Today’s News 27th April 2016

  • GOP MeNTaL MiDGeTS!

    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.”

    US Secretary of State John Kerry (L) and Saudi Foreign Minister Adel al-Jubeir shake hands after speaking to the media together at King Salman Regional Air Base in Riyadh, Saudi Arabia, January 23, 2016.
     
     
    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.

    Qatar's Minister of Energy and Industry Mohammed Saleh al-Sada (C),Saudi Arabia's minister of Oil and Mineral Resources Ali al-Naimi (C-L), Venezuela's minister of petroleum and mining Eulogio Del Pino (L), and Russia's Energy Minister Alexander Novak (C-R) attend a press conference on February 16, 2016 in the Qatari capital Doha

    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.  

    New york - 9/11 memorial
     
     

    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…

     

    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…

     

    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

    Trump RI

    Trump MD

    Trump CT

    Trump PA

    Hillary DE

    Hillary MD

     

     

    *  *  *

    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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Today’s News 26th April 2016

  • "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.

    Screen Shot 2016-04-25 at 8.55.11 AM

    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:

  • 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

    These_4_Charts_Give_a_Bird’s-Eye_View_of_How_the_US_Economy_Is_Falling_Apart

    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.

    These_4_Charts_Give_a_Bird’s-Eye_View_of_How_the_US_Economy_Is_Falling_Apart

    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.

    These_4_Charts_Give_a_Bird’s-Eye_View_of_How_the_US_Economy_Is_Falling_Apart

    The biggest drop was in auto spending, which was down 2.1%.  One of the weakest sectors, however, was restaurants.

    These_4_Charts_Give_a_Bird’s-Eye_View_of_How_the_US_Economy_Is_Falling_Apart

    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.”

    These_4_Charts_Give_a_Bird’s-Eye_View_of_How_the_US_Economy_Is_Falling_Apart

    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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Today’s News 25th April 2016

  • GaWD SaVe THe QUeeN…

    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. 

    IMF Forecast for Australia since 1990

    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.

     China GDP growth Q1 2016

    China TSF Q12016

    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.

    China GDP Decomposition

    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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Today’s News 24th April 2016

  • Is This The End Of The U.S Dollar? Geopolitical Moves "Obliterate U.S Petrodollar Hegemony"

    Submitted by Mac Slavo via SHTFPlan.com,

    It seems the end really is nigh for the U.S. dollar.

    And the mudfight for global dominance and currency war couldn’t be more ugly or dramatic.

    The Saudis are now openly threatening to take down the U.S. economy in the ongoing fallout over collapsing oil prices and tense geopolitical events involving the 9/11 cover-up. The New York Times reports:

    Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

    China has been working for years to establish global currency status, and will strengthen the yuan by backing it with gold in moves clearly designed to cripple the role of the dollar. Zero Hedge reports:

    China’s shift to an official local-currency-based gold fixing is “the culmination of a two-year plan to move away from a US-centric monetary system,” according to Bocom strategist Hao Hong. In an insightfully honest Bloomberg TV interview, Hong admits that “by trading physical gold in renminbi, China is slowly chipping away at the dominance of US dollars.”

    Putin also waits in the shadows, making similar moves and creating alliances to out-balance the United States with a growing Asian economy on the global stage.

    Luke Rudkowski of WeAreChange asks “Is This The End of the U.S. Dollar?” in the video below.

    He writes:

    In this video Luke Rudkowski reports on the breaking news of both China and Saudi Arabia making geopolitical moves that could cause a U.S economic collapse and obliteration of the U.S hegemony petrodollar. We go over China’s new gold backed yuan that cannot be traded in U.S dollars and rising tension with Saudi Arabia threatening economic blackmail if their role in 911 is exposed.

    Visit WeAreChange.org where this video report was first published.

    The Federal Reserve, Henry Kissinger, the Rockefellers and their allies created the petrodollar and insisted upon the world using the U.S. dollar to buy oil, placing debt in American currency and entire countries under the yoke of the West.

    But that paradigm has been crumbling as world order shifts away from U.S. hegemony.

    It is a matter of when – not if – these events will change the U.S. financial landscape forever.

    As SHTF has warned, major events are taking place, and no one can say if stability will be here tomorrow.

    Stay vigilant, and prepare yourself and your family as best as you can.

  • FBI May "Leak" Clinton Email Probe If DOJ Blocking Continues

    The feud between the FBI and the Department of Justice over whether or not to proceed with charges against Hillary Clinton in the ongoing email investigation just took an unexpected turn.

    Recall that one month ago, we found out that on one hand, the FBI is seemingly hell-bent on chasing down every possibly angle involving Hillary’s email abuse, when we reported that one hundred forty-seven FBI agents have been deployed to chase down clues and leads and that the FBI has accelerated the investigation because officials want to avoid the possibility of announcing any action too close to the election. A former Clinton staffer is also cooperating with that investigation, and it’s believed Clinton herself will be questioned.

    The flipside has been the Department of Justice which has been stonewalling the probe every step of the way. It hasn’t been alone in its unwillingness to pursue Hillary: on April 1, the state department announced that it is suspending its probe of “top secret” Clinton emails.

    The divergence of these two paths, one which wants to get to the bottom of Hillary’s email probe and the other which is dead set on blocking it, has led online betting markets such as PredictIt to put the the odds of federal charges being filed against Hillary at record lows.

     

    Which, paradoxically, could be bad news for Hillary.

    On Friday, US Senator Chuck Grassley who chairs the Senate Judiciary Committee, and who has pushed for additional scrutiny of Clinton’s email use during her tenure as secretary of state, dropped a dramatic “hint” during a breakfast meeting with the Des Moines A.M. Rotary club when he suggested that the FBI “might leak”, hypothetically-speaking of course, reports of its investigation into presidential candidate Hillary Clinton’s use of a private email server as secretary of state.

    In practically laying out the next steps in Hillarygate, Grassley said “an anonymous and unauthorized release of FBI investigative materials could result if officials at the agency believed prosecution of Clinton was stymied for political reasons” according to the Des Moines register.

    “Is there going to be political interference? If there’s enough evidence to prosecute, will there be political interference?” Grassley wondered aloud on Friday. “And if there’s political interference, then I assume that somebody in the FBI is going to leak these reports and it’s either going to have an effect politically or it’s going to lead to prosecution if there’s enough evidence.

    The senior senator’s musing came in response to a long answer to a very general question from one of the Rotarians about the status on inquiries into the email server and Clinton’s handling of the 2012 terrorist attack on a diplomatic post in Benghazi, Libya.

    Which, of course, would be potentially devastating for Hillary as not only would her misdeed as chronicled by the Feds be fully in the open and ammo for any of her competitors in the presidential race, but would also confirm that the Department of Justice is anything but, and has led to such a dramatic perversion of the law as being forced to leak evidence of criminality in the public arena just so the population can be made aware of Hillary’s actions.

    As for Grassley’s unorthodox “suggestion”, when asked by Radio Iowa reporter O. Kay Henderson after the breakfast if he was suggesting the FBI should leak investigative findings, Grassley expounded on his comment.

    “I wouldn’t be encouraging it because if it’s a violation of law, I can’t be encouraging a violation of law,” he said. “This is kind of my own opinion, this is something I’ve heard.”

    Yes, Chuck, we get it. And now we wonder how long before a treasure trove of “leaked” FBI documents exposing the full extent of Hillary’s action is leaked, although we can’t help but wonder that just like the Panama Papers dump, the media will be prepared and will promptly redirect the public’s attention to Vladimir Putin once again as the guilty party behind it all.

  • Kim Jong Un Forces Starving North Koreans To Watch Gourmet Cooking Competition

    One way to deal with bouts of projectile dysfunction is either to launch even more ballistic missiles, or just to call in a thousand of your country’s top cooks and have them make comfort food for you.

     

    According to the Post, North Korean leader Kim Jong Un broadcast a “master chef” style competition to find the country’s top chef, as well as to gorge on food as millions of starving viewers looked on.

    More than 1,000 people entered the competition, with the Pyongyang Times reporting: “The festival was comprised of the exhibitions of gastrological [sic] hits, famous and local special dishes and compulsory dishes and the technical contest and demonstration of top chefs and waiters and waitresses.

    “The participants presented famous local and foreign dishes and specialties of their units and local areas.” The TV menu included some European dining options including pizza and spaghetti as well as a five-pheasant dish and “broccoli five ways.”

    The ultimate arbiter of the food was the tubby tyrant, who by sampling the wares was one step closer to his esthetic ideal: according to defectors from the Communist country he is fattening himself up to look like his grandfather, Eternal President Kim Il-sung, who is still the reclusive county’s head of state despite having been dead since 1994.

    And while young Kim was pointing and looking at machines that do “stuff” and deciding between five-pheasant dish and “broccoli five ways” or to go straight to desert, he conveniently forgot yet again that his country remains on the verge of a famine.

     

  • Hybrid War Hyenas Are Tearing Brazil Apart

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

    The gloomy and repulsive night when the female president of the 7th largest economy in the world was the prey of choice fed to a lynch mob of hyenas in a drab, provincial Circus Maximus will forever live in infamy.

    By 367 votes for and 137 against, the impeachment/coup/regime change-light drive against Dilma Rousseff cleared the Brazilian Congressional circus and will now go to the Senate, where a “special commission” will be set up. If approved, Rousseff will then be sidelined for 180 days and a low-rent tropical Brutus, Vice-President Michel Temer, will ascend to power until the Senate’s final verdict.

    This lowly farce should serve as a wake-up call not only to the BRICS but to the whole Global South. Who needs NATO, R2P (“responsibility to protect”) or “moderate rebels” when you can get your regime change just by tweaking a nation’s political/judicial system?

    The Brazilian Supreme Court has not analyzed the merit of the matter – at least not yet. There’s no solid evidence anywhere Rousseff committed a “crime of responsibility”; she did what every American President since Reagan has done – not to mention leaders all across the world: along with her vice-president, the lowly Brutus, Rousseff got slightly creative with the federal budget’s numbers.

    The coup has been sponsored by a certified crook, president of the lower house Eduardo Cunha; reportedly the holder of several illegal accounts in Switzerland, listed in the Panama Papers and under investigation by the Supreme Court. Instead of lording over near-illiterate hyenas in a racist, largely crypto-fascist circus, he should be behind bars. It beggars belief that the Supreme Court has not launched legal action against Cunha. The secret of his power over the circus is a gigantic corruption scheme lasting many years, featuring corporations contributing to his and others’ campaign financing.

    And that’s the beauty of a regime change-light/color revolution of Hybrid War when staged in such a dynamically creative nation such as Brazil. The hall of mirrors yields a political simulacrum that would have driven deconstructionists Jean Baudrillard and Umberto Eco, if alive, green with envy; a Congress crammed with fools/patsies/traitors/crooks, some of whom are already being investigated for corruption, has conspired to depose a president who is not under any formal corruption investigation – and has not committed any “crime of responsibility”.

    The neoliberal restoration

    Still, without a popular vote, the massively rejected tropical Brutus twins, Temer and Cunha, will find it impossible to govern, even though they would perfectly incarnate the project of the immensely arrogant and ignorant Brazilian elites; a neoliberal triumph, with Brazilian “democracy” trampled down six feet under.

    It’s impossible to understand what happened at the Circus Maximus last Sunday without knowing there’s a gaggle of Brazilian political parties that are seriously threatened by the non-stop overspill of the Car Wash corruption investigation. To ensure their survival, Car Wash must be “suspended”; and it will, under the bogus “national unity” proposed by lowly Brutus Temer.

    But first, Car Wash must produce a high-profile scalp. And that has to be Lula in jail – compared to which the crucifixion of Rousseff is an Aesop fable. Corporate media, led by the noxious Globo empire, would hail it as the ultimate victory, and nobody would care about Car Wash’s enforced retirement.

    The 54 million-plus who voted for Rousseff’s reelection in 2014 voted wrong. The overall “project” is a government without vote and without people; a Brazilian-style parliamentary system, without bothering with pesky “elections” and crucially, including very “generous” campaign financing flexibility not bound to incriminate powerful companies/corporations.

    In a nutshell, the ultimate aim is to perfectly “align” the Brazilian Executive, Legislative, Judiciary and corporate media interests. Democracy is for suckers. Brazilian elites remote controlling the hyenas know very well that if Lula runs again in 2018, he will win. And Lula has already warned; he won’t buy any “national unity” crap; he’ll be back in the streets fighting whatever illegitimate government pops up.

    We’re now open for plundering

    As it stands, Rousseff runs the risk of becoming the first major casualty of the NSA-originated, two-year-long Car Wash investigation. The President, admittedly an incompetent economic manager and lacking the right stuff of a master politician, believed that Car Wash – which practically prevented her from governing – would not reach her because she is personally honest. Yet Car Wash’s not so hidden agenda was always regime change. Who cares if in the process the nation is left on the verge of being controlled exactly by many of those indicted by the anti-corruption drive?

    Lowly Brutus Temer – a vanity case version of Argentina’s Macri – is the perfect conduit for the implementation of regime change. He represents the powerful banking lobby, the powerful agribusiness lobby and the powerful federation of industries in Brazil’s economic leader, the state of Sao Paulo.

    The neo-developmentalist project for Latin America – uniting at least some of the local elites, invested in developing internal markets, in association with the working classes – is now dead, because what may be defined as sub-hegemonic, or peripheral, capitalism is mired in crisis after the 2008 Wall Street-provoked debacle. What’s left is just neoliberal restoration. TINA (“there is no alternative”). This implies, in the Brazilian case, the savage reversion of Lula’s legacy; social policies, technological policies, the drive to globally expand large, competitive Brazilian companies, more public universities, better salaries.

    In a message to the nation, Brutus Temer admitted as much; “hope” after impeachment will be absolutely swell for “foreign investment”, as in let them plunder the colony at will; back to the trademark history of Brazil since 1500.

    So Wall Street, US Big Oil and the proverbial “American interests” win this round at the circus – thanks to the, once again proverbial, vassal/comprador elites. Chevron execs are already salivating with the prospect of laying their hands on the pre-salt oil deposits; that was already promised by a trusted vassal in the Brazilian opposition.

    The coup goes on. The real hyenas haven’t yet pounced. So it's far from over.

  • Guess Who's On The Front Of The New $20 'Trillion Debt' Bill
  • Beware The Bubble In China's Domestic Commodity Market

    Via PandaHedge.com,

    We just see another bubble building up in China, aka the domestic commodity market.  On April 21st, led by bellwether Rebar Steel futures, other 7 commodities were lifted to the up limit (5% to 7%), including iron ore, HRC steel, met coal, asphalt, methanol, cotton, and egg (yes, it’s egg! No one has idea why even eggs go up together with other commodities).  The endless money just flood everywhere in the domestic commodity market, especially for those lagged behind, and fundamentals do not matter here.  The case of Rebar major contract RB1610 (settle in Oct 2016) can tell you how crazy the market is.  On April 21st, RB1610’s trading volume is 22M contracts (equal to 220M tn of rebar steel), but China only produces 200M tn rebar in 2015 (China total steel production is around 850M tn per year).  So the Chinese trades one year production volume for the underlying commodity in a single day, for a specific contract (Oct 2016) only!

    Below is the YTD performace of the major commodities trading in the China domestic futures market.

    price change

    The bulls talk about inflation trade, while the bears talk about deteriorating fundamentals.  Apparently, both side speak in different languages, and in the short term, the side with stronger fire power (money) wins.  The Shanghai Chaos Fund, which was famous for shorting big in copper in 2015, is reported to lose around $80M a day on April 20th as it holds 120k contracts short position in Rebar.  One of its flagship funds, Chaos Value I which invests in A share and commodities, has declined 19% YTD.

    We all know China created $1 tn credit in Q1 to stimuluate the economy, and apparently part of the money flows into the commodity market (the infamous A share equity market is deemed as “bear market” now and the speculators don’t even bother to trade there).  As indicated by the chart below, the total China domestic commodity daily trading amount is RMB1.4tn per day in 2016 (YTD), compared to RMB1.1tn per day in 2015, a 27% increase.  On Apirl 20th, its trading amount hits RMB2.9 tn, compared to the A share market’s RMB0.5tn amount.

    Trading volume

    Trading amount in Chinese domestic commodity market (value in RMB100M)

    Seeing the great “opportunities” of the fantasty commodity bull markets, Chinese retails investors rush to the brokers to open new accounts.  It’s reported that the new accounts number in April is double or triple of the normal days.  Does it smell the same as 2015’s A share market?

     

    But wait, the leverage in the commodities market (easily 10x) is much higher than that in the A share market (normally 2-4x).  If the investors still remember the lesson in 2015, they should pay extra attention now.  When the music stops, the collapse of price can be faster and steeper than the pace of going up.  2009 already showed us a real example in the Rebar market.

    IMG_2657

    White line: Rebar price in 2009 (lhs),  Purple line: Rebar price in 2016 (rhs)

    Is the Rebar rally sustainable?  The A share equity investors gives their own answer.  The orange line (below) is China’s rebar price and the purple line is the share price of Baosteel, the flagship Chinese steel company. 

    Rebar price compare

    Apparently the equity investors don’t believe the rally is sustainable.  However, the funny thing is the North American equity investors are chasing the most leveraged commodities equity names (green line is US Steel and blue line is Teck Resources).  They must hope the comodity rally can continue and hold at high level for a while.  So we will see who is right, the Chinese commodity speculators or North American equity investors.

  • One Reader Tried To Get A Transcript Of What Obama Said To Yellen; This Is What The Fed Replied

    One month ago we showed something curious: literally, the very hour the market was hitting its February lows, Janet Yellen was on the phone with Bank of England governor (and former Goldman Sachs employee) Marc Carney, followed the very next day by a conversation with ECB president (and former Goldman Sachs employee) Mario Draghi.

    One reader tried to get to the bottom of the content of these phone calls and sent a FOIA to the Fed in which he requested the audio file or any documentation of the nature of the telephone call between Yellen and Carney and, subsequently, Draghi.

    The Fed’s response: a resounding “no”, for the following reason: “the responsive document contains nonpublic commercial or financial information” and while “the document containing the exempt information was reviewed… no reasonably segregable nonexempt information was found.” Case closed.

    This came from the “most transparent Fed ever.”

    A few days later, another very important and once again “behind closed doors” event took place: Yellen met with both Obama in the afternoon of April 10, just hours after the Fed held an emergency meeting under expedited procedures to discuss “rates.” That meeting too was confidential. 

    While clearly the detailed contents of the meeting would not be revealed, the White House was kind enough to issue the following three sentence summary:

    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.

