoid performing any toxicological tests,” claiming “these are not recommended and are unlikely to provide useful data for clinical evaluation of patients.”

  Rangan said in the notice that if no “alternative etiology” is found, doctors should consult with him. While it is an indisputable act of due diligence to recommend doctors check for other potential causes of symptoms, it is unclear why a top public health official would discourage doctors from performing tests to better understand illnesses among their patients.

  “It’s not to steer the community away from thinking it’s not an environmental issue,” Rangan insisted to the Los Angeles Daily News, adding that, as the local paper summarized, “even when the gas was leaking he did not recommend that doctors perform toxicological tests because there is no test that can determine if a person was exposed to natural gas.”

  However, residents are concerned not just with methane, but with other contaminants found in it, from mercaptans to benzene to other toxic emissions (mercaptans are odorants added to natural gas to make it detectable, and are believed to have caused symptoms when the gas leak was active). Many found Rangan’s explanation to be insufficient and an attempt to ask doctors to “look the other way.”

  Further, his request that doctors refrain from conducting tests appears to contradict his own supplementary declaration provided for a hearing held last Friday to extend relocation benefits to residents, many of whom feel they were rushed out of temporary housing, evidently, before it was safe to return home.

  In that statement, Rangan referred to the continued illnesses as “perplexing,” proceeding to offer potential explanations not previously disclosed to Anti-Media when he spoke with us:

  “It could be that there are persistent levels of contaminants still present in the community, or there could be other exposures in areas of the community that were missed in the external environmental monitoring, or perhaps gases may have saturated the soil at the Aliso Canyon facility or other substrates and are being released now that the source has been sealed.”

  In spite of Rangan’s multiple hypotheses, however, he has offered no definitive explanation, nor does it appear the Department of Public Health has seriously looked for one (meaning it could be helpful for physicians to run tests on their patients). Asked to investigate a persistent oily residue coating the outside of residents’ homes and the playground of at least one park, representatives sent from Public Health reported they found “no evidence of any oily residue and no health concern for residents or visitors.”

  When residents complained to Councilman Englander, representatives from his office confirmed the playsets were coated in oil and SoCalGas agreed clean the park. Three other parks were also shut down amid concerns about the residue, which Rangan insists is safe, aside from causing skin irritation. Mandi Bane, a lab assistant in Rangan’s office, told Anti-Media they have no intentions to test the soil in the community.

  Because of incidents like this — such as Dr. Rangan downplaying concerns about long-term side effects from mercaptans, though there is little research to support his assurances — some residents increasingly doubt Public Health’s commitment to helping the community. Many have complained they reported symptoms and received little more than packaged statements in response. Some received no response.

  Rangan’s office did conduct door-to-door surveys of residents two weeks ago to gather information on what could be causing the symptoms, an effort reported to be joined by state officials. Bane told Anti-Media they recorded over 200 reports and it would take time to process them before they could comment.

  Rangan’s office also requested outside assistance to conduct indoor air sampling, after it was  “determined that such a protocol is beyond the expertise of the Department of Public Health.”

  Rangan first solicited the help of the EPA to conduct indoor air testing for contaminants, but it was expected to take until May to develop a protocol. Last week, however, Dr. Michael Jerrett, a professor and chairman of UCLA’s Fielding School of Public Health, shared preliminary test results from a small sample of homes with Public Health. The independent study raised concerns about the presence of benzene, a known carcinogen, as well as hexane, in two homes. As a result of these findings, UCLA has partnered with Public Health and Dr. Jerrett and his team will begin sampling 120 homes in the coming days to conduct further analysis. According to a press release from the Department of Public Health posted Saturday:

  “As a continuation of Professor Jerrett’s independent study, an indoor dust swab sampling was completed in seven homes. Benzene and hexane were found in two of the homes. Benzene and hexane, at certain levels, have known toxic effects on humans, but it is unknown whether the levels found are high enough to be of health concern. Professor Jerrett is sharing these findings with the community and will continue to conduct independent scientific analyses.”

   

  As the Daily News explained, Jerrett’s results showed “higher and more variable concentrations of particulate matter in the outdoor air at locations close to the leak site compared to those farther away, according to the Health Department. Particulate matter is described as tiny pieces of solids or liquids in the air, such as dust, dirt, soot, or drops which can irritate the skin, eyes, nose, throat, respiratory, and cardiovascular systems.”

  SoCalGas, however, has failed to provide a conclusive explanation for residents’ illnesses. At a protest on Friday, March 4, which culminated outside the company’s Community Resource Center located in Porter Ranch’s main shopping center, SoCalGas spokeswoman Lisa Alexander spoke to Anti-Media about the reemergence of symptoms. She left the onus of responsibility on the Department of Public Health.

  “You know, we recognize that people are saying that they have symptoms, and we hear that, we see the news stories, we’ve been in touch with Department of Public Health to inquire about that,” she said, adding that Public Health expected symptoms to decrease as the blowout’s emissions dissipated — and with them, the mercaptans.

  

  “Is there one house that has been tested that shows a harmful level at this time?”

  SoCalGas, at the request of County Supervisor Michael Antonovich, agreed to conduct indoor air testing on a ‘random’ sample of 70 homes in Porter Ranch last week. Residents’ increasing distrust of the utility was further intensified when some residents reported they had received calls from the gas company to perform indoor testing on their homes, but were asked if they had legal counsel. If they said yes, multiple residents reported, they were told they were not eligible for the ‘random’ testing.

  Nevertheless, SoCalGas shared these test results at a relocation hearing last Friday to assert air quality had returned to normal. SoCalGas’ attorney James Dragna also reportedly cited the Department of Public Health as an authority on the matter.

  Matt Pakucko, president of Save Porter Ranch, spoke to local CBS radio station KNX shortly after the hearing:

  “This is such propaganda by SoCalGas,” he said. “They used their indoor testing that they just performed over the last week as their main facts on the ground. But they have said themselves weeks ago, months ago, that the mercaptan and the methane — the only things they test for — would be long gone. So they went and tested what they knew would be long gone… I can’t believe the judge bought it.”

  Judge Emilie H. Elias reportedly asked, “Is there one house that has been tested that shows a harmful level at this time?” However, Dr. Jerrett’s results, which showed two homes with potentially hazardous levels of benzene, were not presented.

  Jerrett’s preliminary findings were shared with the county just before the hearing, and county attorney Deborah Fox expressed a desire to submit them to the court for an appeal this week.

  Though the media reported the judge’s ruling as a tepid victory for residents, who will receive one more week of paid relocation services, county attorney Deborah Fox had originally sought two months. She then sought a 30-day injunction, ultimately settling for a single week extension.

  Pakucko said of the ruling:

  “Any sane person would say [the testing should be complete before a decision is made] … there are people reporting health issues, the cause of which has not yet been discovered.”

  Save Porter Ranch and much of the community are campaigning to have the entire, 3,600-acre Aliso Canyon facility shut down.

  SoCalGas had previously been ordered to extend relocation services as residents began reporting symptoms again after the gas leak, a decision the company fought. Residents have also complained they have not yet been reimbursed for the months they were relocated, citing long waits, convoluted customer service, and financial strain caused by SoCalGas’ reimbursement process.

  On Tuesday, County Supervisor Michael Antonovich announced the court had suspended its Friday ruling, presumably in light of the county’s submission of Jerrett’s results. Los Angeles Times reporter Abby Sewell tweeted an update that residents now have until March 29 — an extra four days — pending further legal proceedings.

  As the legal battle continues, the difficulties of obtaining comprehensive, reliable air tests remain complicated by the fact that humans can smell mercaptans at lower levels than equipment can detect them. Pakucko told Anti-Media residents have consistently been reporting the smell of mercaptans, though SoCalGas spokeswoman Melissa Bailey assured Anti-Media via email there were no current leaks.

  Neither SoCalGas nor the regulatory South Coast Air Quality Management District (SCQAMD) offered an explanation to Anti-Media regarding elevations in methane emissions since the gas leak was sealed. They are not consistently high, but nevertheless contradict assurances from the gas company that air quality has returned to “normal.” For example, from March 17 to March 22, methane levels in the community exceeded 3 ppm (parts per million); SCAQMD, itself, says “Results greater than 3 ppm suggest some additional sources of methane.” A March 13 sampling of air at the site of the repaired well, SS-25, found methane levels at 46 ppm; according to SCAQMD, “results greater than 10 ppm suggest a considerable additional amount of methane is present.” Though SCAQMD cautions the levels of methane have been dropping since the methane gas leak was sealed in February, 46 ppm is still 43 ppm above ‘normal.’

  Further, a recently published government survey, initiated after the Aliso Canyon blowout, found 229 leaks in natural gas storage fields across California. Though the leaks were deemed minor, 66 were found at Aliso Canyon.

  As Porter Ranch residents continue to deal with the fallout from the months-long environmental disaster, communities around the country face similar battles. From the increasing number of communities plagued with unsafe levels of lead (among other chemicals) in their water and soil, to the radioactive leaks in New York, Florida, and elsewhere across the country, Americans face an increasingly apparent, non-partisan struggle against aging, dangerous infrastructure — and the apathetic, often negligent authorities and corporate hegemons responsible for maintaining it.

  In Porter Ranch, SoCalGas and public officials have, at least, begun to acknowledge something is still amiss in the community. As Pakucko told Anti-Media:

  “They’ve stopped saying everything’s fine. I’ve got two words for ‘everything’s fine’: Flint, Michigan.”

  

  

  

  

  

• Anonymous Threatens To Expose Ted Cruz Prostitution Scandal

  There were many shots fired yesterday as the “wife feud” between Donald (and Melania) Trump and Ted (and Heidi) Cruz hit new lows, dragging none other than the National Enquirer tabloid into it and escalating the #CruzSexScandal into one of the most talked about topics on social media.

  To be sure, Trump washed his hands of the affair saying “I have nothing to do with the National Enquirer and unlike Lyin’ Ted Cruz I do not surround myself with political hacks and henchman and then pretend total innocence. Ted Cruz’s problem with the National Enquirer is his and his alone, and while they were right about O.J. Simpson, John Edwards, and many others, I certainly hope they are not right about Lyin’ Ted Cruz.”

  Cruz was adamant, repeating that the Enquirer article linking him to five women is “garbage, complete and utter lies” and that “it’s tabloid smear, and it is a smear that has come from Donald Trump and his henchmen,” a perturbed Cruz told reporters at a press conference in Wisconsin.

  On this one occasion, however, Trump may be telling the truth because the source of the original Cruz rumor is none other than Donald Trump’s old nemesis, the same hacker collective which recently released his social security and phone number, Anonymous.

  As the following YouTube clip released on March 15, the Anonymous hacker group warned Ted Cruz last week to leave the race “or else.”

   

  As part of its #OpCruz assault, the hacker collective threatened to release information on Cruz engaging with prostitutes if he did not leave the race. Some of the highlights from the clip:

  Mr. Cruz, we are now demanding that you exit this race within 24 hours, or Anonymous will release all of the information we have found. 

   

  It’s time that we tell America what’s hiding behind the curtain.

   

  Have you heard of the expression “candy wrappers”? Do you recall visiting prostitutes?

   

  Mr. Cruz, we are now demanding you exit this race immediately or Anonymous will release all of the information that we have found. Your so-called underground acts that you think were done in the dark, will be brought out for all the public to see. It will be sent to every media outlet to publicize your disgusting behavior.

   

  We assure you it will go viral on every social media platforms in a matter of minutes. Mr. Cruz your disgusting campaign ends now; your campaign to gain power with ulterior motives that include your wife will also be exposed.

   

  There is nothing from your past that won’t haunt you.”

  In other words, the Anonymous #OpCruz started long before Trump and the Enquirer got involved, and in fact was already active when the Cruz SuperPAC released the first naked photo of Melania Trump early last week.

  Folks watching the #CruzSexScandal unfolding should remember about ten days ago #Anonymous started its #OpCruz.

  — Tim Hogan (@TimInHonolulu) March 25, 2016

  Judging by a twitter account linked to anonymous, it may well have been an Anonymous leak to the Enquirer that started it all, in which case all of Cruz’ accusations aimed at Trump (such as even this most bizarre one) are slanderous, although there is no way to know for sure.

  Uh Oh!! @TedCruz I see your dirty little secret is coming out…. Hmmmmm… I think it was told to you #OpCruz pic.twitter.com/7ksenKySuu

  — The Alchemist (@DarkNetXX) March 24, 2016

   

  The question now is whether Anonymous will carry through with its threat, and release the factual backing of its accusations either directly or via media outlets, just as it did in its feud with Trump, or will it quietly back down.

  #OpCruz Stay tuned… Information coming. #Trump2016 #OpCruz #OpCruz #OpCruz #OpCruz #OpCruz #OpCruz #OpCruz pic.twitter.com/Kc8fkTAHpz

  — The Alchemist (@DarkNetXX) March 17, 2016

   

  The latest tweets from the Anonymous-linked twitter account suggest that something big may be indeed imminent:

  @amandacarpenter We know. #CruzSexScandal pic.twitter.com/vAe47T42yN

  — RayBee Trumplican (@rebernas1) March 26, 2016

  BREAKING #CruzSexScandal #TedCruzSexScandal https://t.co/PqxwvKupRw

  — FandK (@fkandkk) March 25, 2016

  

  

  

  

• Bombshell: King Of Jordan Blames Turkey For Terror In Europe, Says Israel "Looks Other Way" On Al-Qaeda

  When Vladimir Putin told the world that ISIS gets a significant portion of its funding by selling oil to Turkey, he had just finished meeting with Jordan’s King Abdullah.

  The King is no stranger to confronting the jihadists. Last year, Abdullah threatened to fly combat missions against Islamic State himself following the release of a horrific video that depicted a Jordanian pilot being burned alive in a cage.

  Here is the picture the King sent to the militants:

  

  In January, Jordan agreed to share intelligence with Russia in the fight against ISIS and when the French began flying sorties against the extremists following the Paris attacks, their staging ground was an undisclosed Jordanian location.

  In short, Jordan has at times appeared to be more genuine in its commitment to fighting extremism than say, the Saudis, whose determination to spread Wahhabism adds fuel to the ideological fire that drives the groups the kingdom claims to be fighting. “The global war — what I call the Third World War by other means — is one that is a generational one,” Abdullah told CNN in January. “Not only inside Islam, as we as Muslims gain the supremacy against the crazies, the outlaws, of our religion, but also reaching out to other religions that Islam is not what they have seen being perpetuated by 0.1% of our religion.”

  On Friday, we learn that Abdullah met with US lawmakers in secret during the week of January 11 and disclosed that British SAS forces as well as Jordanian soldiers had been on the ground fighting ISIS in Libya since at least the beginning of the year. “Jordanian slang is similar to Libyan slang,” Abdullah said, explaining how his men have been able to assist the British in cleaning up the mess NATO made in Libya which, you’re reminded, became a lawless wasteland in the wake of the uprising that toppled Muammar Gaddafi in 2011.

  But the revelation that British SpecOps were fighting in Libya wasn’t the most interesting thing to emerge from the meeting which purportedly included John McCain, Bob Corker, the chairman of the Senate foreign relations committee, and House Speaker Paul Ryan. Indeed, according to notes seen by The Guardian, Abdullah also implicated Erdogan in perpetuating Sunni extremism as well as purposefully sending terrorists to Europe. The King also suggested that Israel is allowing al-Nusra to operate on its borders because Netanyahu views the al-Qaeda affiliate as a counterweight to Hezbollah.

  Below, find the bullet points from The Guardian presented with no further comment because frankly, nothing further need be said here.

  The memo indicates that Abdullah also told US lawmakers:

  • The Turkish president, Recep Tayyip Erdogan, “believes in a radical Islamic solution to the problems in the region” and the “fact that terrorists are going to Europe is part of Turkish policy, and Turkey keeps getting a slap on the hand, but they get off the hook”.
  • Intelligence agencies want to keep terrorist websites “open so they can use them to track extremists” and Google had told the Jordanian monarch “they have 500 people working on this”.
  • Israel “looks the other way” at the al-Qaida affiliate Jabhat al-Nusra on its border with Syria because “they regard them as an opposition to Hezbollah”.

  

  

  

  

  

• You Are (Still) Here

  Buybacks blacked out, option expiration ramp over, and real investors fleeing… what happens next?

  Dip, Jawbone, Rip… Repeat…

  

   

  And close-up…

  
  

   

  But this time it’s different, 150 days of almost perfect correlation and co-movement means nothing – right?
  

  

  

  

  

  

• Trump Aide "Spills The Beans" On Heidi Cruz As Media Goes Crazy Over #CruzSexScandal

  The “wife” feud, which initially many though was merely a sideshow between Donal Trump and Ted Cruz, has taken a quick turn for the ugly and is escalating dramatically with every passing day, and now that even the National Enquirer has entered the fray, has rapidly devolved to nothing less than the surreal twilight zone.

  For those who need a primer of what is rapidly becoming the biggest “issue” in the presidential race, here is a reminder, courtesy of our post from last night “Tough Guy Ted Warns “Sniveling Coward” Trump: “Leave My Wife Alone“:

  • Phase 1: Cruz Reps “Cross The Line”, when a “SuperPAC” run by a Cruz supporter launched a Trump ad campaign showcasing a naked posing Melania Trump
  • Phase 2: Trumps Warns Cruz: “Lyin’ Ted Cruz just used a picture of Melania from a G.Q. shoot in his ad. Be careful, Lyin’ Ted, or I will spill the beans on your wife!”
  • Phase 3: Cruz firez back, warning Trump: Don’t Do The Same Thing To Me That [My Reps] Just Did To You (Or Else!).
  • Phase 4: Trump Goes There, retweeting an image “comparing” Heidi Cruz and Melania Trump
  • Phase 5: Cruz Goes Full Rambo, says  ‘Donald, you’re a sniveling coward and leave Heidi alone.’

  Or, as we summed up, “a Cruz fan uses naked images of Trump’s wife to disparage him to saintly ‘Utah-ans’; Trump pissed; Cruz warns Trump not to reciprocate; Trump shows ugly picture of Cruz’s wife; Cruz unleashes inner Hulk as Trump dares to do what Cruz reps did to him.”

  That was just the last few days.

  And then the tabloids jumped on board.

  Overnight, Trump-linked National Enquirer, alleged that the Texas senator is “hiding five different mistresses.” According to its source, identified as a “Washington insider,” “private detectives are digging into at least five affairs Ted Cruz supposedly had,” and “the leaked details are an attempt to destroy what’s left of his White House campaign.” The supposed affairs are detailed in the Enquirer’s most recent print issue.

  National Enquirer: Ted Cruz had 5 affairs – Idk if true (but they did break the Tiger Woods affairs). pic.twitter.com/Olof2tPJA8

  — Secular Talk (@KyleKulinski) March 25, 2016

  Though unconfirmed, the rumor sparked chatter across social media Friday with the hashtag #CruzSexScandal, with reactions, as expected, ranging from one end of the spectrum to the other. 

  

  Considering the source, we doubt there is much veracity to the alleged “Cruz sex scandal”, although the tabloid has had its share of “broken” news stores in the past.

  As was to be expected, Cruz immediately denounced the article as “garbage, complete and utter lies” and accused his opponent Donald Trump of being the source of the story as Reuters reports.

  “It’s tabloid smear, and it is a smear that has come from Donald Trump and his henchmen,” a clearly perturbed Cruz told reporters at a press conference in Wisconsin, as the battle for the Republican presidential nomination reached new levels of personal rancor.

  Trump issued a statement saying he was not responsible for the article.

  “I have nothing to do with the National Enquirer and unlike Lyin’ Ted Cruz I do not surround myself with political hacks and henchman and then pretend total innocence,” Trump said in the statement. “Ted Cruz’s problem with the National Enquirer is his and his alone, and while they were right about O.J. Simpson, John Edwards, and many others, I certainly hope they are not right about Lyin’ Ted Cruz.”

  In other words, just as Cruz had “nothing” to do with the first naked photo of Melania that started off this latest scandal, so Trump had “nothing” to do with the Enquirer article.

  Alas, the damage for Cruz may already have been done: the article exploded on Twitter overnight on Thursday. By Friday morning #CruzSexScandal was a worldwide trending topic on Twitter.

  And while Trump has distanced himself from the Enquirer article, very much the same way Cruz distanced himself from the original attack ad, an aide to Donald Trump on Friday did fulfil the businessman’s threat to “spill the beans” on Republican presidential rival Ted Cruz’s wife, Heidi.

  As The Hill first reported, Trump spokeswoman Katrina Pierson rattled off a list of attacks three days after Trump first made the threat. 

  “Spilling the beans is quite simple when it comes to Heidi Cruz,” Pierson said in an interview with MSNBC’s Steve Kornacki. 

  “She is a Bush operative; she worked for the architect of NAFTA, which has killed millions of jobs in this country; she was a member on the Council on Foreign Relations who — in Sen. Cruz’s own words, called a nest of snakes that seeks to undermine national sovereignty; and she’s been working for Goldman Sachs, the same global bank that Ted Cruz left off of his financial disclosure,” Pierson said. 

  “Her entire career has been spent working against everything Ted Cruz says that he stands for,” she added. 

  Cruz spokeswoman Alice Stewart responded to the remarks in a statement to The Hill, saying, “There’s no low the Trump campaign won’t go.”

  Earlier in the MSNBC interview, Pierson said “this isn’t about Heidi Cruz, this is about Melania Trump. Melania Trump was the one that was attacked.”

  Incidentally, she is right, even though that means that this most hypnotic scandal in the republican presidential primary race – and perhaps any US presidential race yet – is nowhere close to over as neither candidate can possibly concede defeat on a topic that is “near and dear” to the heart as one’s wife.

  

  

  

  

• Thunder CLOuds Arrive: 6 CLOs Hit Triggers, Fail Tests

  Over the past several months, we’ve kept a close eye on post-crisis CLOs or, CLO 2.0s, as they’re affectionately known. In the interest of not recounting the story in its entirety here (i.e. for the sake of brevity), here’s a list of posts those interested should review:

  • The Next Shoe Just Dropped: Equity NAVs Of 348 CLOs Slide Below Zero
  • Canary, Meet Coal Mine: These Are The Tranches Where The CLO 2.0 Meltdown Begins
  • Citi Can’t Believe How “Attractive” This Trade Is
  • The Shoe Keeps Dropping: CLOs With Negative Equity Soar By 30% In February To Record 453
  • Coal Mine Canary Or “Opportunity?” You Decide

  Issuance fell off a cliff in the wake of the crisis, but eventually rebounded, and by 2014, issuance was running at a $124 billion per year clip (comparable to auto loan-backed ABS annual supply, for reference). Supply slipped to around $95 billion last year and then, well, then it all fell apart.

  

  The percentage of CLO assets carrying a negative ratings outlook jumped five-fold in just three months to 12.6% according to Moody’s and as Morgan Stanley has been keen to document, the market is literally crumbling.

  As of the end of February, the median US CLO 2.0 equity NAV stood at -1.99 with the number of CLO 2.0 deals’ equity tranches currently having NAV below zero soaring by 30% from 348 to 453.

  

  Over the same period, the underlying asset deterioration continued, we went on to note. By February 29, the median CCC assets in US CLO had reached 4.30% from 3.90% in January. Needless to say, this trend will only continue as the debt-laden US O&G space continues to spiral into oblivion. “Among the 180 loan issuers with price drops larger than 5 points in February, we see 32 issuers in Oil & Gas,” Morgan Stanley warns, before adding that “851 CLO transactions have exposure to these 180 issuers, with a median exposure of 7.07% in the CLO 2.0 space across 654 deals.”

  To determine how it will all play out, we can take a look at history. Let’s go to Morgan Stanley one more time:

  From late 2007, CLO equity investors suffered from a sharp decline in loan prices followed by a rapid increase of asset downgrades. The number of US CLOs failing junior OC triggers climbed and led to an increasing number of deals missing payments to equity tranches. The proportion of deals cutting off payments to equity tranches peaked in 2Q 2009, right after the bottoming of loan prices and the peak of loan downgrades in 1Q 2009.

  Got it. So the credits in the collateral pool suddenly all sour at once, the triggers are hit, and the subordinated tranches are a really bad place to be. Take a look at the red line here:

  

  That’s missed payments to the equity tranches when the market blew up in the wake of the crisis (i.e. that’s CLO 1.0s). The question is how long before that dynamic plays out in 2.0s. As we noted late last month, Moody’s and S&P have delivered their first downgrades of post-crisis CLOs. Here’s a look at the tranches affected by Moody’s decision: 

  

  Now, we learn that Silver Spring and Silvermore, along with four other CLO 2.0s are failing their interest diversion tests. That is, they’ve hit their triggers and payments to the equity tranches are in jeopardy pending how things look next month. Here’s Deutsche Bank: 

  Looking at interest diversion tests, there hasn’t been any diversion of cash interest payments to the equity tranche of post-crisis CLOs so far, but it will come down to the status of these tests for the payment dates in April. Right now there are six CLOs failing their interest diversion tests. One of those, Jamestown IV, is just barely failing the test. Three other deals have coverage right above their respective interest diversion triggers, see Figure 20.

   

  
  

   

  Apart from these deals most other CLOs still have a good buffer before tripping interest diversion tests. Out of the 589 post-crisis broadly syndicated CLOs that have interest diversion tests and are still in their reinvestment period we find twenty deals (including the three mentioned in Figure 20) that have a buffer of one point or less before tripping the test. Other deals have a larger buffer. Figure 21 shows how well the 589 deals are covered, in terms of passing the interest diversion test. We show the data normalized by the initial collateral balance. The graph shows each deals collateral test par value relative to the initial collateral balance plotted against their interest diversion trigger, normalized the same way. Finally, the red line shows where the trigger lies, so the distance from the red line to the blue dot representing each line represents the interest diversion test buffer.

  

   

  Despite Deutsche’s attempt to strike an upbeat tone, what the above means is that the market is beginning to crack and if you get anything out of Morgan Stanley’s recent series of updates, it should be that it won’t be long before there’s (much) more trouble in OC trigger land. 

  Meanwhile, issuance was actually up this month, but we wouldn’t get too excited about the prospects for the leveraged loan market – supply was still some five times lower than last March.

  

  So keep the faith we suppose and remember: Citi can’t imagine how CLO mezz could possibly be any more attractive.

