• Declining Production Rates for many of the Top 30 Oil Producing Countries (Video)

  By EconMatters

   

  

  People don`t realize the magnitude of all the Oil Producing Countries with declining Production Rates, and trending the wrong direction compared with the consistent and steady rise in Global Oil Demand Growth.

  The Oil Market is going to ‘unbalance’ in the opposite direction over the next 12 months, and start heading south fast over the next five years. The US probably needs to increase Oil Production to 12 Million Barrels per day in five years just to keep up with global oil demand, as the US is one of the few countries globally capable of increasing capacity given the resource requirements, political stability, and technological requirements necessary to invest in these capital intensive projects.

  But it is going to take a much higher price for a sustained duration to get the US all the way to 12 Million Barrels per day, as much of the low hanging fruit has already been taken out of the ground so to speak.

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

  

• US Futures Tumble After China Devalues Yuan By Most Since August Collapse

  The ‘odd’ regime shift in the relationship between USDJPY and US equities continues overnight. Following some visible-handedness and follow-through momentum, Yen is weakening against the USD – normally a big flashing green sign for risk-on pajama traders but China’s biggest Yuan devaluation in 9 months (since the August turmoil) seems to have stolen the jam out of the bull’s donut as US equity futures extend losses, AsiaPac credit risk jumps, and USD strength is weighing on crude prices.

  China sent another strong message tonight…

  

   

  Weighing on US equities…

  

   

  Despite Yen weakness…

  

   

  As the Correlation regime has shifted in Yen Carry…

  

   

  It seems the message is loud and clear – Stop with the hawkish tone or else August happens again!!

  

  

  

• ECB Study says US data 'leaked' to key traders

  Apparently, Europeans need to do ‘studies’ to show that markets are rigged.  See the study here.  In Summary:

  We examine stock index and Treasury futures markets around releases of U.S.
  macroeconomic announcements. Seven out of 21 market-moving announcements
  show evidence of substantial informed trading before the official release time. Prices
  begin to move in the “correct” direction about 30 minutes before the release time.
  The pre-announcement price drift accounts on average for about half of the total
  price adjustment. These results imply that some traders have private information
  about macroeconomic fundamentals. The evidence suggests that the preannouncement
  drift likely comes from a combination of information leakage and
  superior forecasting based on proprietary data collection and reprocessing of public
  information. 

  Readers of Splitting Pennies understand Forex and how central banks control Forex markets, which is a superset of all other markets.  So it’s interesting that a working group at the ECB studies stock & treasury futures markets, to show ‘insider trading’ based on ‘price drift’ – are they setting themselves up for the ultimate proof for manipulating the Euro surrounding key ECB data releases?

  Although their conclusion is probably correct, their methodology is ridiculous.  Their proof that there’s insider trading going on is based on ‘price drift’ which accounts for about 50% of the post-data move.

  The European Central Bank published a working paper — which means it hasn’t been peer reviewed as yet — arguing that seven out of 21 market-moving announcements show evidence of “substantial informed trading” before the official release time.The paper identified seven indicators that they said showed “strong” evidence of pre-announcement drift: The Conference Board’s consumer confidence index; the National Association of Realtors’ existing-home sales report and pending-home sales report; the Commerce Department’s preliminary GDP report; the Federal Reserve’s industrial production report; and the Institute for Supply Management’s manufacturing and nonmanufacturing index.

  The accused, has a more reasonable answer for ‘price drift’ – it’s because the market expects the numbers to be as expected:

  A spokesman for the National Association of Realtors says they take any allegations seriously. He points out that the existing-home-sales report is released from a secure location, that reporters are instructed not to communicate outside of the room, and that the organization monitors the media to make sure data is not disseminated early. He’s said on occasion media organizations have accidentally released data early, apologized to the group and not done so subsequently.  The spokesman also suggested, however, that traders may be making educated guesses. The pending-home-sales release tracks closely what the existing-home-sales report eventually shows.  A Federal Reserve spokesman declined to comment. Messages left with the Commerce Department’s Bureau of Economic Analysis and The Conference Board weren’t returned.

  Maybe these Eurodemics didn’t know that Reuters sells data front running as a service, it’s now called “Low Latency News” – See the brochure here.

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• A Whistleblower Manifesto By Edward Snowden

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  In the beginning of a change, the patriot is a scarce man, and brave, and hated and scorned. When his cause succeeds, the timid join him, for then it costs nothing to be a patriot.

   

  The only rational patriotism, is loyalty to the nation all the time, loyalty to the government when it deserves it.

   

  – Quotes by Mark Twain

  Every time I hear from Edward Snowden I’m immediately reminded of how thoughtful, courageous and patriotic he is, and how fortunate we are that he followed his conscience and spilled the beans on a multitude of unaccountable and unconstitutional actions routinely committed by America’s deep state government.

  Earlier today, The Intercept posted a piece written by Edward Snowden pulled from the recently published book Inside the Assassination Complex. It’s a short piece, but extremely powerful and to the point. I saw it as a whistleblower’s manifesto in which Mr. Snowden explains why he felt he had no other choice but to come forward, and why others in similar positions should consider doing the same should they find themselves in a position to defend the U.S. Constitution and inform the general public. We all know that the deep state will never voluntarily work to protect “we the people,” as such, leaking on behalf of the public interest is now a matter of national survival.

  So without further ado, here are excerpts from Snowden’s latest piece, Whistleblowing is Not Just Leaking — It’s an Act of Political Resistance:

  I’ve been waiting 40 years for someone like you.” Those were the first words Daniel Ellsberg spoke to me when we met last year. Dan and I felt an immediate kinship; we both knew what it meant to risk so much — and to be irrevocably changed — by revealing secret truths.

   

  One of the challenges of being a whistleblower is living with the knowledge that people continue to sit, just as you did, at those desks, in that unit, throughout the agency, who see what you saw and comply in silence, without resistance or complaint. They learn to live not just with untruths but with unnecessary untruths, dangerous untruths, corrosive untruths. It is a double tragedy: What begins as a survival strategy ends with the compromise of the human being it sought to preserve and the diminishing of the democracy meant to justify the sacrifice.

   

  A single act of whistleblowing doesn’t change the reality that there are significant portions of the government that operate below the waterline, beneath the visibility of the public. Those secret activities will continue, despite reforms. But those who perform these actions now have to live with the fear that if they engage in activities contrary to the spirit of society — if even a single citizen is catalyzed to halt the machinery of that injustice — they might still be held to account. The thread by which good governance hangs is this equality before the law, for the only fear of the man who turns the gears is that he may find himself upon them.

   

  Hope lies beyond, when we move from extraordinary acts of revelation to a collective culture of accountability within the intelligence community. Here we will have taken a meaningful step toward solving a problem that has existed for as long as our government.

   

  Not all leaks are alike, nor are their makers. Gen. David Petraeus, for instance, provided his illicit lover and favorable biographer information so secret it defied classification, including the names of covert operatives and the president’s private thoughts on matters of strategic concern. Petraeus was not charged with a felony, as the Justice Department had initially recommended, but was instead permitted to plead guilty to a misdemeanor. Had an enlisted soldier of modest rank pulled out a stack of highly classified notebooks and handed them to his girlfriend to secure so much as a smile, he’d be looking at many decades in prison, not a pile of character references from a Who’s Who of the Deep State.

  In the above paragraph, Snowden highlights the most corrosive aspect of modern American society, the institutionalization of a barbaric and un-American two-tierd justice system. For more on the Petraeus angle referenced, see: Some Leaks Are More Equal Than Others – Hypocritical D.C. Insiders Line up to Defend General Petraeus from Prosecution.

  Now back to Snowden.

  This dynamic can be seen quite clearly in the al Qaeda “conference call of doom” story, in which intelligence officials, likely seeking to inflate the threat of terrorism and deflect criticism of mass surveillance, revealed to a neoconservative website extraordinarily detailed accounts of specific communications they had intercepted, including locations of the participating parties and the precise contents of the discussions. If the officials’ claims were to be believed, they irrevocably burned an extraordinary means of learning the precise plans and intentions of terrorist leadership for the sake of a short-lived political advantage in a news cycle. Not a single person seems to have been so much as disciplined as a result of the story that cost us the ability to listen to the alleged al Qaeda hotline.

   

  If harmfulness and authorization make no difference, what explains the distinction between the permissible and the impermissible disclosure?

   

  The answer is control. A leak is acceptable if it’s not seen as a threat, as a challenge to the prerogatives of the institution. But if all of the disparate components of the institution — not just its head but its hands and feet, every part of its body — must be assumed to have the same power to discuss matters of concern, that is an existential threat to the modern political monopoly of information control, particularly if we’re talking about disclosures of serious wrongdoing, fraudulent activity, unlawful activities. If you can’t guarantee that you alone can exploit the flow of controlled information, then the aggregation of all the world’s unmentionables — including your own — begins to look more like a liability than an asset.

   

  At the other end of the spectrum is Manning, a junior enlisted soldier, who was much nearer to the bottom of the hierarchy. I was midway in the professional career path. I sat down at the table with the chief information officer of the CIA, and I was briefing him and his chief technology officer when they were publicly making statements like “We try to collect everything and hang on to it forever,” and everybody still thought that was a cute business slogan. Meanwhile I was designing the systems they would use to do precisely that. I wasn’t briefing the policy side, the secretary of defense, but I was briefing the operations side, the National Security Agency’s director of technology. Official wrongdoing can catalyze all levels of insiders to reveal information, even at great risk to themselves, so long as they can be convinced that it is necessary to do so.

   

  Reaching those individuals, helping them realize that their first allegiance as a public servant is to the public rather than to the government, is the challenge. That’s a significant shift in cultural thinking for a government worker today.

   

  At the heart of this evolution is that whistleblowing is a radicalizing event — and by “radical” I don’t mean “extreme”; I mean it in the traditional sense of radix, the root of the issue. At some point you recognize that you can’t just move a few letters around on a page and hope for the best. You can’t simply report this problem to your supervisor, as I tried to do, because inevitably supervisors get nervous. They think about the structural risk to their career. They’re concerned about rocking the boat and “getting a reputation.” The incentives aren’t there to produce meaningful reform. Fundamentally, in an open society, change has to flow from the bottom to the top.

   

  And when you’re confronted with evidence — not in an edge case, not in a peculiarity, but as a core consequence of the program — that the government is subverting the Constitution and violating the ideals you so fervently believe in, you have to make a decision. When you see that the program or policy is inconsistent with the oaths and obligations that you’ve sworn to your society and yourself, then that oath and that obligation cannot be reconciled with the program. To which do you owe a greater loyalty?

   

  As a result we have arrived at this unmatched capability, unrestrained by policy. We have become reliant upon what was intended to be the limitation of last resort: the courts. Judges, realizing that their decisions are suddenly charged with much greater political importance and impact than was originally intended, have gone to great lengths in the post-9/11 period to avoid reviewing the laws or the operations of the executive in the national security context and setting restrictive precedents that, even if entirely proper, would impose limits on government for decades or more. That means the most powerful institution that humanity has ever witnessed has also become the least restrained. Yet that same institution was never designed to operate in such a manner, having instead been explicitly founded on the principle of checks and balances. Our founding impulse was to say, “Though we are mighty, we are voluntarily restrained.”

  For more on the judicial system as the “limitation of last resort,” see: Can You Say ‘Rubber Stamp?’ FBI and NSA Requests Never Denied by Secret Court.

  When you first go on duty at CIA headquarters, you raise your hand and swear an oath — not to government, not to the agency, not to secrecy. You swear an oath to the Constitution. So there’s this friction, this emerging contest between the obligations and values that the government asks you to uphold, and the actual activities that you’re asked to participate in.

   

  By preying on the modern necessity to stay connected, governments can reduce our dignity to something like that of tagged animals, the primary difference being that we paid for the tags and they’re in our pockets. It sounds like fantasist paranoia, but on the technical level it’s so trivial to implement that I cannot imagine a future in which it won’t be attempted. It will be limited to the war zones at first, in accordance with our customs, but surveillance technology has a tendency to follow us home.

   

  Unrestrained power may be many things, but it’s not American. It is in this sense that the act of whistleblowing increasingly has become an act of political resistance. The whistleblower raises the alarm and lifts the lamp, inheriting the legacy of a line of Americans that begins with Paul Revere.

   

  The individuals who make these disclosures feel so strongly about what they have seen that they’re willing to risk their lives and their freedom. They know that we, the people, are ultimately the strongest and most reliable check on the power of government. The insiders at the highest levels of government have extraordinary capability, extraordinary resources, tremendous access to influence, and a monopoly on violence, but in the final calculus there is but one figure that matters: the individual citizen.

   

  And there are more of us than there are of them.

  Amen and perfectly said. We can only hope a handful of government employees and contractors with a conscience and a real dedication to the U.S. Constitution will read this and act accordingly.

  

  

• Mapping The Most Dangerous Places To Live In The World

  Based on the world risk index, which takes into account not only the frequency of natural disasters in each country (known as exposure) but also how well equipped the country is to cope with and recover from the effects of a disaster, The Guardian reports Vanuatu is the riskiest country to live in, with natural disasters on average affecting more than a third of the population each year. If you want to be safe from natural disasters, move to Qatar (the lowest disaster risk country in the world)…

   

  

  Source: The Guardian

  More than one-third of Vanuatu’s population at risk every year

   As a small Pacific island nation with a population of only 260,000 people, a disaster risk of 36.72% places almost 95,000 people at risk from natural disasters each year.

  In 2015 Vanuatu was hit by an earthquake, volcanic eruption and Cyclone Pam in the space of a few weeks, but it’s not just the frequency of disasters that causes problems for the tiny nation. Unlike in larger countries such as the Philippines, a single storm can cause widespread destruction, including in the capital, Port Vila, meaning relief efforts have to be spread across the entire country. Cyclone Pam left 75,000 people in need of emergency shelter and destroyed 96% of food crops.

  If you want to be safe from natural disasters, move to Qatar

   With no reported disasters in EM-DAT, a database of more than 11,000 disasters since 1900, Qatar has the lowest disaster risk of any country, at only 0.08%. It enjoys this status mostly because of its location away from the disaster hotspots in Oceania, south-east Asia and Central America.

  North America and Europe generally rank as significantly low on the list. The United States had a risk level of 3.87% while Canada had a level of 3.14%.

  *  *  *

  Of course – these are just the 'natural' disasters… this does not account for the potential for policy-maker-created catastrophe.

  

  

• Ron Paul: "Our Economic System Is Designed To Fail"

  Submitted Op-Ed via RT.com,

  The current economic system is designed to fail, but so was socialism. That’s according to former GOP Congressman Ron Paul, who told RT’s Boom Bust show that we need to go toward a system of property ownership, voluntary contracts and individual liberty, while getting rid of central banks.

  Ron Paul begins at 14:35…

  A new Harvard University poll shows that 51 per cent of young adults aged 18-29 oppose capitalism in its current form.

  RT: Do you think this poll is just politics, or do you agree that there is something wrong with the US economic system as it operates today?

  Ron Paul: I think the problem is all in semantics. When they say they oppose today’s capitalism, I oppose today’s so-called capitalism. I don’t even like the world “capitalism,” I like “free markets.” But if you say “free markets” and “capitalism” together, we don’t have that. We have interventionism. We have a planned economy, we have a welfare state, we have inflationism, we have central economic planning  by a central bank, we have a belief in deficit financing. It is so far removed from free-market capitalism that it’s foolish for people to label it free market and capitalize on this and say: “We know it’s so bad. What we need is socialism.” That is a problem.

  That is a problem in definitions and understanding of what kind of policies we have. I am a champion of free markets, but not of the current system that we have today. I am highly critical of it, because it is designed to fail. It is designed to reward the rich; it is designed inevitably to destroy the middle class, and also to finance some of the worst things in government: all the deficits with the welfare state and for the warfare state. So yes, it’s failing. People should reject what we have, but they shouldn’t reject liberty and freedom and sound economic policies, because that is not the problem. The problem is we don’t have enough free markets.

  RT: In the same poll it is said that Senator Bernie Sanders, a self-described democratic socialist, has been the most popular candidate for America’s 18-29 year olds. Despite the fact that he is now losing steam, as we’ve seen on the campaign trail, what does it really say to you about what’s driving this voting pattern?

  RP: He’s tapped into something, something that I’ve talked about for years and tapped into when I was a candidate. And that is to describe the frustrations, the evil, and the nonsense of what we have. The problem with Bernie and myself is that he sees it quite differently. He thinks that it’s too much freedom and too much capitalism. And I see it as too much government; it’s too much of interventionist planned economy, which leans itself to fascism. But the young people might not understand the economics and what free markets are really all about, and they don’t understand central banking. And Bernie doesn’t understand that we have to get rid of central planning – from the Central Bank – if we want to help these people.

  The current economic system is designed to fail, but so was socialism. What we need to go toward is property ownership, voluntary contracts and individual liberty in getting rid of the central bank.

  But yes, I am not a bit surprised – it is a good sign that they are upset and they ought to be. What I have in mind is to show them the difference between what we have and what we should have. And believe me, it is not going toward this ancient tradition of government and socialism. We’ve tested socialism. Socialism has been a complete failure. That is what the 20th century was all about, whether it was a fascist system in Germany, or the Soviet system of communism – this all has been a failure. So you don’t want to go toward socialism, you have to go toward property ownership, volunteer contracts and individual liberty in getting rid of the central bank. Then you might talk about a real alternative. But the young people have a justification; they are justified in detesting what we have, because it has served the rich and has really hurt the poor and the middle class.

  RT: Some would argue that the data does signal a generational shift is under way here, in which more young people are receptive to bigger government, rather than smaller government right now. And the issues that young people care at this moment are low wages, jobs, student debt, income inequality, etc. You would probably argue that libertarianism can still best tackle those problems. How so?

  RP: I don’t think the young people would. They might be sucked into believing that the government can give them a temporary benefit by raising a wage, but they just need a better understanding. But they are not for the big government when it comes to their personal liberties, their sexual habits, the civil liberties that they like. They like their privacy. So I don’t think they are looking for bigger government. The young people that I talked to – they are not looking for a bigger government and more militarism; they are not championing the person that wants to spend a lot more money on military and rebuild the military – that’s all big government. 

  But yes, they are tempted because of this lack of understanding to go along with bigger government, when it comes to trying to have a better economic system. This is a result of a hundred years of teaching our young people that government is necessary to redistribute wealth. And they do – they redistribute wealth –  the more they try, the more the wealthy get wealthier. It redistributes it upward, and it ruins the middle class. That is what they have to understand. But they’re onto something and they should be justified in looking at this. But, as a group of people, the millennials are not looking for more government. Only in that economic sphere are they tempted to look at this. There are many others who declare themselves libertarians. They want less government in their lives and they want more privacy and they want [fewer] wars.

  RT: When you ran for president four years ago, you had a message that resonated with young people. Your comments that fixing the economy should start with fixing foreign policy were very popular. Do those voters still exist and where did they go?

  RP: I think a lot of them are sitting on their hands and rightfully so. How could they pick somebody that would champion those same views? But some who are just loosely connected, not well-informed and get led into believing that we have to have a super military force to rule the world, and police the world, and be occupying these countries – yes, they get tempted to go along with this. But the true believer in a free society – they are not champing at the bit to champion the cause of any of these candidates right now…

  RT: Some of those voters might have gone over to Donald Trump. He is the frontrunner on the GOP side. The economy is still the most important issue for voters, and he has been most vocal about amending NAFTA, reducing taxes, building a wall between the US and Mexico, and so on. What is it really do you think at the end of the day? What is so appealing here to his voters?

  RP: He has a personality, he has a megaphone, and he is getting the attention, and you don’t have anybody in particular out there talking about the real economic issues. But he is regressive… he is falling backward. He is going to the dark ages of thinking that he can go into mercantilism, protect natural resources, put on tariffs, and just bash and blame everybody else: The Mexicans, the Chinese. That is going to be devastating to the economy – it has nothing to do with freedom. It has to do with the opposite – it is an exaggeration of economic planning that we already have. So he is going in the wrong direction, just as Bernie is, even if they are both tapping into the disenchantment that… a lot of people have with what is happening.

  

  

• EliminaTED: Cruz Drops Out Of Presidential Race, Leaving Trump Republican Presidential Candidate

  #Breaking: Ted Cruz drops out of the 2016 presidential race https://t.co/7eshI3SCbQ pic.twitter.com/fO5Q3c4hBi

  — CNN (@CNN) May 4, 2016

   

  Ted Cruz drops out of the 2016 presidential race: "We are suspending our campaign" https://t.co/e9c4dkjYeB https://t.co/Uqiezjh6U0

  — CNN Politics (@CNNPolitics) May 4, 2016

   

  As Politico reports,

  Ted Cruz is quitting the presidential race, according to campaign manager Jeff Roe, ending one of the best-organized campaigns of 2016 after a series of stinging defeats left Donald Trump as the only candidate capable of clinching the nomination outright.

   

  Cruz had appeared likely to go all the way to the Republican convention, but a string of massive losses in the Northeast, and his subsequent defeat in Indiana, appear to have convinced him there’s no way forward.

  His wife bore thr brunt of his frustration…

  Ted Cruz elbows wife in the face after suspension campaign https://t.co/o1PKW4zxG4

  — Affinity Magazine (@TheAffinityMag) May 4, 2016

  And of course, Kasich is sticking with it…

  John Kasich, however, pledged on Tuesday night to stay in the race until a candidate reaches 1,237 bound delegates.

  And finally…

  Carly Fiorina files for unemployment.

  — Stalingrad & Poorski (@Stalingrad_Poor) May 4, 2016

  HISTORIC: Carly Fiorina is reportedly the shortest-lived vice presidential candidate in history. pic.twitter.com/azLMlKtzvR

  — Breaking News Feed (@pzf) May 4, 2016

  Most importantly, with Cruz's withdrawal from the race, this means that barring something completely unexpected, the Republican party's presidential candidate is now Donald Trump.

   

  

  And it's official…

  .@realDonaldTrump will be presumtive @GOP nominee, we all need to unite and focus on defeating @HillaryClinton #NeverClinton

  — Reince Priebus (@Reince) May 4, 2016

  "I put Trump recently at a 2% chance to be the Republican nominee. 1 in 64 chance if you round-up"-Nate Silver on August 21, 2015

  — GreekFire23 (@GreekFire23) May 4, 2016

  But, but, but…

  

  h.t @tinderboxcap

  

• ReaDY FoR SoDoMY…

  

  

• The Hire That Could Be The Difference Between A Fed Rate Hike And BoJ Helicopter Money

  Back in March, Japan's Global Pension Investment Fund appointed Norihiro Takahashi as its new president. Few paid much attention to it, but it may very well end up being one of the most significant events that occurred as we look back in twelve to eighteen months.

  The GPIF manages roughly $1.2 trillion in assets, with over 60% currently allocated domestically between equity and fixed income. Given the state of the stock market and the negative interest rate policy in Japan, it would make sense that an incoming president would take a hard look at the current asset mix policy and adjust it to best suit the needs of its members, something outgoing president Takahiro Mitani has been vocal about in recent years.

  Recall that back in 2014 under pressure from Prime Minister Abe to move the fund into riskier assets, Mr. Mitani reluctantly rebalanced its portfolio away from domestic bonds, and into domestic equities, something that clearly did not make him happy. "Our sole objective is not to invest so that the Japanese economy will be better; our job is to invest with the people's money in a safe and efficient manner so we can protect and manage their funds" the Financial Times quoted him as saying.

  The policy asset mix change was dramatic, slashing target domestic bond allocation from 60% to 35%, and increasing target domestic stock allocation from 12% to 25%. Also not to be lost in that policy change is the fact that the target allocation to international stocks increased from 12% to 25%.

  

   

  Today, the policy remains intact, with actual allocation percentages within the permissible range.

  

  Which brings us to performance. The fund returned $42 billion in the three months ending December 2015, but in looking at the current state of the Japanese economy with future returns in mind, one would see where it is reasonable to assume that incoming president Takahashi would take a hard look at the current policy asset mix, and perhaps propose a rebalance away from domestic assets and into international – presumably U.S. bonds and equities.

  As a result of NIRP, JGB's are now seeing negative yields prevail throughout the entire front end of the curve, and the long end at best will produce perhaps just under 50bps, and that's if the BoJ doesn't continue to push those into negative territory.

  

   

  From the equity side of things, despite the BoJ's best efforts to push stocks up with their ETF purchases, the Nikkei is down double digits, with no real catalyst for improvement in sight.

  

  If outgoing president Mitani had any words of advice to Mr. Takahashi, they were probably along the lines of making sure he does what's right for those pensioners the fund represents, and given the status of the asset classes above, what's right may very well mean another rebalance into international fixed income and equities (presumably U.S. given that nearly everyone else is enacting NIRP at the moment as well). If a move as drastic as the 2014 rebalance is seen during the first 12-18 months of Mr. Takahashi's tenure, it could mean hundreds of billions transferred into international assets, and out of Japan. This could have a significant impact on the investment landscape for everyone involved.

  At the end of the day, the GPIF's hire could either make it easier for the Federal Reserve to hike rates (as the market is bid with the rebalanced funds), or it could trigger the use of helicopter money in Japan at the very hint of such a rebalance, something that Kuroda of course says the BoJ "isn't thinking about at all."

  Time will tell the answer to this, but one thing is certain, the hire made by the GPIF in March of 2016 could certainly prove to be pivotal.

  

  

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• Chipotle Mexican Grill Stock Analysis 5-2-2016 (Video)

  By EconMatters

  

  We look at this one time momentum stock from a mini case study perspective regarding some of the issues this company faces in trying to recover from the food safety issues of recent memory, and move forward as a growth stock for the next decade.

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

  

• Obamacare To Unveil "Price Shock" One Week Before The Elections

  The writing was on the wall long before the largest US insurer, UnitedHealth, decided to pull the plug on Obamacare in mid April.  Then, just a week later, Aetna’s CEO said Thursday that his company expects to break even, but legislative fixes are needed to make the marketplace sustainable.

  “I think a lot of insurance carriers expected red ink, but they didn’t expect this much red ink,” said Greg Scott, who oversees Deloitte’s health plans practice. “… A number of carriers need double-digit increases.”

  It gets better.

  One week ago Marilyn Tavenner, who until January 2015 ran the federal Centers for Medicare and Medicaid Services, aka the massive Federal agency that oversaw the rollout of Obamacare and the disastrous implementation of HealthCare.gov and who is now as an insurance lobbyist, said she sees big jumps in Obamacare insurance premiums.

  Translation: insurers are not making money, and they need to make money or Obamacare is doomed. Which means even more dramatic rate hikes are about to be unveiled. However, it’s not the what but rather the when that is the shock. And, as Politico reports, the timing could not possibly come at a worse time for Democrats.

  “Proposed rate hikes are just starting to dribble out, setting up a battle over health insurance costs in a tumultuous presidential election year that will decide the fate of Obamacare.”

  The headlines are likely to keep coming right up to Election Day since many consumers won’t see actual rates until the insurance marketplaces open Nov. 1 — a week before they go to the polls.

  That’s right: just one week before the election date, Americans will be served with what now appears will be double (if not more) digit increases in their insurance premiums. Politico is spot on in saying that “the last thing Democrats want to contend with just a week before the 2016 presidential election is an outcry over double-digit insurance hikes as millions of Americans begin signing up for Obamacare.”

  They will have no choice: following years of actual delays to avoid a major public backlash on the critical mandate, this time the hammer is set to fall and it will do so at the worst possible time for Hillary Clinton.

  “Any reports of premium increases will immediately become talking points on the campaign trail,” said Larry Levitt, senior vice president for special initiatives at the nonprofit Kaiser Family Foundation. “We’re in an election where the very future of the law will be debated.” Democrats say they will mount a vigorous defense of a law that has provided 20 million people with coverage — and point to Republicans’ failure to propose any coherent alternative to Obamacare.

  Which is another way to say Democrats are near panic.

  “The Republicans will try to make Clinton own the higher prices, but the problem is that Republicans have no alternative or answer,” said Anna Greenberg, a Democratic pollster. “They are in the position of taking away insurance if they repeal Obamacare.”

  Somehow we doubt that would be such terrible news for all those millions of Americans whose mandatory “tax” (thank you Supreme Court) subsidies keep the program alive. We also doubt that anyone among America’s middle class will shed a tear if Obamacare is gone.

  Which brings us to the key question: just how much of a shocker will be unveiled days before the election? According to Politico, and here we disagree as we have seen price increases in the high double digit ragne, “average rate hikes have been modest in the past despite apocalyptic predictions: premiums increased by an average of 8 percent this year, according to an administration analysis. That report “debunks the myth” that Obamacare customers experienced double-digit rate hikes, said Department of Health and Human Services spokesman Ben Wakana.”

  Where we do agree with Politico is that “there are reasons to think the next round may be different.” Blue Cross and Blue Shield plans, which dominate many state exchanges, saw profits plummet by 75 percent between 2013 and 2015, according to an analysis by A.M. Best Co. A chief reason for the financial woes: “the intensity of losses in the exchange segment.”

  “I have to raise prices because I have to assume the worst,” said Martin Hickey, CEO of New Mexico Health Connections, one of the surviving co-ops, which expects to increase prices by roughly a third for 2017. “Whether it stabilizes or not, we can’t take the risk.”

  Even New York-based Oscar, the much ballyhooed, tech-savvy startup bankrolled with billions in venture capital dollar, is sputtering. Medical costs for Oscar’s individual customers in New York, where it has the most customers, outstripped premiums by nearly 50 percent last year, according to financial filings.

  “In some cases the hole is getting deeper rather than getting better,” said Deloitte’s Scott.

  In short: expect majour double-digit percent increases in premium prices, and not just because Obamacare is fatally flawed, but for two key reasons we warned about years ago when Obamacare was being rolled out: i) not enough participants to make it economically scalable and ii) those who did sign up are so sick that they promptly soaked up all the externalities.

  From Politico:

  One big reason is lower-than-expected enrollment of younger, often healthier people who balance the costs of those who require more costly care. Roughly 12.7 million Americans signed up for Obamacare plans during the most recent open enrollment period. That’s far below the 22 million projected by the Congressional Budget Office, and it’s certain to decline as some drop out.

   

  “The pool is far less healthy than we forecast,” said Brad Wilson, CEO of Blue Cross Blue Shield of North Carolina, which says it lost $400 million on its exchange business during the first two years and is weighing whether to compete for Obamacare customers in 2017. “That’s an issue not just here in North Carolina, but all over. … We need more healthy people in the pool.”

  Then again, the healthy people have no incentive to sign up and would rather pay the penalty charge instead of spending far more to subsidize those who are not healthy. Sure enough, as with all epically flawed government projects, the cracks in Obamacare became apparent with time.

  There’s a growing realization the financial penalty for failing to obtain coverage is an insufficient cudgel to convince younger Americans to enroll. The fee for 2016 is $695, or 2.5 percent of income, whichever is higher. Just 28 percent of HealthCare.gov customers for 2016 were between the ages of 18 and 34, significantly below the 35 percent threshold typically considered necessary for a balanced marketplace.

   

  “It wasn’t enough of a hammer,” said Kevin Fitzgerald, an insurance lawyer with Foley & Lardner. “You need a lot of healthy people to sign up to make the numbers work. Obviously that didn’t happen.”

  Ah, we get it now: only Obamacare had “enough of a hammer” it would work like a charm.

  And then there was the timing arbitrage. Health plans have complained that Obamacare’s enrollment rules are too loose, allowing people to wait until they need medical care to sign up for coverage, and then to halt payments once they’ve received treatment.

  This may work for Netflix, but it is an absolute disaster when it affects a mandatory tax program that is supposed to benefit everyone.

  The Obama administration is addressing some of these concerns: It has eliminated some reasons Obamacare customers can use to sign up outside the standard enrollment season. And it plans to require proof from exchange customers that they’re eligible to sign up outside the normal window because, say, they’ve moved or had a kid, which are among the most common reasons.

  Alas, such “real time fixes” also never work and end up being gamed by the consumers every step of the way. Which is why health plan officials say more needs to be done to stabilize the markets, for instance, by giving them greater flexibility to sell different kinds of policies. “We have real concerns about the next year or two based on the experience so far,” said Ceci Connolly, CEO of the Alliance of Community Health Plans, which represents 22 plans. “Even for our members that are getting close to breaking even on this, they say that it’s a really challenging and unpredictable environment.”

  Most health plans remain optimistic the markets will eventually stabilize. Security Health Plan, which does business in 41 Wisconsin counties, attracted three times as many exchange customers as anticipated during its first year of Obamacare business.

  “Was it a financial winner? No,” said John Kelly, the health plan’s chief marketing and operations officer. “We expected to take losses and we did.”

  But no more, which is why literally in the days heading up to the general election, the US population will be served a very unpleasant reminder of what happens when big state goes out of control, and that there is no such thing as “free healthcare.”

  Just how much of a hit to Hillary’s election chances the “Obamacare shock” will be, we will find out on November 8.

  

  

  

• Don't Sleep Through The Revolution: A Graduation Message For A Dark Age

  Submitted by John Whitehead via The Rutherford Institute,

  “The most striking fact about the story of Rip Van Winkle is not that he slept 20 years, but that he slept through a revolution. While he was peacefully snoring up on the mountain, a great revolution was taking place in the world – indeed, a revolution which would, at points, change the course of history. And Rip Van Winkle knew nothing about it; he was asleep.”—Martin Luther King Jr., Commencement Address for Oberlin College

  The world is disintegrating on every front – politically, environmentally, morally – and for the next generation, the future does not look promising. As author Pema Chodron writes in When Things Fall Apart:

  When the rivers and air are polluted, when families and nations are at war, when homeless wanderers fill the highways, these are the traditional signs of a dark age.

  Those coming of age today will face some of the greatest obstacles ever encountered by young people.

  They will find themselves overtaxed and struggling to find worthwhile employment in a debt-ridden economy on the brink of implosion. Their privacy will be eviscerated by the surveillance state.

  They will be the subjects of a military empire constantly waging war against shadowy enemies and on guard against domestic acts of terrorism, blowback against military occupations in foreign lands. And they will find government agents armed to the teeth ready and able to lock down the country at a moment’s notice.

  As such, they will find themselves forced to march in lockstep with a government that no longer exists to serve the people but which demands they be obedient slaves or suffer the consequences.

  It’s a dismal prospect, isn’t it?

  Unfortunately, we who should have known better failed to guard against such a future.

  Worse, as I document in my book Battlefield America: The War on the American People, we neglected to maintain our freedoms or provide our young people with the tools necessary to survive, let alone succeed, in the impersonal jungle that is modern civilization. 

  We brought them into homes fractured by divorce, distracted by mindless entertainment, and obsessed with the pursuit of materialism. We institutionalized them in daycares and afterschool programs, substituting time with teachers and childcare workers for parental involvement. We turned them into test-takers instead of thinkers and automatons instead of activists.

  We allowed them to languish in schools which not only often look like prisons but function like prisons, as well—where conformity is the rule and freedom is the exception. We made them easy prey for our corporate overlords, while instilling in them the values of a celebrity-obsessed, technology-driven culture devoid of any true spirituality. And we taught them to believe that the pursuit of their own personal happiness trumped all other virtues, including any empathy whatsoever for their fellow human beings.

  We botched things up in a big way, but hopefully all is not lost.

  Not yet, at least.

  Faced with adversity, this generation could possibly rise to meet the grave challenges before them, bringing about positive change for our times and maintaining their freedoms, as well.

  The following bits of wisdom, gleaned from a lifetime of standing up to injustice and speaking truth to power, will hopefully help them survive the perils of the journey that awaits:

  Wake up and free your mind. Resist all things that numb you, put you to sleep or help you “cope” with so-called reality. From the day you are born, enter school, graduate and get a job, virtually everything surrounding you is not something you entered by free will. And those who establish the rules and laws that govern society’s actions dictate what is proper. They desire compliant subjects. Those who become conscious of the chains that bind them and free their minds and decide to disagree are often ostracized and find themselves behind bars. However, as George Orwell warned, “Until they become conscious, they will never rebel, and until after they rebelled, they cannot become conscious.” It is these conscious individuals who change the world for the better.

  Be an individual. For all of its championing of the individual, American culture advocates a stark conformity. As a result, young people are sedated by the flatness and predictability of modern life. “You can travel far and wide and have a difficult time finding a store or restaurant that is even mildly unique,” writes Thomas More in The Care of the Soul. “In shopping malls everywhere, in restaurant districts, in movie theaters, you will find the same clothes, the same names, the same menus, the same new films, the identical architecture. On the East Coast, you can sit in a restaurant seat identical to that you sat in on the West Coast.” In other words, the repetition that is modern life means the death of individuality. 

  Resist the corporate state. Don’t become mindless consumers. Consumption is a drug. It makes us unaware of the corruption surrounding us. As Chris Hedges writes in Empire of Illusion:

  Corporations are ubiquitous parts of our lives, and those that own and run them want them to remain that way. We eat corporate food. We buy corporate clothes. We drive in corporate cars. We buy our fuel from corporations. We borrow from, invest our retirement savings with, and take our college loans with corporations and corporate banks. We are entertained, informed, and bombarded with advertisements by corporations. Many of us work for corporations. There are few aspects of life left that have not been taken over by corporations, from mail delivery to public utilities to our for-profit health-care system. These corporations have no loyalty to the country or workers. Our impoverishment feeds their profits. And profits, for corporations, are all that count.

  Realize that one person can make a difference. If we’re going to see any positive change for freedom, then we must change our view of what it means to be human and regain a sense of what it means to love one another. That will mean gaining the courage to stand up for the oppressed. In fact, it’s always been the caring individual—the ordinary person doing extraordinary things—who has made a difference in the world. Even Mahatma Gandhi, who eventually galvanized the whole of India, brought the British Empire to its knees, and secured freedom for his people, began as a solitary individual committed to the idea of nonviolent resistance to the British Empire.

  Help others. We all have a calling in life. And I believe it boils down to one thing: You are here on this planet to help other people. In fact, none of us can exist very long without help from others. This is brought home forcefully in a story that Garret Keizer recounts in his insightful book Help: The Original Human Dilemma. Supposedly in hell the damned sit around a great pot, all hungry, because the spoons they hold are too long to bring the food to their mouths. In heaven, people are sitting around the same pot with the same long spoons, but everyone is full. Why? Because in heaven, people use their long spoons to feed one another.

  Learn your rights. It’s easy to complain, throw up your hands and just accept the way things are. Unfortunately, for all the moaning and groaning, very few people take the time to change the country for the better. Yet we’re losing our freedoms for one simple reason: most of us don’t know anything about our freedoms. Lest we forget, America is a concept. You have to earn the right to be an American, and that means taking the time to learn about your history and the courageous radicals who fought and died so that you and I could live in a free country. At a minimum, anyone who has graduated from high school, let alone college, should know the Bill of Rights backwards and forwards. However, the average young person, let alone citizen, has very little knowledge of their rights for the simple reason that the schools no longer teach them. So grab a copy of the Constitution and the Bill of Rights, and study them at home. And when the time comes, stand up for your rights.

  Speak truth to power. Don’t be naive about those in positions of authority. As James Madison, who wrote our Bill of Rights, observed, “All men having power ought to be distrusted.” We have to learn the lessons of history. People in power, more often than not, abuse that power. To maintain our freedoms, this will mean challenging government officials whenever they exceed the bounds of their office.

  Don’t let technology be your God. Technology anesthetizes us to the all-too-real tragedies that surround us. Techno-gadgets are merely distractions from what’s really going on in America and around the world. As a result, we’ve begun mimicking the inhuman technology that surrounds us and lost sight of our humanity. If you’re going to make a difference in the world, you’re going to have to pull the earbuds out, turn off the cell phones and spend much less time viewing screens. 

  Give voice to moral outrage. As Martin Luther King Jr. said, “Our lives begin to end the day we become silent about the things that matter.” There is no shortage of issues on which to take a stand. For instance, on any given night, over half a million people in the U.S. are homeless, and half of them are elderly. There are 46 million Americans living at or below the poverty line, and 16 million children living in households without adequate access to food. Congress creates, on average, more than 50 new criminal laws each year. With more than 2 million Americans in prison, and close to 7 million adults in correctional care, the United States has the largest prison population in the world. At least 2.7 million children in the United States have at least one parent in prison. At least 400 to 500 innocent people are killed by police officers every year. Americans are now eight times more likely to die in a police confrontation than they are to be killed by a terrorist. On an average day in America, over 100 Americans have their homes raided by SWAT teams. Since 9/11, we’ve spent more than $1.6 trillion to wage wars in Afghanistan and Iraq. It costs the American taxpayer $52.6 billion every year to be spied on by the government intelligence agencies tasked with surveillance, data collection, counterintelligence and covert activities.

  Cultivate spirituality. When the things that matter most have been subordinated to materialism, we have lost our moral compass. We must change our values to reflect something more meaningful than technology, materialism and politics.

  Standing at the pulpit of the Riverside Church in New York City in April 1967, Martin Luther King Jr. urged his listeners:

  [W]e as a nation must undergo a radical revolution of values. We must rapidly begin the shift from a “thing-oriented” society to a “person-oriented” society. When machines and computers, profit motive and property rights are considered more important than people, the giant triplets of racism, materialism, and militarism are incapable of being conquered.

  We didn’t listen then, and we still have not learned: Material things don’t fill the spiritual void.

  Unfortunately, our much-vaunted culture of consumerism and material comforts has resulted in an overall air of cynicism marked by a spiritual vacuum, and this generation of young people is paying the price. For example, at least one in 10 young people now believe life is not worth living. A survey of 16- to 25-year-olds by the Prince’s Trust found that for many young people life has little or no purpose, especially among those not in school, work or training. More than a quarter of those polled feel depressed and are less happy than when they were younger. And almost half said they are regularly stressed and many don’t have anything to look forward to or someone they could talk to about their problems. Equally alarming is a recent report by The Washington Post indicating that the U.S. suicide rate has increased sharply since the turn of the century, particularly among women.

  No wonder many young people have such a pessimistic view of the future. But that can change. As King said, we have to start putting people first.

  Pitch in and do your part to make the world a better place. Don’t rely on someone else to do the heavy lifting for you. As King noted, “True compassion is more than flinging a coin to a beggar; it comes to see that an edifice which produces beggars needs restructuring.” In other words, don’t wait around for someone else to fix what ails you, your community or nation. As Gandhi urged: “Be the change you wish to see in the world.”

  Finally, you need to impact the government, be part of the dialogue on who we are and where we’re going as a country. It doesn’t matter how old you are or what your political ideology is. These are just labels. If you have something to say, speak up. Get active, and if need be, pick up a picket sign and get in the streets. And when civil liberties are violated, don’t remain silent about it. Take a stand!

  The only way we’ll ever achieve change in this country is for this generation of young people to say “enough is enough” and fight for the things that truly matter. 

  I shall end as Dr. King ended his commencement address to the graduates of Oberlin College in June 1965:

  Let us stand up. Let us be a concerned generation. Let us remain awake through a great revolution. And we will speed up that great day when the American Dream will be a reality.

  

  

• China Manufacturing PMI Disappoints – In Contraction For 14th Straight Month

  Despite a trillion dollars of credit spewed into the Chinese ‘economy’ speculative finance channels, Manufacturing remains in a slump as April’s China PMI tumbled to 49.4 after a brief bounce back up to 49.8 (from the 48.0 low in Feb). This is the 14th month in a row of contraction.

  

  As Caixin reports, relatively weak market conditions and muted client demand contributed to a further solid decline in staff numbers, which seems to put a nail in the coffin of anyone who believes recent price action in industrial commodities is anything but speculative fervor.

  

   

  Commenting on the China General Manufacturing PMI data, Dr. He Fan, Chief Economist at Caixin Insight Group said:

  “The Caixin China General Manufacturing PMI for April came in at 49.4, down 0.3 points from March’s reading. All of the index’s categories indicated conditions worsened month-on-month, with output slipping back below the 50-point neutral level. The fluctuations indicate the economy lacks a solid foundation for recovery and is still in the process of bottoming out. The government needs to keep a close watch on the risk of a further economic downturn.”

  

  

• Ben Tanosborn: How Blacks & Latinos Will Lose The Election For The Democratic Party In 2016

  Authored by Ben Tanosborn,

  Forget about the number of superdelegates; or the several undemocratic manipulations by the Democratic National Committee (DNC).  The reality that stands out loud and clear at the end of April, with almost two-thirds of the primary-caucus vote having been cast, is that Hillary Clinton is commandingly leading Bernie Sanders in the democratically-chosen delegate count by a tally of 55 percent against 45 for the senator. 