    This in turn came from the “most transparent administration ever.” Sarcasm aside, the above was far more “transparent” than what the Fed provided following Yellen’s meeting, which was nothing.

    Which is why one reader decided to once again give it a try, and get to the bottom of what was said during the Yellen-Obama meeting asking for the minutes from said meeting.

    The Fed’s response: “we don’t keep those.”

    And that, dear readers, is how fully and thoroughly accountable to the public both the White House and the Federal Reserve truly are.

  • Japan's Keynesian Death Spiral – How Central Planners Crippled An Economy

    Submitted by Yonathan Amselem via The Mises Institute,

    The greatest tragedy of the 2008–2009 financial meltdown was not that it happened. The collapse of asset prices was the necessary result of near zero interest rates. No, the most devastating aspect of the financial meltdown is that central planning alchemy lost no credibility. Policymakers around the world are still turning to Keynesian and socialist interventionism to address problems caused by Keynesians and socialists. The twin sledgehammers of central banking and almost unlimited state power have so distorted global markets (again) that some economies are now terminal. The latest victim of the interventionists and micromanagers is the nation of Japan. A once genuinely productive and innovative nation has, over the years, slowly succumbed to the cancerous rot of interventionism.

    Japan’s World War II defeat left behind a barren rocky island whose industrial capacity, infrastructure, and labor force were devastated by Allied bombs. Japan’s flattened cities and smoldering factories may have painted a gloomy future but Japan had the thing that mattered most — a population largely free to organize and rebuild. The American military and remnants of central Japanese authority tried to lead the rebuilding of Japan through the political process but lines of communication and the transportation infrastructure were so damaged that many population centers away from Tokyo were left relatively free to rebuild. The resulting Japanese economic boom catapulted Japan’s living standards to a level on par with most Westernized nations. This explosive growth, described as a “miracle,” was no such thing. Japan’s new-found prosperity was simply what happens when markets are allowed to function. Unfortunately, the central planners in banking and government couldn’t resist the statist urge of heavy-handed interventionism. If there’s anything the political elite hate, its free people making voluntary decisions without their forceful input.

    Central Planning Has Turned Japanese Corporations into Welfare Queens

    The central planners imposed a number of zany anti-market schemes on the Japanese economy that have never been substantively reformed to this day. Legislators shielded Japan’s massive industrial base from foreign competition through protectionist tariffs and even subsidized some overseas exports. On the domestic front, nascent Japanese companies were heavily burdened by onerous regulations and very high taxes — this made it nearly impossible for start-ups to get off the ground and challenge the corporate establishment’s market share. As if this was not enough, exporters were further coddled by the Bank of Japan (BOJ). The BOJ has been fervently trying to turn the yen into toilet paper for the last thirty years. A cheap currency means artificially high profits for companies that export goods and artificially high costs for companies that import goods. After all, no government scheme could rightfully call itself a government scheme if it didn’t enrich somebody at the direct expense of others. The destructive effects of these policies have massively eroded Japanese productivity in the twentieth and twenty-first centuries.

    As happens in all industrialized economies with a powerful state and central bank, Japan’s largest corporations became agents or semi-agents of the state. Japanese automakers, shippers, and other producers could reliably be expected to carry out carry out government labor or production policy in exchange for direct access to politicians, cheap loans, anti-competitive legislation, guaranteed profits, and bail outs. Japanese companies (particularly manufacturers) are deeply entrenched and largely immune to domestic and foreign competitors. Government protectionism turned once productive Japanese companies slow and arthritic. The few actually productive sectors of Japan have been forcefully shrunken by taxes to subsidize an outrageously bloated government and the multitude of corporate parasites huddled around its teats. The result is that Japanese companies are increasingly noncompetitive in a global marketplace shared by dynamic companies from Australia, New Zealand, Singapore, Hong Kong, and other more-market-oriented economies.

    Keynesian Alchemy in Japan

    Japan’s Keynesian death spiral began almost three decades ago. In 1986 the value of the Japanese yen almost doubled relative to the US dollar. Consequently, Japan’s mammoth export sector took a beating. Businesses with political influence found they could achieve higher returns not by innovating or cutting costs, but rather, by pressuring the political and monetary elite to flood the market with cheap credit. The BOJ and short-sighted politicians were happy to oblige. The result was a bubble unlike anything Japan had ever experienced. The land value of Tokyo surpassed the land value of the entirety of the United States. In just a few short years, the Nikkei quadrupled in size and an enormous Japanese financial sector came into existence. The overfinancialization of an economy is among the first signs of a malignant central bank sized tumor. The rise of gargantuan investment banks and multimillion dollar derivatives traders in the United States correlated almost exactly with the death of sound (ish) money in 1971 (Nixon’s administration took the United States completely off the gold standard). Japan’s monetary madness resulted in corporations and households assuming record levels of debt that were financed by zero savings in the private economy.

    The inevitable bursting of the bubble in the early 1990s was truly spectacular. The Nikkei lost over 80 percent of its value, land and home prices almost completely flattened, and GDP growth crashed to an anemic 1 percent. When economists refer to Japan’s “lost decade” they refer to Japan’s post-bubble economy. Yet, Japan now finds itself creeping into a third decade with minuscule growth. The Nikkei and asset prices have never recovered anywhere near their previous highs. Anyone getting into the Nikkei in 1990 would, after twenty-six years, have returns of roughly -50 percent. Keynesians and other economic interventionists would do well to view Japan as the canary in the coal mine. The United States and Europe have doubled down on Keynesian alchemy this last decade but our leaders need only look at the devastation these schemes have brought to Japan — a nation that has tried to borrow, print, and tax itself into prosperity for thirty years. Japan is in the late stages of Keynesian cancer and policymakers in the rest of the developed world would do well to take notice.

    Demographics

    As if the political elite’s harebrained schemes weren’t doing enough to put a nail in Japan’s coffin, the nation is also suffering a demographic disaster. A country that consumes more adult diapers than baby diapers is a nation on its way to the dustbin of history. There is such a shortage of young, capable labor in Japan that the nation has even started importing “interns” from China to work in its many industries. As is happening in Europe and the United States, endless undergraduate and postgraduate “education” has sheltered young adults more and more from the real skills demanded by the labor market. Young adulthood is financed almost exclusively by debt or capital consumption of their parent’s savings. The hassles of starting and raising a family have become more and more burdensome to unskilled, indebted Japanese couples (with no savings) that probably only enter the workforce for the first time in their mid-twenties.

    It Is Not Too Late

    Japan has a highly capable workforce, an impressive industrial base, and all the infrastructure necessary to reassert itself as a global commercial powerhouse. Japan’s recovery means cutting taxes, paring down its outrageously expensive mercantile policies, allowing for easier immigration of foreign companies and their employees, and letting the market decide the true value of the yen. The Japanese people need to reject the schemers and planners who are suffocating a great nation.

  • It's Now Cheaper To 'Buy' A Dry Bulk Freight Tanker Than A Starbucks Coffee

    Just 3 short months ago, we detailed how – thanks to the collapse in China's growth and massive commodity inventory gluts, the cost of renting a Dry Bulk Tanker was less than the cost of renting a ferrari for a day…

     

     

    As Bloomberg reported at the time,

    Rates for Capesize-class ships plummeted 92 percent since August to $1,563 a day amid slowing growth in China. That’s less than a third of the daily rate of 3,950 pounds ($5,597) to rent a Ferrari F40, the price of which has also fallen slightly in the past few years, according to Nick Hardwick, founder of supercarexperiences.com.

     

    The Baltic Exchange’s rates reflect the cost of hiring the vessel but not fuel costs. Ships burn about 35 metric tons a day, implying a cost of about $4,000 at present prices, data compiled by Bloomberg show.

    One would think, considering how much the Baltic Dry Index has 'surged' off its all-time record lows – and the noise being spewed by Cramer et al. that this is somehow indicative of the "big comeback" in the Chinese (and world) economies – that the situation would have improved… But it has not!

     

    For the cost of $1 – less than the price of a Grande Black Coffee at Starbucks – you too can be the owner of a 58,429 deadweight tonne bulk carrier…

    As The Guardian reports,

    Goldenport, one of the last shipping companies left on the London Stock Exchange, has delisted from the market and sold off six of its remaining eight vessels for $1…

     

    The giveaway reflects the most dismal shipping conditions in decades, caused by economic slowdown in China combined with an oversupply of vessels due to a building spree during a previous boom and the fact that "average daily hire rates have fallen below even a vessel’s daily operating expenses."

     

    The Greek owners are looking for buyers for two remaining vessels and are taking Goldenport off the stock market, saying it no longer makes sense to list shares which have dropped from highs of $100 in 2007 to less than 2c now.

     

    John Dragnis, the chief executive of Goldenport, said “Dry bulk vessels generally have fallen in value by around 60% over the last year partly because of extreme oversupply and partly because of low demand for coal as China moves towards renewable energy to curb [carbon] emissions," adding that “The prevailing market conditions are probably the worst of the last 30 years."

    All of which seems very odd given the aforementioned resurgence of the Baltic Dry – unless that is not reflecting reality (like so many other indicators).which leaves us to wonder if all this exuberant excitement with regard the Baltic Dry Index's resurrection from the dead is just more China-credit-fueled smoke-and-mirrors speculation – just as it was in 2009 when QE unleashed hope, only to be dashed on the shores of demand-doldrum-reality…

    Richard Fulford-Smith, the founder of the Affinity shipbroking firm and a leading figure in the London maritime scene, said the bulk shipping markets were in “a sad state” and there could be more bankruptcies and exits before any bounce back. Fulford-Smith, 60, added: “I will probably be retired by the time there is any real recovery.”

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Today’s News 23rd April 2016

  • Weather Channel Founder Slams Global Warming: "The Theory Has Failed"

    If Bill Nye had his way, Weather Channel founder John Coleman would be heading for jail. Having spent more than 60 years as a meteorologist, Coleman penned a pointed rebuke to "the science guy's" vehement faith in the 'science' of climate change, exclaiming that "science has taken a back seat at The UN… get politics out of the climate debate."

    On this Earth Day 2016, there is a great deal of frenzy about how our Earth is going to become uninhabitable, as the civilized activities of man allegedly trigger unstoppable global warming and climate change.

     

    With the Obama administration set to commit the U.S. to the Paris climate agreement by signing our nation onto the document Friday, it is obvious that science has taken a back seat at the United Nations.

     

    The environmentalists, bureaucrats and politicians who make up the U.N.’s climate panel recruit scientists to research the climate issue. And they place only those who will produce the desired results. Money, politics and ideology have replaced science.

     

     

    U.N. climate chief Christiana Figueres has called for a “centralized transformation” that is “going to make the life of everyone on the planet very different” to combat the alleged global warming threat. How many Americans are looking forward to the U.N. transforming their lives?

     

    Another U.N. official has admitted that the U.N. seeks to “redistribute de facto the world’s wealth by climate policy.” The former head of the U.N. climate panel also recently declared that global warming “is my religion.”

     

    When all the scare talk is pushed aside, it is the science that should be the basis for the debate. And the hard cold truth is that the basic theory has failed. Many notable scientists reject man-made global warming fears. And several of them, including a Nobel Prize winner, are in the new Climate Hustle movie. The film is an informative and even humorous new feature length movie that is the ultimate answer to Al Gore’s An Inconvenient Truth. It will be shown one day only in theaters nationwide on May 2.

     

    As a skeptic of man-made global warming, I love our environment as much as anyone. I share the deepest commitment to protecting our planet for our children and grandchildren. However, I desperately want to get politics out of the climate debate. The Paris climate agreement is all about empowering the U.N. and has nothing to do with the climate.

    Source: USA Today

  • Patrick Buchanan: Dishonoring General Jackson

    Submitted by Patrick Buchanan via Buchanan.org,

    In Samuel Eliot Morison’s “The Oxford History of the American People,” there is a single sentence about Harriet Tubman.

    “An illiterate field hand, (Tubman) not only escaped herself but returned repeatedly and guided more than 300 slaves to freedom.”

    Morison, however, devotes most of five chapters to the greatest soldier-statesman in American history, save Washington, that pivotal figure between the Founding Fathers and the Civil War — Andrew Jackson.

    Slashed by a British officer in the Revolution, and a POW at 14, the orphaned Jackson went west, rose to head up the Tennessee militia, crushed an Indian uprising at Horseshoe Bend, Alabama, in the War of 1812, then was ordered to New Orleans to defend the threatened city.

    In one of the greatest victories in American history, memorialized in song, Jackson routed a British army and aborted a British scheme to seize New Orleans, close the Mississippi, and split the Union.

    In 1818, ordered to clean out renegade Indians rampaging in Georgia, Jackson stormed into Florida, seized and hanged two British agitators, put the Spanish governor on a boat to Cuba, and claimed Florida for the USA.

    Secretary of State John Quincy Adams closed the deal. Florida was ours, and Jacksonville is among its great cities.

    Though he ran first in popular and electoral votes in 1824, Jackson was denied the presidency by the “corrupt bargain” of Adams and Henry Clay, who got secretary of state.

    Jackson came back to win the presidency in 1828, recognized the Texas republic of his old subaltern Sam Houston, who had torn it from Mexico, and saw his vice president elected after his two terms.

    He ended his life at his beloved Hermitage, pushing for the annexation of Texas and nomination of “dark horse” James K. Polk, who would seize the Southwest and California from Mexico and almost double the size of the Union.

    Was Jackson responsible for the Cherokees’ “Trail of Tears”?

    Yes. And Harry Truman did Hiroshima, and Winston Churchill did Dresden.

    Great men are rarely good men, and Jackson was a Scots-Irish duelist, Indian fighter and slave owner. But then, Presidents Washington, Jefferson, Madison and Monroe were slave owners before him.

    To remove his portrait from the front of the $20 bill, and replace it with Tubman’s, is affirmative action that approaches the absurd.

    Whatever one’s admiration for Tubman and her cause, she is not the figure in history Jackson was.

    Indeed, if the fight against slavery is the greatest cause in our history, why not honor John Brown, hanged for his raid on Harper’s Ferry to start a revolution to free the slaves, after he butchered slave owners in “Bleeding Kansas”? John Brown was the real deal.

    But replacing Jackson with Tubman is not the only change coming.

    The back of the $5 bill will soon feature Martin Luther King, Eleanor Roosevelt, and opera singer Marian Anderson, who performed at the Lincoln Memorial after being kept out of segregated Constitution Hall in 1939.

    That act of race discrimination came during the second term of FDR, Eleanor’s husband and the liberal icon who named Klansman Hugo Black to the Supreme Court and put 110,000 Japanese into concentration camps.

    And, lest we forget, while Abraham Lincoln remains on the front of the $5 bill, the war he launched cost 620,000 dead, and his beliefs in white supremacy and racial separatism were closer to those of David Duke than Dr. King.

    Alexander Hamilton, the architect of the American economy, will stay on the $10 bill, due in part to the intervention of hip-hop artists from the popular musical, “Hamilton,” in New York.

    But Susan B. Anthony, Elizabeth Cady Stanton and Sojourner Truth, who fought for women’s suffrage, will be put on the back of the $10. While Anthony and Stanton appear in Morison’s history, Sojourner Truth does not.

    Added up, while dishonoring Andrew Jackson, Treasury Secretary Jack Lew is putting on the U.S. currency six women — three white, three African-American — and King.

    No Catholics, no conservatives, no Hispanics, no white males were apparently even considered.

    This is affirmative action raised to fanaticism, a celebration of President Obama’s views and values, and a recasting of our currency to make Obama’s constituents happy at the expense of America’s greatest heroes and historic truth. Leftist role models for American kids now take precedence over the history of our Republic in those we honor.

    While King already has a holiday and monument in D.C., were the achievements of any of these six women remotely comparable to what the six men honored on our currency — Washington, Jefferson, Hamilton, Jackson, President Grant and Ben Franklin — achieved?

    Whatever may be said for Eleanor Roosevelt, compared to her husband, she is an inconsequential figure in American history.

    In the dystopian novel, “1984,” Winston Smith labors in the Ministry of Truth, dropping down the “memory hole” stories that must be rewritten to re-indoctrinate the party and proles in the new history, as determined by Big Brother. Jack Lew would have fit right in there.

  • Swedish Muslim Politician Quits After Refusing To Shake Women's Hands

    As if Sweden wasn't troubled enough, The Local reports that another Green Party politician, who ignited a storm of controversy after refusing to shake hands with a female reporter on grounds that it violated his Muslim faith, announced on Wednesday that he was quitting politics. This follows the resignation of Sweden's housing minister following a week of mounting controversy over his contacts with Islamic organisations and Turkish ultranationalists.

    During an interview with a female reporter from the TV4 broadcaster on Tuesday, Yasri Khan placed his hand over his heart instead of shaking her hand in greeting.

     

     

    "People can greet each other in different ways. The most important thing is to show respect by seeing each other, to meet each other… to respect each other," Khan said during an interview with state broadcaster Swedish Radio.

     

    Khan, also the general secretary of the organization Swedish Muslims for Peace and Justice, has faced strong criticism from within his party since the incident.

     

    "It is unacceptable. You can't have a man in the party who can't greet women in the same way you greet a man. I'm upset," Stina Bergström, a Green Party parliamentarian, told Swedish tabloid Aftonbladet.

     

    In interviews with Swedish media, Khan lashed out at his critics and said that the debate, and his fellow Muslim Green Party member Mehmet Kaplan's resignation, had caused him to run out of energy.

     

    "In today's political climate, I wonder if politics is right for me, and if I want to be a media circus clown," he told the Nyheter24 news site.

    Kahn's resignation from the Green Party follows the resignation of another Green Party member – Sweden's housing minister, Turkish-born Mehmet Kaplan…

    Sweden’s housing minister has resigned following a week of mounting controversy over his contacts with Islamic organisations and Turkish ultranationalists, piling further pressure on the country’s already unpopular minority coalition government.

     

    The Social Democrat prime minister, Stefan Lofven, said Turkish-born Mehmet Kaplan, a member of the junior coalition partner Green party and former spokesman for Sweden’s Muslim Council, had submitted his resignation and that he had accepted it.

     

    Sweden’s centre-left coalition of Social Democrats and Greens has been severely strained by Europe’s migration crisis, with the arrival of about 160,000 asylum seekers in the country last year forcing Stockholm to impose border controls and tighter rules in a U-turn on decades of generous refugee policies.