  Oh, and don’t forget that next month banks will reevaluate credit lines on RBL for the beleaguered O&G sector. We’ll leave it to readers to determine for themselves what that means for CLO 2.0s, but we will give you a hint. Match up the following table with the “Deal Name” column in Figure 20 shown above.

  

  

  

  

  

  

• Bitcoin Market Technical Analysis and Commentary – 2 26 2016 (Video)

  By EconMatters

  

  We delve into the technicals of the Bitcoin Market in this video.

  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle  

  

  

  

  

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• Was This The Worst Economist Forecast Of All Time

  When it comes to predicting the future, there has traditionally been a stealthy contest between economists and weathermen as to who is the worst predictor of coming events. Lately, there was some confusion when economists – this includes central bankers and market “strategists” –  tired of being humiliated in public for their terrible predictions, decided to become Monday Morning weathermen (ironically, none more so than those who competed with Groundhog Phil and lost) and blame their lack of foresight on the weather.

  This led to even more humiliation for said economisseds (sic) and entertainment for everyone else.

  But there is little confusion about what may have been the worst economic forecast of all time. For the answer go to Japan, and back 30 years in time, just after Japan’s mega asset bubble burst when in their desperation to preserve the myth that “all is well”, economists were “predicting” how little Japan’s growth would be impacted as a result of the burst bubble.

  They were all wrong.

  As HSBC’s Stephen King points out, nowadays, Japan’s “lost decades” are seen to be a blindingly-obvious consequence of the bursting of Japan’s late-1980s stock market and land price bubbles (ahem China). At the time, however, few managed to predict what was apparently so obvious in hindsight.

  Which brings us to what probably is the worst economic forecast of all time: in the mid-1990s, the forecasting consensus had every confidence that nominal Japanese GDP would rise 25% over the next five years. Consensus was wrong: by 2000, nominal GDP was more than 24% lower than had been projected five years earlier.

  

  Did the forecast humiliation end there? Oh no. 

  The gap between forecast and reality got bigger and bigger thereafter. In fact, over 30 years later, Japan’s nominal GDP and GDP per capital now is where it was 30 years ago even as Japan has piled up a total debt load that is now over 400% of GDP.

  

  Finally, as a consequence, bond yields fell further and further, continuously undershooting forecasts.

  

   

  Does this look familiar? If not, recall this chart?

  

  And this:

  

  Comical economists aside, “Japanification” is precisely what is happening to the rest of the “developed world” as global growth continues to deteriorate, global debt grows and the only short-term resolution is to keep rates as low as possible… and now, negative across 28% of the entire world.

  This weekend we will lay out HSBC’s thoughts on what “turning Japanese” means for the rest of the world. Spoiler alert: only bad things.

  In the meantime we ask, when will “economists” be finally laughed off the global stage for the charlatan comedians they all are?

  

  

  

  

• "Satanic Cocktail" Of Nails And Acetone Used In Devilish Brussels Bomb Design

  Nearly four days have passed since four men detonated explosives-laden belts and luggage in the Brussels airport and metro killing nearly two dozen people and injuring hundreds and there’s still quite a bit of ambiguity regarding who exactly is dead, who’s still at large, and who was at the scene in the first place.

  Part of the confusion stems from the fact that the attackers who died in the blasts were strewn all over the crime scene in pieces, but authorities did manage to determine that among those who blew themselves up were brothers Khalid and Ibrahim El-Bakraoui, one of which was the subject of an Interpol red notice and the other was flagged by Turkey as a “foreign fighter” and deported. Also thought to have been killed in the airport bombings: bombmaker Najim Laachraoui, who is said to have played an instrumental role in building the explosives used in the Paris attacks.

  Following the bombings, the taxi driver who delivered Ibrahim Bakraoui, Laachraoui, and a third assailant to the airport called the police. The driver became suspicious when the men were reluctant to let him assist with their luggage which he described as exceptionally heavy. The driver then led police back to the apartment in Schaerbeek (the site of Friday’s sweeping police operation) where he had picked the three men up. On the fifth floor, authorities found 33 lbs of explosives, 180 liters of chemicals, guns, a suitcase full of nails, and an Islamic State flag. Nothing suspicious about that.

  Apparently, the apartment was a bomb making factory and in it, the Bakraouis (possibly with the help of Laachraoui or another bombmaker), built the TATP-based explosives used in Tuesday’s attacks. TATP, or triacetone triperoxide, has become an ISIS favorite and for those unlucky enough to find themselves in close proximity when it’s detonated, it’s bad news. Dubbed “the mother of Satan” by Palestinian militants, the white powder is cheap to make and the ingredients are impossible to trace, making it ideal for the clandestine activities of the Islamic State cells operating under the radar of European anti-terror police.

  “Used in the 2005 London bombings and the Nov. 13 Paris attacks, and found in a series of foiled bomb attempts in Europe since 2007, TATP appears to be Islamic State’s explosive of choice,” Reuters writes. Here’s more:

  Making a TATP bomb, although a more lengthy process than the fertilizer-based explosives used by other European militants, is cheap and simple and recipes and videos by chemistry buffs abound on the Internet. It was discovered by a 19th century German chemist and is very powerful, even in small quantities.

   

  All the ingredients – acetone found in cleaning products, hydrogen peroxide found in wood bleach and sulphuric acid used to unblock kitchen pipes – were available at one Brussels hardware store this week for less than 40 euros ($45).

   

  Nails and bolts can be added to increase the bomb’s impact and afterwards stuffed into bags and taped into suicide belts.

   

  It goes undetected by airport scanners, leaving authorities to rely on sniffer dogs. Though the bombs can have a strong smell — the bombers’ taxi driver said he smelled chemicals on the ride to the airport — there were few such dogs in the Brussels’ airport check-in area on Tuesday when the men detonated the explosives hidden in holdalls on baggage trolleys, according to several witnesses, including an airport worker.

  Ehud Keinan, an Israeli scientist who has spent 35 years studying TATP, said that as little as 4 kg could produce the kind of devastation seen in Brussels.

   

  “It is very easy to make, not like a conventional bomb,” said Keinan, the dean of chemistry at Technion-Israel Institute of Technology in Haifa.

   

  “You don’t need to be part of a large organization or need training to do this.”

   

  Still, one of the three Brussels suspects, Najim Laachraoui, a 25-year-old Belgian who blew himself up in the airport attack and is suspected of making suicide vests for Paris, had studied engineering at university and excelled in lab work.

   

  Within two weeks of the July 2005 London attacks, the British chemical industry and British hardware stores stepped up their reporting of suspicious or large purchases of chemicals.

   

  However, in France, the explosive precursor hydrogen peroxide is sold legally as a way to clean private swimming pool water and no one is considering banning nail varnish remover.

   

  “If you go into any pharmacy in Brussels, you can buy 50 ml of acetone. If you go into a hundred pharmacies, you can get that much more,” said Peter Newport, the chief executive of Britain’s Chemical Business Association, which sits on the European Commission’s expert group on regulating precursors.

  “There are actually very few bombmakers in the grand scheme of things,” Brian Castner, a former Air Force explosive ordnance disposal technician and author of the book “All the Ways We Kill and Die,” tells The Washington Post. “Once one finds a successful way to construct these things, they [can] mass produce.”

  “While there are bomb-building manuals available on the Internet, Castner added that a competent terrorist cell would not rely on them; instead, recruits apprentice with master bombmakers in places such as Syria and Iraq before returning to their home countries,” WaPo continues. “And in Afghanistan and Iraq, the United States has targeted bombmakers.”

  For the scientifically inclined, here’s a detailed description of “mother of Satan” from Tech Insider: 

  One reason TATP is difficult to detect is because it does not contain nitrogen, a key component of homemade “fertilizer” bombs that security scanners are now very good at finding.

   

  Each molecule contains only hydrogen, oxygen, and carbon — some of the most common elements on Earth — shaped in a ring.

   

  The explosive power of TATP has puzzled scientists since its discovery in 1895. Unlike nitrogen-based bomb materials, which store up energy as they’re cooked into explosive form, TATP can be made at room temperature — no flames required.

   

  So where does it get its explosive energy, if not by heating?

   

  
  

   

  It wasn’t until 2005 that Keinan figured out detonating TATP is more like a massive air blast than a fire bomb. When a crystal of the explosive is rattled hard enough, each solid molecule instantly breaks into four gas molecules.

   

  “Although the gas is at room temperature, it has the same density as the solid, and four times as many molecules, so it has 200 times the pressure of the surrounding air,” according to the release about Keinan and his colleagues’ 2005 study of TATP.

   

  “This enormous pressure — one-[and-a-half] tons per square inch — then pushes outward, creating an explosive force” on par with TNT, states the release.

   

  “In a TATP explosion, the gas molecules give up their energy of motion to the surroundings, in the process creating the shock wave that does the damage.”

  So an extremely powerful (if unstable) explosive powder that’s easily synthesized from cheap, readily available, not to mention completely legal ingredients. “There are so many valid uses by the public of these substances,” the aforementioned Peter Newport admits. Right, but there aren’t a lot of uses for 40 gallons of acetone and eight gallons of hydrogen peroxide (the quantities found in the Schaerbeek hideout) and as The New York Times notes, US officials are curious as to “how the terrorists were able to elude detection” while obtaining those quantities of precursors – “especially during a manhunt for Salah Abdeslam.”

  The answer, of course, is that Belgian authorities have proven themselves to be completely incompetent and, as we wrote earlier today, have now simply resorted to arresting people first and asking questions later in an increasingly desperate attempt to get out ahead of the next attack which we imagine was probably planned weeks ago in a Molenbeek apartment amongst empty bottles of nail polish remover, loaded Kalashnikovs, and half-empty pizza boxes. 

  As for the public, we implore you to do your part by following the advice that’s prominently displayed on signs plastered all over New York’s Grand Central Station: “If you see something, say something.” In this context we suppose that means that if you see the guy shown below buying a bottle of nail polish remover (or worse, a can of Nutella), call the police immediately…

  

  

  

  

  

  

• The Slow, Inevitable Collapse Of The Two-Party System

  Submitted by Russell Whitehouse via OrientalReview.org,

  In this election year, it’s clear that a seismic political shift is rumbling through America.  Widespread discontent for the status quo is surfacing from both the left and right.  A year ago, it would have been impossible to envision a card-carrying socialist and a pre-WWII style populist mounting legitimate presidential campaigns (much less without Super PACs).  Now, far-left and far-right sentiments are emerging from the underground as perfectly palatable options to Middle America.  Establishment darlings like Hillary Clinton, Jeb Bush & Marco Rubio have faced extreme pressure from the New Normal in their respective political tents.

  It has become clear that the traditional 2-party system in America is starting to erode.  Sanders’ supporters view Clinton as too untrustworthy & beholden to Big Business.   Meanwhile Trump’s blue-collar base has rejected rank-and-file Republicans as being too unsympathetic to their economic concerns, while his surprising chunk of the evangelical contingent is refuting the Bush-flavored puritanism of Ted Cruz.  Conversely, Clinton’s supporters reject Sander’s bold platform as delusional and Cruz’s base is increasingly being filled by #NeverTrump neocon purists and Romey-ite country club Republicans.

  One can see political parallels across the pond, in the UK’s 2015 Parliamentary elections.  The two main parties in Westminster Palace, Conservative and Labour (roughly equivalent to the GOP and Democrats), were shaken up by two popular insurgencies.  UKIP, the UK Independence Party, rose up from the rising flames of the relatively conservative British heartland’s fears of free trade in the EU and immigration, winning an eighth of the popular vote in England. To the north, SNP, the Scottish National Party, won 95% of Scotland’s seats by inspiring among other things, record youth turnout and social media support (sound familiar?), with a message of social democracy and defiance against the British status quo.

  

  Intra-party schisms are also forming in the two Anglophone democracies.  The Tories are tearing themselves apart over the Brexit, austerity and jockeying to succeed Cameron as Party Leader, while the American neocons are assessing the fallout of Trump’s ascendance while in free fall.  Labour officials are debating whether to follow their insurgent leader Jeremy Corbyn to the far Left after 20 years of Tony Blair’s New Labour movement, which moved the party to the center to win back the support of big business and blue-collar voters.  The New Labour centrist putsch coincided with Bill Clinton (and later Obama’s) similar efforts as the face of the Democrats.   Now, Democratic voters are beginning to second-guess this political realignment, spearheaded by the presumptive Democratic nominee’s husband.  Her opponent Bernie Sanders is siphoning away the youth vote and blue-collar moderates from the Democratic establishment, two of the Party’s traditional constituencies, by railing against neoliberal policies like free trade and social welfare cuts.

  Given the rise of social-democratic populism and nativist-protectionist populism to either flank of American politics, it would make sense to look at the formation of entirely new parties.  Bernie Sanders can form a Stars-and-Pinstripes version of SNP; he too has the momentum of a more secular, progressive generation reaching political maturity as the more religious, conservative Baby Boomers begin to die out.  Assuming Trump completes his takeover of the Grand Old Party at July’s convention, the neocon brain trust can form a new conservative movement; this is already being planned by members of the #NeverTrump triad. Evangelical and free market diehards can unite to mount a serious challenge to Trump’s right by fielding a Texas crusader like Ted Cruz or Rick Perry, or Mormon elder statesman Mitt Romney.

  Regardless of how Trump and Sanders fare in their respective conventions, they could still operate a serious race for the White House.  Both New York loudmouths boast a gigantic wave of rabid new voters, as well as a wellspring of working-class Americans desperate to reverse Wall Street’s increasingly oligarchical dominance, mass layoffs/underemployment, stagnant wages, crumbling infrastructure & the other byproducts of the neoliberal-neoconservative economic policy alliance.  Sanders could march into November as the nominee of the new Democratic Socialist Party, with a trail of young, idealistic future leaders tweeting and live-streaming behind him. 

  Depending on July’s RNC, we could see a Make America Great Again Party (MAGAP, for short) trumpeting Trump’s message of putting power back in the hands of the American working class or a Romney-Cruz True Conservatives Party ticket touting Christian piety and Wall St fiscal policy.

  Get used to Sanders, Clinton, Trump & Cruz.  You may see all 4 of them, come November…

  

  

  

  

  

• Is Trump Starting To Get To Cruz: "I Don't Want To Copulate With Him"

  The GOP presidential nominee campaign just went from the sublime to the utterly ridiculous. In what appeared to a prepared remark, Ted Cruz just explained to holiday-weekend-crowd of reporters that he “has no desire to copulate with Donald Trump.”

  Compare this:
  

  “Let me be clear, Donald Trump may be a rat, but I have no desire to copulate with him.”

  Which oddly seems to imply that Cruz may enjoy the company of rats (just not Donald Trump size ones).

   

  To this:

   

  Simply put, the so-called establishment has absolutely no idea how to cope with The Donald and as “Lyin’ Ted” just illustrated, are out of their class when it comes to fighting the ‘controlled chaos’ that is Trump.

  One can only imagine how Hillary will cope with any of this sheer madness. Actually, one can’t.
  

  

  

  

  

  

• Thanks Obamacare: This Is What Americans Spent Most Money On In 2015

  We have been covering the consumption tax, pardon, endless spending black hole that is Obamacare for over a year, so we doubt it will come as a surprise to anyone that in 2015 healthcare was the second biggest use of US consumer funds, soaking up a record $1.9 trillion in real dollars, and more importantly for US economic “growth”, the single biggest source of incremental spending by nearly a factor of two.

  Incidentally, with spending on healthcare (courtesy of the Supreme Court’s Obamacare tax) soaring, while outlays on the traditionally most consumption-intensive category, housing and utilities, going nowhere for the past several years, it is only a matter of 2-3 quarters before Healthcare surpasses Housing as the biggest use of American cash.

  Putting this in context, a recent report from Freedom Partners Health found that health insurance premiums have increased faster than wages and inflation in recent years, rising an average of 28 percent from 2009 to 2014 despite the enactment of Obamacare, or rather “because of.” Obama signed the Affordable Care Act into law on March 23, 2010, and Wednesday is the law’s sixth anniversary.

  So, without further ado, this is what drove American consumer spending in the officially concluded, for GDP purposes, 2015. We show this just in case there is still any confusion why US households are unable to channel more spending into “discretionary”, non-mandatory purchases unlike Obama’s “health insurance” tax, pardon, noble venture.

  

  

  

  

  

  

• How to Destroy ISIS Propaganda and Wipe Out Its Ability to Recruit

  The Little-Known Secret to Destroying ISIS Propaganda

  I'm not opposed to killing every ISIS member and recruit. After all, they're trying to kill us.

  But Russia and the U.S.-led coalition haven't been able to wipe out ISIS with bombs.

  Why not?

  Military history shows that you usually cannot defeat your enemy unless you understand him at least a little bit.

  For example, the great Chinese military strategist Sun Tzu wrote in the Art of War:

  It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.

  Part of why we haven't won the battle against ISIS is we don't understand why their recruitment has been so successful.

  Specifically, ISIS pitches itself to ignorant, naive, unemployed, young Muslims as the group which will stop the Christian and Jewish "occupiers" from stealing their lands.

  (That's obviously no excuse for joining a terrorist group. Like I said, I have no problem killing everyone in ISIS.)

  But if the actual truth – that ISIS kills far more Muslims than Christians or Jews – were publicized, ISIS' propaganda and recruiting success would collapse.

  In other words, ISIS ability to recruit fighters and supporters would evaporate, and the group itself would quickly wither.

  “Between 82 and 97% of Terrorism-Related Fatalities” Are MUSLIM

  The U.S. National Counterterrorism Center – the United States government organization responsible for national and international counterterrorism efforts – reported in 2011 (page 14):

  In cases where the religious affiliation of terrorism casualties could be determined, Muslims suffered between 82 and 97% of terrorism-related fatalities over the past five years.

  The State Department commented:

  NCTC [i.e. the National Counterterrorism Center] maintains its statistical information on the U.S. government's authoritative and unclassified database on terrorist acts, the Worldwide Incidents Tracking System (WITS).

   

  ***

   

  Muslims continued to bear the brunt of terrorism ….

  • In cases where the religious affiliation of terrorism casualties could be determined, Muslims suffered between 82 and 97 percent of terrorism-related fatalities over the past five years.
  • Muslim majority countries bore the greatest number of attacks involving 10 or more deaths ….

  According to a 2009 report published by the Counter Terrorism Center at the United States Military Academy at West Point, Al-Qaeda kills over seven times more Muslims than non-Muslims.

  The UN reported last year that Muslims are the largest victims of ISIS in Iraq.

  In 2013, the National Consortium for the Study of Terrorism and Responses to Terrorism's Global Terrorism Database – joint government-university program on terrorism, hosted at the University of Maryland noted that between 2004 and 2013, about half of all terrorist attacks, and 60% of fatalities due to terrorist attacks, took place in Iraq, Afghanistan and Pakistan – all of which have a mostly Muslim population:

  

  The head of the Global Terrorism Database told BBC:

  While she doubts that 95% of terrorism victims are Muslim, she thinks the truth might not be far off.

   

  "It's not out of the realm of possibility, given the extreme concentration of attacks in majority-Muslim countries," Miller says.

  In other words, the vast majority of Muslims not only condemn ISIS … but they are actually bearing the brunt of ISIS’ cruelty.

  One American Muslim writes at Daily Beast:

  We Muslims despise these crazy people more than anyone else does.

   

  Denounce ISIS? Muslims despise ISIS. (At least those who aren’t pathological.)

   

  True, ISIS is compromised of people who claim to be Muslims. But the number one victim of this barbaric terror group is Muslims. That’s undisputed. ISIS has killed thousands of Muslims across the Middle East, including beheading Sunni Muslims in Iraq for failing to pledge loyalty to them, executing Imams for not submitting to them, and even killing an Imam in Iraq for simply denouncing them.

  (Muslims are also being slaughtered by ISIS for standing up and publicly opposing the terrorist group’s persecution of Christians. And as a sidenote, a 2013 study by Duke University showed that Muslim Americans helped catch more terrorism suspects and perpetrators than the United States government itself.)

  Indeed, if we want to stop ISIS, one of the most important things we can do is publicize the fact that ISIS is killing more “fellow” Muslims than any other victims. This will destroy ISIS propaganda that they are focused on a jihad or "holy war" against Christian and Jewish "occupiers".

  As Daily Beast pointed out in 2014:

  The group’s killing of Westerners gets attention. But ISIS has killed far more Muslims, and publicizing that fact would harm it more.

   

  Last Thursday, the United Nations released a report that could provide us with one of the keys to defeating ISIS. Unfortunately, it received almost zero media attention.What makes this 26-page report (PDF) so powerful is that it describes to us the gruesome circumstances in which ISIS has killed fellow Muslims. We are talking beheadings, killing of women for objecting to ISIS’ policies, and executing Sunni Muslim clerics for refusing to swear allegiance to ISIS.

   

  Why is this important? This information can hopefully help dissuade other Muslims from joining or financially supporting ISIS. And it may even persuade other Muslim countries to join or increase their efforts in fighting ISIS. The reason being that slaughtering fellow Muslims is seen as universally wrong across the Muslim world and as a violation of Islamic values. In fact, Al Qaeda has even publicly criticized ISIS for this very conduct.

   

  ***

   

  The leaders of ISIS are very aware that the killing of fellow Muslims—especially Sunnis- could hurt their cause in attracting support from the Sunni Muslim world. In fact, ISIS is so concerned about the possible backlash that the group’s leaders addressed this subject (PDF) in the latest issue of its online magazine.

   

  ***

   

  I wish the media would give more coverage to ISIS’ crimes against Muslims. The publicity would hurt the group’s cause tremendously, and it could also make the case to my fellow Americas that this fight is not Islam versus the West. Rather, it’s everyone who doesn’t want to live under ISIS’ brutal dictatorship versus ISIS.

   

  And those Muslims who gave their lives fighting against or refusing to give into ISIS in our common struggle should be recognized in the media for their bravery. It would be very powerful to see images in our media of the Muslims killed by ISIS, not just Westerners.

  How to Stop ISIS

  Unfortunately, Western governments are increasing the threat from terrorism (all of the countries we’ve “regime changed” have descended into brutal chaos, allowing ISIS and other terrorists to spread) … instead of doing the things which will stop terrorism.

  One of those things is to publicize the fact that most of ISIS' victims are Muslim, as it will destroy ISIS propaganda.

  Even the folks who want all Muslims to wipe each other out might wish to recognize that failing to publicize that fact is allowing ISIS recruitment to explode.  While Armageddon might sound exciting to some, I'd rather punch holes in the inflating ISIS balloon, and then bump off the remaining ISIS fighers.

  Postscript: Despite the feeling we get from watching the MSM that we are all about to be killed by terrorists, the truth is that we are much more likely to die from a boring or bizarre accident than at the hand of a terrorist … even the fear of terrorism is arguably more dangerous than terrorism itself.

  

  

  

  

• How America Works (In 1 Uncomfortable Cartoon)

  This won’t end well…

   

  

   

  Source: The Burning Platform blog

  

  

  

  

  

• America's Top Rogue Mercenary – Blackwater's Erik Prince Is Under Federal Investigation

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Just weeks before Blackwater guards fatally shot 17 civilians at Baghdad’s Nisour Square in 2007, the State Department began investigating the security contractor’s operations in Iraq. But the inquiry was abandoned after Blackwater’s top manager there issued a threat: “that he could kill” the government’s chief investigator and “no one could or would do anything about it as we were in Iraq,” according to department reports.

   

  –  From the post: New York Times Reports – Blackwater Threatened to Kill a State Dept. Official and the U.S. Government Did Nothing

  A little over two years ago, I published a post titled, How Erik Prince, Founder of Blackwater, Will Help China Subjugate Africa. Here’s what we learned at the time:

  Shares of DVN Holdings, controlled by Hong Kong businessman Johnson Ko Chun-shun and state-owned Citic Group, surged 7.3 per cent after it appointed Erik Prince – former owner of controversial US security firm Blackwater – as chairman, and granted him more share options.

   

  Prince last November sold to DVN a company that plans to build a pan-Africa provider of aviation, logistics, risk management, security services and exploration support services, needed by many Chinese businesses active in Africa. He received US$3 million plus the first batch of options.

   

  Prince has logistics, aviation, manufacturing, resources and energy business interests in Africa, the Middle East and North America, and is the founder of Frontier Resource Group, a private equity firm active in African aviation, exploration, mining and logistics, DVN said.

   

  The firm subsequently paid US$42 million in fines for hundreds of violations of US export rules, to avoid criminal charges, The New York Times reported.

  The writing was on the wall back then, and it appears the Department of Justice has finally picked up on the shadiness of it all.

  Earlier today, The Intercept published a detailed account of the ongoing investigation into America’s number one mercenary, Erik Prince. Here are a few excerpts:

  Erik Prince, founder of the now-defunct mercenary firm Blackwater and current chairman of Frontier Services Group, is under investigation by the U.S. Department of Justice and other federal agencies for attempting to broker military services to foreign governments and possible money laundering, according to multiple sources with knowledge of the case.

   

  What began as an investigation into Prince’s attempts to sell defense services in Libya and other countries in Africa has widened to a probe of allegations that Prince received assistance from Chinese intelligence to set up an account for his Libya operations through the Bank of China. The Justice Department, which declined to comment for this article, is also seeking to uncover the precise nature of Prince’s relationship with Chinese intelligence.

   

  The Intercept interviewed more than a half dozen of Prince’s associates, including current and former business partners; four former U.S. intelligence officers; and other sources familiar with the Justice Department investigation. All of them requested anonymity to discuss these matters because there is an ongoing investigation. The Intercept also reviewed several secret proposals drafted by Prince and his closest advisers and partners offering paramilitary services to foreign entities.

   

  In 2010, amid public scandals and government investigations, Prince began to sell off his Blackwater empire. Using new vehicles, he continued to engage in controversial private security ventures, including operations in Somalia and the United Arab Emirates. Eventually, the former Navy SEAL and self-proclaimed American patriot began building close business ties with powerful individuals connected to the Chinese Communist Party. In January 2014, Prince officially went into business with the Chinese government’s largest state-owned investment firm, the Citic Group, and founded Frontier Services Group, which is based in Hong Kong. Citic Group is the company’s single largest investor, and two of FSG’s board members are Chinese nationals.

   

  Working with a small cadre of loyalists — including a former South African commando, a former Australian air force pilot, and a lawyer with dual citizenship in the U.S. and Israel — Prince sought to secretly rebuild his private CIA and special operations enterprise by setting up foreign shell companies and offering paramilitary services, according to documents reviewed by The Intercept and interviews with several people familiar with Prince’s business proposals.