  How the remaining primary vote goes through mid-June, unless some transformational event or revelation take place, is not likely to change quantifiably or selectively the fact that the former first lady is irrefutably poised to receive, by acclamation in Philadelphia one guesses, the Democratic nomination to vie for a long term lease – 4-years with a conditional renewal for another 4-years – of the White House and its more celebrated political dependencies.  And her scoundrel spouse, William Jefferson Clinton, smilingly, will be at the convention willing and able to receive all the political accolades he undoubtedly feels his multiple talents deserve.

  But… unfortunately for the Democratic Party and the Clinton legacy, their future, as well as the White House might be forever lost.  For all of the Scoundrel’s political savvy, he will finally appear, past the November election, in all its naked glory for history to judge: an articulate and charismatic American emperor who, although never wearing clothes, had much of the country seeing him through a deceitful sartorial kaleidoscope.

  Let us reasonably, and logically, look at the repercussions as April is ending and Indiana gets ready to vote and apportion its 92 Hoosier Democratic delegates.  Does it make any sense that Hillary Clinton is receiving an inordinately, and questionably undeserving, high percentage of the Latino and Afro-American vote?  That, while Bernie Sanders is garnering the same Pyrrhic vote as that which the Latino-Black folks are predicted to give Donald Trump in the general election?  Go figure such illogical behavior!  

  Loyalty you say? Is Bernie just another unknown white-face, long on promises and short on their delivery… perhaps the rationale which reigns in many or most L&A minds?  Whichever reasons are chosen, whether those or multiple others, it is obvious that leaders of the many social, business, religious and political groups are playing that fictional Hamelinian role leading their people to the precipice and asking them to jump; or, a contemporary, real example dating back to 1978 when Jim Jones offered “salvation” to his near-1000 followers in Jonestown by asking them to drink a cyanide-laced little cup of Kool-Aid.

  If the chosen parallel of Luciferian Jim Jones and African-American and Latino leaders seem farfetched… our intention is not to vilify anyone, nor to diminish these leaders’ best and noble intentions.  Our sole intent is to point out the possible, no, the probable unintended consequences that Hillary Clinton’s nomination could bring to the entire nation… and more specifically to these two minorities that jointly comprise 31 percent of the “legal” US population – Hispanic/Latino 18 and Black 13 – without any regard or consideration for 10-20 million undocumented or illegals, overwhelmingly Latino.

  The mantle of qualifications vested on Hillary Clinton is weaved with nothing but the thread of exposure, more often used in the world of politics than in the real, business world… where lots of experience, if consistently associated to bad decision-making, do not qualify but actually disqualify someone from attaining more responsible positions.  If Hillary’s sum total decisions, or adherence to decisions, were to be tallied in good and bad decision columns, from her start with Goldwater half century ago to her stint as Secretary of State for Barack Obama – and her lack of vision when offering crucial advice to him, she would not receive a passing grade; not when bluntly failing the most critical and valuable attribute for a decision-maker: good judgment.

  Qualifications and judgment aside, there is another variable in this particular election that has not been properly addressed.  It has to do with those who “felt the bern” and are unlikely to vote for Hillary even if Bernie himself pleads them to vote for her.  Many of the millennials probably won’t bother to cast their vote… and another just-as-important and decisive group: that of poor white workers, who saw Bernie as the leader in their economic struggle might seek a Hillary-alternative as will many pacifists who see Clinton as hawkishness personified.

  Probable end result when subtracting from the potential Democratic vote disenchanted millennials, economic-revolutionaries, and doves could easily bury any and all hope for the Clintons to return to the White House.  Many millennials won’t vote; and many impoverished whites in the Democratic Party will feel forced to switch their anti-establishment allegiance from Bernie to Donald Trump, as incongruent as that may seem, hoping for a better economic future and/or a more constructive, less confrontational hawkish attitude internationally.

  And that brings us to the conclusion that for all the antipathy that might exist between African-American and Latino “super-minorities” and Donald Trump, it is these major minority voting blocks that appear to be clearing the path for this Demeaner-in-Chief to exchange his ostentatious quarters in Trump Plaza for the more modest ceremonial trappings of the White House.

  Ironic we might add, since a 50 percent vote for Bernie in the primaries by Blacks and Browns (which is far less than he might deserve given his past history and lofty principles), would have switched the percentage in delegate count from the current 55-45 percent favoring Hillary to a remarkable same 55-45, but this time favoring Bernie (the math is rather simple).

  And the story in all probability ends here, “How Blacks and Browns Lost the Election for the Democratic Party in 2016,” without the need for a guru-performed political autopsy.

  No, Jane (Sanders), there won’t be a miracle on Pennsylvania Avenue in 2017, just as there wasn’t one on 34^th  Street for Kris Kringle in 1947, even if in our fantasy we went ahead and fictionalized one.

   

  

  

• Are Central Banks Running the Oil Market or Just the World?

  by David Haggith

   

  The question begs for conspiracy theories to satisfy it, but one might more aptly say that central banks beg for conspiracy theories to explain them, since they operate in the shadows while being given charge of all the financial systems of all the world’s greatest economies. Central bankers have the unchaperoned power to create the greatest fortunes ever known to mankind at will and to invest it wherever they want. With trillions of dollars at their disposal and trillions more whenever they want to conjure it into existence, what is to stop them from cornering every market on earth?

   

  Capitalist central banks have become ultimate central planners

   

  Why would we even think central banks wouldn’t manipulate all markets to the benefit of their own member banks when two Fed officials have stated that by intention the Fed’s FOMC was front-running the stock market to create a “wealth effect”? (Apparently the “wealth effect” is to make the wealthy vastly wealthier because that’s what happened; I certainly haven’t seen any wealth trickling into my bank account as a result of this overt manipulation of markets.)

  We used to have regulations that prevented banks from investing in stocks (and thereby central banks from indirectly manipulating the stock market by giving money to their member banks to invest). Next, the Fed will be deciding what companies to favor. Maybe they already do.

  What if another corporation like GM that is too big to fail is failing? Is there any reason this time around that central banks should tell us they are going to bail it out by buying up its stocks now that central-bank intervention is standard procedure? (The Fed would argue to congress, “It was important we did that quickly and secretively so as not to create a massive market scare that could have jeopardized the recovery.”)

  Anything is justifiable if it necessary for “the recovery.” The Fed, of course, wouldn’t buy those stocks directly; but will it’s member banks suddenly start sweeping up some company’s stocks with money the Fed creates as it nudges them to spend the money in that direction?

  How would we know? Nudges that happen between major bankers at Federal Reserve board meetings are unseen as they are not a part of corporate reports that would explain why a large national bank suddenly bought a great deal of one company’s stock. “It just looked like a good investment for us.”

  Through the decades-long process of deregulating, we removed those important barriers and have created a free-for-all between banks and markets. Central banks have the power to create unlimited amounts of money in a single day, based solely on their own discretion, with no supervision by any other entity as to what they are doing. They create that money as deposits ex nihilo in banks that know where the money is intended to go. (Where the money should go can be agreed upon as gentleman and gentlelady over a martini and cigar with no public record other than “met to discuss corporate default problems.”)

   

  Central banks run their national economies unsupervised by anyone

   

  Seriously? You think they’re supervised? By whom? Certainly not by congress here in the US. Congress merely asks the head banker some questions and then lets the Federal Reserve continue on with whatever its bankers were doing. We audit corporations, and government even audits the government; but the largest financial institution on earth runs audit-free year after year, decade after decade, as congress grandstands in feigned outrage at times and at other times listens in awe, but always defaults to merely trusting the Federal Reserve. Always.

  If you were corrupt, wouldn’t you naturally try to get on the board of the largest financial institution on earth that never gets audited and has the power to create as much money as it wants to out of thin air to give to your bank with one the provisos that it keep inflation in check and keep jobs looking halfway respectable?

  There is nothing to stop the Fed — nor probably most central banks — from deciding to create $100 billion in the accounts of its member banks, saying, “We’ll deposit this money when you show us you’ve purchased that much in oil from companies being hit the worst.” There is no risk for the bank or the Fed because it was all free money anyway. They just suddenly own lots of oil.

  If there are any barriers still standing to that sort of thing, how would we or congress ever know if those barriers were being respected when congress never audits the Fed and accepts anything it says as sufficient for congressional oversight? It is in that sense that I say there is really nothing to stop central banks from soaking up all the oil for sale in the oil market right now. How would anyone ever know if they bought oil through corporate banking proxies or through other central banks who used their own proxies?

  That is exactly what the Fed overtly did with US government bonds, so why not oil? They were front-running the bond market by saying to their member banks, “If you buy these government bonds, we’ll buy them directly from you the next day. That way we are not breaking the law by directly buying the government’s debt, and then we’ll create as much money in your reserve account as what you spent on the bonds plus half a percent.”

  What a joke! How is that simpleton’s shell game not directly buying the government debt? As soon as you start telegraphing to banks that you will buy government bonds off of them overnight for a half a percent profit to the bank (called front running the bond market) on a no-risk deal for the banks, you know banks are going to leap to do that.

  You’re creating the market for the bonds. You’re not just soaking up the banks’ bonds. The fact that you passed the bond through someone else’s hands is no different than money laundering. It’s bond laundering. “NO, we didn’t finance the government. We bought up some old government bonds that some of our banks no longer wanted.” Yeah, right.

  This the Fed did overtly for years.

  What a charade … and no one cared … other than a few readers of The Great Recession Blog, Zero Hedge, and other similar sites. Most didn’t bat an eye. The same thing was happening with stocks for the entire past seven years (and still is happening as the Fed reinvests its money). Even though the Fed originally denied it was pumping up the stock market; recently two major Fed board members admitted the Fed was front-running the stock market, and still few cared. It’s no surprise to anyone because most people knew that is where much of the Fed’s free money was going.

   

  Are central banks manipulating the oil market?

   

  Therefore, it should not seem like any big conspiracy theory, when you see total nonsense pricing (bad news is good news) in the oil market to ask, are central banks now moving on to doing the same thing in the oil market?

  Why wouldn’t they? 1) What’s to stop them? 2) Clearly US banks that are members of the Federal Reserve System are being hurt by the oil price war, so the Fed can justify this as another “intervention” they need to do to save their own banks from collapsing due to bad loans throughout the oil industry.

  Two more oil company’s declared bankruptcy this week. Week by week, a storm surge is building up against banks that are heavily invested in this industry:

   

  The bankruptcies are continuing fast and furious across the energy sector.With the ill-effects spreading beyond just the oil and gas business — evidenced by major renewables firm SunEdison filing for Chapter 11 last month.

   

  But the U.S. E&P [exploration and production] sector still remains one of the biggest unknowns when it comes to bad loans. With numerous observers having recently warned about a big wave of defaults coming in this space.

   

  And a new data point late last week suggests we may be reaching a tipping point.

   

  That came from leading American investment bank JPMorgan. Which said in an SEC filing Friday that its holdings of potentially bad loans took a major jump over the past quarter. JPMorgan reported on its holdings of “criticized” loans — a term used in the banking industry to refer to “substandard or doubtful” debts … leapt by 45 percent over the last quarter — to $21.2 billion as of March 31. (Oilprice.com)

   

  Over twenty billion of bad debts — most of it in oil companies! That number beats many of the big bankster bailouts during the worst of the Great Recession for size. That’s just one major bank, and those are only the loans the banks is showing as bad. How many other loans does JPMorgan have that are not in some stage of default but that are with oil production companies that are sinking fast?

  How bad is the pinch on other banks that invested in the oil sector? Read the “panic index”:

   

  Little-reported but extremely critical data point for the oil and gas industry emerged yesterday. With insiders in the debt business saying that risk levels in the sector have risen to unprecedented levels.

   

  That came from major ratings service Moody’s. With the firm saying that one of its proprietary indexes of credit problems in the oil and gas sector has hit the highest mark ever seen.

   

  That’s the so-called “Oil and Gas Liquidity Stress Index”. A measure of the number of energy companies that are facing looming credit problems because of overextended debt…. In fact, that level is now considerably worse than seen during the last recession…. “This progression signals that the default rate will continue to rise as the year progresses.” (Pierce Points)

   

  You may recall there was a commodities crash in energy prices running into the Great Recession, too. In other words, the pain is just beginning. The squeeze will get tighter.

  What better way to keep some of these companies out of default (and thereby keep the banks who financed them out of trouble) than by getting the price of oil back up a little? So, would the Federal Reserve become proactive to support these American companies that are pressing major US banks into perilous situations, now that it is accustomed to massive interventions and financial inventions as daily procedure?

  Might that explain why the price of oil goes up, regardless of what happened at Doha?

  Maybe that is exactly what the surprise, “expedited” meetings of the Federal Reserve were about shortly before the Doha meeting and what the Fed’s rushed closed-door meeting with the president and vice president was about — what to do when Doha failed (as they knew it would, given Saudi Arabia’s overt statements). As anyone knew it would if they were willing to see straight.

  If not the Fed, then why not some other central bank in some country where a major bank is being crippled by the oil price crush? A bank that could fall on others and create a domino effect if it fell.

  Central banks are so grossly out of control with no elected oversight and unlimited financial power to create money and decide where it goes, that I have to ask, is it possible that there are no honest markets left anywhere? How would we know? No one ever gets to see inside the central bank’s inner workings to know. Just how completely have the banks taken control of every aspect of the economy — or, at least, of every aspect they care to control?

   

  But you cannot manipulate markets forever

   

  Suppose some central bank somewhere decided to buy up oil through proxies to keep the price rising, in spite of all risks, in order to keep a few of its major member banks from going bankrupt due to exposures even more extreme than the one known about and admitted above.

  As a result, the producers keep producing because someone keeps buying. The price keeps bubbling upward, which saves some companies and their banks for the time being; but also entices more producers to come back on line. Prices keep going up, regardless, and even though Saudi Arabia and Russia actually increase production, too.

  In such a situation, you might expect to see headlines, such as the following:

   

  “Oil Rallies On As Traders Ignore Red Flags”

   

  No matter how much crude oils stocks around the world rise, prices keep rising because of the price intervention. Oil tankers stack up at sea, but the prices keep going up. You start to wonder if the market is rigged. Why are so many speculators betting that the price of oil can go up forever? You start to think of the US housing market in early 2007 when everyone thought housing could defy gravity and climb forever.

  Then one day you read a headline like …

  “Rotterdam Tanks are Full: All tankers being sent back out to sea”

  A week later, you read the same thing in Oklahoma and other parts of the world.

  Sooner or later reality butts in. Price manipulation causes distorted markets and only accelerates the problem because falling prices didn’t result in supply correction. Instead, the prices themselves, get corrected, and supplies follows the money … until it the money had nowhere left to go. You cannot buy oil at any price — regardless of how low — if you have nothing to put it in.

  Game over … just as it was for housing in the last half of 2007.

   

  Bonds, stocks, the oil market — they all look as rigged right now as the Arizona Republican Convention where Trump, who won the vast majority of votes in the Arizona primary, got almost none of the delegates. The party will make sure their guy wins no matter what in order to protect the party establishment from the rogue. And “the establishment” is largely Wall Street — mostly banks.

  That’s why it is is time to, above all else, vote against the establishment in either party, top to bottom.

  Exxon, Chevron, PetroChina, Conocophillips, all reported heavy losses. Who are they banking with? Are they simply too big to fail?

   

  from The Great Recession Blog

  

• “Nightmare” Mistake: Visa Free Travel For 80 Million Turks Coming Up

  Submitted by Mike "Mish" Shedlock of MishTalk

  “Nightmare” Mistake: Visa Free Travel For 80 Million Turks Coming Up

  Of all the inane, self-serving, deals German Chancellor Angela Merkel made with Turkey, visa-free travel for 80 million Islamic Turks tops the list.

  “This is all a nightmare,” said one diplomat charged with making the deal work.

  Nightmares aside, Brussels Prepares Legal Groundwork on Visa-Free Travel for Turks.

  Brussels will this week propose visa-free travel to Europe for 80m Turks but says Ankara still needs to meet several politically explosive reform conditions within weeks, including overhauling its terrorism laws and party funding rules.

   

  The enhanced travel rights were Turkey’s main windfall from a landmark EU deal in March, in which Ankara helped dramatically cut migrant flows to Europe by agreeing to take back all migrants arriving on the Greek islands.

   

  On Wednesday the European Commission will legally recommend Turks should be granted short-term visa-free travel to the Schengen area. But it will point out that up to nine of the 72 eligibility conditions required of Turkey remain incomplete, according to people familiar with the proposal.

   

  The stage is now set for a stand-off before the June visa deadline, with far-reaching consequences for the migration crisis, domestic politics across Europe and Turkey’s long-term relations with the bloc. Decisions on visa rights for Ukraine, Georgia and Kosovo are set to be taken at the same time.

   

  “This is all a nightmare,” said one diplomat involved in talks. Another European diplomat described the Turkey-EU deal as carrying “the seeds of its own destruction”.

   

  It is a gamble some senior EU officials fear “is a big mistake” and will backfire. “This will be the perfect get-out for the Dutch, French and Germans, who are facing major domestic problems and  suffering from buyer’s remorse since the Turkey deal,” the official said. “And the European Parliament will just not accept a political fudge, the Turks won’t be able to ram it through.”

  Appropriate Terms (in Order of Occurrence)

  • Windfall to Turkey
  • Short-Term
  • Stage Set for Standoff
  • Nightmare
  • Seeds of its Own Destruction
  • Big Mistake
  • Backfire
  • Political Fudge

  Political fudge, seeds of its own destruction, and nightmare are my three favorite descriptions.

  A strong argument can be made for “short-term” given the massive long-term problems should this deal actually go through.

  

  

• Ron Paul: Drafting Women Means Equality In Slavery

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

  Last week the House Armed Services Committee approved an amendment to the National Defense Authorization Act requiring women to register with Selective Service. This means that if Congress ever brings back the draft, women will be forcibly sent to war.

  The amendment is a response to the Pentagon’s decision to allow women to serve in combat. Supporters of drafting women point out that the ban on women in combat was the reason the Supreme Court upheld a male-only draft. Therefore, they argue, it is only logical to now force women to register for Selective Service. Besides, supporters of extending the draft point out, not all draftees are sent into combat. 

  Most of those who opposed drafting women did so because they disagreed with women being eligible for combat positions, not because they opposed the military draft. Few, if any, in Congress are questioning the morality, constitutionality, and necessity of Selective Service registration. Thus, this debate is just another example of how few of our so-called “representatives” actually care about our liberty. 

  Some proponents of a military draft justify it as “payback” for the freedom the government provides its citizens. Those who make this argument are embracing the collectivist premise that since our rights come from government, the government can take away those rights whether it suits their purposes. Thus supporters of the draft are turning their backs on the Declaration of Independence.

  While opposition to the draft is seen as a progressive or libertarian position, many conservatives, including Ronald Reagan, Barry Goldwater, and Robert Taft, where outspoken opponents of conscription. Unfortunately, the militarism that has led so many conservatives astray in foreign policy has also turned many of them into supporters of mandatory Selective Service registration. Yet many of these same conservatives strongly and correctly oppose mandatory gun registration. In a free society you should never have to register your child or your gun. 

  Sadly, some opponents of the warfare state, including some libertarians, support the draft on the grounds that a draft would cause a mass uprising against the warfare state. Proponents of this view point to the draft’s role in galvanizing opposition to the Vietnam War. This argument ignores that fact that it took several years and the deaths of thousands of American draftees for the anti-Vietnam War movement to succeed.

  A variation on this argument is that drafting women will cause an antiwar backlash as Americans recoil form the idea of forcing mothers into combat. But does anyone think the government would draft mothers with young children?

  Reinstating the draft will not diminish the war party’s influence as long as the people continue to believe the war propaganda fed to them by the military-industrial complex’s media echo chamber. Changing the people’s attitude toward the warfare state and its propaganda organs is the only way to return to a foreign policy of peace and commerce with all.

  Even if the draft could serve as a check on the warfare state, those who support individual liberty should still oppose it. Libertarians who support violating individual rights to achieve a political goal, even a goal as noble as peace, undermine their arguments against non-aggression and thus discredit both our movement, and, more importantly, our philosophy.

  A military draft is one of — if not the — worst violations of individual rights committed by modern governments. The draft can also facilitate the growth of the warfare state by lowing the cost of militarism. All those who value peace, prosperity, and liberty must place opposition to the draft at the top of their agenda. 

  

  

• Every Time This Has Happened, A Recession Followed

  Three months ago the Fed released its Fourth Quarter “Senior Loan Officer Opinion Survey on Bank Lending Practices”, which revealed something ominous. It showed that in Q4, lending standards tightened for the second consecutive quarter. This was a problem because as Deutsche Bank pointed out at the time two consecutive quarters of tightening Commercial & Industrial loan standards “has never happened before without it signalling an eventual move into recession and a notable default cycle. Once we have 2 such quarters lending standards don’t net loosen again until the start of the next cycle.”

  As of today, we now have three consecutive quarters of tightening lending standards. In fact, based on the latest survey, net lending standards tightened even more than during Q4 as shown in the chart below, and are now the tightest on net since the financial crisis. Needless to say, if a recession and a default cycle has always followed two quarters of tighter lending conditions, three quarters does not make it better.

  

  This is what the Fed said:

  On balance, a moderate net fraction of banks reported a tightening of lending standards for C&I loans to large and middle-market firms over the past three months. Meanwhile, only a modest net fraction of banks reported tightening lending standards for C&I loans to small firms. Banks reported that they tightened some C&I loan terms for large and middle-market firms: A moderate net fraction of banks reported that they had increased premiums charged on riskier loans, a modest net fraction of banks reported that loan covenants had tightened, and most other terms to such firms remained basically unchanged on net. Banks reported mixed responses regarding changes in loan terms for small firms. A majority of the domestic respondents that tightened either standards or terms on C&I loans over the past three months cited a less favorable or more uncertain economic outlook as well as a worsening of industry-specific problems affecting borrowers as important reasons. Meanwhile, a significant net fraction of foreign respondents reported a tightening of lending standards for C&I loans.

  In other words, credit availability is bad and getting worse, and may explain why the ECB had no choice but to shock the credit pipeline into action when Draghi announced that the ECB would monetize corporate bonds (and soon enough, junk bonds).

  And while our focus looking at this data is on the implied probability (based on historical precedented, now at 100%) of a recession, Bank of America’s high yield strategist Michael Contopoulos is looking  at the implications of continued lending tightness on the credit market, where he has been uncharacteristically gloomy for many moths. This is what he said:

  Banks tightening their grip on lending

   

  Today’s Senior Loan Officer Opinion Survey on Bank Lending Practices confirmed several of our concerns from last year; that in the face of deteriorating corporate fundamentals, a weak economic outlook, industry specific woes in the commodity space and global markets that have been volatile, banks would pull back the reins on lending. Below we highlight some of the details of the report that we think are relevant when considering the durability of the post February 11th high yield rally.

  • The two best predictors of the US default rate are C&I lending and the proportion of downgrades to upgrades within high yield. With both deteriorating over the last several quarters our model now suggests a default rate over the next 12 months of 5.4%. We note, however, that the model this time last year forecast a 2.7% default rate yet with the high degree of Energy defaults, we have actually realized a 5.3% rate as of April 30th. It stands to reason, then, that our model, usually highly accurate in its calculation, could be understating the actual default rate over the next 12 months. We think there is upside to our forecast of 5-6% this year, and caution investors that non-commodity defaults are also likely to rise absent a complete opening of capital markets.

  

  • The survey noted that banks tightened their lending standards on C&I and commercial real estate loans while enforcing material adverse changes clauses or other covenants to limit draws on existing Energy credit lines. Late last year and earlier this year we wrote that one of our fears was that regional banks in areas hit hard by the energy rout would be less willing to lend than before the collapse in oil. Our theory has been that as banks set aside reserves for their Energy exposure, they will tighten lending standards in other areas. Sure enough, the survey noted that “on balance, banks indicated a spillover from the energy sector onto credit quality of loans made to businesses and households located in energy-sector-dependent regions.” As these areas of the US experience further hardship, we expect the quality of borrower to deteriorate and lending standards further tighten in these regions. This likely means the one area of lending strength, the consumer, could begin to realize tightening later in the year.
  • Demand also waned for C&I loans, as large and middle market firms in particular noted decreased investment in PPE and a decline in financing needs for M&A, accounts receivable and inventories. In our mind, a lack of demand could prove to be indicative of an economy that has not only stalled, but one in which corporate CEOs and CFOs lack confidence in. Additionally, with little capex to cut, deteriorating assets, a labor market that is both tight and unproductive, and a bank lending environment that is becoming harder to leverage, we wonder how long it will be before corporates begin to cut headcount.

  The survey noted that a “majority of the domestic respondents that tightened either standards or terms on C&I loans over the past three months cited a less favorable or more uncertain economic outlook as well as a worsening of industry-specific problems affecting borrowers” as the reason for tightening. As we read this statement, our first thought is that the problems are not just an Energy story any longer.

  What all of the above means is simple: either lending standards will ease or the Fed will have no choice but to do what the ECB has done, and jam the credit channel open by actively backstopping bond – and loan – issuance. Either that, or the central banks will have to engage in more coordinated commodity manipulation attempts, since at the very core of the deteriorating lending standards is the collapse in the oil price which in turn has forced banks to collapse revolver availability and halt future issuance until they have some visibility on where the price of oil stabilizes.  Perhaps instead of monetizing loans, Yellen will covertly greenlight whoever is the global activist central bank du jour, with a mission to monetize enough oil to push it another $10-20 higher. At that point we will eagerly look forward to Saudi Arabia’s response as crude above $50 will mean virtually the entire shale patch is back online.

  On the other hand, if just like the BOJ last week the Fed does nothing , we have little reason to doubt the historical precedent in which case the countdown to the next recession can officially begin.

  

  

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• Paper Gold Is Rising, Report 1 May, 2016

  The price of gold shot up over $60 this week. The price of silver moved up proportionally, gaining over $0.85. The mood is now palpable. The feeling in the air is that of long suffering suddenly turned to optimism. Big gains, if not the collapse of the price-suppression cartel, are now inevitable.

  The headlines and articles, screaming for gold to hit $10,000 to $50,000, are pervasive. Today we won’t dwell on our favorite point that if the price of gold hits $50,000 then that means the price of the dollar has collapsed. If you own an ounce of gold, then you may have a lot more dollars. But unfortunately, each of those dollars is worth a lot less.

  Today, we want to look at this new alleged precious metals bull market. Does it have legs? Are we likely to see silver hit $20, much less $1,000? We will support our analysis with a new graph to show the big picture.

  Let’s look at the only true picture of supply and demand fundamentals. But first, here’s the graph of the metals’ prices.

         The Prices of Gold and Silver
  
  

  Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio was down slightly this week. 

  The Ratio of the Gold Price to the Silver Price
  
  

  For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

  Here is the gold graph.

         The Gold Basis and Cobasis and the Dollar Price
  
  

  We actually had to expand the range of both axes. The price of the dollar fell off the bottom, currently about 24mg. The cobasis (which is our measure of the scarcity of gold) also fell off the bottom, while the basis (which is our measure of abundance) rose above the top.

  As the price of gold continues to rise, it becomes more abundant. Indeed, we can hardly say “scarcity” any more with a cobasis below -1%.

  Look, the supply and demand fundamentals could change at any time. However, as of this moment, the picture painted by the basis is not $10,000 or $50,000. It’s more like $1,235. More on this below.

  First let’s turn to silver.

  The Silver Basis and Cobasis and the Dollar Price
  
  

  The first thing you’ll notice is that the red cobasis line (i.e. scarcity) has not been falling to match the falling price of the dollar measured in silver (i.e. rising price of silver, measured in dollars) the way it has in the gold chart above. However, two factors mitigate this. One, the silver cobasis is much lower on an absolute basis (no pun intended). In gold, the cobasis is -1.1%, whereas for silver it’s -1.4%.

  Two, silver has a much stronger tendency to a falling basis and rising cobasis as each contract nears expiration. In times of greater scarcity, it causes temporary backwardation—each contract tips into backwardation before it goes off the board. This phenomenon begins to distort the silver chart much farther out than in gold, and to a greater (numerical) degree. It has already taken hold in the July silver contract.

  This segues into our next chart, a view new to this Report. We show the August and December gold contracts and the September and December silver contracts. Just the basis only, to make the chart easier to read.

  The Gold and Silver Basis with LIBOR
  
  

  You can see another aspect of our previous point. Even this far out, the silver contracts show more volatility than gold. And the two different months deviate from one another more than in gold.

  Note the strong rising trend starting around mid-January.

  So what is this showing, really? The basis is the real-world profit you would make to carry metal. Suppose you buy a bar of metal and simultaneously sell a futures contract, storing the metal in the meantime. You pocket the carry spread. If we quote it in terms of dollars, it’s about 14 cents for December silver. We quote it as an annualized percentage, so that you can easily compare it to other investments (more on this in a moment).

  The trend for the past few months is that carrying is more and more profitable. What does that tell us? It means that more and more firms will enter the carry trade. A profit attracts people, for some odd reason or another having to do with wanting to make money or something…

  Anyways, we know that more market participants are carrying metal because it’s more profitable than it was. Whatever number of people wanted to do it when the profit was 7 cents, we know that more will do it for 14.

  What is this telling us about the state of the market for metal? If more and more metal is going into carry trades, then the marginal buyer of metal is this trader who carries metal—whom we often call the warehouseman. The marginal demand for metal is to be carried. This is a dangerous state, because when it flips around, then this marginal demand disappears and then the marginal supply of metal is coming out of carry trades. This is hardly the picture of a shortage driving a durable bull market.

  We included two different LIBOR rates on the chart. It’s interesting to compare the basis to LIBOR. Now, in gold, carrying is about the same as 6-month LIBOR. In silver, the return is above that, and at one point got above 12-month LIBOR.

  We have one final point. These traders are carrying metal to earn a small spread, with no price exposure. They are arbitragers. The activity of the arbitrageur always causes compression of the spread from which he is profiting. In this case, the carry trade involves buying metal in the spot market and selling it in the futures market. This tends to push up the price of spot metal and pull down the price of futures contracts.

  So we have a growing group that’s pushing to compress the basis spread—basis is futures minus spot. Yet the basis is widening despite that. What could cause something to rise, when there’s a powerful and growing force trying to make it fall? What is the even-bigger force at work here?

  It is the fast and furious buying of speculators, who bid up futures contracts on leverage. Paper gold is rising, and it’s pulling up gold metal. Paper silver is rising, and it’s pulling up silver metal.

  For now.

   

  © 2016 Monetary Metals

  

• Seymour Hersh Says Hillary Approved Sending Libya's Sarin To Syrian Rebels

  Authored by Eric Zuesse via Strategic-Culture.org,

  The great investigative journalist Seymour Hersh, in two previous articles in the London Review of Books ("Whose Sarin?" and "The Red Line and the Rat Line") has reported that the Obama Administration falsely blamed the government of Syria’s Bashar al-Assad for the sarin gas attack that Obama was trying to use as an excuse to invade Syria; and Hersh pointed to a report from British intelligence saying that the sarin that was used didn’t come from Assad’s stockpiles. Hersh also said that a secret agreement in 2012 was reached between the Obama Administration and the leaders of Turkey, Saudi Arabia, and Qatar, to set up a sarin gas attack and blame it on Assad so that the US could invade and overthrow Assad.

  "By the terms of the agreement, funding came from Turkey, as well as Saudi Arabia and Qatar; the CIA, with the support of MI6, was responsible for getting arms from Gaddafi’s arsenals into Syria."

  Hersh didn’t say whether these 'arms' included the precursor chemicals for making sarin which were stockpiled in Libya, but there have been multiple independent reports that Libya’s Gaddafi possessed such stockpiles, and also that the US Consulate in Benghazi Libya was operating a "rat line" for Gaddafi’s captured weapons into Syria through Turkey. So, Hersh isn’t the only reporter who has been covering this. Indeed, the investigative journalist Christoph Lehmann headlined on 7 October 2013, "Top US and Saudi Officials responsible for Chemical Weapons in Syria" and reported, on the basis of very different sources than Hersh used, that:

  "Evidence leads directly to the White House, the Chairman of the Joint Chiefs of Staff Martin Dempsey, CIA Director John Brennan, Saudi Intelligence Chief Prince Bandar, and Saudi Arabia´s Interior Ministry."

  And, as if that weren’t enough, even the definitive analysis of the evidence that was performed by two leading US analysts, the Lloyd-Postal report, concluded that:

  "The US Government’s Interpretation of the Technical Intelligence It Gathered Prior to and After the August 21 Attack CANNOT POSSIBLY BE CORRECT."

  Obama has clearly been lying.

  However, now, for the first time, Hersh has implicated Hillary Clinton directly in this 'rat line'. In an interview with Alternet.org, Hersh was asked about the then-US-Secretary-of-State’s role in the Benghazi Libya US consulate’s operation to collect weapons from Libyan stockpiles and send them through Turkey into Syria for a set-up sarin-gas attack, to be blamed on Assad in order to ‘justify’ the US invading Syria, as the US had invaded Libya to eliminate Gaddafi. Hersh said:

  "That ambassador who was killed, he was known as a guy, from what I understand, as somebody, who would not get in the way of the CIA. As I wrote, on the day of the mission he was meeting with the CIA base chief and the shipping company. He was certainly involved, aware and witting of everything that was going on. And there’s no way somebody in that sensitive of a position is not talking to the boss, by some channel".

  This was, in fact, the Syrian part of the State Department’s Libyan operation, Obama’s operation to set up an excuse for the US doing in Syria what they had already done in Libya.

  The interviewer then asked:

  "In the book [Hersh’s The Killing of Osama bin Laden, just out] you quote a former intelligence official as saying that the White House rejected 35 target sets [for the planned US invasion of Syria] provided by the Joint Chiefs as being insufficiently painful to the Assad regime. (You note that the original targets included military sites only – nothing by way of civilian infrastructure.) Later the White House proposed a target list that included civilian infrastructure. What would the toll to civilians have been if the White House’s proposed strike had been carried out?"

  Hersh responded by saying that the US tradition in that regard has long been to ignore civilian casualties; i.e., collateral damage of US attacks is okay or even desired (so as to terrorize the population into surrender) – not an ‘issue’, except, perhaps, for the PR people.

  The interviewer asked why Obama is so obsessed to replace Assad in Syria, since "The power vacuum that would ensue would open Syria up to all kinds of jihadi groups"; and Hersh replied that not only he, but the Joint Chiefs of Staff, "nobody could figure out why". He said, "Our policy has always been against him [Assad]. Period". This has actually been the case not only since the Party that Assad leads, the Ba’ath Party, was the subject of a shelved CIA coup-plot in 1957 to overthrow and replace it; but, actually, the CIA’s first coup had been not just planned but was carried out in 1949 in Syria, overthrowing there a democratically elected leader, in order to enable a pipeline for the Sauds’ oil to become built through Syria into the largest oil market, Europe; and, construction of the pipeline started the following year. But, there were then a succession of Syrian coups (domestic instead of by foreign powers – 1954, 1963, 1966, and, finally, in 1970), concluding in the accession to power of Hafez al-Assad during the 1970 coup. And, the Sauds' long-planned Trans-Arabia Pipeline has still not been built. The Saudi royal family, who own the world’s largest oil company, Aramco, don’t want to wait any longer. Obama is the first US President to have seriously tried to carry out their long-desired "regime change" in Syria, so as to enable not only the Sauds’ Trans-Arabian Pipeline to be built, but also to build through Syria the Qatar-Turkey Gas Pipeline that the Thani royal family (friends of the Sauds) who own Qatar want also to be built there. The US is allied with the Saud family (and with their friends, the royal families of Qatar, Kuwait, UAE, Bahrain, and Oman). Russia is allied with the leaders of Syria – as Russia had earlier been allied with Mossadegh in Iran, Arbenz in Guatemala, Allende in Chile, Hussein in Iraq, Gaddafi in Libya, and Yanukovych in Ukraine (all of whom except Syria’s Ba’ath Party, the US has successfully overthrown).

  Hersh was wrong to say that "nobody could figure out why" Obama is obsessed with overthrowing Assad and his Ba’ath Party, even if nobody that he spoke with was willing to say why. They have all been hired to do a job, which didn’t change even when the Soviet Union ended and the Warsaw Pact was disbanded; and, anyone who has been at this job for as long as those people have, can pretty well figure out what the job actually is – even if Hersh can’t.

  Hersh then said that Obama wanted to fill Syria with foreign jihadists to serve as the necessary ground forces for his planned aerial bombardment there, and, "if you wanted to go there and fight there in 2011-2013, ‘Go, go, go… overthrow Bashar!’ So, they actually pushed a lot of people [jihadists] to go. I don’t think they were paying for them but they certainly gave visas".

  However, it’s not actually part of America’s deal with its allies the fundamentalist-Sunni Arabic royal families and the fundamentalist Sunni Erdogan of Turkey, for the US to supply the salaries (to be "paying for them", as Hersh put it there) to those fundamentalist Sunni jihadists – that’s instead the function of the Sauds and of their friends, the other Arab royals, and their friends, to do. (Those are the people who finance the terrorists to perpetrate attacks in the US, Europe, Russia, Afghanistan, Pakistan, India, India, Nigeria, etc. – i.e., anywhere except in their own countries.) And, Erdogan in Turkey mainly gives their jihadists just safe passage into Syria, and he takes part of the proceeds from the jihadists’ sales of stolen Syrian and Iraqi oil. But, they all work together as a team (with the jihadists sometimes killing each other in the process – that’s even part of the plan) – though each national leader has PR problems at home in order to fool his respective public into thinking that they’re against terrorists, and that only the ‘enemy’ is to blame. (Meanwhile, the aristocrats who supply the "salaries" of the jihadists, walk off with all the money.)

  This way, US oil and gas companies will refine, and pipeline into Europe, the Sauds’ oil and the Thanis’ gas, and not only will Russia’s major oil-and-gas market become squeezed away by that, but Obama’s economic sanctions against Russia, plus the yet-further isolation of Russia (as well as of China and the rest of the BRICS countries) by excluding them from Obama’s three mega-trade-deals (TTIP, TPP & TISA), will place the US aristocracy firmly in control of the world, to dominate the 21st Century, as it has dominated ever since the end of WW II.

  Then, came this question from Hersh:

  "Why does America do what it does? Why do we not say to the Russians, Let’s work together?"

  His interviewer immediately seconded that by repeating it, "So why don’t we work closer with Russia? It seems so rational". Hersh replied simply: "I don’t know". He didn’t venture so much as a guess – not even an educated one. But, when journalists who are as knowledgeable as he, don’t present some credible explanation, to challenge the obvious lies (which make no sense that accords with the blatantly contrary evidence those journalists know of against those lies) that come from people such as Barack Obama, aren’t they thereby – though passively – participating in the fraud, instead of contradicting and challenging it? Or, is the underlying assumption, there: The general public is going to be as deeply immersed in the background information here as I am, so that they don’t need me to bring it all together for them into a coherent (and fully documented) whole, which does make sense? Is that the underlying assumption? Because: if it is, it’s false.

  Hersh’s journalism is among the best (after all: he went so far as to say, of Christopher Stephens, regarding Hillary Clinton, "there’s no way somebody in that sensitive of a position is not talking to the boss, by some channel"), but it’s certainly not good enough. However, it’s too good to be published any longer in places like the New Yorker. And the reporting by Christof Lehmann was better, and it was issued even earlier than Hersh’s; and it is good enough, because it named names, and it explained motivations, in an honest and forthright way, which is why Lehmann’s piece was published only on a Montenegrin site, and only online, not in a Western print medium, such as the New Yorker. The sites that are owned by members of the Western aristocracy don’t issue reports like that – journalism that’s good enough. They won’t inform the public when a US Secretary of State, and her boss the US President, are the persons actually behind a sarin gas attack they’re blaming on a foreign leader the US aristocrats and their allied foreign aristocrats are determined to topple and replace.

  Is this really a democracy?

  

  

• British "Spies" Among Thousands Of names Exposed Following Massive Leak At Largest Mid-East Bank

  The Panama Papers leak was for appetizers. The real leak, one which took place quietly and under the radar a few days ago, and may have exposed far more wealthy and important individuals, was that of the Qatar National Bank – the Middle East’s largest lender by assets – where a massive 1.5 GB data dump posted online last week exposed the personal data of thousands of clients.

  According to IBT, the massive data dump appears to contain hundreds of thousands of records including customer transaction logs, personal identification numbers and credit card data. Additionally, dozens of separate folders consist of information on everything from Al Jazeera journalists to what appears to be the Al-Thani Qatar Royal Family and even contains a slew of records listed as Ministry of Defence, MI6 (the UK foreign intelligence service) and Qatar’s State Security Bureau, also known as “Mukhabarat”.
  

  The bank told Reuters it had taken immediate steps to ensure customers would not suffer any financial loss after the security breach although it was not clear how the bank planned to protect accounts whose details, including customer names and passwords, have already been published.

  

  “We are taking every measure to protect the privacy of our customers and have engaged an external third party expert to review all our systems to ensure no vulnerabilities exist,” the bank said in a statement on Sunday. “All our customers’ accounts are secure.”

  Except, of course, all those thousands whose data is already in the public domain.

  According to Reuters, the 1.5GB trove of leaked documents posted online included the bank details, telephone numbers and dates of birth of several journalists for satellite broadcaster Al-Jazeera, supposed members of the ruling al-Thani family and government and defense officials.

  Some files had pictures of account holders from Facebook and LinkedIn, a potentially sensitive issue in a conservative country where privacy is valued.

  The bank said the breach was an attack on its reputation, rather than specifically targeted at the customers, and only involved a portion of Qatar based customers.

  The statement did not mention the identity of the hackers.

  QNB said some of the data released may be accurate but much of it was constructed and “contains a mixture of information from the attack as well as other non-QNB sources, such as personal data from social media channels.” Which is merely another word for damage control.

  A copy of the leaked content seen by Reuters contained transaction data of QNB customers that showed overseas remittance data from as recently as September 2015. One file had information on what appeared to be 465,437 QNB accounts, although only a fraction of these accounts had anything resembling full account details.

  Several known Qatari figures in the government and media whose names appeared on the list confirmed to Reuters that their account details were accurate.  Middle Eastern banks are attractive targets for cyber criminals because of the high levels of wealth in the oil-rich region. Qatar is the wealthiest country in the world on a per-capita basis, according to the World Bank.

  As Security Affairs reports, “one researcher, speaking on condition of anonymity, also confirmed that he had successfully used leaked customer internet banking credentials from the data dump to begin logging in to the customer’s account, purely for research purposes. But he said the bank’s systems then sent a one-time password to the customer’s registered mobile number, which would serve as a defense against any criminals who might now attempt to use the leaked data to commit fraud.”

  But perhaps the most notable information contained in the leak a folder listed as “SPY, Intelligence” that quickly catches the eye. As IBT wrties, it contains a slew of records listed as Ministry of Defence, MI6 (the UK foreign intelligence service) and Qatar’s State Security Bureau, also known as “Mukhabarat”.

  

  The MI6 file, which sits alongside similar documents reportedly from Polish and French intelligence, opens up an in-depth report on an alleged agent. This includes names of close relations, phone numbers, social media accounts and credit card data. Furthermore, in one instance, a file marked “wife”, opens a photo showing a woman and two children. There are roughly a dozen of these intelligence dossiers included in the Qatar data dump.

  As noted above, the alleged banking leak also openly lists a folder marked “Al Jazeera” that stores nearly 30 separate profiles alongside an Microsoft Excel file that holds more than 1,200 records – including national ID numbers, telephone numbers and home addresses. Much like the intelligence files, the Al Jazeera disclosure contains a number of entries labelled “SPY” and also includes images of the person alongside social accounts, banking data and passwords.

  The massive leak was initially uploaded at Global-Files.net however was quickly removed without explanation. Then, the website Cryptome mirrored the entire data dump in an easily-accessible format.

  1/2 As @aljazeera______ tweeted, Qatar National Bank hacked. 15,460 files 100Ks accounts, pwds, PINs, “Spies” pic.twitter.com/cnjdumTlJu

  — Cryptome (@Cryptomeorg) April 25, 2016

  2/2 QNB hack: 15.4K docs, 1.4GB, most tiny, dozens big. Zip (431MB): https://t.co/R4jiU8iXEy (RU?) /@aljazeera______ pic.twitter.com/KXjI2ELvzi

  — Cryptome (@Cryptomeorg) April 25, 2016

  If the QNB hack https://t.co/R4jiU8iXEy site goes down, we’ll offer the Zip. Unless irresistably bribed to dribble, redact and talk big.