     

    Kaplan, 44, denied any wrongdoing and said he was stepping down because public and media criticism was making it impossible for him to do his job. He said he opposed “all forms of extremism, whether nationalistic, religious or in any other form” and supported “human rights, democracy and dialogue”.

     

    The minister, who was born in Turkey and arrived in Sweden at the age of eight, has come under increasing pressure after local media last week published photos of him at a dinner with Turkish ultranationalists, including the Swedish head of the extremist Grey Wolves organisation, and a former leader of the main Turkish nationalist group in Sweden, who was forced to resign earlier this month after calling on Turks to kill “the Armenian dogs”.

     

    The minister was further attacked for his links to a number of Islamic organisations, including the international Millî Görü? movement, that some suspect of promoting religious fundamentalism. Kaplan has acknowledged the ties, but said they “don’t mean I agree with them on everything”.

     

    The pressure increased at the weekend when Swedish media published seven-year-old footage of him comparing Israel’s policies towards Palestinians to the Nazis persecution of the Jews.

    It has not been a good week for the centre-left party, the junior partners of Sweden's ruling coalition. On Tuesday its co-leader and deputy prime minister, Åsa Romson, landed herself in hot water after using the Swedish word for 'accident' (which can also mean 'misfortune') to refer to the September 11th terror attacks.

  • Why US Government And Saudi Arabia Don't Want Americans Knowing The Truth About 9/11

    Via TheAntiMedia.org,

    In a rare show of bipartisanship, President Obama and top Republicans in Congress have come together to shield Americans from knowing the truth about who was behind the 9/11 terror attacks, which took the lives of 2996 people in 2001. However strange it is for neoconservative members of Congress to agree with Obama on anything, there is no doubt the issue must be serious if it warrants this level of partnership.

    The issue at hand is the classified, 28-page section of the 9/11 commission report, which many experts and politicians with knowledge of the documents have said point to Saudi Arabian government officials’ direct role in the terror attacks. This is why the Saudis put out a stern warning several days ago threatening to dump up to $750 billion in U.S. assets if Senate Bill 2040 becomes law; S.B. 2040 would make public the 28 pages and also allow for victims of 9/11 to sue foreign governments found responsible.

    The Saudis’ warning seems to have worked, with Obama now in the nation to “mend ties” with the monarchy and top Republicans sounding the alarm about the 9/11 bill. In an interview with Charlie Rose, President Obama claimed:

    “If we open up the possibility that individuals in the United States can routinely start suing other governments, then we are also opening up the United States to being continually sued by individuals in other countries,” apparently referencing the U.S.’ own attacks overseas that have taken the lives of countless civilians.

    Currently, Saudi Arabia enjoys “sovereign immunity” with the U.S., meaning even if the 28 pages proved Saudi officials were indeed behind the 9/11 attacks, Americans would not be able to seek justice for their losses. The new 9/11 bill would change that, and the Saudi response to the legislation moving through Congress reinforces suspicions the kingdom is somehow behind the 9/11 attacks.

    The video below further explains why both Saudi Arabia and members of the U.S. government don’t want the 9/11 bill to pass:

  • Gundlach Predicts "Trump Will Win", Says "The Federal Reserve Has Basically Given Up"

    In an interview posted on Swiss Finanz und Wirthschaft, Jeff Gundlach unleashes his deep ir, and in traditional style, offloads on both the Fed and all central banks, sayng that “negative interest rates are the dumbest idea ever“, adding that the Fed has given up both trying to normalize interest rates as well as trying to actually stimulate the economy:

    What you see is that the same pattern has been in place since 2012: Hope for growth in the new year that ends up being revised downwards, over and over and over again. But now we have reached the point at which no one bothers anymore about the comedy of predicting 3% real GDP growth. Even nominal GDP growth isn’t probably going to be at 3% this year. Actually, nominal GDP is at a level that has historically been a recessionary level. It isn’t this time because the inflation rate is close to zero. But no one bothers anymore and the Federal Reserve has basically given up.

    He also says the he has “been waiting for about two years for the Fed to capitulate on their interest rate increase dreams. Now, I think they did.

    As noted above, Gundlach has seen many stupid ideas in his time but nothing as bad as NIRP. “I think the next big thing will be that at some point central bankers in Japan and in Europe will have to realize that they need to give up on negative interest rates. Negative interest rates are the dumbest idea ever. It’s horrible. Look at how badly it’s been working. The day that the Bank of Japan went negative the Yen started strengthening like crazy and the stock market is down. That’s exactly the opposite of what they wanted. The same thing happened with the ECB.”

    He then takes on the US stock market, saying it “seems egregiously overvalued versus other stock markets…. fundamentally, it’s very hard to believe in US stocks. Earnings and profit margins are dropping and companies basically are borrowing money to pay dividends and to buy back shares.” He spares no love for junk bonds either: “it’s likely that you are going to see declines in the US stock market and since the correlations are so high this means that probably the junk bond market will go back down, too.”

    What about oil: “I predicted oil would make it easily to $ 40 and it did so very comfortably. But now it’s having a very hard time getting to $45. It bounces up a dollar, down a dollar and I think if oil is going back down to $ 38 people are going to be very concerned.

    His diatribe against conventional wisdom continues, when he blast that “the riskiest things are now stocks and other investments perceived to be safe. One of the most popular categories in US investing are low volatility stock funds. But there is no such thing! If you think that a stock like Johnson & Johnson can’t go down, you’re wrong. And if people own funds that invest in stocks which they think are immune from decline and they start to decline, all hell breaks loose.”

    What does Gundlach like? Gold and TSYs:

    “Gold is doing fine. It’s preserving capital in the US, it’s been making money over the last couple of years for European investors. That’s why I own gold. Because in a negative return environment anything that holds its value or makes a little is good.”

    On the topic of who wins the election, he says 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.”

    He also thinks Trump would be the best candidate for the US economy:

    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.

    Finally, here is Gundlach’s explanation on what it takes to be a good investor:

    I made a name for myself primarily because in March of 2005 I was convinced that there would be a complete collapse of the credit market. When it was still hypothetical, people argued with me. They said that this would never happen. But I was right. So you have to find a center piece idea that will be important in driving the market. And you have to have an intuition about how other investors will react if you’re right and they wake up to that idea. Such opportunities do not happen very often. It is not always so obvious. So you have to pick your moments. In the financial markets, 80% of the time it’s a coin flip. But the other 20% of the time you have very high confidence and it’s not a coin flip. For instance, I don’t think the stock market is a coin flip. Especially in the United States stocks are very expensive, particularly low volatility stocks.

    In short, Gundlach doing what he does best: holding nothing back.

    * * *

    His full interview with FuW below:

    Jeffrey Gundlach, CEO of the investment firm DoubleLine, expects central bankers to capitulate on negative interest rates and is bearish on US stocks.

    In the global financial markets the bulls have taken over once again. In the United States, stocks are even flirting with a new record high. Nevertheless, Jeff Gundlach doesn’t trust this recovery and expects a severe setback. «The riskiest things are now stocks and other investments perceived to be safe», says the CEO of the Los Angeles based investment firm DoubleLine. The star investor, who is celebrated on Wall Street as the new bond king, is surprised that nobody seems to care anymore about the worldwide growing mountain of debt. Especially in the junk bond market, he sees a massive wave of defaults on the horizon. Mr. Gundlach likes gold and thinks the Federal Reserve has given up on its plans to normalize interest rates. Next, he expects central bankers elsewhere to capitulate on negative interest rate policies.

    Mr. Gundlach, it is getting suspiciously quiet in the global financial markets. What is your assessment of the current situation?
    What you see is that the same pattern has been in place since 2012: Hope for growth in the new year that ends up being revised downwards, over and over and over again. But now we have reached the point at which no one bothers anymore about the comedy of predicting 3% real GDP growth. Even nominal GDP growth isn’t probably going to be at 3% this year. Actually, nominal GDP is at a level that has historically been a recessionary level. It isn’t this time because the inflation rate is close to zero. But no one bothers anymore and the Federal Reserve has basically given up.

    How serious is this slowdown? Could the US even fall into a recession?
    We will be on watch for that in the coming months. But it doesn’t really matter. Recessions don’t drive financial markets. It’s the other way around. People are so focused on this «recession-yes-or-no-question». What really matters is that we are in a low nominal growth environment and global growth keeps getting marked down. It is going to be slower in 2016 than in 2015.

    What does that mean with respect to monetary policy in the United States?
    I have been waiting for about two years for the Fed to capitulate on their interest rate increase dreams. Now, I think they did. Federal Reserve Chair Janet Yellen basically capitulated on March 29th. So far she had been acting as if each voice at the Fed carried the same weight: One official would say this, and another official would say something different. And because there were contradictory statements being made, the markets were getting very confused. But Janet Yellen took control with her speech at the Economic Club of New York. She did a good job and said that she is not going to raise rates at the next Fed meeting in April despite all these other Fed officials saying that April is a possibility. But it’s not going to happen. We’re not going there. So you’ve gotten about as much capitulation as you can get.

    But what about a rate hike at the more important Fed meeting in June?
    The Fed has already reduced its forecast to two rate hikes. And that’s going to turn into one hike pretty quickly because we’re getting close to mid-year and I really doubt that they are going to do a rate hike in June. But what they are going to do is a rolling twelve month two hikes type of thing. So in June they will signal two hikes by June 2017 and then they will just keep pushing it forward. That’s a movie we’ve seen before. The Fed has pushed forward such decisions for years. We were always going to get to a Federal Funds Rate of 3% and it was always going to be starting in six months. But it never happened.

    But actually, the Fed raised interest rates in December for the first time since the financial crisis.
    Well, that didn’t work very well. The stock market crashed and the credit markets were a disaster. The Fed’s dots of four rate hikes this year made no sense and they’ve capitulated. The markets have humiliated the Fed into abandoning their pretty idiotic forecast.

    So what’s next for the financial markets?
    The capitulation of the Fed is pretty much fully priced in. But I think the next big thing will be that at some point central bankers in Japan and in Europe will have to realize that they need to give up on negative interest rates. Negative interest rates are the dumbest idea ever. It’s horrible. Look at how badly it’s been working. The day that the Bank of Japan went negative the Yen started strengthening like crazy and the stock market is down. That’s exactly the opposite of what they wanted. The same thing happened with the ECB. Around a year ago, the consensus recommendation was to sell US equities and to buy European stocks because of negative interest rates in Europe. That turned out to be the most common mistake that was made in 2015. It’s been a horrible outcome. So there is mounting evidence that negative interest rates do the opposite of what the central bankers were hoping for.

    Why don’t negative interest rates work?
    Negative interest rates are designed to fight deflation. But they are the very definition of deflation: Your money is disappearing. As an investor, you are going to have less money in the future than you have today with negative interest rates. That’s deflation! So negative interest rates are deflationary and they are tremendously negative for monetary velocity. For instance, in Japan they’re issuing huge amounts of high denomination Yen notes. That’s because of negative interest rates people don’t want to put their money in the bank and they don’t want to invest in Yen denominated bonds. That’s why I think eventually you are going to get helicopter money.

    Are you concerned about that?
    I’m not concerned about anything. My job is not to set policies. I’m not an economist or a politician or a central banker. I invest people’s money. So I’m agnostic as to what’s good and what’s bad in terms of policy. I just deal with it.

    So how do you deal with negative interest rates and central bank capitulation?
    It’s all about capital preservation. If you can get a few percent return in a deflationary environment you’re doing fine. Because if you invest in European government bonds your base case is that you are going to have a negative return. The same applies if you invest in Japanese government bonds. So gold is a high yielding investment. You are getting zero yield versus negative yields in the case of short term European bonds and most Japanese bonds. Gold is doing fine. It’s preserving capital in the US, it’s been making money over the last couple of years for European investors. That’s why I own gold. Because in a negative return environment anything that holds its value or makes a little is good. Also, US bonds look relatively good. You have a positive yield of 2 or 3% this year from a bond portfolio in the US. Of course, that’s not great for European investors because the dollar has been weakening.

    And what about stocks? Especially in the US, equities have staged a surprising comeback since the heavy turmoil at the beginning of the year.
    The US stock market seems egregiously overvalued versus other stock markets. Emerging markets look vastly better, Japan looks better and Europe does too. That’s because they’re all down. It’s remarkable that the US stock market is within about 2% of its all-time high and every other significant stock market is down substantially. Also fundamentally, it’s very hard to believe in US stocks. Earnings and profit margins are dropping and companies basically are borrowing money to pay dividends and to buy back shares. That’s completely non-productive borrowing and just creates a bigger debt burden. So it’s likely that you are going to see declines in the US stock market and since the correlations are so high this means that probably the junk bond market will go back down, too.

    There’s also a strong correlation between junk bonds and oil. What’s your take on the recent rally in crude?
    I predicted oil would make it easily to $ 40 and it did so very comfortably. But now it’s having a very hard time getting to $45. It bounces up a dollar, down a dollar and I think if oil is going back down to $ 38 people are going to be very concerned.

    Energy companies are playing an important role in the junk bond sector. What would oil at $ 38 mean for the credit markets?
    Just like oil, the high yield market has enjoyed the easy rally. I think it’s basically over. I don’t see how you are supposed to be all fond off high yield bonds, since they are facing enormous fundamental problems. I thought people would learn their lesson but the issuance in the years 2013/14 was vastly worse than the issuance in 2006/07. Also, in the bank loan market covenant lite issuance rose to 40% in 2006/07. In this cycle it climbed to 75%. The leverage in the high yield bond market is enormous and you’re about to have a substantial increase in defaults. I wouldn’t be surprised if the cumulative default rate in the next five years were going to be the highest in the history of the high yield bond market.

    What would be the consequences of that?
    We are now in a culture of default. There is no stigma about defaulting anymore. During the housing crash, homeowners walked away from their mortgages. That was the beginning of a massive tolerance of default. Today, people talk about Puerto Rico defaulting like it’s nothing. But if Puerto Rico defaults why won’t some clever person in Illinois say: «Let’s default, too! » Constitutionally, Illinois is not allowed to default, but Puerto Rico wasn’t either. For Illinois it just seems impossible to pay their pension obligations. And then, what about Houston, what about Chicago, what about Connecticut? I am surprised that people have lost their focus on the enormity of the debt problem. Remember, in 2010 and 2011 there was such a laser focus on the debt ceiling in the US and we were worried about Greece. Nobody is worried anymore. People are distracted by this negative interest rate experiment.

    That’s also interesting with respect to the presidential elections. In contrast to 2012, this time there is not much talk about national debt and budget cuts.
    What you see this time is only child’s play. The next election is going to be much more transformative than this one. Because in this election, both parties are kind of clinging to the belief that they can keep the genie in the bottle. But we’re on the cusp of big change and, unfortunately, it’s all wrapped up in generational problems. The big problem that is coming, of course, is the unfunded liabilities that have been promised to the baby boomers. According to one calculation, the unfunded liabilities of all these entitlements on a present value basis are $ 60 trillion in the United States, just at the federal level. But in this election, nobody is talking about addressing them. Donald Trump wants to keep social security the same, Bernie Sanders says make it even bigger, while Hillary Clinton represents more of the same.

    So who do you think will win the race for the white house?
    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.

    How would the financial markets react should Trump win?
    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.

    How do you explain that a guy like Trump might actually win the election?
    His popularity is very similar to the popularity of unconstrained bond funds. About two or three years ago, unconstrained bond funds became the most popular thing in the United States retail market and in the institutional market probably, too. Because when investors analyzed all the bond segments they were familiar with, they didn’t like what they saw. They didn’t like treasuries, they were scared of the Fed, they didn’t like traditional strategies. So, if everything you think you know looks unattractive, you go for something that you have no idea about. And that’s an unconstrained bond fund. The thinking was: «Don’t even tell me what you are doing, I do not want to know. Because if I know, I won’t like it. » The same is true with respect to the elections: «Don’t give me a traditional candidate. Give me someone who I have no idea what he is going to do» – and that’s basically Donald Trump.

    That shows that it is not easy to invest your money these days. What does it take in general to be a good investor?
    I made a name for myself primarily because in March of 2005 I was convinced that there would be a complete collapse of the credit market. When it was still hypothetical, people argued with me. They said that this would never happen. But I was right. So you have to find a center piece idea that will be important in driving the market. And you have to have an intuition about how other investors will react if you’re right and they wake up to that idea. Such opportunities do not happen very often. It is not always so obvious. So you have to pick your moments. In the financial markets, 80% of the time it’s a coin flip. But the other 20% of the time you have very high confidence and it’s not a coin flip. For instance, I don’t think the stock market is a coin flip. Especially in the United States stocks are very expensive, particularly low volatility stocks.

    What exactly is the problem with low volatility stocks?
    The riskiest things are now stocks and other investments perceived to be safe. One of the most popular categories in US investing are low volatility stock funds. But there is no such thing! If you think that a stock like Johnson & Johnson can’t go down, you’re wrong. And if people own funds that invest in stocks which they think are immune from decline and they start to decline, all hell breaks loose.

  • Albert Edwards Finally Blows Up: "I'm Not Really Sure How Much More Of This I Can Take"

    Earlier this week we described the personal come to non-GAAP Jesus moment of trading commentator Richard Breslow, who confessed in no uncertain terms that he has had it with endless central banking intervention: “a portfolio built to only withstand stress thanks to central bank intervention is one destined to blow-up spectacularly. The embedded flaw in this new logic is that central banks give investors perfect foresight. And nothing can go wrong… You don’t need to be a Taleb or Mandelbrot to calculate that we have been having once in a hundred year events on a regular basis for the last thirty years.

    Today it is another famous skeptic, SocGen’s Albert Edwards who has had enough and says he feels “utterly depressed” because  he has not “one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result. The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!”

    As he openly warns his readers :

    “I have long recognised my own contrariness (or is it bloody-mindedness) and hopefully put it to good use in my chosen profession. If you want the consensus bull-market cheerleading nonsense, readers know it is amply available elsewhere.”

    With that warning in place, here is why the man who popularized the deflationary “Ice Age” blows up.

    I am neither monetarist nor Keynesian. I see merit and demerit in both sides of a very fractious argument. But what I do know is when in the last few weeks I have heard that Janet Yellen sees no bubble in the US, when Ben Bernanke hones and restates his helicopter money speech, and when Mario Draghi says that the ECB’s policy of printing money and negative interest rates was working, I feel utterly depressed (I could also quote similar nonsense from Japan, the UK and China). I have not one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result. The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!

    We said in 2010 when the Fed launched QE2 that the ultimate outcome would be civil (or more than civil) war, so we thoroughly agree with Edwards “depression” because sadly he is right, but since stocks keep rising, few others seem to care.