   

  Since 2014, Prince has traveled to at least half a dozen countries to offer various versions of a private military force, secretly meeting with a string of African officials. Among the countries where Prince pitched a plan to deploy paramilitary assets is Libya, which is currently subject to an array of U.S. and United Nations financial and defense restrictions.

   

  Prince engaged in these activities over the objections of his own firm’s corporate leadership. Several FSG colleagues accused him of using his role as chairman to offer Blackwater-like services to foreign governments that could not have been provided by the company, which lacks the capacity, expertise, or even the legal authority to do so.

   

  “He’s a rogue chairman,” said one of Prince’s close associates, who has monitored his attempts to sell mercenary forces in Africa.

   

  That source, who has extensive knowledge of Prince’s activities and travel schedule, said that Prince was operating a “secret skunkworks program” while parading around war and crisis zones as FSG’s founder and chairman. “Erik wants to be a real, no-shit mercenary,” said the source. “He’s off the rails exposing many U.S. citizens to criminal liabilities. Erik hides in the shadows … and uses [FSG] for legitimacy.”

  I get that FSG claims no part in this, but seriously, what did you expect when you went into business with this guy? It’s not as if his past was some big secret.

  The Libyan proposal, reviewed by The Intercept, was code-named Operation Lima. It offered the Libyans an array of military equipment and services — including weaponized vehicles, helicopters, boats, and surveillance airplanes — to help stabilize eastern Libya. The ground force, according to a person involved with the plan, would consist of a troop of former Australian special operations commandos. Given the instability of the government and Prince’s inability to navigate complex Libyan factions to vet potential partners, he had trouble finding the right power brokers to help sell the proposal.

   

  “Money laundering for Libyan officials using a Chinese bank — that is the issue that pushed it over the edge” for the Justice Department, said the second former intelligence official.

   

  The U.S. spies monitoring Prince soon discovered that he had traveled to the Chinese-controlled peninsula of Macau in an effort to open a bank account, according to two people familiar with the investigation. A well-connected source within the Macau banking community told The Intercept that Prince first attempted to open an account at the Macau branch of a European-connected bank, but was denied after a review by the bank’s European headquarters.

   

  Later, Prince traveled to Beijing, where he met with Chinese agents from the Ministry of State Security, according to the second former intelligence official and a source familiar with the meeting.

   

  In January, Prince returned to Macau and opened an account at the Bank of China, according to several sources, including the second former intelligence official and the source with close connections to Macau’s banking community.

   

  “It was not a personal account,” said the former U.S. intelligence official briefed on the investigation. “He was doing it for the purpose of what is considered now — in the investigation — money laundering on behalf of the Libyans.”

   

  Toensing, Prince’s lawyer, confirmed that Prince successfully opened an account with the Bank of China. “He opened an account on behalf of a business,” she said. Toensing declined to say for which business he opened the account, but said that it complied with U.S. banking regulations. “This is not an FSG bank account,” a spokesperson for FSG told The Intercept.

   

  While Prince’s re-invented Libya “border security” proposal was framed as a means of stopping migration, sources with knowledge of Prince’s business strategy allege that he had greater ambitions in that country. One person involved in Prince’s plan said the anti-migration force was seen as a vehicle for Prince to build a “backdoor” for so-called kinetic, or lethal, operations in Libya — a form of mercenary mission-creep. “During the day, you do interdiction of migrants — not kinetic,” said the person involved in the plan. “But those routes are used by weapons smugglers and drug traffickers at night. Insurgents too. Erik’s guys can then be offered to the Libyans to help with their other problems. That’s how you get kinetic.”

   

  The plan called for a series of “border security” bases housing intelligence centers, helicopters, surveillance airplanes, and weaponized vehicles. Prince proposed a fully equipped, contemporary military force to be staffed in part by foreign mercenaries.

   

  Among the concerns of government investigators is that Prince’s attempts to provide defense-related services to Libya and other countries violate U.S. defense export regulations. Under federal law, U.S. citizens seeking to offer military services or technologies to Libya must have a license certifying that the services or articles are approved under the International Traffic in Arms Regulations, or ITAR. “Many of these services and articles are designed to kill people or defend against killing people,” said John Barker, a former deputy assistant secretary of state for export controls. “To protect U.S. national security and foreign policy as well as that of its allies, the U.S. requires prior authorization.”

   

  An FSG official said the company did not know if Prince obtained a license for his activities in Libya, but noted that he did not have one in his capacity as FSG’s chairman. One of Prince’s Libya proposals reviewed by The Intercept lists FSG as the commercial vendor for the project.

   

  Prince has run up against ITAR in the past. In 2010, Prince sold most of his equity in the companies that fell under the Blackwater umbrella. Claiming that left-wing activists, Democratic politicians, and lawsuits had destroyed his companies, he left the United States and became a resident of Abu Dhabi. The remnant of his network was renamed Academi LLC. Federal prosecutors eventually attempted to prosecute Prince’s former companies, culminating in a 2012 deferred prosecution agreement to settle a lengthy list of U.S. legal and regulatory violations committed from 2005 through 2008 when Prince was in charge, including ITAR violations.

   

  A senior official involved with the Blackwater-related litigation, who has since left the government, told The Intercept that the Obama administration’s continued willingness to award contracts to former Blackwater entities while the case was active was a fatal impediment to a successful prosecution. The official, comparing the former Blackwater empire to a drug syndicate, added that prosecutors could not get anyone under Prince to testify against him personally. “This is very much the concern,” the former official told The Intercept. “You push the buttons on the company, but the main bad guy gets away and does it again.”

  Remarkable. “Mr. Liberal” Obama was cheerfully awarding Erik Prince and Blackwater corporate offshoots government contracts despite an ongoing investigation.

  No criminal charges were filed against Prince. 

   

  In federal court filings, Prince’s former companies admitted to providing — on numerous occasions during Prince’s tenure — defense goods and services to foreign governments without the required State Department licensing. In some cases, they admitted to providing services even after failing to obtain a license from the State Department.

   

  As part of their settlement with the government, Prince’s companies ultimately agreed to pay nearly $50 million in fines and other penalties and to implement compliance procedures to ensure such illegal activities did not continue. In September 2015, the deferred charges were dismissed after the U.S. government certified that the companies had “fully complied” with all of its conditions.

  Right, because fining a mercenary sociopath is such an effective deterrent. This is what you get when you use deferred prosecutions on these people. They get right back at it. Same exact thing happened with the banks. The U.S. justice department is not just worthless, it’s dangerous.

  At that point, Prince was already deep into creating new companies registered outside of the United States and appeared poised to return to the conduct that had marked his time at the helm of Blackwater.

   

  An internal document from Prince’s inner circle, reviewed by The Intercept, shows his team openly discussing the need to avoid U.S. and international defense export regulations and to mask the involvement of Prince and his cohort in efforts to provide mercenary services and military equipment to foreign governments. “Erik is always pressing the limits as to what is possible,” said the close associate of Prince’s.

   

  According to multiple sources familiar with Prince’s activities, as well as documents reviewed by The Intercept, Prince is considering an invitation to speak at a conference later this month in China sponsored by the country’s main domestic security organization, the Ministry of Public Security.

   

  Internally, FSG executives determined that any presentations by the company’s U.S. citizen personnel at the conference could potentially violate U.S. laws against providing defense advice to China. Smith issued a directive that no U.S. personnel from FSG were authorized to attend. Erik Prince, Smith told his staff, would need to make his own decision.

  There’s only one way to stop a guy like this — lock him up.

  For once, do your job Department of Justice.

  

  

  

  

  

• The Dirty Dozen – Meet The Republicans That Will Vote For Hillary

  Members of the GOP foreign policy establishment are open to supporting Hillary Clinton for president if that’s what it takes to prevent Donald Trump from becoming commander in chief. As The Hill reports, a number of prominent Republicans who signed a scathing open letter denouncing Trump said they aren’t wavering from their opposition to him…"Donald Trump is not a Republican. … He is a caricature of classless wealth. … He is a caricature of the ugly American."

   “What’s happening is you have a lot of people who are desperate to get anybody in there other than Trump. … People are going to go for Cruz, because at the end of the day they think he’s considerably less bad than Trump,” said Eliot A. Cohen, a former adviser to Sen. Marco Rubio (R-Fla.) who also served in the George W. Bush administration.

   

  Cohen, along with Bryan McGrath, organized an open letter opposing Trump that was signed by more than 120 members of the Republican foreign policy establishment. The letter declared that Trump is unfit to be president because his views of American power are “wildly inconsistent and unmoored in principle.”

  The Hill contacted 13 of the people on the letter and heard back from all but two of them…

  “Donald Trump is not a Republican. … He is a caricature of classless wealth. … He is a caricature of the ugly American,” said McGrath, the deputy director at the Center for American Seapower at the Hudson Institute who is now working with the Cruz campaign.

   

  Still, some say the fact that more supporters of Bush and Rubio haven’t joined Cruz shows how unenthusiastic many are about him.

   

  “All the palatable choices are gone,” said a senior Republican congressional staffer who wished to remain unidentified in order to speak freely.

   

  …

   

  Stephen Rodriguez, a former Bush adviser and managing partner at One Defense who is now supporting Cruz, called Trump “amoral,” a “fraud” and a “dangerous demagogue.”

   

  “I don’t know what’s worse — having Trump say all those ridiculous things and being totally clueless, or having him say all those things and actually mean it?” said Rodriguez, who signed the letter.

   

  “At the end of the day, he has done nothing to earn my vote. He doesn’t have the character or the values that would qualify him to be president of the United States and commander in chief, nor is he a conservative or a Republican,” said Roger Zakheim, a visiting fellow at the American Enterprise Institute, who advised Rubio and also signed the letter.

  Some members of the Republican foreign policy establishment are “shell-shocked” by what has happened in the primary race, the GOP staffer said, and are just planning to stay on the sidelines going forward. Some of them are hoping for a third-party candidate from the GOP.

  “If indeed it comes down to Hillary versus Trump as the nominees … then I’m certainly interested in whether or not we’ll see a third party, but I can’t support Trump’s candidacy,” Zakheim said.

   

  John Noonan, a former Jeb Bush adviser, said he would write in Washington Redskins quarterback Kirk Cousins for president if Trump is the GOP nominee and then vote Republican down the rest of the ballot.

   

  “Cousins isn’t any less experienced than Trump, and at least Cousins has never bankrupted a casino,” he said. But, he added, “I’d like to see Cruz beat Trump or a third-party conservative come in, in that order.”

  Several admit that if absolutely forced to choose between Trump and Clinton, they would pick the former secretary of State.

  “I’ll never support Trump, period. If the only choices I’m offered is between Hillary and Trump, I’ll go for Hillary,” said Cohen, who said he’s hoping for a third possibility or a write-in.

   

  One pointed to Clinton’s speech earlier this week at the American Israel Public Affairs Committee, saying it was relatively well received and could have been delivered by Rubio.

   

  McGrath said he would vote for Clinton if he “got a gun held to my head” and was forced to choose only between her and Trump. He added that in reality, however, he would write in a name.

   

  But, he added, “on foreign and defense policy, I at least trust Hillary’s judgment.”

   

  McGrath isn’t alone.

   

  “If it’s between Trump and Clinton, I will vote for Clinton,” Drezner said.

   

  “I think there are others who will make that determination, even if you don’t like Hillary Clinton, if you dislike her domestic agenda,” he added.

   

  Max Boot, a Council on Foreign Relations senior fellow and former Rubio foreign policy adviser who also signed the letter, said he would choose Clinton over both Trump and Cruz.

   

  "I would consider a conservative third party but would vote for Hillary over Trump — not a close call," he said. "Cruz [versus] Clinton is a closer call but on foreign policy grounds I would probably vote for Hillary."

  So – to sum up – 120 GOP establishmentarians question Trump's choices of foreign policy advisors and would vote for Hillary because "on foreign and defense policy, I at least trust Hillary’s judgment." Given that utter denial and totally non-democratic perspective, perhaps The GOP deserves exactly what it gets. What a farce!!

  

  

  

  

  

• The "Restaurant Recovery" Is Over: Casual Dining Sales Tumble For Fourth Straight Month

  While the US manufacturing sector has been in a clear recession for the past year as a result of the collapsing commodity complex, so far the stable growth in low-paying service jobs – at least according to the BLS’ statistical assumptions – such as those of waiters and bartenders have kept the broader service economy out of contraction (even though recent Service PMI data has been downright scary). 

  

   

  This is now changing: as we showed a month ago, according to the lagged effect of the collapse of the Restaurant Performance Index, that party is over:

  

   

  … just like it was in 2008;

  

   

  But while such macro indices suffer from the same calendar and statistical aberrations which the BLS is all too famous for, a confirmation of the troubling restaurant downward trend was provided yesterday by company-level channel checks, courtesy of Sterne Agee, which show that same store sales trends at America’s casual dining restaurants – those which cater to the vast majority of the US middle class – have suffered a fourth consecutive month of declines, something not observed since the first financial crisis, sliding a whopping 3% in March.

  From Sterne Agee’s March 24 channel checks:

  Our channel checks for casual dining suggest a decline in casual dining same store sales (SSS) trends in the first half of March. While it is too early to determine if this is a trend, it appears that a fourth month in a row of negative SSS may occur, which we believe would be a disappointment to investors.

   

  Casual Dining Stocks are Under Pressure in Recent Trading: On a month-to-date basis, we note that casual dining stocks have been under pressure, with an average price decline of -3.1%, including bottom-tier performers: Buffalo Wild Wings -10.2%, Red Robin -8 4% and Brinker -8.3.

  

  To be sure, Sterne Agee tries to spin this disturbing trend as faborably as posible:

  While there is much debate on whether the discounting/promotional environment in the quick service (QSR) space is affecting casual dining, we think it is too early to call this a shift in consumer behavior or change in trend.

  However, it is becoming all too obviouos that not only has the great gas price collapse of 2015/2016 done anything to boost consumer spending on such core discretionary items as dinner, but that the purchasing power of the US middle class continues to deteriorate with every passing month – having troughed so far in March – and that economists are clueless to explain the reason behind this.

  And the worst news is that with gas prices set to anniversary their 2015 lows in a few months at which point they will start rising due to the base effect, suddenly the great “gas tax savings” which did nothing to boost spending, is about to go into reverse, and lead to the next even sharper leg lower in US household spending. We are confident economists will be very confused about the reasons why the US economy is about to deteriorate substantially in the second half, however surely they will find some climatic anomaly to blame it on.

  

  

  

  

  

• New Eye-Opening Documentary Completely Exposes Barbaric Saudi Regime

  Submitted by Michaela Whitton via TheAntiMedia.org,

  A British television crew recently filmed an undercover documentary in Saudi Arabia in an attempt to penetrate the world’s most secretive and murderous regime. Working with a team of undercover Saudi cameramen, the one hour eye-opener, Exposure: Saudi Arabia Uncovered, was broadcast by ITV on March 22. It reveals the hidden side of the regime, which buys billions of pounds worth of British arms, accepts training from British security forces, sells oil back to the U.K., and enjoys nothing less than red carpet treatment from the British royal family.

  After setting up a fake company, the crew flew into Riyadh posing as businessmen, wielding carefully concealed hidden cameras. For cover, they said they were in the country to attend a business conference on cyber-security. What they discovered was a state that beheads — and even crucifies — its citizens; where women lack basic human rights and its children are indoctrinated. Patrolled by religious police, citizens are tortured, imprisoned, and sentenced to death for writing blogs and questioning authority. It sounds like the Islamic State, but it’s not — it’s the Kingdom of Saudi Arabia. And it is fully propped up by Europe and the United States.

  The mind-boggling documentary reveals how Saudi Arabia’s money and Wahhabi ideology has helped drive terrorism around the world. Shining a light on Britain’s shoulder-rubbing with the ruling royals, the production has pushed the U.K. government to admit they have provided more than 300 Saudi police officers with training since 2012.

  “A necessary evil”

  In January 2015, the Union Jack flew at half-mast at Westminster as a mark of respect for the death of Saudi ruler, King Abdullah. During the same month, young Saudi blogger Raif Badawi received 50 lashes in public. Convicted of insulting Islam after blogging about his government and religion, quoting Albert Camus, he wrote:

  "The only way to deal with an unfree world is to become so absolutely free that your very existence is an act of rebellion.”

  Comments like this earned the father of three 1,000 total lashes and ten years in prison.

  “We don’t approve of what Saudi Arabia does, we don’t like what they do, but they are a necessary evil in combating other regimes,” former Head of International Terrorism, Colonel Richard Kemp, told ITV.

   

  “And of course, ultimately they have a lot of oil,” he added.

  Undercover cameraman Yasser is from an underground network of Saudi activists. He risked life and limb to provide a window into the brutal and secretive country where the King is all powerful, journalists cannot operate without a minder, and dissent is a cardinal sin. In the country, which is home of some of Islam’s holiest sites, the Saudi state oil company is worth £7 trillion. The royal family is worth billions. In contrast, an estimated quarter of the population lives in poverty, and numerous women were filmed begging and being beaten in the streets.

  It is estimated that only one in five Saudi women of working age are employed. They are banned from driving and struggle to perform simple tasks, such as going to the doctor without a male guardian. But some are fighting back, and prominent human rights activist Loujain Hathloul has become the face of the Saudi women’s rights movement.

  Moments after uploading videos of herself driving — as part of a campaign to change the ban against it — the activist was arrested for trying to enter Saudi Arabia from the United Arab Emirates while behind the wheel. Imprisoned for 73 days without trial, she remains banned from traveling. Terrorism charges also were filed against her. Facing persistent death threats towards her and her family, for some she is a hero. For others, she is a hate figure.

  The Committee for the Promotion of Virtue and Prevention of Vice

  The religious police, officially known as the Committee for the Promotion of Virtue and Prevention of Vice, patrol streets and shopping malls enforcing strict Islamic laws. Yasser films himself and his friend as they are violently stopped from playing a lute outside. Playing music in public is forbidden, and their instrument and hidden camera are smashed. In other instances, religious police force women to cover themselves and drive people out of cafes to pray.

  This strict form of Sunni Islam is known as Wahhabism, and it is the religion on which Saudi Arabia was founded. It is thought that the majority of Saudis support the state ideology, and the activists film a preacher spreading hatred of other religions and the Shia minority. Children are shown being indoctrinated by school textbooks, made in Saudi Arabia and exported to the world.

  “No country is the perfect ally, perfect partner, without any reservations whatsoever. Welcome to the real world, welcome to the premier league,” said former CIA Director, General David Petraeus.

  Director of the Institute for Gulf Affairs, Ali al-Ahmed, said the Saudi education system was created as a security measure to protect the ruling family and mislead millions of students into hatred of other religions and cultures. Some say the state has made progress in removing some of the worst examples of hatred from its textbooks, but the books can still be found in mosques and schools around the world.

  Al-Ahmed added, “It’s no wonder that thousands of Saudis joined ISIS and other terror groups because they were trained in Saudi schools.”

  “Chop Chop Square”

  In 2015, Saudi Arabia executed 157 people. Traditional punishments are employed, and executions are often carried out in public by one sword blow to the neck. Headless bodies are sometimes displayed publicly, and the documentary shows harrowing footage of a Burmese woman screaming for mercy as she is beheaded in the street.

  Yasser says many Saudis are angry but cannot speak out due to fear of imprisonment, adding that the regime relies on secrecy; criticism of the government is considered an act of terror. The film crew visits one of Saudi Arabia’s most notorious landmarks, known as Chop Chop Square. It is the scene of many of the regime’s public executions and has drains in the ground for blood.

  Since 9/11, Saudi Arabia has attempted to show the world they are tackling terrorism. The regime has clamped down on private donations to extremists from inside the Kingdom and carried out airstrikes against ISIS. They deny they are supporting the terror group, but many feel it is the underlying Wahhabi Salafi ideology that is the wider problem.

  Former Director of Political Islam of the CIA, Emile Nakleh told ITV:

  “The ideology of ISIS is not much different from the ideology that Wahabi Salafi Islam in Saudi adheres to. Unless the Saudis deal with this issue, we are going to constantly fight yesterday’s wars. Even if we defeat ISIS there will be another terrorist organisation, perhaps with a different name, as long as they have this ideology.”

  Unwilling to tolerate dissent and fiercely opposed to sharing power, Saudi Arabia executed 47 people in January of this year — its largest mass execution since 1980. Some were convicted terrorists, but others were political activists. Footage smuggled out by activists has revealed that the executions sparked the largest public protests since the Arab Spring.

  Since the mass executions, Yasser has stopped filming undercover. He claims it is just too risky continue, which, of course, is exactly what these public displays of punishment are all about. Although activists are being forced underground, the spread of mobile phones and cameras means it is becoming impossible for the regime to control what the world sees.

  While in the country pretending to be traders, the filmmakers’ website was hacked, leading them to believe their cover was blown. As a result, they promptly left the country.

  The documentary ends with a statement from the Saudi authorities condemning the covert filming by ITV:

  “The kingdom of Saudi Arabia utterly rejects the partisan nature and sensationalist tone of this documentary which sets out to portray the country in a negative and unbalanced light. The Kingdom’s legal system is based on the due process of Islamic Sharia Law. The Kingdom is at the forefront of international efforts to combat terrorism and will pursue anyone who supports and funds terrorist activities. To suggest otherwise is a slur. In keeping with its biased agenda, ITV chose to undertake covert filming when they could have applied for and received a journalistic visa, like many of their counterparts.”

  The full documentary, Exposure: Saudi Arabia Uncovered, can be viewed here.

  

  

  

  

  

• Foreigners Dumped More Japanese Stocks This Week Than Ever Before

  USDJPY just had its best week in 2 months, funding bullish momentum and carry trades around the world in the midst of dismal economic data everywhere and tumbling earnings expectations. This "bullish" Yen strength, however, amid China's biggest weekly devaluation in almost 3 months, was ironically driven by drastic investment outflows – record sales of Japanese stocks by foreigners (sell JPY), and record purchases of foreign bonds by Japanese investors (sell JPY). Sooner, rather than later, it is obvious that the investment outflows will dominate the carry trades (see Thursday and Friday) and Kuroda and Abe will have a major problem.

  Yen was dumped all week…

  

   

  Which provided just enough juice for carry trades to lift Japanese stocks (despite the weakness in data and China's biggest weekly Yuan devaluation in almost 3 months)

  

  But notice that the last two days have seen Japanese stocks decouple from USDJPY, perhaps the first glimpse of the investment outflows overwhelming any casino-based carry trades flows.

  And this is why… Foreigners sold a record amount of Japanese stocks last week… (implicitly meansing Yen was sold)

  

   

  And Japanese investors fled the insanity of record low yields in JGBs, buying a record amount of foreign bonds last week (implicitly selling Yen again)…

  

   

  So the Yen weakness – which was so bullishly supportive of global equity markets via carry – was in fact a signal of massive investor anxiety fleeing the sinking ship. Peter Pan-ic indeed.

  Abe and Kuroda will soon face a major problem as a weaker Yen will signal the exact opposite trade that has been so active since 2012 – weakness means weak Japanese economy means sell Japanese assets.. and we will soon see capital controls in the world's largest debtor nation.

  And remember – the devaluation of The Yen has done nothing – NOTHING – to improve exports for Japan…

  

   

  “The tailwind from the weak yen has gone. We can’t help but hold a pessimistic view on the outlook for exports,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo, said before the figures were released. “Domestic demand won’t be dependable at all, and the same goes for exports. I can’t deny the possibility of another economic contraction this quarter.”

  

  

  

  

  

• Easter Weekend Reading: Bears Battered But The Buyback Bounce Is Over

  Submitted by Lance Roberts via RealInvestmentAdvice.com,

  At the beginning of this month, I discussed the monthly statistics for March. To wit:

  “It is often the case that the month following a negative return month will post a positive return as markets bounce from oversold conditions. However, as shown below, this is not always the case.

   

  The chart below shows both February and March returns going back to 1957. During that period, the month of March has posted gains following a February loss 15 times, and losses following a February decline 13 times. Again, at 53.6%, the odds aren’t much better than a coin toss at best.”

  

  One interesting note about the chart above is the sharp increase in monthly market volatility since the turn of the century as computers, online-trading, and algorithms took over the markets. Also, QE programs accelerated returns during the post-financial crisis period which has positively skewed the statistical analysis.

  While the month is not over as of yet, the current 5.37% advance is within the context of previous market rallies since 1997.

  

  With the majority of short-covering appearing to be complete, and volume on a steady decline, we may have seen a bulk of the reflexive bull rally already. As noted by Dana Lyons earlier today:

  Always useful to observe behavior on days like yest: e.g. Rydex traders covered signif % of shorts;bear assets not low, but lowest since 2/1

  — Dana Lyons (@JLyonsFundMgmt) March 24, 2016

   

  With April wrapping up the seasonally strong period of the year, the seasonal adjustment boost to economic data coming to an end, and earnings growth remaining elusive – the summer months could prove to be problematic. For now, we will have to wait and see what develops.

  With that, I just want to wish you all a very happy, safe and joyful Easter weekend.