  — Cryptome (@Cryptomeorg) April 25, 2016

   

  After analysing the data Simon Edwards, cybersecurity expert with Trend Micro, told IBT that “the breach seems to be a classic attack on a bank, with the majority of data leaked online exposing customers’ bank account details, such as account numbers, credit cards and addresses.

  “There’s also a lot of information on banking transactions, suggesting that the perpetrators were trying to expose specific transactions. This theory can be further strengthened by the hacker’s attempts to profile the bank’s customers into different categories, mostly focusing on Qatar’s TV network along with other foreign agencies, some of which are categorised as ‘spies’.”

  He added: “Interestingly, there is also additional data about mainly foreign bank account holders, which includes information such as their Facebook and LinkedIn profiles, along with ‘friends’ associated through those social networks. This data doesn’t appear to have come directly from the bank itself, rather the perpetrator used the data held by the bank to then build up profiles of further targets.”

  Unlike the Panama Papers which were greeted to resounding global media fanfare, virtually no outlets have reported on the Qatar bank’s hack, which suggests to us that the data contained there is much more relevant and sensitive, and public attention will be diverted at all costs.

  We are currently going through the source data.

  

  

• Why So Worried?

  What a bunch of worry warts.

  

   

  Just because the Fed and Wall Street have driven home ownership rates to an all-time low and increased the number of renters to an all-time high through their warped monetary schemes, while driving rents up at an annual pace of over 8%, why worry?

   

  Just because your monthly rent is at an all-time high, while real median household income is at the same level it was in 1989, why worry?

   

  Just because your healthcare costs are rising at an annual rate of 10% or more, why worry about making your rent payment?

   

  Just because you have $40,000 of student loan debt and a waiter job at Applebees, why worry about that silly rent payment?

   

  Just because filling up your leased SUV is 30% more expensive than it was in mid-February, why worry about rent?

  Don’t worry, be happy.

  Via Jim Quinn's Burning Platform blog

  

  

• You're Next!

  …and now the fun really begins…

   

  

  Source: Ben Garrison

  

  

• "Get Out Traitor" – German Justice Minister Flees In Armored Mercedes After Angry Protesters Boo Him Offstage

  Heiko Maas, the German Minister of Justice, was unable to finish his Labor Day celebration speech on the 1st of May as he was loudly booed and chased off the stage by the German people. The people repeatedly shouted “traitor”, “leftist rat”, “get out!”, “we are the people” and “Maas must go!”, eventually getting him to cancel his speech and flee to his armored Mercedes escorted by his armed bodyguards.

  Maas is considered one of the biggest proponents of expanding censorship laws, demanding persecution, fines and jail-time for everybody posting “hate speech” on social media. Recently his party suffered a devastating loss in polls across the country, losing to the Alternative for Germany (AfD) by a landslide in the last state election of Saxony, where he held his speech.

  In his speech he claimed that “the people shouting ‘traitor’ don’t even know what’s happening to them.” Many of the same people would disagree.  According to vidmax “the German people are confused and angry about why they’re told that they have to be frugal and avoid having children because of the immense cost while simultaneously working their fingers to the bones to fund a foreign invasion.”

  Those in the audience in the audience ridiculed Maas for claiming that actual workers in the audience “hijack Labor Day.” He was ultimately chased offstage for what people in the audience said was the hypocrisy of celebrating Labor and fair wages while his party supports the import of millions of unskilled workers.

  The booing public ultimately forced him to end his speech early; he was then forced into his armored Mercedes at which point he quickly fled.

  Perhaps not surprisingly this took place just hours after Germany’s ascendant right-wing AfD party adopted an anti-Islam manifesto, according to which Muslims are no longer welcome in Germany.

  

  

• Deutsche Bank Unveils The Next Step: "QE Has Run Its Course, It's Time To Tax Wealth"

  Helicopter money may be on the horizon, but if Deutsche Bank has its way, there is at least one intermediate step.

  According to DB’s Dominic Konstam, now that the benefits QE “have run their course”, it is time for the next, and far more drastic step: “the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates.”

  Here is the big picture unveiling of what is coming next from Deutsche Bank’s Dominic Konstam, who is also buying the Treasury long end hand over fist:

  • The G3 central banks all stood pat, continuing the move away from the beggar-thy-neighbor paradigm. However, the adverse market reaction to the BoJ’s inaction suggests that the benefits of QE (or QQE) in its present form might have run their course.
  • It is becoming increasingly clear to us that the level of yields at which credit expansion in Europe and Japan will pick up in earnest is probably negative, and substantially so. Therefore, the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates.
  • Until then, bank NIM compression will continue to drive elevated demand for dollar-denominated assets, which manifests itself in suppressed UST term premia and wide cross-currency bases.
  • What this means for the US is that policy rates and longer bond yields are unlikely to go up until global growth accelerates materially. Until such time, it is critical for the Fed to continue to relent, allowing real yields to keep falling while breakevens rise and nominal yields remain roughly static.
  • If the Fed were to turn hawkish, there is perhaps even less scope for long-end yields to rise as breakevens would likely collapse on policy error fears.

  Some of the troubling detail:

  QE as implemented in major economies since the crisis has operated through two shocks: a demand shock whereby real yields are forced lower through lower nominal yields and static – or even falling – breakevens, and a shock to inflation expectations, whereby real yields ultimately continue to fall but due to rising BEI and static to lower nominal yields. In the case of the Anglo-Saxon economies, the demand shock quickly gave way to the shock (higher) to inflation expectations and actually allowed nominal yields to rise, if fleetingly.

   

  The second shock, to inflation expectations, has thus far remained stubbornly elusive in Europe and more so in Japan, and ephemeral in the Anglo-Saxon economies. That said, this dynamic appears to have re-emerged in the US post Fed relent and has been an important driver of the recovery in risk assets and, more generally, the easing of financial conditions.

   

  This week’s BoJ announcement disappointed, and as a result the yen appreciated sharply. This outcome does not bode well for the future efficacy of QE, at least while that is the primary policy tool in use. Breakevens have been drifting lower and real yields have been drifting higher since last summer. In other words, financial conditions in Japan are tightening, suggesting the need for more stimulus. However, the BoJ already holds a significant proportion of the assets that would be available for purchase, and the gains from additional QE activity – higher breakevens, lower real yields, and a weaker yen – are likely on the margin to be fleeting. It appears that the markets doubt the BoJ’s willingness or ability to carry on with larger and broader asset purchases, or worse yet they do not believe that such asset purchases will have their desired stimulative effect

   

  Further QE should be viewed as an experiment in real time, where the point of inquiry is the level of real or nominal yields at which credit will begin to expand more strongly with loan-to-deposit ratios increasing. What seems increasingly clear to us is that this level is likely at negative yields, and probably substantially so. If this is true, it would suggest to us that the equilibrium level of rates in the economy is probably negative. This in turn would strongly suggest a significant re-think to short-rate policy. In this case, central banks should move more strongly toward penalizing savings, rather than just the institutions that “house” those savings – the banks. This would mean allowing significantly negative retail deposit rates or perhaps even wealth taxes. With this stick would also come a carrot – one example being that while deposit rates penalize savings (the whole point), banks might also pay borrowers to buy houses via negative mortgage rates.

  In short, the real central bank panic is about to be unleashed; who will suffer? Why everyone else. And should wealth taxes really be imminent, we foresee a lot of “boating incidents” in the immediate future.

  

  

• Iraqi Oil & The 'Strange' Death of Mr. Abadi

  Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

  As expected, PM Abadi was always going to come off worse in his last ditch attempt to try and regain some kind of political initiative by appointing a new look ‘technocratic’ government in Baghdad. But the ailing Prime Minister has managed to back himself into a particularly tight corner after being outplayed by Muqtada al Sadr, Iyad Allawi and even Nouri Al Maliki. Rather than sticking to his ‘technocratic guns’ Abadi blinked first on cabinet changes, by allowing more traditional ‘muhasasa’ (i.e. quota based) politics to play through, falling back on the so called ‘three presidencies’ agreement between himself, President Fuad Masum, and parliamentary speaker, Salim al-Jiburi. The move’s since been condemned as protecting ‘establishment’ interest compared to more ‘comprehensive change’ that Maliki, Sadr and Allawi are all pitching.

  For those well versed in Iraqi politics, you’ll realise just how perverted that political situation is, but the key point to register is Mr. Abadi is now a totally lame duck PM. Whether he can stagger on to 2018 elections looks increasingly unlikely. If anything, the only thing keeping him in post right now is the simple issue that political factions aren’t in a credible position to decide on an instant successor. That, and the blunt fact that Iran is working behind the scenes to line up a far more ‘client orientated’ PM next time round at the political level, with exactly the same Persian positioning for the next Grand Ayatollah at the ‘theocratic level’. For better or worse, Abadi is no more than an interim Iranian (and to some extent US) placeholder at this stage.

  Obviously when we say ‘gamble’ everything is relative in Iraq. In reality things had got so bad for Mr. Abadi that he didn’t have any choice but to attempt a ‘technocratic coup’ amid a spate of public protests and simmering intra-Shia rivalries. That’s exactly the same political tiger Mr. Abadi’s been riding since 2014 to try and appease popular concerns on basic goods, power, water and jobs on the one hand, all retarded by inter-sectarian, and more notably, intra-sectarian divides in Iraq on the other. That was always a dangerous animal to ride, and especially with the likes of Sadr (Peace Brigades), Hakim (ISCI), Badr and the residual influence of Maliki (Dawa) all poised to go in for the intra-Shia kill as and when the time came. Unfortunately for Mr. Abadi, the clock has just stopped. He can’t rally support within the State of Law coalition, let alone more discrete ranks of Dawa to his cause at this late technocratic stage. Relations with the Kurds are similarly vexed, where vying factions within the KRG are using Abadi’s weakness to progress their own autonomous interests. That’s all the way down to operational control of Kirkuk Oil Company, prompting further supply cuts from Baghdad to choke off Northern revenues, and more importantly, keep some notion of a ‘unitary’ Iraq in place.

  

  Needless to say that remains a losing long term battle, but from here, we expect Abadi to face more calls to resign to pave the way for fresh elections. On balance, those calls will be narrowly dismissed, not because Abadi has any political capital left to appoint a new cabinet, but because a dearth of consensus over who’d replace him. Iran is more than happy to keep Abadi in post to bring Iraq to its knees, while the US won’t want the horrifying nightmare of orchestrating an Iraqi election before US Presidential elections are out the way.

  Fall short on the 2018 dates, and you’ll merely highlight the ingrained presence ISIS still has in Iraq, amid inexorable state collapse. What we’ll see instead is endless political crises, with far greater factionalism, with more violence between and within sectarian groups to protect respective turfs amid ongoing government quota debates, fiscal ‘challenges’ and opportunistic land grabs, either amongst themselves, or picking up new ‘real estate’ wherever ISIS sees temporal rolled back. For cynics (aka realists) that pretty much describes what’s happening around Abadi anyway, where ‘Popular Mobilisation Units’ are rapidly morphing into an Iraqi version of the Iranian Revolutionary Guards, while Badr and ISCI continue to cement control of Southern production when it comes to military hardware and boots on the Basra / Misan ground. Admittedly not everyone’s signed up to every Iranian edict, least of all Mr. Sadr who’s keen to carve out some form of ‘local autonomy’.

  But beyond day to day Shia spats, the overall direction of travel remains undeniably Persian in a weakened Iraq. On that note it’s going to be a very long summer for Abadi. Not only does he have to find some way of keeping his notional seat in pernicious Baghdad politics, he has to brace for major bouts of social unrest over failed reforms in the summer blaze when his same ‘political tiger’ will roar once more. Water and electricity will go into short supply, but not as short as Mr. Abadi’s political capital. What little he had left, is spent. The strange death of Mr. Abadi has happened.

  

  

• Deutsche Bank Has Systemic Money Laundering, Terrorist Financing And Sanctions Problems: UK Regulator

  Just two days after Deutsche Bank fired the head of its “integrity committee”, Georg Thoma who had been originally tasked with clearing up the bank’s past scandals, because according to DB’s vice chairman Alfred Herling, Thoma had been “overzealous” and “goes too far when he demands ever wider investigations and more and more lawyers come marching up”, today the UK financial watchdog agency FCA announced that Germany’s biggest bank has “serious” and “systemic” failings in its controls against money laundering, terrorist financing and sanctions, the Financial Times reported.

  The Financial Conduct Authority (FCA), has now ordered a separate independent review, the FT reported the letter as saying. The FCA declined to comment.

  In other words instad of firing it “Chief Ethics Officer” (sic), Deutsche should have ideally hired a few more because as a result of this latest probe it is most likely looking at billions more in settlement charges over the next 6 – 12 months.

  “Our overall conclusion was that Deutsche Bank UK had serious AML (anti-money laundering), terrorist financing and sanctions failings which were systemic in nature,” the FCA letter, dated March 2, reportedly said.

  “Effective senior management engagement and leadership on financial crime had been lacking for a considerable period of time.” And where there is effective senior management, the board makes sure to get rid of said management, because if it actually followed the law how could this megabank ever make money in Europe’s monetary twilight zone.

  Meanwhile, Deutsche Bank said it is cooperating with regulators to fundamentally reform its anti-financial crime program.

  “We understand the importance of this issue and are committed to and engaged in fixing it”, a company spokesman said in an emailed statement on Sunday.

  This is only the latest brush-up between DB and the FCA: in late 2014, the UK regulator put Deutsche Bank’s London office under enhanced supervision owing to concern about the bank’s governance and controls. Enhanced supervision procedures are normally kept private and can follow fines. Following its review, Reuters reports, the FCA ordered a so-called skilled persons report – also called a Section 166 report – to assess remedial work Deutsche must now carry out.

  Deutsche Bank’s new chief executive, John Cryan, who took over in July, has embarked on a deep restructuring of the bank, which includes an overhaul of governance procedures.

  Cryan announced in November a review of its know-your-client mechanisms and its vetting procedures when taking on new clients. It has also suspended taking on new customers from 109 countries which it has defined as high risk, compared with 30 countries it had earlier classified as too risky.

  The report on the FCA letter comes not only days after the abovementioned acrimonious public squabble among members of Deutsche Bank’s supervisory board and the ejection of the man heading the supervisory board’s Integrity Committee, but also just weeks after Deutsche became the first bank to settle and admit to charges that it had manipulated the gold market, and had also agreed to expose other gold manipulation cartel members.

  

  

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• State-Sanctioned Theft – The Failed War On Drugs And Cops' Abuse Of Civil Forfeiture

  Submitted by Lorelei McFly via CopBlock.org,

  One of the biggest lies our government tells us is that it wages the War on Drugs to keep us safe. More than 40 years after it was started, we know that it has been a colossally-expensive epic failure on its stated goals, was intentionally designed to further disenfranchise marginalized groups, and has become a full-fledged assault on our civil liberties.

  Even with all the billions of tax dollars it spends each year, and all the flashy photo ops of seized drugs stacked on tables, the Drug Enforcement Agency only stops 1% of the illegal drug supply from being distributed in America, according to the video below. Not only is law enforcement pathetically inept at stemming the flow of drugs, they are active participants in the illicit drug trade at both the federal and local level:

  • Documents Show CIA complicity in the crack cocaine epidemic of the 1980s
  • DEA’s 12-year business arrangement with El Chapo’s Sinaloa drug cartel
  • Florida Cops Laundered Millions For Drug Cartels, Failed To Make A Single Arrest
  • 13 Current and Former North Carolina and Virginia Law Enforcement Officers Indicted for Drug Smuggling
  • California Drug Cop Busted Smuggling $2 Million Worth of Marijuana
  • Pennsylvania Police Officer Who Obtained Hundreds of Narcotic Pills from 19 Different Doctors Given Plea Deal for Probation
  • Narcotics Unit Supervisor Charged with Stealing Drugs from Evidence Room in Ohio

  That drug prohibition causes far more harm than it supposedly prevents would not even be a question of debate were it not for the fact that so many people’s livelihoods now depend on waging it. The ugly unspoken truth is that the War on Drugs is a massive jobs and funding program for law enforcement that is operated under the guise of saving people from the evils of substance abuse.

  State-Sanctioned Theft

  Everything we do is suspect, and everything we own is subject to seizure— take cash for an example. The saying used to be that “cash is king,’ however these days it’s “cash is criminal” since cash transactions and even withdrawing or carrying “large amounts,” basically more than a few dollars, of your own money is now considered an indication of criminal activity (see here).  Section 31 U.S.C. 5103 states, “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues,” so why does the government that prints that same money have such a problem with its citizens using it?

  How Cash Became Criminal

  Cash transactions are anonymous, so it is assumed that people who make cash transactions are trying to avoid leaving records of their activities. And if any aspect of your life is not a traceable, verifiable open book for the government, obviously you must be hiding something.  Never mind that the case is often that people simply find using cash allows them to manage their finances more responsibly without risking overdraft or interest fees, or are making a purchase that requires cash, such as buying a used car, or that they simply do not have access to bank accounts due to low income or poor credit history.

  According to the FDIC, “7.7 percent (1 in 13) of households in the United States were unbanked in 2013. This proportion represented approximately 16.7 million adults.”  20.0 percent of U.S. households, approximately 50.9 million adults, were underbanked in 2013, “meaning that they had a bank account but also used alternative financial services (AFS) outside of the banking system,” such as money orders, check cashing, remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shops, or auto title loans.

  The FDIC report also states “In many cases, financial life events, such as job loss, significant income loss or a new job, appear to be important reasons why households leave or enter the banking system.” The documentary Spent: Looking for Change, highlights the struggles of the unbanked and underbanked using the personal stories of several individuals.

  While using cash out of preference or necessity is a perfectly legal activity, it is politically expedient for law enforcement agencies to pretend otherwise because they have incentives to do so. Civil asset forfeiture allows law enforcement agencies to take money, cars, houses, and other property that they suspect of being purchased with the proceeds from criminal activity or of being used in connection with criminal activity. The agencies then either keep or sell the property and use it or the proceeds for their own purposes. It’s such a huge cash cow for law enforcement that in 2014, the amount federal agencies netted through civil asset forfeiture, $5 billion, exceeded the amount Americans lost through burglaries, $3.5 billion. The actual amount seized is even higher than this, since this figure does not include the amounts taken by state and local law enforcement agencies.

  Taking money from bad guys, sounds great, right? Oh, there’s a catch.  Cops don’t have to actually prove you committed any crime. They don’t even have to charge you with one. You, on the other hand, need to go to court and jump through whatever hoops the government requires to prove your innocence and get your property back. See How police took $53,000 from a Christian band, an orphanage and a church for a recent example of how police use civil forfeiture to knowingly steal from innocent citizens who have no involvement in the drug trade.

  Cops and prosecutors also intimidate people into giving up their property by threatening to pursue criminal charges if they try get it back.From Taken, New Yorker Magazine’s investigation into one Texas town’s massively corrupt civil asset forfeiture program:

  “The eye-opening event was pulling those files,” Guillory told me. One of the first cases that caught his attention was titled State of Texas vs. One Gold Crucifix. The police had confiscated a simple gold cross that a woman wore around her neck after pulling her over for a minor traffic violation. No contraband was reported, no criminal charges were filed, and no traffic ticket was issued. That’s how it went in dozens more cases involving cash, cars, and jewelry. A number of files contained slips of paper of a sort he’d never seen before. These were roadside property waivers, improvised by the district attorney, which threatened criminal charges unless drivers agreed to hand over valuables.

  Law enforcement agencies say this is a vital tactic for battling drug kingpins and vast criminal enterprises, but the typical value of property seized tends to be low, victimizing citizens who usually have the least resources, and the least ability to fight back.

  The Institute for Justice, an organization at the forefront of the battle against abusive forfeiture practices, “was able to obtain property-level forfeiture data for 2012 from 10 states, allowing median property values to be calculated. In those states, the median value of forfeited property ranged from $451 in Minnesota to $2,048 in Utah, not much more than an American’s average annual cell phone bill.”

  Meanwhile what happens to the criminal masterminds who actually are involved in nefarious activities on a grand scale? They get a slap on the wrist. From the Rolling Stone article,Outrageous HSBC Settlement Proves the Drug War is a Joke:

  [Assistant Attorney General] Breuer this week signed off on a settlement deal with the British banking giant HSBC that is the ultimate insult to every ordinary person who’s ever had his life altered by a narcotics charge. Despite the fact that HSBC admitted to laundering billions of dollars for Colombian and Mexican drug cartels (among others) and violating a host of important banking laws (from the Bank Secrecy Act to the Trading With the Enemy Act), Breuer and his Justice Department elected not to pursue criminal prosecutions of the bank, opting instead for a“record” financial settlement of $1.9 billion, which as one analyst noted is about five weeks of income for the bank.

   

  The banks’ laundering transactions were so brazen that the NSA probably could have spotted them from space. Breuer admitted that drug dealers would sometimes come to HSBC’s Mexican branches and “deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows.”

  The article continues:

  Even more shocking, the Justice Department’s response to learning about all of this was to do exactly the same thing that the HSBC executives did in the first place to get themselves in trouble – they took money to look the other way.

   

  And not only did they sell out to drug dealers, they sold out cheap. You’ll hear bragging this week by the Obama administration that they wrested a record penalty from HSBC, but it’s a joke. Some of the penalties involved will literally make you laugh out loud. This is from Breuer’s announcement:

   

  As a result of the government’s investigation, HSBC has . . . “clawed back” deferred compensation bonuses given to some of its most senior U.S. anti-money laundering and compliance officers, and agreed to partially defer bonus compensation for its most senior officials during the five-year period of the deferred prosecution agreement.

   

  Wow. So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me? That’s the punishment? The government’s negotiators couldn’t hold firm on forcing HSBC officials to completely wait to receive their ill-gotten bonuses? They had to settle on making them “partially” wait? Every honest prosecutor in America has to be puking his guts out at such bargaining tactics. What was the Justice Department’s opening offer – asking executives to restrict their Caribbean vacation time to nine weeks a year?

  However there is some good news! Last year Montana and New Mexico passed reform measures that require a criminal conviction before assets can be stolen by state agents, and Nebraska just did, too.  Of course, several cities in New Mexico refuse to abide by the law andare now being sued by the Institute for Justice as a result, but it’s still progress, right? Also, the Department of Justice announced last year that it was drastically scaling back its equitable-sharing program, which state and local agencies have used to undermine local ordinances restricting forfeiture activities. Well, the impact wasn’t really as big as they first made it out to be, and that doesn’t matter anyway because DOJ already reinstated the program last month.

  

  

• Visualizing The Market Cycle

  Is it possible to time the market cycle to capture big gains?

  Like many controversial topics in investing, there is no real professional consensus on market timing. Academics claim that it’s not possible, while traders and chartists swear by the idea.

  That said, as VisualCapitalist's Jeff Desjardins notes, one thing that everyone can probably agree on is that markets are cyclical and that securities do have recurring chart patterns. They aren’t predictable all of the time, but learning the fundamentals around market cycles can only help an investor in furthering their understanding of how things work.

  The following infographic explains the four important phases of market trends, based on the methodology of the famous stock market authority Richard Wyckoff. The theory is: the better an investor can identify these phases of the market cycle, the more profits can be made on the ride upwards of a buying opportunity.

   

  

  Courtesy of: Visual Capitalist

   

  Here are the descriptions of each major phase of the market cycle:

  Accumulation: Occurs after a drop in prices. Process of buyers gaining control from sellers which leads to markup.

   

  Markup: Bullish phase of a stock’s life is defined by higher highs and higher lows. This is where you want to get long on breakouts and after short-term pullbacks. Rallies are “innocent until proven guilty”.

   

  Distribution: Occurs after a prolonged price advance. Sellers gain control of prices, which leads to decline.

   

  Decline: Bearish phase of a stock’s life. This is where you want to be short, so look to sell short fresh breakdowns after minor rallies have exhausted themselves. Rally attempts are “guilty until proven innocent”.

  The basic strategy is to pay close attention during the accumulation and distribution phases as the market shifts from buyers to sellers, or vice versa. Then, by recognizing the markup and decline phases, an investor can be appropriately long or short to make solid returns.

  Original graphic by: AlphaTrends

  

  

• Deutsche Bank Unveils The Next Step: "QE Has Run Its Course, It's Time To Tax Wealth"

  Helicopter money may be on the horizon, but if Deutsche Bank has its way, there is at least one intermediate step.

  According to DB’s Dominic Konstam, now that the benefits QE “have run their course”, it is time for the next, and far more drastic step: “the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates.”

  Here is the big picture unveiling of what is coming next from Deutsche Bank’s Dominic Konstam, who is also buying the Treasury long end hand over fist:

  • The G3 central banks all stood pat, continuing the move away from the beggar-thy-neighbor paradigm. However, the adverse market reaction to the BoJ’s inaction suggests that the benefits of QE (or QQE) in its present form might have run their course.
  • It is becoming increasingly clear to us that the level of yields at which credit expansion in Europe and Japan will pick up in earnest is probably negative, and substantially so. Therefore, the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates.
  • Until then, bank NIM compression will continue to drive elevated demand for dollar-denominated assets, which manifests itself in suppressed UST term premia and wide cross-currency bases.
  • What this means for the US is that policy rates and longer bond yields are unlikely to go up until global growth accelerates materially. Until such time, it is critical for the Fed to continue to relent, allowing real yields to keep falling while breakevens rise and nominal yields remain roughly static.
  • If the Fed were to turn hawkish, there is perhaps even less scope for long-end yields to rise as breakevens would likely collapse on policy error fears.

  Some of the troubling detail:

  QE as implemented in major economies since the crisis has operated through two shocks: a demand shock whereby real yields are forced lower through lower nominal yields and static – or even falling – breakevens, and a shock to inflation expectations, whereby real yields ultimately continue to fall but due to rising BEI and static to lower nominal yields. In the case of the Anglo-Saxon economies, the demand shock quickly gave way to the shock (higher) to inflation expectations and actually allowed nominal yields to rise, if fleetingly.

   

  The second shock, to inflation expectations, has thus far remained stubbornly elusive in Europe and more so in Japan, and ephemeral in the Anglo-Saxon economies. That said, this dynamic appears to have re-emerged in the US post Fed relent and has been an important driver of the recovery in risk assets and, more generally, the easing of financial conditions.

   

  This week’s BoJ announcement disappointed, and as a result the yen appreciated sharply. This outcome does not bode well for the future efficacy of QE, at least while that is the primary policy tool in use. Breakevens have been drifting lower and real yields have been drifting higher since last summer. In other words, financial conditions in Japan are tightening, suggesting the need for more stimulus. However, the BoJ already holds a significant proportion of the assets that would be available for purchase, and the gains from additional QE activity – higher breakevens, lower real yields, and a weaker yen – are likely on the margin to be fleeting. It appears that the markets doubt the BoJ’s willingness or ability to carry on with larger and broader asset purchases, or worse yet they do not believe that such asset purchases will have their desired stimulative effect

   

  Further QE should be viewed as an experiment in real time, where the point of inquiry is the level of real or nominal yields at which credit will begin to expand more strongly with loan-to-deposit ratios increasing. What seems increasingly clear to us is that this level is likely at negative yields, and probably substantially so. If this is true, it would suggest to us that the equilibrium level of rates in the economy is probably negative. This in turn would strongly suggest a significant re-think to short-rate policy. In this case, central banks should move more strongly toward penalizing savings, rather than just the institutions that “house” those savings – the banks. This would mean allowing significantly negative retail deposit rates or perhaps even wealth taxes. With this stick would also come a carrot – one example being that while deposit rates penalize savings (the whole point), banks might also pay borrowers to buy houses via negative mortgage rates.

  In short, the real central bank panic is about to be unleashed; who will suffer? Why everyone else. And should wealth taxes really be imminent, we foresee a lot of “boating incidents” in the immediate future.

  

  

• China Takes Drastic Measures To Save The Regime

  Submitted by George Friedman via MauldinEconomics.com,

  Chinese President Xi Jinping recently announced that he would take command of all of China’s armed forces, including the People’s Liberation Army (PLA).

  Xi is already chairman of the Central Military Commission that oversees the army. He is now taking a more direct role as head of the new Joint Operations Command Center, which puts him in operational command of the PLA in times of war.

  The new title in all likelihood means little in terms of actual command, but it has tremendous political significance. Officially, the Chinese are reforming their military, which is logical (read why here). The roots of this change, however, lie in China’s economic crisis and the need to preserve the regime.

  The regime no longer delivers on its promises

  Mao Zedong founded China as a moral project: to create a country ruled by communism. After Mao’s death, the project was replaced by another: to modernize the Chinese economy and create prosperity. 

  The leadership in the new regime rotated in an orderly fashion, and government after government oversaw the generation of increasing wealth.
  Mao justified the regime as a dream (or nightmare, depending on how you view Maoism), while his successors promised prosperity, and they delivered. 

  Until now…

  There is occasional talk that China will somehow return to a period of rapid growth and increasing wealth. But the vast outflow of money (some in the hands of private individuals, some taken from government coffers and informally privatized) is the short explanation for why China has reached a new normal. 

  If the rule is “follow the insiders,” the insiders are saying that getting money out of China is a priority. The story is more complex, of course. If a regime justifies itself by delivering prosperity, and it stops delivering, the regime is in trouble.

  China’s problem can no longer be considered primarily economic. That train has left. The economic reality is locked in and will remain in place for a long time. 

  China is now in the throes of a political challenge

  The coastal region will grow at a much slower rate than before, if at all. People who came from the interior for jobs will have to return to the interior. 

  The interior—a vast and impoverished region—is the population heartland of China. Over 60 percent of China’s population lives there. But the coast is the country’s economic heartland, and that dichotomy defines China’s political problem.

  Xi must satisfy both regions, which won’t be easy. The interior wants money for jobs, economic development, and ultimately increased consumption. The only place to get this money from is the coastal region, which obviously does not want to make the transfer.

  The coast is economically tied to the United States and Europe, not to the interior. It wants to maintain those links. But the interior is where the majority of Chinese live, and it was the foundation of the Chinese revolution and the regime. 

  Xi is frightened that the interior will destabilize the regime under economic pressure and that he will lose control over the coastal region, as happened in the 19th century.

  These are distant yet rational fears. Xi’s mission is to ensure that the Communist Party keeps China under control. His primary challenge is the inequality among classes and regions that the post-Mao economic surge created.

  Xi must have control over the wealthy

  The Communist Party came to rule China by exploiting that inequality. If the party can’t solve the problem it has created, it must at least try to control it.

  The first step toward control was to impose a dictatorship on the to prevent the emergence of any organized resistance. Today, further liberalization is out of the question, and suppressing any elements that demand it is essential.

  The regime also wants to assert control over private assets. Such control is essential if money will be used to quell unhappiness in the interior, and the vast anti-corruption purge is designed to achieve this.

  The campaign is not so much aimed at suppressing corruption, although doing so has its uses. Rather, it is designed to intimidate all those who have accumulated wealth. This class must be brought under the control of the party to prevent it from using its wealth to control the party. 

  The mission set out by Deng Xioping was to “enrich yourself.” Now the fear is that the wealthy have gone too far. The somewhat random and unpredictable purges are intended to frighten the rich. 

  One result is capital flight, and that is a problem. But the goal is to make wealth subordinate to political power, not the other way around. Otherwise, the party becomes fundamentally weak.

  The People’s Liberation Army is the guarantor

  Wealth is part of the equation, but in the end, the People’s Liberation Army is the key. It is the ultimate guarantor of the regime in two ways. 

  First, it has the power to crush opposition, as it did in Tiananmen Square. Second, the children of peasants fill its ranks, and they see enlistment as a path to upward mobility. Taken together, its makeup and power can guarantee the communist regime’s survival.

  On the other hand, the PLA is also capable of undermining the regime. Its enormous size might enable it to subvert the party’s power throughout the country. 

  The party and the PLA had a clear alignment in the past. Now that bond is less certain. The PLA’s officer corps has gotten deeply involved in enriching themselves. The PLA was directly involved in PLA-owned enterprises.

  The enterprises have been reduced, but the PLA leadership is still intertwined with Chinese business—either directly or through relatives. The PLA’s size and influence mean that its officers’ interests are torn between the party and the wealthy, which is now under attack.

  The regime, however, is reducing PLA’s massive size, which makes good military sense. It also makes political sense. This allows Xi to eliminate those involved in what is now termed corruption, to confiscate their wealth, and to intimidate others. 

  This purge is similar to those going on in many institutional bureaucracies in China, except that the size and importance of the PLA outstrips all other institutions. A smaller and reconfigured PLA will pose less of a threat to the regime, even if its military efficiency increases.

  This transition is dangerous for the party and for Xi. The writing is on the wall for many in the army who have accumulated wealth, but restructuring will take several years.

  The PLA will have to be tightly controlled. That is why Xi set up a Discipline Inspection Commission in January specifically for the PLA, answerable directly to the Central Military Commission. 

  This is also why Xi has taken direct control of military operations. He or his trusted advisors will have direct access to plans and operations. The PLA will come under Xi’s direct supervision. 

  Any broad conspiracy that includes the PLA will be readily detected. You can’t hide the kinds of troop movements that would pose an existential threat to the regime.

  The PLA is the center of gravity of the regime, and if Xi loses control of it, he could lose control of everything. Xi would never have appointed himself head of the Joint Operations Command Center if he hadn’t felt the move absolutely necessary. 

  He moved to take control of the PLA’s operations to ensure that he could preserve the regime. He put a very different gloss on the action, positioning it as an expansion of his power… and it was. 

  But it was an expansion compelled by the regime’s insecurity. At first glance, his move should succeed. But there are so many complex and competing interests involved that when Xi pushes on some, others could come loose.

  

  

• What Are The Three Signs Of A "Disorderly" Currency Market: Richard Koo Explains

  One of the biggest ironies in recent months has been the Bank of Japan’s recurring insistence that it would promptly intervene in the FX market if the ongoing “disorderly” moves in the Yen do not stop. This was ironic because it was the BOJ’s own insistence in characterizing virtually every move as disorderly that ultimately led to the most disordely move of all this week when following the BOJ’s “disappointment” in failing to do anything, the Yen soared the most in years, to a level not seen since October of 2014. Now that was a truly “disorderly” move, which was only made possible by the BOJ’s constant and misguided rhetoric.

  

   

  Then just yesterday, the Treasury unveiled a brand now “monitoring list”, on which it put five economies but most notably China and Japan. And once again, that word “disorderly” appeared.  This is what the Treasury said:

  Economies with flexible exchange rates hold reserves in order to intervene in foreign exchange markets to prevent a disorderly depreciation of their currencies.

  Not only that, but the Treasury made it clear that it would very explicitly frown on any “disorderly” currency depreciation by US trade partners going forward.

  The United States has secured commitments from the G-20 member countries to move more rapidly to more market-determined exchange rates, avoid persistent exchange rate misalignments, refrain from competitive exchange rate devaluations, and not target exchange rates for competitive purposes. Through Treasury’s leadership, the G-7 member countries, including Japan, have publicly affirmed that their fiscal and monetary policies will be oriented toward domestic objectives using domestic instruments.

  But if the BOJ was so perilously wrong in its characterization of what disorderly exchange rates are, then what are they? For the answer we go to Richard Koo and the following explanation.

  What is meant by “orderly” exchange rate movements

   

  At the press conference following the meeting of G20 finance ministers and central bank governors in Washington on 15 April, Treasury Secretary Jack Lew responded to Finance Minister Aso’s expression of “strong concern” about “one-sided” increases in the yen the previous day by saying that “despite recent yen appreciation, foreign exchange markets remain orderly.” This comment made it far more difficult for Japan to engage in currency intervention.

   

  The operative term in this exchange was “orderly.” Currency authorities in the developed economies have a basic agreement to leave the determination of exchange rates up to the market. The one exception to this rule is that national authorities are allowed to intervene, even unilaterally, when markets become “disorderly.”

   

  There is a proper definition for what constitutes a disorderly market. When I worked as an economist at the New York Fed’s forex desk, the definition was divided into three stages.

   

  First sign of disorderly market: widening bid-offer spreads

   

  The first sign that a market has grown disorderly is that forex dealers’ bid-offer spreads (the difference between the prices they are willing to buy and sell at) start to widen.

   

  For instance, a normal bid-offer spread of 0.03 yen might rise to 0.05 or 0.10 yen as market conditions become turbulent. Spreads increase because exchange rate volatility forces dealers to provide themselves with a wider margin of safety.

   

  Second sign: gapping

   

  If the market turmoil continues, the next phenomenon witnessed is something called gapping. This happens when there is a discontinuity between the bid-offer quotes submitted by dealers.

   

  For example, if one dealer says it will buy at 110.25 yen/dollar (bid) and sell at 110.30 yen/dollar (offer), the next quote will usually overlap that range. In this case, it might be 110.27–110.32 or 110.23–110.28.

   

  But when even dealers are no longer sure what is going on in the market, the original quote of 110.25–110.30 might be followed by a non-overlapping quote of 110.35–110.40. Such moves are also likely to be accompanied by a widening of bid-offer spreads.

   

  In extreme cases, dealers stop answering their phones

   

  In the final stages of a disorderly market, when extreme turmoil leaves all participants unsure what to do next, dealers will simply stop answering their phones. By having traders connect to other internal extensions, the firm can keep all its phone lines busy and avoid taking any outside orders.

   

  This is a disorderly market, and in such cases central banks are allowed to intervene in the currency market to restore order.

  Now, as even Jack Lew admits, central bank intervention in a disorderly market is fine. A far bigger risk in game theoretical terms, as well as angering the global reserve currency hegemon, is when a central bank intervenes when the moves are perfectly orderly; this is precisely what the market was convinced the BOJ would do on Wednesday night… and was massively wrong.  According to Nomura’s Koo, the answer is that “Japanese intervention in orderly forex market could be seen as collapse of cooperative relationship“

  This sort of phenomenon has yet to be observed in the yen’s current upswing, which is why Mr. Lew went out of his way to describe forex markets as “orderly.”

   

  If Japan were to unilaterally intervene to weaken the yen under such conditions, it would be doing so without US approval, which would signal a rift between the two countries.

   

  Japan is, of course, a sovereign nation and is free to intervene if it so desires. The problem is how the market might react to a perceived collapse of its cooperative relationship with the US.

  It happened once before under Eisuke “Mr Yen” Sakakibara., when the Japanese finance minister intervened in 1999 against US wishes. This is what happened then.

  Problems [in Japan’s relationshbip with the US] surfaced late in June 1999, when then-Vice Minister of Finance Eisuke Sakakibara, perhaps seeking to celebrate his impending retirement, declared his intention to push the yen down to 122 versus the dollar from the existing level of 117 and implemented an intervention totaling several trillion yen.

   

  This action, which was not only unilateral but was against the wishes of the US, seriously upset US Treasury Secretary Lawrence Summers, who was already jittery over the trade frictions between the two nations. Mr. Summers quickly distanced himself from Japan’s intervention in no uncertain terms.

   

  The markets took this official exchange as evidence of a breakdown in the cooperative relationship between Japan and the US that had been in place ever since the Louvre Accord in 1987. Helped by the fact that Japan was running a large trade surplus at the time, the yen strengthened and USD/JPY, instead of heading towards 122, plummeted to 102.

   

  Not only did Japan experience heavy foreign exchange losses, but the economy now had to deal with a sharply higher yen. The Assistant Treasury Secretary for International Affairs at the time, Timothy Geithner, is reported to have shouted at a Japanese counterpart, “Didn’t anyone try to stop him [Sakakibara]?”

  Perhaps the BOJ’s January NIRP announcement was also a unilateral decision without prior approval from the US, which explains why the USDJPY instead of soaring, has tumbled to nearly 2 year lows.

  One thing is increasingly certain: the US has finally put its foot down, not surprisingly at a time when the USD is rapidly sliding. Maybe the period of strong dollar generosity for the rest of the world, has come and gone, and from this point on it is time for the US to reap the benefits of a rapidly depreciation currency especially since the threat of any rate hikes is virtually gone. That said, we won’t know for sure until Goldman finally capitulates on its dollar call which has been “long and wrong” for the past six months. Only when Robin Brooks finally throws in the towel, will it be safe to once again go long the USD.

  

  

• Taking The 'Petro' Out Of The Dollar

  Submitted by Alasdair Macleod via GoldMoney.com,

  Saudi Arabia has been in the news recently for several interconnected reasons. Underlying it all is a spendthrift country that is rapidly becoming insolvent.

  While the House of Saud remains strongly resistant to change, a mixture of reality and power-play is likely to dominate domestic politics in the coming years, following the ascendency of King Salman to the Saudi throne. This has important implications for the dollar, given its historic role in the region.

  Last year’s collapse in the oil price has forced financial reality upon the House of Saud. The young deputy crown prince, Mohammed bin Salman, possibly inspired by a McKinsey report, aims to diversify the state rapidly from oil dependency into a mixture of industries, healthcare and tourism. The McKinsey report looks like a wish-list, rather than reality, particularly when it comes to tourism. The religious police are unlikely to take kindly to bikinis on the Red Sea’s beeches, or to foreign women in mini-shorts wandering around Jeddah.

  It is hard to imagine Saudi Arabia, culturally stuck in the middle ages, embracing the changes recommended by McKinsey, without fundamentally reforming the House of Saud, or even without a full-scale revolution. Nearly all properties and businesses are personally owned or controlled by members of the extended royal family, not the state, nor by lesser mortals. The principal exception is Aramco, estimated to be worth $2 trillion.

  The state is subservient to the House of Saud. It is therefore hard to see how, as McKinsey recommends, the country can “shift from its current government-led economic model to a more market-based approach”. The country is barely government led: a puppet of the Saudis is more like it. But the state’s lack of funds is making it increasingly desperate.

  It was for this reason the Kingdom recently placed a $10bn five-year syndicated loan, the first time it has entered capital markets since Saddam Hussein invaded Kuwait. It proposes to raise a further $100bn by selling a 5% stake in Aramco. The financial plan appears to be a combination of this short-term money-raising, contributions from oil revenue, and sales of US Treasuries (thought to total as much as $750bn). The government has, according to informed sources, been secretly selling gold, mainly to Asian central banks and sovereign wealth funds. Will it see the Kingdom through this sticky patch?

  Maybe. Much more likely, buying time is a substitute for ducking fundamental reform. But one can see how stories coming out of Washington, implicating Saudi interests in the 9/11 twin-towers tragedy, could easily have pulled the trigger on all those Treasuries.

  Whatever else was discussed, it seems likely that this topic will have been addressed at the two special FOMC meetings “under expedited measures” at the Fed earlier this month, and then at Janet Yellen’s meeting with the President at the White House. This week’s holding pattern on interest rates would lend support to this theory.

  The White House’s involvement certainly points towards a matter involving foreign affairs, rather than just interest rates. If the Saudis had decided to dump their Treasuries on the market, it would risk collapsing US bond markets and the dollar. Through financial transmission, euro-denominated sovereign bonds and Japanese government bonds, all of which are wildly overpriced, would also enter into free-fall, setting off the global financial crisis that central banks have been trying to avoid.

  Perhaps this is reading too much into Saudi Arabia’s financial difficulties, but the possibility of the sale of Treasuries certainly got wide media coverage. These reports generally omitted to mention the Saudi’s underlying financial difficulties, which could equally have contributed to their desire to sell.

  While the Arab countries floated themselves on oceans of petro-dollars forty years ago, they have little need for them now. So we must now turn our attention to China, which is well positioned to act as white knight to Saudi Arabia. China’s SAFE sovereign wealth fund could easily swallow the Aramco stake, and there are good strategic reasons why it should. A quick deal would help stabilise a desperate financial and political situation on the edges of China’s rapidly growing Asian interests, and keep Saudi Arabia onside as an energy supplier. China has dollars to dispose, and a mutual arrangement would herald a new era of tangible cooperation. The US can only stand and stare as China teases Saudi Arabia away from America’s sphere of influence.

  In truth, trade matters much more than just talk, which is why a highly-indebted America finds herself on the back foot all the time in every financial skirmish with China. Saudi Arabia has little option but to kow-tow to China, and her commercial interests are moving her into China’s camp anyway. It seems logical that the Saudi riyal will eventually be de-pegged from the US dollar and managed in line with a basket of her oil customers’ currencies, dominated by the yuan.