    Edwards’ lament continues:

    I?m not really sure how much more of this I can take. So here we are 5, 6 or is it now 7 years into this economic recovery and it still remains pathetically weak. And so it should in the wake of one of the biggest private sector credit bubbles in history. The de-leveraging hangover was always going to be massive and so it is. Quick-fix monetary QE nonsense has made virtually no difference to the economic recoveries other than to inflate asset prices, make the rich richer, inequality worse and make Joe and Joanna Sixpack want to scream in rage. They are doing so by rejecting the establishment political parties and candidates at almost every electoral turn and seeking out more extreme alternatives at both ends of the political spectrum. And who can blame them apart from the chattering classes?

     

    I have just returned from Germany on a marketing trip. I absolutely agreed with their Finance Minister Schäuble when he blamed ECB loose money policies for contributing to the rise in the extremist right Alternative for Germany party. Schäuble, “said to Mario Draghi…be very proud: you can attribute 50% of the results of a party that seems to be new and successful in Germany to the design of this [monetary] policy,” And this is not just a German phenomena – it is a global one. The people are angry and they are lashing out. But central bankers have painted themselves into a corner with their overconfident rhetoric and monetary experiments. They have now committed us all to their road to perdition.

    Finally for those convinced in central bank ultraomnipotence, Edwards has the following parting words:

    As investors hung on the words of ECB chair Mario Draghi once again, I was reminded when reading the excellent monthly newsletter of Graham Summers at Phoenix Capital just how desperate Central Bankers will become once they are painted into a corner. Graham  writes “Whereas another Central Banker might state, “we are ready to act if warranted,” Mario Draghi says things like he’ll “do whatever it takes… and believe me it will be enough.” Bear in mind that famous statement was made entirely off-the-cuff as former Treasury Secretary Timothy Geithner revealed.

     

    Geithner:

    [T]hings deteriorated again dramatically in the summer which ultimately led to him saying in August, these things I would never write, but he off-the-cuff – he was in London at a meeting with a bunch of hedge funds and bankers. He was troubled by how direct they were in Europe, because at that point all the hedge fund community thought that Europe was coming to an end. I remember him telling me [about] this afterwards, he was just, he was alarmed by that and decided to add to his remarks, and off-the-cuff basically made a bunch of statements like ‘we’ll do whatever it takes’. Ridiculous.

     

     

    Interviewer: This was just impromptu.

     

    Geithner: Totally impromptu?. I went to see Draghi and Draghi at that point, he had no plan. He had made this sort of naked statement of this stuff. But they stumbled into it. (Source: Financial Times)”

     

    Here is former Secretary of the Treasury, Timothy Geithner, stating openly that Mario Draghi had “no plan” and was simply bluffing when he claimed, “we’ll do whatever it takes.” Lets not kid ourselves, these “guys” are literally making it up as they go along!

    There is little more to add, suffice that all of the above explains the relentless thrust by the mainstream media to pain central bankers as nothing less than supermen, or in the case of Roger Lowenstein’s famous op-ed, “Heroes.”

  • Valued At $16 It Sold For $68 Million "In 7200 Seconds" – The Inside Story Of Vancouver's Wildest Property Deal

    For the past four months we have been closely following the sheer bubble panic, if not outright insanity, that has gripped the Vancouver housing market (here, here, here, here, here and many more) which has been over the past year, converted into the personal offshore piggybank of wealthy Chinese oligarchs seeking to park laundered money outside of their home nation. On the way, the story took an odd detour into the outright bizarre when we reported the curious story of the Chinese tycoon found “chopped up into 100 pieces” in a Vancouver mansion.

    But nothing compares to this fascinating story reported first by the South China Morning Post, in which the paper’s investigation revealed the obscure transactions behind a commercial real estate frenzy, including a two-hour stampede by investors desperate to pay C$60m for a site valued at C$16m. Then, a month after taking ownership, they resold it for C$68m.

    Presenting, the inside story of Vancouver’s wildest property deal, gone in 7,200 seconds

    Julia Lau (inset) boasted on social media that the October sale of C$60 million
    worth of shares in 1059 and 1075 Nelson Street (main picture) in Vancouver
    had been sold out to investors in “7,200 seconds”.

    It was in fall last year that Bruno and Peter Wall received an offer too good to refuse.

    The prominent Vancouver property developers behind Wall Financial Corporation had spent C$16.8 million (HK$102 million) to buy two ageing walk-up apartment blocks on adjacent lots on Nelson Street in 2013. They had big plans for the downtown site: a glittering 60-storey residential skyscraper, taking advantage of the location within the city’s West End Community Plan, where a building could rise 168 metres tall under new zoning. The project was dubbed “Nelson on the Park” and the Walls turned to favourite designer Chris Doray to come up with what they hoped would be a new Vancouver landmark.

    But now a consortium of investors was proposing something even more remarkable.

    They would pay the Walls C$60 million for the site alone, which had just been valued at C$15.6 million by BC Assessment. The huge profit was impossible to resist, and the sale was completed in late January.

    Doray, a 25-year veteran of the Vancouver development scene whose design has now been shelved, said he was “astonished” by the transaction, which he said set a new benchmark for commercial real estate in the city.

    “The price on this block of land has now thrown everybody in the industry out of whack,” said Doray. “The property is worth, what, C$20 million, and somebody pays C$60million? One wonders what’s going on. Is this New York? Is this Hong Kong?”

    1059 Nelson Street in downtown Vancouver, where property developers
    Bruno and Peter Wall had once hoped to build a 
    60-story skyscraper.

    The scale of the purchase, orchestrated by Sun Commercial Real Estate (Suncom) – a firm that specialises in pooling wealthy investors from Vancouver’s Chinese immigrant community – was exceptional enough.

    The now-shelved design for ‘Nelson on the Park’.

    But an investigation by the South China Morning Post now reveals the strange and frantic backdrop to the transaction – including a two-hour stampede by Suncom’s investors, desperate for a slice of the deal. It is a transaction that also sheds light on the rush of Chinese money fuelling Vancouver’s soaring real estate market.

    The Post interviewed key players and pored over land titles, company directorship and address changes, and English and Chinese social media postings to understand a transaction that looked, from the outside, incomprehensible – and potentially disastrous.

    But Suncom, whose activities are being reviewed by the BC Securities Commission, knew exactly what it was doing.

    Because on February 29, one month after taking ownership of the Nelson Street site, the Suncom consortium flipped it, corporate records show.

    The price was C$68 million. And the Post met the new buyer, a rich Chinese immigrant named Gao Shan, last month.

     

    ‘Prepare the bank draft tomorrow. The shares will be sold out on Monday’

    The blocks of apartments at 1059 and 1075 Nelson St could not be more nondescript. On a recent afternoon, there was a broken ground-floor window at weary-looking 1075, a Canadian flag draped as a makeshift curtain. Next door, at 1059, a waft of marijuana smoke drifted out of an open window.

     But as she considered the apartments last October 8, Suncom’s self-professed vice-president, Julia Lau Chi Yuen, told her Facebook friends she was feeling excited.

    Julia Lau (centre) with performers at a Suncom party last July 19.

    Once among the most successful realtors in Vancouver, the Hong Kong immigrant had been prohibited from practising the previous January, after voluntarily surrendering her license ahead of a disciplinary hearing by the Real Estate Council of BC.

    Nine months later, she was busy rounding up investors for 1075 and 1059 Nelson Street, the site still owned by the Walls, which Suncom was promoting as “1065 Nelson St”. Lau was a good fit with Suncom, having fostered close connections with the city’s rich Chinese immigrant buyers; in a 2013 interview, she told the SCMP they made up 80 per cent of her customers and later boasted on her website of selling more than C$560 million worth of homes from 2009 to 2014.

    In a Facebook post that Thursday, Lau claimed “we just bought” 1065 Nelson St. Suncom was offering C$60 million worth of “shares” in the property that were poised to go on sale the next week – and they would go fast.

    “Whoever want [sic] to invest has to prepare the deposit with bank draft tomorrow. The shares will be sold out on Monday,” she predicted.

    “The shares will be sold out on Monday”. An October 8, 2015,
    Facebook posting by Suncom’s self-professed vice president Julia Lau.

    It was no idle brag.

    The Nelson Street sale was not the biggest that Suncom had promoted, but with its prominent downtown location and massive price-to-valuation mark-up, the transaction represented a culmination of efforts.

    On February 21 last year, Suncom had pitched C$30 million worth of shares in two lots at Tisdall Street on Vancouver’s Westside, that had a BC Assessment valuation of only C$11.7million. Investors snapped up the shares in one day, Lau said on Facebook. Land titles show 5826 and 5860 Tisdall Street are now owned by a holding company (“5826&5860 Tisdall Holding Ltd”) whose directors are Suncom president Davidson Guo and Denise Dan Wei She.

    A Chinese language flyer posted online by Julia Lau declares that shares in
    1065 Nelson Street sold out in just “7,200 seconds”

    Then, on May 22, Suncom put the site of Richmond’s Silver City entertainment complex up for grabs, with C$103 million worth of shares selling out in one week. Guo and She are also the directors of the company (“14111 Entertainment Blvd Investments Ltd”) that now owns that sprawling 10-hectare site.

    Meanwhile, capital outflows from China were reaching a fever pitch, as companies and individuals scrambled to send money overseas last year in record volumes ahead of a feared yuan devaluation. The Canadian dollar was also plummeting, making Canadian property relatively more affordable to yuan earners, and average detached house prices in metro Vancouver soared more than 40 per cent last year, hitting an average of C$1.8 million.

    Peer-reviewed research had previously indicated how Vancouver’s property market had decoupled from the local economy, and was instead being steered by recent immigrants’ foreign earnings and wealth. The vast majority of those rich immigrants have been Chinese.

    And so, against this heady backdrop on the morning of October 12, Suncom threw open the gates for the Nelson Street sale.

    The result was nothing short of a frenzy.

    “The 60million dollars project at 1065 Nelson St Vancouver’s shares sold out in two hours! Thank you very much for the supporting from all my clients!” Lau announced on Facebook on October 14.

    A Chinese-language flyer on Suncom letterhead she posted at the same time trumpeted the sale as her “perfect success”.

    “Sale of C$60 million property project completed in 7,200 seconds,” it said. “My perfect success – thanks to the strong support and love of shareholders. My only return – the maximum returns I can bring to you.”

    The Post has no evidence that Lau received remuneration for providing real estate services while unlicensed, as prohibited under the Real Estate Services Act; her Facebook posting from October 14 suggests that she claims not to have been paid. Nor does the Post suggest that Lau was selling shares in real property at the Nelson St site, as opposed to shares in a company that owned the site. Neither Lau nor her lawyer, Joe Carangi, responded to SCMP questions about her role in the Nelson Street sale and her other activities on behalf of Suncom.

    “I’m so proud to call myself the vice president!” Julia Lau at a Suncom
    party in photos she posted online last September. 
    The firm has since
    claimed she was never an employee or 
    officer of the firm

    Fundraising tactics used in deals involving Suncom have previously drawn the attention of the BC Securities Commission, which in January announced it was reviewing the firm’s activities, partly in response to an SCMP article about whether the firm was involved in crowdfunding. In BC, crowdfunding – the mass online recruitment of investors – is limited to C$250,000 per project and a maximum of two projects per year. Individual investors are limited to C$1,500 per project. The BCSC told the Post this month that the review of Suncom was ongoing.

    In a statement issued on March 12 via lawyer James Carpick, the company said that “as far as Suncom knows, Ms Lau was never involved in ‘crowdfunding’.”

    But the firm distanced itself from Lau, saying that she was never formally employed by Suncom, but was “allowed to use the title ‘Vice President’ for a few months in the summer of 2015”. “Suncom terminated her use of that title, although she may have placed ads that used it that could not be recalled instantly, and she may have used it for a longer time than she was permitted to do, but, if that happened, this was not something within Suncom’s control or done with its approval,” the statement said.

    Suncom refused to discuss the identity of its investors, and whether they qualified for exemptions from prospectus-issuance, normally required in the case of securities sales.

    As for Suncom’s plans for the site, the firm revealed that it had “no ongoing involvement” in the property.

    The site had already been resold – and with speed that suggested negotiations were underway even before the purchase from the Walls had closed at the end of January.

     

    Who owns 1065 Nelson Street?

    Keeping up with the changing ownership of the Nelson Street site has been no simple matter.

    The changes do not show up in land titles for the two lots, because they remain to this day in the hands of Nelson Street Residences Ltd, a firm set up by the Walls in 2013 which was added to the titles in March 2014.

    Instead, it is ownership of Nelson Street Residences that has changed hands, thereby avoiding property transfer taxes of C$1.78 million for Suncom’s consortium. The share-transfer tactic is common among commercial real estate deals and perfectly lawful.

    These transfers are depicted in directorship and mailing address changes for the company, which switched on January 30 from Wall Financial Corp’s office, to a multimillion-dollar penthouse in the downtown Shangri-La Estates. The new director was named as “Peter She”; Suncom refused to discuss his connection, if any, to the firm, and Peter She did not respond to SCMP questions delivered via a registered letter that was accepted at his address.

    The land title for 1075 Nelson Street, obtained in January 2016, lists the
    owner as Nelson Street Residences, whose address is
    the Burrard Street
    offices of Wall Financial Corp

    A corporate search for Nelson Street Residences, conducted on February 10,
    2016, lists Peter She as the new director, with the mailing address switching
    to a penthouse in the Shangri-La Estates on West Georgia St.

    However realtor David Taylor, the Colliers International vice-president who acted as a consultant to the Walls on the sale, confirmed that they had sold the Nelson Street site to Suncom’s consortium for C$60 million.

    Joanne Liu, vice-president of Wall Financial, said she was prohibited from discussing the sale by a confidentiality clause, although she confirmed that Peter She did not represent the Walls.

    In any case, Peter She did not last long in his position at Nelson Street Residences, because on February 29, directorship again changed, to a man named Gao Shan, whose address was listed as an accountancy office on West Broadway.

    By keeping his name off the land titles, Gao legally avoided paying more than C$2million in property transfer taxes.

    Another corporate search, conducted on March 24, shows that on February
    29, 2016, Peter She was replaced by Gao Shan as the
    sole director of
    Nelson Street Residences, with its address moving
    from She’s downtown
    penthouse to an accountancy office on West
    Broadway.

     

    ‘The whole industry is astonished’

    Chris Doray, who designed Vancouver’s Wall Centre and was again commissioned by Bruno and Peter Wall for the ill-starred Nelson on the Park project, has watched the site change hands with a mounting sense of disbelief.

    His innovative design for the site, nicknamed the “pixelated tower”, was shortlisted at the 2015 World Architecture Festival in Singapore. It features a lattice-like façade that seems to dissolve into the sky.

    But Doray now considers the plans shelved. “[They] weren’t so much interested in the project, but more in the land, as an investment,” Doray said of the consortium that bought the site off the Walls.

    The widespread industry rumour – since confirmed by the SCMP – that the site had already been flipped seemed to validate Doray’s suspicions that the previous sale was a purely “speculative purchase”.

    “I cannot believe that people will pay that kind of money for a plot of land”.
    Chris Doray, designer of the shelved “Nelson on
    the Park” skyscraper.

    A source familiar with the initial C$60 million sale said “this is Chinese money, looking for an increase in value of the land”. “It seems crazy to think that someone might pay more, say a year from now, but it’s happening all the time,” the source said apparently without realising that a subsequent sale had already taken place.

    Doray said Wall Financial had attempted to persuade its buyers to press on with the skyscraper project, which he said had been “quite well received by the City” last summer.

    “It was there, pretty much ready to go, but they were not interested. They just sold it to another party,” he said.

    He said that in a quarter century of involvement in Vancouver’s real estate scene he had seen nothing like the transactions linked to the Nelson Street lot. “I cannot believe that people will pay that kind of money for a plot of land. The whole industry is astonished.”

    The now-shelved design for ‘Nelson on the Park’, and its  “pixelated” roof.

    Meeting Mr Gao

    In a strange twist, the new buyer of the site, Gao Shan, shares his name with a well-known Chinese embezzler who lived as a fugitive in Vancouver before surrendering in 2012 to authorities in the mainland, where he is less than two years into a 15-year jail term.

    A third Gao Shan, meanwhile, is listed by Interpol as a fraud suspect and international fugitive.

    And so the SCMP requested to meet the director of Nelson Street Residences, to confirm that he was not acting on behalf of either of his dubious namesakes by using their identity documents. An April 4 meeting took place at the office of Gao’s accountant, Jonathan Wong.

    Gao, tanned and dressed casually in a long-sleeved polo shirt, bore no resemblance to either of his namesakes, who are aged 50 and 52; he appeared younger than both. “[There are] many people named Gao Shan,” he joked in English, glancing at the Interpol notice.

    Wong handed over his client’s BC drivers’ licence as identification, but the date of birth had been covered with an opaque piece of tape, which the SCMP asked to be removed. Wong was reluctant, citing concerns about identity theft, but Gao waved away his worries and the tape was briefly peeled off to show a 1971 birthdate matching neither that of the convicted embezzler nor the fugitive fraud suspect.

    The SCMP makes no suggestion of any wrongdoing by Gao or Wong; nor does it suggest any connection between the Nelson Street Residences director and either of the two men who share his name.

    Wong was keen for the meeting to end but the SCMP asked Gao for an on-the-record interview. The accountant demurred, but Gao gave a grin. “One question only,” Gao said, holding up a finger.

    Why would Gao pay C$68 million for the Nelson Street properties, when this was so far in excess of the valuation? After a brief discussion in Putonghua, Wong answered on Gao’s behalf, without disputing the sum.

    It is an investment that Mr Gao sees will give him a good return, and that’s why he made the purchase. I hate to give such a general answer but that’s how business decisions are made. If it’s not going to make money, he’s not going to invest,” Wong said.

    The Post managed one follow-up question, asking Gao if he intended to develop the site. “Yes, this is a development site, it’s for development,” said Wong, after a nod from Gao. Wong also allowed that his client be described as a property developer. “I don’t believe there is anything more,” Wong said, and the meeting was adjourned.

    In a subsequent email, Wong said: “Historical price and government assessment values were irrelevant in setting the purchase price of the two properties. Only the projected net profit was relevant.” He added that “you may be amazed” by checking the potential development returns on the site.

    Designer Doray, who understands the potential of the site as well as anyone, isn’t so sure. “If the developer pays C$60 million for the piece of land, can you imagine what any condos on it would sell for, if they finally finish this project?” Doray said, laughing. “It will be untouchable – well, for the local market. It could only be an elite group of people at this price.”