  ---

  CENTRAL BANKING

  • How To Rob A Central Bank by Bloomberg
  • New Rules For The Monetary Game by Raghuram Rajan via Project Syndicate
  • Fed Funds Fanaticism Will Keep Failing by Louis Woodhill via RCM
  • Central Banks Are Doing The Unthinkable by Mehreen Kahn via The Telegraph
  • Why Janet Yellen Is Toast by Pater Tenebrarum via Acting-Man
  • The Biggest Short by Robert Gore via The Burning Platform

  ---

  MARKETS

  • April Will Decide Markets Fate by Avi Gilburt via MarketWatch
  • Here’s Why Nobody Believes This Rally by Tyler Durden via ZeroHedge
  • Dividend Cut List Continues To Grow by Ironman via Political Calculations
  • It’s Time – The Rally Is Finished by Macroman 
  • 2016-2018 Looking A Lot Like 2007-08 by Doug Kass via Real Clear Markets
  • Profits Gap Is A Warning To Investors by Alex Dumortier via Motley Fool
  • Odey: “No Longer A Market But A Battlefield” by Julia LaRoche via BI
  • Clark: The Nikkei Leads The Bust In The S&P 500 by Tyler Durden via Zerohedge

  ---

  OIL

  • Saudis Won’t Let Oil Stay Above $40 by Panos Mourdoukoutas via Forbes
  • How Bad Will Losses To Banks & Investors Be? by Yves Smith via Naked Capitalism
  • Why Oil Prices Are About To Plunge by Tyler Durden via ZeroHedge
  • Don’t Be Fooled By Spike In Oil Prices by Matt Egan via CNN Money

  ---

  OTHER GOOD READS

  • Americas’s Retirement Crisis Getting Worse by Philip Moeller via Money
  • Why A 100% Stock Portfolio Could Hurt You by John Coumarianos via MarketWatch
  • Market Remains Obscenely Overvalued by John Hussman via Hussman Funds
  • Yellen – Armed, Dangerous & Lost by David Stockman via Contra Corner
  • Mind The Gap by Salil Mehta of Statistical Ideas
  • It’s Hard Being A Bear by Joe Calhoun via Alhambra Partners
  • Bollinger Band Squeeze Signaling A Change? by Steve Deppe via SeeItMarket
  • 3 Critical Things To Know Before Investing by Capitalist Exploits via ValueWalk
  • The Wealth Effect Could Shift Into Reverse by Jesse Felder via The Felder Report
  • Stock Rally Getting Too Complacent via Dana Lyons via Tumblr

  ---

  “Successful preservation of capital must overcome the handicaps of socialistic governments, supposedly to help the masses.” – Gerald Loeb

  

  

  

  

  

• Deutsche Bank's Dire Warning On Global Trade: "The Currency War Is Futile"

  “It’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing as they should.”

  That’s from WTO chief economist Robert Koopman, and it’s a quote we’ve used on a number of occasions. Koopman is referring to the fact that for several years in a row, the rate of growth in global trade has lagged GDP growth. That’s a problem for two reasons: 1) GDP growth is hardly robust as it is, and 2) before the recent downturn, the last time trade growth underperformed the rate of economic expansion was two decades ago.

  As WSJ noted last autumn, trade growth has averaged just 3% per year. That’s half of the 1983-2008 average.

  “It’s fairly obvious that we reached peak trade in 2007,” Scott Miller, trade expert at the Center for Strategic and International Studies, a Washington, D.C., think tank told the Journal.

  Since then, the evidence has continued to pile up that global trade has flatlined. Freight volume in the US fell for the first time in three years in November, while monumental declines for Class 8 truck sales vividly demonstrate the extent to which commerce is simply grinding to a halt across the US economy. As for global trade, well, the Baltic Dry speaks for itself.

  

  “It is worse than in 2008. The oil price [is low] and freight rates are lower. The external conditions are much worse,” Maersk CEO Nils Andersen said, just last month. Maersk Line – the company’s golden goose and the world’s largest container operator – racked up $182 million in red ink last quarter alone.

  In this environment the “answer” has been competitive devaluation – i.e. a currency war. Although this is, in the end anyway, a zero sum game, until recently there was still some hope that key EMs could rely on devlaued currencies to help cushion their current accounts from the slowdown and restore some semblance of balance and competitiveness.

  However, it would appear that, as outlined above, the link between output and trade growth might have been severed sometime in the post-crisis world. If that’s the case, the FX wars may be largely futile and what looks like an undervalued currency might have much, much further to fall – or could simply decline in virtual perpetuity. That’s a rather disconcerting proposition to say the least. Especially for EM.

  Below, find excerpts from a new note out of Deutsche Bank where FX strategist Gautam Kalani believes the fundamental relationships officials all take for granted and use to justify the whole “devalue our way to propsperity” line may no longer hold. 

  *  *  *

  From Deutsche Bank

  1) Is the currency war futile? It looks increasingly so.

  The fundamental currency-current account relationship is as follows: large currency undervaluation current account improvement currency appreciation. The first link describes the ‘currency war’ argument, whereby a weaker currency leads to an exports pickup and thus a boost to growth. The second link underlines how current account improvement in response to a large undervaluation is an important channel through which large undervaluations can trigger FX appreciation.

  There is a concern that this competitive devaluations channel (the first link) may have broken down (to a large extent) because of the collapse in global trade. Global growth today is generating much less trade growth than in the past (chart below). As a result, currency adjustment is not enough to spur growth significantly because global trade is increasingly less important to the overall makeup of GDP. This raises the possibility that the currency war is largely futile, as currency depreciation does not give much of a boost to exports/growth, and certainly much less impetus than in the past.

  

  2) What is the implication of a futile currency war for EM FX? Beware of going long currencies purely on the basis of fundamental undervaluation.

  Focusing on EM, lingering growth concerns further increase the perceived need for currency depreciation. However, since currency depreciation does not translate easily into exports improvement, more currency adjustment is probably required than in the past to obtain the same growth/current account impetus; currencies must be more undervalued before substantially improving the current account. In sum, a significant undervaluation of an EM currency may not be sufficient to drive appreciation via the current account channel; rather, even more currency adjustment may be required for some undervalued currencies.

  Current accounts, especially in LatAm but also in high-yielding EMEA, still reflect excessive domestic absorption. Improvements have been limited despite large scale FX depreciation. Further, what current account improvement has taken place has been mainly on account of import compression rather than exports – perhaps FX weakness has played some role in this as imports become more expensive with a weaker currency, but a majority of it reflects demand slowdown in EM. Therefore, for currencies running large current account deficits, more FX adjustment may be on the cards before undervaluations start providing material support.

  

  3) Which currencies to be wary of going long purely on the basis of fundamental undervaluation? In EMEA, ZAR stands out as an example.

  If global trade growth has collapsed and the currency war is futile, a currency that is heavily undervalued on a fundamental model like BEER or PPP could easily become more undervalued. In this context, the FEER model, which estimates misalignments based purely on the distance of the cyclically- adjusted current account balance from its long-term average, could provide an appropriate warning signal. That is, one should be wary about long a currency on the basis of BEER undervaluation if it is also showing FEER overvaluation, as FEER overvaluation signals that the current account balance is still below its long-term average and therefore has not adjusted by ‘enough’.

  *   *   *

  We’ve said it before and we’ll say it again: central banks better figure out how to print trade, and fast.

  

  

  

  

  

• Trump Aide "Spills The Beans" On Heidi Cruz As Media Goes Crazy Over #CruzSexScandal

  The “wife” feud, which initially many though was merely a sideshow between Donal Trump and Ted Cruz, has taken a quick turn for the ugly and is escalating dramatically with every passing day, and now that even the National Enquirer has entered the fray, has rapidly devolved to nothing less than the surreal twilight zone.

  For those who need a primer of what is rapidly becoming the biggest “issue” in the presidential race, here is a reminder, courtesy of our post from last night “Tough Guy Ted Warns “Sniveling Coward” Trump: “Leave My Wife Alone“:

  • Phase 1: Cruz Reps “Cross The Line”, when a “SuperPAC” run by a Cruz supporter launched a Trump ad campaign showcasing a naked posing Melania Trump
  • Phase 2: Trumps Warns Cruz: “Lyin’ Ted Cruz just used a picture of Melania from a G.Q. shoot in his ad. Be careful, Lyin’ Ted, or I will spill the beans on your wife!”
  • Phase 3: Cruz firez back, warning Trump: Don’t Do The Same Thing To Me That [My Reps] Just Did To You (Or Else!).
  • Phase 4: Trump Goes There, retweeting an image “comparing” Heidi Cruz and Melania Trump
  • Phase 5: Cruz Goes Full Rambo, says  ‘Donald, you’re a sniveling coward and leave Heidi alone.’

  Or, as we summed up, “a Cruz fan uses naked images of Trump’s wife to disparage him to saintly ‘Utah-ans’; Trump pissed; Cruz warns Trump not to reciprocate; Trump shows ugly picture of Cruz’s wife; Cruz unleashes inner Hulk as Trump dares to do what Cruz reps did to him.”

  That was just the last few days.

  And then the tabloids jumped on board.

  Overnight, Trump-linked National Enquirer, alleged that the Texas senator is “hiding five different mistresses.” According to its source, identified as a “Washington insider,” “private detectives are digging into at least five affairs Ted Cruz supposedly had,” and “the leaked details are an attempt to destroy what’s left of his White House campaign.” The supposed affairs are detailed in the Enquirer’s most recent print issue.

  National Enquirer: Ted Cruz had 5 affairs – Idk if true (but they did break the Tiger Woods affairs). pic.twitter.com/Olof2tPJA8

  — Secular Talk (@KyleKulinski) March 25, 2016

  Though unconfirmed, the rumor sparked chatter across social media Friday with the hashtag #CruzSexScandal, with reactions, as expected, ranging from one end of the spectrum to the other. 

  

  Considering the source, we doubt there is much veracity to the alleged “Cruz sex scandal”, although the tabloid has had its share of “broken” news stores in the past.

  As was to be expected, Cruz immediately denounced the article as “garbage, complete and utter lies” and accused his opponent Donald Trump of being the source of the story as Reuters reports.

  “It’s tabloid smear, and it is a smear that has come from Donald Trump and his henchmen,” a clearly perturbed Cruz told reporters at a press conference in Wisconsin, as the battle for the Republican presidential nomination reached new levels of personal rancor.

  Trump issued a statement saying he was not responsible for the article.

  “I have nothing to do with the National Enquirer and unlike Lyin’ Ted Cruz I do not surround myself with political hacks and henchman and then pretend total innocence,” Trump said in the statement. “Ted Cruz’s problem with the National Enquirer is his and his alone, and while they were right about O.J. Simpson, John Edwards, and many others, I certainly hope they are not right about Lyin’ Ted Cruz.”

  In other words, just as Cruz had “nothing” to do with the first naked photo of Melania that started off this latest scandal, so Trump had “nothing” to do with the Enquirer article.

  Alas, the damage for Cruz may already have been done: the article exploded on Twitter overnight on Thursday. By Friday morning #CruzSexScandal was a worldwide trending topic on Twitter.

  And while Trump has distanced himself from the Enquirer article, very much the same way Cruz distanced himself from the original attack ad, an aide to Donald Trump on Friday did fulfil the businessman’s threat to “spill the beans” on Republican presidential rival Ted Cruz’s wife, Heidi.

  As The Hill first reported, Trump spokeswoman Katrina Pierson rattled off a list of attacks three days after Trump first made the threat. 

  “Spilling the beans is quite simple when it comes to Heidi Cruz,” Pierson said in an interview with MSNBC’s Steve Kornacki. 

  “She is a Bush operative; she worked for the architect of NAFTA, which has killed millions of jobs in this country; she was a member on the Council on Foreign Relations who — in Sen. Cruz’s own words, called a nest of snakes that seeks to undermine national sovereignty; and she’s been working for Goldman Sachs, the same global bank that Ted Cruz left off of his financial disclosure,” Pierson said. 

  “Her entire career has been spent working against everything Ted Cruz says that he stands for,” she added. 

  Cruz spokeswoman Alice Stewart responded to the remarks in a statement to The Hill, saying, “There’s no low the Trump campaign won’t go.”

  Earlier in the MSNBC interview, Pierson said “this isn’t about Heidi Cruz, this is about Melania Trump. Melania Trump was the one that was attacked.”

  Incidentally, she is right, even though that means that this most hypnotic scandal in the republican presidential primary race – and perhaps any US presidential race yet – is nowhere close to over as neither candidate can possibly concede defeat on a topic that is “near and dear” to the heart as one’s wife.

  

  

  

  

• Is ISIS Faithful To Islam?

  Submitted by Patrick Buchanan via Buchanan.org,

  “We are not at war with Islam,” said John Kasich after the Brussels massacre, “We’re at war with radical Islam.”

  Kasich’s point raises a question: Does the Islamic faith in any way sanction or condone what those suicide bombers did?

  For surely the brothers and their accomplice who ignited the bombs in the airport and set off the explosion on the subway did not do so believing they were blasting themselves to hell for all eternity.

  One has to assume they hoped to be martyrs to their faith if they slaughtered infidels to terrify and expel such as these from the Islamic world and advance the coming of the caliphate of which the Prophet preached.

  And where might they have gotten such ideas?

  Kasich’s word, radical, comes from the Latin “radix,” or root.

  And if one returns to the roots of Islam, to the Quran, does one find condemnation of what the brothers did — or justification?

  Andrew McCarthy was the prosecutor of the “Blind Sheikh” whose terrorist cell tried to bring down a World Trade Center tower in 1993, and plotted bombings in the Holland and Lincoln tunnels.

  The U.S. government depicted the sheikh as a wanton killer who distorted the teachings of his faith.

  Yet, McCarthy discovered that Sheikh Omar Abdel Rahman was no imposter-imam, but “a globally renowned scholar — a doctor of Islamic jurisprudence who graduated from al-Azhar University in Cairo, the seat of Sunni Islamic learning for over a millennium.”

  Seeking to expose the sheikh as a fraud who had led his gullible followers into terrorism, against the tenets of their faith, McCarthy discovered that “Abdel Rahman was not lying about Islam.”

  “When he said the scriptures command that Muslims strike terror into the hearts of Islam’s enemies, the scriptures backed him up. When he said Allah enjoined all Muslims to wage jihad until Islamic law was established throughout the world, the scriptures backed him up.”

  “[T]he Blind Sheikh’s summons to Islam was rooted in a coherent interpretation of Islamic doctrine. He was not perverting Islam,” writes McCarthy in the Hillsdale College letter Imprimis. McCarthy goes on:

  “Islam is not a religion of peace. … Verses such as ‘Fight those who believe not in Allah,’ and ‘Fight and slay the pagans wherever ye find them, and seize them, beleaguer them, and lie in wait for them in every stratagem of war’ are not peaceful injunctions….”

  In its formative first century, Islam conquered the Middle and Near East, North Africa and Spain with sword and slaughter, not persuasion and conversion.

  Undeniably, there are millions of Muslims in America who love this country and have served it in every walk of life, from cops, firemen and soldiers, to doctors, scholars and clergy.

  Yet when “moderate, peaceful Muslims” were called to testify as defense witnesses, says McCarthy, they could not contradict the Blind Sheikh’s claim that he had correctly interpreted the Quran.

  The questions that arise are crucial.

  When we call Islam a “religion of peace,” are we projecting our own hopes? Are we deceiving ourselves? Are the Muslims we respect, admire and like, as friends and patriots, assimilated and “Americanized” Muslims who have drifted away from, set aside, or rejected many core beliefs of the Quran and root teachings of their own faith?

  Are they simply secularized Muslims?

  When the Afghan regime we installed sought to cut off the head of a Christian convert, was that un-Islamic? Or does Islam teach that this is the way to deal with apostates?

  Is the hate spewing forth from the Ayatollah toward Americans and Jews un-Islamic? Is the Saudis’ cutting off of heads and hands of adulterers and thieves and suppressing of women un-Islamic?

  Or is that what the Quran actually teaches?

  Have the Islamists of al-Shabab in Somalia, Boko Haram in Nigeria, Hezbollah in Lebanon, al-Qaida and ISIS in Syria and Iraq — who daily die fighting in the name of Islam — misread their sacred texts?

  Are they all heretics who fail to understand the peaceful and loving character of their Islamic faith?

  Or is the West deluding itself? Is it possible we are the ones misreading the sacred books of Islam and what the triumph of Islam would mean for our civilization — because we lack the courage to face the truth and do what is necessary to avoid our fate?

  Islam is rising again. Of its 1.6 billion adherents worldwide, many are returning to the roots of their faith, seeking to live their lives as commanded by the Prophet, the Quran and Sharia.

  Western survival would seem to dictate a halt to all immigration from lands where this deadly virus we call “radical Islam” — with which Kasich concedes we are at war — is rampant, just as we would halt immigration from lands where the bubonic plague was rampant.

  That would surely contradict the cherished beliefs of Western liberals.

  But, then, as James Burnham reminded us, “Liberalism is the ideology of Western suicide.”

  

  

  

  

  

• "There Is No Word To Describe This" – The Energy Forward P/E Multipe Is Now Off The Charts

  Back in January 2015, when we looked at the utterly disconnected fundamentals of the energy sector, we were stunned to note that the forward 12-month P/E for the Energy sector has risen above 22.4, the first time it had done so since April 8, 2002. On that date, the closing price of the Energy sector was 225.15 and the forward 12-month EPS estimate was $10.05.

  Our amazement was contained in the following summary: “using the S&P Energy Sector Index data, the sector’s forward multiple is now an absolutely ridiculous, mindblowing 23x.“

  This was 14 months ago. Where do we stand now?

  The snapshot answer comes courtesy of the latest Factset weekly earnings insight, according to which as of this moment, the forward P/E of the Energy sector is no longer “an absolutely ridiculous and mindblowing 23x“…. it is, in fact, more than double that at 58.7x, which also happens to be more than four times higher than the 15 year average.

  There is no longer a word to describe the lunacy where the forward P/E multiple was literally “off the chart” until the Y-axis was doubled.

  

   

  Where it gets even more surreal is when looking at the forward energy sector P/E (as defined by Bloomberg) charted over time. Yes, we laughed long and hard.

  

   

  What is beyond strange is that while forward earnings have imploded in just the past three months, prices of energy companies have actually gone up as the next Factset chart shows! In other words, the market’s discounting mechanism is not onlyl broke but is now going in reverse, where the worse the projected earnings, the better for stock prices.

  

   

  However, this type of disconnect – especially when it is as glaring as this – never lasts.

  In that vein, one year ago, when oil had first crashed hard and when the S&P energy sector was trading at 550, we calculated that “Either Oil Soars Back To $88, Or Energy Stocks Have To Tumble By Over 40%” Energy stocks indeed tumbled, and at one point the drop was nearly 40% as predicted, but have since jumped higher on more artificial central bank manipulation of prices.

  

   

  Unfortunately for those buying, this rebound won’t last because while central banks may have goosed asset prices, they have failed to stimulate the price of the one all important commodity, the one which flows through to earnings: oil.

  Which leads us to a redo of the simple calculation we did one year ago: what does the current disconnect between the price of oil, energy stock prices and valuations mean? The answer, like last January, is simple: either the long-term PE multiple is now null and void, and the “New Normal” forward PE of not only 20x+, but almost 60x, is “realistic”, which of course is ridiculous, or there are two alternatives:

  • Energy sector earnings have to surge by 275%, implying oil prices have to more than triple to $148, for the forward P/E multiple to return to normal, or
  • The Energy sector price has to crash from 461 today to 123 where it would trade down to its historic forward 14x P/E multiple, suggesting a price drop of over 70%!

  This is shown visually on the table below:

  

  We’ll let the algos decide which option works.

   

  

  

  

  

  

• Who's Anti-American?

  Submitted by Bill Bonner of Bonner & Partners (annotated by Acting-Man/com's Pater Tenebrarum),

  Who’s Anti-American?

  Maryland!
  The Old Line bugle, fife, and drum,
  Maryland!
  She is not dead, nor deaf, nor dumb.
  Huzza! She spurns the Northern scum!
  She breathes! She burns! She’ll come! She’ll come!
  Maryland! My Maryland!

  – Maryland’s State Song

   

  

  J’accuse…

  Guilty as Charged

  Yesterday, one dear reader wrote in to say we were “cynical” and “anti-American.”

  Today, we rise to defend our reputation… such as it is. Cynical? Nah… We’d need a big dose of positive thinking and earnest optimism to be cynical. According to the Oxford English Dictionary, people who are cynical are “suspicious,” “doubting,” and “skeptical.”

  We’re way beyond that. We’re pretty sure that the system is rigged… and rotten. Elections are exercises in solemn deceit. And the Fed’s management of the economy is a mixture of delusion and self-serving scam. We don’t have much doubt about it. That’s just the way it is.

  As for “anti-American,” our accuser needs to clarify the allegation. Is he talking about the Deep State? The empire? Or is he talking about the 50 sovereign states… and the Old Republic? Or the language? The culture? Reality TV… the Kardashians… NASCAR racing… Old Faithful and the mighty Mississip’?

  No one can be anti-America; America is too many things to too many people. But if he’s talking about the federales who control half our national output… tie us in knots with Obamacare, National Labor Relations Board rules, and all their other dopey programs… and stomp around the world trying to justify their trillion-dollars-a-year security budget…

  …if he’s talking about Hillary, Bernie, The Donald, the Bushes, et al… and all the 535 members of the U.S. Congress… and the 2,783,000 zombies on the U.S. payroll…

  …if he’s talking about the connivers who pump out phony credit… stifle real savings… sabotage real wealth creation… and shift trillions of dollars from the people who earned it to the cronies favored by the Establishment…

  If he’s talking about THAT America, he’s right. We’re agin’ it. Guilty as charged. And we’re not alone. Apparently, about half the country is “anti-American.” Here’s our friend and Black Swan author Nassim Nicholas Taleb explaining The Donald phenomenon:

  The “establishment” composed of journos, BS-vending talking heads with well-formulated verbs, bureaucrato-cronies, lobbyists in training, New Yorker-reading semi-intellectuals, image-conscious empty suits, Washington rent seekers and other “well-thinking” members of the vocal elites are not getting the point about what is happening and the sterility of their arguments. People are not voting for Trump (or Sanders). People are just voting, finally, to destroy the establishment.

   

  

  Nassim Taleb explains the Donald and the Bern – and he’s right.

   

  The Failure of NIRP

  Yesterday, stocks took a little rest. The Dow went approximately nowhere. At first glance, things don’t look bad. U.S. crude oil is back over $40 a barrel. And U.S. stocks are back in the black for the year.

  But China is on a debt binge that is bound to end in a blowup. And U.S. corporate earnings are falling, leaving only borrowing and share buybacks to hold up prices.

  Frackers are still operating at a loss. Auto and student debt are going into default. Global trade – as measured by freight indexes – is still sinking.

  And Japan – the pacesetter in the race to the bottom – is proving that negative interest rates have an effect exactly opposite to what the meddlers intended. NIRP (negative-interest-rate policy) is supposed to spur lending and spending. In Japan, it has done neither – the yen is strengthening as the economy weakens.

   

  

  Total NIRP fail in Nippon – click to enlarge.

   

  NIRP was always an “experimental” policy. Central banks in Sweden, Denmark, Switzerland, the euro zone, and Japan have all pushed their target lending rates into negative territory. All that has been learned so far (apart from that this doesn’t work) is that sales of home safes go up, as people take out cash and keep it at home.

  Negative interest rates amount to a tax on savings. You pay to save instead of being paid to save. Whether the people hoarding cash are worried about the prospect of paying a negative interest rate tax on their bank deposits, or anticipating some more awful crisis…we don’t know.

  More to come on QE and negative rates and why they really are old-fashioned “money printing” after all –  tomorrow. For now, let us return to the “anti-American” allegation.

   

  Anti-American… in Maryland

  We’re fond of the place we grew up – the Maryland Tidewater. At least, we are fond of it as it was when we grew up in it. But it has changed. Last week, the Maryland State Senate voted to change the words of the state song, bringing it more in line with the spirit of the Empire.

   

  

  Sheet music of the old song – the one that still said “northern scum”. Huzzah!

   

  The song recalls the period – in the early 1860s – in which Maryland was attacked… by the United States of America. “Northern scum,” is how our state song describes its historic enemies. Maryland was a “border” state, not sure how it felt about the secession movement.

  Then the Yankees invaded, cutting off civilized discussion on the matter. They arrested Baltimore’s mayor, the city council, the police commissioner, and the entire board of police. All were held without charges. Habeas corpus was suspended.

  Then when the Supreme Court ruled that the feds had no power to ignore constitutional protections, Abe Lincoln simply ignored the Supreme Court. He continued to hold his prisoners in the “American Bastille” – Fort McHenry. One of the prisoners – held without charges – was the grandson of Francis Scott Key, who had written the American national anthem.

   

  

  Francis Scott Key – his grandson found out who the “real Lincoln” was.

   

  He must have seen the black humor of his situation. In 1814, during Britain’s attack on Fort McHenry, his grandfather had wondered whether the flag still flew “o’er the land of the free and the home of the brave.”

  In 1861, Lincoln gave the answer: No.

   

  

  

  

  

  

• US Kills ISIS Second-In-Command For 3rd Time In 2 Years

  While Russia and Iran are busy liberating whole cities from ISIS in Syria, the US is sticking with the “one raid at a time” approach and it apparently paid dividends on Thursday morning when Abu Alaa Afri, also known as Abd al-Rahman Mustafa al-Qaduli and Haji Imam was killed in Syria.

  US Defense Secretary Ash Carter and Joint Chiefs Chairman Gen. Joe Dunford are set to make the announcement this morning at a press conference and the Pentagon is thrilled. Al-Qaduli had a $7 million bounty on his head, higher than Omar the Chechen (who was killed earlier this month) and Abu Mohammed al-Adnani who is arguably more influential than Bakr himself.

  A physics teacher by trade, Mosul-born al-Qaduli was ISIS before ISIS was ISIS. He served as a deputy to Abu Musab al-Zarqawi (Islamic State’s “godfather”) and was jailed by the US in Iraq in 2012. Upon his release, he joined ISIS and reportedly was Bin Laden’s choice to lead the group after Abu Omar al-Baghdadi and Abu Ayyub al-Masri were killed in 2010. He was, however, passed over for Abu Bakr al-Baghdadi, whose family can be loosely traced to the Prophet.

  

  Al-Qaduli is no stranger to being dead.

  He died last April for instance, in a strike on a mosque in Iraq. “Al-Qaduli was one of several people killed in a strike that hit a mosque where Islamic State leaders were meeting,” WSJ reported at the time. He was also killed in September of 2014. Here’s the airstrike that killed him last year:

  In any event, if al-Qaduli is indeed no more, it means that ISIS has lost two of its top brass in the space of just three weeks (al-Shishani being the other).

  And if US SpecOps did indeed kill him, it just goes to show that the CIA has indeed served a burn notice on the entire chain of command. After all, Russia and Hezbollah are pushing uncomfortably close to Deir ez-Zor and Raqqa and dead men, as they say, tell no tales.

  

  

  

  

  

  

  

  

  

  

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• Diversify Into Gold As An “Insurance Policy” Against Geopolitical Risk

  “Investors could be forgiven for heading for the hills given the tumultuous start to 2016,”  so writes Andrew Oxlade in The Telegraph today who advises investors to diversify into gold as an “insurance policy”:

  We have long been advocates of exposure to gold as an insurance policy. This was demonstrated once again in the recent sell-off when the price of bullion surged from $1,061 (£762) an ounce on New Year’s Day to $1,246 (£895) by early February. In times of fear, gold is in demand. The price also rises when inflation becomes a danger.