  Future currency policies pursued by both China and Saudi Arabia and their interaction will affect the dollar. China wants to use her own currency for trade deals, but must not flood the markets with yuan, lest she loses control over her currency. The internationalisation of the yuan must therefore be a gradual process, supply only being expanded when permanent demand for yuan requires it. Meanwhile, western analysts expect the riyal to be devalued against the dollar, unless there is a significant and lasting increase in the price of oil, which is not generally expected. But a devaluation requires a deliberate act by the state, which is not in the personal interests of the individual members of the House of Saud, so is a last resort.

  It is clear that both Saudi Arabia and China have enormous quantities of surplus dollars to dispose in the next few years. As already stated, China could easily use $100bn of her stockpile to buy the 5% Aramco stake, dollars which the Saudis would simply sell in the foreign exchange markets as they are spent domestically. China could make further dollar loans to Saudi Arabia, secured against future oil sales and repayable in yuan, perhaps at a predetermined exchange rate. The Saudis would get dollars to spend, and China could balance future supply and demand for yuan.

  It would therefore appear that a large part of the petro-dollar mountain is going to be unwound over time. There is now no point in the Saudis also hanging onto their US Treasury bonds, so we can expect them to be liquidated, but not as a fire-sale. On this point, it has been suggested that the US Government could simply block sales by China and Saudi Arabia, but there would be no quicker way of undermining the dollar’s international credibility. More likely, the Americans would have to accept an orderly unwinding of foreign holdings.

  The US has exploited the dollar’s reserve currency status to the full since WW2, leading to massive quantities of dollars in foreign ownership. The pressure for dollars to return to America, when the Vietnam war was wound down, was behind the first dollar crisis, leading to the failure of the London gold pool in the late sixties. After the Nixon Shock in 1971, the cycle of printing money and credit for export resumed.

  In the seventies, higher oil prices were paid for by printing dollars and by expanding dollar bank credit, in turn kept offshore by lending these exported dollars to Latin American dictators. That culminated in the Latin American debt crisis. From the eighties onwards, the internationalisation of business was all done on the back of yet more exported dollars, and wars in Iraq and Afghanistan echoed the earlier wars of Korea and Vietnam.

  Many of these factors have now either disappeared or diminished. For the last eighteen months, the dollar had a last-gasp rally, as commodity and oil prices collapsed. The contraction in global trade since mid-2014 had signalled a swing in preferences from commodities and energy towards the money they are priced in, which is dollars. The concomitant liquidation of malinvestments in the commodity-exporting countries has been contained for now by aggressive monetary policies from China, Japan and the Eurozone. The tide is now swinging the other way: preferences are swinging out of the dollar towards oversold commodities again, exposing the dollar to a second version of the gold pool crisis. This time, China, Saudi Arabia and the BRICS will be returning their dollars from whence they came.

  In essence, this is the market argument in favour of gold. Over time, the price of commodities and their manufactured derivatives measured in grams of gold is relatively stable. It is the price measured in fiat currencies that is volatile, with an upward bias. The price of a barrel of oil in 1966, fifty years ago, was 2.75 grams of gold. Today it is 1.0 gram of gold, so the purchasing power of gold measured in barrels of oil has risen nearly three-fold. In dollars, the prices were $3.10 and $40 respectively, so the purchasing power of the dollar measured in barrels of oil has fallen by 92%. Expect these trends to resume.

  This is also the difference between sound money and dollars, which has worked to the detriment of nearly all energy and commodity-producing countries. With a track-record like that, who needs dollars?

  It is hard to see how the purchasing power of dollars will not fall over the rest of the year. The liquidation of malinvestments denominated in external dollars has passed. Instead, the liquidation of financial investments carry-traded out of euros and yen is strengthening those currencies. That too will pass, but it won’t rescue the dollar.

  

  

• It's A Trap!

  We (the people) love the smell of ‘free stuff’ in the morning…

   

  

   

  Source: TheBurningPlatform.com

  

  

• Nothing Is Real: "It's All Being Played To Keep People Believing The System Is Working"

  Submitted by Mac Slavo via SHTFPlan.com,

  The stock market may be hovering near all-time highs, but according to Greg Mannarino of Traders Choice that doesn’t mean the valuations are actually real:

  We exist, beyond any shadow of any doubt, in an environment of absolute fakery where nothing is real… from the prices of assets to what’s occurring here with regard to the big Wall Street banks, the Federal Reserve, interest rates and everything in between.

   

  …All of this is being played in a way to keep people believing, once again, that the system is working and will continue to work.

  Full Interview with USA Watchdog:

   

   

  President Obama has suggested that people like Greg Mannarino who are exposing the fraud for what it is are just peddling fiction. And just this week the President argued that he saved the world from a great depression and that the closing credits of the 2008 crash movie “The Big Short” were inaccurate when they claimed that nothing has been done to fundamentally curb the fraud and fix the system under his administration. But as Mannarino notes, the President and his central bank cohorts are making these statements because the system is so fragile that if the public senses even the smallest problem it could derail the entire thing:

  Let’s just look at the stock market… there’s no possible way at this time that these multiples can be justified with regard to what’s occurring here with the price action of the overall market… meanwhile, the market continues to rise.

   

  …

   

  Nothing is real. I can’t stress this enough… and we’re going to continue to see more fakery… and manipulation and twisting of this entire system…  We now exist in an environment where the financial system as a whole has been flipped upside down just to make it function… and that’s very scary.

   

  …

   

  We’ve never seen anything like this in the history of the world… The Federal Reserve has never been in a situation like this… we are completely in uncharted territory where the world’s central banks have gone negative interest rates… it’s all an illusion to keep the stock market booming.

   

  …

   

  Every single asset now… I don’t care what asset… you want to look at currency, debt, housing, metals, the stock market… pick an asset… there’s no price discovery mechanism behind it whatsoever… it’s all fake… it’s all being distorted.

   

  …

   

  The system is built upon on one premise and that is confidence that it will work… if that confidence is rattled the whole thing will implode… our policy makers are well aware of this… there is collusion between central banks and their respective governments… and it will not stop until it implodes… and what I mean by implode is, correct to fair value.

  And when that confidence is finally lost and the fraud exposed – and it will be as has always been the case throughout history – the destruction to follow will be one for the history books.

  In a previous interview Mannarino warned that things could get so serious after the bursting of such a massive bubble that millions of people will die on a world-wide scale:

  It’s created a population boom… a population boom has risen in tandem with the debt. It’s incredible.

   

  So, when the debt bubble bursts we’re going to get a correction in population. It’s a mathematical certainty.

   

  Millions upon millions of people are going to die on a world-wide scale when the debt bubble bursts. And I’m saying when not if…

   

  …

   

  When resources become more and more scarce we’re going to see countries at war with each other. People will be scrambling… in a worst case scenario… doing everything that they can to survive… to provide for their family and for themselves.

   

  There’s no way out of it.

  And that may be why governments around the world are preparing for nothing short of Armageddon that will see rioting in the streets, violence, civil war and regime change. In the United States, the Federal government and Pentagon have been war-gaming large scale economic collapse scenarios and those preparations began in earnest shortly after the collapse of 2008.

  Nationally syndicated talk radio host Mark Levin explains:

  I’m going to tell you what I think is going on.

   

  I don’t think domestic insurrection. Law enforcement and national security agencies, they play out multiple scenarios. They simulate multiple scenarios.

   

  I’ll tell you what I think they’re simulating.

   

  The collapse of our financial system, the collapse of our society and the potential for widespread violence, looting, killing in the streets, because that’s what happens when an economy collapses.

  I’m not talking about a recession. I’m talking about a collapse, when people are desperate, when they can’t get food or clothing, when they have no way of going from place to place, when they can’t protect themselves.

   

  There aren’t enough police officers on the face of the earth to adequately handle a situation like that.

   

  I suspect, that just in case our fiscal situation collapses, our monetary situation collapses, and following it the civil society collapses – that is the rule of law – that they want to be prepared.

   

  There is no other explanation for this.

  The entire system is built upon a fraud. The losses have been hidden and papered over with trillion dollar cash infusions by governments and central banks around the world.

  It is only a matter of time. That we can be sure of.

  If you’re reading this and haven’t yet done so, it’s time to prepare for a collapse of a magnitude never before witnessed.

  The elite are feverishly building bunkers for a reason, just as the government is spending billions of dollars on food stockpiles, assault weapons, and hundreds of millions of rounds of ammunition.

  Why? Because they know.

  

  

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• The SHOCKING Inside Scoop On Being a Guest Writer At Zero Hedge

  I've been a guest writer at Zero Hedge for quite a few years. 

  Shocking as it may seem, "Tyler" and the gang have put absolutely no pressure on me to spin stories one way or the other.

  … Or to avoid any topics.

  I've asked Tyler more than once whether I should write on a certain topic, and he's consistently – and shockingly – said I should write whatever I want.

  For example,  on September 30, 2009, I asked Tyler about posting rules.

  He replied:

  You can post whatever, whenever and however you wish.

  On January 11, 2010, I wrote: "Tyler: Not Sure Whether This is Appropriate For ZH."

  He wrote back:

  Go for it.

  On August 17, 2010, I wrote:  "I don't know if I should post to ZH."

  Tyler responded:

  Don’t see why not. People enjoy the debate

  On September 5, 2010, I ran a new story by Tyler, asking: "Appropriate or Inappropriate for ZH?"

  He wrote back:

  Yes.

  On September 10, 2010, I floated another controversial post – which I was sure would be shot down – asking: "Not Appropriate for ZH?"

  Tyler wrote back:

  Post. We don’t censor

  Those are just a few examples I found in a couple minutes of trawling through my old emails.

  And that's why I like Zero Hedge so much … it really is a free market-place of ideas.

  Indeed, I love how the site pulls no punches and slams every clown running amok … whether EU dictocrats,the Keynesians running the Chinese economy, the failed socialists in Venezuela, Putin, or corrupt American politicians and economic "leaders" (whether they call themselves "Democrats" or "Republicans".

  Like the boy who points out that the emperor has no clothes – when everyone else is busy scraping and bowing and currying favor – Zero Hedge is a great site exactly because it calls it like it sees it.

  No wonder ZH has become so popular.   People are hungry for uncensored news.

  And no wonder the mainstream media hates it so much …

  

• The Oligarchy Is Tottering – Trump Tramples The Neocons' "False Song Of Globalism"

  Submitted by Justin Raimondo via AntiWar.com,

  The reaction to GOP frontrunner Donald Trump’s much-awaited foreign policy speechfrom the Washington elites was all-too-predictable: they sneered and snickered that he had mispronounced “Tanzania.” The more substantive criticisms weren’t much better: perpetual warmonger Lindsey Graham, whose presidential bid garnered zeropercent in the polls, tweeted “Trump’s FP speech not conservative. It’s isolationism surrounded by disconnected thought, demonstrates lack of understanding threats we face.” For Graham, anything less than starting World War III is “isolationism” – a view that gives us some insight into why his presidential campaign was the biggest flop since the “new” Coke. This is the party line of neoconservatives who have long dominated Republican foreign policy orthodoxy, to the GOP’s detriment. Neocon character assassin Jamie Kirchick, writing in the European edition of Politico, put a new gloss on it by claiming to detect a Vast Kremlin Conspiracy as the animating spirit behind the Trump campaign.

  Which just goes to show that having Roy Cohn as your role model can lead one down some pretty slimy rabbit holes. I guess that’s why the editors of Politico put Kirchick’s smear piece in the European edition, where hardly anyone will read it, saving a morereasonable analysis by Jacob Heilbrunn for the US version. (Although, to be sure, apiece by neocon-friendly Michael Crowley limns the same McCarthyite theme inPolitico’s magazine.)

  Heilbrunn is the editor of The National Interest, publication of the Nixon Center, which has been a sanctuary for the outnumbered – but now rising – “realist” school of foreign policy analysts. The Trump speech was sponsored by TNI, and Heilbrunn gave a very interesting if somewhat defensive explanation for the motives behind their invitation to Trump, succinctly summarizing its significance:

  “His speech did not deviate from the themes he has already enunciated and it showed that he is willing to go very far indeed. Nothing like this has been heard from a Republican foreign policy candidate in decades. Trump doesn’t want to modify the party’s foreign policy stands. He’s out to destroy them.”

  This is why the Republican Establishment hates Trump: it’s no accident that the same neocons who lied us into the Iraq war and profited personally and professionally from that disastrous adventure are now in the vanguard of the “Never Trump” brigade. As Heilbrunn points out:

  “This is why perhaps his most significant statement was: ‘I will also look for talented experts with new approaches, and practical ideas, rather than surrounding myself with those who have perfect résumés but very little to brag about except responsibility for a long history of failed policies and continued losses at war.’ What Trump is talking about is dispensing with an entire wing of the GOP that has controlled the commanding heights of foreign policy over recent decades.”

  This is my favorite part of Trump’s peroration. Here he is openly telling the neocons, who have inveigled themselves into every administration since the days of Ronald Reagan, that they will be kicked to the curb if and when he takes the White House. Which is why they are even now returning to the Democratic party, channeling the long departed spirit of “Scoop” Jackson – and good riddance to them. If ever a group of failed ideologues deserved their comeuppance it is this gang, which led the nation into the Middle East quagmire and steered the GOP to a series of humiliating defeats.

  Pledging to “shake the rust off America’s foreign policy,” Trump started out by saying he would “invite new voices and new visions into the fold.” And while I think Heilbrunn’s somewhat overstates the case, it is certainly true that what follows is something we haven’t heard from a Republican frontrunner is quite a long time. Adopting a campaign slogan that has the neocons and their left-wing internationalist enablers in a lather, Trump reiterated his theme of “America First” – a phrase with a long and largely misunderstood history in the annals of American conservatism, and one which he gives new life and new meaning.

  Trump gives us a capsule history of US foreign policy, from World War II to the end of the cold war, that is light on nuance but true in essence: we “saved the world” twice, and then crashed on the rocks of hubris and miscalculation:

  “Unfortunately, after the Cold War our foreign policy veered badly off course. We failed to develop a new vision for a new time. In fact, as time went on, our foreign policy began to make less and less sense. Logic was replaced with foolishness and arrogance, which led to one foreign policy disaster after another.

   

  “They just kept coming and coming. We went from mistakes in Iraq to Egypt to Libya, to President Obama’s line in the sand in Syria. Each of these actions have helped to throw the region into chaos and gave ISIS the space it needs to grow and prosper. Very bad. It all began with a dangerous idea that we could make western democracies out of countries that had no experience or interests in becoming a western democracy.

   

  “We tore up what institutions they had and then were surprised at what we unleashed. Civil war, religious fanaticism, thousands of Americans and just killed be lives, lives, lives wasted. Horribly wasted. Many trillions of dollars were lost as a result. The vacuum was created that ISIS would fill. Iran, too, would rush in and fill that void much to their really unjust enrichment.”

  A more perceptive summary of the post-Soviet post-9/11 policies that have led us to disaster would be hard to imagine: indeed, Trump’s critique parallels what we have been saying on this web site ever since its founding in 1995. To hear it coming from a Republican candidate for President who is not Ron Paul is astonishing: and that it is being said by the GOP frontrunner, who spoke these words after winning every county in five Northeastern states, is simply breathtaking.

  I’ve covered Trump’s views on NATO in this space, but in this speech he gives us a new perspective. He is constantly bewailing the fact that Obama’s America projects weakness – a standard Republican line – but here he makes clear that he’s not just talking about how our enemies perceive us, but also how our alleged friends see us

  “Our allies are not paying their fair share, and I’ve been talking about this recently a lot. Our allies must contribute toward their financial, political, and human costs, have to do it, of our tremendous security burden. But many of them are simply not doing so.

   

  “They look at the United States as weak and forgiving and feel no obligation to honor their agreements with us. In NATO, for instance, only 4 of 28 other member countries besides America, are spending the minimum required 2 percent of GDP on defense. We have spent trillions of dollars over time on planes, missiles, ships, equipment, building up our military to provide a strong defense for Europe and Asia.

   

  “The countries we are defending must pay for the cost of this defense, and if not, the U.S. must be prepared to let these countries defend themselves. We have no choice.”

  Billions of dollars in “defense” spending are tied up in NATO contracts: the power and prestige of Washington’s foreign policy “experts” are inextricably linked to maintaining the Atlanticist bridge that binds us to our free-riding European client states. And now the candidate most likely to win the GOP presidential nomination is threatening to take it all away from them. No wonder they hate his guts and will do anything to stop him.

  A major push by the neoconservatives and their left-internationalist allies in the Clinton camp has been a campaign to demonize the Russians and restart the cold war. Trump made it clear he is having none of that:

  “We desire to live peacefully and in friendship with Russia and China. We have serious differences with these two nations, and must regard them with open eyes, but we are not bound to be adversaries. We should seek common ground based on shared interests.

   

  “Russia, for instance, has also seen the horror of Islamic terrorism. I believe an easing of tensions, and improved relations with Russia from a position of strength only is possible, absolutely possible. Common sense says this cycle, this horrible cycle of hostility must end and ideally will end soon. Good for both countries.

   

  “Some say the Russians won’t be reasonable. I intend to find out. If we can’t make a deal under my administration, a deal that’s great – not good, great – for America, but also good for Russia, then we will quickly walk from the table. It’s as simple as that. We’re going to find out.”

  While much attention is paid to the Middle East, the real threat to peace is the possibility of a stand off between Washington and Moscow. A new arms race is in the works, and the threat of nuclear conflict – which Trump correctly says is the biggest threat of all – looms larger by the day. That Trump seeks a rapprochement with Russia is a very big plus – and a major reason why the War Party has mobilized against him.

  When it comes to the Middle East, Trump is proposing a new turn:

  “Unlike other candidates for the presidency, war and aggression will not be my first instinct. You cannot have a foreign policy without diplomacy. A superpower understands that caution and restraint are really truly signs of strength. Although not in government service, I was totally against the war in Iraq, very proudly, saying for many years that it would destabilize the Middle East. Sadly, I was correct, and the biggest beneficiary has been has been Iran, who is systematically taking over Iraq and gaining access to their very rich oil reserves, something it has wanted to do for decades.

   

  “And now, to top it off, we have ISIS. My goal is to establish a foreign policy that will endure for several generations. That’s why I also look and have to look for talented experts with approaches and practical ideas, rather than surrounding myself with those who have perfect résumés but very little to brag about except responsibility for a long history of failed policies and continued losses at war. We have to look to new people.”

  Out with the neocons – and in with a new foreign policy that promotes peace, prosperity, and the radical idea that we have to put American interests first. Trump was explicitly making an appeal to anti-interventionists when he said:

  “The world must know that we do not go abroad in search of enemies, that we are always happy when old enemies become friends and when old friends become allies, that’s what we want. We want them to be our allies.

   

  “We want the world to be – we want to bring peace to the world. Too much destruction out there, too many destructive weapons. The power of weaponry is the single biggest problem that we have today in the world.

   

  “To achieve these goals, Americans must have confidence in their country and its leadership. Again, many Americans must wonder why we our politicians seem more interested in defending the borders of foreign countries than in defending their own.”

  And then there’s this:

  “No country has ever prospered that failed to put its own interests first. Both our friends and our enemies put their countries above ours and we, while being fair to them, must start doing the same. We will no longer surrender this country or its people to the false song of globalism. The nation-state remains the true foundation for happiness and harmony. I am skeptical of international unions that tie us up and bring America down and will never enter.”

  Now I can imagine some libertarians will cringe at the idea that the nation-state is a foundation for any kind of happiness, but they fail to put this in context: we’re talking here about a nation-state founded as a result of a victorious American Revolution – the only successful libertarian revolution in history.

  Which brings us to the darker side of Trumpian nationalism, with its all its contradictions – some of them potentially fatal.

  Like all nationalism, Trump’s is ambidextrous: the American variety is usually inward-looking, with its European cousin mostly expansionist-minded. And yet it can be bellicose when it perceives a threat, a characteristic that fits neatly with Trump’s public persona. There are certain advantages to this: as one of my Twitter followers put it, “For better or for worse, Trump’s anti-interventionism works because he doesn’t project sympathy for the enemy.” Opponents of America’s wars have been regularly subjected to the argument – a smear, really – that they’re working on behalf of America’s enemies. About Trump the War Party can make no such accusation.

  Yet this immunity also confers contradictions, and Trump’s speech is rife with them. He has said he opposes sending ground troops to Syria to fight ISIS, and yet he insists ISIS will be defeated during his presidency – although he’s unwilling to say just how. We’re too “predictable,” he avers, but don’t the American people have the right to know what his plan is?

  He wants to “rebuild” the military – as if a country that spends 40 percent of all the money spent on “defense” worldwide requires it. Yes, he says he wants to ensure US military “dominance” so that no one will ever dare to attack us – and therefore we’ll never have to actually use our military – and yet if one is constantly preparing for war, then war will surely come. Trump, like Ron Paul, is constantly talking about our huge national debt: unlike Paul, however, he wants to “invest” in the military because it’s the “best” investment and he’s vowed to spare no expense. Suddenly the debt is conveniently forgotten.

  Trump rightly points to the power of modern weaponry – specifically, nuclear weapons – as the biggest threat to our security, and yet in his speech he called for ramping up and “modernizing” our nuclear deterrent. This project, already undertaken by the Obama administration, involves miniaturizing nukes and therefore making them more “usable” – a dangerous development indeed.

  Trump rails against the Iran deal: it’s a “bad deal,” the “absolute worst,” he insists. And yet Iran has abided by it, to the letter. War has been avoided: and he himself has said he wouldn’t rip it up, as his rival Ted Cruz has vowed. While saying we shouldn’t go abroad seeking enemies, his fearmongering over the alleged threat from Iran tells a different story. The reality is that there’s no evidence Iran is seeking to build a nuclear arsenal: our own intelligence community has confirmed this. Yet to listen to Trump, you’d think they’re about to nuke the Trump Tower. So there’s another contradiction – and they’re adding up.

  His fearmongering over Iran is tied to his pandering to Israel, which he glorifies as “the only democracy in the Middle East.” In Trump’s world, Israel is blameless: its occupation of the West Bank, its merciless attacks on defenseless Gaza, its apartheid-like domestic regime – all this ignored. While it’s true that he says he would be “evenhanded” in trying to negotiate a settlement of the Israeli-Palestinian conflict, how seriously can we take this pledge when his pro-Israel rhetoric is so over-the-top? Indeed, he attacks the Obama administration for its supposedly ill treatment of Israel, and yet they are just trying to be as evenhanded as he says he wants to be.

  American nationalism is a schizophrenic creature: on the one hand, it is pacific, inward-looking, and benign. On the other hand, it can be vengeful, aggressive, and malevolent. Like Trump himself, it is often unpredictable. And therein lies the danger – and the opportunity.

  Nationalists of the Trumpian sort see America as an exceptional nation, but unlike the aggressive nationalists of the neoconservative variety they don’t believe the American system can be exported, and certainly not by force of arms.  As Trump put it in his speech:

  “Finally, I will work with our allies to reinvigorate Western values and institutions. Instead of trying to spread universal values that not everybody shares or wants, we should understand that strengthening and promoting Western civilization and its accomplishments will do more to inspire positive reforms around the world than military interventions.”

  This rejection of catholicity is the core of the nationalist insight: it accounts for their views on immigration as well as their noninterventionist foreign policy. Trump weaves these strands into a pattern of thought that is challenging – and displacing – the militant universalism that unites both neoconservatism and modern liberalism.

  For all his faults as a candidate, Trump is forcing a sea change in the American political discourse. His campaign for the presidency has certainly shifted the terms of the debate over foreign policy, not only in the GOP but generally. Senator Rand Paul’s candidacy was dogged by questions about his lack of “orthodoxy” on foreign policy issues. That orthodoxy has now been smashed to smithereens, and future Rand Pauls will face no such suspicious inquiries. Candidates will no longer be required to sing, in unison, “the false song of globalism” – and we have Donald Trump to thank for that.

  The task of anti-interventionists is not – as some would have it – to sit on the sidelines, or to join the “Never Trump” neocons and Clintonistas in attacking the Trump phenomenon as somehow beyond the pale. It is, instead, to push the discourse even further. We must take advantage of the opening provided by Trump’s campaign to point out the contradictions, recruit Trump’s supporters into a broader movement to change American foreign policy, and break the bipartisan interventionist consensus once and for all.

  For the past twenty years, movements have arisen to challenge American imperialism: the campaigns of Pat Buchanan, the antiwar left that arose during the Bush years, the Ron Paul campaigns that energized many thousands of young people and put some meat on the bones of the libertarian movement. You’ll note the pattern: the Buchanan movement was small yet vociferous, the antiwar left was much bigger and yet more diffuse, the Ron Paulians were (and are) substantial in size and highly focused and well-organized – yet all crested without achieving a mass character, falling short of their goals.

  The Trump movement is different: it is massive, and it is capable of winning. That’s what has the Establishment in such a panic that they are considering denying Trump the nomination and bringing in a candidate on a “white horse” to steal the GOP from the Trumpians. If that happens, the system will be shaken to its very foundations, its very legitimacy in doubt – a perfect storm as far as libertarians are concerned.

  But there is more to it than that. If we step back from the daily news cycle, and consider the larger significance of the Trump phenomenon, the meaning of it all is unmistakable: we haven’t seen anything like this in American politics – not ever. Revolution is in the air. The oligarchy is tottering. The American people are waking up, and rising up – and those who try to ignore it or disdain it as mere “populism” will be left behind.

  Yes, the road ahead is going to be rough, largely unpaved, and strewn with pitfalls. It would be easy to fall prey to the errors of pandering, of over-adaptation, or their opposite: sectarianism, and strategic inflexibility. Ideological entrepreneurship is an art, not a science, and it takes a skillful player to distinguish between opportunism and taking advantage of legitimate opportunities.

  Yet there is no alternative, because abstention means extinction. Libertarians – and anti-interventionists of every political stripe – must intervene, or die out. Natural selection will take care of those who cannot or will not adapt to the new reality.

  And this kind of sectarianism is absolutely unforgivable, because the new reality is far from a hostile environment. It is, in many ways, far more conducive than the old left-right paradigm, which is seeing the last of its iron grip on political consciousness loosened and dispelled.

  We are living in revolutionary times. Every political movement and tendency will be put to the test. Some will be found wanting, and they will fall by the wayside. Others will adapt and prosper. Whether we have the courage to face the future is an issue that will soon be decided, and it is we who will do the deciding – because our fate is in our hands.

  

  

• The Most Expensive Cities To Live In Across The Globe

  ‘Exceptional’ America is no longer the home of the world’s most expensive city in which to live and work. As the latest report from the World Economic Forum finds, the honor of the priciest place to reside is the United Kingdom’s capital – London. At £80,777 (~$120,000) per person per year, “The Big Smoke” is twice as costly as Los Angeles or Sydney…

  London has topped the list since June 2014…

  

   

  However, all is not lost for USA, USA, USA!

  A quarter of the top 20 most expensive cities are in the United States, with New York (at a yearly cost of over £79,000) coming in just behind London.

  Overall, the average cost of home and office accommodation per person per year across the top 20 cities is £40,641, with Rio de Janeiro being the most affordable.

  Savills’ index is aimed at giving employers an idea of the cost of accommodating an employee in cities around the world. Head of World Research at Savills, Yolande Barnes, says: “The productivity of cities and their value to global businesses clearly has a pronounced effect on demand and hence rental costs.”

   

  The highest-ranking cities for productivity, such as London and New York, are also the most expensive to live and work in.

   

  Barnes adds: “World cities can become a victim of their own success when rents rise to the point where affordability becomes an issue.”

   

  Savills wants to see an increase in supply of high-quality workspace, noting that this will be a crucial development for emerging cities such as Rio de Janeiro, Mumbai and Lagos.

  Of course, there is always Vancouver (if you’re Chinese).

  

  

• Caught On Tape: The Last Minutes Of Life Of A Bumbling ISIS Fighter

  Amid pay cuts and sex-slave incentives, it appears not only is ISIS fighters' enthusiasm flagging but their IQ appears to be dropping too. As the following rather shockingly comical clip via VICE News shows a cluster of shambolic and frenzied ISIS extremists were 'caught on tape' as they struggle to fire rockets at Kurdish pashmerga troops near Mosul, Iraq.

  As NY Post reports, the footage shows the chaos inside an improvised armored carrier as the fighters shout at each other while bullets fly.

   

  “Careful not to shoot at our brothers!” one yells. “Where is my magazine?” another shouts.

  One asks for a rocket launcher.

  “The rockets for firing at people or armored vehicles?” one of the discombobulated men asks.

  When someone on the vehicle fires his assault rifle, another yells at him: “The bullet casings are hitting us! Be careful, Abu Abdullah!”

  When one finally fires a rocket, all hell breaks loose and debris lands inside the open-air carrier.

  “Good job, but you roasted us, too!” one yells. “What is wrong with you, Abu Hajaar?”

  “I need a rocket for firing at people!” one of them pleads.

  Finally, their carrier is hit and the men jump out of the burning vehicle.

  “The driver has died!” one yells.

  The jihadist whose headcam caught the pandemonium is eventually mortally wounded by the enemy forces.

  “I’ve been shot!” he yells as the rest of his comrades retreat.

  Source: NYPost.com

  

  

• The US Endgame? Creating A Climate That "Could Easily Be Transformed Into War"

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

  Most readers have been watching, as the U.S. and Russia seem to be positioning themselves along Cold War lines.  The posturing is not confined to maneuvering military assets; it also runs along economic lines, in which most warfare is at least based if not a major or the sole impetus.  Each power has sought to cement its claims/presence in areas bordering the sphere of influence of, or the actual territory of the other power.  Such posturing can be dangerous and lead to an incident that escalates into the uncontrollable.

  Recently the news media has been abuzz with the Russian fighter aircraft buzzing the U.S. in the face: first the incident with the two fighters coming within 30 feet of an American naval vessel, and another separate incident involving aerial theatrics around a U.S. reconnaissance aircraft (a Boeing RC-135 intelligence-gathering spy plane).  The U.S. responded in kind on April 20 by allowing a guided missile destroyer, the U.S.S. Cook to encroach upon Russian borders while conducting maneuvers near Poland.  The U.S. claimed that Russian aircraft were doing fly-by’s to intimidate the destroyer.

  Unlike the puissant response by John Kerry, feigning anger and doing nothing with the Russian aircraft incidences of the past two weeks, Russia is not playing with the destroyer incident.  The Russian ambassador to NATO, Alexander Grushko is reported by Reuters to have made the following statement:

  “This is about attempts to exercise military pressure on Russia.  We will take all necessary measures, precautions, to compensate for these attempts to use military force.”

  This statement by Grushko was not limited to the incident with the Cook.  NATO Secretary General Jens Stoltenberg has affirmed in the past week the intention of NATO to deploy command and control centers in Bulgaria, Estonia, Latvia, Lithuania, Poland, and Romania.  Exercises are currently being planned and prepared in Estonia by NATO air assets, to include participation by Sweden and Finland, both non-NATO members.  The exercises are scheduled to commence on April 28.

  Although the exercises are superficially being dubbed maneuvers to help with control of civilian airports and coordination with them during “an emergency situation,” in reality they are both posturing and stationing aircraft on Russia’s western flank.  Also, the mainstream media barely mentioned the fact that last month, NATO fighter aircraft approached a Russian aircraft carrying Sergei Shoigu, the Russian Defense Minister who was en route to inspect military facilities and readiness in Kalingrad, toward Russia’s western border.

  Much has also been mentioned by NATO of Russian “aggression and encroachment” regarding Ukraine, still beset by more than a year of fighting in its eastern region between Ukrainian forces and ethnic Russian separatists.  NATO has condemned Russia for supplying these separatists with equipment, materials, and personnel.  Russia has responded to this accusation by declaring eastern Ukraine to be mired in a civil war.

  There are also underlying economic issues to all of this.  As mentioned in previous articles, the entire involvement of NATO wanting to “assist” Russia in her support of Syria was nothing more than an attempt to oust Assad.  This, in turn took a back seat to the desires of NATO and the U.S. to annex a portion of Syria in order to enable a natural gas pipeline from Qatar into Western Europe for the purpose of negating Russia’s Gazprom from supplying Western Europe with natural gas.  Basically, the Russians solidified Assad’s position, bombed the insurgents into submission, left supplies and advisers with Assad, and withdrew from the board.  The U.S. was left stultified with egg on its face.

  Now the BRIC nations are starting their markets up in earnest, backing their currencies with gold and trading in Shanghai, China, and Moscow in Russia.  These two nations, incidentally are #1 and #3 respectively regarding gold production.  The former produced 490 tons in 2015, and the latter put out 295 tons that year.  The two nations account for 25% of the gold production for the world.  Those are staggering numbers.  In addition to production, China and Russia have been building up their reserves of gold astronomically.

  They are ranked 5^th and 6^th respective to gold reserves.  The U.S. is listed as “#1” but this is another faux pearl attached to others on a string, such as phony employment numbers and the inflated GDP as reported by parrots of the media and business insider networks who are, in reality inside of the pockets of the administration and the Federal Reserve.

  Another point of interest that may have a great effect is that Congress is in the midst of passing legislation to hold Saudi Arabia partially accountable for the 9-11 attacks.

  The Saudis responded with informing the state department that they will call in assets and all accounts payable if that is the case.  This could really domino and also spell an immediate end to the Petrodollar.  Wouldn’t that be interesting?  Congress would hit the Saudis up with a bill, and the Saudis would pay us in “fiat” Federal Reserve notes, maybe cutting off the oil supply as well.  Payment of the bill then may as well be in toilet paper.

  To summarize, akin to ancient Rome, the United States has over-extended herself.  She has created a climate that could easily be transformed into a war on a slight pretext.  Wars, as it is well known are also a means a nation can extricate itself from debt and financial responsibility.  The dying Petrodollar system has been on life support for some time, and it appears other nations such as the BRIC’s are taking the initiative to return to a true monetary standard.  This is the same gold and silver standard that the U.S. should never have left in the first place.

  

  

• In Latest US-China Escalation, Beijing Denies US Aircraft Carrier Access To Hong Kong Port

  What until now was mostly effete jawboning over US complaints surrounding China’s territorial expansion ambitions in the South China Sea, including the occasional sailing of a US ship deep inside the disputed territorial waters (with zero impact especially now that China may soon start building maritime nuclear power plants in the area), changed dramatically earlier today when China officially denied a U.S. carrier strike group’s request for a port visit to Hong Kong next week.

  

  The Stennis strike group

  As Stripes writes, the Chinese Ministry of Foreign Affairs notified the United States Thursday of its decision to deny the USS John C. Stennis and its escort ships access to the former British colony, Darragh Paradiso, a spokeswoman for the U.S. Consulate General in Hong Kong, said by phone. The ministry provided no explanation for the move.

  While U.S. warships frequently visit Hong Kong, port calls have been canceled at times of diplomatic strain between the two Asia-Pacific powers. In 2007, China denied access to the city’s port by the aircraft carrier USS Kitty Hawk.

  The decision follows weeks of increasing diplomatic sparring between China and the U.S. over Beijing’s claims to more than 80 percent of the South China Sea. The nuclear-powered Stennis has played a central role in U.S. efforts to demonstrate its continued security presence in the disputed waters, with Defense Secretary Ashton Carter visiting the warship on patrol there in April.

  

  A plane carrying U.S. Secretary of Defense Ash Carter lands on the deck of the USS
  John C. Stennis on April 15, 2016, as the ship sailed through the South China Sea.

  According to Shi Yinhong, director of the Center on American Studies at Renmin University in Beijing, and a foreign policy adviser to the State Council, the Stennis has become a “symbol of efforts to spark strategic tensions between China and the United States. The cancellation is a snapshot of the current intensity in China-U.S. security relations. Without significant security need, routine port calls would not have been canceled.“

  While the US has been complaining about China’s territorial expansions over the past year, culminating with the current recent incident, China’s claims to the South China Sea have resulted in numerous other disputes with other neighboring Southeast Asian nations that assert rights to the area, including Vietnam and the Philippines. Tensions are running high as the region braces for a ruling by an international arbitration panel on a Philippine challenge to China’s claims.

  “We have a long track record of successful port visits to Hong Kong, including with the current visit of the USS Blue Ridge, and we expect that will continue,” Paradiso said, referencing the U.S. Navy command ship already moored in the city.

  Finally, earlier today the US State Department confirmed that indeed China has refused to allow Stennis to dock in Hong Kong.

  #China denied Hong Kong port call by USS Stennis aircraft carrier, @StateDept confirms. #VOAalert

  — Steven L Herman (@W7VOA) April 29, 2016

  

  

• "Erdogan Is The Father Of ISIS" – New Documentary Outlines Turkey's Support Of The Islamic State

  Is Turkey the support behind ISIS? A documentary released by RT lays out evidence that would lead to that conclusion… one we first exposed here, here, and here… and is interestingly timed given Europe's potential desire to regain some leverage over Erdogan.

  The documentary takes place just days after the YPG took back the town of Shaddadi (a former ISIS stronghold), and what is revealed will most certainly go under reported, but is important nonetheless. The documentary points out that the connection between Turkey and ISIS is strong. Killed ISIS fighters left behind passports indicating that the fighters all came through Turkey, and by their own admission, interviewed ISIS fighters admit to coming through Turkey with no issue at all. The locals who were working under ISIS say that oil was refined and sold to Turkey in return for money and weapons, and YPG fighters who fight against ISIS find that much of the ISIS supplies come from Turkey.

  Here are some key elements of the documentary:

  Captured ISIS fighters admit that coming through Turkey was easy. The fighters believe this to be the case due to the fact that it has a common enemy with ISIS, the YPG (People's Protection Unit). The YPG is yet another rebel group fighting in the Syrian civil war, and Turkey views the YPG as an extension of the Kurdistan Workers' Party (PKK) who call for an independent Kurdish state within Turkey. The fighter alleges that Turkey's president Recep Erdogan wants ISIS to control Syria in order to grow the oil trade.

  

  

  

  "The prophet told us to build a caliphate. I spoke with my friend about it, they told me to go to Istanbul. I went to Turkey, I got into the airport, went through passport control. The formalities were a breeze. Crossing the border wasn't hard either, it was like crossing the street. A man told me that Islamic State had erased the borders, that there were no borders. I'd heard of it, but I didn't quite get it until I saw it myself. If Turkey wanted to stop the refugee influx, it could have long ago."

  Passports left behind by those killed during the battle show that the fighters came through Turkey.

  

  

  The locals, and sadly, many of them children, spoke of the horror everyone had lived under during ISIS' two year control of the town.

  

   

  

   

  

  The documentary then goes through a flat once occupied by what appears to be an ISIS accountant of some sort, the flat had all kinds of oil related documents.

  

  

  ISIS would take oil from the Jabisah oil field near the town of Shaddadi in Northern Syria, to Raqqa, and ultimately to Turkey where they would sell it says Ghazi Hussein, a resident of Hasakah province, who witnessed the terrorists having Jabisah under their control.

  

  

  One local estimated that ISIS made a million dollars a week.

  YPJ (women's division of the YPG) fighters explained that all of the gear found on ISIS fighters is from Turkey, and are curious as to why nobody is connecting the dots yet.

  

  One captured ISIS fighter even says that "Erdogan is the father of ISIS."

  You can watch the full documentary below [warning: contains content that may be disturbing]

  

  

• The Woodstock Of Crony Capitalism

  By Adventures in Capitalism

  The Woodstock Of Crony Capitalism

  It’s been a while since I’ve attended the Berkshire Hathaway (BRK:NYSE) annual meeting. Between the tedium of little kids asking questions about how to live life, to the feel-good nature of the thing, I simply got repulsed. Why do a bunch of hard-nosed capitalists choose to act like Ned Flanders for a weekend—in Omaha of all places? It’s illogical and completely artificial.

  

  Then, a few weeks back, as friends asked if I was attending this year, I had a certain realization—all this play-acting is simply Buffett, the puppet-master at his most brilliant. As he plows capital into highly regulated industries, he has the upper hand because he has skillfully crafted the image of the Mid-Western grandfather that can do no wrong. He can cozy up to regulators and politicians and get what he wants—without the added costs and distractions of lobbyists and consultants. Who wouldn’t want to get their permits in half the time and with a fraction of the cost? Want to block a Canadian pipe-line that would compete with your cherished rail-road? Become the President’s “economic advisor.” Want to abuse tax loopholes? Bemoan that your secretary pays a higher tax rate than you. You want to obstruct solar energy in Nevada? Elon Musk is a foreigner, Omaha is as American as it gets. Your railroad has an atrocious safety record? Well, at least we don’t have to worry about global warming from that pipeline…

  I can go on and on, but I went from disgusted to awestruck. In this horribly overregulated world of ours, Buffett has evolved into the apex predator. Why wouldn’t he? Over his career, he’s consistently gone where the opportunities were. He’s gone from investing in “cigar-butts” when few other investors knew how to look for companies trading for less than cash, to branded products with pricing power that could thrive during the increasing inflation of the 70’s and early 80’s to a diversified book of high return on capital businesses during the great bull market that began in 1982. Over this time, he realized that he could leverage his bets with an insurance business that not only gave him access to cheap capital, but removed the headaches associated with bond maturities and margin calls.

  Over the past fifteen years, the US has undergone a massive increase in pernicious regulation. Therefore, it seems only natural that opportunities would exist in the most regulated sectors of the economy. If you can get your permits and deny those permits to others, if you can avoid environmentalists and NIMBYs, if you can dodge taxes, if you can charm the cliques in Washington, you have an opportunity to earn outsized profits—especially if you have an endless fire-hose of cheap insurance float to deploy.

  

  Crony capitalism is highly lucrative and as a Berkshire shareholder, I’ve reaped the rewards. Now, I once again want to sit at the feet of the master. How do you make people like you to the point that they give you a free pass on whatever you want? When you call up a regulator, do you even talk about the issues? Or do you talk about your Ukulele skills and Omaha little league? You have to admire what he’s accomplished and I will be there to watch him amuse the petite bourgeoisie. I see a world that continues to become more regulated—where a cloistered elite uses special interest groups to crush opponents and destroy businesses. Either you’re calling the shots, or you’re getting abused like a peasant.

  The Koch Brothers spend hundreds of millions on elections. Soros spends similarly on fringe groups that break windows and overturn cars. Neither really accomplishes his goals. Buffett gets what he wants. In Davos, they chug bottles of Chateau Lafite Rothschild and plot how to pillage small nations. At Berkshire, we will eat Dilly bars and plot how to pillage the middle class. Capitalism is beautiful and crony capitalism is the end product of politicians who prostitute the laws. I don’t have the power to change the current rules, but I can certainly learn to thrive within them.

  This is a long-winded way of saying that after a few years of sitting out the meeting, I’ll be there. If you want to grab a drink, email me and I’ll tell you where I am. Beer with friends is fun—free beer at someone else’s party is the true definition of value investing.

  

  

• What Happens If Everybody Pulls Their Money Out Of The Bank Today?

  For every dollar that you have in the bank there is actually 0.00061 dollars available…in other words, there's 6 cents for every $100 dollars of deposits that you have at the bank.

  As Mike Maloney explains in this brief clip, we live in an economic system that is made complicated by design. Basically, it’s set up so most people don’t even try to understand it.

  Got Gold?

   

  

  

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• Russian Fighter Jet Flies Within 50 Feet Of US Spy Plane Over Russian Naval Base

  Tensions continue to escalate between the US and Russia. As a reminder, Russia conducted several close encounter fly-bys when first a Russian Su-24 “buzzed” the US missile destroyer USS Donald Cook in the Baltic Sea, and just days later flew within 50 feet of a US recon plane also flying over the Baltic Sea. The U.S. quickly responded and complained vocally to Russia, followed quickly by the first deployment of US F-22 stealth fighter to Romania, in close proximity to both the Black Sea and 400 km from the Russian military stronghold of Sevastopol on the Crimean Peninsula.

  It now appears there was a third incident involving an extremely close encounter. According to the Free Beacon, a Russian MiG-31 jet flew within 50 feet of a U.S. surveillance aircraft in Northeast Asia last week, in what was dubbed “Moscow’s latest aerial saber-rattling” against American ships and planes by US defense officials.