  • "A Scramble For Gold Has Begun"

    Authored by James Rickards, originally posted at The Telegraph,

    For a century, elites have worked to eliminate monetary gold, both physically and ideologically.

    This began in 1914, with the UK’s entry into the First World War. The Bank of England wanted to suspend convertibility of bank notes into gold. Keynes counselled wisely that the bank should not do so. Gold was finite, but credit elastic.

    By staying on gold, the UK could maintain its credit, and finance the war effort. This transpired. The House of Morgan organised massive credits for the UK, and none for Germany. This finance was crucial, and sustained the UK until the US abandoned neutrality and tipped the military balance against Germany. 

    Despite formal convertibility of sterling to gold, the Bank of England successfully discouraged actual conversion.

    Gold sovereigns were withdrawn from circulation and turned into 400-ounce bars. This form of bullion limited gold ownership to the wealthy, and confined gold’s presence to vaults. A similar disappearance of gold as a circulating currency occurred in the US. 

    The price of gold has jumped in recent years Credit: London Metal Exchange

     

    In 1933, US President Franklin Roosevelt issued an executive order making ownership of gold a crime. FDR relied on the Trading with the Enemy Act of 1917 as statutory authority for this edict. Since the US was not at war in 1933, the enemy was presumably the American people. 

    In 1971, US President Richard Nixon ended convertibility of US dollars into gold by trading partners of the US. Closing the gold window was said by Nixon to be temporary. Forty-five years later the window is still closed. 

    In 1973, the G7 nations, and the IMF demonetised gold. IMF members were no longer required to hold gold reserves. Gold was now just another commodity. The view of the monetary elites was that gold was dead. 

    Yet, like Banquo’s ghost, gold insists on its seat at the monetary table. The US holds 8,133 tonnes of gold. The members of the eurozone and ECB hold 10,788 tonnes.  China reports holdings of 1,788 tonnes, but actual holdings are closer to 4,000 tonnes, based on reliable data from Hong Kong exports and Chinese mining.

    Russia has 1,447 tonnes, and has been acquiring over 200 tonnes per year. Mexico, Kazakhstan, and Vietnam, among other nations, have added to their gold reserves recently. (Pity the UK, which sold more than half its gold at rock- bottom prices between 1999 and 2002). 

    After decades as net sellers of gold, central banks became net buyers in 2010. A scramble for gold has begun. 

    What drives gold’s new allure? In some cases, central banks are constructing a hedge against US dollar inflation.

    China has $3.2 trillion in reserves, over half of which is denominated in US dollars, mostly US Treasury notes. The dollar has no greater friend than China because its wealth is held in dollars. Still, inflation looms. China cannot dump its Treasury notes; the Treasury market is deep, but not that deep.

    If Chinese selling of Treasuries became a threat to US interests, a US president could freeze Chinese accounts with a phone call. 

    The Chinese know this. They are stuck with their dollars. They fear, rightly, that the US will inflate its way out of its $19 trillion mountain of debt.

    China’s solution is to buy gold. If dollar inflation emerges, China’s Treasury holdings will devalue, but the dollar price of its gold will soar. A large gold reserve is a prudent diversification.  Russia’s motives are geopolitical. Gold is the model 21st century weapon for financial wars.

    The US controls dollar payments systems and, with help from European allies, can eject adversaries from the international payments system called Swift. Gold is immune to such assaults. Physical gold in your custody cannot be hacked, erased, or frozen. Moving gold is a simple way for Russia to settle accounts without US interference.

    Countries are also acquiring gold in advance of a collapse of the international monetary system. The system has collapsed three times in the past century. Each time, major financial powers came together to write new rules.

    This happened at Genoa in 1922, Bretton Woods in 1944, and the Smithsonian Institution in 1971.  The international monetary system has a shelf life of about 30 years.

    It has been 30 years since the Louvre Accord (an upgrade to the Smithsonian Agreement). This does not mean the system will collapse tomorrow, but no one should be surprised if it does. When the financial powers next convene to reform the system, there will be no appetite for the dollar’s exorbitant privilege.

    The Chinese yuan and Russia ruble are not true reserve currencies. The only feasible benchmarks for a new system are the IMF’s world money, called special drawing rights, and gold. 

    Critics claim there is not enough gold to support the financial system. That’s nonsense. There is always enough gold, it’s just a matter of price.

    Based on the M1 money supplies of China, the eurozone, and the US, and with 40pc gold backing, the implied non-deflationary price of gold is $10,000 per ounce.

    At that price, a stable gold-backed monetary system could be sustained.  When it comes to monetary elites, watch what they do, not what they say.

    While elites disparage gold at every opportunity, they are buying it, hoarding it, and preparing for the day when one’s gold determines one’s seat at the table of systemic reform.

    It’s past time to claim your seat with an asset allocation to physical gold.

  • Depression, Debasement, & 100 Years Of Monetary Mismanagement

    From the archives of Bill Bonner at Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

    Lost From the Get-Go

    There must be some dark corner of Hell warming up for modern, mainstream economists. They helped bring on the worst bubble ever… with their theories of efficient markets and modern portfolio management. They failed to see it for what it was. Then, when trouble came, they made it worse. But instead of atoning in a dank cell, these same economists strut onto the stage to congratulate themselves.

     

    Keynes

    The scalawag himself. Keynes provided governments with the “scientific” fig leaf fore interventionism that economists had previously denied them. The cost in terms of economic and technological progress is incalculable.

     

    The Greatest Depression that could so easily have happened in 2009 but did not is the tribute that the world owes to economics”, wrote Arvind Subramanian in The Financial Times.

     

    Arvind

    Arvind Subramanian: congratulating mainstream economists (a sub-set of society that includes him) for failing to foresee a mess their own advice has produced. The chutzpa of this guy is really admirable. He is of course correct that it is difficult to make forecasts (in fact, economics as a science has nothing to do with making predictions), but anyone who didn’t see the 2008 crisis coming had to be blind as a fricking bat. Even housewives could see it coming, but a very long list of prominent professional economists and “policymakers” evidently couldn’t. Fine, but these are the same people that insist that they know what to do about it. That is decidedly not so. They have now produced what will turn out to be an even greater mess.

     

    We were lost from the get-go, trying to interpret the sentence. It is as tangled and puerile as the staggering conceit behind it. Then, Mr. Subramanian sets up the stage props:

    “In 2008, as the global financial crisis unfolded, the reputation of economics as a discipline and economists as useful policy practitioners seemed to be irredeemably sunk. Queen Elizabeth captured the mood when she asked pointedly why no one (in particular economists) had spotted the crisis coming. And there is no doubt that, notwithstanding the few Cassandras who had correctly prophesied gloom and doom, the profession had failed colossally…”

    He then brushes off the Queen’s very sensible question:

    “But crises will always happen, and even if there is a depressing periodicity to them as Professors Reinhart and Rogoff have catalogued, their timing, form, and provenance will elude prognostication.”

     

    Queen_2

    The Queen, here seen shortly after being apprised of Mr. Subramanian’s excuse in the FT

     

    Of course, the record doesn’t show that the crisis eluded prognostication; any dope could have seen it coming. But the prognosticators who had contributed so mightily to the crisis had blinded themselves with their own claptrap. Still, Mr. Subramanian figures that they “vindicated” the profession in the way they responded to the crisis.

    “On monetary policy, Bernanke was true to the word he gave to Milton Friedman on the occasion of his 90th birthday: ‘Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.’

     

    Bernanke, the pre-eminent student of the Great Depression, found conventional and some very unconventional ways of not doing ‘it’ again. At the peak of his interventions, the U.S. Fed came to resemble the Soviet Gosbank, more a micro-allocator of credit than a steward of macroeconomic policy.”

    It probably wasn’t the point he intended to make, but the Fed does resemble the Soviet era Gosbank – manipulating, meddling, and micro-managing the economy toward destruction.

     

     

    Gosbank_Building_(Rostov-on-Don)4

    Gosbank building in Rostov-on-Don (??????????????? ???? ????, Gosudarstvenny bank SSSR, State Bank of the Union of Soviet Socialist Republics). It is interesting that Mr. Subramanian didn’t even bat an eye over the Fed’s similarities with Gosbank. Of course these similarities didn’t just pop into the open on occasion of the 2008 crisis. “Gosbank” is precisely what the Fed is. It is a socialistic State-run central planning agency. What else is it supposed to be? Don’t be misled by the often stated assertion that it is a privately owned cartel. Its charter is from the government and its board of governors is government-appointed. It is the link between the banking cartel and the State, but it would not exist or have any power without the State.

     

    Led by a Scalawag 

    Meanwhile, Congress is doing some Soviet style management too; it is now owner of the nation’s largest automobile company and its largest insurance business:

    “They took their cue from the writings of the academic scribbler of yore – Lord Keynes – and provided massive public demand for goods and services where private demand had collapsed…”

     

    wolf

    Chief economics quack of the FT, Martin Wolf (another one of those who didn’t see it coming, but know all the solutions). It is no surprise that he invoked the scalawag Keynes.

     

    We were still gasping for air when, on the 30th of December, columnist Martin Wolf called upon Keynes’ ghost again. He, too, shuddered to think how horrible things would have been if the financial authorities had not taken resolute action:

    “We could not, in such times, even take the survival of civilization itself for granted. Never before had I felt more strongly the force of John Maynard Keynes’ toast ‘to the economists – who are the trustees, not of civilization, but of the possibility of civilization.’”

    Is there any doubt that Keynes was a scalawag? Civilization flourished for thousands of years before anyone made a living as an economist. Crises came and went.

    In the 19th century, for example, there were panics followed by depressions in 1819, 1837, 1857, 1873, and 1893. Not one of the depressions seemed worthy of the “great” modifier. Hundreds of banks failed. Civilization didn’t seem to care. The rich and powerful took their lumps along with everyone else; most people enjoyed watching them go down. Business went on.

     

    436px-Fed_Reserve

    The ominous newspaper headline that announced the passage of the Federal Reserve Act. A “constructive act to aid business”?. It took just 15 years under the stewardship of this “constructive” agency to bring about one of the greatest economic catastrophes in history.

     

    In 1913, on Christmas Eve, Congress passed the Federal Reserve Act, setting up America’s central bank. Only then did economists get their hands on the economy’s throat. The dollar was worth about the same thing it had been worth 100 years before.

    Now, almost a hundred years later, it is worth only 3 cents. And only 16 years after economists took their positions at the Federal Reserve came a depression worse than anything the nation had ever seen – at least, it was worse after government economists finished with it.

     

    Purchasing power

    After the dollar had been stable for a century, it was decided that central planners could do better. This is the result, along with far weaker economic growth and far greater inequality – click to enlarge.

     

    The Great Depression may have been an accident, but the debasement of the dollar certainly was not. It was a matter of policy. Economists, led by Keynes, had the idea that they could spur the economy forward by creating phantom demand – in the form of additional units of purchasing power. The gold standard stood in the way; it was abandoned like a bad neighborhood.

    First, temporarily, then partially, then, in 1971, completely. The first consumer credit boom came in the ’20s… leading to the Great Depression. By the 1980s, 50 years later, Americans had lost their residual fear of debt. Consumer credit boomed again.

    Then it bubbled. Economists didn’t understand what was going on. They rarely do. But they had created a hundred-year flood of consumer debt. Now, they congratulate themselves; households sink… but civilization floats.

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Today’s News 22nd April 2016

  • Retailer Bankruptcies Are Hailing Down on the US Economy

    Wolf Richter   www.wolfstreet.com

    Another retailer is heading for bankruptcy. This time Aeropostale, with 800 teen-clothing stores, after three years in a row of losses. It’s “preparing to reorganize under a Chapter 11 bankruptcy, and could file as soon as this month, according to people familiar with the matter,” Bloomberg reported today.

    Upon Bloomberg’s propitious report, Aeropostale shares plunged 28% to 15 cents. It has been a penny stock since last September. The New York Stock Exchange, which had threatened the company with delisting, removed the stock before 2 p.m. today, and trading of the shares has been suspended.

    Bloomberg:

    Aeropostale is trying to work out a loan to finance its operations during the bankruptcy process, according to the people. A deal to avert a filing or find a buyer also could still emerge, they said.

    Which is what just about all collapsing retailers are valiantly trying to do. And often to no avail.

    In March, Aeropostale had already announced that it would “evaluate strategic alternatives.” It hired Stifel Financial Corp. to work on a sale or restructuring. According to Bloomberg, it’s also working with law firm Weil Gotshal & Manges LLP and FTI Consulting, “people familiar with the matter said last week.”

    As in so many cases, there is a private equity angle. PE firm Sycamore Partners owns a large state in Aeropostale and is its main lender. But they have been embroiled in a feud. Sycamore also owns Aeropostale’s key clothing supplier, MGF.

    In 2013, when Sycamore acquired its stake in Aeropostale and lent if $150 million, it obtained two seats on the board and set up the supply deal with MGF. Bloomberg:

    At the time, Sycamore was seen as possible savior for the troubled chain. Some investors expected the investment firm to eventually acquire the rest of Aeropostale, helping redeem a stock that has been declining since 2010.

    But that didn’t work out. These hopeful investors lost their shirts. Sycamore’s two directors left Aeropostale’s board. In March, Aeropostale said that MGF has stopped delivering merchandise in violation of the terms of its agreement, leaving the retailer short on merchandise. MGF, as Bloomberg put it, said “it was merely seeking protection from Aeropostale.”

    There are numerous other 1990s and 2000s brands that didn’t quite make the transition in the relentlessly tough US retail environment of squeezed consumers, fickle and picky teens, smart women, shoppo-phobic men, inscrutable millennials, and a brutal shift to online sales.

    And now their bankruptcies are hailing down on the US economy with increasing intensity. Here are a few standouts in 2016 and 2015. Note the PE firms behind many of them:

    April 16, 2016: Vestis Retail Group, the operator of sporting goods retailers Eastern Mountain Sports (camping, hiking, skiing, adventure sports), Bob’s Stores (family clothing and shoes), and Sport Chalet (general sporting goods), filed for Chapter 11 bankruptcy. It will close all 56 stores and stop online sales.

    In the filing, it blamed the going-out-of-business sales at “certain Sports Authority locations,” plus the weather, which had been too warm, and trouble with switching to a new software platform. It’s owned by private equity firm Versa Capital Management LLC.

    April 7, 2016: Pacific Sunwear of California, clothing retailer with nearly 600 stores and derailed ambitions of skate-and-surf cool, filed for Chapter 11 bankruptcy. PE firm Golden Gate Capital, a lender to the company, agreed to convert over 65% of its loan into equity of the reorganized company and add another $20 million in financing. Wells Fargo agreed to provide $100 million of debtor-in-possession financing.

    March 2, 2016: Sports Authority filed for Chapter 11 bankruptcy. It said it would close 140 of its 450 stores, including all stores in Texas. In 2006, it had been taken over in a leveraged buyout by a group of PE firms led by Leonard Green & Partners [Another Private-Equity LBO Queen Bites the Dust].

    February 2, 2016: Hancock Fabrics filed for Chapter 11 bankruptcy, for the second time. It closed 70 of its retail sewing and crafting stores. Its inventories are being liquidated with going-out-of-business sales at the remaining 185 stores.

    January 16, 2015: Wet Seal, teen fashion retailer, filed for Chapter 11 bankruptcy.

    October 2015: American Apparel filed for Chapter 11 bankruptcy, after years of all sorts of sordid turmoil – and losses since 2009.

    In 2014, hedge fund Standard General entered into a deal with the company’s “controversial” founder and former CEO Dov Charney. The deal raised his stake to 43% but gave the hedge fund a big block of the shares as collateral. The hedge fund and some other investors also own a big part of American Apparel bonds and thus control the bankruptcy negotiations. The hedge fund expects to emerge owning about a quarter of the restructured company’s debt and about 5% of its new equity.

    September, 2015: Quiksilver, surfwear retailer, filed for Chapter 11 bankruptcy. In January, 2016, it emerged from bankruptcy and is now controlled by PE firm Oaktree Capital.

    June, 2015: Anna’s Linens filed for Chapter 11 bankruptcy.

    April 2015: Frederick’s of Hollywood filed for Chapter 11 bankruptcy

    February 2015: RadioShack filed for Chapter 11 bankruptcy. In May 2015, Standard General took control of it in a bankruptcy auction.

    February 2015: Cache Inc., women’s dress and formal-wear retailer, filed for Chapter 11 bankruptcy.

    January 2015: Body Central Corp, women’s clothing retailer, after announcing it was exploring a Chapter 11 bankruptcy, ended up not filing, but closed its 265 stores under a Florida process called “an assignment for the benefit of creditors.”

    These are the ugly skid marks of the “end of the credit cycle,” as it’s called, an era when defaults and bankruptcies suddenly re-materialize, and when investors get to eat big losses in what they thought were conservative investments.

    In March, total commercial bankruptcy filings by corporations of all sizes and other business entities jumped 25% from a year ago to a total of 3,351, with the two biggest culprits being energy and, well, retail. Read…  US Commercial Bankruptcies Suddenly Soar

  • Is Hillary Clinton The Democrats' Richard Nixon?

    Authored by Eric Zuesse,

    Richard Nixon’s similarities to Hillary Clinton are remarkable:

    1: Both were highly successful politicians who had exceptionally negative net-approval ratings from the U.S. public, but were viewed highly favorably by the voters within their own Party.

    2: Both were unsuccessful in their first run for the Presidency, but managed to come back and ran considerably more successful campaigns the second time around.

    3: Both were highly distrusted, except by the voters within their own Party.

    4: Both went into their Presidential campaign years (especially the second time around) as being “the candidate with experience.”

    5: Both were war-hawks and proponents of a big military, but were also liberals on social policies and regulatory policies (for example, Nixon signed into law the National Environmental Policy Act, several environmental initiatives including the Clean Air and Clean Water Acts, the Mammal Marine Protection Act, and the creation of the Environmental Protection Agency; and, he started the Earned-Income Tax Credit, which "now lifts more children out of poverty than any other government program”).