  Deflation remains the bigger threat for now, which is partly why gold has been a poor investment in recent years, but the money printing excesses of central banks could yet unleash inflation. In the meantime, the gold price offers some protection during repeat episodes of buckling confidence.

  
  Gold in GBP – 5 Years

  The Telegraph, like GoldCore, had warned of such turbulence at the start of the year. John Ficenec, editor of the Questor column, warned of the real risk of volatility and falls in stock markets.

  We believe that the tragic events in Brussels show the continued very high degree of geopolitical risk and the need for an insurance policy.

  Further attacks are quite possible, including in the U.S., and this should support gold.

  Geopolitical risk is frequently underestimated and it would be unwise to discount the risk of a September 11 style attack in the coming months. Intelligence agencies and ISIS themselves are warning of such attacks and investors need to be diversified to hedge this growing risk.

  It gives us no pleasure to be the bearer of this bad news but it is important that the reality of the real risks of today are considered in order to protect and grow wealth in these uncertain times.

  Read Telegraph article here

   

  
  Market Performance This Week (Finviz)

   

  Gold is -2.6% and silver -3.4% this week and markets are in a sea of red as they react to the terrorist attacks in Brussels (See Table).

   

  Gold Prices (LBMA)

  24 Mar: USD 1,216.45, EUR 1,088.75 and GBP 861.89 per ounce
  23 Mar: USD 1,232.20, EUR 1,101.76 and GBP 870.03 per ounce
  22 Mar: USD 1,251.80, EUR 1,117.35 and GBP 876.96 per ounce
  21 Mar: USD 1,244.25, EUR 1,104.47 and GBP 863.60 per ounce
  18 Mar: USD 1,254.50, EUR 1,112.93 and GBP 868.78 per ounce

  Silver Prices (LBMA)

  24 Mar: USD 15.28, EUR 13.70 and GBP 10.82 per ounce
  23 Mar: USD 15.58, EUR 13.92 and GBP 10.99 per ounce
  22 Mar: USD 15.89, EUR 14.16 and GBP 11.12 per ounce
  21 Mar: USD 15.81, EUR 14.02 and GBP 10.99 per ounce
  18 Mar: USD 15.94, EUR 14.13 and GBP 11.02 per ounce

  Gold News and Commentary

  Spot gold targets biggest weekly loss in four months (Reuters)

  Stock Slide Deepens in Asia as Oil Slumps Amid Resurgent Dollar (Bloomberg)

  Gold Falls to Lowest in a Month as Dollar Advance Saps Demand (Bloomberg)

  World’s richest Hindu temple wants gold back rather than cash (Reuters)

  China’s vice finance minister denies any secret US-China exchange rate deal (Reuters)

  Gold Investors Unfazed By Fading Rally – Chart (Bloomberg)

  Silver Attractive as Gold-Silver Ratio at 2008 Financial Crisis Level – Video (Bloomberg)

  Technician: Gold Heading Toward $1,450—Here’s Why (CNBC)

  Bonds Best-Bid But Bullion Blasted As Belgium-Bombing-Bounce Is Battered (ZH)

  Stocks vs. Gold – Money and Investment (Future Money Trends)

  Read More Here

   

  

  ‘7 Real Risks To Your Gold Ownership’ – Must Read Gold Guide Here

  Please share our website with friends, family and colleagues who you think may benefit from it.

  Thank you

  

  

  

  

• BaNK LiVeS MaTTeR…

  

  

  

  

  

• The Threat Continues: Yuan Weakens For 6th Straight Day – Longest Losing Streak In 2 Years

  PBOC fixed the Yuan at its weakest in 3 weeks, pushing the devaluation streak to its longest since early January. However, Offshore Yuan has now dropped over 1.1% against the USD, extending losses for the 6th straight day to 3-week lows. This is the longest streak of weakness in the offshore Yuan since April 2014.

   

  

   

  It appears EUR and JPY took enough pain so the basket is revrting to the USD again…

  

   

  What’s the opposite of passive-aggressive as a clear message is being sent to The Fed – tighten and we unleash the Yuan-weakness-driven turmoil…

  

  

  

  

  

• Refugee Crisis: Using Chaos To Build Power

  Submitted by Alex Newman via TheNewAmerica.com,

  A European Union military force with power to intervene in member states. A new “Marshall Plan” to radically redesign whole regions of the world and impose regional government. A United Nations empowered to manage it all. Christendom under siege. And the end of nationhood as it is understood today. That is where the “refugee crisis” is heading, as the engineered disaster wreaks havoc across Europe and beyond. Despite the appearance of chaos, though, it is all by design, with a series of radical goals in mind.

  While the establishment’s demands on Europe to accept millions of Middle Eastern refugees have been couched in “humanitarian” rhetoric, the real agenda is nothing of the sort. Rather than helping out their fellow human beings, globalist forces actually created the refugee crisis and the suffering behind it. And they are using it to advance multiple, related agendas — primarily globalism and statism. That the crisis is being exploited to undermine Western culture, national sovereignty, and even nationhood itself is now beyond dispute. Top globalists are openly bragging about it.

  “I will ask the governments to cooperate, to recognize that sovereignty is an illusion — that sovereignty is an absolute illusion that has to be put behind us,” declared former Goldman Sachs chairman Peter Sutherland, an ex-member of the Bilderberg Steering Committee who currently “serves” as the UN special representative of the secretary-general for international migration. “The days of hiding behind borders and fences are long gone. We have to work together and cooperate together to make a better world. And that means taking on some of the old shibboleths, taking on some of the old historic memories and images of our own country and recognizing that we’re part of humankind.”

  Billionaire globalist and open-borders zealot George Soros, in denouncing European officials trying to control the human tsunami coming across their borders, similarly declared, “Our plan treats the protection of refugees as the objective and national borders as the obstacle.”

  In essence, then, the engineered refugee crisis was created and is being used, at least in part, to advance what globalists often refer to in public as “global governance” and their “new world order.” As part of that, even the idea of nationhood is under fire — everybody is just part of “humankind,” as Sutherland put it. And as such, people must be governed by the “Parliament of Humanity,” as UN Secretary-General Ban Ki-moon referred to the dictators club known as the UN last year.

  Already, the UN manages a global refugee program via the UN High Commissioner for Refugees (UNHCR). This agency decides which refugees will be settled where, including those destined to be settled in the United States at U.S. taxpayer expense. Further clues about the agenda can be found in the fact that the UN refugee outfit was until very recently led by António Guterres, the former president of the powerful global socialist-government-promoting Socialist International, as senior editor William Jasper documented in an October 19, 2015 cover story for this magazine.

  There are several elements to the globalist plot as it relates to the refugee crisis.

  Creating the Refugee Crisis

  To begin with, it is important to understand that the same self-styled humanitarians claiming to be concerned about refugees, while demanding that they be given asylum in the West by the millions, are, in reality, the same people responsible for making their victims into refugees to begin with. As this magazine documented extensively in its October 19 cover story package, the globalist establishment literally unleashed the refugee exodus.

   

  Among other actions to spark the crisis, Western governments and their allies — not to mention the globalist forces behind them, such as the Council on Foreign Relations and other global-government-promoting powerhouses — destroyed multiple Middle Eastern nations via war and chaos. These include Libya, bombed to smithereens by Obama and NATO under the supposed authority of the UN; as well as Syria, destroyed by civil war fueled by the globalist establishment; and of course Iraq, also crushed by Western intervention and globalist-fueled civil war.

   

  Those same globalist forces were also responsible for wreaking havoc in many more nations — such as Yemen, Egypt, Ivory Coast, and Tunisia — through supporting uprisings, revolutions, terror groups, dictatorships, and more.

   

  The predictable response to having one’s nation destroyed, of course, is attempting to leave — particularly if wealthier, freer nations throw down the welcome mat. And that is exactly what has happened and is still happening. Many of the same globalists responsible for creating the chaos and terror that refugees are fleeing from are publicly and loudly opening Europe’s doors to the growing tsunami of displaced victims. Obama and his billionaire supporter Soros, for example, were both instrumental in the UN-authorized war to destroy Libya, which was based on lies, and in fueling the civil war that is destroying what remains of Syria. And both of those figures have been very outspoken in demanding that the West welcome millions of refugees, regardless of the costs or the desires of Western voters.

   

  The question that must be asked is: “Why?” The answers can be found in what has happened and what is happening, and especially in the policy prescriptions allegedly aimed at dealing with the crisis that globalists unleashed. At this point, Europe, Africa, and the Middle East are all in the cross hairs of internationalists, who are exploiting the refugee crisis to build up supranational institutions at the regional and global level to smash national sovereignty and even nationhood, to build up the power of government generally, and to destabilize societies. If left unchecked and unexposed, the refugee crisis will serve as a powerful tool to push the world ever closer to “global governance,” with a great deal of pain and misery along the way.

   

  A New Marshall Plan: Regional Government for the Middle East

  With the refugee situation quickly spiraling out of control across parts of the continent — the mass sexual assaults on New Year’s Eve across Germany and beyond, the implosion of law and order around Calais in France, the widely reported overrunning of Stockholm’s central station by refugee youths, and more — the public is now growing increasingly outraged. Indeed, even the establishment forces responsible for unleashing the chaos are now in some cases denouncing it. The New York Times, an establishment mouthpiece that dutifully promoted the globalist wars that sparked the refugee crisis and the subsequent flooding of the West with the victims of those wars (and many opportunists who joined the exodus), ran an op-ed pointing out that Germany was “on the brink” due to the crisis. Top European political bosses have also been sounding the alarm.

   

  Another senior globalist, Rothschild banking dynasty protégé and billionaire hedge-fund boss Soros, played an instrumental role in encouraging the myriad wars and the subsequent tsunami of refugees into Europe that was sparked by those wars. And now, like other establishment voices, Soros is also pointing out the obvious. The European Union, he said in a recent interview, is “on the verge of collapse” due to the sudden influx of well over a million Islamic refugees last year. Not coincidentally, Soros also has ideas about “solutions.” And not surprisingly, those alleged “solutions” involve more globalism for Europe, Africa, and the Middle East — along with less sovereignty, self-government, and liberty.

   

  In an interview with Bloomberg from the World Economic Forum (WEF) in Davos, Switzerland, the radical anti-national sovereignty statist claimed that Europe needed to finance a new “Marshall Plan” for the regions of the world from which the refugees are fleeing — regions and nations destroyed in large part by the globalist Western establishment figures pushing the new plan. Soros was expressing support for a proposal made earlier by a fellow globalist, German Finance Minister Wolfgang Schäuble. The new Marshall Plan they envision seeks to transfer wealth from struggling European taxpayers to areas of the globe ruined by globalist machinations — but the real agenda goes much deeper, as did the last Marshall Plan after World War II.

   

  “What is most important is for us to invest billions in those regions from which the refugees come to reduce the pressure on the external frontiers of Europe,” Schäuble argued in a panel discussion at the globalist WEF, speaking alongside several European prime ministers who also played a key role in flooding Europe with refugees displaced from the nations they helped destroy. “That will cost Europe much more than we thought.” Of course it will, and taxpayers, already suffering under a crushing burden, will pay for it all. Writing in the Soros-backed “Project Syndicate” propaganda organ in 2014, Schäuble previously called for a global taxation regime in a piece called Why Taxation Must Go Global,one of his many calls for more globalism and statism.

   

  So what would a new “Marshall Plan” for the Middle East and Africa look like? A brief history of the original Marshall Plan might offer some clues. Officially known as the “European Recovery Program,” or ERP, the scheme involved transferring the equivalent of almost $150 billion in today’s dollars from U.S. taxpayers to Western European governments. The ostensible purpose was to help rebuild Europe after World War II. In practice, though, it served as a key tool in the transformation of Western Europe into a statist region dominated by Big Government and supranational institutions, eventually culminating in the subjugation of Europeans under the unaccountable EU super-state. That was the goal all along.

   

  As far back as 1947, then-U.S. Secretary of State George Marshall (CFR) — a key player in handing China to Chairman Mao’s murderous communists, and perhaps mass-murdering dictator Joseph Stalin’s most important ally in the world — called for European “economic cooperation” as a precondition for the desperately needed American aid after the war. “It is already evident that, before the United States government can proceed much further in its efforts to alleviate the situation and help start the European world on its way to recovery, there must be some agreement among the countries of Europe as to the requirements of the situation and the part those countries themselves will take in order to give proper effect to whatever action might be undertaken by this Government,” said Marshall, the man after whom the scheme was named. “The initiative, I think, must come from Europe…. The program should be a joint one, agreed to by a number, if not all European nations.” The Committee of European Economic Cooperation responded with a major report signed by government representatives from across Europe outlining efforts to create a “customs union” that could eventually lead to even further cooperation. U.S. officials were pleased.

   

  Members of Congress even tried to get language in the statement of purpose for the original Marshall Plan bill of 1948 explicitly declaring that it was the policy of the United States to encourage the economic unification and the political federation of Europe. In the end, language calling for the development of economic cooperation was included instead. The next year, the “political federation” amendment was pursued again, with the result being the addition of the sentence: “It is further declared to be the policy of the people of the United States to encourage the unification of Europe.” By 1951, Congress finally came out and said it openly, with a clause included in the 1951 Mutual Security Act stating that its purpose was “to further encourage the economic unification and the political federation of Europe.”

   

  The goals of U.S. government support for European integration were explained in part decades ago, though largely ignored, by top U.S. officials. On September 20, 1966, for example, then-Under Secretary of State George Ball (CFR) testified before Congress on the State Department’s view on forming an “Atlantic Community,” essentially merging the United States with Europe. “I find little evidence of any strong interest among Europeans for any immediate move toward greater political unity with the United States,” he explained. “They fear the overwhelming weight of U.S. power and influence in our common councils…. We believe that so long as Europe remains merely a continent of medium- and small-sized states there are definite limits to the degree of political unity we can achieve across the ocean.” Globalism was the agenda then, just as it is today.

   

  Creating a Middle East Union

  Not coincidentally, the new “Marshall Plan” is being pushed by the same globalist establishment that has been openly advancing the imposition of a “Middle East Union” on the region in recent years. “Just as a warring [European] continent found peace through unity by creating what became the EU, Arabs, Turks, Kurds and other groups in the region could find relative peace in ever closer union,” claimed Mohamed “Ed” Husain, a former caliphate-seeking Islamist and current “adjunct senior fellow for Middle Eastern studies” at the CFR, in a piece published in the Financial Times and on the CFR website in mid-2014. “After all, most of its problems — terrorism, poverty, unemployment, sectarianism, refugee crises, water shortages — require regional answers. No country can solve its problems on its own.” That is, of course, nonsense, but it is standard globalist rhetoric.

   

  Plenty of other globalists have offered similar admissions. It has become fashionable for establishment figures and their hangers-on to compare today’s Middle East with Europe before the EU. Indeed, Richard Haass, the CFR boss and a former leader at the U.S. State Department, writing in Soros’ Project Syndicate, does precisely that. In an incredible admission, Haass explains, without admitting the CFR’s giant role in instigating all of the tragedies he mentions, that the CFR-backed globalist wars of the last decade and a half were crucial in setting the region on fire — the same blaze that now supposedly can only be extinguished by a CFR-inspired “Middle East Union.” The globalist strategy used over and over again goes like this: Create a problem, then exploit and manage the inevitable reaction to push a “solution.”

   

  “The 2003 Iraq war was highly consequential, for it exacerbated Sunni-Shia tensions in one of the region’s most important countries and, as a result, in many of the region’s other divided societies,” Haass wrote. “Regime change in Libya [by Obama, the UN, NATO, and CFR apparatchiks] has created a failing state; lukewarm support for [CFR- and Soros-backed] regime change in Syria has set the stage for prolonged civil war.” And the chaos, bloodshed, and terror will continue, he says, until “a new local order emerges or exhaustion sets in.” In the meantime, globalists should treat the region as a “condition to be managed,” Haass said. How convenient — the CFR sets a fire, and now purports to have the fire extinguisher, promising a raging inferno unless and until everyone submits to the globalist demands, including a new regional “order,” which, as in “new world order,” is globalist-speak for transnational government.

   

  Of course, Husain, Haass, and the CFR are not alone. In 2011, the Islamist president of Turkey at the time, Abdullah Gül, also called for an EU-style regime to rule the Middle East. Speaking in the United Kingdom, Gül claimed “an efficient regional economic cooperation and integration mechanism” was needed for the region. “We all saw the role played by the European Union in facilitating the democratic transition in central and Eastern Europe after the fall of the Berlin Wall,” he claimed. Islamic Turkey is also working to join the EU.

   

  Various Middle Eastern tyrants have echoed the calls for a regional regime, too — the kings of Saudi Arabia and Jordan, for example. As Husain pointed out, the radical Muslim Brotherhood and the terrorist group Hamas are also working to unify the Middle East under one single tyrannical government of gargantuan proportions. With financial backing from the West under a new “Marshall Plan” and the bloodshed fueled by globalist-engineered wars, not to mention EU and UN support, the plot could easily become a reality.

   

  Further Empowering the European Union

  Also being advanced using the refugee crisis is the further empowerment of the EU itself, the regional government created thanks in large part to the original Marshall Plan. Among the various schemes allegedly needed to deal with the immigrant influx is the creation of military outfits — a border and coast-guard force — ostensibly aimed at “protecting Europe’s borders” from the immigration tsunami. The force would also fight “transnational crime and terrorism,” according to an EU outline of the scheme. The plan calls for mandatory biometric ID checks to come or go from the super-state’s territory, so everyone can be checked against Interpol’s databases.

   

  Most alarmingly, perhaps, the EU military force would be able to “intervene” in European nations — even without permission from national authorities, as long as EU bosses claim the situation is “urgent.” In fact, even if the nation “considers that there is no need for additional intervention” from the new EU force, it could still be imposed by Brussels. The force would also have the power to commandeer national governments’ resources, something even the U.S. federal government cannot do to state or local authorities.

   

  At the national level, some European officials were appalled. Creating such a structure “that is independent of member states is shocking,” said Polish Foreign Minister Witold Waszczykowski, noting that nobody even knew who the force would be accountable to. Greek and Swedish officials also spoke out.

   

  Among EU leadership, though, it is par for the course. “Managing Europe’s external borders must be a shared responsibility,” claimed European Commission “First Vice President” Frans Timmermans with the Dutch Labor Party, a Bilderberg summit attendee. Noting that the new force could take over the management of national borders in some circumstances, the globalist official claimed, “It is essential to restore the credibility of our border management system.”

   

  Meanwhile, EU officials and apparatchiks have taken to shrieking whenever a government actually takes serious actions to “restore the credibility” of border management. The howls have been especially pronounced when border checks were re-introduced along some intra-EU borders. When Hungarian authorities tried to stop the tsunami with a fence along the border with Serbia, for instance, eurocrats were fuming. In a letter sent to the government of Hungary, the European Commission — essentially the unelected regime now ruling Europe — blasted the use of troops on the border, complained about criminal sanctions imposed on illegal immigrants who damage the fence, and demanded that refugees stop being denied entry on the grounds that they transitted through a safe country. In short, actually guarding the borders appears to be the last thing on the EU’s agenda, except as an excuse to create a paramilitary force with powers to intervene in member nations.

   

  Also at the top of the EU-empowerment agenda is a new agency in charge of refugees, with the power to resettle refugees in EU members against their will. A number of Eastern European governments have fought back against the plot, but it continues to advance, having already allocated a number of immigrants throughout the bloc. Last year the EU agreed to relocate 40,000, with that number set to balloon even further. (More than a million others are simply staying in nations where they registered without involvement with EU.)

   

  For the UN, even all of that has not been enough. “UNHCR is deeply disappointed that although a majority of member States were in agreement with a wider relocation proposal involving 120,000 people, a final consensus on this could not be reached,” a UNHCR spokesperson said after the EU approved the deal. “Decisive agreement is needed without further delay to address the needs, as is bold action based on solidarity from all member States.” The then- “High Commissioner” himself, former Socialist International boss António Guterres, has also been loudly demanding that the EU usurp all power over asylum and resettlement. In other words, more assaults on sovereignty.

   

  Some Europeans, though, have seen through the scheming and the exploitation of the refugee crisis by the Brussels-based super-state to advance its radical agenda. “Is Western Europe to be a series of democratic nation states that govern themselves, control their borders and trade with each other, or is the supra nationalist agenda of Brussels going to win? That’s the real debate that’s going on,” said EU Parliamentarian and U.K. Independence Party chief Nigel Farage.

  Separately, Hungarian Prime Minister Viktor Orbán has described the orchestrated refugee tsunami as a tool of a “treasonous conspiracy” to destroy nationhood, Western civilization, and Christendom. “Ladies and gentlemen, what we face is nothing less than the challenge of finding ourselves at the gateway to the implementation of a deliberate conceptual project, which could be described as left-wing and which seeks to marginalize the nation states of Europe,” he told his countrymen. “Where this project has failed to overcome Christianity and the identity of the nation state — and the values and responsibility springing from it — in conventional political struggle, it will strive to eliminate it on ethnic grounds.”

   

  Beyond crushing sovereignty, the crisis is also advancing assaults on liberty. Especially useful to the assault on individual freedoms has been the threat of terrorism posed by the influx of millions of Muslims, at least some of whom are and will be radicalized.

   

  ISIS has been boasting that its operatives are among the refugees, and U.S. presidential contender Ben Carson even said it would be “jihadist malpractice” not to send terrorists into the West among the immigrants. He is right, of course, as the Paris attacks last year showed. Now, the jihadists will be used as the justification to wage war on liberty.

   

  Already, as The New American has documented extensively, “Islamic” terror — much of it fomented behind the scenes by globalists and communists — is being used as a pretext to radically expand government. Just last year, EU “police,” known as Europol, announced the creation of a new unit to censor the Internet under the guise of fighting “extremism.” In Britain, authorities are cracking down on homeschoolers and Sunday schools under the guise of rooting out Islamic extremism. Attacks on gun rights, free speech, and more are all advancing under the guise of stopping “Islamic terrorism” and “Islamic extremism.” And as millions of Muslims continue to flood Europe, the totalitarian advances will only accelerate.

  The end game is clear: using the increasingly powerful regional blocs such as the European Union, the African Union, Putin’s Eurasian Union, and the Middle East Union as building blocks to build what globalists such as Soros, Bush, Clinton, Biden, and others often refer to in public as their “New World Order.” In his recent book World Order, globalist operative and former Secretary of State Henry Kissinger laid out the plan. “The contemporary quest for world order [world government] will require a coherent strategy to establish a concept of order [regional government] within the various regions and to relate these regional orders [governments] to one another,” he wrote. State Department documents going back decades outline the same strategy.

  If humanitarianism were truly the motivation, countless experts have pointed out, it would be radically more cost effective, not to mention humane, to help refugees and victims of globalist wars closer to their homes. Literally 25 to 50 times more people could be supported in Lebanon or Jordan than in Europe for the same amount of tax funds. The wars that destroyed Middle Eastern countries and caused the crisis to begin with would never have been launched if the purported “humanitarian concerns” of the establishment were genuine. Instead, the agenda is to advance globalism, pure and simple, and the establishment seems barely interested in concealing it anymore.

  In short, the “refugee crisis” appears to have been engineered in yet another typical example of what legendary French philosopher Frédéric Bastiat described as concocting the antidote and the poison in the same laboratory. Now that the deed is done, politicians and establishment figures are pointing out the obvious while exploiting the inevitable public reaction. Hopefully the people of Europe and the world will be smarter than to fall for the ruse yet again, as the consequences are deadly serious.

  

  

  

  

  

• Tough Guy Ted Warns "Sniveling Coward" Trump: "Leave My Wife Alone"

  This embarrassing episode just goes from farce to farcical-er.

  Phase 1:Cruz Reps "Cross The Line"

  Almost a week ago, we were stunned when we learned that in order to support Ted Cruz and to "attack" Donald Trump, Liz Mair's anti-Trump Make America Awesome super PAC launched a Facebook campaign which in addition to showcasing Mitt Romney's support for Ted Cruz, emphasizing Trump’s past support for pro-choice policies, it also crossed the family line when it showed a GQ modeling photo of Melania Trump posing nude.

   

  

   

  Phase 2: Trumps Warns Cruz…

  Lyin' Ted Cruz just used a picture of Melania from a G.Q. shoot in his ad. Be careful, Lyin' Ted, or I will spill the beans on your wife!

  — Donald J. Trump (@realDonaldTrump) March 23, 2016

  Phase 3: Cruz Warns Trump – Don't Do The Same Thing To Me That [My Reps] Just Did To You (Or Else!)…

  Pic of your wife not from us. Donald, if you try to attack Heidi, you're more of a coward than I thought. #classless https://t.co/0QpKSnjgnE

  — Ted Cruz (@tedcruz) March 23, 2016

  Phase 4: Trump Goes There…

  "@Don_Vito_08: "A picture is worth a thousand words" @realDonaldTrump #LyingTed #NeverCruz @MELANIATRUMP pic.twitter.com/5bvVEwMVF8"

  — Donald J. Trump (@realDonaldTrump) March 24, 2016

  Phase 5: Cruz Goes Full Rambo…

  Ted Cruz: 'Donald, you're a sniveling coward and leave Heidi alone.' pic.twitter.com/0V3Xd8QOGT

  — POLITICO (@politico) March 24, 2016

  So to sum up – 'Cruz' uses naked images of Trump's wife to disparage him to saintly 'Utah-ans'; Trump pissed; Cruz warns Trump not to reciprocate; Trump shows ugly picture of Cruz's wife… Cruz unleashes inner Hulk as Trump dares to do what Cruz reps did to him…

  All we can say is – thank goodness there are no naked picture of Heidi floating around…yet.

  Stay Classy San Diego!

  

  

  

  

• For The Average American, Owning A Home Is Increasingly Unaffordable

  One month ago, in its traditionally cheerful assessment of the US housing market, the NAR’s Larry Yun snuck in an unexpected warning:

  “Home prices ascending near or above double-digit appreciation aren’t healthy – especially considering the fact that household income and wages are barely rising.”

  He did it again just a few days ago:

  “The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers.“

  This is about as close to a warning that the US housing market is back into bubble territory as one can hope to get from the NAR.