  

  Russian Mig-31 planes

  “On April 21, a U.S. Navy P-8 Maritime Patrol reconnaissance aircraft flying a routine mission in international airspace was intercepted by a MiG-31 Russian jet in the vicinity of the Kamchatka Peninsula,” Cmdr. Dave Benham, a spokesman for the Pacific Command, told the Washington Free Beacon. While Benham added that the intercept was “characterized as safe and professional” there was more to the story as another defense official familiar with the MiG-31 intercept said the jet flew within 50 feet of the P-8, a maritime patrol and anti-submarine warfare aircraft.

  The WFB adds that the incident took place near the Russian city of Petropavlovsk-Kamchatsky, a port located on the southeastern end of the peninsula, which explains why Russia may not have been particularly enthused with a US spy plane flying virtually on top of its territory.

  Kamchatka is Russia’s main military hub in the Pacific and the focus of a buildup of Russian military forces that Moscow has said is intended to match the U.S. military rebalance to Asia. Several military bases are located there, along with a major naval base. The peninsula is also the main impact range for Russian missile flight tests launched from the central part of the country.

  Worse, the P-8 flight appears to have been part of an effort to spy on Russia’s deployment of a new missile submarine at Petropavlovsk, and since clearly the US was fully aware that Russia would respond unfavorably to this encroachment one wonders if the US wasn’t merely acting to provoke its Russian counterparts into something more than merely a “safe and professional” response. 

  The Russian navy’s Pacific Fleet conducted exercises in the Sea of Japan on April 22, a day after the P-8 was intercepted, according to a Twitter search. Russian naval forces from Kamchatka also carried out missile and artillery fire exercises in recent days. The WFB adds that the military activities may have also been a target of the P-8 surveillance operations.

  In other words, the US was deploying spy planes in the immediate vicinity if not over Russian territory and was surprised when Russian engaged with an appropriate response. One wonders just how the US would react if Russian spyplanes were flying in the vicinity of Norfolk or San Diego.

  Meanwhile the farce continued: on Capitol Hill, Defense Secretary Ash Carter told a Senate hearing on Wednesday that the recent incidents are an indicator of “tension that has built up in Europe especially over the last couple of years since events in Crimea and Ukraine.” Incident such as US spyplanes flying over critical Russian bases and being surprised by the reaction. 

  On the recent buzzing of the Cook, Carter said “it is unprofessional behavior, and whether it is encouraged from the top, whether it was encouraged from higher up or not I can’t say. But we do expect it to be discouraged from higher up from now on,” he added. “These pilots need to get the word, ‘Hey, knock it off. This is unprofessional. This is dangerous. This could lead somewhere.’”

  Indeed: and the next time Carter wants it to certainly “lead somewhere”, he should send not one spy plane but several F-22 on a routine fly by in the same area only to be surprised by the Russian reaction.

  Meanwhile, retired Navy Capt. Jim Fanell said the close-in MiG-31 intercept is significant. “The 50-foot closest point of approach by Russian Far East MiG-31 Foxhound interceptors to a U.S. Pacific Fleet P-8 reconnaissance flight is an indicator the Russian Navy has likely transferred their first Dolgorukiy-class SSBN to the Pacific Fleet,” Fanell said, using the acronym for ballistic missile submarine.

  The need to monitor new Russian missile submarines adds to the already overloaded requirements for U.S. submarine forces. “This clearly represents another clear and present danger to U.S. national security,” Fanell said. The “nation needs more ballistic missile and fast attack nuclear submarines, and fast.”

  Meanwhile, as the US builds up its ballistic missile arsenal and attack subs, it will just have to make do with more such incursions in close proximity to Russia and be amazed at the “provocative” response.

  

  

• This Is Where America's Runaway Inflation Is Hiding

  The Census Bureau released its quarterly update on residential vacancies and homeownership for Q1 which is closely watched for its update of how many Americans own versus rent. It shows that following a modest pickup in the homeownership rate in the prior two quarters, US homeowners once again posted a substantial decline, sliding from 63.8% to 63.5%, and just 0.1% higher than the 50 year low reported in Q2 2015.

  

   

  And perhaps logically, while homeownership continues to stagnate, the number of renters has continued to soar. In fact, in the first quarter, the number of renter occupied houses rose by precisely double the amount, or 360,000, as the number of owner occupied houses, which was a modest increase of 180,000. This brings the total number of renter houses to 42.85 million while the number of homeowners is virtually unchanged at 74.66 million.

  A stark representation of the divergence between renters and owners can be seen in the chart below. It shows that over the past decade, virtually all the housing growth has come thanks to renters while the number of homeowners hasn’t budged even a fraction and has in fact declined in absolute numbers. What is obvious is that around the time the housing bubble burst, many Americans appear to have lost faith in homeownership and decided to become renters instead.

  

   

  An immediate consequence of the above is that as demand for rental units has soared, so have median asking rents, and sure enough, according to Census, in Q1  the median asking rent at the national level soared to an all time high $870.

  

   

  Which brings us to the one chart showing where the “missing” runaway inflation in the US is hiding: if one shows the annual increase in asking rents, what one gets is the following stunning chart which shows that while rent inflation had been roughly in the 1-2% corridor for two decades, starting in 2013 something snapped, and rent inflation for some 43 million Americans has exploded and is currently printing at a blended four quarter average rate of just over 8%, the highest on record, and 4 times higher than Yellen’s inflationary target.

  

  So the next time Janet Yellen laments the collapse of inflation, feel free to show her this chart which even she can easily recreate using the government’s own data (the sad reality is that rents are rising even faster than what the governmet repoirts) at the following link.

  

  

• Why The US Output Gap Means The 10 Year Is Going Below 1%

  Submitted by Kessler Companies

  Output Gap Update – Q1 2016

  

  Among our favorite indicators to write about is the GDP output gap. Today we update it with the latest Q1 2016 GDP data. We’ve written about it many times in the past (some recent examples: 09/30/2015, 12/27/2014, and 06/06/2014). It is the standard for representing economic slack in most other developed countries but is usually overlooked in the United States in favor of the gap between the unemployment rate and full employment (also called NAIRU (link is external)). This is partially because the US Federal Reserve’s FOMC has one half of its main goal to promote ‘full employment’ (along with price stability) but it is also partially because the unemployment rate makes the economy look better, which is always popular to promote. In past US business cycles, these two gaps had a close linear relationship (Okun’s law (link is external)) and so normally they were interchangeable, yet, in this recovery, the unemployment rate suggests much more progression than the GDP output gap.

  The unemployment gap now, looked at on its face, would imply that the US is at full employment; i.e., the unemployment rate is 5% and full employment is considered to be 5%. Thus, this implies that the US economy is right on the verge of generating inflation pressure. Yet, the unemployment rate almost certainly overstates the health of the economy because of a sharp increase over the last many years of unemployed surveyee’s claiming they are not involved in the workforce (i.e. not looking for a job). From the beginning of the last recession, November 2007, the share of adults claiming to be in the workforce has fallen by 3.0% of the adult population, or 7.6 million people of today’s population! Those 7.6 million simply claiming to be looking for a job would send the unemployment rate up to 9.4%!. In other words, this metric’s strength is heavily reliant on whether people say they are looking for a job or not, and many could switch if the economy was better. Thinking about this in a very simplistic way; a diminishing share of the population working still has to support the entire population and without offsetting higher real wages, this pattern is regressive to the economy. The unemployment rate’s strength misses this.

  Adding to the evidence that the unemployment rate is overstating the health of the economy is the mismatch between the Bureau of Labor Statistics’ (BLS) household survey (unemployment rate) and the establishment survey (non-farm payroll number). Analyzing the growth in non-farm payrolls over the period of recovery (and adjusting for aging demographics) suggests that the US economy still has a gap to full employment of about 1.5 million jobs; this is the Hamilton Project’s Jobs Gap (link is external).  

  But, the labor market is a subset of the economy, and while its indicators are much more accessible and frequent than measurements on the entire economy, the comprehensive GDP output gap merits being part of the discussion on the economy. Even with the Congressional Budget Office (CBO) revising potential GDP lower each year, the GDP output gap (chart) continues to suggest a disinflationary economy, let alone a far away date when the Federal Reserve needs to raise rates to restrict growth. This analysis suggests a completely different path for the Fed funds rate than the day-to-day hysterics over which and how many meetings the Fed will raise rates this year. This analysis is the one that has worked, not the “aspirational” economics that most practice.

  In an asset management context, US Treasury interest rates tend to trend lower when there is an output gap and trend higher when there is an output surplus. This simple, yet overlooked rule has helped to guide us to stay correctly long US Treasuries over the last several years while the Wall Street community came up with any reason why they were a losing asset class. We continue to think that US Treasury interest rates have significant appreciation ahead of them. As we have stated before, we think the 10yr US Treasury yield will fall to 1.00% or below.

  

  

• Visualizing China's Rising Dominance In Trade (In 4 Shocking Maps)

  We often use big, overarching ideas to help us understand the world and the opportunities contained within. These narratives, which can change over time, are used to create context. They give us a frame of reference for comprehending the news and events that affect our outlook on things.

  As VisualCapitalist's Jeff Desjardins notes, China’s economic prowess is one of these new paradigms that has emerged, but many people still can’t really wrap their heads around the scale or scope of it.

  It’s happened suddenly, and the ramifications are extremely relevant to our investments and understanding. Here’s four maps on China’s trade dominance that will help you think differently about the world:

  China is the world’s #1 trade partner

  

  Image courtesy of: Connectography

  The United States is the number one trading partner for 56 countries, with important relationships throughout North America, South America, and Western Europe.

  Meanwhile, China is the top partner for 124 countries, dominating trade in Asia, Eastern Europe, Africa, and Australia.

  China’s Sphere of Influence

  This map shows the portion of trade conducted by each country with China in Southeast Asia.

  

  Image courtesy of: Stratfor

  The influence that China has with nations in Southeast Asia is significant. Most trade is in double-digit percentages, and China views this as its immediate sphere of influence. Throughout history, territories in this region would even pay tribute to China to gain access to trade.

  “In East Asia’s tribute system, China was the superior state, and many of its neighboring states were vassal states, and they maintained a relationship of tribute and rewards,” writes Liu Mingfu in The China Dream, a popular book about China’s plans to return to power.

  Maintaining influence in Southeast Asia is part of the reason that Beijing is posturing in the South China Sea. In fact, China’s coastguard is growing so fast that in 10 years it will have more tonnage than all of the coastguards in Southeast Asia, the United States, and Japan combined.

  Building a New Silk Road for Chinese Trade

  

  Image courtesy of: Council of Foreign Relations

  China seeks to increase trade ties with Asia and Europe even further by building a new Silk Road that puts even Marco Polo’s route to shame.

  The Chinese transcontinental network, a massive infrastructure project pegged for completion by 2025, is expected to bring down overland travel time from Beijing to London to just two days. Currently, it takes 15 days for the journey.

  The project’s aim is to shorten the time of bulk consumer-goods transport to Europe, while unlocking the economic potential behind Eurasian cities from Almaty to Tehran. The new Silk Road will include at least one high-speed line that goes 320 km/h, and the network will help to link up 70% of the world’s population in roughly 40 countries.

  Infrastructure Override

  You may have heard of the AIIB (Asian Infrastructure Investment Bank), which was officially launched at the end of last year. Initially proposed by China, the bank now has over a $100 billion of capitalization and 57 founding member states.

  

  Image courtesy of: Reuters

  While this shows China’s push for infrastructure especially to coincide with its new Silk Road, there is another very interesting detail: Beijing controls 26.06% of the votes, essentially giving it veto power as most bank decisions need 75% of the votes to pass.

  In other words, only infrastructure projects that benefit Chinese trade will likely get the nod from Beijing.

  Source: VisualCapitalist.com

  

  

• Why Is JPM's "Quant Guru" Suddenly Worried About The "Endgame"

  When JPM quant Marko Kolanovic released his latest report today, we were expecting him to read his latest insight on the positioning of quant funds, on the relative imbalance of risk parity, or perhaps whether market gamma was suggesting that the market is poised for an inflection point, either lower or higher. Instead, we were surprised to read an extended analysis looking at how trapped the “out of options” central banks are, what the next steps are for the global economy, how the market is now as overvalued as it was before the 2000 crash, how rising rates “would make the current S&P 500 level look like a bubble”, and the exhaustion of all available policy options, which he dubbed the “endgame.” To wit:

  If investors lose confidence that the debt can ever be repaid, they will reduce their holdings, increasing the cost to governments or inviting more central bank buying. This can eventually result in the devaluation of all currencies against real assets such as gold, high inflation or even outright defaults (as was the case in Greece). If such a trend develops in one of the large economies, it could have far-reaching consequences.

  We were most surprised by Kolanovic’s strong case to buy gold, although considering it comes just one week after a Pimco economist dared to propose that central banks should monetize gold next in an attempt to massively boost inflation expectations (while send the price of gold to $5,000), perhaps we are not that surprised.

  * * * .

  We are confident readers will find it just as an engaging read.

  From JPM’s Marko Kolanovic

  Central banks, Inflation, and Debt Endgame

  With the Fed and BoJ meetings behind us, markets are increasingly accepting that central banks are nearly out of options. Central banks can hardly raise interest rates, and there is a growing realization that negative interest rates simply make no sense (see analysis below). Unconventional approaches of buying corporate bonds (ECB) and stocks (Japan) so far have not produced significant results, and run the risk of tainting these assets for private investors. The next attempt to boost the economy or prevent a potential market crisis will likely need to be accomplished by fiscal measures. Fiscal measures may be employed even if there is no crisis (e.g., post US election), and over the next months investors will look closely at potential measures and their impact on equity markets, commodities (potential positive impact on certain sectors – e.g., from infrastructure spending), and the value of debt and currencies (likely negative impact).

  Before we discuss the implications and risks that could result from such developments, we present an analysis that suggests that central banks face the risk of entrenched low inflation (rather than the risk of high inflation) and likely will not be able to raise rates meaningfully. Figure 1 shows the cumulative PCE (relative to the Fed’s 2% target) that shows significant and persistent undershooting over the past 8 years. Since 2000, the cumulative undershoot is 6% on the core PCE measure. Over the past 4 years, core PCE undershot by more than 1.5 % (and headline by 3.5%, the difference being largely due to the 2014 decline in energy). This undershooting is fairly significant: over the past 2 years headline PCE undershot by 3% (2 standard deviations) and Core by 1% (1 standard deviation). What should be more worrying is that PCE readings historically show strong persistence (serial correlations). This means that a low core PCE reading today implies that PCE is more likely to stay low in the future as well (e.g., core PCE reading today has 80% correlation with the reading of 12 months ago). Our quantitative model of core PCE indicates the most likely level is still below the Fed’s 2% target and continuing to undershoot over the next 3 years.

  In that context, the Fed should welcome any overshooting of the target as that is the only way it can end up closer to the stated 2% target over any meaningful time period (e.g., 2, 5, or 10 years). For instance, overshooting the target over the next 2-3 years by ~0.5% each year (or over the next 1-2 years by ~1%) would put the inflation averages within the margin of the stated 2% target. The problem is that it simply may not happen, and inflation breakeven rates in the US, Europe and Japan point to the same direction.

  Over the past 20 years, PCE overshoots (undershoots) tended to coincide with S&P 500 rallies (declines). However, over the past 8 years, PCE kept trending lower, while the market rallied strongly. While the Fed’s QE programs did not prevent inflation to persistently undershoot the 2% target, a potential byproduct was inflated S&P 500 valuations. Indeed, many clients ask us how much of the S&P 500 rally can be attributed to near zero rates and can be at risk should rates continue to rise? Assuming the S&P 500 returning to median P/E levels for comparable rate and inflation environments in the past, it would suggest a 5%-15% de-rating of the equity multiple should rates continue to rise at a moderate pace and assuming no increase of recession probability. If rates increase the probability of recession, it would likely result in a larger market pullback, as both earnings and multiples would suffer.

  Should the problem of low inflation go away (e.g., if there is an oil price shock, or upside growth surprise) and there is need to raise rates more significantly, the Fed will face another problem. That is how to hike but not push the equity market significantly lower. The reason is that with current levels of leverage, rates behave like a ratchet (easy to turn lower, but hard to turn higher without breaking the gears). Over the years of ZIRP, asset prices and business models adjusted to low rates. For example, home buyers make decisions based on monthly mortgage payment levels, and S&P 500 companies (ex-financials) have the highest leverage since 2007 (when leverage was at record levels), with some of the debt used to buy back shares.

  Indeed, the current S&P 500 P/EBITDA ratio is at the same level as shortly before the market crash of 2000. The distinction between current market valuations being reasonable vs. bubble-like is due to low interest rates (as well as lower effective tax rates). Significant increase of rates (e.g., to levels implied by 2018 Fed dots) would make the current S&P 500 level look like a bubble.

  As we argued above, it is hard to see short-term rates moving meaningfully higher any time soon. We also think that rates cannot go much lower either as negative rates fundamentally don’t make sense (issues such as physical storage of cash can make negative yields viable only over short periods of time). So the attempt to boost growth or fight a potential crisis will likely need to be accomplished by fiscal measures.

  However, fiscal measures also bring an increased level of government debt and increased market and credit risk of owning government bonds. These risks are in addition to current low yields and a less favorable correlation of bonds to risky assets. The unfavorable risk-reward of government bonds near the point of zero yields will likely prevent asset managers from increasing holdings of government bonds. If there are no private buyers, governments can still place their bonds with central banks. This trend is of course already in place – for instance, the Fed’s holdings of US Treasuries increased from ~18% in 2008 to ~34% today.

  Increased government spending, financed by central banks could indeed create inflation, but will further elevate the problem of debt viability. If investors lose confidence that the debt can ever be repaid, they will reduce their holdings, increasing the cost to governments or inviting more central bank buying. This can eventually result in the devaluation of all currencies against real assets such as gold, high inflation or even outright defaults (as was the case in Greece). If such a trend develops in one of the large economies, it could have far-reaching consequences.

  Once fiscal measures replace monetary measures, we think investors will increasingly focus on the dynamics of government debt and currency valuations, particularly in Japan and the US.

  How can an investor hedge against the risk of these potential developments? One can reduce allocation to bonds and increase allocation to real assets and equity sectors related to real assets. Investors can also move away from bonds that are not backed by reserve assets such as currency reserves or gold. The ability of a government to pay back debt and at the same time as maintaining the value of the currency should be measured by hard assets for which transfer to bondholders is politically viable. For example, during the Greek crisis, the option of selling islands owned by the government was off limits. On the other hand, governments can easily part with assets with no national or cultural attachments such as FX reserves or gold, as was recently the case with Ukraine and Venezuela.

  

  

• Junk Economics: Michael Hudson Rages "Wall Street Has Taken Over The Economy.. & Is Draining It"

  Submitted by Annie Zhou via FinancialRepressionAuthority.com,

  FRA Co-founder Gordon T. Long is joined by Professor Michael Hudson in discussing his concept of the FIRE economy and its influence on the production and consumption economy, along with some of his writings.

  Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Killing the Host (2015), The Bubble and Beyond (2012), Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971), amongst many others.

   

  ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East. Michael acts as an economic advisor to governments worldwide including Iceland, Latvia and China on finance and tax law.

  Full Interview:

   

  Abstract:

  FIRE ECONOMY

  FIRE is an acronym to the Finance, Insurance, and Real Estate sector. Basically that sector is all about assets, not production and consumption. Most people think of the economy as being producers making goods and services and paying labor to produce them, and then labor is going to buy the goods and services. But this production and consumption is rife in the asset economy of who owns assets and who owns other things.

  The Finance, Insurance, and Real Estate sector is dominated by finance. For instance, 70-80% of bank loans in North America and Europe are mortgage loans against real estate. The only way of buying a home or commercial real estate is on credit, so the loan to value ratio goes up steadily, banks lend more to the real estate sector, and real estate is worth whatever banks are willing to lend against it.

  As banks loosen credit terms, lower interest rates, take lower down payments and basically lower amortization rates, interest only loans, they’re going to lend more hand more against property.

  “Property’s bid up on price, but all of this rise in price is debt leverage.”

  A financialized economy is a debt leveraged economy, whether it’s real estate or insurance or just living, and debt leveraging means a larger portion of assets are represented by debt, raising debt-equity ratios, but also that more and more of people’s incomes and tax revenue is paid to creditors. So there’s a flow of revenue from the production and consumption economy into the financial sector.

  WE’RE STILL IN CAPITALISM, NOT CREDITISM

  There’s a huge amount of gross savings, about 18-19% of the US economy, coded in part in debt. The savings that are lent out to borrowers are debt. So you have the 1% lending out their savings to the 99%, but the gross savings are higher.

  “Every economy is a credit economy.”

  “The IMF has this Austrian theory that pretends money began as barter and capitalism operates on barter, and this is a disinformation campaign. This is a very modern theory that is basically used to say “oh, debt is bad”, an what they really mean is that public debt is bad, the government shouldn’t create money or deficit, and you should leave it all to the banks who should somehow run off debt and in-debt the economy”.

  “You can usually ignore just about everything the IMF says, and if you understand money you’re not going to be hired by the IMF.

  They impose austerity programs that they call “stabilization programs” that are actually destabilization programs, almost wherever they’re imposed.

  “When you have an error repeated year after year, decade after decade, it’s not really insanity doing the same thing thinking it’ll be different. It’s sanity. It’s doing the same thing thinking the result will be the same again and again.”

  The result will be austerity programs making the budget deficit even worse. The successful era of monetarism is to force countries to have self-defeating policies that end up having to privatize their natural resources, public domain, public enterprise, their communications and transportation, and sell it off.

  Everything that the classical economists saw and argued for – public investment, bringing costs in line with the actual cost of production – that’s all rejected in favor of a rentier class evolving into an oligarchy. Financiers in the 1% are going to pry away the public domain from the government and privatize it so that they get all of the revenue for themselves. It’s all sucked up to the top of the pyramid, impoverishing the 99%.

  “As long as you can avoid studying economics, you know what’s happened. Once you take an economics course you step into the brainwashing of an Orwellian world.”

  KILLING THE HOST

  Finance has taken over the industrial economy. Instead of banks evolving from usurious organizations that leant to governments, finance was going to be industrialized. They were going to mobilize savings and flow it back into financing the means of production, starting with heavy industry. In Germany in the late 19^th century, banks worked with government and industry in a kind of triangular process. But that’s not what’s happening now. After WW1 and especially after WW2, finance reverted to its pre-industrial form and instead of allying themselves with industry, they allied with real estate and monopolies because they realized they can make more money off real estate.

  You had David Ricardo arguing against the landed interest in 1817. Now the banks are all in favor of supporting land rent, knowing that today people can buy and sell property, renters are paying interests, and they’re going to get all of the rent.

  “You have the banks merge with real estate against industry, against the economy as a whole, and the result is that they’re a part of the overhead process, not part of the production process.”

  THE WALL STREET ECONOMY

  “The Wall Street economy has taken over the economy and is draining it.”

  Instead of the circular flow between producers and consumers, you have more and more of this flow being diverted to pay interest and insurance and rent. In other words, to pay the FIRE sector, most of which is owned by the 1%. The agency is active politicking by the financial interests and the lobbyists on Wall Street to obtain all of the growth of income and wealth for themselves, and that’s what happened in America and Canada since the late 1970s.

  INVESTMENT STRATEGIES FOR TODAY

  What all the billionaires and heavy investors do is they’re simply trying to preserve their wealth. They’re not trying to make money, they’re not trying to speculate, and if you’re an investor you’re not going to outsmart the billionaires because the markets are basically fixed. It’s the George Soros principle.

  “If you have so much money, billions of dollars, you can break the Bank of England. You don’t follow the market, you don’t anticipate it, you actually make the market and push the market up.”

  You have to be able to control the prices and you have the insiders making money but the investors are not going to make money.

  The Canadians don’t buy stocks until they’re up at the very top and then they lose all the money, and finally when the market’s all the way at the bottom the Canadians begin selling because they can see a trend, and then they miss the upswing.

  “J” IS FOR JUNK ECONOMICS

  “It begins as a dictionary of terms just so I can provide people with a vocabulary. The vocabulary that is taught to students today, used by the mass media and government spokesmen, is basically a set of euphemisms. Almost all the words we get are kind of euphemisms to conceal the actual dynamics that’s happening. For instance, “business cycles”. Nobody in the 19^th century used “business cycle”. They spoke about “crashes”. They know that things go up slowly and then plunge very quickly. It was a crash, not the sine curve you have in Josef Schachter’s business cycle. A cycle is something that is automatic, and if it’s a cycle then you’d think “oh, okay, everything that goes up will come down and everything that goes down will come up, just wait your turn.” And that means you should be passive. That is the opposite of everything that’s said in classical economics in the progressive era, when they realized that economies don’t recover by themselves”.

  “You need the government to step in, you need something exogenous, as the economists say. You need something from outside the system to revive it.”

  This idea of the business cycle analysis is, somehow you leave out the whole role of government. If you look at neoliberal and Austrian theory, there’s no role of government spending or public investment. And the whole argument of privatization, for instance, is the opposite of what was taught in American business schools in the 19^th century.

  The first professor of economics at the Wharton School of Business, Simon Patten, said public infrastructure is a fourth factor of production but its role isn’t to make a profit. It’s to lower the cost of public services and basic inputs to lower the cost of living and cost of doing business to make the economy more competitive.

  “The privatization of this adds in interest payments, dividends, managerial payments, stock buybacks, and merges and acquisitions, and obviously bills all of these financialized charges into the price system and raises the cost of living and doing business.”

  MORE ON FIRE ECONOMICS

  We’re going into a debt deflation and the key is to look at debt. If the economy has to spend more and more money, then the reason he economy isn’t recovering isn’t simply because this is a normal cycle.

  “It’s not because labour is paid too much, it’s because people are diverting more and more of their income to paying their debts, so they can’t afford to buy goods.”

  Markets are shrinking, so real estate rents are shrinking, and profits are shrinking. Instead of using earnings to reinvest, hire more labor to increase production, companies are using their earnings for stock buybacks and dividend payouts to raise the share price so that the managers can take their revenue in the form of bonuses and stocks and live in the short run.

  “They’re all setting up to take the money and run, leaving the companies are bankrupt shells, which is pretty much what hedge funds do when they take over companies.”

  The financialization of companies is the reverse of everything classical economists were saying. They can get wrap themselves in this cloak of classical economics by dropping history of economic thought from the curriculum. Following the banks and the Austrian school of the banks’ philosophy, that’s the road to serfdom. That’s the road to debt serfdom.

  “It lets universities and its government be run by the neoliberals, and they’re a travesty of what real economics is all about.”

  

  

• China Bond-Sale Cancellations Soar As BofA Warns "Default Risk Is Mispriced"

  While BofA’s base-case calls for “no crisis,” the soaring levels of bond-sale cancellations hitting the non-government credit markets is starting to make Asia strategist David Cui nervous…

  Year-to-date, 241 non-government bond issuances had been cancelled or postponed; 120 so far in April alone, vs. 315 in total in 2015 (Chart 1). At this stage, the situation appears manageable – in April month-to-day, issuers successfully sold 709 bonds (worth Rmb1.04tr), so the success rate is still above 85%. That said, if, contrary to our expectation, the bond market indeed corrects sharply, finances of developers, banks, brokers, industrials and utilities may suffer disproportionally, by our assessment, because they are highly geared and they have heavily relied on bonds recently.

  

  Bond default risk is mispriced: A perceived implicit government guarantee on bonds and other moral hazards in the shadow banking sector, including wealth management products, is largely behind the mispricing, in our view. There also appears to be noticeable bond-rating inflation, in our opinion.

  And the wall of maturing debt that will need to be rolled/refinanced is about to peak…

  

   

  Especially troubling for energy, industrials, and materials companies who are about to face a dramatic drop in their underlying commodity valuations…

   

  

  

   

  BofAML’s base case is no crisis over the next few months, but risk exists: We expect the government to inject enough liquidity and to bail out enough bonds to prevent a credit crunch in the bond market this round. However, the risk exists that the government could mismanage. Also, restrictions on how much the government can loosen and stimulate are getting tighter, in our view, due to the high debt level, the pressure on RMB and, possibly, inflation/asset speculation risk.

  

  

• "Why Our Children Should Hate Us" – Read The Lance Simmens Article Banned By The Huffington Post

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Although Lance Simmens has been intimately involved in public life for several decades, you’ve probably never heard of him. As such, a little introduction is needed.

  As mentioned, Lance Simmens’ career was spent in public policy. Specifically, he worked for two U.S. Presidents as well as a couple of senators and governors. Since retirement, he’s been a prolific writer, publishing 180 articles at the Huffington Post over the past 8 years. As such, it came as a great shock to him to discover that one of his recent articles was removed by the Huffington Post shortly after publication. It was the first article ever rejected by the online publication, and the unacceptable subject matter was nothing more than a positive review of the banned everywhere documentary VAXXED.

  Here’s Lance Simmens describing the ordeal in a recent interview:

  He mentions being locked out of his account, but it seems to have been reinstated since I came across a new piece published April 22 titled, Can Berners Become Trumpeters?

  His VAXXED article; however, remains missing in action. As such, I bring you the banned Huffington Post article titled, Why Our Children Should Hate Us:

  Vaxxed, the controversial documentary alleging a direct causal relationship between vaccines and exponential increases in autism amongst children is a deeply disturbing and hence critically important piece of work that will cause many sleepless nights for parents of infants everywhere.

   

  I had the honor of both watching the film and participating in a discussion afterwards with its Producer, Del Bigtree and Director, Dr. Andrew Wakefield. It is a must see film and deserves to serve as a catalyst for a national discussion of the role of mandatory vaccines for children and the role of the pharmaceutical industry in government decision-making.

   

  What is equally disturbing, however, is that the film represents another in a cascade of documented allegations calling to task not only the corruption of government regulatory agencies but the corruption of science and scientific method itself. And to the extent that the current Presidential election contest has sparked virulent dissatisfaction with our elected leadership and the institutions of government, we must take this opportunity to seriously question what many had taken for granted: namely, that government has as its most solemn mission the protection of public health, safety and welfare. The film carefully documents decisions by the Centers for Disease Control that lend credence to systemic corruption.

   

  As a father of two millennials, I have been bombarded with what has turned out to be a warranted cynicism, criticism, and rejection of government. As one who devoted nearly 40 years to the promotion of public service and government, I have come to reassess my initial reluctance to such criticisms. The kids have every right to be cynical and critical and as hard as it is for parents to accept it, probably know more than we do.

   

  The corruption of science and scientific method has manifested itself most prominently in recent years with a spate of attempts to deny the existence of global climate change and the role that continued fossil fuel usage plays in accelerating it. This, of course, finds refuge in the stalling tactical maneuvers perfected by the tobacco industry over a half century ago. These “Merchants of Doubt” cast an effective smoke screen that effectively blurs rational thought by an unsuspecting public that would much rather leave it to the experts. And the experts on protecting the public are those we elect to steer the ship of state.

   

  But of late we have seen spineless political chicanery, which I must sadly admit is totally bipartisan, when it comes to issues like fracking and the substitution of natural gas as a purportedly transitional fuel to bridge the gap between coal and renewables. What, in essence, we are doing is substituting one form of greenhouse gas, carbon dioxide with its long-term atmospheric consequences, with a far more potent heat-trapping gas, methane, in the short- and intermediate-term. This is fossil foolishness that will sentence our kids and grandkids to a lifetime of gut-wrenching and maybe irretrievably lesser quality-of-life choices. But the effects will not show up until after those making the decisions have long left their lofty perches within the government.

   

  Fracking is contaminating water supplies and the air we breathe, is causing public health problems and facilitating earthquakes in places that have never even had earthquakes in recorded history, yet the regulatory responses are negligible. While New York State maintains a moratorium on fracking its neighbor Pennsylvania continues to put communities at risk. California—with its tough-talking Governor Jerry Brown loudly decrying climate change and promising to be a world leader on mitigation strategies—is essentially missing in action when it comes to regulating fracking in the Central Valley and even within the city limits of Los Angeles. The inadequacy of California’s regulatory body to place the citizens’ health and safety above industry considerations borders on criminal.

   

  We all witnessed the BP disaster in the Gulf of Mexico, and its dastardly cousin in Porter Ranch, California, that has been described as BP on land, the release of nearly 100,000 metric tons of methane from a leaking natural gas storage well. Yet we merrily proceed to push forward with government-subsidized fossil fuel production policies that benefit the richest corporations known to mankind.

   

  We see government failure and most likely criminal negligence if not outright prosecutable actions on behalf of government officials with regard to the contaminated drinking water in cities like Flint, Michigan, and evidently in cities all across the U.S.

   

  There are crimes against humanity being perpetrated by chemical companies like Monsanto as glyphosates and genetically engineered foods find their ways comfortably into our kitchens and stomachs. Steven Druker, in his seminal book Altered Genes, Twisted Truth has meticulously documented systemic corruption in the Food and Drug Administration.

   

  In Malibu, there is a local effort to address the existence of PCB’s in window caulking in schools yet the school board spends millions of dollars to fight its removal rather than simply remove it. Once again it seems to be far easier to spend money denying the evidence than in fixing the problem. This is obscene and unfortunately the problem extends to schools throughout the country. Why is it we have so little regard for the injuries we are inflicting upon our children?

   

  Last but not least we are witnessing a monumental failure on the part of the Fourth Estate, the media. Bowing to the pressures of deep-pocketed advertisers, the media refuses to even make an attempt at investigative journalism. A glaring exception to this is the case of the Spotlight investigative team at the Boston Globe, which uncovered massive corruption within the Catholic Archdiocese in sheltering child molesters and pedophiles among the priesthood. We celebrate this as an act of great valor, when in essence it ought to be business as usual. This should not be the exception; it should be the norm and the media is abdicating its responsibility to expose the truth and instead prefers the safer course which is to be complicit in the cover-up. Richard Dreyfuss and I recently penned an article calling attention to this complicity here.

   

  I have worked in numerous governmental agencies at senior levels where I attempted to defer to the scientific expertise when contemplating major policy decisions affecting millions of people. To see the systemic corruption that is occurring in government agencies like the Environmental Protection Agency, Department of Energy, Department of Health and Human Services including the Centers for Disease Control and the Food and Drug Administration not only makes me sad but it makes me mad.

   

  There has always been an attempt in this nation to balance out the avarice of the private sector with a regulatory framework in the public sector that protects those most vulnerable in society. That balance has been totally upended and as the latest effort on behalf of those involved in Vaxxed shows, we as a society can no longer depend upon our government leaders and institutions to protect us.

   

  We must begin by electing leaders who will restore the balance that is needed to protect at the very least our children. If we do not our legacy to our children will be one punctuated by scorn and anger. In this instance our kids actually know us better than we know ourselves. What a sad commentary on the state of affairs of the human race.

  The first thing that strikes you upon reading the article above is that only a small portion of the piece even discusses VAXXED, and yet a mere endorsement of this documentary by a veteran writer who’s been publishing on the Huffington Post for nearly a decade is enough to elicit an article ban.

  Which leads us to a couple of followup questions. Is this how the Huffington Post treats its longtime contributors? Are writers not allowed to share their personal opinions about a movie? Or is the issue this movie in particular? Why is this one documentary so threatening? 

  It seems like it’s this particular movie, which makes me even more curious to see it. As I wrote in a post published earlier this month, Video of the Day – Producer of Vaccine Documentary Banned From Tribeca Film Festival Speaks Out:

  What I’m still having trouble getting my head around is why a documentary that is apparently so easily disproven and full of garbage poses such a threat to so many powerful people. Indeed, the film’s critics should be thrilled about an opportunity to discredit the film publicly, and the total panic generated by the simple screening of a movie is what I find so bizarre and noteworthy.

   

  Perhaps it’s partly due to the following, which was noted in a recent article critical of the film published by the Hollywood Reporter:

   

  It’s all effective, but also purely anecdotal. It’s more interesting to learn that drug manufacturers are protected by federal law from customer lawsuits claiming adverse effects from vaccines, and that injury claims are handled by a particular U.S. court that is commonly known as the “Vaccine Court,” a term that doesn’t exactly inspire confidence.

  I haven’t seen this film, but one thing is clear. Some very, very powerful and influential people are terrified of it and are doing everything they can to make sure it never sees the light of day.

  Which makes me infinitely more curious.

  Here’s the trailer:

  

  

• Just Released: Listen To Boehner Calling Ted Cruz A "Luciferian Son Of A Bitch"

  Just in case you were waiting for the “taken out of context” or “just kidding” excuse to come from the GOP establishment over John Boehner’s earlier comments with regard to the ‘luciferian, son of a bitch’ Ted Cruz… none will be coming. Here is the full 97 seconds of truthiness from the mouth of the cryingest speaker America has ever known…

  “[Ted Cruz] is lucifer in the flesh…I have as many Democrat friends as I have Republican and I get along with almost everyone… but I have never worked with a more miserable son of a bitch than Ted Cruz… over my dead body would he represent [Republicans]”

  Boehner then went on to discuss his “friend Donald Trump.”

  One wonders how (or if) Cruz will talk his way out of this? Perhaps another pretend cabinet appointment?
  

  

  

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• World's Most Exclusive Club

  Today I received in the mail the State of California Primary Voter’s Guide, which the Secretary of State prints up by the millions and sends to every blessed citizen. I was expecting a few boring candidate statements of the U.S. Senate – AKA the World’s Most Exclusive Club – but, boy, was I wrong. Just take a look at some of these gems.

  First off is a chap named Tim (I like him already………) who, understandably, doesn’t associate himself with any particular party. It seems what matters to him most is good old J.C., and he comes right to the point:

   

  Next up is a woman whose first name, apparently, is President (which is shooting a bit high, since she only wants to be a United States Senator, a “prolific occupation”, as she puts it). For those considering whether or not to give her their vote, keep in mind that she is “mainstream Facebook in social media”, to say nothing of the fact that her core values are what drive America.

   

  Mr. Peters, who decided not to bother sending in a photograph, is an “Andrew Jackson Democrat”, which I guess means he will soon be removed from our currency. The last 118 years, evidently, were misguided.

   

  Karen Roseberry goes oblique on us with this coined phrase…….

   

  If you take the time to go to her web site, however, you can start to drink in her qualifications for this high office.

   

  My personal favorite, being from Silicon Valley myself, is Jason Hanania’s, who offers up a binary statement (which cost him $25, the per-word rate, for his entire statement).

   

  Mike Peitiks is sporting a rocking beard and offers up his “single board” of a platform, which is climate change. I’d like to point out not one other candidate swore on the graves of future Californians. Not one.

   

  Lastly, we end with Ling Ling Shi who, at long last, is willing to challenge the “10 giant chaos in economy” that we’re all so weary of fighting. Rock it, Ling Ling!

  

  

• Japanese Bloodbath After BoJ Disappoints – Nikkei Drops 1000 Points, USDJPY Crashes

  If there was a sign that nothing else matters but central bank largess, this was it. The moment The Bank of Japan statement hit and proclaims “unchanged” a vacuum hit USDJPY and Japanese stocks. Reflecting that Japan’s economy has “continued a moderate recovery trend” which is utter crap given the quintuple-dip recession, Kuroda and his cronies said they will “add easing if necessary” and apparently that is not now. Not so much as a higher ETF purchase or moar NIRP.. and the aftermath is carnage – NKY -1000 points and USDJPY crashed to a 108 handle!!

  • *BOJ WILL ADD EASING IF NECESSARY
  • *BOJ: SEES LARGE DOWNSIDE RISKS FOR ECONOMIC OUTLOOK
  • *BOJ: JAPAN’S CPI TO BE AROUND ZERO PERCENT FOR TIME BEING

  Incidentally, this is what consensus looked like ahead of today’s BOJ decision:

  Of 41 respondents, 19 predict an increase in purchases of
  exchange-traded funds, eight expect a boost in bond buying, and eight
  project the BOJ will cut its negative rate.

  And the result…

  

   

  Close-up…

  

   

  Some context…

  

   

  The BoJ website crashed also.

  

   

  The fallout is going global… Dow Futures tumbled 150 points to LoD…

  

   

  And Yuan surged…

  

   

  Just as we noted earlier, the biggest argument for a BOJ disappointment was that with the G7
  meeting in Japan in on month on 26–27 May 2016, it’s unlikely that
  Japanese policymakers will want to draw attention yet again to the idea
  that they are in the business of manipulating the JPY lower. After all
  the most recent G20 meeting once again confirmed that absent “disorderly moves” in the Yen, the US would frown on any attempt to dramatically manipulate its currency lower.

  Unless, of course, Abe wants to send Lew and Obama a message, that if
  China can enjoy a weaker dollar (courtesy of its USD peg), then so
  should the Bank of Japan.

  

  

• "We All Work As A Team" – Millennials Explain How It's Going Living 'Rent-Free' At Home

  With millennials now the largest generation in the United States, a look into their economic standing is warranted. Using New York City as a proxy, we learn that millennials are now making 20% less than the generation before them, and have incurred tens of billions in student loan debt. Faced with these facts, they are searching for ways to cut down on expenses in order to make ends meet, and one common sense way to do that is to move back in with mom and dad.

  The Chicago Tribune helps us understand how all of that is working out. To start, more than 20 percent of millennials are living with their parents, even after obtaining a college degree. Even if some are fortunate to move out, often times they boomerang back to their parents' home by age 27.

  As such, stories such as the one from 34 year old Meghan Kennihan are becoming the norm, even in today's economic "recovery".

  "I had an apartment in Chicago," said Meghan Kennihan, 34, a running coach and personal trainer who lives in her folks' finished basement in La Grange. "It was tiny and expensive. I was miserable. I moved back. Now, I have a bedroom plus an area for my scrapbooking hobby and another for my exercise equipment. It's like having my own apartment except I have more space than I can afford to have in an apartment."

  In order to move out on her own, Meghan cites the need for an employer who can help cover her health insurance, something all of these newly created waiter and bartender jobs aren't able to do.

  "To be able to buy my own place, I would need to work for an employer that would cover insurance for me"

  

   

  Not only is there more space, but the price is right. Millennials have been able to save on rent, and are just trying to chip in other ways around the house where possible, as 24 year old Dean Pearce explains.

  "My parents have done so much for me, and now they're letting me live here rent-free, so I try to help out. I pick up my sister from school, do the dishes or whatever chore needs to be done. My mom makes dinner. We all work as a team."

  As a matter of fact, the trend of kids living at home with their parents has gotten so strong that home builders are now designing homes with just that in mind. "One out of six buyers have or plan to have a grown child at home" said Richard Bridges, Chicago division sales manager at David Weekly Homes. For a mere $35,000-plus, Richard says the plan can include a bedroom/bathroom suite in a finished basement to accommodate the kids who inevitably will be returning home to live.

  Chicago area builder PulteGroup says in their new models, kids can enjoy a bedroom/bathroom suite with a kitchenette and separate living space. "Our NexGen option is the greatest in housing since indoor plumbing." said Jeff Roos, western regional president at Lennar Corp.

  In summary, it looks like things are going well for kids who are moving back home, all things considered. Rent is affordable, and now parents are even taking it upon themselves to buy houses that have the look and feel of one's own personal apartment for their children to return home to someday. It is safe to say that this is quickly becoming the new American Dream for current and future generations.

  The likelihood of this trend reversing course any time soon? Not likely. As Lennar Corp's Jeff Roos points out:

  "It could be a while before the millennial makes enough money to leave"

  

  

  

• Paul Craig Roberts: World War III Has Begun

  Authored by Paul Craig Roberts,

  The Third World War is currently being fought. How long before it moves into its hot stage?

  Washington is currently conducting economic and propaganda warfare against four members of the five bloc group of countries known as BRICS—Brazil, Russia, India, China, and South Africa.

  Eric Draitser provides some details of Washington’s assault on Russia: http://www.mintpressnews.com/brics-attack-western-banks-governments-launch-full-spectrum-assault-russia-part/215761/

   

  …of Washington’s attack on South Africa: http://www.mintpressnews.com/brics-attack-empires-destabilizing-hand-reaches-south-africa/215126/

   

  …and of Washington’s attack on Brazil: http://www.mintpressnews.com/brics-attack-empire-strikes-back-brazil/214943/

   

  For my column on Washington’s attack on Latin American independence, see: http://www.paulcraigroberts.org/2016/04/22/washington-launches-its-attack-against-brics-paul-craig-roberts/

  Brazil and South Africa are being destabilized with fabricated political scandals. Both countries are rife with Washington-financed politicians and Non-Governmental Organizations (NGOs). Washington concocts a scandal, sends its political agents into action demanding action against the government and its NGOs into the streets in protests.