    6: Whereas Nixon, running during the Cold War against the sitting Vice President Hubert Humphrey in 1968, lied that he had ‘a secret plan to end the Vietnam war' (he actually had — and applied — a secret plan to extend the Vietnam war), and he won the Presidency on the basis of that lie; Hillary Clinton, running against the anti-restoration-of-the-Cold-War progressive Bernie Sanders in 2016, lies by saying that she has a plan to end the war in Russia-allied Syria. Sanders says: “Of course Assad is a terrible dictator. But I think we have got to get our foreign policies and priorities right. The immediate — it is not Assad who is attacking the United States. It is ISIS. And ISIS is attacking France and attacking Russian airliners. The major priority, right now, in terms of our foreign and military policy should be the destruction of ISIS.” Clinton says an emphatic no to that: "Assad has killed, by last count, about 250,000 Syrians. The reason we are in the mess we're in, that ISIS has the territory it has, is because of Assad.” So, she is promising regime-change in Syria and saying that it’s the prerequisite to defeating ISIS — which is an absurd lie, since ISIS, and Al Qaeda, and all the other jihadist groups who have flocked into Syria to overthrow and replace Assad, are certainly not the way to defeat ISIS, nor to defeat the other jihadist groups there, all of which are anti-Assad, as is Clinton herself. Clearly, then, her ‘plan’ to win the war in Syria is, essentially, to replace Assad with jihadists — to whom the U.S. is sending thousands of tons of weapons. Her Big Lie there is merely stupider than Nixon’s (it’s transparently stupid, because both she and ISIS aim, above all, to overthrow Assad), but it’s just as much a lie about war-and-peace as was Nixon’s ’secret plan to end the Vietnam war’; and, in that sense, it is remarkably similar and (like Nixon’s lie was) can be believed only by liar-trusting fools, including virtually all members of the candidate’s own Party, plus a large percentage of political independents.

    7: Both Richard Nixon and Hillary Clinton were/are famous for being secretive, and for distrusting everyone except his/her proven-loyal personal entourage — loyalty is a higher value to them than is any other. They are paranoid — very us-versus-‘them’ — and all-too-willing to use unethical means of defeating ‘them’ (not really the American people’s foreign ‘enemy’, but, above all, their own domestic “enemies-list”).

    8: Both Nixon and Clinton famously use curse-words profusely in private, and treat their subordinates like trash, and rule them by fear.

    9: Both of them had/have established records backing coups abroad, in order to impose the will of America’s President, no matter how bloody (such as the coups that overthrew Mossadegh in Iran in 1953 and Allende in Chile in 1973, and the coups that overthrew Zelaya in Honduras in 2009, and Yanukovych in Ukraine in 2014).

    *  *  *

  • Denver Schools To Arm Guards With Military-Style Rifles

    Submitted by Mac Slavo via SHTFPlan.com,

    Are children safe in public schools?

    If the answer seems pretty obvious, it is confirmation that society has definitely gone to extremes that would not have been recognizable in past decades of American history.

    Now Denver-area schools are becoming the first to guard their student populations with military-style semiautomatic rifles, and things certainly appear to be escalating.

    via NBC News/AP:

    A suburban Denver school district is arming its security staff with military-style semiautomatic rifles in case of a school shooting or other violent attack, a move that appears unprecedented even as more schools arm employees in response to mass violence elsewhere.

     

    The guards, who are not law enforcement officers, already carry handguns.

     

    […]

     

    The move raised new questions about how far school officials should go in arming employees, a practice that has become standard in the aftermath of the 2012 Sandy Hook Elementary School shootings.

    One can only hope that these weapons would stop a shooter before they could hurt anyone, but there isn’t any guarantee.

    Active shooters, mass killings and militarized police and security now haunt the halls where education and learning is supposed to be taking place. More children than ever before are on pharmaceutical medications, despite the known links to suicide and homicide. Between Common Core and politically-correct policies, these institutions are teaching that up-is-down, and down-is-up like never before.

    One school in Florida even punished a 16-year old student for wrestling a gunman threatening other students to the ground and preventing a shooting. Active shooter and martial law drills have become commonplace, and many of them have been unannounced, causing terror and panic in students and teachers.

    While most schools remain “gun-free zones” and have been reluctant to allow teachers to be armed in the case of the worst incidents, many have readily invested in armed security, surveillance technology and counter-terrorism approaches to “safety” in schools.

    The result has been a heightened atmosphere that is increasingly paranoid, and ready to treat anyone and everyone as potential suspects – including children:

    Ken Trump, a school safety consultant in Cleveland, said the Douglas County case may mark the first time a district has equipped its in-house security officers with semiautomatic rifles.

     

    “Taking this step certainly ratchets up a notch the whole idea, the question of what’s reasonable, what’s necessary in terms of arming officers,” Trump said.

    But are they being protected from potential violence, or indoctrinated in a police state society where even children are under sharp suspicion, and misbehavior is criminalized? Can we see down the road as to whether this is likely to tend towards more freedom, or less? More armed citizens is positive, but more guns only in the hands of police, but private and public, may prove not be.

    Regardless, it is a precedent for the growing police state society that expects individuals to conform to the masses, and obey authorities at all costs. Michael Snyder argued that public schools are purposely preparing students to live in such a society:

    Our children are the future of America, and our public schools are systematically training them to become accustomed to living in a “Big Brother” police state. All across the United States today, public schools have essentially become “prison grids” that are run by control freaks that are absolutely obsessed with micromanaging the lives of their students down to the smallest detail. As you will read about below, students all over the country are now being monitored by RFID microchips, their lunches are being inspected on a daily basis by school administrators, and the social media accounts of students are being constantly monitored even when they are at home.

     

    […] One thing that was unheard of back when I was in high school was “active shooter drills”. They are being held in school districts all over the nation today, and they often involve the firing of blanks and the use of fake blood.

    In typical fashion, Snyder goes on to make a long list of bizarre school practices that will make your head spin, and are, frankly, teaching the future members of society how to become helpless slaves.

    Everyone can see that there is a problem, but nobody seems to know the way to fix it.

    There is a fine line somewhere in there…

  • Hundreds Of Chinese Children Mysteriously Fall Ill Suffering From Nose Bleeds, Rashes, Coughing

    Hundreds of school children in East China’s Jiangsu Province have fallen mysteriously ill, suffering from nose bleeds, itching, rashes, coughing, and other complicated symptoms, whose cause has not been determined.

    CRI reports that some of the parents alleged that they noticed irritant smells at the school. They suspect that the smell comes from chemical factories near the school, which they believe are the main causes of their children’s symptoms.

    This is the second week in a row where students were found to be suffering from the same symptoms in the same province.

    As a result, local authorities have mandated that five chemical factories near the school suspend operations. Meanwhile, the school insists on continuing all school activities as usual.

     

    Mckinsey estimated in a 2013 study that China would drive roughly 60% of global chemical market demand growth from 2011 to 2020. As firms scramble to get chemical plants up and running in China, it appears that “safety” was conveniently brushed aside and is now leading to dramatic consequences for all those in the vicinity .

  • Commodity Trader: "What Is Happening Has Absolutely No "Reasonable" Explanation"

    One commodity trader writes in with some very unique observations. From trader "Peter"

    * * *

    The insanity has now fully spilled into the commodity markets – a market which I professionally made a transition to after the 2008 crisis from the financial markets, simply because I believed it was a market that would still function according to true fundamentals…

    I guess that only lasted so long…

    The commodity markets have been prone to excessive speculation for years, but at the end, the thought of specializing in something “tangible” that EVENTUALLY would have to revert back to true supply and demand fundamentals made all the sense in the world.  Specially with the true circus that the financial markets have become since 2008…

    * * *

    From: XXXXXXXXXX
    To: "Peter"
    Sent: Wednesday, April 20, 2016 1:35 PM
    Subject: volume totals today

    774K of soybeans traded today and that would be a record by nearly 160K contracts as yesterday set the record at 615K.

    Over 88K Jly/Nov traded today and 97K May/Jly traded.  Unheard of non-roll numbers.

    Meal volume was 270K and we have to think that was a record as well but not 100% on that one.

    Lots of ideas around to try and explain the move: from commercial short hedgers blowing out, Chinese pricing, product switching from Argentina to the US.

    Not really sure if all or any of this is true but it was quite a wild session

    * * *

    From: "Peter"
    Sent: Wednesday, April 20, 2016 2:41 PM
    To: XXXXXXXXXX
    Subject: RE: Some staggering volume totals today

    Man… I would be VERY surprised if this was due to any of the reasons people are mentioning…

        Chinese pricing – I am very positive it does have something to do with it, but for the overnight session – not the daytime.
        Commercial hedgers blowing out – very possibly adding to the mess – but no way commercial volume takes us to these levels of ridiculousness in total volume…
        Product switching from ARG – yep, because we REALLY need to ration our 400+ mb bean stocks… LOL

    This is way past insane, ridiculous, etc…

    The “fundamental” reasons people are trying to ping to this are simply a nice “window dressing”…

    There is nothing else that can explain this other than you know what? 

    Here comes my Very-REAL Conspiracy Theory: the stupid FED and other Central Bankers around the world acting in unison to artificially raise inflation so that they can hopefully get out of the F’ing mess they got themselves into with this low/negative rate BS.  Call me crazy, and I am not a “conspiracy theorist” – but what is happening has absolutely no “reasonable” explanation.  So I have to think outside the box…

    The FED and other Central Banks have already destroyed the equity and other macro-financial markets… it is now turn for the commodities markets…

    I am serious … I really am… I wish I was just being sarcastic… but pause for a moment and think about what is written above…

    What explains the move in Crude? Ok, I could try and put some sort of “rationality” on the initial move from $26 – $40 (as crazy as it was), but the action in the oil market since Sunday’s “about face” in Doha?  No way anything other than pure, simple and outright manipulation can explain these last 3 days of action in the crude oil market… nothing…

    How about the fact that the main drag on the inflation figures has been what? What? FOOD & ENERGY…

    So is it so crazy to think that Central Bankers all got together in early 2016 and came up with the following equation???

    ARTIFICIALLY RAISE COMMODITY VALUATIONS = HIGHER ARTIFICIAL INFLATION = CLAMORING FOR RATES TO BE RAISED = CENTRAL BANKS HAVING A “SUCCESSFUL” END TO THE CLUSTERFCK THEY GOT THEMSELVES AND THE REST OF ALL OF US INTO WITH THEIR “ZIRP” AND “NIRP” EXPERIMENTS…

    Who or what has the power to produce such volume in such short amount of time?????? Not the powerful Chinese, not the commercials, not even the “regular” hedge fund crowd… This is much bigger than that Chris… much bigger…

    When you pause and think about what I just wrote – it will not sound that crazy after all…

    I truly wish I was joking…

    I also wish I could let go of my natural makeup of focusing on “fundamentals” and just go long everything… but I don’t believe I can… and I am frankly and idiot for it…

    Don’t write this off as some crazy conspiracy… Think about it… it is almost scary how much sense it makes…
    At the end of the day… it is what it is…

    Peter
     

  • Is Bitcoin About To Soar?

    Back on September 2, 2015 when bitcoin was trading at $230, we laid out the simplest and most fundamental reason why, irrelevant of one’s ideological persuasion with “alternative” or digital currency – bitcoin would soar.

    it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented “forking” with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.

    For now only a small fraction of the eligible potential Chinese bitcoin users have emerged. Even so, bitcoin is now double the price where it was when we wrote the above forecast.

    But what if just like every other market, fundamentals only matter to a certain extent, and what is far more important is the algos scanning for patterns and creating self-fulfilling chartist prophecies.

    In other words, what if the Bitcoin technicals are far more important? Then we may be about to see a major breakout to the upside. As Dan Eskola writes, “a large move in bitcoin” is imminent.

    He explains why:

    A “Bullish Pennant” is a buy indicator. It exists here since the price action in October 2015 was bullish. Since then the prices have stabilized somewhat but have not sold off or broke out higher. Bitcoin prices are searching for direction.

    The long term chart also shows some common characteristics.

    Fundamental analysis is great, technical analysis is easy. The following fundamental bullish factors indicate that the prices for Bitcoin are headed higher.

    1. A finite number of Bitcoin will be mined.
    2. Central bankers are convinced inflation targeting is the correct policy action to promote price stability.
    3. Capital controls in struggling economies are creating new users of Bitcoin.
    4. Easier to transfer than Gold, the traditional inflation hedge.
    5. ETF $COIN seeking regulatory approval will expand market awareness and offer another vehicle for investors.

    I believe the market participants that price Bitcoin use technical analysis because it is easy and fundamental analysis is difficult. I believe that Bitcoin prices will move higher for the rest of 2016.

  • 47% Of Americans Can't Even Come Up With $400 To Cover An Emergency Room Visit

    Submitted by Michael Snyder via The Economic Collapse blog,

    If you had to make a sudden visit to the emergency room, would you have enough money to pay for it without selling something or borrowing the funds from somewhere? 

    Most Americans may not realize this, but this is something that the Federal Reserve has actually been tracking for several years now.  And according to the Fed, an astounding 47 percent of all Americans could not come up with $400 to pay for an emergency room visit without borrowing it or selling something

    Various surveys that I have talked about in the past have found that more than 60 percent of all Americans are living to paycheck to paycheck, but I didn’t realize that things were quite this bad for about half the country.  If you can’t even come up with $400 for an unexpected emergency room visit, then you are just surviving from month to month by the skin of your teeth.  Unfortunately, about half of us are currently in that situation.

    Earlier today someone pointed me toward an excellent article in The Atlantic that discussed this, and I have to admit that The Atlantic is one of the last remaining bastions of old school excellence in journalism that you will find in the mainstream media.  Of course I don’t see eye to eye with them on a lot of things philosophically, but there are some really hard working journalists over there.

    The article where I found the 47 percent figure comes from The Atlantic, and it is entitled “The Secret Shame of Middle-Class Americans“.  It was authored by Neal Gabler, and he says that he can identify with the 47 percent of Americans that don’t have $400 for an unexpected emergency room visit because he is one of them

    I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5—literally—while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs. I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn’t know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil.

    To me, this is yet more evidence that the middle class in America is dying.

    Last year, it was reported that middle class Americans make up a minority of the population for the very first time in our history.

    But back in 1971, 61 percent of all Americans lived in middle class households.

    So what happened?

    Well, the big corporations started shipping millions of good paying manufacturing jobs overseas.  Millions of other good paying jobs were replaced by technology, and the competition for the good jobs that remained became extremely intense.

    During the good times, the U.S. economy still created new jobs, but most of those jobs were low paying service jobs.

    At this point, a majority of American workers have jobs that would be considered low paying.  In fact, 51 percent of all American workers make less than $30,000 a year according to the Social Security Administration.

    And once you account for inflation, the truth is that our incomes have been going down for years.  According to a study that was released by Pew Charitable Trusts, median household income in the United States decreased by 13 percent between 2004 and 2014.

    That isn’t “progress” any way that you slice it.

    If you go all the way back to 1970, the middle class took home approximately 62 percent of all income in the United States.

    Today, that number has fallen to just 43 percent.

    So the fact that 47 percent of Americans can’t even pay for an unexpected emergency room visit is not exactly a surprise.  To be honest, a whole host of other surveys have come up with similar numbers.  Here is more from Neal Gabler

    A 2014 Bankrate survey, echoing the Fed’s data, found that only 38 percent of Americans would cover a $1,000 emergency-room visit or $500 car repair with money they’d saved. Two reports published last year by the Pew Charitable Trusts found, respectively, that 55 percent of households didn’t have enough liquid savings to replace a month’s worth of lost income, and that of the 56 percent of people who said they’d worried about their finances in the previous year, 71 percent were concerned about having enough money to cover everyday expenses.

    What all of these numbers tell us is that the middle class is disappearing.  I tend to compare it to a game of really bizarre musical chairs.  With each passing month more chairs are being pulled out of the circle, and those members of the middle class that haven’t fallen into poverty yet are just hoping that a chair will still be there for them when the music stops.

    Even during the “Obama recovery”, we have seen poverty in America absolutely explode.  In fact, some brand new numbers just came out that are quite startling.  The following comes from another author for The Atlantic named Gillian B. White

    Recently, the Brookings Institution published a report looking at the same idea but giving it a different name. The paper, builds on research from the British economist William Beveridge, who in 1942 proposed five types of poverty: squalor, ignorance, want, idleness, and disease. In modern terms, these could be defined as poverty related to housing, education, income, employment, and healthcare, respectively. Analyzing the 2014 American Community Survey, the paper’s co-authors, Richard Reeves, Edward Rodrigue, and Elizabeth Kneebone, found that half of Americans experience at least one of these types of poverty, and around 25 percent suffer from at least two.

    To underscore this point, let me just run five quick facts about the growth of poverty in this country by you…

    The number of Americans that are living in concentrated areas of high poverty has doubled since the year 2000.

     

    In 2007, about one out of every eight children in America was on food stamps. Today, that number is one out of every five.

     

    46 million Americans use food banks each year, and lines start forming at some U.S. food banks as early as 6:30 in the morning because people want to get something before the food supplies run out.

     

    The number of homeless children in the U.S. has increased by 60 percent over the past six years.

     

    According to Poverty USA, 1.6 million American children slept in a homeless shelter or some other form of emergency housing last year.

    That last number really gets me every time.

    How can “the wealthiest and most powerful nation on the planet” have more than a million homeless children?

    This is one of the reasons why I hammer on our ongoing economic collapse over and over and over.  It is affecting real families with real children that have real hopes and real dreams.

    This is not the way our country is supposed to work.

    It is supposed to be “the land of opportunity”.

    It is supposed to be a place where anyone can live “the American Dream”.

    But instead it has become an economic wasteland where the largest and most prosperous middle class in the history of the world is being systematically eviscerated.

    So no, the U.S. economy is not doing “just fine” – anyone that tries to tell you that lie is simply peddling fiction.

  • Pimco Economist Has A Stunning Proposal To Save The Economy: The Fed Should Buy Gold

    Back in December 2014, just before the ECB officially launched its initial phase of QE in which it would monetize government bonds, Mario Draghi was asked a very direct question: what types of assets could the ECB buy as part of its quantitative easing program. He responded, “we discussed all assets but gold.”

    The reason for his tongue in cheek response was because over the prior few weeks speculation had arisen that gold could be part of the central bank’s asset purchases after Yves Mersch, a member of the ECB executive board and former Governor of the Central Bank of Luxembourg, said on November 17 that theoretically the ECB could purchase other assets such as gold, shares, ETFs to fulfill its promise of adopting further unconventional measures to counter a longer period of low inflation.

    Mario Draghi promptly shot down that idea.

    But according to a provocative paper released by none other than Pimco’s strategist Harley Bassman, Yves Mersch’s inadvertent peek into what central bankers are thinking, may have been on to something. 