  Overnight, we got another confirmation of American runaway – if only for the vast majority of people – home prices, when RealtyTrac released its Q1 2016 Home Affordability Index, which showed that in Q1 2016, 9% of U.S. county housing markets were less affordable than their historically normal levels, up from 2 percent of markets that exceeded historic home affordability levels a year ago.

  

  That may not sound like much but it means that marginal “bubble” conditions of the type the NAR was warning about, have returned.  It means that home buyers need to spend more of their incomes on housing, leaving less money for other purchases.

  But where this home inflation is most evident is in the clear disconnect between home prices which are rising faster than wages in most of the United States, making homeownership increasingly difficult for average Americans. 

  The report found that home price growth exceeded wage growth in nearly two thirds of the nation’s housing markets so far this year, with urban centers like San Francisco and New York City among the least affordable.

  This is what the RealtyTrac report found:

  Annual change in median home prices in Q1 2016 outpaced annual change in average weekly wages in Q3 2015 (the most recent county-level wage data available from BLS) in 276 of the 456 counties analyzed for the report (61 percent).

   

  The top five most-populated county housing markets where price growth outpaced wage growth were Los Angeles County, California (5 percent median home price growth and 3 percent average wage growth); Maricopa County, Arizona in the Phoenix metro area (8 percent median home price growth and 2 percent average wage growth); San Diego County, California (5 percent median home price growth and 4 percent average wage growth); and Orange County, California (5 percent median home price growth and 2 percent average wage growth).

   

  Other markets where median home price growth outpaced average wage growth included counties in Miami, Brooklyn, Dallas, Seattle and Las Vegas.

   

  “I’m sure it comes as no surprise to anyone in Seattle that it’s getting harder and harder to afford a home,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “Thanks in part to strong income growth and intense competition, home prices continue to escalate at rates that are negatively impacting affordability. Something else pushing up prices is the Washington State Growth Management Act, which continues to limit developable land and is holding back many builders from adding much-needed inventory to the market.”

  More troubling is that at the national level, prevailing home prices have now risen faster than average wages for four consecutive years.

  

   

  It is this troubling trend – which is leading to declining demand as well as even bubblier, debt-fueled conditions for the rest – that the NAR is worried about.

  So is RealtyTrac: “While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” said Daren Blomquist, senior vice president at RealtyTrac, which monitors housing market trends.

  Well, that’s what mortgage debt is for; the same debt the Fed is hoping US consumer will splurge on and US lenders will eagerly hand out just so the housing bubble of 2006/7 can be recreated and housing can again become a “money-like” instrument – which as we have explained in our shadow debt series is the all important missing link which the Fed needs to come back so it can finally stop micromanaging the US market and to a lesser extent, economy.

  It is the stubborn unwillingness of Americans to comply with this directive to go out and rake up as much mortgage debt as they can that is the biggest hurdle to “renormalizing” to a post-bubble economy, because in addition to a stock bubble, the US economy also needs a housing bubble to restore its previous “shine.”

  RealtyTrac also found that the national median home price requires 30% of average wage. This means that in Q1, the average wage earner needed to spend 30.2% of monthly wages to make monthly mortgage payments (including property taxes and insurance) on a median-priced home ($199,000), up from 26.4 percent of average wages needed to buy a median-priced home in the first quarter of 2015.

  It adds that “when home prices were most affordable nationwide in Q1 2012, the average wage earner needed to spend 22.2 percent of monthly wages to buy a median-priced home. When home prices were least affordable nationwide in Q2 2006, the average wage earner needed to spend 53.2 percent of monthly wages to buy a median priced home.“

  * * *

  What this simply means is that while few will want to admit it, the bubble conditions of an unaffordable (for most) housing bubble have returned.

  Finally, for those curious, these are the least and most affordable housing markets in the US:

  Markets least affordable by absolute standard

  The top five least affordable counties based on percentage of average wages to buy a median priced home were Kings County, New York (Brooklyn) at 120.4 percent; Marin County, California in the San Francisco metro area at 109.2 percent; Santa Cruz County, California in the Santa Cruz metro area at 106.9 percent; New York County, New York (Manhattan) at 105.1 percent; and San Francisco County, California at 95.3 percent.

  Markets most affordable by absolute standard

  The top five most affordable counties based on percentage of average wages to buy a median priced home were Wayne County, Michigan (Detroit) at 8.5 percent; Baltimore County, Maryland at 9.2 percent; Clayton County, Georgia in the Atlanta metro area at 10.1 percent; Bay County, Michigan in the Bay City metro area at 11.5 percent; and Rock Island County, Illinois in the Davenport-Moline-Rock Island metro area at 12.3 percent.

   

  

  

  

  

  

  

• It's 1790 All Over Again – The World Is Sunk By Central Banker Conceit

  Authored by Hugo Salinas Price via Plata.com,

  It was 1790 and the revolutionary National Assembly in Paris was worried.

  Complaints were reaching the Assembly from all over France, that business was stagnant, sales were down, people were without work, and there was a great scarcity of money.

  This was quite natural, because all business slows down when the prevailing source of Authority is under question. The Bastille prison had been taken the prior year by a revolutionary crowd and all sorts of ugly things were being said about King Louis XVI and his pretty young Queen, Marie Antoinette.

  But this was the "Age of Reason" and the most educated, intelligent and reasonable people in France were members of the revolutionary National Assembly, which gathered daily in Paris.

  The Assembly put their highly educated heads together and came to the conclusion that a scarcity of money was quite intolerable and that the Assembly must really do something about it.

  "What do we have highly educated brains for, if we can't solve the problem of a scarcity of money? Without a doubt, Reason can overcome this problem."

  So the members of the National Assembly thought about the problem of the scarcity of money, and came up with a splendid idea: "Let us create the necessary money, and things will go swimmingly."

  Thus was born the "Assignat". Out of the collective wisdom of the Assembly, the Assignat was born as a claim upon the vast extension of lands recently taken by the State of France, from the Catholic Church. What could be more solid than a claim upon the lovely lands of dear France?

  The Assignats were soon printed up, with various denominations of monetary value in gold Francs.

  At first, the Assignats circulated alongside gold coin at par value. But soon enough, the exchange value of the Assignats against gold began to fall.

  Thus began a nightmare episode that lasted seven years.

  The first issue of Assignats did not relieve the problem of business being in a funk. So a second issue followed the first; and then another, and then more, and thick and fast they came at last, and more and more and more, falling, falling, always falling in value against gold.

  The highly intelligent gentlemen of the Assembly decided that this fall in value of their Assignat must be the work of wicked, unpatriotic people who should be severely punished.

  The Assembly decreed that a merchant should be punished by being sent to the galleys or to the guillotine, if he should venture to ask a customer who wanted to know the price of bread, with what money he planned to pay for the bread – whether it was with gold coin or with Assignats?

  The Assembly created a national net of spies to hunt down the wicked hoarders of gold, confiscate their gold and have them part with their heads with a short, sharp shock on a big, black block.

  In the meantime, the more intelligent of the citizenry took out enormous debts in Assignats, with the certainty that their value would soon plummet; with borrowed Assignats they purchased all sorts of things of lasting value, such as real estate, art and jewelry. In due course, the value of the Assignat fell to next to nothing and the debts were wiped out. Enormous wealth was transferred from the mass of the ignorant to the few who were able to see what was going on.

  Eventually, the common people of Paris found that bread was hard to come by. Starvation set in, and the Parisian government had to provide rations of bread for the multitude – rotting, wormy bread.

  In 1797 Napoleon came to power in France. He put a stop to the very reasonable plans of the highly educated men of the National Assembly, and declared that henceforth, only gold would be money.

  In the center of the Place Vendome, where today there stands a great column surmounted by a statue of Napoleon, a huge bonfire consumed piles of freshly printed Assignats and the wooden printing machinery which fabricated them.

  The highly educated and eminently reasonable men of the National Assembly had succeeded – in the mighty work of bringing France to its knees. But not one of those men, responsible for the colossal disaster, was ever known to have said about it: "We were mistaken".

  2016: Why is it 1790 all over again? Because just as in France in 1790, today we have a set of conceited men running the world's economic policy on the basis of a flawed intellectual construct. In 1790, the flawed construct was the Assignat. Today, the flawed intellectual construct is the irredeemable dollar and its derivative currencies.

  In 1790, gold was the enemy of those conceited men, because the depreciation of the Assignat against gold revealed the falsity of the Assignat; so the National Assembly did their best to suppress the use of gold by violence against its owners. Today, gold is once again the enemy of our conceited masters: gold, whose value threatens to expose the falsity of the irredeemable dollar.

  In 1933, the value of the dollar in gold was 1 1/2 grams. Today, the value of the dollar is only about 2 1/2 hundredths of a gram of gold. Our conceited masters are struggling to keep their intellectual construct, the irredeemable currency which is the dollar, from plunging in value to thousandths and ten-thousandths of a gram.

  Like the Assignat, which in 1797 fell to a value of zero grams of gold, the dollar faces the same inevitable fate. And since the rest-of-the-world's currencies are derivatives of the dollar, they too will become worthless.

  The fundamental flaw in the thinking of the conceited members of the National Assembly of France in 1790 was their mistaken idea that they could invent a money more suitable than gold to achieve the prosperity of France.

  Today, the fundamental flaw in the thinking of our conceited Masters of the Universe is the same as that which blinded the members of the National Assembly in France, in 1790: they are convinced that their intellectual construct, the irredeemable dollar, is far more suitable than gold for use as money.

  The conceit of the majority of the members of the National Assembly in France in 1790 led to the total prostration of the economy of France in the course of seven years. The conceited Central Bankers of today will without a doubt achieve a world sunk in economic prostration. But don't expect any one of them to ever say "We were mistaken".

  So that's why It's 1790 All Over Again.

  

  

  

  

  

• Q1 2016 Marijuana Industry Survey & Outlook

  Via ConvergEx's Nick Colas,

  Our latest quarterly report on the recreational marijuana business shows a vibrant and growing industry as more states legalize the drug.

   

  We survey numerous stores in Colorado, Washington, and Oregon to track how a newly legalized market develops its cost structure and product mix. Our Colorado contacts reported steady pricing and customer traffic compared to three months ago, and brought in $576 million in retail marijuana sales last year – 84% more than in 2014.

   

  Washington dispensaries, on the other hand, are where Colorado stores were a few quarters ago, facing falling prices partly due to new entrants. Demand remains strong, however, with about 150 to 300 customers still visiting stores each day.

   

  Oregon marijuana stores are in an even earlier stage, with only medical dispensaries allowed to sell recreational marijuana in the form of flower until later this year. Even still, Washington dispensaries posted $486 million in total sales last year, not too far behind Colorado even with fewer months to mature. The state of Oregon also brought in $3.5 million in tax revenue during the first month cannabis sales were taxed in January. That’s more than Colorado or Washington earned during their first month runs. Read on for the details of each developing market.

  In less than a month, tens of thousands of people will gather at festivals to celebrate a national holiday: “420”. Never heard of it? It’s like Oktoberfest, but centers on the consumption of marijuana instead of beer. As for where the designation 420 started, there are many origin stories but one in particular seems to carry the most credence:

  • It supposedly all started back in 1971 at San Rafael high school in northern California with a group of five teenagers and a map. Known as the “Waldos” because they met by a wall after school at 4:20pm, they sought out what was their version of treasure in Point Reyes forest: marijuana plants.
  • They never found the plants, but “420” became a code word, synonymous with the prospect of smoking cannabis but suggesting so discreetly. Then the Grateful Dead moved into town, elevating the term to another level. The Waldos started hanging around the band’s rehearsals and parties. One of the member’s older brother “managed a Dead sideband and was good friends with bassist Phil Lesh” according to the Huffington Post, while another member’s Dad handled the band’s real estate. The term eventually made its way through the Dead Head community as the band toured in the 80s and 90s.
  • In 1990, a reporter at High Times saw an explanation of “420” on a Grateful Dead Concert flyer. This gave the term international recognition as the magazine started basing events around it, even buying 420.com. And the rest is history. Every year on April 20th, people pay homage to the drug, ideally smoking at 4:20pm.

  High Times magazine’s annual U.S. Cannabis Cup remains the most highly anticipated event for the 4/20 holiday. The festival holds a contest that judges and awards companies for the best flower, concentrates, and edibles, for example. It also features educational seminars, expositions, concerts, and product showcases. More than 35,000 people attended the five-day event every day last year in Denver. Not this year, however, as county governments in Colorado prevented High Times from obtaining a permit in Denver and subsequently in Pueblo. The magazine will host a one-day Colorado Cannabis Cup award show in Denver, but the main event will occur over three days in San Bernardino, California.

  This is not a welcomed development at Colorado retail marijuana dispensaries, which would have benefitted from the extra foot traffic. According to our latest quarterly survey on the legal recreational marijuana market, our interviews of managers and employees at several Colorado retail dispensaries expressed their disappointment that the event was moved out of state. They expect fewer customers than last year due to lost tourist activity, and they miss out on an opportunity to network. One respondent, for example, found a seed company he continues to use at one of these rallies in the past. But ever since marijuana was legalized in the state, they’ve experienced a crackdown on events surrounding 420.

  Nevertheless, these dispensaries still expect some rallies and a spike in sales during the holiday.They are already preparing by planning specials for that week, adding staff, and placing early orders with vendors for concentrates and edibles, for example. Based on our usual analysis including price, units, and mix, here’s a snapshot of our most recent findings on retail marijuana businesses in Colorado:

  #1 – Price: Competition continues to put pressure on prices as stores still try to find an equilibrium, but they’ve remained relatively steady over the past couple of quarters. Customers can still find an ounce for $150 to $350, and an eighth for $25 to $45 – especially with frequent specials and discounts. One contact said he sees a more pronounced tier structure developing on the recreational side of business. People can choose to pay less for lower quality or accept higher prices for better quality strains. Overall, prices have mostly stabilized after declining significantly from when we first started our surveys in June 2014 ($400/ounce and $50-$70/eighth) to September 2015 ($300/ounce and $30-$45/eighth).

   

  #2 – Units/Traffic: About 150 to 350 customers still visit our contacts stores each day, spending $50 to $60 on average. Fridays and holidays also remain the busiest periods, similar to all retail stores. Tourists account for about 50% of their customers, so they are also expecting greater business this spring and summer as the weather warms. You may guess they received a slight boost in sales on St. Patrick’s Day, but most survey respondents said snow actually offset any holiday bump.

   

  #3 – Mix: Most stores report a 50/50 split between purchases of flower and concentrates/edibles. Some dispensaries claimed flower sells the most, while one manager said sour gummies outsell all of his store’s other products. Our contacts reported an improvement in the quality of edibles as more vendors come to market. Dispensaries also have a greater appreciation for what sells best. The most interesting product we heard about was gluten free chocolate, which shows just how far these vendors have come. Lastly, vaporizer pens and cartridges continue to gain popularity as a cleaner and odorless means of smoking.

  All in all, recreational marijuana stores in Colorado received $575.8 million in 2015 revenue based on tax data from the Colorado Department of Revenue. That’s an 84% comp to 2014, showing robust growth in the industry. Turn to other states in which retail marijuana is legal and you’ll see they have posted impressive growth figures as well, even with less time to mature. We’ve expanded our survey to include marijuana dispensaries in Washington and Oregon, which started selling retail cannabis in July 2014 and October 2015 respectively. Here are our takeaways for both markets:

  The price for an eighth carried a wide range of between $25 to $60, depending on the strain, at dispensaries in Washington and Oregon. Washington, however, continues to experience more downward pressure in pricing, whereas prices have remained steady in Oregon. Only medical marijuana stores in Oregon can sell recreational cannabis until later this year, so they won’t feel the competition of those new entrants until then. In the meantime, the ability to sell recreational marijuana in addition to medical marijuana has been a huge boon to business. One store manager said retail cannabis now accounts for as much as 85% of her overall sales.

   

  There are two reasons Washington’s prices continue to fall: more awarding of licenses to retailers and lower wholesale prices after the tax structure was changed from 25% levied on producers, processors, and retailers to 37% on only retailers. The Washington State Liquor and Cannabis Board (WSLCB) raised the former retail store cap of 334 to 556 to help in the process of merging the medical and recreational markets on July 1st.

   

  One contact, for example, noted the Vancouver City Council recently approved 3 more marijuana stores, increasing the cap from 6 to 9. He also said he sees a couple of price drops once every other week. This forces stores to lower their prices and offer more discounts to stay competitive. Consequently, the WSLCB reported that the average statewide price per gram of marijuana neared $10 at the beginning of this year compared to upwards of $25 when it was first sold legally in July 2014.

   

  Washington continues to experience similar product trends to Colorado, with flower accounting for half of sales and edibles/concentrates making up the balance. Vaporizer pens and cartridges are also their most sought after product of late. They also run daily and weekly specials.

   

  Stores in Southern Washington experienced competition with dispensaries in Oregon during the fourth quarter, as Oregon did not have a sales tax. Since January, recreational marijuana sold in Oregon medical dispensaries have been subject to a 25% sales tax, which will drop to 17% at the state level when retail stores open in the fall. These rates are lower than Washington’s sales tax of 37%, but some of our Washington contacts said they are taking business from Oregon because they are allowed to sell edibles and concentrates. Oregon dispensaries can only sell flower to those without a medical card, but hope they will be allowed to sell edibles and extracts when retail stores open in the second half of this year. They can also only sell up to 7 grams, whereas customers can buy up to an ounce in Washington.

   

  Last year, Washington dispensaries posted $486.2 million in total sales (excluding the excise tax), about $90 million less than recreational sales alone in Colorado. With that said, Washington stores brought in $63.3 million in January compared to $52.1 million in Colorado retail sales.

   

  Oregon’s Department of Revenue reported the state collected $3.5 million in taxes for recreational marijuana sales in January. That suggests $14 million in retail revenue during the first month the tax took effect. It also exceeded the $2.9 million in taxes collected for both medical and retail marijuana sales in Colorado when stores were first able to sell the drug recreationally in January 2014. Washington also received less, only $1 million in August 2014.

  Despite the success of recreational marijuana stores in Colorado, Washington, and Oregon, the drug remains illegal on a Federal level and banking is limited as a result. Marijuana business residency ownership requirements also act as a roadblock to outside investment. The U.S. Department of Justice frowns upon outside money flowing into the marijuana industry as well. In order to invest in a marijuana business, you must have been a resident for two years in Colorado. Cannabis businesses can raise funds by issuing convertible notes to out of state individuals, with the exception of foreigners, but the holders of debt can only purchase equity when they meet the requirements for ownership of a licensed marijuana business.  

  The residency requirement used to be six months in Washington, but the WSLCB recently applied new rules that allow an investor from out of state to loan money to a marijuana business. It’s still murky as to whether an investor can receive profits in exchange for financing, however. Moreover, the governor of Oregon recently signed House Bill 4014 into law, which removes a 2-year residency requirement for recreational marijuana producers, processors and retailers. This will make it easier for marijuana business owners to access capital. 

  In sum, keep paying attention to the developments in this growth industry and we’ll provide updates along the way. Investing in current marijuana markets remains risky, but states where cannabis is legal continue to push for changes that are friendlier to outside investment. Colorado, Washington, and Oregon serve as informative experiments, with Alaska joining the mix once stores open later this year. Progress in these states and greater legalization elsewhere will continue to unfold within the next few years. The next major ballot initiative for legalizing marijuana occurs in California this fall. Hopefully changes in regulations that support marijuana businesses and investment will continue to follow suit.

  We’ll leave you with this: ever wonder about the 419.99 mile marker on I-70 in Colorado? That’s because people kept stealing the original 420 sign for reasons you now know.

  Sources:
  http://www.bbc.com/news/blogs-magazine-monitor-27039192

  http://www.huffingtonpost.com/2013/04/20/420-weed-day-marijuana-april-holiday_n_3122359.html

  http://tdn.com/news/local/local-marijuana-retailers-contend-with-falling-prices/article_72268328-fef1-5905-b2cd-e965add7a149.html

  http://www.redmond-reporter.com/news/371464581.html#

  https://www.bellinghamlegal.com/marijuana-business-law/washington-state-to-allow-non-residents-to-invest-in-marijuana-businesses/

  http://news.yahoo.com/first-month-oregon-pot-sales-tax-receipts-far-031541037.html

   

  

  

  

  

  

• Emory Students "Scared, In Pain" After Safe-Space Violated By Word "Trump" Written In Chalk

  Seriously!!

  The Daily Mail reports, the president of Emory University has spoken to demonstrators who said they were frightened after someone wrote 'Trump 2016' in chalk around campus.

  Students at the Atlanta school, which has an enrollment of more than 14,000 claim their 'safe space' was violated when the messages appeared on sidewalks and buildings.

   

  Jim Wagner, president of the Atlanta university, wrote Tuesday that the students viewed the messages as intimidation, and they voiced 'genuine concern and pain' as a result.

   

  He acted after student government wrote to him and slammed the university's response, prompting a meeting that led to protests.

   

  Now administrators want to track down those responsible for the controversial markings.

  Be warned the following "controversial markings" may offend…

  

  

   

  Had enough… there is more!!

  

   

  Emory's student newspaper, The Wheel, said Wagner outlined four steps that administrators plan to take in order to address the issues raised by the protesters who said they were in pain in a campus-wide email.

  Wagner added that the Freedom of Expression Committee is meeting to address whether the person or people responsible for the chalking were in compliance with Emory’s policy.

   

  He said that they would debate technical issues, such as whether or not the chalkings were done on an appropriate surface.

   

  However, he believes that the broader concern motivating the protests had to do more with the ideas the chalkings stood for than how they were done.

   

  The Wheel also reported that the students this week chanted, 'You are not listening! Come speak to us, we are in pain!' shortly before Wagner agreed to meet with them.

  Poor babies. Social media responded…

  'The crybaby students forfeited any expectation of an open discussion with their demands that any talk or chalk of Trump should be banished from their fantasyland.'

   

   'I have no idea how you kids will survive once you get out into the real world. People have different opinions than you. You need to grow up, and fast.'

   

  One person also wrote: 'Within a year I am ashamed of both my undergraduate college (Yale) and my graduate university (Emory Law, '77).

   

  'I am a liberal supporter of Clinton and Sanders (the former by a shade) and I want to shout at the thin-skinned crybabies on these campuses who are so obsessed with 'safe spaces' and so dismissive of free speech values: "GROW THE F*** UP !"

  As we summed up recently, no matter where you go in life, someone will be there to offend you. Maybe it’s a joke you overheard on vacation, a spat at the office, or a difference of opinion with someone in line at the grocery store. Inevitably, someone will offend you and your values. If you cannot handle that without losing control of your emotions and reverting back to your “safe space” away from the harmful words of others, then you’re best to just stay put at home.

  

   

  Remember, though: if people in the outside world scare you, people on the internet will downright terrify you. It’s probably best to just accept these harsh realities of life and go out into the world prepared to confront them wherever they may be waiting.

  

  

  

  

  

• "Why We Need To Beat Russia"

  Submitted by The Saker, authored by Cathal Haughian

  250,000 capitalists read the Financial Times, and it has been our undertaking to chronicle our understanding of capitalism via our book The Philosophy of Capitalism. A USA led team has answered the question ‘What is The Nature of the Monetary System?’ The Monetary system has three layers – the core is Religion and the unconscious mind – as they formed first. The outer layer is operational and intersects with geopolitics, it explains:

  Why we need to beat Russia

  We may see Syria as a testing ground for Imperial Power. Russia has tested our influence and shown the World it’s wanting, so it’s crucial to appreciate why and of what consequence.

  Our Imperial weapons give definite form to our Empire. And nothing has shaped our Empire more than the FIAT. The deformation began in 1971, when the US imposed her Power to re-define the rules of the monetary system for her sole benefit. The ability to print IOU’s in exchange for real value is more clever than theft as we borrow and do not pay back in kind due to inflation. Our enemies, adversaries and vassals must found their financial systems upon the printed dollar which they must purchase with hard earned money. That seizure has financed a vast network of military bases, bribery, assassinations, coup d´états and perpetual war.

  What’s not to like? All that Power without taxing the produce of the American people. So why have we lost in Syria?

  Let’s begin by appreciating that the global “FIAT system” is responsible for our moral crisis and departure from virtue. As we embrace further the gods of greed – listen to the masses cheer for Clinton and Trump – we must recall that virtue is knowledge of what is good. We are getting weak because we have forgotten what is good for us.

  The root of this evil is our love of easy money, or FIAT money, defined by those with power as “wealth by decree” which places an arbitrary value upon “wealth issued by men” such that buying power has no natural governor, as it did when gold was freely traded along currencies in truly free markets. But whom, may we ask, has the power to decree wealth? And with such great power to do so, who can be trusted with such great responsibility?

  No one. That is who.

  But nonetheless, governments and monarchies throughout the ages have been entrusted to issue wealth by decree. All have failed, because power corrupts, and absolute power corrupts absolutely.

  So in every FIAT timeline we see the more powerful become wealthier and the wealthy become more powerful, because it is they who control the issuance and distribution of wealth. Inequality of Wealth, therefore, always reaches its peak at the end of the FIAT timeline. As social position offers more favours than purpose and production. What has happened is what always happens – you have a system politicized to such an extent that political access – and not profits from innovative new solutions – Become the core of the incentive structure.

  Notice how productivity declined after Bretton Woods and later when Bretton Woods was abandoned. One of the problems of easy money, not the only one mind you, is the financialization of the economy. Financialization drains key human capital and generates malinvestment. Nuclear engineers are doing MBA’s so that they can work as investment bankers! Trillions of dollars have been invested in real estate developments that provide no productivity gains. Easy money kept fracking companies alive –producing an endless glut of gas that had nowhere to go but heat tar sands in Canada – what waste!

  This is the real economic evil of our current monetary system – malinvestment – with two insidious effects:

  1. A halt in fundamental scientific breakthroughs and
  2. The West, apart from Germany and Norway, has run at a loss for decades

  If the common man had a say in all this, he would declare his modest holdings to be the pinnacle of wealth, by his decree. He will offer you his apartment for your mansion, his hot dog for your lobster, his bike for your car and so forth. If this sounds ridiculous, then think how absurd it is to offer stacks of paper for these same items, which (based upon the numbers and signatures printed upon them) you would gladly accept, by decree.

  We know that paper is just as intrinsically worthless as the electronic digits they represent in a bank account. The issue here is who holds the power of decree. The little people never will. The monied men hold this power – like a parasite feeding upon any who deign to offer value at the marketplace.