  Washington tried this against China with the orchestrated Hong Kong “student protest.” Washington hoped that the protest would spread into China, but the scheme failed. Washington tried this against Russia with the orchestrated protests against Putin’s reelection and failed again.

  To destablilze Russia, Washington needs a firmer hold inside Russia. In order to gain a firmer hold, Washington worked with the New York mega-banks and the Saudis to drive down the oil price from over $100 per barrel to $30. This has put pressure on Russian finances and the ruble. In response to Russia’s budgetary needs, Washington’s allies inside Russia are pushing President Putin to privatize important Russian economic sectors in order to raise foreign capital to cover the budget deficit and support the ruble. If Putin gives in, important Russian assets will move from Russian control to Washington’s control.

  In my opinion, those who are pushing privatization are either traitors or completely stupid. Whichever it is, they are a danger to Russia’s independence.

  As I have often pointed out, the neoconservatives have been driven insane by their arrogance and hubris. In their pursuit of American hegemony over the world, they have cast aside all caution in their determination to destabilize Russia and China.

  By implementing neoliberal economic policies urged on them by their economists trained in the Western neoliberal tradition, the Russian and Chinese governments are setting themselves up for Washington. By swallowing the “globalism” line, using the US dollar, participating in the Western payments system, opening themselves to destabilization by foreign capital inflows and outflows, hosting American banks, and permitting foreign ownership, the Russian and Chinese governments have made themselves ripe for destabilization.

  If Russia and China do not disengage from the Western system and exile their neoliberal economists, they will have to go to war in order to defend their sovereignty.

  

  

• Chinese Commodity Trading Volume Crashes: "Most Don't Even Know What They Are Trading"

  The speculative Chinese commodity bubble has begun to reach the mainstream as Citi's warning to "hold on to your hats" today at the surge in trading volumes across Rebar, Iron Ore, Coke, and Copper literally exploded with the former now the most actively trade commodity in the world. The frenzy has become so insane that the head of the largest metals exchange in the world exclaimed at a conference in Singapore today that "I don't think most people who trade it know what it is." We suspect he is 100% correct and judging by the following chart, we know exactly how it will end.

  As Bloomberg reports, the head of the world’s largest metals exchange said while volumes in China’s commodity futures markets have become phenomenal, it’s possible some traders don’t even know what it is they are buying or selling.

  “Why should steel rebar be one of the world’s most actively-traded futures contracts?” Garry Jones, chief executive officer of the London Metal Exchange, said at a conference in Singapore on Wednesday. “I don’t think most people who trade it know what it is.”

   

  Trading of commodity futures in China from steel reinforcement bars — a benchmark product used in construction — to iron ore, coking coal and cotton has ballooned this month on an unprecedented surge in retail investor interest. The jump in volumes has stunned global markets, according to Morgan Stanley, while eliciting concern from Goldman Sachs Group Inc.

   

  Exchanges in Asia’s top economy including in Shanghai have announced a series of measures this month to cool the frenzy, and said more steps may follow.

   

  “If you look at the client base of most Chinese exchanges, it’s heavily retail-focused,” Jones said on a panel discussion addressing commodities and risk management in China. The exchanges there “have very high retail participation. They have a very high velocity of trading,” he said.

  Now where have we seen this pattern of massive speculative volume rushing in from retail investors chasing a trend?

  

  The speculative activities will be vulnerable to a sharp reversal, once the upward price momentum wanes, according to BMI Research, a unit of Fitch Group, drawing parallels with a rally, followed by a slump, in Chinese equities last year.

  And that did not end well for price action before in 2015…

  

   

  or 2009…

  

   

  And just as expected above…once the volume reaches a crescendo it crashes and The Party's Over

  

   

  As reports from China suggest both major margin increases at the main exchanges and crackdowns on real production: Tangshan city is banning all coke, steel & cement productions for 24 hours starting this noon.

  

• Apple Suicide: Man With Head Wound Found Dead Inside Apple Conference Room; Gun Nearby

  Update: according to ABC’s Matt Keller, the dead person found in a conference room at Apple Headquarters was a man. A gun was found nearby.

  #Breaking– Person found dead in conference room at #Apple Headquarters is a man. A gun was found nearby. pic.twitter.com/PKgnFy7MRh

  — Matt Keller (@MattKellerABC7) April 27, 2016

  Sheriff spokesperson confirms person found dead in conference room was #Apple employee. No one else involved. pic.twitter.com/rLic0WGTo7

  — Matt Keller (@MattKellerABC7) April 27, 2016

   

  Reuters adds that according to the East Bay Times newspaper reported that an emergency call was made at 8:35 a.m. from Apple’s campus in Cupertino and that the victim, who had suffered a head wound, was pronounced dead at the scene.  Local television station KTVU said investigators from the Santa Clara County Sheriff’s Office were en route to the scene.

  Finally, some media report that the police are already investigating the death as a possible suicide, implicitly confirmed by the Santa Clara Sheriff office which described the event as an isolated incident:  “Through further investigation, they determined there was no other individuals involved and they believe it was an isolated incident. There was no one else on campus or in the public at risk,” Sgt. Andrea Urena with the Santa Clara County Sheriff’s Department told reporters.

  * * *

  And the hits just keep on coming. One day after AAPL reported its first revenue decline in over a deace, its first earnings disappointment in years, and the first ever decline in iPhone sales in history, the Santa Clara County Sheriff’s Office is reportedly investigating a body found at Apple’s Cupertino headquarters according to NBC.

  Sheriff investigation at #Apple headquarters in Cupertino. A body was found in a conference room. pic.twitter.com/HC7UBPWROM

  — Matt Keller (@MattKellerABC7) April 27, 2016

  Santa Clara Co Sheriff spokeswoman can’t confirm death at this point but is headed to Apple & expects to have more info to release later.

  — Maureen Naylor (@MaureenKTVU) April 27, 2016

  Acting spokesperson Sgt. Andrea Urina said she has no other other information at this time. Sheriff’s investigators are on scene. The Santa Clara County Fire Department said crews were called to the scene but were then waved off and never went on campus.

  

  As BMO adds, deputies were called to the company’s corporate headquarters on Wednesday morning after a person was found dead, but only few details were immediately available. Multiple police vehicles could be seen at the campus.

  Authorities have declined to provide further details, and it is unclear whether the person is an employee of Apple. The cause of death was also not immediately known and is under investigation by the Santa Clara County Sheriff’s Office.

  

  The Apple Campus is the corporate headquarters of Apple Inc., located at 1 Infinite Loop in Cupertino, California, United States. Its design resembles that of a university, with the buildings arranged around green spaces, similar to a suburban business park.

  Developing story

  

  

• Central Bankers To The Masses: "Let Them Eat Rate"

  Authored by former Fed Advisor Danielle DiMartino Booth,

  There never was any cake, just crust.

  And the French Marie had nothing to do with it. Rather, a Spanish-born queen married to France’s King Louis XIV a century earlier was the ill-mannered Marie who dared to taunt the peasantry. So how then exactly did, “Let them eat cake!” become so universally associated with Marie-Antoinette? In a nutshell: Blackmail.

  Historians have uncovered the nasty truth, and it can be laid squarely at the feet some far from scrupulous London-based thugs, intent on shaking down King Louis XVI with threats to besmirch his young bride’s reputation. According to Simon Burrows of Leeds University, a criminal network, drawn to the French monarchy’s vast wealth, plotted to profit by producing a series of pamphlets filled with lies about the ill-fated queen. Those lies included a charge that she had callously suggested her subjects eat cake in response to news of a bread shortage plaguing the masses. Though the king paid a dear price for the pamphlets’ destruction, some 30 copies were not burned as promised and found their way into the public’s hands sealing the queen’s fate kneeling before the guillotine.

  Today, the shortage plaguing angry masses of savers worldwide is not one of bread or cake, but rather one of positive rates of return on their cash holdings. The central bankers know best as they command us to eat one rate cut after another. And like it.

  For nearly 30 years, central bankers have based their haughty reasoning on the idea that the lower the interest rate, the greater the generation of economic growth. As then Fed Chairman Ben Bernanke explained in 2012, “My colleagues and I are very much aware that holders of interest-bearing assets, such as certificates of deposit (CDs), are receiving very low returns. But low interest rates also support the value of many other assets that Americans hold, such as homes and businesses large and small.”

  It’s certainly been the case that the prices of homes and businesses have been upheld. Though their appetite may have waned a bit, investors have richly rewarded companies who use low interest rates to finance share buybacks with debt. And there’s no doubt investors of a different ilk did more than their fair share to prop up home prices at the lower end while wealthy individuals have bid up the prices of luxury homes to record highs.

  The question is, is that what Bernanke intended? It would appear not as one of the stated objectives of the punishing policy of ultra-low rates was to spur income-generating job creation:

  “Healthy investment returns cannot be sustained in a weak economy, and of course it is difficult to save for retirement or other goals without the income from a job. Thus, while low interest rates do impose some costs, Americans will ultimately benefit most from the healthy and growing economy that low interest rates help promote.”

  Or at least that’s what Bernanke led us to believe.

  While it is true that returns on risky investments have been stellar, fewer and fewer Americans are comfortable with the risks associated with owning the most common of the pack — stocks. According to an April Gallup poll, the percentage of U.S. adults invested in the stock market has fallen to 52 percent from 65 percent in 2007, a 20-year low. So while there are definitely benefits to some, Bernanke’s “ultimately benefitting most” part has fallen far short, and to an increasing extent.

  Digging into the data, at -14 percentage points, those aged 18 to 34 were the most aggressive lot to abandon stocks. Meanwhile, at -9 percentage points, those aged 55 and above were the least. There seems to be an intuitive disconnect somewhere in that divide, one that should keep policymakers up at night.

  There is a very real refute that we’d have to return to the bad old days of rampant inflation, when the degradation of the purchasing power of the dollar more than offsets the plump interest rates on offer at our local bank branch.

  While we collectively rue that era, it’s fair to say most seniors would gladly settle for a happy medium, a return to the turn of this young century when you could get a five-year jumbo CD sporting a five-percent APR, which was offset by inflation somewhere in the two percent vicinity. Traditionally, two to three percentage points above inflation is where that old relic, the fed funds rate, traded. So the math worked.

  Of course, it could be worse. At least U.S. yields on savings are positive. That’s more that can be said of the $7 trillion of foreign sovereign bonds trading at negative yields. This dynamic spells disaster for life insurers to say nothing of pensions. Increasingly, foreign pensions are raising retirement ages as well as requiring higher employer and employee contributions, all the while lowering the salaries against which benefits are calculated, even as they segue benefits onto 401k-style platforms.

  For now, the judiciary in the U.S. is holding the legal line. As long as that’s the case, actions to shore up pension underfunding will be avoided. Of course, at some point drastic measures will be required as the tax bases supporting future benefits shrink in proportion to the highest tax payers fleeing the fleecing.

  Public pensioners with no back-up savings are sure to be enraged when their day of reckoning arrives. Then, today’s non-pension-backed retirees making crumbs on their cash holdings will be flush in comparison.

  And yet Bernanke deigns to wonder. Last fall after leaving the Fed, he had this to say to Martin Wolf of the Financial Times: “It’s ironic that the same people who criticize the Fed for helping the rich also criticize it for hurting savers. What’s the alternative? Should the Fed not try to support the recovery?”

  This coming from the same man who once said, “No one will lend at a negative interest rate; potential creditors will simply choose to hold cash, which pays a zero nominal interest rate.”

  According to one recent Wall Street Journal story, that last observation certainly does hold true. Negative interest rates do benefit at least one of our contingencies: U.S. companies with European subsidiaries. Now that the European Central Bank (ECB) is in the business of buying corporate bonds, demand for issuance is all but a lock given the ECB can buy up to 70 percent of an issue, at issuance, to boot. Bully for that?

  Not so fast says Standard & Poor’s (S&P), which just stripped the energy giant ExxonMobil of its coveted since 1949 ‘AAA’ credit rating. Why? Share repurchases and dividend payments have “substantially exceeded” internally generated cash flows in recent years even as its debt load has doubled. That leaves two solitary AAA-rated U.S. credits, Johnson & Johnson and Microsoft. It’s getting mighty lonely at the top.

  But of course, there’s nothing of the wildcatter in ExxonMobil’s overindulging its shareholders. For seven straight quarters, over 20 percent of the companies in the S&P 500 have reduced their year-over-year share count by at least four percent, which conveniently translates into at least a four percent pop in their PER share earnings. Ain’t math grand?

  Based on the data thus far, the trend is becoming increasingly entrenched. S&P’s Howard Silverblatt anticipates that public filings will reveal that over one-in-four deep-pocketed (debt-pocketed?) issues were in the aggressively juicing earnings cohort in the first quarter.

  The end result of all of these financial shenanigans? For starters and enders, a whole lot of nothing productive. According to Bookmark Advisors’ Peter Boockvar, the absolute level of core capital spending (nets out transportation) was $66.9 billion vs. $69 billion in 2011. As for the percentage of capacity that’s being utilized, it remains well below its long-term average seven years into this economic expansion.

  “Cheap money has created too much excess,” Boockvar noted. “On top of that, some CEOs are more interested in the short term focus on other capital uses such as buying back their own stock in the now second-longest bull market of all time.”

  Is it any wonder small investors continue to lose faith in the stock market? Should they be chastised for wanting a teensy weensy return on their cash? Dare we brand these conservative souls greedy, wanting to have their cake and eat it too?

  Perhaps. But maybe the real solution to placate the angry masses is an admission that the original intent of zero-to-negative interest rates has utterly failed. Sufficient economic growth to offset the forced risk taking simply has not materialized leaving Grandma and Grandpa with their life savings hanging in the balance.

  Perhaps the current conundrum will present an opportunity when the next recession arrives, a chance to recognize the failure of the low interest rate era. As counterintuitive as it would seem, why not use the next period of economic weakness to set a permanently higher floor on interest rates. Will the weakest operators meet their makers at the corporate guillotine? Naturally that will be the case. But isn’t that the American way?

  A new generation of revolutionary central bankers must be called to arms for all of our sake. Their battle cry: We commit to never returning rates to zero or below again, to never let be money be free and forever ensure there is a true cost associated with borrowing. Release the markets to set interest rates now and forever!

  Will it work? Stranger things have been known to succeed in capitalistic economies with competitive and freely functioning markets.

  

  

• Debt Is Growing Faster Than Cash Flow By The Most On Record

  By now it is a well-known fact that corporations have no real way of generating organic growth in this economy, so they are relying on two things to boost share prices: multiple expansion (courtesy of central banks) and debt-funded buybacks (courtesy of central banks), the latter of which requires the firm to generate excess incremental cash. Incidentally, as SocGen showed last year, all the newly created debt in the 20th century has gone for just one thing: to fund stock buybacks.

  

   

  The problem with this is that if a firm is going to continue to add debt to its balance sheet in order to fund buybacks (and dividends), then it needs to be able to generate enough operational cash flow in order to service the debt. Even if one makes the argument that debt is cheap right now, which may be true, or that central banks are backstopping it, which is certainly true in Europe as of a month ago, the fact remains that principal balances come due eventually also, and while debt can be rolled over, at some point the inability to generate cash from the operations catches up with them; furthermore even a small increase in rates means the rolling debt strategy is dies a painful death, as early 2016 showed.

  In the following chart we can see net debt growth skyrocketing nearly 30% y/y, while EBITDA (cash flow) has been contracting for the past year. In fact, as SocGen shows below, the difference in the growth rate between these two most critical data series is now over 35% – the biggest negative differential in recent history.

  

   

  Of course, every finance 101 student knows that a firm which has to borrow more cash than it is able to produce from its core operations is not a sustainable business model, and yet today’s CFOs, pundits and central bankers do not.

  And the next question is: what happens if the Fed does raise rates, what happens to the feasibility of these companies servicing the debt while also spending on R&D and CapEx (assuming there is any), and who can only afford the rising interest expense as a result of ever smaller interest rates? The answer is, first, massive cost cutting, i.e. layoffs, which would be a poetic way for the Fed’s disastrous policies to be reintroduced to the real economy… and then, more to the point, mass defaults. 

  

  

• What If The BOJ Disappoints Tonight: How To Trade It

  It wasn’t until a week ago that the loud calls for the Bank of Japan to do much more easing came loud and strong, because it was last Wednesday when Goldman announced it had changed its base-case scenario from one of a June easing to making “easing in April our base-case scenario, given the rising risk that business confidence has been dented by recent financial market instability and the Kumamoto earthquakes, and in view of BOJ governor Haruhiko Kuroda’s recent proactive statements on possible additional easing in response to the sharp deceleration in inflation in April.” At that moment many Wall Street sellside lemmings promptly followed in Goldman’s footsteps and likewise made April their base easing case.

  Incidentally, moments ago Japan reported its latest March inflation data, according to which prices excluding fresh food slumped 0.3% from a year earlier, the biggest drop since April 2013, suggesting Japan’s deflationary black hole is once again sucking everything in and the BOJ may have no choice but to act.

  It was also one week ago when Goldman proposed that what the BOJ would most likely do was neither more QE (due to collateral limitations) nor more NIRP (due to its devastating effect), but double the pace of ETF purchases:

  The main issue for the BOJ, in our view, will be the means of applying additional easing. From an exchange rate perspective, the most effective means would be to widen the negative interest rate. However, financial institutions have not reacted positively to negative interest rate and we think there is a general unease among the population with respect to the policy, so we think the BOJ is unlikely to take rates deeper into negative territory at this stage.

   

  Another option would be to increase quantitative easing by again stepping up JGB purchases (currently at the rate of 80 trillion yen per year), but the marginal effect would be minimal as the decline in the yield curve is already more than sufficient, and we think additional expansion would even risk giving the impression that the BOJ is closer to the limit of purchasing JGBs at the current pace.

   

  By a process of elimination, we think the BOJ is most likely to ease mainly via the qualitative measure, with increasing ETF purchasing the central pillar, with a view to improving business confidence. We think the market is already factoring in an increase in annual purchasing from ¥3.3 tn to ¥5-6 tn, and we thus think the BOJ may look to slightly more than double its current figure to around ¥7 tn.

  Goldman floated one more option, namely the “possibility that the BOJ may combine the expansion of ETF purchases with a cut in the interest rate of its loan support scheme.” Incidentally this is precisely the “trial balloon” which the BOJ floated via Bloomberg the next day, sending the USDJPY higher by 300 pips – the most since the announcement of QQE – and since the market reaction to that particular “leak” was so positive, it stands to reason that this a combination of rate cuts on bank loans coupled with an increase in ETF purchases is what Kuroda will announce in a few short hours.

  Then, perhaps to set an even bid/ask range, earlier this week Goldman’s FX team came out with an absolutely outlandish research report, according to which the Bank of Japan would go so far as unleashing helicopter money to push the USDJPY to 130 for one simple reason: “the BoJ is already so long into ‘the reflationary trade’ that it has to continue to deliver further accommodation for the time being.“

  Basically, what Goldman is saying is the BOJ has to crush its currency today at all costs or risk losing even more credibility after the January NIRP fiasco.

  We doubt that the BOJ will unleash helicopter money today, but it may well boost the amount of equities it purchases by doubling its ETF purchases and it certainly may cut the interest rate of its loan support scheme to benefit Japan’s banks.

  Incidentally, this is what consensus looks like ahead of today’s BOJ decision due out in just a few short hours:

  Of 41 respondents, 19 predict an increase in purchases of exchange-traded funds, eight expect a boost in bond buying, and eight project the BOJ will cut its negative rate.

  This also means that a majority predict the BOJ will do nothing, which judging by the recent pent up market expectations of a major BOJ easing event would likely send the USDJPY plunging, which is ironic considering what Japan has already done to its monetary base and the BOJ’s balance sheet…

  

   

  But if the BOJ does disappoint, and one thinks it will, how should one trade it? For the answer we go to Credit Suisse whose strategists Shahab Jalinoos and Bhaveer Shah write that they suspect there is enough upside risk in the price for USD/JPY to allow for a decent move lower if the BOJ disappoints the market, adding what we said above, namely that the market is pricing in a higher probability of action this week than the economics consensus appears to suggest.

  This is how they would trade it:

  • Buy a 3 May 16 expiry 107.80 strike USD put/JPY call for ~0.185% of notional (spot ref: 111.37)
  • Both 1-wk implied vol and the risk-reversal skew bid for USD calls/JPY puts suggest market pricing in a risk of a pop higher in USD/JPY after the BOJ that is meaningful compared to historical precedent
  • A comparison with the same indicators in the 3-mo. tenor suggests risk is concentrated around BOJ decision
  • The trade would also perform if FOMC is more dovish than generally expected at its April 27 meeting
  • Risk to the trade is limited to the upfront premium
  • If BOJ were to expand the balance sheet with a domestic asset price and credit creation focus as opposed to an explicit attempt to weaken the JPY, the infrequently seen phenomenon of both a stable JPY and a stronger Nikkei could transpire

  But the biggest argument for a BOJ disappointment is that with the G7 meeting in Japan in on month on 26–27 May 2016, it’s unlikely that Japanese policymakers will want to draw attention yet again to the idea that they are in the business of manipulating the JPY lower. After all the most recent G20 meeting once again confirmed that absent “disorderly moves” in the Yen, the US would frown on any attempt to dramatically manipulate its currency lower.

  Unless, of course, Abe wants to send Lew and Obama a message, that if China can enjoy a weaker dollar (courtesy of its USD peg), then so should the Bank of Japan.

  In any case, for those who do think the Bank of Japan will disappoint tonight, that is how to profit.

  

  

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• GOP MeNTaL MiDGeTS!

  

  

• Aussie Dollar Plunges As Inflation Slumps To Record Low

  Despite surging commodity prices in China – which must be real and represent demand growth and price increases, right? – Aussie core inflation slowed to the weakest on record as headline prices unexpectedly fell last quarter (CPI -0.2%). RBA Rate-cut odds tripled instantly sending AUD down over 1.2% (its biggest drop in 2 months). Perhaps, just perhaps, that collossal credit injection in Q1 via China did not make it into the AsiaPac economy after all and merely fueled a speculative frenzy in commodities that merely “looks” like a recovery?
  

  The Reserve Bank of Australia looks at two core inflation measures — trimmed mean and weighted median — and Wednesday’s report showed:

  • Trimmed mean CPI rose 0.2% QoQ vs. median forecast of 0.5%
  • Weighted median CPI gained 0.1% QoQ vs. median forecast of 0.5%
  • CPI fell 0.2%, first decline since final quarter of 2008 vs. median forecast 0.2% rise

  This does not look like a recovering Chinese economy is helping…
  

  

   

  Which drove traders to bet on a rate-cut…

  • *RBA MAY RATE CUT ODDS RISE TO 40% FROM 14% YDAY, FUTURES SHOW

  “A pre-emptive May cut is surely now a real possibility,” said Gareth Berry, a foreign-exchange and rates strategist in Singapore at Macquarie Bank Ltd. “At the latest, an August cut is now inevitable. That spells the end of this three-month old Australian dollar rebound, and the downtrend can now resume in earnest.”

  

   

  “Whereas the RBA was previously thinking that low inflation would allow it to cut interest rates if demand faltered, it is now clear that low inflation itself is the problem,” said Paul Dales, chief economist for Australia and New Zealand at Capital Economics. “An inflation-targeting bank like the RBA can’t ignore such a big undershoot of underlying inflation.”

  As Goldman notes,

  We believe the RBA will now be forced to lower their inflation forecasts in the May Statement of Monetary Policy, not just due to the low CPI data for 1Q16 but also in response to the rise in the A$ through 2016 which will further challenge the RBA’s assessment that inflation will accelerate to well within the target band due to rising tradeable inflation. From our perspective the inflation data is key evidence that excess capacity exists in both product and labour markets and this is supported by private sector wages expanding at record lows and the recent erosion of surveyed measures of inflation expectations (see here). In concert with our analysis that the reported strength in GDP growth in 4Q15 overstates the underlying pulse of the domestic economy (see here) and evidence that economic activity is slowing in 2016 across a broad range of indicators (including investment intentions, retail sales, finance approvals, tourist arrivals, housing turnover, consumer confidence).

   

  Moreover, the RBA clearly established the criteria required for them to act upon their easing bias; weak inflation, slowing employment growth and a currency at a level that challenges the RBA assumptions of future economic growth. On all three criteria the evidence supports the case to ease policy in May. Should the RBA choose to remain on hold in May the RBA will be more than aware that the calendar quickly becomes crowded by a likely election campaign through May to early July (the RBA’s July meeting is just 3 days post the likely date of the federal election) and the leadership transition at the RBA scheduled for September. History has shown that since 1990 the RBA has not been overly influenced by political and leadership events. The RBA has eased on 3 occasions and hiked once in the month of or the month prior to a federal election and Governor Stevens continued a tightening cycle soon after his appointment to Governor. Nevertheless, it would seem lmore likely that the next widow for the RBA would be late in 2016.

   

  While it is still possible that the RBA holds out hope that the rally in commodity prices might continue and that the US Federal Reserve turns significantly more hawkish, we continue to believe that the course of least regret is for the RBA to follow its inflation targeting framework and ease in May, where we continue to forecast a 25bp reduction. Nevertheless, following the firming of the possibility of an early federal election in July we have decided to move our final forecast rate cut to November 2016 (previously July). Our A$ forecast is under review.

  *  *  *

  Makes one wonder if any of this bounce in Chinese industrial metals is real at all…

  

   

  Charts: Bloomberg

  

  

• Censored, Surveilled, Watch-Listed, & Jailed: The Absurd Citizenry Of The American Police State

  Submitted by John Whitehead via The Rutherford Institute,

  “You had to live – did live, from habit that became instinct – in the assumption that every sound you made was overheard, and, except in darkness, every movement scrutinized.”—George Orwell, 1984

  In past ages, those who dared to speak out against tyranny – viewed as an act of treason – were blinded, castrated, disfigured, mutilated, rendered mute by having their tongues cut out of their heads, and ultimately crucified.

  In the American police state, the price to be paid for speaking truth to power (also increasingly viewed as an act of treason) is surveillance, censorship, jail and ultimately death.

  It’s a diabolically ingenious tactic for muzzling, disarming and ultimately eliminating one’s critics or potential adversaries.

  However, where many Americans go wrong is in assuming that you have to be doing something illegal or challenging the government’s authority in order to be flagged as a suspicious character, labeled an enemy of the state and locked up like a dangerous criminal.

  In fact, as I point out in my book Battlefield America: The War on the American People, all you really need to do is use certain trigger words, surf the internet, communicate using a cell phone, drive a car, stay at a hotel, purchase materials at a hardware store, take flying or boating lessons, appear suspicious, question government authority, or generally live in the United States.

  With the help of automated eyes and ears, a growing arsenal of high-tech software, hardware and techniques, government propaganda urging Americans to turn into spies and snitches, as well as social media and behavior sensing software, government agents are spinning a sticky spider-web of threat assessments, behavioral sensing warnings, flagged “words,” and “suspicious” activity reports aimed at snaring potential enemies of the state.

  It’s the American police state’s take on the dystopian terrors foreshadowed by George Orwell, Aldous Huxley and Phillip K. Dick all rolled up into one oppressive pre-crime and pre-thought crime package.

  What’s more, the technocrats who run the surveillance state don’t even have to break a sweat while monitoring what you say, what you read, what you write, where you go, how much you spend, whom you support, and with whom you communicate. Computers now do the tedious work of trolling social media, the internet, text messages and phone calls for potentially anti-government remarks—all of which is carefully recorded, documented, and stored to be used against you someday at a time and place of the government’s choosing.

  While this may sound like a riff on a bad joke, it’s a bad joke with “we the people” as the punchline. Yet it is no laughing matter that Americans are being jailed for growing orchids, feeding whales, collecting rainwater, and praying in their backyards. There is nothing humorous about Americans having their families terrorized by SWAT teams, their pets killed, their children shot, their homes trashed and their privacy shredded. And there’s really not much comic relief to be found when the citizenry is forced to pay their own government to jail, spy on, censor, terrorize and kill them.

  The following activities are guaranteed to get you censored, surveilled, eventually placed on a government watch list, possibly detained and potentially killed.

  Laugh at your own peril.

  Use harmless trigger words like cloud, pork and pirates: The Department of Homeland Security has an expansive list of keywords and phrases it uses to monitor social networking sites and online media for signs of terrorist or other threats. While you’ll definitely send up an alert for using phrases such as dirty bomb, Jihad and Agro terror, you’re just as likely to get flagged for surveillance if you reference the terms SWAT, lockdown, police, cloud, food poisoning, pork, flu, Subway, smart, delays, cancelled, la familia, pirates, hurricane, forest fire, storm, flood, help, ice, snow, worm, warning or social media.

   

  Use a cell phone: Simply by using a cell phone, you make yourself an easy target for government agents—working closely with corporations—who can listen in on your phone calls, read your text messages and emails, and track your movements based on the data transferred from, received by, and stored in your cell phone. Mention any of the so-called “trigger” words in a conversation or text message, and you’ll get flagged for sure.

   

  Drive a car: Unless you’ve got an old junkyard heap without any of the gadgets and gizmos that are so attractive to today’s car buyers (GPS, satellite radio, electrical everything, smart systems, etc.), driving a car today is like wearing a homing device: you’ll be tracked from the moment you open that car door thanks to black box recorders and vehicle-to-vehicle communications systems that can monitor your speed, direction, location, the number of miles traveled, and even your seatbelt use. Once you add satellites, GPS devices, license plate readers, and real-time traffic cameras to the mix, there’s nowhere you can go on our nation’s highways and byways that you can’t be followed. By the time you add self-driving cars into the futuristic mix, equipped with computers that know where you want to go before you do, privacy and autonomy will be little more than distant mirages in your rearview mirror.

   

  Attend a political rally: Enacted in the wake of 9/11, the Patriot Act redefined terrorism so broadly that many non-terrorist political activities such as protest marches, demonstrations and civil disobedience were considered potential terrorist acts, thereby rendering anyone desiring to engage in protected First Amendment expressive activities as suspects of the surveillance state.

   

  Express yourself on social media: The FBI, CIA, NSA and other government agencies are investing in and relying on corporate surveillance technologies that can mine constitutionally protected speech on social media platforms such as Facebook, Twitter and Instagram in order to identify potential extremists and predict who might engage in future acts of anti-government behavior. A decorated Marine, 26-year-old Brandon Raub was targeted by the Secret Service because of his Facebook posts, interrogated by government agents about his views on government corruption, arrested with no warning, labeled mentally ill for subscribing to so-called “conspiratorial” views about the government, detained against his will in a psych ward for having “dangerous” opinions, and isolated from his family, friends and attorneys.

   

  Serve in the military: Operation Vigilant Eagle, the brainchild of the Dept. of Homeland Security, calls for surveillance of military veterans returning from Iraq and Afghanistan, characterizing them as extremists and potential domestic terrorist threats because they may be “disgruntled, disillusioned or suffering from the psychological effects of war.” Police agencies are also using Beware, an “early warning” computer system that tips them off to a potential suspect’s inclination to be a troublemaker and assigns individuals a color-coded threat score—green, yellow or red—based on a variety of factors including one’s criminal records, military background, medical history and social media surveillance.

   

  Disagree with a law enforcement official: A growing number of government programs are aimed at identifying, monitoring and locking up anyone considered potentially “dangerous” or mentally ill (according to government standards, of course). For instance, a homeless man in New York City who reportedly had a history of violence but no signs of mental illness was forcibly detained in a psych ward for a week after arguing with shelter police. Despite the fact that doctors cited no medical reason to commit him, the man was locked up in accordance with a $22 million program that monitors mentally ill people considered “potentially” violent. According to the Associated Press, “A judge finally ordered his release, ruling that the man's commitment violated his civil rights and that bureaucrats had meddled in his medical treatment.”

   

  Call in sick to work: In Virginia, a so-called police “welfare check” instigated by a 58-year-old man’s employer after he called in sick resulted in a two-hour, SWAT team-style raid on the man’s truck and a 72-hour mental health hold. During the standoff, a heavily armed police tactical team confronted Benjamin Burruss as he was leaving an area motel, surrounded his truck, deployed a “stinger” device behind the rear tires, launched a flash grenade, smashed the side window in order to drag him from the truck, handcuffed and searched him, and transported him to a local hospital for a psychiatric evaluation and mental health hold. All of this was done despite the fact that police acknowledged they had no legal basis nor probable cause for detaining Burruss, given that he had not threatened to harm anyone and was not mentally ill.

   

  Limp or stutter: As a result of a nationwide push to certify a broad spectrum of government officials in mental health first-aid training (a 12-hour course comprised of PowerPoint presentations, videos, discussions, role playing and other interactive activities), more Americans are going to run the risk of being reported for having mental health issues by non-medical personnel. Mind you, once you get on such a government watch list—whether it’s a terrorist watch list, a mental health watch list, or a dissident watch list—there’s no clear-cut way to get off, whether or not you should actually be on there. For instance, one 37-year-old disabled man was arrested, diagnosed by police and an unlicensed mental health screener as having “mental health issues,” apparently because of his slurred speech and unsteady gait, and subsequently locked up for five days in a mental health facility against his will and with no access to family and friends. A subsequent hearing found that Gordon Goines, who suffers from a neurological condition similar to multiple sclerosis, has no mental illness and should not have been confined.

   

  Appear confused or nervous, fidget, whistle or smell bad: According to the Transportation Security Administration’s 92-point secret behavior watch list for spotting terrorists, these are among some of the telling signs of suspicious behavior: fidgeting, whistling, bad body odor, yawning, clearing your throat, having a pale face from recently shaving your beard, covering your mouth with your hand when speaking and blinking your eyes fast. You can also be pulled aside for interrogation if you “have ‘unusual items,’ like almanacs and ‘numerous prepaid calling cards or cell phones.’” One critic of the program accurately referred to the program as a “license to harass.”

   

  Allow yourself to be seen in public waving a toy gun or anything remotely resembling a gun, such as a water nozzle or a remote control or a walking cane, for instance: No longer is it unusual to hear about incidents in which police shoot unarmed individuals first and ask questions later. John Crawford was shot by police in an Ohio Wal-Mart for holding an air rifle sold in the store that he may have intended to buy. Thirteen-year-old Andy Lopez Cruz was shot 7 times in 10 seconds by a California police officer who mistook the boy’s toy gun for an assault rifle. Christopher Roupe, 17, was shot and killed after opening the door to a police officer. The officer, mistaking the Wii remote control in Roupe’s hand for a gun, shot him in the chest. Another police officer repeatedly shot 70-year-old Bobby Canipe during a traffic stop. The cop saw the man reaching for his cane and, believing the cane to be a rifle, opened fire.

   

  Stare at a police officer: Miami-Dade police slammed the 14-year-old Tremaine McMillian to the ground, putting him in a chokehold and handcuffing him after he allegedly gave them “dehumanizing stares” and walked away from them, which the officers found unacceptable.

   

  Appear to be pro-gun, pro-freedom or anti-government: You might be a domestic terrorist in the eyes of the FBI (and its network of snitches) if you: express libertarian philosophies (statements, bumper stickers); exhibit Second Amendment-oriented views (NRA or gun club membership); read survivalist literature, including apocalyptic fictional books; show signs of self-sufficiency (stockpiling food, ammo, hand tools, medical supplies); fear an economic collapse; buy gold and barter items; subscribe to religious views concerning the book of Revelation; voice fears about Big Brother or big government; expound about constitutional rights and civil liberties; or believe in a New World Order conspiracy. This is all part of a larger trend in American governance whereby dissent is criminalized and pathologized, and dissenters are censored, silenced or declared unfit for society.

   

  Attend a public school: Microcosms of the police state, America’s public schools contain almost every aspect of the militarized, intolerant, senseless, overcriminalized, legalistic, surveillance-riddled, totalitarian landscape that plagues those of us on the “outside.” From the moment a child enters one of the nation’s 98,000 public schools to the moment she graduates, she will be exposed to a steady diet of draconian zero tolerance policies that criminalize childish behavior, overreaching anti-bullying statutes that criminalize speech, school resource officers (police) tasked with disciplining and/or arresting so-called “disorderly” students, standardized testing that emphasizes rote answers over critical thinking, politically correct mindsets that teach young people to censor themselves and those around them, and extensive biometric and surveillance systems that, coupled with the rest, acclimate young people to a world in which they have no freedom of thought, speech or movement. Additionally, as part of the government’s so-called ongoing war on terror, the FBI—the nation’s de facto secret police force—is now recruiting students and teachers to spy on each other and report anyone who appears to have the potential to be “anti-government” or “extremist” as part of its “Don’t Be a Puppet” campaign.

   

  Speak truth to power: Long before Chelsea Manning and Edward Snowden were being castigated for blowing the whistle on the government’s war crimes and the National Security Agency’s abuse of its surveillance powers, it was activists such as Martin Luther King Jr. and John Lennon who were being singled out for daring to speak truth to power. These men and others like them had their phone calls monitored and data files collected on their activities and associations. For a little while, at least, they became enemy number one in the eyes of the U.S. government.

  There’s always a price to pay for standing up to the powers-that-be.

  Yet as this list shows, you don’t even have to be a dissident to get flagged by the government for surveillance, censorship and detention.

  All you really need to be is a citizen of the American police state.

   

  

  

• Following The "Sell-Off" Gundlach Is Starting To Buy Treasuries

  This afternoon Jeffrey Gundlach held one of his periodic interviews with Reuters’ Jenna Ablan in which he said that the selloff in Treasuries is over and that investors looking to purchase Treasuries in the wake of the bond market’s sell-off – if one can call a move in the 10Y to 1.91% a selloff – are making a prudent move. “I think it is a reasonable strategy to start legging into the Treasury market.”

  To be sure, he is talking his book, but at least he is honest about it: “We’ve been buying a little bit today … we bought a small amount of guaranteed mortgages, particularly Freddie Mac MBS.”

  What about equity investors? Gundlach said that investors who want to purchase equities at this juncture should consider non-U.S. stocks. “They are down more than U.S. stocks. If U.S. equities go higher, it would seem very implausible that other markets would not participate in the rally even more.” 

  Gundlach, who runs $95 billion at DoubleLine, said he does not expect much from the latest Federal Reserve meeting but does expect somewhat “hawkish” language about the potential for hikes at meetings later this year.  Instead he believes, as do we since 2013, that the next major easing step is also the final one: Gundlach suggested that a “helicopter money” drop could be the government’s next big monetary and fiscal move to stimulate the U.S. economy.

  “Helicopter money is going to happen,” he said.

  Gundlach’s track record has so far been mostly impeccable: last year, Gundlach correctly predicted that oil prices would plunge, junk bonds would live up to their name and China’s slowing economy would pressure emerging markets. In 2014, Gundlach correctly forecast U.S. Treasury yields would fall, not rise as many others had expected.

  So if it is not the Fed, then what does spook him?

  Last month, Gundlach told Reuters that he foresees a “global growth scare” between now and the end of the summer, triggered by a presidential nomination of Donald Trump.

  Trump’s protectionist policies could mean negative global growth, Gundlach warned. “As he gets the nomination, the markets and investors are going to worry about it more. You will see a downgrading of global growth based on geopolitical risks. You must factor this into your risk-management.”

  Which is ironic because as we reported last Friday, Gundlach also sees Trump as being the next president, and a good one at that.

  Trump is going to win. I think Clinton and Sanders are both very poor candidates. I know the polls are signaling the opposite. But the polls said the opposite four years ago, too.

   

  In the short term, Trump winning would be probably very positive for the economy. He says a lot of contradictory things and things that are not very specific. But he does say that he will build up the military and that he will build a wall at the border to Mexiko. If he wins he’s got at least to try those things. Also, he might initiate a big infrastructure program. What’s his campaign slogan? Make America great again. What that means is let’s go back to the past, let’s go back to the 1960s economy. So he might spend a lot of money on airports, roads and weapons. I think Trump would run up a huge deficit. Trump is very comfortable with debt. He’s a debt guy. His whole business has had a lot of debt over time and he has gone bankrupt with several enterprises. So I think you could have a debt-fuelled boom. But the overall debt level is already so high that you start to wonder what would happen after that.

  It remains to be seen if Gundlach is right about bonds or stocks, but when it comes to Trump, as of moments ago, he is well on his way with a clean sweep in the entire “Amtrak Primary”, winning all five contested states.

  

  

• Obama Blowback & Saudi Arabia's "Real Nuclear Option"

  Authored by Pepe Escobar, originally posted Op-Ed at SputnikNews.com,

  US President Barack Obama landed in Saudi Arabia for a GCC petrodollar summit and to proverbially “reassure Gulf allies” amidst the oiliest of storms.

  The Doha summit this past weekend that was supposed to enshrine a cut in oil production by OPEC, in tandem with Russia – it was practically a done deal – ended up literally in the dust.

  The City of London – via the FT – wants to convey the impression to global public opinion that it all boiled down to a dispute between Prince Mohammed bin Salman – the conductor of the illegal war on Yemen —  and Saudi Oil Minister Ali Al-Naimi. The son of  — ailing — King Salman has been dubbed “the unpredictable new voice of the kingdom’s energy policy.”

  

   

   

  A famous 3 am call did take place in Doha on Sunday. The young Salman called the Saudi delegation and told them the deal was off.  Every other energy market player was stunned by the reversion.

   

  Yet the true story, according to a financial source with very close links to the House of Saud, is that “the United States threatened the Prince that night with the most dire consequences if he did not back down on the oil price freeze.”

  So – predictably — this goes way beyond an internal Saudi matter, or the Prince’s “erratic” behavior, even as the House of Saud is indeed racked by multiple instances of fear and paranoia, as I analysed here. 

  As the source explains, an oil production cut would have “hindered the US goal of bankrupting Russia via an oil price war, which is what this is all about. Even the Prince is not that erratic.”

  Iran had made it more than clear that after the lifting of sanctions it does not have any reason to embark on a production cut. On the contrary; oil contributes to 23% of Iran’s GDP. But as far as the House of Saud is concerned – feeling the pain of a budget deficit of $98 billion in 2015 — a moderate cut was feasible, along with most of OPEC and Russia, as Al-Naimi had promised.

  

  Another key variable must also be taken into account. Not only the whole saga goes way beyond an internal Saudi dispute; no matter what Washington does, the oil price has not crashed as expected. This would indicate that the global surplus of oil has been largely sopped up by falling supply and increasing demand.

  As a GCC-based oil market source reveals, “have you noticed how much attention Kerry and Obama have been giving Saudi Arabia out of all proportion to the past to keep that oil price down? Yet WTI is up and holding over $40.00 a barrel. That’s because oil demand and supply is tightening.” The oil market source notes, “oil surplus is now probably less than a million barrels a day.” So the only way, in the short to medium term, is up.

  Blowback from His Masters’ Voice?

  The House of Saud, by flooding the market with oil, believed it could accomplish three major feats.

  1) Kill off competition – from Iran to the US shale oil industry.

   

  2) Prevent the competition from stealing market share with key energy customer China.

   

  3) Inflict serious damage to the Russian economy. Now it’s blowback time – as it could come from none other than His Masters’ Voice.

  The heart of the whole matter is that Washington has been threatening Riyadh to freeze Saudi assets all across the spectrum if the House of Saud does not “cooperate” in the oil price war against Russia.

  That reached the tipping point of the Saudis shaking the entire turbo-capitalist financial universe by issuing their own counter threat; the so-called $750 billion response.  

  The — burning — issue of freezing all Saudi assets across the planet has come up with the US Congress considering a bill exposing he Saudi connection to 9/11.  

  

   

   

  The declassification and release of those notorious 28 pages would do little to rewrite recent history; 9/11 – with no serious investigation — was blamed on “Islamic terror”, and that justified the invasion of Afghanistan and the bombing/invasion/occupation of Iraq, which had no connection to 9-11 nor any weapons of mass destruction.  

  The 28 pages did intimidate the House of Saud and Saudi intelligence though. Especially because the odd sharp brain in Riyadh could make the connection; the 28 pages were being paraded around in Western corporate media before the OPEC meeting to keep the Saudis in line on the oil war against Russia. That may have been yet another Mafia-style “offer you can’t refuse”; if the House of Saud cuts oil production, then it will be destroyed by the release of the 28 pages. 

  So we are now deep into Mutually Assured Threat (MAT) territory, more than Mutually Assured Destruction (MAD).

  No one really knows how much Saudi Arabia has tied up in US Treasuries – except for a few insiders in both Riyadh and Washington, and they are not talking. What is known is that the US Treasury bundles Riyadh's holdings along with other GCC petrodollar monarchies. Together, that amounted to $281 billion two months ago.