    In “Rumpelstiltskin at the Fed“, Bassman goes down the well-trodden path of proposing Fed asset purchases as the last ditch panacea for the US economy, however instead of buying bonds, or stocks, or crude oil, Bassman has a truly original idea: “the Fed should unleash a massive Fed gold purchase program that could echo a Depression-era effort that effectively boosted the U.S. economy.

    He is of course, referring to FDR’s 1933 Executive Order 6102, which made it illegal for a citizen to own gold bullion or coins. Americans promptly sold their gold to the government at the official price of $20.67, with the resulting hoard of gold was then placed in Fort Knox.

    The Gold Reserve Act of 1934 raised the official price of gold to $35.00, a near 70% increase. It also resulted in an implicit devaluation of the US dollar. As Bassman points out, over the three years from January 1934 to December 1936, GDP increased by 48%, the Dow Jones stock index rose by nearly 80%, and most salient to our topic, inflation averaged a positive 2% annually, despite a national unemployment rate hovering around 18%.

    In short, a brief economic nirvana which was unleashed by the devaluation of the dollar confiscation of gold. In fact, we have frequently hinted in the past that another Executive Order 6102 is inevitable for precisely these reasons. However this is the first time when we see a “respected economist” openly recommend this idea as a matter of monetary policy.

    Bassman says that the Fed should “emulate a past success by making a public offer to purchase a significantly large quantity of gold bullion at a substantially greater price than today’s free-market level, perhaps $5,000 an ounce? It would be operationally simple as holders could transact directly at regional Federal offices or via authorized precious metal assayers.”

    What would the outcome of such as “QE for the goldbugs” look like? His summary assessment:

    A massive Fed gold purchase program would differ from past efforts at monetary expansion. Via QE, the transmission mechanism was wholly contained within the financial system; fiat currency was used to buy fiat assets which then settled on bank balance sheets. Since QE is arcane to most people outside of Wall Street, and NIRP seems just bizarre to most non-academics, these policies have had little impact on inflationary expectations. Global consumers are more familiar with gold than the banking system, thus this avenue of monetary expansion might finally lift the anchor on inflationary expectations and their associated spending habits.

     

    The USD may initially weaken versus fiat currencies, but other central banks could soon buy gold as well, similar to the paths of QE and NIRP. The impactful twist of a gold purchase program is that it increases the price of a widely recognized “store of value,” a view little diminished despite the fact the U.S. relinquished the gold standard in 1971. This is a vivid contrast to the relatively invisible inflation of financial assets with its perverse side effect of widening the income gap.

    And before Krugman accuses Bassman of secretly being on our payroll, this is how Pimco’s economist defends his unorthodox idea:

    Admittedly, this suggestion is almost too outrageous to post under the PIMCO logo, but NIRP surely would have elicited a similar reaction a decade ago. But upon reflection, it could be an elegant solution since it flips the boxes on a foreign currency “prisoner’s dilemma” (more on this below). Most critically, a massive gold purchase has the potential to significantly boost inflationary expectations, both domestic and foreign.

     

    * * *

     

    Many people will rightfully dismiss the gold idea as absurd, as just another fanciful strategy to print money; why not just buy oil, houses or some other hard asset? In fact, why fool around with gold; why not just execute helicopter money as originally advertised? I would answer the former by noting that only gold qualifies as money; and as for the latter, fiscal compromise on that order seems like a daydream in Washington today – don’t expect a helicopter liftoff anytime soon.

     

    Let’s be honest; most people thought NIRP was just as nonsensical a few years ago, yet it has now been implemented by six central banks with little evidence it is effective. And while a gold purchase program should qualify as a fairy tale, what is unique here is that it actually occurred with a confirmed positive effect on the U.S. economy.

    We agree, if for no other reason than everything central banks have done and tried in history has been a disastrous mistake, leading to either huge asset bubbles or massive busts, which in turn have needed even more spectacular bubbles to be reflated and so on. As such, the one thing that central banks should do is that which they are “genetically” against – purchasing the one asset class which is their inherent nemesis, the one Ben Bernanke said had value only because of “tradition”: Gold.

    Of course, all of the above assumes Americans would be willing to sell their gold to the Fed at any prices, but as Bassman finally lays it out, it is worth finding out. Janet, are you listening?

    * * *

    From PIMCO, by Harley Bassman


    Rumpelstiltskin at the Fed

    Though it seems incredibly farfetched, a massive Fed gold purchase program could echo a Depression-era effort that effectively boosted the U.S. economy.

    As our title alludes, I am about to spin a monetary policy fairy tale, a fantasy that could certainly never occur … except for the small detail that it’s happened before.

    First I must remind you there are only two avenues out of a debt crisis – default or inflate – and inflation is just a slow-motion default. Thus in the darker days of the global financial crisis, the U.S. Federal Reserve set sail on a monetary experiment tangentially suggested by late Nobel laureate Milton Friedman, the original coiner of the phrase “helicopter money.” (Ben Bernanke borrowed this clever construct in his famous November 2002 speech, “Deflation: Making Sure ‘It’ Doesn’t Happen Here.”)

    The notion was simple: Increase monetary velocity via financial repression to create inflation, depreciate nominal debt and deleverage both the public and private economies of the U.S. The toolkit of financial repression would include, but not be limited to, near-zero overnight interbank borrowing rates, massive asset purchase programs (also known as quantitative easing or QE), term surface restructuring (known as Operation Twist) and good old-fashioned jawboning, in this case taking the form of distant forward guidance.

    Notwithstanding various political exhortations, there can be little doubt the Fed’s aggressive monetary policies after the collapse of Lehman Brothers were quite effective in cushioning the macro economy from the financial turmoil. Would the economy have cured itself without the Fed? We can’t prove a negative, but up until China allowed the devaluation of the yuan last August and Japan implemented negative interest rates in January, the Fed’s “Plan A” was working reasonably well.

    But we do not operate in a vacuum, and various monetary machinations from the eurozone, Japan and China are now working in concert to export deflation to the U.S. This is quite worrisome as it may well hinder the U.S. economy from reaching the Fed’s target inflation level (2%) and escape-velocity economic growth.

    Thus did Fed Chair Janet Yellen, in her most recent visit to Congress, tentatively start to explore a “Plan B” (which looks like Plan A on steroids) that includes, if only in theory, the barest remote possibility of a negative interest rate policy (NIRP).

    There are a host of reasons PIMCO believes NIRP would be not only ineffective, but also possibly harmful to the U.S. economy, and these have been detailed by CIOs Scott Mather and Mihir Worah. But this does raise the question as to whether the Fed has indeed reached the bottom of its toolkit. Many things are possible, at least in theory, including the famous helicopter drop. Another option is to resurrect a plan that was actually implemented (with great success) 83 years ago.

    The real fairy tale

    From shortly after the October 1929 stock market crash to just before Franklin Delano Roosevelt became president in 1933, U.S. gross domestic product (GDP) declined by nearly 43%; during a similar timeframe, consumer prices declined by nearly 24%.

    Employing what can only be described as force majeure politics, in April 1933 the U.S. government issued Executive Order 6102, which made it illegal for a citizen to own gold bullion or coins. Lest they risk a five-year vacation in prison, citizens sold their gold to the government at the official price of $20.67. This hoard of gold was then placed in a specially built storage facility – Fort Knox.

    The Gold Reserve Act of 1934 raised the official price of gold to $35.00, a near 70% increase; positive results were almost immediate. Over the three years from January 1934 to December 1936, GDP increased by 48%, the Dow Jones stock index rose by nearly 80%, and most salient to our topic, inflation averaged a positive 2% annually, despite a national unemployment rate hovering around 18%.

    Such a pity that these halcyon days were soon sullied as the government tightened financial conditions (both fiscal and monetary) from late 1936 to early 1937, which many point to as the precipitant of the Dow’s 33% decline. Additionally, the 1938 calendar reported a 6.3% decline in GDP and a 2.8% deflation in consumer prices. (Many suspect it is the fear of a 1937 redux that motivates the Fed to contemplate additional extraordinary actions, including NIRP.)

    So in the context of today’s paralyzed political-fiscal landscape and a hyperventilated election process, how silly is it to suggest the Fed emulate a past success by making a public offer to purchase a significantly large quantity of gold bullion at a substantially greater price than today’s free-market level, perhaps $5,000 an ounce? It would be operationally simple as holders could transact directly at regional Federal offices or via authorized precious metal assayers.

    Admittedly, this suggestion is almost too outrageous to post under the PIMCO logo, but NIRP surely would have elicited a similar reaction a decade ago. But upon reflection, it could be an elegant solution since it flips the boxes on a foreign currency “prisoner’s dilemma” (more on this below). Most critically, a massive gold purchase has the potential to significantly boost inflationary expectations, both domestic and foreign.

    Asset or currency?

    While never an officially stated policy, there has been a slow-moving, low-intensity currency war taking place over the past decade. The U.S. was the first mover, implementing QE in 2009, which had the effect of depreciating the trade-weighted U.S. dollar (USD) by 16%. Japan was next, implementing “Abenomics” in 2012; this helped depreciate the yen (JPY) versus the USD by over 30% in eight months. Europe went last when Mario Draghi followed through on “whatever it takes” in 2014; the euro devalued versus the USD from peak to trough by 24%. China had pegged the yuan to the USD to help maintain a stable trading environment, however, the increasing value of their currency against their other trading partners was hindering growth, and thus the motivation for a slight realignment last August.

    The problem the world’s major economies now face is that any attempt to depreciate their currencies to improve the terms of trade must effectively come out of the pockets of their partners; this creates a classic prisoner’s dilemma. Thus the interesting twist of a Fed gold purchase program.

    Warren Buffett famously railed against the shiny yellow metal in 2012 when he noted all the gold in the world could be swapped for the totality of U.S. cropland and seven ExxonMobils with $1 trillion left over for “walking-around money.” His point was that these assets can generate significant returns while owning gold produces no discernable cash flow.

    While this observation is certainly true, the rub is that this is not a fair comparison since gold is not an asset; rather, it should be considered an alternate currency. Pundits often describe the five factors that define “money”:

    1. Its supply is controlled or limited,
    2. It is fungible/uniform – this is why diamonds cannot qualify,
    3. It is portable – this is why land cannot qualify,
    4. It is divisible – thus art cannot be money, and
    5. It is liquid – this means people will readily accept it in exchange.

    By this definition, gold is certainly a form of money, and to Mr. Buffett’s point, one also earns no cash flow on paper dollars, euros, yen or yuan.

    Raising expectations

    A massive Fed gold purchase program would differ from past efforts at monetary expansion. Via QE, the transmission mechanism was wholly contained within the financial system; fiat currency was used to buy fiat assets which then settled on bank balance sheets. Since QE is arcane to most people outside of Wall Street, and NIRP seems just bizarre to most non-academics, these policies have had little impact on inflationary expectations. Global consumers are more familiar with gold than the banking system, thus this avenue of monetary expansion might finally lift the anchor on inflationary expectations and their associated spending habits.

    The USD may initially weaken versus fiat currencies, but other central banks could soon buy gold as well, similar to the paths of QE and NIRP. The impactful twist of a gold purchase program is that it increases the price of a widely recognized “store of value,” a view little diminished despite the fact the U.S. relinquished the gold standard in 1971. This is a vivid contrast to the relatively invisible inflation of financial assets with its perverse side effect of widening the income gap.

    In coda I would respond to the argument that a central bank cannot willfully create inflation – I disagree; it just depends upon how hard one tries. There are plenty of examples ranging from Weimar Germany to Zimbabwe where central banks have unleashed uncontrolled hyperinflations.

    The more interesting question is not whether the Fed can create a 15% to 20% price spiral, but rather can they implement policies that will result in a somewhat gentle and controlled 2% to 3% inflation rate that will slowly deleverage the U.S. debt load while simultaneously increasing middle class nominal wages.

    Many people will rightfully dismiss the gold idea as absurd, as just another fanciful strategy to print money; why not just buy oil, houses or some other hard asset? In fact, why fool around with gold; why not just execute helicopter money as originally advertised? I would answer the former by noting that only gold qualifies as money; and as for the latter, fiscal compromise on that order seems like a daydream in Washington today – don’t expect a helicopter liftoff anytime soon.

    Let’s be honest; most people thought NIRP was just as nonsensical a few years ago, yet it has now been implemented by six central banks with little evidence it is effective. And while a gold purchase program should qualify as a fairy tale, what is unique here is that it actually occurred with a confirmed positive effect on the U.S. economy.

    So when the next seat for a Fed governor becomes available, I would nominate Rumpelstiltskin … just a thought.

  • Soros Warns China Credit Cycle Has Gone "Parabolic" Just To Keep Zombies Alive

    After warning last year of a "practically unavoidable" hard-landing to come in China, George Soros unleashed his central-planner-crushing self last night on the great red ponzi. As we noted last night, Soros warned the "parabolic" rise in credit  is very worrisome, and "eerily reminiscent of US in 2007-8," specifically adding that "most of the money that banks are supplying is needed to keep bad debts and loss-making enterprises alive." Soros' full discussion can be found below…

    “Most of the damage occurred in later years," he said according to Bloomberg, referring to the spurt in US growth before the crash.

    Simply put – as we highlighted with the shenanigans in the steel industry – China is attempting reflate its economy once again by reviving zombies who have now died twice. This can only end badly, and Soros was not alone in his opinions…

    "Whether we call it stabilization or not, I am not sure,” Andrew Colquhoun, the head of Asia Pacific sovereigns at Fitch Ratings said in an interview in New York. “From a credit perspective, we’d be more comfortable with China slowing more than it is. We are getting less confident in the government’s commitment to structural reforms."

     

    The stabilizing trend isn’t giving investors “enough confidence,” as China seems to have relied more on government investment in state-owned enterprises to boost the economy, said Gao Xiqing, former vice chairman of the China Securities Regulatory Commission, in an interview in New York this week.

    George Soros' full discusssion can be viewed below (he begins at around 27:00 mark)…

    asiasociety on livestream.com. Broadcast Live Free

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Today’s News 21st April 2016

  • Treasury Removes Jackson From $20 Bill, Will Replace Him With Harriet Tubman

    Presenting an artist's impression of what your new $20 bill will soon look like.

     

    It's official.

    Moments ago Politico reported that the U.S. Treasury will announce that it plans to replace former President Andrew Jackson on the $20 bill with Harriet Tubman, the sources said. There will also be changes to the $5 bill to depict civil rights era leaders including Marian Anderson, Eleanor Roosevelt and Martin Luther King Jr.

    Not every dead president is being scraped however: treasury Secretary Jack Lew on Wednesday will announce a decision to keep Alexander Hamilton on the front of the $10 bill and put leaders of the movement to give women the right to vote on the back of the bill.

     Lew's decision comes after he announced last summer that he was considering replacing Hamilton on the $10 bill with a woman. The announcement drew swift rebukes from fans of Hamilton, who helped create the Treasury Department and the modern American financial system. Critics immediately suggested Hamilton take Jackson off the $20 bill given the former president's role in moving native Americans off their land.

    Jackson may remain on the $20 bill in some capacity, but will clearly be demoted.

    Lew told POLITICO last July that Treasury was exploring ways to respond to critics. “There are a number of options of how we can resolve this,” Lew said. “We’re not taking Alexander Hamilton off our currency.”

    * * *

    Here is the official statement from the US Treasury:

    Treasury Secretary Lew Announces Front of New $20 to Feature Harriet Tubman, Lays Out Plans for New $20, $10 and $5

     

    4/20/2016 ?

    WASHINGTON – In a letter to the American people, Treasury Secretary Jacob J. Lew today announced plans for the new $20, $10 and $5 notes, with the portrait of Harriet Tubman to be featured on the front of the new $20.

     

    Secretary Lew also announced plans for the reverse of the new $10 to feature an image of the historic march for suffrage that ended on the steps of the Treasury Department and honor the leaders of the suffrage movement—Lucretia Mott, Sojourner Truth, Susan B. Anthony, Elizabeth Cady Stanton, and Alice Paul.  The front of the new $10 note will maintain the portrait of Alexander Hamilton.

     

    Finally, he announced plans for the reverse of the new $5 to honor events at the Lincoln Memorial that helped to shape our history and our democracy and prominent individuals involved in those events, including Marian Anderson, Eleanor Roosevelt and Martin Luther King Jr.

     

    The reverse of the new $20 will feature images of the White House and President Andrew Jackson.

     

    In his letter, Secretary Lew noted that the Bureau of Engraving and Printing will work closely with the Federal Reserve to accelerate work on the new $20 and $5 notes, with the goal that all three new notes go into circulation as quickly as possible, consistent with security requirements.

    Here is Jacob Lew's "explanatory" letter:

    An Open Letter from Secretary Lew:

     

    When I announced last June that a newly redesigned $10 note would feature a woman, I hoped to encourage a national conversation about women in our democracy.  The response has been powerful.  You and your fellow citizens from across the country have made your voices heard through town hall discussions and roundtable conversations, and with more than a million responses via mail and email, and through handwritten notes, tweets, and social media posts.  Thank you for sharing this thoughtful and impassioned feedback.

     

    Over the course of the last 10 months, you put forth hundreds of names of people who have played a pivotal role in our nation’s history.  Many of you proposed that our new currency highlight democracy in action and reflect the diversity of our great nation.  Some of you suggested we skip the redesign of the $10 note, which is the next in line for a security upgrade, and move immediately to redesigning the $20 note.  And others proposed unconventional ideas, such as creating a $25 bill.

     

    I have been inspired by this conversation and today I am excited to announce that for the first time in more than a century, the front of our currency will feature the portrait of a woman—Harriet Tubman on the $20 note.

     

    Since we began this process, we have heard overwhelming encouragement from Americans to look at notes beyond the $10.  Based on this input, I have directed the Bureau of Engraving and Printing to accelerate plans for the redesign of the $20, $10, and $5 notes.  We already have begun work on initial concepts for each note, which will continue this year.  We anticipate that final concept designs for the new $20, $10, and $5 notes will all be unveiled in 2020 in conjunction with the 100th anniversary of the 19th Amendment, which granted women the right to vote.

     

    The decision to put Harriet Tubman on the new $20 was driven by thousands of responses we received from Americans young and old.  I have been particularly struck by the many comments and reactions from children for whom Harriet Tubman is not just a historical figure, but a role model for leadership and participation in our democracy.  You shared your thoughts about her life and her works and how they changed our nation and represented our most cherished values.  Looking back on her life, Tubman once said, “I would fight for liberty so long as my strength lasted.”  And she did fight, for the freedom of slaves and for the right of women to vote.  Her incredible story of courage and commitment to equality embodies the ideals of democracy that our nation celebrates, and we will continue to value her legacy by honoring her on our currency.  The reverse of the new $20 will continue to feature the White House as well as an image of President Andrew Jackson.