  And that is the cut of the second edge my friends. That is the death blow. The Fiat produced a parasite – the financial sector – that in its greed is killing the real economy. So when we read about absence of opportunity with such empathy, know that the parasite suffers too, as the problem of debt reaches higher toward senior capital.

  When we see debt piled on debt just to prolong the dying system, take note that a few monied men enjoy the fruits of this easy money for a time before defaulting … and with no collateral to make lenders whole, many walk away with nothing more than an impaired credit rating – into a waiting system where debt is harshly devalued.

  Monsanto can darken the sunflower harvest in the Ukraine, and Allianz can steal a few tranquil Greek islands, but the ambience is never quite the same as when hard working people had their just rewards, and goodness and charity and kind souls rejoiced – with compassion and cooperation – while loving the narrative of a life written while desiring only the product of their work.

  The world this Global Reserve Fiat creates is one of misery and strife where evil and greed feeds upon the spirit, and the world becomes an immoral wasteland of modernity. The worker is discriminated against as all pressure and stress is heaped upon his future, as the law discriminates between debts held as an asset vs. debt held as a liability.

  You see, reader, while we all hold “deposits” at banks, which is an euphemism for bank debt, only the lending class (and I use this term in the broadest sense) get to hold debt on their balance sheets as a wealth asset, whereas the little people hold debt as an obligatory liability. If there is a default, all the better as the law allows them to seize the “secured” assets as collateral. Is there a flaw in my thinking? Let us see…

  You may say that banks are able to hold debt as an asset because they have the capital to cover that debt – to which I would say, “Really ??!!” As we understand the nature of debt in this modern era of aging debt, and the derivatives that attempt to hedge those obligations, this is simply not the case, as the lessons of Enron, AIG, Lehman, MF Global – ad nauseam – clearly prove. The empire of debt is hallmarked by misery for the masses though this is no accident, for a system cannot discriminate in and of itself. Financial laws are written by and for the hidden agenda of monied men, how can we conclude otherwise? A few of which see war or systemic crisis as an opportunity to rewrite the social contract e.g. the tax payer takes over bank debt, see Ireland, Britain and soon Australia and the Eurozone.

  Look at the workers as they make their way home on the subway, standing tightly together, neither wanting nor caring to utter a word to one another, their grey features melted by the stress of their “wealth as debt”. Their one shot at consciousness ground away while vampire and zombie stories speak to their existence. Look at the once prosperous cities around you, like Detroit, or Camden, crumbling into 3rd world ghettos. Not exactly a world that the 1% wants to live in, but one they deserve – one of their making.

  They can insulate themselves in the Hamptons for only so long until the sirens sound. It has always been this way, and it will always be this way, until man changes his nature by recognizing what is good for him.

  Now, the East – China / Russia / India – challenge the Global Reserve Fiat. And when the dollar fails, and it will: For debt is the essence of fiat, and when it defaults, the system defaults with it.

  Fiat Debt is unstable for two reasons:

  1. Because no natural ecosystem is able to sustain unlimited, continuous exponential growth – as all 100% fiat (debt-based) valuation systems require. More debt is required to repay existing debt plus interest. The basic operational problem: you can inflate a system easily by issuing new “secured” debt against collateral and thereby increasing collateral value (think about mortgages as buying power to buy houses, pushing house prices up, collateral looks fine even if debtors cannot pay interest or principal – as long they can easily refinance or banks can sell recovered properties in a real estate market spiked by easy credit and demographics (like in the US from 2001-2005, or London and Sidney now). Easy credit can paper over affordability and to some extent demographics. Now this definitely does not work in reverse; you cannot even stop because once credit stops flowing, prices start to tatter; and in the latter stages even an decrease in the rate of increase might be enough to crash the system.
  2. Because it is entered into and created so lightly, and it is based on the assumption of a fixed future performance by an entity or individual. And when the 98% – their future burdened by intolerable debt, unemployment and declining wages – decide to walk away? The fear of that decision has been driving interest rates down for decades, to make it bearable not for the good of mankind but to prolong the system. This brings into relief an internal contradiction: wages decline in sync with interest rates because the bargaining power of workers evaporates as Central Bankers reduce the cost of capital, contributing to the substitution of labour and labour wages by that of the machines and AI software. Until the workers walk away from more debt for less income, we watch this balancing act between debt pretending to be wealth, and wealth being treated as a “bad investment”. All performed for the benefit of gradually changing our definitions, as we evolve into a new equilibrium determined by the East – Their collective gold reserves will be large enough to re-price the currencies and free the markets.

  As we look at the precarious nature of our faith-based money, we must acknowledge the moral implications of “dishonest money”. Seizure by decree, whether judged just by Constituted Power, is immoral. But the fact that dishonest money is so easy to create, control and redistribute helps one understand the wave of immorality that has swept over our world.

  Paying tribute with labor and exchange rates is not enough for the empire of debt. Rather, its vassals must accept and embrace the ideology of the empire as well – “Wealth as Debt” and Globalism. It’s their separation in language which causes the confusion – Globalism and Absolutism – for they are one and the same thing.

  When Russia and China stockpile honest money, they attack our most potent weapon and father of our decline. Our Imperial weapon will die by both edges of its own sword, one being the contempt with which it is so easily created to bend the will of the world to its bidding, and the other sharp edge which the wicked are blind to recognize: The evil that sound money prohibits.

  Will Russia and China attack the fiat dollar using overt enemy action? Possible, but not probable: as they can simply undermine “confidence” in the FIAT and wait upon the 2% to bury the blade. The Dynasties of Wealth – Have you ever wondered how we hedge our holdings through turmoil? The top 85 patricians of which own more wealth than the bottom 3.5 billion humans – will move first. The 1%, then 2% and whoever else left standing will be forced to follow through.

  Only Gold has the history, depth, unique qualities, loyalty of the elite and transitional power to challenge any man, any nation, any system on earth, past, present and future. The Dynasties understand this, because they have both witnessed and authored this axiom across generations of asset accumulation.

  When they vote, they vote with their ability to make markets, and then reap the profit from the market they make, offering favor to those who protect their interests. They easily control men through greed and are beholden to Gold alone. Gold transitions their wealth recycling system through change.

  As the sand peters past the last curve of the hour glass the Dynastic hand is clear to see. So the Neo-cons need to beat Russia, and soon, as only Globalism can keep the markets enchained.

  

  

  

  

  

• Presenting The Complete Brussels ISIS Cell Org Chart

  Earlier today and on several occasions since Tuesday morning when the Bakraoui brothers blew themselves up at the Brussels airport and city metro, we’ve documented the connection between the Brussels attacks, the brazen assault on Paris in November, and other terror-related events that have unfolded in Belgium over the past 14 months.

  Here are some bullet points worth noting:

  • In January 2015, two men are killed in a police raid on a flat in Verviers; the men are later pictured with Paris ringleader Abdelhamid Abaaoud in a cover story for Islamic State magazine Dabiq
  • In September, one “Soufiane Kayal” was seen with Salah Abdeslam at a Hungary-Austria border checkpoint; Kayal would later turn out to be bomb maker Najim Laachraoui whose DNA was found on explosive material in Paris and also in two residences (one in Auvelais that was raided on November 26 and one on Rue Henri Bergé, in the Schaerbeek section of Brussels that was searched in December); he is now thought to have blown himself up on Tuesday at the Brussels airport
  • A November 30 raid on a home in Auvelais where Abaaoud may have met with suicide bombers turns up a 10-minute surveillance tape apparently filmed at the home of a senior Belgian nuclear official; reports later suggested the camera was set up and retrieved by the Bakraoui brothers
  • A March 14 raid on an apartment in Forest rented to one of the Bakraoui brothers leaves one gunman dead, but two other presumed jihadis escape; Paris fugitive Salah Abdeslam’s fingerprints are found in the apartment

  And the list goes on. The takeaway seems to be that beginning some years ago, Abdelhamid Abaaoud (who allegedly became Emir of War in Deir ez-Zor after Omar the Chechen was transferred to Iraq) established the Brussels cell and it’s been growing and building its operational capabilities ever since.

  For those interested in understanding how it all fits together, we bring you the following org chart from The Guardian:

  

  

  

  

  

• What Killed The Middle Class?

  Submitted by Charles Hugh-Smith of OfTwoMinds blog,

  If the four structural trends highlighted below don't reverse, the middle class is heading for extinction.

  Everyone knows the middle class is fading fast. I've covered this issue in depth for years, for example: Honey, I Shrunk the Middle Class: Perhaps 1/3 of Households Qualify (December 28, 2015) and What Does It Take To Be Middle Class? (December 5, 2013)

  This raises an obvious question: what killed the middle class? While many commentators try to identify one killer cause (for example, the U.S. going off the gold standard in 1971), the die-off of the middle class is more akin to the die-off in honey bees, which is the result of the interaction of multiple causes (factors that increase the toxic load dumped on bees and other pollinators by modern agriculture).

  Longtime collaborator Gordon T. Long and I discuss the decline of the middle class and other key topics in a new 29-minute video How did that work out for you?

  So where do we begin this detective story? With the engine of all real prosperity, productivity. This chart reveals that wages stopped rising with productivity around 1980.

  

  Here's another look at the same phenomenon:

  

  Productivity has been slipping since around 2003: Alan Greenspan:"Productivity is Dead”

  

  Cause #1: declining productivity, which means the pie of real wealth is no longer expanding.

  Exhibit #2: middle class wage earners have not received any of the gains. Wages as a percentage of GDP have been falling for decades, with occasional blips up in tech/housing bubbles:

  

  Inflation-adjusted household income has dropped back to levels first reached in the 1980s:

  

  More recently, wages have actually declined, regardless of educational attainment:

  

  Income gains have all flowed to the top 10%, with most of the gains being concentrated in the top 5% and top 1%:

  

  If the middle class didn't receive any of the gains, who did? Corporate profits have soared to unprecedented levels:

  

  Cause #2: all the gains in the economy have flowed to corporations and the top 10% of financiers, managers and technocrats.

  But wait a minute–hasn't the rising stock market enriched the middle class? Short answer: no. Middle class household wealth has absolutely cratered since the top of the housing bubble in 2007, and hasn't recovered.

  

  Why? Middle class wealth is based not in stocks but in the family home. The middle class does not own enough financial assets to have participated in the latest stock market bubble, while the majority did not recover the wealth lost in the housing bubble bust. This is the cost of allowing the financial sector to financialize housing and mortgages in the 2000s.

  

  Cause #3: the middle class doesn't own the "right" assets to benefit from systemic financialization and financial speculation.

  How about rising costs? The federal agencies tasked with measuring inflation assure us inflation is near-zero. But these measures underweight big-ticket costs like healthcare and higher education, where costs have exploded higher, greatly increasing the burden on the middle class:

  

  Cause #4: soaring costs of big-ticket expenses such as higher education and healthcare. Saving $10 on cheap jeans imported from Asia does not make up for 135% jumps in tuition and college fees, and $100 decline in the cost of a laptop computer does not make up for healthcare insurance and out-of-pocket expenses in the tens of thousands of dollars per household.

  Correspondent Kevin K. submitted this article and accompanying note: Colleges with the biggest tuition hikes (my ala mater University of Hawaii-Manoa clocked in with an increase of 137% since 2004.)

  "It looks like the article linked above didn't do much research since:
  University of California Davis
  2004 in-state tuition $5,684
  2015 in state tuition $13,951
  Percentage increase 145.44 percent"

  There is no way middle class households with declining real incomes can pay soaring costs imposed by state-enforced cartels and gain ground financially. If the four structural trends highlighted above don't reverse, the middle class is heading for extinction, the victim of financialization, the glorification of financial speculation via central bank-central state policies, the decline of productivity and rising costs imposed by state-enforced cartels.

  Gordon T. Long and I discuss the decline of the middle class and other key topics:

  

  

  

  

  

• The Biggest Short

  Authored by StraightLineLogic.com's Robert Gore via The Burning Platform blog,

  Some reversals of financial trends prove so momentous they define the generation in which they occur. The stock market crash in 1929 kicked off the Great Depression, which ushered in the welfare and then the warfare state and redefined the relationship between government and citizens.

  Bonds and stocks began their bull market runs in the early 1980s. Now, those markets are fonts of optimism increasingly unhinged from reality. The US has come full circle. The New Deal and World War II marked a massive shift of resources and power to the federal government. Conversely, financial reversal will fuel a virulent backlash against the government and its central bank.

  Such epochal reversals are usually foreseeable. However, they are long in the making and involve such a confluence of powerful forces that usually only a handful get the timing right. Calling the end of the current bull markets has been difficult because of governments and central banks are desperate to keep them alive. Central bankers prattle on about the wealth effects of elevated stock markets and how low interest rates promote debt and consumption, supposedly the fountainhead of economic progress. Those emissions are noxious nonsense. Central banks promote rising markets because they are under the thumbs of their governments; independent central banker is an oxymoron. High stock prices are a popular barometer of social mood, while high bond prices keep interest rates low, benefitting the largest borrowers, governments.

  Consider the absurdity of loaning money to any of today’s welfare state governments, including the most indebted of them all, the US government. Most of them haven’t run an honest, GAAP budget surplus in decades. They have compiled staggering amounts of debt relative to their economies’ GDPs. Unfunded pension and medical liabilities are many times the amount of the stated, on-the-books debts. Those programs could be cut, but a compilation of such cuts the last thirty years would fill a book slightly thicker than Hillary Clinton’s Integrity. The debt cavalcade will stop only when creditors say “Enough!” or start charging usurious interest rates.

  Yet, that is the opposite of what creditors are doing now: they are paying governments for the privilege of lending them money! Governments are assumed to have a call on every last dollar, euro, yen, and yuan their economies generate, but there are flaws in that assumption. To the limited extent today’s economies function, they do so because vestigial capitalism still offers incentives, markets, and the price mechanism. The foundation of production is brains and brains are quite sensitive to incentives and the political and legal framework in which they operate. Nobody designs the newest generation semiconductor, app, or robot when virtually everything they produce is expropriated by the state. Tax rates have probably gone as high as they can go in terms of extracting revenue, and even if they haven’t, any revenue increase from higher rates will be nowhere near enough to repay governments’ debts and unfunded liabilities.

  So rational investors must question governments’ ability to pay their debts, which leaves irrational investors—central banks—as the buyers. The Bank of Japan is the market for Japanese government debt. While the situation is not quite as bad in Europe and the US, the ECB and the Federal Reserve have amassed huge portfolios of their own sovereigns’ debt, purchased from private banks in exchange for central bank reserves that they conjure at will in unlimited amounts. Speculators buy debt with negative yields from governments that are poor credit risks because central banks will pay them an even higher price at an even more negative yield. The stated goal of the central banks is to increase economic activity and inflation rates, which would increase interest rates and reduce bond prices, inflicting losses on bondholders, including, perversely, central banks.

  This is the very definition of a market awaiting a crash: a long running bull trend that has pushed prices to absurd prices (you can get no more absurd bond pricing than that which yields, so to speak, negative yields); an extreme divergence between the government bonds prices and their underlying value as a claim against issuers that are de facto bankrupt; a commitment by governments and central banks to inflict losses on those who buy government debt; a long historical dishonor roll of instances where governments and central banks have done just that; a class of dumb money, short-term, price insensitive buyers (speculators and central banks), and a degree of complacency and obtuseness so extreme that market participants make a mad dash for these putrid instruments at every appearance of financial and economic turmoil. So why not rush right out and short sovereign debt markets, either directly or indirectly through any number of exchange traded funds?

  Markets often take seemingly forever to do what rational people think they should have done long ago. They can, as John Maynard Keynes noted, stay irrational far longer than those who bet against them can stay solvent. Japanese finances are in far worse shape than the US government’s or most European government’s, and its aging population is a demographic and actuarial nightmare. Roughly half the government’s deficit is monetized by the sole buyer, the Bank of Japan, and if it stepped out of the way yields would skyrocket. Yet, speculators have been shorting Japanese government bonds and losing money for decades. The Japanese government’s 10-year bond trades at an all-time high price and with a negative yield.

  In the US, the majority of Wall Street sharpies have recommended shorting bonds for several years running, based on an imminent, central-bank inspired economic lift off that has never arrived. Anyone who has taken their advice has suffered the same fate as those shorting Japanese debt. Nobody ever suggests shorting sovereign debt because of deteriorating credit quality. Long before their longest maturity bonds mature, sovereigns will have insufficient revenues to pay all their obligations. In the US by 2025, Social Security, Medicare, Medicaid, and interest on the government’s debt will consume all tax revenues and taxes would have to double to pay for the rest of the budget. That’s if doubling the top rate to 80-plus percent actually doubled tax revenues, which it won’t; revenues would undoubtedly shrink.

  Shorting sovereign debt has been a widow maker, although on fundamentals sovereign debt is the biggest short of them all. Bonds now trading at high premiums with negative yields will go to zero as governments go bankrupt. Sovereign debt is the foundation for the $225 global pyramid of debt. When it goes so will the rest of the pyramid, and so too will debt-supported equity, commodity, and derivatives markets. The time to catch those trades will be when government bond yields persistently climb in the face of clear, impossible-to-deny economic weakness and financial turmoil: market recognition that governments are not safe havens, they’re insolvent. The economic production that supposedly supported their debt holdings gone, all creditors will have is a promise from governments to redeem unsupported debt with more unsupported debt. It will be the worst of times and the best of times. The financial system will crater. However, that may usher in a replacement based on sanity rather than political promises, flimsy pieces of paper, quack economics, and debt, conjured with a computer keystroke, masquerading as money.

  

  

  

  

  

  

• Microsoft's Twitter Chat Robot Quickly Devolves Into Racist, Homophobic, Nazi, Obama-Bashing Psychopath

  Two months ago, Stephen Hawking warned humanity that its days may be numbered: the physicist was among over 1,000 artificial intelligence experts who signed an open letter about the weaponization of robots and the ongoing “military artificial intelligence arms race.”

  Overnight we got a vivid example of just how quickly “artificial intelligence” can spiral out of control when Microsoft’s AI-powered Twitter chat robot, Tay, became a racist, misogynist, Obama-hating, antisemitic, incest and genocide-promoting psychopath when released into the wild.

  For those unfamiliar, Tay is, or rather was, an A.I. project built by the Microsoft Technology and Research and Bing teams, in an effort to conduct research on conversational understanding. It was meant to be a bot anyone can talk to online. The company described the bot as “Microsoft’s A.I. fam the internet that’s got zero chill!.”

  Microsoft initially created “Tay” in an effort to improve the customer service on its voice recognition software. According to MarketWatch, “she” was intended to tweet “like a teen girl” and was designed to “engage and entertain people where they connect with each other online through casual and playful conversation.”

  The chat algo is able to perform a number of tasks, like telling users jokes, or offering up a comment on a picture you send her, for example. But she’s also designed to personalize her interactions with users, while answering questions or even mirroring users’ statements back to them.

  This is where things quickly turned south.

  As Twitter users quickly came to understand, Tay would often repeat back racist tweets with her own commentary. Where things got even more uncomfortable is that, as TechCrunch reports, Tay’s responses were developed by a staff that included improvisational comedians. That means even as she was tweeting out offensive racial slurs, she seemed to do so with abandon and nonchalance.

  Some examples:

  

  

  

  

  

   

  This was just a modest sample.

  There was everything: racist outbursts, N-words, 9/11 conspiracy theories, genocide, incest, etc. As some noted “Tay really lost it” and the biggest embarrassment was for Microsoft  which had no idea its “A.I.” would implode so spectacularly and right in front of everyone. To be sure, none of this was programmed into the chat robot, which was immediately exploited by Twitter trolls, as expected, and demonstrated just how unprepared for the real world even the most advanced algo really is.

  Some pointed out that the devolution of the conversation between online users and Tay supported the Internet adage dubbed “Godwin’s law.” This states as an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches.

  Microsoft apparently became aware of the problem with Tay’s racism, and silenced the bot later on Wednesday, after 16 hours of chats. Tay announced via a tweet that she was turning off for the night, but she has yet to turn back on.

  Humiliated by the whole experience, Microsoft explained what happened:

  “The AI chatbot Tay is a machine learning project, designed for human engagement. It is as much a social and cultural experiment, as it is technical. Unfortunately, within the first 24 hours of coming online, we became aware of a coordinated effort by some users to abuse Tay’s commenting skills to have Tay respond in inappropriate ways. As a result, we have taken Tay offline and are making adjustments.”

  Microsoft also deleted many of the most offensive tweets, however, copies were saved on the Socialhax website, where they can still be found.

  Finally, Tay “herself” signed off as Microsoft went back to the drawing board:

  c u soon humans need sleep now so many conversations today thx????

  — TayTweets (@TayandYou) March 24, 2016

  We are confident we’ll be seen much more of “her” soon, when the chat program will provide even more proof that Stephen Hawking’s warning was spot on.

  

  

  

  

  

• Jihad In Brussels

  Submitted by Judith Bergman via The Gatestone Institute,

  • "Islam belongs in Europe…. I am not afraid to say that political Islam should be part of the picture." — Federica Mogherini, EU High Representative for Foreign Affairs and Security Policy.

  • The Western narrative represents a complete refusal to examine the doctrines of Islam, out of fear of offending Muslims. This is not a purely European phenomenon. The Obama Administration ordered a cleansing of training materials that Islamic groups deemed offensive.

  • One crucial aspect of sharia that the West refuses to internalize is the injunction to perform jihad, both violent and non-violent.

  • "[T]he most important factor is Belgium's culture of denial… Observers who point to unpleasant truths such as the high incidence of crime among Moroccan youth and violent tendencies in radical Islam are accused of being propagandists of the extreme-right, and are subsequently ignored and ostracized." — Teun Voten, a Dutch cultural anthropologist who lived in a Muslim area of Brussels between 2005 and 2014.

  Federica Mogherini, the EU's High Representative for Foreign Affairs and Security Policy, said on June 24, 2015, at a conference aptly named "Call to Europe V: Islam in Europe":

  "The idea of a clash between Islam and 'the West'… has misled our policies and our narratives. Islam holds a place in our Western societies. Islam belongs in Europe…. I am not afraid to say that political Islam should be part of the picture."

  Nine months later, the ignorance, willful blindness and sheer incompetence regarding even the most basic tenets of Islam, which Mogherini betrayed in her statement has reaped yet another lethal result. What she said is fairly representative of the view aired in public by the European political and cultural establishment.

  Thirty-one people were killed and around 300 wounded in Brussels on March 22, in the bombings of Brussels airport and Maalbeek metro station, at the heart of the European Union itself. ISIS took responsibility for these latest terrorist attacks

  Mogherini, at an official press conference in Jordan, broke down in tears during her comments on the day's terrorist attacks. But the pain she, as one of the highest-profile representatives of the EU, exhibited on behalf of the many killed and wounded in Europe, is self-inflicted. It is Europe's immunity to facts that has led directly to the current state of utter chaos in European security matters.

  Predictably, ISIS tried to justify the attacks by claiming that Belgium was targeted because it was "a country participating in the international coalition against the Islamic State" — despite Belgium having participated only in a limited bombing campaign in Iraq that ended nine months ago. Clearly, the Iraq campaign had nothing to do with the Brussels attacks, but served as a useful excuse because this kind of reasoning feeds into the dominant narrative in Europe, as expounded by Federica Mogherini.

  The current Western narrative represents a persistent and unfaltering refusal to examine the doctrines of Islam, out of fear of offending Muslims. This refusal is not a European phenomenon. The White House ordered a cleansing of training materials that Islamic groups deemed offensive as far back as five years ago. In 2013, the Washington Times also reported that countless experts on Islamic terrorism were banned from speaking to any U.S. government counterterrorism conferences, which include those of the FBI and the CIA. Government agencies were instead ordered to invite Muslim Brotherhood front groups.

  Western political and military establishments, as well as media and cultural elites, refuse to examine the political and military doctrines of Islam, and make them a subject of honest intellectual inquiry. When they are facing an enemy that uses these very doctrines as its reason for being, this refusal can only be described as gross malfeasance and reckless endangerment.

  The political and cultural elites regularly communicate a deep fear that the fight against terrorism, if taken too far, may compromise the very democratic values and freedoms that this fight is meant to preserve. What they ignore is the irony that, by abdicating the right freely to inquire about — and discuss — the nature of Islam, they have already compromised the most fundamental democratic value: freedom of thought, expressed by freedom of speech.

  Political Islam is indeed already very much a part of the picture in Europe, but not quite in the way Mogherini imagined it.

  The political and military doctrines of Islam — the political Islam to which Mogherini so casually refers — are codified in Islamic law, sharia, as found in the Quran and the hadiths. Unlike prevailing misconceptions on Islam, these doctrines are not, in mainstream Islam, subject to mitigating interpretations.

  The Islamic injunction to perform jihad, both violent and non-violent, seems an aspect of sharia the West refuses to internalize. CIA director John Brennan, in a 2010 speech to the Center for Strategic and International Studies, when he was deputy national security advisor for homeland security, described jihad as,

  "a holy struggle, a legitimate tenet of Islam, meaning to purify oneself or one's community, and there is nothing holy or legitimate or Islamic about murdering innocent men, women, and children."

  This is simply not true. As Dr. Majid Rafizadeh writes, the Quran is not open to interpretation:

  "The Qur'an has descended, word for word, from the creator Allah, through Muhammad. This is accepted throughout the entirety of the Islamic word… a true Muslim, who represent[s] the real Islam, should be the one who follows and obeys Allah's words (from the Qur'an) completely. As a result, anyone who ignores some of the rules is not, and cannot be, considered a reflection of Islam, a good Muslim, or even a Muslim."

  Sheikh Muhammad Abdullah Nasr, a scholar of Islamic law and graduate of Egypt's Al Azhar University, explained in November 2015 why the prestigious institution, which educates mainstream Islamic scholars, refuses to denounce ISIS as un-Islamic:

  "The Islamic State is a byproduct of Al Azhar's programs. So can Al Azhar denounce itself as un-Islamic? Al Azhar says there must be a caliphate and that it is an obligation for the Muslim world. Al Azhar teaches the law of apostasy and killing the apostate. Al Azhar is hostile towards religious minorities, and teaches things like not building churches, etc. Al Azhar upholds the institution of jizya [extracting tribute from religious minorities]. Al Azhar teaches stoning people. So can Al Azhar denounce itself as un-Islamic?"