  Yet the Saudis are now saying they would get rid of a whopping $750 billion. A New York investment banker advances that “six trillion dollars would be more like it.” Earlier this year, I revealed on Sputnik how the House of Saud was busy unloading at least $1 trillion in US securities on the market to balance its increasingly disastrous budget. The problem is no one was ever supposed to know about it. 

  The fact is the US and the West froze $80 billion in assets that belonged to the deposed head of the Egyptian snake, Mubarak. So a freeze tied up with framing Saudi Arabia for terrorism would not exactly be a hard sell.

  The nuclear option

  For all the pledges of eternal love, it’s an open secret in the Beltway that the House of Saud is the object of bipartisan contempt; and their purchased support, when push comes to shove, may reveal itself to be worthless.

  Now picture a geopolitical no exit with a self-cornered House of Saud having both superpowers, the US and Russia, as their enemies.

  Obama’s visit is a non-event. Whatever happens, Washington needs to sell the fiction that the House of Saud is always an ally in the “war on terra”, now fighting ISIS/ISIL/Daesh (even if they don’t.) And Washington needs Riyadh for Divide and Rule purposes – keeping Iran in check. This does not mean that the House of Saud may not be thrown under the bus in a flash, should the occasion arise.

  As the source close to Riyadh advances, “the real nuclear option for the Saudis would be to cooperate with Russia in a new alliance to cut back oil production 20% for all of OPEC, in the process raising the oil price to $200.00 a barrel to make up for lost revenue, forced on them by the United States.” This is what the West fear like the plague. And this is what the perennial vassal, the House of Saud, will never have the balls to pull off.

   

  

  

• Is The Race Over: Market Odds Of Contested Convention Tumble As Trump Nomination Odds Surge

  While it was broadly accepted that Trump would sweep tonight’s “Acela Primary”, few were expecting Trump to post majority wins in any of the states. And Yet, that appears to be taking place nowhere more so than in Pennsylvania where Trump’s vote as of this moment is over 65%, a result which would go far to assuring Trump of getting the required 1237 votes to avoid a contested convention.

  And indeed, the market is already responding. Moments ago, on popular online betting side PredictIt, the odds of a contested GOP convention just tumbled to 21%, trying the record low in history.

  

   

  Meanwhile, Trump’s odds of wining the GOP primary have soared, and are now at 80%, tying the highest level in contract history.

  

   

  So, with Hillary also now assured of the Democratic nomination, and with Trump on his way, is the presidential primary race effectively over?

  

• U.S. Commodity Regulator Was Unaware About Deutsche Bank's Gold-Rigging Until Ten Days Later

  Almost two weeks ago, On April 14, we reported the striking news that DB has decided to “turn” against the precious metals manipulation cartel by first settling long-running silver and gold price fixing lawsuits which in addition to “valuable monetary consideration” would expose the other banks’ rigging after DB also “agreed to provide cooperation to plaintiffs, including the production of instant messages, and other electronic communications, as part of the settlement.”

  It was then that we also reminded readers that the US commodity “regulator”, the CFTC in 2013 closed its five year investigation concerning allegations that the biggest bullion banks manipulate silver markets and prices.  It proudly reported in September 2013 that it found no evidence of wrongdoing and dropped the probe. This is what it said:

  The Commodity Futures Trading Commission (CFTC or Commission) Division of Enforcement has closed the investigation that was publicly confirmed in September 2008 concerning silver markets. The Division of Enforcement is not recommending charges to the Commission in that investigation. For law enforcement and confidentiality reasons, the CFTC only rarely comments publicly on whether it has opened or closed any particular investigation. Nonetheless, given that this particular investigation was confirmed in September 2008, the CFTC deemed it appropriate to inform the public that the investigation is no longer ongoing. Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets.

  We concluded by asking whether, in light of this confirmation that the CFTC’s probe was “lacking” perhaps it was time for the so-called regulators who at the time was headed by ex-Goldmanite Gary Gensler (and assisted by “revolving door” expert and HFT lobby sellout Bart Chilton) to reopen its investigation?

  Much to our surprise, we found that the CFTC not only was not planning on reopening its investigation, but that it had actually not heard about the settlement until nearly ten days later.

  This is what Chris Powell, treasurer of the Gold Anti-Trust Committee, which has been crusading against precious metals manipulation for years, wrote:

  CFTC didn’t know of Deutsche’s market-rigging settlement until asked by GATA

  Since the CFTC has jurisdiction over the U.S. commodity futures markets and since the commission purported to have undertaken a five-year investigation of the silver market, closing it in September 2013 upon concluding that there was no cause for action –

  http://www.cftc.gov/PressRoom/PressReleases/pr6709-13

  — it was natural to seek comment from the commission about the Deutsche Bank news.

  So on Saturday, April 16, your secretary/treasurer e-mailed the commission’s news media office as follows, providing the Internet link to the Bloomberg News report:

  “Does the commission have any reaction to Deutsche Bank’s admission to manipulating the gold and silver markets, as reported by Bloomberg News this week? Is the commission responding to Deutsche Bank’s admission in any way? As you may recall, some years ago the commission reported that it had investigated the silver market and had found nothing improper. Is the commission reconsidering that conclusion?”

  Receiving no response, on Tuesday, April 19, your secretary/treasurer sent by facsimile machine a letter to the office of the chairman of the CFTC, Tim Massad, reading: “As I am unable to get any acknowledgement from your commission’s press office, could you answer my questions here? Does the commission have any reaction to Deutsche Bank’s admission to manipulating the gold and silver markets, as reported by various news organizations last week? Is the commission responding to Deutsche Bank’s admission in any way? As you may recall, some years ago the commission reported that it had investigated the silver market and had found nothing improper. Is the commission reconsidering that conclusion? Thanks for your help.”

  Having received no acknowledgment of that letter as well, yesterday – Friday, April 22 – your secretary/treasurer telephoned the CFTC’s press office and within a half hour of leaving a message received a cordial call back from an assistant to the director. He said he was unaware of the Deutsche Bank story and could find no reference to it in the commission’s compendium of news reports of interest to the commission’s work.

  Your secretary/treasurer conceded that the story is being largely suppressed by Western financial news organizations and sent him the links to the Reuters and Bloomberg stories as well as a link to the original complaint in the class-action lawsuit. He said he would consult his superiors and hoped to reply to me next week.

  Of course all this gives the impression that the CFTC not only doesn’t know what’s going on in its jurisdiction but also that it doesn’t want to know. It is additional evidence that certain commodity market rigging is outside the commission’s concern because the U.S. government and other governments are the actual perpetrators, surreptitious market rigging by the government being specifically authorized by the Gold Exchange Act of 1934 as amended in the 1970s –

  https://www.treasury.gov/resource-center/international/ESF/Pages/esf-ind…

  — and because of the admission in recent official filings by CME Group, operator of the major U.S. futures exchanges, that it provides volume trading discounts to governments and central banks for surreptitiously trading all futures contracts on its exchanges:

  http://www.gata.org/node/14385

  http://www.gata.org/node/14411

  All this also seems to confirm that the prerequisites of this market rigging are the cowardice of the monetary metals mining industry, which refuses to protest it, and the cowardice of mainstream financial news organizations, which refuse to report it.

  

  

• These Five Trends In China Will Change The Gold Market

  Via HardAssetsAlliance.com,

  Apple spent about five years developing the iPhone, which has changed the smartphone market forever. Until the release, however, nobody could imagine what impact the iPhone would have on the market.

  And most consumers didn’t know about it at all.

  The same thing is happening with China and gold right now. The gold market will soon be very different than from what we see today – largely due to the current developments in China.

  China’s influence will impact not just gold investors but everyone who has a vested interest in the global economy, stock markets, and the US dollar. After all, China will be a dominant force in all, as most analysts project.

  Here are the five trends in China that will change the gold market forever…

  (Hedge fund manager Dan Tapiero talks about some of these trends in his short interview, especially the #5 listed below.)

  Trend #1: China now officially participates in the gold price fix

  China has officially established a daily yuan price fix for gold.

  Gold fixing was historically held at the London Bullion Market Association (LBMA). China was not part of that process, so it started its own pricing benchmark.

  The Shanghai Gold Exchange’s program includes 12 “fixing” members, 10 of which are Chinese banks. The new gold benchmark will better reflect local market flows and, just as important, reduces gold’s price dependency on the US dollar.

  The program has profound implications as the gold trade continues to move from West to East. It will increase China’s influence over the gold price and expand the yuan’s role as a global currency.

  Trend #2: China also participates in setting the silver price

  China Construction Bank, one of the country’s largest, recently joined the elite group of banks that set silver’s official daily price.

  The Chinese bank now bids prices with HSBC, JPMorgan Chase, Bank of Nova Scotia, Toronto Dominion Bank, and UBS. That means China now has direct influence on the price of this key industrial and monetary metal.

  These two moves makes sense, since some of the world's top gold and silver consumers are in the East—India, Russia, Turkey, and of course China.

  It is clear China wants more influence over gold and silver prices—and now it will get it.

  Trend #3: The renminbi is in the IMF basket

  Last November, the IMF added the renminbi to its reserve currency basket. The prestigious basket will include the yuan along with the dollar, euro, pound sterling, and yen when calculating the value of the Special Drawing Rights (SDRs).

  The long-term implication is that the yuan may one day become as recognizable as the dollar or euro.

  It also means China must accumulate enough bullion reserves to stand on the world stage. And by any measure, it doesn’t have enough.

  Some analysts believe China has more than the official 1,797.5 tonnes it reported in March, but that amount is 4.5 times less than 8,133.5 tonnes the US holds. Even if China doesn’t want that much, the current total represents only 2.2% of its total reserves.

  This means that not only does China need to continue buying gold in massive quantities, it will at some point need to announce it holds a much higher amount. And that announcement will light a fire under the gold price.

  You may not trust the numbers coming out of Beijing, but keep in mind that China’s biggest goal is to become a first world economy. It wants to be on the same footing as the US, Japan, and Europe.

  And one way to achieve that is to accumulate a lot more gold.

  Trend #4: Chinese gold production is slowing

  China produces more gold than any other nation.

   

  

   

  But even the world’s top producer isn’t immune to the effects of the four-year bear market in gold. Mine production is slowing and is poised to decline for at least several years just like everywhere else.

  That’s because the cost of production has risen, ore grades are falling, and reserves in the country are limited.

  And get this: China doesn’t export gold in any meaningful amount. So whatever gets produced there, stays there.

  Bottom line: China’s gold production won’t make it to world markets. Its output is in decline and won’t be available to meet global demand.

  Trend #5: Lack of other alternatives for Chinese investors

  This trend is explosive…

  As hedge fund manager Dan Tapiero points out, Chinese investors will be increasingly attracted to gold because they won’t want their savings at a zero percent interest rate.

  Yet, Beijing has made it clear that it will bring rates lower. So what will investors buy? Government debt yields just 1–2%. High-yield corporate debt pays more, but only 15% of Chinese debt is rated by foreign agencies like Moody’s and S&P, so it comes with a lot of potential credit risk. The stock market wiped out many investors, and real estate petered out.

  UBS analysts agree:

  Deterioration in China's macro backdrop could trigger flows towards gold; there are a limited number of investment alternatives and gold is poised to benefit should outlooks across the different options turn sour… rotation into gold ETFs would be a relatively easy switch for local equity investors and could gain further traction if equity markets continue to weaken.

  That’s not all.

  Chinese savers have huge exposure to a devaluation of their currency, as their wealth is tied directly to the fate of the renminbi. Devaluation fears have prompted massive capital outflows from both the currency and the country—some of which is fleeing into gold.

  Looking at the big picture over the next 3-5 years—these changes signal that China will be a big driver of the gold price.

  

  

• Hillary 4 – 1 Bernie As The Donald Sweeps 5 East Coast Primaries: "As Far As I'm Concerned, It's Over"

  The Results are in…

  

   

  Delegates Tonight

  • REP: Trump 105, Kasich 5, Cruz 1
  • DEM: Clinton 190, Sanders 114

  During her speech, Hillary noted:

  • *CLINTON CALLS FOR OVERTURNING CITIZENS UNITED RULING
  • *CLINTON CRITICIZES TRUMP FOR SAYING SHE'S PLAYING WOMAN CARD
  • *CLINTON: `LOVE TRUMP'S HATE'
  • *CLINTON TO SANDERS BACKERS: MORE THAT UNITES THAN DIVIDES

  Trump Sweep Night Press Conference highlights…

  Donald Trump: "As far as I'm concerned, it's over" https://t.co/ud3Wy2I4r0 #SuperTuesday https://t.co/JQvpXMAKXv

  — CNN Politics (@CNNPolitics) April 27, 2016

  Donald Trump: "I consider myself the presumptive nominee" https://t.co/ud3Wy2I4r0 #SuperTuesday https://t.co/jmJouwCjxU

  — CNN Politics (@CNNPolitics) April 27, 2016

  Trump: Clinton's email controversy "is an absolute, criminal outrage" https://t.co/ud3Wy2I4r0 #SuperTuesday https://t.co/imDVmTzV29

  — CNN Politics (@CNNPolitics) April 27, 2016

  Trump on Clinton: "The only thing she's got going is the woman's card" https://t.co/ud3Wy2I4r0 #SuperTuesday https://t.co/Y8xLWZoyAH

  — CNN Politics (@CNNPolitics) April 27, 2016

   

  Trump won by a landslide, Clinton dominant but loses Rhode Island…

  

   

  As we detailed earlier, Ted Cruz got his pre-concession speech in early this evening, just before the polls closed at 8pmET, jabbing at Trump being "Hillary's running mate" and "the only candidate that Hillary could beat." Ironically, Cruz blamed the media for getting excited about Trump's victories tonight…

  Ted Cruz: "Donald Trump is likely to win some states" https://t.co/ud3Wy2I4r0 #SuperTuesday https://t.co/0DWCKOpfbv

  — CNN Politics (@CNNPolitics) April 26, 2016

   

  But the rant rang dull as his speech was rudely interrupted by the actual results. As expected Donald Trump took Connecticut, Maryland, and Pennsylvania, with Rhode Island and Delware too early to call for now. NBC also projects Hillary to win Maryland. As Goldman warns the rest of the fields: "There isn’t that much left on the table between today's contests and June 7."

  • *CLINTON PROJECTED TO WIN MARYLAND DEMOCRATIC PRIMARY: NBC
  • *CLINTON PROJECTED WINNER OF PA. DEMOCRATIC PRIMARY: FOX
  • *HILLARY CLINTON WINS DELAWARE DEMOCRATIC PRIMARY
  • *DONALD TRUMP SWEEPS ALL 5 OF TODAY'S REPUBLICAN PRIMARIES

  

  Of course the next crucial thing to watch is whether Trump can take 50% (and hence the bulk of the delegates).

  Trump DE

  BREAKING: CBS News projects @realDonaldTrump wins DE GOP primary: https://t.co/TR3aXAMx8O pic.twitter.com/vXAE8x5w1c

  — CBS News (@CBSNews) April 27, 2016

  Trump RI

  BREAKING: CBS News projects @realDonaldTrump wins RI GOP primary: https://t.co/TR3aXAMx8O #SuperTuesday pic.twitter.com/6P8PFgZTXs

  — CBS News (@CBSNews) April 27, 2016

  Trump MD

  BREAKING: CBS News projects @realDonaldTrump wins MD GOP primary: https://t.co/TR3aXAMx8O pic.twitter.com/q56ZyIebR9

  — CBS News (@CBSNews) April 27, 2016

  Trump CT

  BREAKING: CBS News projects @realDonaldTrump wins CT GOP primary: https://t.co/TR3aXAMx8O pic.twitter.com/viUBjs6JM5

  — CBS News (@CBSNews) April 27, 2016

  Trump PA

  BREAKING: CBS News projects @realDonaldTrump wins PA GOP primary: https://t.co/TR3aXAMx8O pic.twitter.com/mLKOhyrjnF

  — CBS News (@CBSNews) April 27, 2016

  Hillary DE

  BREAKING: CBS News projects @HillaryClinton wins DE Dem primary: https://t.co/TR3aXAMx8O #SuperTuesday pic.twitter.com/dVgt4QvIhy

  — CBS News (@CBSNews) April 27, 2016

  Hillary MD

   

  BREAKING: CBS News projects @HillaryClinton wins MD Dem primary: https://t.co/TR3aXAMx8O pic.twitter.com/9Mcgv2bZnC

  — CBS News (@CBSNews) April 27, 2016

   

  *  *  *

  Before the results started to roll in, this is where they stood…

  

   

  *  *  *

  Finally, here is Goldman summarizing the situation from here…

  After a brief period of uncertainty following the Wisconsin primary earlier this month, the Republican nomination once again looks like it is Mr. Trump’s to lose, while Sec. Clinton appears to have a tight grip on her party’s nomination and could clinch it outright (including “superdelegates” in the total) before the last of the contests in June.

  Trump looks very likely to win all five states; the main uncertainty at this point is whether he will win sufficient delegates to put him on track to clinch a majority of delegates prior to the Republican convention that starts July 18. Connecticut, Delaware, Maryland, Pennsylvania, and Rhode Island go to the polls, with 118 Republican delegates at stake. Our expectation, based on polling in the states and each state’s primary rules, is that Mr. Trump is likely to win slightly less than 100 of the delegates in play.

  Coordination between Gov. Kasich and Sen. Cruz might make a difference in Indiana, though Mr. Trump still looks like the narrow favorite there. Sen. Cruz and Gov. Kasich appear to be coordinating their campaign strategies, with Gov. Kasich shifting resources out of Indiana, and Sen. Cruz suggesting he will not focus on New Mexico or Oregon. The contest in Indiana does indeed look close — Mr. Trump leads Sen. Cruz by an average of 39% to 33% in an average of the only three polls in the state, conducted last week; Gov. Kasich is farther behind at around 19%. If enough support shifts to Sen. Cruz, it is possible that he could take the 30 delegates that Indiana will award to the statewide winner, plus a fraction of the additional 27 delegates split among the winners of the 9 congressional districts. However, “strategic voting” seems unreliable. When Sen. Rubio attempted something similar in urging his Ohio supporters to vote for Gov. Kasich, his actual vote share came in 4pp below his prior level of support, or a decline of slightly more than half. But the political and ideological differences between Sen. Cruz and Gov. Kasich are much greater than between Sen. Rubio and Gov. Kasich. Moreover, while the intent of the strategy seems clear enough, Gov. Kasich stopped short of actually instructing supporters to vote for Sen. Cruz.

  Whatever the outcome in Indiana next week (May 3), Oregon and New Mexico will probably be less consequential. Although Sen. Cruz has suggested he will shift resources out of Oregon (May 17) and New Mexico (June 7), it might not make that much of a difference. These are among the few states left that allocate their delegates in proportion to the statewide result, so even if Gov. Kasich were to deny Mr. Trump a win in either state, it probably would make only a small dent in the delegate count.

  There isn’t that much left on the table between today's contests and June 7. A few other states vote in May, but these contests look unlikely to change the outlook significantly. Nebraska (May 10), Montana, and South Dakota (both June 7) look likely to award Sen. Cruz all of their combined 92 delegates. New Jersey (June 7) awards all of its 51 delegates to the statewide winner, and Mr. Trump seems to have a sizeable advantage there. West Virginia (May 10) has an unusual system that looks likely to award a substantial share of delegates to Trump while possibly also producing some unbound delegates. Washington State (May 27) is a bit of a mystery at this stage due to a lack of polls; it awards its statewide delegates proportionally so it might make slightly less of a difference in the delegate math in any case. Overall, we expect that Trump will win around half of the 199 delegates up for grabs in May, suggesting that the risks are fairly evenly balanced in next month’s contests.

  The outlook in California (June 7) will quickly become a focus. Polling since the start of the month in California shows Mr. Trump averaging 46% support, well above Sen. Cruz’s 25% and Gov. Kasich’s 19%. However, while California awards 3 delegates to the winner of each congressional district (159 in total) like several other states, it awards a disproportionately small number to the statewide winner (13 delegates, which is the same number Rhode Island awards to the statewide winner, for example). This is important because even if Trump wins the majority in the state as a whole, he is apt to lose delegates to Gov. Kasich and Sen. Cruz in some congressional districts. We assume that he will win around 100 of the 172 California delegates in our illustrative delegate count (Exhibit 1) but there is obviously a good deal of uncertainty in these later races.

  

  The outcome of the Republican nomination looks unlikely to become clear until the convention. If Trump fails to win 1237 delegates in the contests through June 7, his remaining option to secure the nomination would be to win the support of unbound delegates before or even during the convention, which starts July 18. Under the hypothetical delegate scenario illustrated in Exhibit 1 where Trump wins around 1200 of the delegates but falls short of a majority, he would need to work to gain the support of another 37 or more unbound delegates, out of around 150 total. However, a number of these delegates have already announced their support for other candidates (e.g., Sen. Cruz), leaving a smaller pool for Trump to draw from. The primary results in Pennsylvania could shed some light on this question; Pennsylvania will send 54 unbound delegates to the convention—the largest amount from any single state—and some Pennsylvania delegates have suggested they might feel obliged to support their state’s winner (though others have already announced support for a candidate regardless of the results). We would expect to see additional scrutiny of these delegates’ intentions in coming days.

  

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• "Brexit" – What Else Is Wrong With The European Union?

  Submitted by Josephine Bacon via The Gatestone Institute,

  • Ever since the inception of the European Economic Community, British politicians across the entire political spectrum have been perceptive enough to realize that Britain will lose its sovereignty and turn into a vassal of the France-Germany axis.

  • This month, in March, an official audit reported that EU auditors refuse to sign off more than £100 billion ($144 billion) of EU spending. The Brussels accounts have not been given the all-clear for 19 years in a row.

  There is a joke going around the internet it how the European Union works (or doesn't):

  Pythagoras's theorem – 24 words.
  Lord's Prayer – 66 words.
  Archimedes's Principle – 67 words.
  10 Commandments – 179 words.
  Gettysburg address – 286 words.
  U.S. Declaration of Independence – 1,300 words.
  U.S. Constitution with all 27 Amendments – 7,818 words.

  EU regulations on the sale of cabbage – 26,911 words.

  Why are EU Regulations so long? Maybe because they have to be translated into the 18 official languages? Interpreters also have to be found who can work into and from those languages at the European Parliament. The translation budget is massive. One of the official languages currently is Irish. It can confidently be said that there is no one in the Republic of Ireland who does not speak English; many Irish do not even speak or understand Irish, and certainly none of Ireland's politicians will be fluent only in Irish. But all of the "acquis," the body of regulations that are already part of the EU body of laws, also have to be translated into the languages of candidates for EU membership, such as Turkey, thus adding more languages to the tally each time a new regulation is passed. If Catalonia breaks away from Spain and remains a member of the EU, Catalan will need to be added, even though Catalan politicians all speak perfect Spanish.

  Corruption and Waste

  This month, in March, an official audit reported that EU auditors refuse to sign off more than £100 billion ($144 billion) of EU spending. The Brussels accounts have not been given the all-clear for 19 years in a row. Moreover, the EU is apparently less than incompetent at managing the funds it has.

  This is happening at a time when the EU is demanding that the UK pay it £1.7 billion ($2.45 billion). It was reported on September 17, 2015 in the Daily Mail newspaper that Britain had reluctantly paid this sum, which prime minister David Cameron himself, a fan of staying in Europe, has described as "appalling."

  Also reported on September 17 in the Daily Telegraph, was that, according to the annual report of the European Court of Auditors, £5.5 billion ($7.9 billion) of the EU budget last year was misspent because of controls on spending that were deemed by experts to be only "partially effective."

  The audit, published on March 17, 2016, found that £109 billion ($157 billion) out of a total of £117 billion spent by the EU in 2013 alone was "affected by material error" — that is, disappeared into various people's pockets.

  Thanks to the European Union, the Value Added Tax (VAT), the tax which in the UK replaced purchase tax in 1973, is now applied to services as well as goods. Such a tax discriminates against service-based economies, such as those of the developed countries, because such economies are taxed so they cannot compete with services provided outside the EU. Each member country's tax regime is micro-managed by the European Union. The former purchase tax was specifically designed for taxing luxury goods, but the VAT is now imposed even on essentials needed by the poorest members of society. Furthermore, the VAT discriminates against women because the EU requires the member states to tax products used by only one gender, such as tampons.

  The "Traveling Circus"

  Few people outside European parliamentary circles are aware that there is an EU "traveling circus." Once a month, the European Parliament moves from Brussels in Belgium to Strasbourg in France. Even though Members of European Parliament (MEPs) voted to scrap this move, the French government, which initiated this madness in the first place, has the power to block any such decision and is apparently determined to do so. That is another fact which goes unmentioned by those determined to keep the UK in the EU. When this author challenged an MEP, Mary Honeyball, on the subject, she claimed that it was "being dealt with," but the French government is fiercely opposed to keeping the parliament exclusively in Brussels and it has the power to block any such reform. The cost of the "travelling circus" alone is conservatively estimated at £130 million ($187 million) a year.

  Free Movement of Labour

  The free movement of labour between EU member states was always going to be a non-starter. Has anyone noticed the hordes of British plumbers and electricians emigrating to Bulgaria and Romania? The movement of skilled and unskilled labour from the poorest countries of the EU to the wealthier ones — those that offer generous benefits to the unemployed and even subsidise low wages — has always been a fact of life, one seriously underestimated by successive British governments. The British suffer most because, of all the countries of the EU, the UK offers the most generous benefits. The so-called "freedom of movement," which has proved to be just a one-way street, is only one of the reasons why Britain needs to regain control of its own destiny and stop being subservient to laws being made by unelected, overpaid, un-unelectable bureaucrats in Brussels.

  But Will There Be a Brexit?

  Unfortunately, most voters in the British referendum glean their information from the sound bites of politicians on television. This circumstance leaves the public open to manipulation, uninformed, and ignorant of the facts. One fact, however, that cannot be ignored is that ever since Britain joined the European Economic Community in 1973, British politicians across the entire political spectrum from left (Tony Benn) to right (Enoch Powell) were perceptive enough to realize that Britain would lose the power to make its own laws and turn into a vassal of the France-Germany axis.

  

  Leaving the European Union will give the UK back its sovereignty and leave it free to make alliances not only with its former European partners, but with other Commonwealth countries, to say nothing of the United States, and Central and South America.

  

  

• "A Total Game Changer" – From Over-Population To De-Population

  Submitted by Chris Hamilton via Hambone's Stuff blog,

  Strangely, the world is suffering from two seemingly opposite trends…overpopulation and depopulation in concert.  The overpopulation is due to the increased longevity of elderly lifespans vs. depopulation of young populations due to collapsing birthrates.  The depopulation is among most under 25yr old populations (except Africa) and among many under 45yr old populations.

  So, the old are living decades longer than a generation ago but their adult children are having far fewer children.  The economics of this is a complete game changer and is unlike any time previously in the history of mankind.  None of the models ever accounted for a shrinking young population absent income, savings, or job opportunity vs. massive growth in the old with a vast majority reliant on government programs in their generally underfunded retirements (apart from a minority of retirees who are wildly "overfunded").  There are literally hundreds of reasons for the longer lifespans and lower birthrates…but that's for another day.  This is simply a look at what is and what is likely to be absent a goal-seeked happy ending.

  In a short yet economically valid manner, every person is a unit of consumption.  The greater the number of people and the greater the purchasing power, the greater the growth in consumption.  So, if one wanted to gauge economic growth, (growth in consumption driving economic growth), multiply the annual change in population by purchasing power (wages, savings) per capita.  Regarding wage growth, I hold wages flat as from a consumption standpoint, wage growth is basically offset by inflation.  Of course, there is another lever beyond this which central banks are feverishly torqueing; substituting the lower interest rates of ZIRP and NIRP to boost consumption from a flagging base of population growth.  (There is one more boost to consumption, huge increases in social transfer payments primarily among the advanced economies…but while noted, these are a story for another day.)

  THE DETAILS

  The chart below is total annual population growth broken down by OECD nations (33 wealthiest nations…representing 1.3 billion people, OECD members), BRIICS (Brazil, Russia, India, Indonesia, China, S. Africa…representing 3.4 billion people), and the RoW (Rest of the World…representing about 3 billion people).  Takeaways – 1) total annual population growth peaked in 1988 and has been decelerating since falling 13% & now down 12m/yr from peak.  2) Growth has been shifting away from the BRIICS to the RoW.

  

   

  Below, global annual total population change vs. under 45 annual population change broken down by OECD, BRIICS, and the Rest of World.  What should be clear…1) under 45 population growth has fallen by nearly 60% & is down 44m/yr from peak growth.  2) All under 45 population growth (net) is among the poorer nations of the Rest of the World.  Growth has shifted from rich to middle to poor nations and from young to old.  Those with little income, savings, and/or access to credit can't consume much.  Elderly on fixed incomes, declining vitality, and credit averse won't consume much.  Clearly, the impact of the slowing and shifting population growth on slowing growth of consumption should be easily understood.

   

  

   

  Global annual population growth by GDP per capita.  OECD nations given an average of $40k per capita, BRIICS $15k per capita, and the RoW $8k per capita (below).  Annual growth in consumption peaked in 1989 and has been falling since…of course this is unadjusted for the big impact that credit has to increase real consumption.

   

  

   

  Global annual under 45 population growth by GDP per capita further broken down by growth among OECD, BRIICS, & RoW (below).  The deceleration of global GDP per capita is entirely among the under 45 OECD and BRIICS which have nearly entirely ceased.  The only under 45 growth in consumption is among the decelerating RoW.

   

  

   

  Below, 0-64yr/old annual global population growth vs. 0-64yr/old population growth among combined OECD, China, Brazil, and Russia vs global debt growth.  The surge in debt since 1988 coinciding with the collapse of growth among the wealth OECD and aspiring BRIICS (growth has fallen from 30m/yr to 3m/yr (90% decline) and growth among the RoW has entirely stalled since '88 at +55m/yr.  The central bank response to take interest rates to ZIRP (and now NIRP) has been an attempt to maintain consumption growth against declining population growth.  Only central bankers know what they'll do as under 65yr/old populations begin outright shrinking nearly everywhere but Africa?!?

   

  

   

  A look at annual global populations; young vs. old (below).  The 0-5yr/old population has stalled but nowhere near so for the 75+yr/old population.  In 1950 there were ten "babes" for every 75+yr/old…by 2050, the two groups are estimated to be 1:1 but this estimate is likely to be far too optimistic if economic conditions continue deteriorating.

  

  US 20-59yr/old annual population growth vs. the Federal Reserves FFR (%) and US total debt (below).  Federal Reserve actions have been and remain a simple (ultimately unwinnable) fight vs. the decelerating growth among the core US population since the early 1980's.  The great recession of 2008-'09 shouldn't be a shocker given the sharp 20-59yr/old population growth deceleration culminating in '07.

   

  

   

  Below, Japan's 20-59yr/old annual population growth vs. BOJ interest rate and Japanese federal debt.  Japan's annual core population turned negative in '00 and interest rates hit ZIRP and debt creation took off.  Japan's plan to monetize likely well in excess of 100% and maybe ultimately 1,000% or 10,000% of GDP is a curious solution which may lead to an eventual hiccup which leaves Japanese society in absolute chaos (2nd chart below).  But if it were only Japan that had this plan…but alas, it is the same for all major central banks presently or eventually facing depopulation.  (Debt in chart below is denominated in Yen, not dollars).

   

   

  

   

  

  Below, Germany's 20-59yr/old annual population change vs. debt to GDP.  Germany's 20-59yr/old population turned negative in '94 but the implementation of the Euro and Euro wide market (with the Maastrich treaty in 1992 and implementation Euro area wide in 1999) quintupled Germany's available export base under a now common currency (2nd chart below).  The impact was a stay of execution for Germany but a grinding, terminal cancer for the remainder of the Euro area.

   

  

  

   

  Below, China's annual 20-59yr/old population change, Bank of China interest rates, and China total debt growth.  Annual Chinese core population growth has collapsed since '08 by 90% and will turn negative in 2018 and remain increasingly negative for decades thereafter.  The insane Chinese debt ramp to offset the declining population growth has no possible means to resolve in any manner but catastrophe. 

   

  ***Noteworthy, despite China's recent elimination of it's "one child policy", it should be noted that China's birthrates are higher than Japan, S. Korea, Taiwan, and many EU nations…none of whom have any policies restricting births and most with policies to encourage higher fertility.  The elimination of the "one child" policy in China is unlikely to have significant impact…family finances and struggling economies are far more likely to determine family formation in China and world-over.***

  

   

  CONCLUSION

  An economic and financial system premised on perpetual growth was bound to run into trouble (what do you do when you have taken a wrong turn?…apparently just keep going!).  The inevitable deceleration of population growth was the trigger that turned central bankers into pushers offering ever cheaper credit.  The lower rates drove unsustainable rates of consumption absent even further rate cuts and likewise drove overcapacity which likewise needed even lower rates.  But negative rates of NIRP are simply no longer under the heading of capitalism (a market that doesn't value capital likely isn't capitalism?!?).  When we've clearly changed "ism's"…we've crossed the Rubicon.

  What happens as population growth turns to population decline is honestly and literally a complete and total game changer.  A flat to declining number of buyers and consumers opposite ramping elderly sellers plus their unfunded liabilities is a problem with no happy resolutions.  Currencies (what will constitute "money"), "free-markets", and perhaps the basis of civilization hang in the balance of the transition from high population growth to potential outright depopulation.

  I believe this is the correct lens through which to view and understand why growth is perpetually weakening, why commodity overcapacity and slowing demand will only accelerate, why the Treasury market continues to see "buying" despite the near total absence of buyers (Treasury Mystery), why equities are a "buy" (but for all the wrong reasons), and why precious metal valuations are so extremely suspect in the face of a monetary onslaught. 

   

  

  

• The Separation Of Bathroom & State

  Submitted by Roy Cordato via The Mises Institute,

  The saga of the so-called Charlotte bathroom ordinance — and the state of North Carolina’s response to it — has taken on a life of its own. At the national level leftists are accusing North Carolina of bigotry while, in the name of tolerance, a growing list of performers and businesses are boycotting the state. Unfortunately, what has gotten lost in all the rhetoric surrounding this issue is the truth about both the original Charlotte law and the state’s response to it.

  In late February the Charlotte, North Carolina, city council passed an “antidiscrimination” law, scheduled to go into effect on April 1. It was aimed at protecting what, in the view of the city council, are the rights of those in the gay, lesbian, and transgender community. The centerpiece of this law was a provision that prohibits businesses providing bathrooms, locker rooms, and showers from segregating usage of those facilities by gender, biologically defined. Biological males or females must be allowed to use the facilities of the opposite sex if they claim that that is the sex they identify with psychologically. (Note, no proof was required.)

  Much of the criticism of the Charlotte bill was centered around two issues: the religious freedom of business owners and the privacy rights of people, particularly women, using public bathroom and shower facilities. Most of the vocal opposition to the ordinance came from religious organizations and advocacy groups that focused on traditional values. As argued by John Rustin, President of the Family Policy Council:

  Similar ordinances have been used to force small business owners like florists, bakers, photographers and bed-and-breakfast owners and others either to conform to a government-dictated viewpoint in violation of those sincerely held religious beliefs or to face legal charges, fines and other penalties that have ultimately caused some to go out of business.

  Private Property, Not Religion, Is the Key

  While religious liberty is an important concern, the issue is much broader. This ordinance was an assault on the rights of private property owners and economic freedom, regardless of one’s religious beliefs.

  The primary targets of the Charlotte ordinance were privately owned businesses that offer bathrooms, changing rooms, showers, etc., for their customer’s convenience. The decision of how to structure access to these facilities may, for some, be based on their religious beliefs but for many others it is a secular business decision. Their goal is customer satisfaction driven by the desire to make a profit and earn a living. The property that they use is privately owned, the investments that they make come from private funds, and those who reap the rewards or suffer the losses are private entrepreneurs. The bathrooms in their establishments are part of the product that they provide.

  In a free society based on property rights and free markets, as all free societies must be, a privately owned business would have the right to decide whether or not it wants separate bathrooms strictly for men and women biologically defined, bathrooms for men and women subjectively or psychologically defined, completely gender neutral bathrooms with no labels on the doors, or no bathrooms at all.

  Businesses Seek to Please Their Customers

  Their goal is to provide the products and services that most of their customers want in an environment that those customers feel comfortable in. This environment may indeed be different for different establishments depending on the desires and cultural makeup of their clients. This Charlotte ordinance told businesses that they are not allowed to adjust their decisions regarding their bathroom, locker room, or shower facilities in order to accommodate customer preferences. In this sense the now overturned Charlotte ordinance was a gross violation of property rights and economic freedom and on libertarian grounds needed to be overturned.

  So what was the state of North Carolina’s response to all this? In fact, it was to restore freedom and property rights and to guarantee those rights across the state. The law in North Carolina that so many progressives are up in arms about does not prohibit businesses from having bathrooms, locker rooms, showers, etc., that allow use by people of all genders defined biologically, psychologically, or whatever. In a “myths vs facts” explanatory statement put out by the governor of North Carolina this was made quite clear:

  Can private businesses, if they choose, continue to allow transgender individuals to use the bathroom, locker room or other facilities of the gender they identify with …?

   

  Answer: Yes. That is the prerogative of private businesses under this new law. …The law neither requires nor prohibits them from doing so.

  In other words, the state of North Carolina codified a basic libertarian principle: the separation of bathroom and state.

  The only place where bathrooms, showers, etc., must conform with biological sex is in government owned facilities — courtrooms, city halls, schools, etc., where this separation is not possible. So yes, in North Carolina 12-year old boys, defined by what body parts they are sporting, may not use the girls’ locker room and showers after gym class at the local public middle school. Of course private middle schools are free to do what they want. If not believing that this is unjust discrimination makes me a bigot, then so be it.

  So where does this approach leave the issue of religious freedom? For the most part, and particularly in cases like this, religious freedom is nothing more than the right to use your own property in a way that comports with your religious beliefs. This applies not only to the issue of who gets to use what bathrooms but also to the Little Sister’s of the Poor and Obama’s contraceptive mandate, and most of the other religious freedom cases that are of concern to traditional values advocates. If property rights and economic freedom are the values that are upheld, then religious freedom will take care of itself.

  

  

• Cash-Starved ISIS Offers Incentive Pay For Fighters: $50 Per "Female" Sex Slave

  ISIS appears to be at a bit of a crossroads. As we detailed yesterday, faced with a cash crunch and significant military losses, the organization is becoming quite strained. The group has reached the point where the rank and file are becoming frustrated and have started to defect.

  

  In order to stop the defections, ISIS dug deep in its bag of incentives and decided to employ the carrot and stick method.

  First we learned of the stick, which is to literally freeze members to death if they're caught trying to defect.

  As we wrote yesterday

  According Iraqi media agency Al Sumaria News, the 45 defectors attempted to flee the battlefield during recent fights in Iraq. They accused deserters were executed by being locked in morgue freezers in Mosul for 24 hours, left for a slow, presumably agonizing death.

   

  Their bodies were reportedly then stretched out along the sides of the road at city entrances to act as a warning to any other fighter who might have second thoughts.

  Now, courtesy of the Washington Post, we learn what the carrot is. A wage voucher obtained by the post details out the fact that ISIS is now paying soldiers extra cash for each additional family member. Also, as a sick and twisted added bonus, anyone who has a sex slave gets another $50… USD of course.

  The base salary offered to the worker named al-Jiburi was a pittance, just $50 a month. But even the cash-challenged Islamic State knew it had to do more to sustain the loyalty of a man with nine mouths to feed.

   

  A crinkled wage voucher breaks it down by family member:

  • For each of his two wives, al-Jiburi would receive an extra $50.
  • For each of his six children under age 15, he would get another $35.
  • Any “female captive” – sex slave – would entitle him to an additional $50.

  For al-Jiburi, described in the document as a service worker for the terrorist group, the monthly total came to $360, payable in U.S. greenbacks.

  The voucher that shows the breakdown is shown below – the article notes that the document was dated within the last six months, and was found along with other documents in Syria and Iraq.

  

   

  Although the article goes on to caution any predictions about the collapse of ISIS, what's taking place is an indication that the group is in rough shape, and is now turning on its own. We certainly won't make any predictions, but none of this bodes well for the sustainability of the organization – which perhaps even more worryingly leaves ISIS fighters with even less to lose by their actions.

  

  

• A Look Inside Europe's Largest Foreigner "Ghetto"

  On the heels of State Department spokesman John Kirby's renewed proclamation that "US is committed to admitting more refugees," we thought this brief clip from France's picturesque Mantes La Jolie (in the western suburbs of Paris) – Europe's largest "ghetto" – would be useful…

  

   

  Here's the postcard…

  

   

  Le Val-Fourré, the largest housing project in the district, is extremely ghettoized, and is dominated by immigrants from the Maghreb, the majority of whom are Moroccan, and sub-Saharan immigrants.

  

   

  The friendly local inhabitants – who seem to be integrating into European culture so well – appear to not take kindly to police driving through the middle of their road-blockage, drug-dealing, motorbike-racing, street party… and trouble ensues…

  h/t LiveLeak

  It is any wonder the police stayed away from Mollenbeek?

  *  *  *

  Coming to a 'picturesque city in America' any day now.

  

  

• Seymour Hersh: Saudis Paid Pakistan to Hold bin Laden To Prevent U.S. Interrogation

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  In the aftermath of the most signifiant geopolitical event of my lifetime, the attacks of September 11,2001, the U.S. government proceeded to concoct a fairytale for public consumption in order to advance imperial ambitions overseas and a implement a domestic surveillance state at home. This should be obvious to everyone by now.

  The official 9/11 story has been filled with holes since the very beginning, but a traumatized American public was too gullible and emotionally damaged to see them. Those of us who saw such inconsistencies and pointed them out have been derided as “conspiracy theorists” for years, yet fifteen years later, the biggest “conspiracy theory” in modern American history is rapidly becoming conspiracy fact.

  At the very least, we now know there was Saudi involvement far beyond just the 15 of 19 hijackers who were Saudi nationals, but that’s still just scratching the surface. Once people come to terms with the fact the tale they’ve been told was completely invented, other obvious questions will have to be asked. Most critically, the question of World Trade Center 7.

  As I wrote in the recent post, 60 Minutes Explores the Saudi Links to 9/11 Attacks:

  I still haven’t seen a convincing explanation for how a 47-story tower that wasn’t hit by a plane imploded on itself. The very serious experts tell us that WTC7 collapsed due to fires caused by debris from the collapse of the nearby North Tower of the World Trade Center. So not only are we supposed to believe a massive office building came down demolition style without being hit by a plane, here’s the real kicker. A study from the National Institute of Standards and Technology (NIST) admits that the collapse of WTC 7 is the first known instance of a tall building brought down primarily by uncontrolled fires.

  Yes, it’s true, and we desperately need to get to the bottom of this.

  

  But I digress. The main thrust of this article is to highlight some new revelations from Pulitzer Prize winning journalist Seymour Hersh. Last May, he published a blockbuster article challenging the entire government story surrounding the death of Osama bin Laden, something I highlighted in the post: U.S. Officials Panic About Seymour Hersh Story; Then Deny His Claims Using Jedi Mind Tricks.

  Well he’s back, and he recently shared more groundbreaking information in a fascinating interview with AlterNet. Here are some choice excerpts:

  Ken Klippenstein: In the book you describe Saudi financial support for the compound in which Osama Bin Laden was being kept in Pakistan. Was that Saudi government officials, private individuals or both?

   

  Seymour Hersh: The Saudis bribed the Pakistanis not to tell us [that the Pakistani government had Bin Laden] because they didn’t want us interrogating Bin Laden (that’s my best guess), because he would’ve talked to us, probably. My guess is, we don’t know anything really about 9/11. We just don’t know. We don’t know what role was played by whom.

  Bingo. We don’t know anything, except that the U.S. government has been lying to the public for 15 years.

  KK: So you don’t know if the hush money was from the Saudi government or private individuals?

   

  SH: The money was from the government … what the Saudis were doing, so I’ve been told, by reasonable people (I haven’t written this) is that they were also passing along tankers of oil for the Pakistanis to resell. That’s really a lot of money.

   

  KK: For the Bin Laden compound?

   

  SH: Yeah, in exchange for being quiet. The Paks traditionally have done security for both Saudi Arabia and UAE.

   

  KK: Do you have any idea how much Saudi Arabia gave Pakistan in hush money?

   

  SH: I have been given numbers, but I haven’t done the work on it so I’m just relaying. I know it was certainly many—you know, we’re talking about four or five years—hundreds of millions [of dollars]. But I don’t have enough to tell you.

   

  KK: Why didn’t they apprehend Bin Laden? Can you imagine the intelligence we could have gotten from him?

   

  SH: The Pakistani high command said go kill him, but for chrissake don’t leave a body, don’t arrest him, just tell them a week later that you killed him in Hindu Kush. That was the plan.

   

  Many sections, particularly in the Urdu-speaking sections, were really very positive about Bin Laden. Significant percentages in some areas supported Bin Laden. They [the Pakistani government] would’ve been under great duress if the average person knew that they’d helped us kill him.

   

  KK: In the book you quote a Joint Chiefs of Staff adviser who said that Brennan told the Saudis to stop arming the extremist rebels in Syria and their weapons will dry up—which seems like a rational request—but then, you point out, the Saudis ramped up arms support.

   

  Seymour Hersh: That’s true.

   

  KK: Did the U.S. do anything to punish the Saudis for it?

   

  SH: Nothing. Of course not. No, no. I’ll tell you what’s going on right now … al Nusra, certainly a jihadist group… has new arms. They’ve got some tanks now—I think the Saudis are supplying stuff. They’ve got tanks now, have a lot of arms, and are staging some operations around Aleppo. There’s a ceasefire and even though they’re not part of it, they obviously took advantage of the ceasefire to resupply. It’s going to be bloody.

   

  KK: Just to be clear, the U.S. hasn’t done anything to punish or at least disincentivize the Saudis from arming our enemies in Syria?

   

  SH: Quite the contrary. The Saudis and Qatar and the Turks put money into those arms [sent to Syrian jihadis].

   

  You’re asking the right questions. Do we say anything? No. Turkey’s Erdogan has played a complete double game: for years he supported and accommodated ISIS. The border was wide open—Hatay Province—guys were going back and forth, bad guys. We know Erdogan’s deeply involved. He’s changing his tune slightly but he’s been deeply involved in this.

   

  Let me talk to you about the sarin story [the sarin gas attack in Ghouta, a suburb near Damascus, which the U.S. government attributed to the Assad regime] because it really is in my craw.  In this article that was this long series of interviews [of Obama] by Jeff Goldberg…he says, without citing the source (you have to presume it was the president because he’s talking to him all the time) that the head of National Intelligence, General [James] Clapper, said to him very early after the [sarin] incident took place, “Hey, it’s not a slam dunk.”

   

  You have to understand in the intelligence community—Tenet [Bush-era CIA director who infamously said Iraqi WMD was a “slam dunk”] is the one who said that about the war in Baghdad—that’s a serious comment. That means you’ve got a problem with the intelligence. As you know I wrote a story that said the chairman of the Joint Chiefs told the president that information the same day. I now know more about it.

   

  The president’s explanation for [not bombing Syria] was that the Syrians agreed that night, rather than be bombed, they’d give up their chemical weapons arsenal, which in this article in the Atlantic, Goldberg said they [the Syrians] had never disclosed before. This is ludicrous. Lavrov [Russia’s Foreign Minister] and Kerry had talked about it for a year—getting rid of the arsenal—because it was under threat from the rebels.

   

  The issue was not that they [the Syrians] suddenly caved in. [Before the Ghouta attack] there was a G-20 summit and Putin and Bashar met for an hour. There was an official briefing from Ben Rhodes and he said they talked about the chemical weapons issue and what to do. The issue was that Bashar couldn’t pay for it—it cost more than a billion bucks. The Russians said, ‘Hey, we can’t pay it all. Oil prices are going down and we’re hurt for money.’ And so, all that happened was we agreed to handle it. We took care of a lot of the costs of it.

   

  Guess what? We had a ship, it was called the Cape Maid, it was parked out in the Med. The Syrians would let us destroy this stuff [the chemical weapons]… there was 1,308 tons that was shipped to the port…and we had, guess what, a forensic unit out there. Wouldn’t we like to really prove—here we have all his sarin and we had sarin from what happened in Ghouta, the UN had a team there and got samples—guess what?

   

  It didn’t match. But we didn’t hear that. I now know it, I’m going to write a lot about it.

   

  Guess what else we know from the forensic analysis we have (we had all the missiles in their arsenal). Nothing in their arsenal had anything close to what was on the ground in Ghouta. A lot of people I know, nobody’s going to go on the record, but the people I know said we couldn’t make a connection, there was no connection between what was given to us by Bashar and what was used in Ghouta. That to me is interesting. That doesn’t prove anything, but it opens up a door to further investigation and further questioning.

  Now watch his interview with Democracy Now, taped earlier today:

  And just like that, conspiracy theory once again becomes conspiracy fact.

  As I tweeted the other day:

  Advice: If there's ever another big terror attack against the U.S. don't be so quick to give up your rights based on a government fairytale.

  — Michael Krieger (@LibertyBlitz) April 21, 2016

  

  

• A Bird's-Eye View Of How The US Economy Is Falling Apart (In 4 Simple Charts)

  Submitted by Tony Sagami via MauldinEconomics.com,

  My college-aged kids love him. I’m not talking about Stephen Curry or Justin Bieber (although they love them too); I’m talking about Bernie Sanders.

  Whether you support him or not, my guess is that most Americans my age are very surprised about his popularity. However, it shouldn’t be a surprise given the economic stress many Americans face.

  The four charts below capture the essence of what I’m talking about…

  A shrinking middle class and a growing lower class

  

  Sadly, roughly 50 million Americans live below the poverty line—the largest number in our nation’s history—and the poorest 40% of all Americans now spend more than 50% of their incomes just on food and housing.

  Consumer sentiment is plummeting

  No wonder that consumer sentiment has been sinking fast, which is a very troubling sign for our consumer-driven economy.

  

  Spending is slowing

  That consumer angst translates into a drop in spending. The Commerce Department reported that retail sales dropped by 0.3% in March, well below the +0.1% gain Wall Street was expecting.

  

  The biggest drop was in auto spending, which was down 2.1%.  One of the weakest sectors, however, was restaurants.

  

  Wages are shrinking

  I suspect the root of the issue is wages… or lack thereof. The reality is that inflation-adjusted wages—despite the recent minimum wage increase in several states—have been shrinking.

  A recent report concluded, “In real terms, the average wage peaked more than 40 years ago.”

  

  Check out these discouraging numbers:
  •    39% of American workers make less than $20,000 a year.
  •    52% of American workers make less than $30,000 a year.
  •    63% of American workers make less than $40,000 a year.
  •    72% of American workers make less than $50,000 a year.

  Debt is piling up

  And it doesn’t help that Americans continue to rack up debt. 

  Example: Outstanding auto loans have hit more than a trillion dollars. With an average balance of $12,000 per person, that consumes nearly 8% of the average borrower’s disposable income!

  No wonder that an estimated 62% of Americans are living paycheck to paycheck.

  And all of us—low, medium, and high income combined—are working longer than ever to pay a growing tax bill. Tax freedom day (the day when the nation as a whole has earned enough to pay the state and federal tax bill for the year) arrived on April 24, according to the nonpartisan Tax Foundation.

  That means all the money we made in the first 114 days of 2016 went to taxes.

  

  

• Malaysian Ringgit Tumbles After 1MDB Default Raises Spectre Of Sovereign Failure

  Update: after widening by 2bps earlier, Malaysia CDS is now +4 at 167bps and starting to move as macro “analysts” finally catch up on the entire story and comprehend the implications.

  * * *

  Malaysian CDS rose to near 3-month highs and the Ringgit has spiked over 300 pips – back near recent lows – after the Malaysian slushfund government investment fund 1MDB is reportedly in default. This is exactly the scenario we laid out last week that initially sent the currency lower and CDS higher, as the Abu Dhabi sovereign wealth fund has by all appearances started a potential waterfall default on Malaysian sovereign debt (due to cross-default triggers at the sovereign).

  As we reported one week ago, Malaysia government investment fund was put into default by the Intl Petroleum Investment Co. Moments ago, the 5 day grace period on the missed $50.3 million payment on the TIAMK 5.75% 2022s privately placed by 1MDB Energy (Langat) expired, and as Bloomberg reported, 1MDB is now officially in default after missing its interest payment.

  The big question now is – as SocGen explores – Given the default of 1MDB, Could a Malaysian Sovereign Default Occur?

  While we await confirmation of whether the missed $50.3m on the TIAMK 5.75% 2022s privately placed by 1MDB Energy (Langat) has been made good as we approach the end of the five-day grace period today (25 April 2016), wire service reports (e.g. Bloomberg) indicate that 1MDB has met with holders of the Malaysian Ringgit (or MYR) SUKUK bonds which were issued by the 1MDB to “seek waivers from triggering cross default”.

   

  We understand that the dispute over the non-payment of the missed $50.3m coupon which was originally due on 18 April 2016 relates to the now widely reported dispute between the two guarantee providers on the 5.75% TIAMK 2022 bonds – namely 1MDB and Abu Dhabi’s International Petroleum Investment Corporation (or IPIC). The dispute relates to the alleged non-conformance of terms to a ‘side’ agreement between the two parties made in May/June 2015 in relation to IPIC assumin  the obligations on the $3.5bn of 1MDB bonds issued in 2012, including the TIAMK 2022s (both the 5.75% TIAMK 2022s – which were privately placed – and the 5.99% TIAMK 2022 public bonds).

   

  We understand that the latest “waivers from triggering cross default” were sought by holders of MYR 5bn of SUKUK bonds issued by 1MDB and which carry an explicit guarantee by the Government of Malaysia (or GoM). The MYR SUKUKs were presumably issued by 1MDB’s predecessor, the “Terengganu Investment Authority Berhad” (or TIA) in May 2009, prior to the name change to 1MDB in September 2009 following its takeover by the federal government. We understand that the MYR SUKUKs were issued in eight tranches of 5.75% 30-year paper of between MYR600m and MYR650m for MYR5bn in total – they will mature in May 2039. The language of the explicit guarantee states that a default will occur (and possibly cross-default) when (among other things): “… the Issuer fails to or makes default in the payment of any amount (whether principal, profit or any other amount) due from it under the IMTN [i.e. the SUKUK bonds] or any of the other transaction documents on the due date (whether formally demanded or not) or on demand …”. We believe the waiver sought from the holders of the MYR SUKUK issue could be to avoid triggers on the GoM’s other debt/liabilities.

   

  It is also worth keeping in mind the following disclosures made by the GoM in the Supplement (dated 19 April 2016) to their Offering Circular (dated 11 April 2016) for the dual-tranche $2bn of USD SUKUK bonds (10-year and 30-year) that was issued last week:

   

  “As at the date of this Supplement, this dispute [i.e. between 1MDB and IPIC] concerning the obligations of 1MDB and IPIC under the IPIC Term Sheet] has yet to be resolved. If the interest payments under the 2022 Notes are not made on or before April 25, 2016, it would constitute an event of default thereunder, which could result in acceleration of the 2022 Notes and could result in cross-defaults or cross-acceleration of other indebtedness of 1MDB by the relevant creditors (emphasis ours). The total principal amount of such other relevant indebtedness of 1MDB which could become due and payable as a result of the foregoing, and to which the Government is potentially exposed by way of guarantees for such debt is RM5.8 billion [USD1.48bn equiv.]. In addition, the Government is potentially liable for up to U.S.$3.0 billion in principal, plus interest, under its letter of support as set out above [namely the OGIMK 2023s]. If 1MDB were unable to make such payments as they become due, the Government does not believe that any amounts that it would be required to pay with respect to the indebtedness of 1MDB would be material to the Government.”

   

  Should the $50.3m coupon for the 5.75% TIAMK 2022s remain unpaid after today, we would think (although details are unavailable) the coupon would need to be paid within ten days of the bond trustees invoking the bond guarantee after receipt of the 75% quorum. In the meantime, the non-payment of the missed coupon is especially credit negative for the IPIC bond complex, especially given the existence of cross-default language in the IPIC bond complex which we understand (based on reports e.g. The Edge) could total some $16bn of the company’s bond debt.

   

  As for the 1MDB bond complex, despite the lack of cross-default language with regards to the the 4.22% OGIMK 2023s and the 5.99% TAIMK 2022, the presence of the “explicit” guarantee by the GoM in relation to the MYR SUKUK bonds could risk cross-default triggers at the sovereign. We note that 5-year MALAY CDS are currently indicated at 162 (vs ~155 as at the end of last week). The 4.22% OGIMK (which carry a Letter of Support from the GoM) were last indicated (on Bloomberg at 89.5 /91.00 (or at Z+469 bp), with the 5.99% TIAMK 2022s at 99.125 100.50 (or at Z+463 bp).

  *  *  *

  For now CDS is edging higher but MYR is the market moving fastest…

  

  

  

• It Is Harder To Become A Chinese Civil Servant Than Get Into Princeton

  A record-setting 115,831 Chinese people lined up for Hubei province's civil services exam on Friday… all knowing that the 6,500 open positions meant the chances of acceptance were lower than that of getting into Princeton or Yale…

  Up from 106,000 last year, China People's Daily reports this year's applicants the most numerous ever…

  

   

  Applicants across 25 cities sat for China's national exam for access to the civil service, comprising tests of professional ability and language.

  

  

  Each year, authorities are extremely careful to avoid irregularities, but this year, the human resources department of east China's Jiangxi Province said on Saturday evening that it has started investigating the alledged leak of the provincial civil service exam.

  The annual exams kicked off on Saturday in several provinces across China including Jiangxi. However, some people posted on their social network accounts suggesting the exam information might have been leaked because the questions were the same as on their practice materials.

   

  In addition, a few people were spotted distributing the answers for the tests outside the exam sites after the first test in the morning concluded.

   

  

   

  As the exam is conducted jointly, several provinces are involved.

   

  So far, only Jiangxi Province has responded to the situation.

   

  China's revised criminal laws shows zero-tolerance to exam-related misconduct and has defined cheating on major national exams as a criminal crime.

   

  

   

  People found guilty of cheating face up to seven years in jail.

  

  

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• GaWD SaVe THe QUeeN…

  

  

• Bernie Sanders Is A "Testament To American Suckerdom"

  Submitted by Jeff Deist via The Mises Institute,

  This article from the Free Beacon about Bernie Sanders being kicked out of a “hippie commune” in 1971 reads like something from The Onion. Bernie, age 30(!) at that point, was like a bad college roommate who preferred late night political discussions to housework and cleaning. And based on uncontested reports of his nonexistent career path, we can safely assume he contributed nothing to the communal finances.

  That Bernie Sanders – a shiftless layabout who openly joined socialist and communist groups – can even sniff the US presidency is a testament to American suckerdom and an enduring fetish for collectivism among rich westerners.

  But the question of communes is an interesting one for libertarians. Under what conditions, with what people, and for how long can collectivism work? Economics helps explain why communal living (beyond family groups) tends to fail because of bad incentives, but it alone doesn’t explain the political and sociological elements. 

  Voluntary communal living is not per se impossible, in small homogeneous groups with close-knit identities and deeply shared values. Israeli kibbutzim are one keen example, although most today employ some elements of private property ownership and differing wages for various jobs. Amish and Mennonite communities in the US are another, with the interesting feature of a “rumspringa” period where young people are permitted to sample modern life before deciding to commit to the church and community.    

  Milton Friedman, writing in Chapter 5 of Free to Choose, had this to say about kibbutz communities in Israel:

  Egalitarians in the United States may object that the fewness of communes and their fragility reflect the opprobrium that a predominately “capitalist” society visits on such communes and the resulting discrimination to which they are subjected. That may be true for the United States, but as Robert Nozick has pointed out, there is one country where that is not true, where, on the contrary, egalitarian communes are highly regarded and prized. That country is Israel.

   

  …

   

  Everyone is free to join or leave a kibbutz, and kibbutzim have been viable social organizations. Yet at no time, and certainly not today, have more than about 5 percent of the Jewish population chosen to be members of a kibbutz. That percentage can be regarded as an upper estimate of the fraction of people who would voluntarily choose a system enforcing equality of outcome in preference to a system characterized by inequality, diversity, and opportunity.

  Murray Rothbard, critiquing Karl Polanyi's The Great Transformation, had a typically trenchant view:

  Anyone who wants to can, in a free society, even join a voluntary commune, like Brook Farm or an Israeli kibbutz, and lead as blissfully communistic life as he or she wishes. Since everyone still has the option to do so, since anyone has the option to go off to a desert island or join a commune, why is Polanyi bitter about the market?

  Although US communes enjoyed a resurgence in the 1960s and 70s, their memberships never approached 5% of the population. And their abrupt decline demonstrates that communal living is both hard to sustain and hard to pass on to children.

  What must be emphasized is this: in Ron Paul’s America, or Hans Hoppe’s private law society, voluntary “socialist” arrangements would be perfectly allowable and legal. But libertarian communities are never permitted in statist societies.

  Libertarianism has nothing to say about private communities except this: force and fraud are not permitted. So thousands or even millions of people could come together in areas like San Francisco and voluntarily create single-payer health schemes, “dues” based on income, free schools, collective child-raising, etc. — the whole panoply of progressive programs.

  But the opposite is not true: in Bernie Sanders’s America, libertarians cannot opt out of income taxes, Selective Service, Social Security, Medicare, drug laws, property restrictions, federal regulations, or a host of state and local laws. There are no libertarian communities permitted within the geographical confines of the US.

  So while pro-Bernie progressives are free to create their own communities in Ron Paul’s world, Ron Paul libertarians are compelled by force to participate in Bernie’s world. That is the fundamental difference between liberty and socialism, between voluntaryism and collectivism, between statism and private property. Nothing prevents progressives from living as they wish now, except the very things they viciously oppose: decentralization, secession, and local control.

  Progressives hate hearing that taxation is theft, that government is force, and that every rule and regulation implies violence for noncompliance. It offends them on a visceral level, because their entire worldview hangs on the myth of social contract. But their currency is violence, and real contracts — in the form of voluntary, private communities — are not allowed.

  

  

• "They Should Be Met By Force" – US General Warns Russia Future Fly-Bys "Won't End Well For You"

  By Richard Sisk, first posted on Military.com

  Russia should be warned that its dangerous flybys of U.S. ships and planes could be met by force, President Barack Obama’s nominee as the next NATO and U.S. European Command commander said Thursday.

  “Sir, I believe that should be known — yes,” Army Gen. Curtis M. “Mike” Scaparrotti said when asked by Sen. John McCain whether Russia should be told that the U.S. would take action if American lives were endangered.

  Pursuing the same line of questioning, Sen. Joe Donnelly, an Indiana Democrat, asked Scaparrotti whether the Russians should be told that “next time it doesn’t end well for you.”

  The general responded that “we should engage them and make clear what’s acceptable. Once we make that known, we have to enforce it.

  “I think they’re pushing the envelope in terms of our resolve,” Scaparrotti added. “It’s absolutely reckless, it’s unjustified and it’s dangerous.” As NATO commander, he said one of his first actions would be to review the rules of engagement for U.S. and allied forces in the region.

  

  On Monday, two Russian Su-24 fighters made numerous, close-range and low-altitude passes while the U.S. guided missile destroyer USS Donald Cook was conducting landing drills with helicopters in the Baltic Sea.

  On Tuesday, a Russian helicopter circled around the Cook seven times at a low altitude. About 40 minutes later, two Su-24s made 11 close-range and low-altitude passes.

  Secretary of State John Kerry later said that the sailors of the Cook would have been justified in shooting down the Russian fighters.
  “It’s unprofessional, and under the rules of engagement that could have been a shoot down, so people need to understand that this is serious business, and the United States is not going to be intimidated on the high seas,” Kerry said in an interview on CNN Espanol.
  Scaparrotti, now commander of U.S. Forces Korea, was testifying before the Senate Armed Services Committee at what could be called a historic confirmation hearing.

  Seated next to him at the witness table was Air Force Gen. Lori Robinson, currently commander of Pacific Air Forces, who has been nominated as the next commander of U.S. Northern Command and the North American Aerospace Defense Command (NORAD). If confirmed, Robinson would become the first woman to command a combatant command.

  Both Robinson and Scaparrotti appeared headed to easy confirmation. “I look forward to moving your nominations through the U.S. Senate,” said McCain, an Arizona Republican and the SASC chairman.

  

  

• Why Voters Will Stay Angry

  From the supporters of Donald Trump to the street protesters of southern Europe, voters around the world are mad as hell. Inequality, immigration, and the establishment's perceived indifference are firing up electorates in a way that's rarely been seen before. As the following charts from Bloomberg show, the forces shaping the disruption of global politics have been building for years and aren't about to diminish…

  The world's middle classes are getting poorer

  The share of wealth owned by the middle class declined in every part of the world on a relative basis

  

  U.S. workers' share of income has dropped to near the lowest since World War II

  

  And in the past century, the rich have gotten markedly richer

  

  Incomes in Europe's southern crisis countries have fallen since 2009, while rising elsewhere

  

   

  Things are even worse for young people

  In Spain and Greece, unemployment among those under 25 is still close to 40 percent despite a slight improvement in recent years
  

  U.S. student debt is soaring, while median pay for recent college graduates has barely budged

  

  Parents in major western countries are increasingly worried about their children's prospects

  

   

  Immigration and war are compounding the anxiety

  European countries are seeing unprecedented flows of refugees seeking asylum and have little power to stop them within the passport-free zone

  

  As Syria's implosion sends millions of refugees toward the EU, more voters choose immigration as a top concern

  

  Americans worry about immigration more than they did 14 years ago

  

   

  All this is causing politics to fragment

  Last year, only 19% of Americans trusted their government "just about always" or "most of the time" – down from 54% after the 9/11 attacks

  

  As measured by historical voting in the U.S. House of Representatives, the two U.S. political parties have moved away from the center in the past 40 years

  

  It's the same picture in Europe as distrust of government has surged, to a high of 84% in Spain

  

   

  That's all helping insurgent parties storm the region's national parliaments

  Political newcomers have gained far greater share in recent elections, and established parties in some cases have withered away

  

   

  Asia is bucking the trend. So far

  Asia has largely been exempt from the West's discontent, in part because incomes have risen so rapidly

  

  But unrest can't be ruled out, especially as China's growth miracle recedes. Already workers' strikes are becoming more and more widespread

  

   

  Upcoming elections with potential to cause more chaos…

  Brexit, June 23, 2016
  Polls*:
  36% stay
  36% leave
  28% don't know

  U.S., November 2016
  Democrat Hillary Clinton leads Republican Donald Trump in the latest average of polls on a head-to-head comparison* of the parties' front-runners. Yet that matchup is far from assured, as Republican power brokers are exploring ways to keep Trump from claiming the nomination at the party's convention in July and pushing his closest rival, Senator Ted Cruz, as the preferred alternative in the remaining state nominating contests.

  France, May 2017
  First-round voting preference:
  27% National Front's Marine Le Pen
  22% President Francois Hollande
  21% Former president Nicolas Sarkozy

  Germany, around summer 2017
  While national polls show Angela Merkel's Christian Democratic Union far ahead of the second-biggest party, the Social Democrats, the insurgent Alternative for Germany could cause trouble. Support for the anti-immigrant party surged in recent regional elections.

   

   

  Source: Bloomberg.com

  

  

• The British Response To Obama "Why Should We Take Advice From A President Who Has Surrendered The World To Chaos?"

  Following Obama’s stunning foray into UK politics with his anti-Brexit oped (which surprised both the pro and anti-Brexit camp as there was little to be gained from Obama’s gracious entrance of an elephant in a UK political China store) on Thursday evening, one person who had a rather visceral reaction was London Mayor Boris Johnson who slammed Obama’s “hypocritical” Brexit diatribe and accused Obama “ancestral dislike of the British empire – of which Churchill had been such a fervent defender” on being part-Kenyan.

  Needless to say at this point any rational dialog ended, and even though Johnson had many valid points, they all got lost in the quasi ad hominem din.

  However, a far more tempered op-ed appeared in The Telegraph by Janet Daley, one in which she does not invoke Obama’s African heritage, but rather his achievements, or lack thereof, in the global arena, and asks point blank:”Why should we take advice from a president who has surrendered the world to chaos?“

  Why indeed?

  This is her take:

  I wonder who in Downing Street briefed Barack Obama’s team on the wording of his friendly warning to the British. Somebody obviously pointed out that the population of this country retained a quaint obsession with the Second World War, and would therefore treat any reference to the glorious dead as irreproachable. So the President invoked the European graves of those American servicemen who died to protect – well, what exactly?

  I thought it was the democratic values and reverence for national independence that Britain shared with the US. Did Mr Obama have any sense at all that what he was now urging the British electorate to accept was precisely the surrender of those sacred principles of democratically accountable government and self-determination for which the combined American and British forces had made their ultimate sacrifice?

  Could this bizarre intervention have been more cynical or wilfully misinformed? In the end, it seemed to come down to trade advantages – to what might once, back in the day, have been called the global interests of US corporate capitalism. Mr Obama even made specific reference in his article in Friday’s Daily Telegraph to the importance of current negotiations on the Transatlantic Trade and Investment Partnership (TTIP), which would reduce barriers to US business interests in the European Union.

  On the same day, 38 Degrees – a front group for the more proactive elements in the public sector unions – took out full-page newspaper adverts campaigning against the adoption of TTIP (“…no trade deal should give corporations more power than people”). If the Labour Left were not in such disingenuous disarray, they could be making a meal of this. In any event, unnamed US trade officials were being ominously quoted as saying that, in the event of Brexit, the UK would come very low on America’s list of priorities for new trade agreements.

  Then Mr Obama himself abandoned such subtlety in his joint press conference with the Prime Minister. Should the UK go its own way, he said, there would be no trade agreement with the US any time soon. Maybe some time down the line, as he put it, we could work something out. But the UK would be “in the back of the queue” because the US would be dealing with the big boys. So this isn’t a warning: it’s a threat. Stay in the EU and make way for American competitors, or else.

  The iron fist of a message inside that velvet glove of carefully recited claptrap about the special relationship is that Obama’s America wants us to stay in the conveniently monolithic, homogeneous trading bloc with which it can most easily do business. In other words, the tentative US economic recovery needs us to sacrifice our country’s judicial independence and the primacy of our parliamentary system, just as the US once sacrificed so many of its young military officers for our survival. That’s the deal.

  But there is no indication, either in Mr Obama’s words or his actual foreign policy, that America would now be prepared to make another such sacrifice for its allies. The withdrawal of the US from world leadership – from being what Mr Obama’s people refer to disparagingly as “the world’s policeman” – has been one of the most dramatic developments on the international stage of the past eight years.

  Into the vacuum left by that withdrawal has stepped (or strode) Vladimir Putin, who can’t believe his luck. At just the moment when Russian national pride desperately needed a renaissance after the mortifying collapse of the Soviet Union and the infuriating rise of all those Lilliputian upstarts in the old Eastern Bloc, along comes a US president who announces in no uncertain terms that America wants to pull out of the global power game. Make no mistake, this began long before the funk over removing Assad in Syria – which Mr Obama has outrageously blamed on David Cameron’s failure to win a parliamentary vote – or the “leading from behind” fiasco in Libya, which Mr Obama also blames on Mr Cameron for having the audacity to think that the US might have been prepared to lead from the front. No, the Obama isolationist doctrine was there from the start: deliberate and consciously chosen.

  It began in his first term as president when he visited Eastern Europe and gave a series of speeches to make the point: the countries that had once required America’s protection from a Soviet superpower were now emerging democracies and fledgling free-market success stories. They could take care of themselves militarily in future. The interceptor missiles that had been scheduled to arrive in Poland, courtesy of the US, would not be delivered. Although they had never been intended as any sort of threat against Moscow, Obama still allowed this move to be seen as part of his “reset” of relations with post-Soviet Russia.

  At home, this was presented as a refusal to pay forever for the protection of a Europe that was no longer threatened by aggressive Communism. The disproportionate share of the Nato budget that the US had been stumping up could be better spent on the kind of welfare and health provision that Europeans took for granted.

  All this suited Putin’s self-image as a global strongman perfectly. America and the West had definitively won the Cold War, and were now apparently unconcerned that they might lose the peace. Putin saw clearly that no one would stand in his way when he launched his irredentist assault on eastern Ukraine. Not only did he annex Crimea but the forces he had unleashed shot a civilian airliner out of the sky – which might have been seen as a contemporary sinking of the Lusitania. He went from triumph to triumph, playing hard-faced poker against Washington’s half-hearted attempt at chess. In the Middle East, Obama’s White House scarcely shows any interest now that it is no longer dependent on the region for oil. It can only be roused to do what is minimally required to keep Americans safe from Isil terrorism.

  But permitting Russia’s proxy, Assad, to remain in place in Syria, as American inaction does, drives every dissident in the region into the arms of anti-Western extremism, and puts American (and European) security at the mercy of a Russia-Syria alliance. Not to mention the salient fact that Assad’s genocidal tyranny fuelled the migrant rush to the European borders. Was Mr Obama aware of that great success story of EU collaboration, in which an emergency was turned into an international tragedy by bureaucratic incompetence and a complete collapse of cooperative goodwill? The abandonment of border checks inside the EU, combined with the unilateral decision by Germany to encourage mass entry, created a living hell in which organised people-trafficking on an industrial scale became a fixture of life.

  When this referendum began, what seems an eternity ago, I was unsure how I would vote. Membership of the EU on a day-to-day basis is pretty much all gain for me, because I am an affluent professional who benefits from the supply of inexpensive domestic help, willing tradesmen and convenient travel that the EU provides. Unlike those whose wages are being undercut by cheap imported labour, or who cannot afford to buy their own homes because of the pressure on housing from unlimited immigration, I have lost nothing.

  But I believe in democratic legitimacy, which means paying attention to people who do not have my advantages. So should I go for self-interest, or for political principle? Watching this campaign, with its unscrupulous attempts to bully and terrorise a brave and conscientious electorate, has made up my mind. I shall be voting for Leave.

  

• Chinese Dragon: Breathing Credit Fumes

  Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

  Economic forecasting, no matter how complex the underlying model may be, is essentially about extrapolating historical trends. We showed last week how economic models completely fail to pick up on structural shifts using Japan as an example. On the other hand, if an economy doesn’t really change much, as in the case of Australia over the last thirty years, model “forecast” are generally quite accurate. However, spending millions of dollars to do the job of a ruler doesn’t seem like wise resource allocation to us. That said there’s obviously a very limited market for model based GDP forecast and most of them are not exchanged among pure market based players, but rather between governmental funded agencies. True, Wall Street spews out their sell-side GDP propaganda on a regular basis, but claiming international banking is anything akin to a free market is absurd. GDP forecasting is something only wasteful organizations do and that should tell you all you need to know about these exercises in futility. 

  

  Take the latest IMF forecast for China as a half decent example. According to the IMF, the credit junkie known as China, which needed one trillion dollar in fresh credit in the first quarter alone to create GDP “growth” of somewhere between 6.3 and 6.7 per cent (265 billion dollars for the quarter) will continue to race ahead with six per cent growth for the foreseeable future. The Chinese economy is 100 per cent dependent on ever more money and credit expansion to maintain its completely unsustainable momentum and will very soon come crashing down. And by the way, China’s reported GDP numbers are obviously grossly overstated anyway.

   

  

  Peddling IMF-fiction though becomes even clearer when we reverse engineer their GDP forecast based on traditional growth models. We know the Chinese labour force is shrinking and the millions of underemployed peasants which used to be the backbone of China’s success are close to exhausted. As the labour force contracts and more resources are spent on taking care of the unproductive members of society savings, and hence investments, will also contribute less to growth going forward.

  So how do IMF economists come up with their 6 per cent forecast? Simple, they add to the total factor productivity assuming China with its credit dependence and excess capacity somehow will suddenly become much better at allocating and utilizing its resources. The problem with this line of thinking is that a more efficient resource allocation today will crush all those factories with excess capacity. In other words, to boost TFP a short term recession is a necessity. Avoiding the recession, id est using ever scarcer capital to fund zombie businesses will wreak havoc with future TFP growth.

  In conclusion, the chart below is utter nonsense as the internal dynamics between capital, labour and productivity does not add up.

  

  True believers want to think China will continue to grow at breakneck speed and the IMF is feeding them what they want to hear to lift animal spirits accordingly. When the house of credit-cards comes crumbling down the IMF will once again be proven to have completely missed an obvious structural shift as the Chinese economy will linger on like Japan has done over the last three decades.

  

  

• Ron Paul Asks "What Did Fed Chairman Yellen Tell Obama?"

  As we reported yesterday, following the meeting held between Obama and Yellen last Monday, one reader tried to get some additional information on what was exchanged between the two most important people in the world beyond the cursory White House statement which is reposted below:

  The President and Chair Yellen met this afternoon in the Oval Office as part of an ongoing dialogue on the state of the economy. They discussed both the near and long-term growth outlook, the state of the labor market, inequality, and potential risks to the economy, both in the United States and globally. They also discussed the significant progress that has been made through the continued implementation of Wall Street Reform to strengthen our financial system and protect consumers.

  Dissatisfied with the token boilerplate language, the reader requested the minutes from said meeting. The Fed’s response: “we don’t keep those.“

  

   

  It goes without saying that with both the White House and the Fed eager to prevent the disclosure of what was said leaking into the public arena, that it had to be quite important.

  How improtant? Here is Ron Paul with his own take on the question of:

  “What Did Fed Chairman Yellen Tell Obama?

   Last week, President Obama and Vice President Biden held a hastily arranged secret meeting with Federal Reserve Chairman Janet Yellen. According to the one paragraph statement released by the White House following the meeting, Yellen, Obama, and Biden simply “exchanged notes” about the economy and the progress of financial reform. Because the meeting was held behind closed doors, the American people have no way of knowing what else the three might have discussed.

  Yellen’s secret meeting at the White House followed an emergency secret Federal Reserve Board meeting. The Fed then held another secret meeting to discuss bank reform. These secret meetings come on the heels of the Federal Reserve Bank of Atlanta’s estimate that first quarter GDP growth was .01 percent, dangerously close to the official definition of recession.

  Thus the real reason for all these secret meetings could be a panic that the Fed’s eight year explosion of money creation has not just failed to revive the economy, but is about to cause another major market meltdown.

  Establishment politicians and economists find the Fed’s failures puzzling. According to the Keynesian paradigm that still dominates the thinking of most policymakers, the Fed’s money creation should have produced such robust growth that today the Fed would be raising interest rates to prevent the economy from “overheating.”

  The Fed’s response to its failures is to find new ways to pump money into the economy. Hence the Fed is actually considering implementing “negative interest rates.” Negative interest rates are a hidden tax on savings. Negative interest rates may create the short-term illusion of growth, but, by discouraging savings, they will cause tremendous long-term economic damage.

  Even as Yellen admits that the Fed “has not taken negative interest rates off the table,” she and other Fed officials are still promising to raise rates this year. The Federal Reserve needs to promise future rate increases in order to stop nervous investors from fleeing US markets and challenging the dollar’s reserve currency status.

  The Fed can only keep the wolves at bay with promises of future rate increases for so long before its polices cause a major dollar crisis. However, raising rates could also cause major economic problems. Higher interest rates will hurt the millions of Americans struggling with student loan, credit card, and other forms of debt. Already over 40 percent of Americans who owe student loan debt are defaulting on their payments. If Federal Reserve policies increase the burden of student loan debt, the number of defaults will dramatically increase leading to a bursting of the student loan bubble.

  By increasing the federal government’s cost of borrowing, an interest rate increase will also make it harder for the federal government to manage its debt. Increased costs of debt financing will place increased burden on the American people and could be the last straw that finally pushes the federal government into a Greek-style financial crisis.

  The no-win situation the Fed finds itself in is a sign that we are reaching the inevitable collapse of the fiat currency system. Unless immediate steps are taken to manage the transition, this collapse could usher in an economic catastrophe dwarfing the Great Depression. Therefore, those of us who know the truth must redouble our efforts to spread the ideas of liberty.

  If we are successful we may be able to force Congress to properly manage the transition by cutting spending in all areas and auditing, then ending, the Federal Reserve. We may also be able to ensure the current crisis ends not just the Fed but the entire welfare-warfare state.

  

  

• White Lies Matter

  Submitted by Matthew Continetti via NationalReview.com,

  How bad is Hillary Clinton’s image? This bad:

  Fifty-six percent of Americans view her unfavorably, according to the Huffington Post pollster trend.

   

  One-third of New York Democratic primary voters say she is neither honest nor trustworthy.

  Her image, writes Dan Balz, “is at or near record lows among major demographic groups.”

  Like, all of them.

  Among men, she is at minus 40. Among women, she is at minus 9. Among whites, she is at minus 39. Among white women, she is at minus 25. Among white men, she is 17 positive, 72 negative. Her favorability among whites at this point in the election cycle is worse than President Obama’s ever has been. . . . Among African Americans nationally the NBC–Wall Street Journal poll shows her with a net positive of 51 points. But that’s down 13 points from her first-quarter average and is about at her lowest ever. Among Latinos, her net positive is just two points, down from plus 21 points during the first quarter.

  Emphasis mine. No doubt some of this degradation is related to a primary that has turned out to be much more competitive than Clinton imagined. But it’s also worth asking why that campaign has lasted so much longer than we assumed.

  A lot of the reason is Clinton: her tin ear, her aloofness, her phony eagerness to please, her suspicion of the press and of outsiders, her — let us say –complicated relationship with the truth, the blithe way in which she dissembles and deceives.

  Over the course of three decades in public life Hillary Clinton has misspoken and misled the public and mismanaged herself and her team to such a degree that voters cannot help noticing. Yes, many of her falsehoods are white lies. But white lies accumulate. They matter. Not only do they harm the truth. They are turning Clinton into one of the least popular candidates in history.

  Since 1998 Clinton has blamed her poor reputation on the vast right-wing conspiracy. Whitewater, Travelgate, Filegate, the health-care disaster — it was all the fault of the Republicans. What’s forgotten is that Clinton has been lying in the service of her ambitions — most notably by protecting her husband from the truth of his infidelities — since long before Bill ran for president. Nor can she blame conservatives for her failure to win the Democratic nomination eight years ago. Hillary can’t help being secretive and deceptive. It’s her nature.

  Think of the transcripts of the speeches she gave to Wall Street audiences. Bernie Sanders would like Clinton to release them. She refuses. Why? “When everybody agrees to do that, I will as well, because I think it’s important we all abide by the same standards.” What baloney. Democratic primary voters see the obvious: Hillary is hiding behind a standard she invented.

  What the other candidates have said to bankers isn’t the issue. No one expects Donald Trump to have been anything other than fulsome in his praise of Wall Street. He probably spoke mainly about himself anyway. What Sanders wants to know is if Clinton said one thing to the financial-services industry and another to the public. Fair question. Especially considering the lady we’re talking about.

  It’s also a question that Clinton could settle rather easily in her favor. Other than the most committed of Bernie Bros, does anyone really think Clinton offered to sell her soul to Lloyd Blankfein, at least on stage? The transcripts won’t contain bombshells but platitudes — thank you so much for having me, it’s great to be here, Bill and I really appreciate the socially conscious investment and work you’re doing for young people around the world, diversity, inclusion, hot sauce, Chelsea built a clinic in Haiti, climate change, I’m a grandma, blah, blah, blah. You won’t be shocked by what she said. You’ll be bored.

  The act of concealment transforms the banal into the insidious. I sometimes wonder if Clinton does this just to give her rather humdrum and lackluster public life a frisson of excitement and danger, or to goad her enemies into overreaction.

  Take the emails. She built the private server to shield her privacy. But the public learned of the server nonetheless. The public always finds out. A judge ordered the emails released. Thus the result of Clinton’s actions was the very opposite of her intent.

  It remains to be seen whether the FBI will indict her for compromising national security, though I rather doubt that will happen. There is no smoking gun. The emails themselves show Clinton to be a tech ignoramus, a workaholic, harried by the pace of events, self-interested, paranoid, dependent on a few close advisers. Nothing we didn’t already know.

  But that didn’t stop Clinton from lying about it. Never does. “The secrecy and the closed nature of her dealings generate problems of their own, which in turn prompt efforts to restrict information and draw even more tightly inside a group of intimates,” wrote Sarah Ellison last year in Vanity Fair. “It is a vicious circle.” And the person responsible for keeping the circle going is none other than the candidate herself: circumspect, wary, so damaged by her years in the public eye that she trusts no one. And receives no trust in return.

  

  

• China's Brave New Math: 24 Of 28 Provinces Report Higher GDP Than National Average

  There is a saying that the whole is greater than the sum of its part. This may be true everywhere, except in China, where the total is whatever some goalseek machine decides it is.

  We first saw China’s flagrant manipulation of data when the nation released its “better than expected” trade “data” two weeks ago. As shown in the chart below, when it comes to the biggest contributor, imports from Hong Kong, it was beyond simply grotesque and had entered the sublimely ridiculous.

  

   

  Then last weekend, following the release of China’s official national GDP print of 6.7%, China also released its sequential GDP growth of 1.1% which, when annualized, one got a number of 4.5%.  Just as bad, based on the accumulated quarter-on-quarter data over the last year, annual growth in 1Q was just 6.3% – substantially below the NBS’s 6.7% reading for year-on-year growth.

  

   

  Then over the weekend, China’s farcical “data” entered the twilight zone, when 24 of 28 Chinese province-level regions reported GDP that was higher than the national figure of 6.7%.

  As China Radio International reports, 28 of 32 Chinese provinces, municipalities and autonomous regions have released their first-quarter GDP growth figures, with Chongqing and the Tibet Autonomous Region taking the lead.

  24 of the provincial-level regions reported rates above the national figure of 6.7%, while places like Jilin found themselves at the bottom of the list with a 6.2% growth. Two other provinces in the country’s northeast, Liaoning and Heilongjiang, have not revealed their numbers yet as well as central Shanxi. 

  

   

  The immediate spin was even more hilarious: not even stepping for second to appreciate that 85% of provinces “reported” numbers that were greater than the average, a professor Liu Yuanchun at the Renmin University of China said “the figures show the government’s stimulus policies are producing results, which signal stable growth.”

  Actually, what the figures show is that China not only continues to fabricate its data with every passing quarter, but it has gotten to the point where it no longer cares if the data makes no sense at all and the government is exposed lying with every incremental data release.

  Considering China once again is desperate to recreate its massive debt-fueled capacity glut, one would think it could afford at least a handful of “data” quality control inespectors to make sure that the presented “data package” is at least modestly believable.

  That said, as CRI adds, “China’s warming property market is also said to have contributed to the better-than-expected GDP numbers. An earlier survey shows that prices of new homes continued to grow in most Chinese cities, as the country is trying to rid overstock.”

  That is surely the case if only for a few more months: the problem as we showed last week is that any “growth”, is incredible as it may be, is entirely on the back of a record $1 trillion in new loan injections in the first quarter.

  

   

  And since only a portion of these funds have once again entered the economy, the rest have gone on to create the latest and greatest commodity bubble China has ever seen, one we profiled yesterday with this stunning chart showing that, according to Deutsche Bank, the onshore China commodity markets this week traded (conservatively) $350bn notional, a 17x increase on the $20bn notional that traded on Feb 1st 2016 i.e. a month ago (is it coincidence that the notional is about the same as at the peak of the equity frenzy?).

  

  There is a problem for China: while in the past it may have avoided international mainstream media attention, this time it is being immediately called out on its numbers:  As the FT reported earlier today, “China’s total debt rose to a record 237 percent of gross domestic product in the first quarter, far above emerging-market counterparts, raising the risk of a financial crisis or a prolonged slowdown in growth, economists warn. While the absolute size of China’s debt load is a concern, more worrying is the speed at which it has accumulated — Chinese debt was only 148 percent of GDP at the end of 2007.”

  And while we welcome the MSM’s focus to a topic we have been covering since 2012, we would like to make a correction: China’s total debt/GDP is not 237%, but instead as we reported back in January, was over 100% higher, or 346%. And since in the subsequent three months, China added another $1 trillion in loans or about 10% of GDP (and who knows how much corporate debt), it is safe to say that as of this moment, China’s real total debt/GDP is now well over 350% and rising exponentially fast.

  So aside from rigged numbers, a commodity bubble and newly exploding debt creation, everything else is ok with China and all those fears about a Chinese hard landing that were so prevalent 4 months ago can be safely swept away…

  

  

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