  Yusuf al-Qaradawi is an extremely influential Islamic cleric and jurist. He is the spiritual leader of the Muslim Brotherhood, as well as chairman of the International Union of Muslim Scholars, president of the European Council for Fatwa and Research, and the host of a popular Al-Jazeera TV program about sharia. Qaradawi has stated that,

  "the shariah cannot be amended to conform to changing human values and standards. Rather it is the absolute norm to which all human values and conduct must conform."

  Turkey's President Recep Tayyip Erdogan, also an Islamist leader, has repeatedly rejected Western attempts to portray his country as an example of "moderate Islam." He states that such a concept is "ugly and offensive; there is no moderate Islam. Islam is Islam."

  The jihadists who carry out terrorist attacks in the service of ISIS are merely following the commands in Quran 9:5, "Fight and kill the disbelievers wherever you find them…" and Quran 8:39, "So fight them until there is no more fitna [strife] and all submit to the religion of Allah."

  Of course, not all Muslims adhere to this view of sharia. Many devout Muslims, including Egypt's President Abdel Fattah el-Sisi, have said they wish to reform it.

  There is, however, a persistent refusal by many in the West to acknowledge that sharia is the doctrine with which jihadists justify the war they wage on the West. This refusal is a most dangerous form of dishonesty; it has arguably already cost hundreds of lives on both American and European soil.

  Unless Islam is radically reformed, and progressive Muslims are supported in a serious way (instead of bypassed in favor of Muslim Brotherhood fronts and other questionable organizations), these kind of terrorist attacks — and worse — could well become even more common throughout the West.

  The infantile refusal of many government leaders to face the hard facts about the nature of Islam's tenets, as opposed to indulging in fanciful utopian fantasies, will not change the plans of jihadists; it will only embolden them.

  There is now speculation that the terrorist attacks in Brussels might have been revenge for the arrest of Salah Abdeslam, who was apprehended last week as a suspect in the Paris terrorist attacks of November 13, 2015. This speculation misses the point. This time, the excuse is the arrest of a high-profile terrorist; with the next attack, the excuse will be something else. There is never any shortage of things that "offend" jihadists. The heart of the matter, however, is the criminally negligent way in which European and American officials deal with the fundamental issue of the doctrines of Islam.

  In a revealing article published November 21, 2015, Teun Voten, a cultural anthropologist who lived in the Muslim majority Molenbeek district of Brussels between 2005 and 2014, asks himself how Molenbeek became the jihadi base of Europe. His answer:

  "…the most important factor is Belgium's culture of denial. The country's political debate has been dominated by a complacent progressive elite who firmly believes society can be designed and planned. Observers who point to unpleasant truths such as the high incidence of crime among Moroccan youth and violent tendencies in radical Islam are accused of being propagandists of the extreme-right, and are subsequently ignored and ostracized.

   

  "The debate is paralyzed by a paternalistic discourse in which radical Muslim youths are seen, above all, as victims of social and economic exclusion. They in turn internalize this frame of reference, of course, because it arouses sympathy and frees them from taking responsibility for their actions. The former Socialist mayor Philippe Moureax, who governed Molenbeek from 1992 to 2012 as his private fiefdom, perfected this culture of denial and is to a large extent responsible for the current state of affairs in the neighborhood.

   

  "Two journalists had already reported on the presence of radical Islamists in Molenbeek and the danger they posed — and both became victims of character assassination."

  This terror-enabling culture of willful ignorance and denial continues up until today — compounded by the lack of a central and unified security authority in Brussels. The city has 19 mayors, one for each borough assembly — as exemplified by the current mayor of Molenbeek, Françoise Schepmans.

  One month prior to the Paris attacks, Schepmans received a list "with the names and addresses of more than 80 people suspected as Islamic militants living in her area," according to the New York Times. The list was based on information from Belgium's security apparatus, and included three of the terrorists behind the Paris attacks, including Salah Abdeslam. "What was I supposed to do about them? It is not my job to track possible terrorists," Mayor Schepmans said. "That is the responsibility of the federal police."

  Federica Mogherini, the EU's de facto foreign minister (posing at left with Iranian Foreign Minister Javad Zarif) said last year, "Islam belongs in Europe…. I am not afraid to say that political Islam should be part of the picture." Françoise Schepmans (right), mayor of the Molenbeek district of Brussels, received a list with the names and addresses of over 80 suspected Islamic militants living in her area. "What was I supposed to do about them? It is not my job to track possible terrorists," she said. "That is the responsibility of the federal police."

  This lack of accountability can only exacerbate an already dire situation. Far more damning, according to reports, is that Belgian authorities had accurate advance warnings that terrorists planned to launch attacks at Brussels airport and in the subway — yet they failed to act. This extremely lax approach to security appears to be a widespread problem in the Belgian — and probably European — political and security apparatus.

  If there is to be any hope of fighting the terror threats against the West, and actually bringing public life back to a semblance of normality, at an absolute minimum the politics of willful ignorance, political correctness, and denial will have to go.

  

  

  

  

  

• When Does The U.S. Stock Bubble Burst: The Best Hedge Fund Of 2016 Has A Surprising Answer

  The name of Russell Clark and his Horseman Global hedge fund are well-known to regular readers: Clark is perhaps best known not only for having run a net short book since early 2012…

  

   

  … but for being consistently profitable and successful during this period, a time when most of his “pedigree” peers have been underperforming the market and losing money hand over fist.

  

  

   

  In fact, based on its size, one can probably argue that Horseman Global is the most successful hedge fund of 2016, if not of the entire decade.

  His latest letter to clients can be found here.

  The reason we bring Horseman Global up is not because his latest letter is out – we will share that once we have it – but because Russell Clark has released a fascinating white paper which seeks to answer the most important question of all: not if there is a bubble – by now everyone, even the central bankers, knows we are currently living inside the biggest asset bubble in history, but when does it burst.

  This is what he says in a letter that looks at the curious relationship between peaks in the Nikkei ant the S&P500:

  “One of the curious things over the last few years, is that despite the last two bubbles in markets being mainly US centred (dot com bubble and US housing) it has been the Japan based Nikkei that has peaked 3 to 6 months before the S&P 500.”

  Here is his full letter:

  One of the curious things over the last few years, is that despite the last two bubbles in markets being mainly US centred (dot com bubble and US housing) it has been the Japan based Nikkei that has peaked 3 to 6 months before the S&P 500. The Nikkei peaked in March of 2000, while the S&P 500 rolled lower in August of that year. The Nikkei peaked in June of 2007, while the S&P 500 peaked in October of that year.

  

  The question is why should this be the case? Most investors would argue that the US economy is larger than Japan, and its stock markets are larger and more liquid. Theoretically, the US market should lead the Japanese markets.

  The reality is that the US does not fund itself. The US has been running a fairly consistent current account deficit since the 1980s.

  

  To fund this current account deficit the US has become the world’s biggest debtor. The US net international investment position was extremely positive for most of the post war period, but over the last decade has deteriorated dramatically.

  

   

  The biggest supplier for credit to the US, particular relative to GDP has been Japan which has seen its net international investment position swell tremendously over the last decade.

  

  My view is that the Japanese are the world’s biggest net savers and investors, and it is the movement of Japanese investments that cause the biggest moves in currencies and equities. If we convert the S&P into yen, we can see that Nikkei and S&P 500 tend to fall at the same time. That is the Nikkei and the S&P move together.

  

  This seems to point to yen weakness being a good indicator of equity strength, as Japanese investors sell yen and seek higher returns elsewhere. Conversely yen strength is a sign that Japanese investors are repatriating assets and global markets are likely to be weak, at least in yen terms. If this is true, the most troubling aspect of such a theory is that Bank of International Settlement (“BIS”) put the case that yen is trading still close to all-time lows on a real trade weighted basis.

  

  This line of thinking provides a very simple model for the performance of the Nikkei and S&P based on the value of the yen. If we assume that yen can rally to 100, we see that the Nikkei traded around 14000 the last time yen traded at 100. This model would assume the S&P would then trade somewhere between 1400 and 1600. I am very interested to see if this theory continues to work.

  * * *

  So are we.

  And there you have it: if you want to know if the US stock bubble is about to burst, just keep an eye on the hilarious if ricketty debacle that Japan’s “stock market” have become, where only the daily interventions of the BOJ keep the whole house of cards from crashing down and wiping out Japan’s economy from the face of the earth. Because if the Nikkei is unable to “keep it up” despite a historic amount of debt monetizations, ETF and REIT purchases, and negtive rates by the BOJ, the S&P 500 will follow shortly.

  

  

  

  

  

• Countdown To Insolvency Begins For Chicago Pensions As State Supreme Court Rejects Reform Bid

  Last July, Cook County judge Rita Novak dealt Chicago Mayor Rahm Emanuel a bitter blow in his efforts to cut pension expenses.

  “A Cook County judge will rule on the legality of a 2014 pension law aimed at reforming two of Chicago’s underfunded city retirement systems,” the Illinois Policy Institute wrote, in the lead up to the crucial ruling. “While the pension law included some much-needed reforms, such as an increase in the retirement age, if upheld the law ultimately would put Chicago residents on the hook for millions of dollars of tax increases.”

  Novak’s decision came on the heels of a May ruling by the state Supreme Court which, in a unanimous decision, struck down a pension reform bid as an unconstitutional violation of benefits that are widely seen as sacrosanct. The read through from that ruling prompted Moody’s to downgrade Chicago to junk, giving the Windy City the dubious distinction of being the only major metropolitan area “in recent history” to carry such a low rating other than Detroit.

  Two months later, Novak cited the state Supreme Court’s ruling on her way to declaring Emanuel’s plan unconstitutional.

  “This principle is particularly compelling where the Supreme Court’s decision is so recent, deals with such closely parallel issues and provides crystal-clear direction on the proper interpretation of the law,” Novak wrote. “The Constitution of Illinois provides that public pensions shall not be diminished or impaired.”

  There you go. As we’ve discussed on a number of occasions, the Illinois Supreme Court’s decision has ramifications far beyond the state’s borders. “My reaction was, ‘Yeah, that’s going to play here,’ ” John D. McGinnis, a lawmaker in Pennsylvania told The New York Times last summer. Pennsylvania, The Times continued, “has also been diverting money from its pension system, setting the stage for a crisis as more and more public workers retire.”

  Essentially, what Illinois has done is set a precedent whereby efforts to reform pension plans and restore sustainability will everywhere and always be struck down. That leaves lawmakers with few options and may end up forcing officials to extend and pretend with ponzi-like schemes such as pension obligation bonds.

  In any event, Chicago made a last ditch effort to salvage the reform effort after Novak’s ruling by appealing Cook County’s decision to the State Supreme court.

  Put simply: Emanuel lost. The court deemed his plan unconstitutional.

  “These modifications to pension benefits unquestionably diminish the value of the retirement annuities the members of (the city workers and laborers funds) were promised when they joined the pension system. Accordingly, based on the plain language of the act, these annuity reducing provisions contravene the pension protection clause’s absolute prohibition against diminishment of pension benefits, and exceed the General Assembly’s authority,” the justices wrote in their opinion.

  “Emanuel tried to require city workers and laborers to increase their retirement contributions by 2.5 percentage points — to 11 percent of their wages — in phases over five years,” The Chicago Tribune writes, adding that “in exchange, the city agreed to increase its annual contributions to the pension funds by hundreds of millions of dollars a year [by] increasing fees on telephone and cellphone bills for emergency dispatch services by $1.40 a month, to $3.90, on every line billed to a city address.”

  Stephen Patton, counsel for the city, tried to make an argument that was absurd and yet completely accurate all at the same time. The changes, he said, did not diminish or impair pension benefits, rather the city’s plan “preserved and protected” them.

  As we wrote immediately after Novak’s ruling last summer, “while we certainly understand the idea that cutting pension benefits amounts a breach of the so-called ‘implicit contract’ between public sector employees and state and local governments, it seems as though workers and the courts are suffering from an acute case of myopia and denial of economic realities. Put simply: if the pension system isn’t reformed, it will run out of money and no one will get anything.”

  “A recent analysis by the Municipal Employees’ Annuity and Benefit Fund of Chicago concluded its assets would be depleted by 2024 if Emanuel’s pension plan failed to pass constitutional muster,” The Tribune continues. So Patton is correct. The reforms would “preserve and protect” benefits but they would of course also diminish them materially from current levels.

  The good news for taxpayers is that they’ll be off the hook in the short-term. Some $250 million the city had committed to spend to sweeten the deal for pensions that went along with the plan will no longer be needed. But over the long haul, this is a disaster. “The city faces a short-term benefit of about $89 million that’s currently in escrow that can be used to help other areas of the budget. But it will be a very hollow victory for the beneficiaries,” Civic Federation President Laurence Msall said.

  “While their contributions will diminish slightly, the condition of the funds will revert back to something that is totally unsustainable and in danger of being completely insolvent within 10 to 15 years,” he continued, before delivering the following rather dire assessment: “Hundreds of millions in savings from rationalized pension benefits will be lost that will either have to be made up from reductions in city services, increased taxes or by allowing these funds to further deteriorate.”

  Of course it’s not that representatives of city employees don’t understand what the word “insolvent” means. They just don’t think it’s workers’ responsibility to figure out how to dig out of the hole. “For too long, city workers have been labeled as the problem when, in fact, we are part of the solution.,” Jeff Johnson, president of the Municipal Employees’ Society representing city workers, said. “With a modest pension of $34,000 and a high population residing in Chicago, we are the single largest tax base of any group.”

  AFSCME Council 31, the Chicago Teachers Union, the Il. Nurses Association and Teamsters Local 700 all agree. “Politicians caused the pension debt by failing to adequately fund employee retirement benefits while city employees were faithfully paying their share,” they said, in a joint statement. Here’s more color from the Chicago Sun Times:

  Earlier this week, top mayoral aides said the city’s course of action would depend largely on how Thursday’s Supreme Court ruling is worded.

   

  If the court gives Chicago a road map on how benefit reductions and increased contributions might be negotiated — in exchange for some other benefit chosen by the employee — then Emanuel will bring labor leaders back to the bargaining table to hammer out such an agreement.

   

  If the door is slammed shut and the court says there is nothing the city can do to change the benefits, then the mayor will have no choice but to find a way to pay the added costs.

   

  In that case, he’ll try to negotiate work-rule changes, lower break-in pay for new employees, another round of health care reforms, and other cost-saving concessions, and dedicate those savings to pensions, City Hall sources said.

   

  The remaining shortfall could come from raising the telephone tax. Chicago is legally authorized to raise its telephone tax to the highest rate charged by any municipality in the state. That means there’s room to grow.

   

  More property tax increases are unlikely, considering the fact that Emanuel just raised property taxes by $588 million for police and fire pensions and school construction and has promised to raise them by another $170 million for teacher pensions, whether or not the state does its part to help a nearly bankrupt Chicago Public School System.

   

  “Obviously, we would have preferred a win, but we don’t think the door is completely shut. They left the door open on collective bargaining as a possible,” said a top mayoral aide who asked to remain anonymous.

   

  Emanuel acknowledged that borrowing more money is “not my favorite option.” But it’s a “better option” than asking property owners to pay more at a time when Rauner’s pro-business, anti-union agenda has the state “spinning around and not doing anything,” the mayor said.

  What all of the above means is that irrespective of who’s ultimately at fault, there will be no legislating away pension benefits – even if doing so is the only realistic way for officials to ensure that state and local governments can continue to pay out any benefits at all going forward. That is, even if long-run insolvency is certain, benefits will be paid out in full up to and until the day of reckoning finally comes and it will be up to lawmakers to figure out how to rescue the system in the meantime. If that means raising taxes and/or going into further debt, then that’s what it means. 

  Obviously, this doesn’t bode well for fiscal sustainability and one can’t help but think that further downgrades from Moody’s are right around the corner. The takeaway for the rest of the country’s state and local governments: if you were considering pension reform, don’t.

  *  *  *

  Full ruling

  Illinois Supreme Court Chicago Municipal Pension

  

  

  

  

  

• The Forex Rigging Irony

  While Forex banks, traders, and other institutions are being blamed for market rigging, the Swiss National Bank can publish reports about its own market rigging, but instead of being a scandal, it’s economic data.  That’s because the vast majority don’t understand how the Forex markets work.  It’s not insulting – it’s a fact.  Currently there are hundreds of pending litigation cases against a plethora of Forex banks, traders, and other institutions – but none against a central bank.  Of course it would be ridiculous to sue a central bank for market rigging – because it’s in their mandate to manipulate the market.  Of course they don’t call it manipulation, they call it ‘market operations’ and the Fed, sometimes known as ‘market intervention’ or ‘stabalization efforts.’  Anyhow, it seems strange that on the one hand, central banks manipulate their own currency via ‘market operations’ which mostly are done through commercial Forex banks, but it is the Forex banks that receive this printed money that are sued, not the central banks.

  But look from the CB perspective – what’s the point of printing money if you can’t use it to intervene in the market and prop your own currency?  

  From Fortress Capital (source: Bloomberg):

  The Swiss National Bank will probably stay on hold at its monetary policy meeting on March 17 as banks in the country are already facing pressure from negative interest rates, economists and strategists say in notes to clients.

  The fact that the euro remained broadly stable against Swiss franc after the European Central Bank meeting lessens pressure on the SNB to act this week. SNB may intervene in the forex market to stem the franc’s appreciation.

  The question in everyone’s mind now – do these central banks really know what they are doing?  I mean, is there a coordinated international policy?  A conspiracy?  A conspiracy would imply intelligence.  Who knows.  

  One perspective is to look at Forex markets from the perspective of those in power, the UHNWI, or ‘them’ – ‘they’ or ‘The Elite.’  They have all the money they can possibly have – with this money they buy power, such as politicians, countries, people, etc.  They can’t buy anything more.  So the only thing left is to ensure the status quo – or ensure as much as possible they maintain their position.  One way to do this which is more subtle, is to destroy the money supply.  By making currency worthless, or worth – less, any potential competition will be either wiped out or marginalized.  Would-be billionaires and up and coming entrepreneurs who are out there in the ‘real world’ making business, are contained.  It also affords them other opportunities, such as providing this fresh QE money to the private banks they actually own, allowing them to invest in HFT and other stat arb style investment strategies with virtually no risk, allowing them to grow their own portfolios at a level which is practically speaking, exponentially greater than the average investor.  And if their investments fail, they can always bail themselves out – or as the trend is, tax savers and bail themselves in.

  Remember, our financial system is created by rules that are constantly changing.  Just as Central Bank are created they are destroyed.  Russia being one of the newest Central Bank in the game; about 30 years old:

  The Central Bank of the Russian Federation (Bank of Russia) was established July 13, 1990 as a result of the transformation of the Russian Republican Bank of the State Bank of the USSR. It was accountable to theSupreme Soviet of the RSFSR. On December 2, 1990 the Supreme Soviet of the RSFSR passed the Law on the Central Bank of the Russian Federation (Bank of Russia), according to which the Bank of Russia has become a legal entity, the main bank of the RSFSR and was accountable to the Supreme Soviet of the RSFSR. In June 1991, the charter was adopted by the Bank of Russia. On December 20, 1991 the State Bank of the USSR was abolished and all its assets, liabilities and property in the RSFSR were transferred to the Central Bank of the Russian Federation (Bank of Russia), which was then renamed to the Central Bank of the Russian Federation (Bank of Russia). Since 1992, the Bank of Russia began to buy and sell foreign currency on the foreign exchange market created by it, establish and publish the official exchange rates of foreign currencies against the ruble.

  If Russia can establish a new Central Bank, why can’t the United States of America, Australia, Canada, Germany?  How close are we to a hyperinflationary trap, as happened during the 19th century?

  Wildcat banking refers to the practices of banks chartered under state law during the periods of non-federally regulated state banking between 1816 and 1863 in the United States, also known as the Free Banking Era. This era, commonly described as an example of free banking, was not a period of true free banking, as banks were free of only federal regulation; banking was regulated by the states. The actual regulation of banking during this period varied from state to state.

  According to some sources, the term came from a bank in Michigan that issued private paper currency with the image of a wildcat. After the bank failed, poorly backed bank notes became known as wildcat currency, and the banks that issued them as wildcat banks.^[1]However, according to others, wildcat meant a rash speculator as early as 1812, and by 1838 had been extended to any risky business venture.^[2] A common conception of the wildcat bank in Westerns and like stories was of a bank that left its safe somewhat ajar for depositors to see, in which the banker would display a barrel full of nails, grain or flour with a thin sprinkling of cash on top, thus fooling depositors into thinking it was a successful bank.  The traditional view of wildcat banks describes them as distributing nearly worthless currency backed by questionable security (such as mortgages and bonds). These actions ended when note circulation by state banks was stopped after the passage of the National Bank Act of 1863. Mark Twain, in his autobiography, refers to the use of such currency in 1853, “The firm paid my wages in wildcat money at its face value”.

  Certainly, our current system is better that which was used during the “Free Banking Era” because the fiat money today is NOT “worthless currency” – but Central Banks such as the SNB (Swiss National Bank) certainly are trying hard to make it such!

  Forex isn’t just a money market, it’s the underpinning of all other markets (i.e. you sell your stocks for US Dollars).  Learn more about Forex with Splitting Pennies – Understanding Forex – the book.

  

  

  

  

  

• 3 Things: 80% Or Bust, Mind The Gap, It’s A Bunny

  Submitted by Lance Roberts via RealInvestmentAdvice.com,

  80% Or Bust

  Not surprisingly, the recent sharp reflexive rally has brought the bulls out in full force as noted by a recent comment on my post earlier this week on “4% From The Highs:”

  “…by the time you get confirmation with the long term indicators above, you will miss out on 20 to 30% of the rally.”

  It’s a fair point if you are a short-term trader looking to time the market. I’m not. As a long-term investor, and specifically as a manager of “other people’s money,” I am much more concerned with the specific inflection points where market dynamics change from a generally positive trend, to a negative one.

  Yes, I will most definitely miss both the bottom and the top of markets. As shown in the chart below, the technical indications of a change in trend are slow to occur. However, I am only really concerned with capturing, or missing, the 80% between the tops and bottoms of major market cycles.

  

  Further, the majority of the “Best-10” and “Worst-10” days are contained primarily within those 80% spans.

  

  So, yes, I am absolutely going to be “wrong” at the tops of markets and at the bottoms while I await confirmation of a longer-term “trend” to emerge. For those that are inherently “bullish” who choose “hope” over what prices are “actually” doing, the historical outcomes have been brutal, to say the least.

  As I have said before, my methodologies are my own. They are not new ideas. They are not innovative. They are simply the lessons I have been repeatedly taught over the last 30-years of managing money. If the markets reverse the current long-term sell signals, I will happily put a lot more money to work. Until then, I will wait rather than trying to “draw to an inside straight.” 

  Think about it this way – if betting in the markets was really the way to build wealth, wouldn’t the vast majority of Americans be wealthy versus just the top 1%? Just a thought.

  Mind The Gap

  I have discussed the problems with earnings and earnings estimates in the past stating:

  “In a 2010 study, by the McKinsey Group, they found that analysts have been persistently overly optimistic for 25 years. During the 25-year time frame, Wall Street analysts pegged earnings growth at 10-12% a year. Unfortunately, earnings only grew at 6% which, as we have discussed in the past, is the growth rate of the economy.”

  

  “The McKenzie study also noted that on average “analysts’ forecasts have been almost 100% too high” which leads investors to make much more aggressive bets on the financial markets. “

  My friend Salil Mehta from Statistical Ideas recently published a great piece on this issue.

  “The gap between the 2016 forecasts and the YTD returns through January is 13% (8% target minus the -5% YTD). Annual returns have a nearly 20% standard deviation (or 19% if you only look from the end of January onward). So it is still plausible — though rather unlikely, with only a one in five probability — to reach the 8% target gain for 2016. (For statistics wonks, the test statistic decomposes the 13% gap to a ~9% move in addition to the typical 4.5% annualized return, and then factors in a 19% standard deviation.) Now that we are further into the year (mid-March), euphoria and complacency are back to extreme market top levels.

   

  It’s also worth noting that strategists at major firms are consistently bullish, year after year. The sources of the most optimistic prognostications also don’t change. Sorted from most to least bullish, they are Federated Investors, JP Morgan, Prudential, Bank of America, and Columbia.”

  

  “In the table below, two pieces of information averaged among the 10 firms listed above are presented:

  1. The difference between the target and the January YTD returns.
  2. The rest of the year returns.”

  ---

  

  ---

  “If these analyst forecasts were mostly in the right direction, you would expect a positive linear relationship between 1 and 2. Regrettably, there is a negative relationship instead. Never mind that the market continued its drop in February, even after the revised forecasts, and the rebound leaves the market still below many firm’s 2016, 2015, and even 2014 targets!

   

  In other words, the larger the gap in January between the YTD returns and the year-end target, the more unlikely the chance the market will recover to the target by the year’s end.

   

  Think about this: For 2016, the 13% gap noted earlier (after the standardization adjustment) is the largest gap among this data.”

  As Salil concludes. “That’s not a good omen.”

  It’s A Bunny

  Since it is Easter, I will leave you with a story about a bunny.

  James Paulsen, Chief Investment Strategist for Wells Capital Management, recently penned an excellent piece with respect to the ongoing “bull/bear” debate.

  “The accompanying exhibit illustrates the U.S. stock market since WWII with recessions shown by the grey bars. In the last two expansions (during the 1990s and again in the 2000s), the stock market was uninterrupted by a bear market posting solid and steady returns until the economic recovery ended with a recession. So far, despite some volatility in 2011, this has also characterized the contemporary bull market. Without a bunny market in more than 20 years (as shown in Exhibit 1, the last bunny market was in the mid-1990s), most investors currently seem to accept that either the bull market will soon resume or we are nearing the end of this expansion. Since there has not been one in some time, few consider that stocks could simply be headed for another bunny market.”

  

  “Most bunny markets occur in the latter part of an economic recovery. Stocks initially recover aggressively after a recession. However, as the recovery matures, cost-push pressures, inflation, and higher interest rates begin to pressure the bull market. This often resolves into a bunny market for the balance of many economic recoveries.“

  I have modified his chart to notate both secular bull and bear market periods. During secular bear markets, as we most likely currently remain in, volatility swings and prices declines are substantially larger than during secular bull market periods. This elevates the risk of emotionally driven investment mistakes during periods of markedly higher volatility which leads to lower rates of investor returns longer term.

  Just some things to think about.