     

    As I said when we launched this exciting project: after more than 100 years, we cannot delay, so the next bill to be redesigned must include women, who for too long have been absent from our currency.  The new $10 will honor the story and the heroes of the women’s suffrage movement against the backdrop of the Treasury building.  Treasury’s relationship with the suffrage movement dates back to the March of 1913, when advocates came together on the steps of the Treasury building to demonstrate for a woman’s right to vote, seven years prior to the passage of the 19th Amendment.  The new $10 design will depict that historic march and honor Lucretia Mott, Sojourner Truth, Susan B. Anthony, Elizabeth Cady Stanton, and Alice Paul for their contributions to the suffrage movement.  The front of the new $10 will continue to feature Alexander Hamilton, our nation’s first Treasury Secretary and the architect of our economic system.

     

    The reverse of the new $5 will depict the historic events that have occurred at the Lincoln Memorial.  In 1939, at a time when Washington’s concert halls were still segregated, world-renowned Opera singer Marian Anderson helped advance civil rights when, with the support of First Lady Eleanor Roosevelt, she performed at the Lincoln Memorial in front of 75,000 people.  And in 1963, Martin Luther King, Jr. delivered his historic “I Have a Dream” speech at the same monument in front of hundreds of thousands.  Honoring these figures will bring to life events at the Lincoln Memorial that helped to shape our history and our democracy.  The front of the new $5 will continue to feature President Lincoln.

     

    Due to security needs, the redesigned $10 note is scheduled to go into circulation next.  I have directed the Bureau of Engraving and Printing to work closely with the Federal Reserve to accelerate work on the new $20 and $5 notes.  Our goal is to have all three new notes go into circulation as quickly as possible, while ensuring that we protect against counterfeiting through effective and sophisticated production.

     

    This process has been much bigger than one square inch on one bill, and along the way, we heard about countless individuals who contributed to our democracy.  Our website, modernmoney.treasury.gov, will highlight many of the names that we heard throughout this process, and help tell some of the many stories that inspired us.  Of course, more work remains to tell the rich and textured history of our country.  But with this decision, our currency will now tell more of our story and reflect the contributions of women as well as men to our great democracy.

     

    Thank you,

     

    Secretary Jacob J. Lew

    * * *

    Confused? Disturbed? Angry? You are not alone. The following rant by Mac Slavo expressed many feeling about the proposed change.

    Andrew Jackson, Who Fought Central Bank, Removed from $20 As “Public Concern for Liberty” Erased

    Andrew-Jackson-Wouldnt-Want-To-Be-On-The-20-Bill-Anyway

    The War on Cash has many fronts.

    The latest battle is for the face of the currency itself, and the central bankers, who control the front anyway, have imposed a symbolic defeat against the leaders in America’s past who have fought against the stranglehold of the money makers.

    Naturally, there are liberal politics at play, fighting for every inch of ground in the war for ideological re-engineering. History is being whitewashed, various figures of antiquity rolling in their graves….

    At stake is a dispute for the powers of government even better than the more famous duel between Aaron Burr and Alexander Hamilton, of whom we also speak.

    The iconic $20 bill, with the face of President Andrew Jackson, and the $10 bill, with the face of the nation’s first Treasury Secretary, Alexander Hamilton, have long pitted two ideological extremes against each other as they pass along as some of the most used denominations in circulation.

    But now, the money powers at the Treasury Department have decided that it is time to add a woman’s face to the money supply as well.

    As such, the powers-that-bank have decided to oust Andrew Jackson from the line up, and with it, part of his legacy.

    It will be “removed in favor of a female representing the struggle for racial equality,” according to CNN, while an early proposal to remove Alexander Hamilton’s bill will be scrapped, though the proposal includes a redesign on the backs of his and several other notes with scenes from the Woman’s Suffrage Movement, Susan B. and all the gals.

    Treasury Secretary Jack Lew is expected to announce this week that Alexander Hamilton’s face will remain on the front of the $10 bill and a woman will replace Andrew Jackson on the face of the $20 bill, a senior government source told CNN on Saturday.

    Dramatically, it seems that there was a backlash to counter the coup against Hamilton, including support from former Federal Reserve chairman Ben Bernanke:

    The decision to make the historic change at the expense of Hamilton drew angry rebukes from fans of the former Treasury Secretary. The pro-Hamilton movement gained steam after the smash success of the hip-hop Broadway musical about his life this year.

     
    Those pressures led Lew to determine that Hamilton should remain on the front of the bill.

    And there’s a reason for Bernanke’s bias towards Hamilton.

    Here’s the scoop from the Economic Policy Journal, who called it a “despicable decision”:

    It was Hamilton, who from the early days of the nation clamored for a central bank and a strong interventionist federal government.

     

    I have quoted Thomas DiLorenzo on the evil Hamilton before:

     

    Hamilton was a compulsive statist who wanted to bring the corrupt British mercantilist system — the very system the American Revolution was fought to escape from — to America. He fought fiercely for his program of corporate welfare, protectionist tariffs, public debt, pervasive taxation, and a central bank run by politicians and their appointees out of the nation’s capital….

     

    Hamilton complained to George Washington that “we need a government of more energy” and expressed disgust over “an excessive concern for liberty in public men”…

     

    The Philadelphie Federal Reserve publication. A History of Central Banking in America, reports:

     

    Alexander Hamilton, the first Secretary of the Treasury, urged Congress to also assume the war debts of the individual states and then create a national bank to help refinance all these debts. Hamilton’s proposal faced major opposition. Critics said that Hamilton’s bank was unconstitutional, would be a monopoly, and would reduce the power of the states. Although Hamilton won, the bank’s charter was limited to 20 years.

    And that’s right where Andrew Jackson’s legacy with the banks picks up.

    With the charter of the first “Bank of the United States” ending, Jackson was determined to stop the charter of the second “Bank of the United States” and famously stated:

    “You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.” (Andrew Jackson, to a delegation of bankers discussing the recharter of the Second Bank of the United States, 1832)

    President Jackson likened their agents to the hydra-beast, with its many heads, and even survived an assassination attempt, by staving off an attacker personally.

    jackson-banks-vipers

    The bankers, and the powerful families including the Rothschilds who supported it, wanted a “national bank” because they could load the board with “their” guys and outweigh the will of the people and the normal channels of government.

    Of course, the same exact state of affairs has been going on today for more than a century with the Federal Reserve, which is run by the successors to the same exact banking interests, including the still immensely-powerful Rothschild family.

    The struggle is depicted well in “The Money Masters,” which spans several centuries of history with the threat of banking powers over individual sovereignty in stark contrast. To be sure, there is an important and nefarious plot afoot to ensnare you, your family and everyone on the block with debt.

     

    There is a line, and you should figure out what side of it you’re going to be on.

    Jackson narrowly succeeded in staving off banker domination of the U.S. during his day.

    Of course, Andrew Jackson, who was the United States’ seventh president, was also a complete controversy his entire lifetime. It is no surprise that the same people who took down the Confederate flag from the South on the back of a mass shooting tragedy are now trying to tear down the image of a particularly controversial and intriguing figure from the American past.

    Jackson was a recalcitrant and unyielding general and war hero, and later an outsider riding a wave of populist support into the White House, bringing in sometimes unscrupulous companions, and plenty of Masons. Many of his backers were diametrically opposed to the entrenched power of New York bankers and speculators, as well as patrician politicians who dominated the first phase of politics in the nation’s history. Jackson played a nasty role in the Trail of Tears affairs with Indians, too, and with the South and Western expansion of slave-friendly territories. Many shades of grey.

    Meanwhile, behind the scenes in the founding days of this country, Alexander Hamilton, an advocate of strong central government, and maneuvered on behalf of his banker masters to collectivize the war debt from the states and create a central bank to control the financial strength of the country, and ingrain the early United States with the mindset of the British masters they had just fought to shake off.

    After the creation of the Federal Reserve in 1913, and the crisis and consolidation of wealth during the Great Depression, and ever since the 2008 economic collapse, the rule by bankers has become a foregone conclusion, though there will be more chances to shake off their yoke of control. (BitCoin is one possible avenue; Congressionally-controlled greenbacks another; gold and silver yet another…)

    Erasing Andrew Jackson from the faces of the fiat funny-money that is passed around by an increasingly ignorant and dependent society (which itself has adopted digital currency as the new norm) will further cut off the past from the masses, and ensure their enslavement.

  • Meet Trump 2.0: "Be Afraid, Anti-Trump Forces, Be Very Afraid"

    Authored by Chris Cillizza, originally posted at The Washington Post,

    Gone was "Lyin' Ted."  In its place was "Senator Cruz." Gone was the long-winded speech that went nowhere. In its place was a succinct recitation of states and delegates won. Gone was the two-day vacation as a reward for winning. In its place was an early morning trip to Indiana followed by another planned stop in Maryland.

    Donald Trump 2.0 made his official debut Tuesday night following his sweeping victory in New York, a win that looks to net him 90 delegates and reestablishes him as the man to beat in the Republican presidential race.

    That version of Trump was markedly more disciplined, gentler and more appealing than the version of Trump we've seen for much of the last year. And, that fact should scare the hell out of establishment Republicans who believed that their efforts to keep Trump from the 1,237 delegates he needs to formally capture the GOP nomination was beginning to catch on.

    Why? Because it's clear, at least for now, that Trump is listening to his new political advisers — chief among them convention manager Paul Manafort and national field director Rick Wiley. Trump's change in tone on Tuesday night was absolutely unmistakeable to anyone who has paid even passing attention to his campaign to date.  The man who had built his frontrunning campaign on a willingness to always and without fail take the race to its lowest common denominator — was suddenly full of respect for the men he beat and full of facts about the state of the race.

    "We have won millions of more votes than Senator Cruz, millions and millions of more votes than Governor Kasich," Trump said. "We've won, and now especially after tonight, close to 300 delegates more than Senator Cruz."

    The change in tone is absolutely necessary if Trump wants to not only find a way to 1,237 delegates but also unite the party behind him in any meaningful way heading into the general election campaign this fall. The truth is that Trump has to play an outsider and an insider game from here on out. The outsider game is to keep winning primaries by convincing margins like he did in New York. The insider game is to show unbound delegates as well as party leaders and influencers that he can be magnanimous, that he can be a uniting force within the party.

    Calling Cruz "Lyin' Ted" is a great laugh line at a Trump rally but accusing the Texas senator of holding up the Bible and then putting it down and lying isn't exactly the sort of rhetoric you need or want from a candidate who needs to bring the party together behind a common enemy in Hillary Clinton. It's the difference between being voted "class clown" and being elected student body president. The former delights in taking the low road for cheap laughs. (I speak from experience.) The latter takes the high road even if it's against his or her own natural instincts.

    Can Trump keep it up?  Discipline on a single night or even a single week is one thing. Discipline over several months amid what will be continued attacks from both Cruz and the "stop Trump" movement is something else. And, listening to your new advisers when they are, well, new is easier than listening to them when it's been a few months of biting your tongue and fighting back some of your natural attack instincts.

    But, Trump has shown — both on Tuesday night and over the past week or so — an ability to reign himself in that suggests he understands that this new and improved version of himself is the one that can actually win the Republican presidential nomination

    Be scared, anti-Trump forces. Be very scared.

    *  *  *

    And as Reuters reports, the message appears to be getting through as U.S. Republican officials began meeting on Wednesday, a day after Donald Trump's crushing victory in a New York presidential nominating contest, and said he has been winning growing acceptance within their ranks – but they want to see the billionaire do more to mend fences with the party establishment.

    Trump was the focus for the party's spring meeting of 168 Republican National Committee (RNC) members in Hollywood, Florida. The three-day conclave at an oceanside resort will take stock of the race for the White House and prepare for a possible contested convention in July in Cleveland.

     

    The New York real estate mogul's win Tuesday in his home state over rivals Ted Cruz and John Kasich was an important milestone for RNC members, who said it could put him on a pathway to acquire the 1,237 delegates needed to win the nomination outright without a contested convention.

     

    "There are a fair number of RNC members who were discounting his chances of success when we met in January and now see that he’s building a substantial lead and may in fact get to 1,237 before we get to the convention," said Steve Duprey, an RNC member from New Hampshire.

     

    "The New York results were such an overwhelming win," Duprey said. "It's impressive. That's what I've heard people talking about."

    Trump, Cruz and Kasich all sent envoys to the meeting to explain their pathways to the nomination.

    South Carolina Republican Party Chairman Matt Moore said Trump's recent hiring of Rick Wiley, a Republican veteran who was former presidential candidate Scott Walker's campaign manager, was a good sign.

     

    "It’s a positive signal despite a lack of general outreach over the past year, and I think the Trump campaign, for all the bluster, recognizes that the RNC will be an integral partner if he is the nominee and it’ll be almost impossible to win the presidency without the RNC as a partner," Moore said.

    In a good sign for Trump, there appeared to be no significant move by the Republican leadership, at least at this meeting, to change the rules governing the convention. There has been talk of rewriting the rules in a way that could benefit an establishment-backed candidate like Kasich.

  • Oil Market Hype And Crisis Signal Greater Troubles Ahead

    Submitted by Brandon Smith via Alt-Market.com,

    Most people are not avid followers of economic news, and I don’t blame them. Financial analysis is for the most part boring and tedious and you would have to be some kind of crazy to commit a large slice of your life to it.

    However, those of us who are that crazy do what we do (and do it independently) because underneath all the data and the charts and the overnight news feeds we see keys to future events. And if we are observant enough, we might even be able to warn people who don’t have the same proclivities but still deserve to know the reality of the world around them.

    Most Americans and much of the rest of the planet probably was not aware of the recent oil producer’s meeting in Doha, Qatar this past Sunday, nor would they have cared. A bunch of rich guys in white dresses talking about oil production levels does not exactly spark the imagination. What the masses missed, though, was an event that could affect them deeply and economically for many months to come.

    A little background highly summarized…

    After the derivatives and credit crisis launched in 2007/2008 the Federal Reserve responded to disastrous levels of deflation with a fiat money printing bonanza. Everyone knows this. The problem was the central bankers never had any intention of actually using all that “cash” to support Main Street or the fundamentals of the economy.

    Instead, they used their printing press and digital loan transfers to artificially re-inflate the coffers of banks and major corporations. It was a blood transfusion for vampires, if you will.

    Through the use of TARP (Troubled Asset Relief Program), quantitative easing, artificially low interest rates, and probably a host of secret actions we’ll never hear about, a steady stream of capital (or debt, to be more precise) was pumped through corporate conduits. The goal? To keep the U.S. from immediate bankruptcy through treasury bond purchases, to boost bank credit, and to allow companies to institute an unprecedented program of stock buybacks (a method by which a corporation buys back its own shares to reduce the amount on the market, thereby manipulating the value of the remaining shares to higher prices).

    As the former head of the Federal Reserve Dallas branch, Richard Fisher admitted in an interview with CNBC:

    “What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

     

    It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow."

    Why would the Fed want to engineer a hollow rally in stocks? As I have said in the past, they did this because they know that the average American watches about 15 minutes of television news a day and gauges the health of the economy only on whether the Dow is green or red. From 2009 to 2015, the Fed felt it needed to support markets through fiat and keep the public placated and apathetic.

    Stocks and bonds were not the only assets being propped up by the Fed, though. In tandem, oil markets were artificially inflated.

    Oil suffered a historic spike in 2008, then collapsed to near $40 (WTI). Starting in 2009 and the initiation of major stimulus measures by the Fed, oil prices came back with a vengeance; almost as if the spike in 2008 was merely a measure to psychologically prepare the public for what was to come. In 2010 prices climbed near the $90 mark, then in 2011 they peaked at around $115 a barrel.

    Then, something magical happened – in December, 2013, the Fed announced the Taper of QE3, something very few people predicted would actually happen (you can read this article breaking down why I predicted it would happen).

    The taper involved slowly cycling out Fed purchases a month at a time. By mid-2014 the taper was nearing completion. Suddenly, oil markets began to tank. By October, 2014 the Fed finished the taper and oil collapsed, from $95 a barrel to a low of under $30 a barrel at the beginning of 2016. The correlation between the Fed taper and the overwhelming drop in oil prices is undeniable. Clearly, high oil prices were primarily dependent on Fed QE.

    While equities fluctuated heavily after the end of QE3, they were still supported by the Fed’s other pillar – near zero interest rates. NIRP allowed the Fed to continue funneling cheap or free money to banks and corporations so they could keep stock buybacks rolling, but oil was done for.

    Now, until recently, oil markets have NOT reflected the true state of the global economy. All other fundamental indicators have been in decline since the crash of 2008, including global exports, imports, the Baltic Dry Index, manufacturing, wages, real employment numbers, etc. Oil consumption in the U.S., according to the World Economic Forum, has sunk to lows not seen since 1997. Current levels of oil consumption are FAR below projections made in 2003 by the Energy Information Administration. By most tangible measurements, we never left the crisis of 2008.

    Oil demand continued to fall but prices remained high because of Fed intervention. My theory: As with stocks, the Fed at that time needed to pump up the only other indicator the mainstream might notice as a sign of dangerous deflation – energy prices.  Dwindling demand is the real problem being hidden in chaos surrounding arguments over production.  The establishment prefers we focus completely on supply while ignoring the warnings of falling demand.

    QE was the first pillar to be pulled from the false recovery, and oil markets plunged. At the end of 2015, the Fed removed the second pillar of NIRP and raised interest rates. OPEC members met to discuss a possible production freeze agreement but the conference failed to produce anything legitimate. This resulted in stocks crashing in extreme volatility to meet up with oil.

    Then something magical happened once again. In mid-February, OPEC members and non-members arranged yet another meeting, this time with much fanfare and steady rumors hinting at a guaranteed production freeze deal. Oil began to climb back from the brink, and stocks rallied over the course of six more weeks.  All eyes were on Doha, Qatar and the oil agreement that would "save markets".

    I bring up the recent history of oil markets because I want to give some perspective to those people who suffer from a disease I call "ticker tracking".  This disease causes extreme short attention span issues and loss of long term memory.  The dopamine addiction of ticker tracking makes people forget about long term trends and their relation to the events of today, to the point that they ignore all fundamentals in the name of watching little red and green lines day in and day out.

    For example, the fact that the Doha meeting failed but did not result in an immediate and massive slide in oil and stocks sent ticker trackers crowing that the market "will never be allowed to fall".  Their affliction keeps them from realizing that the effects of Doha, like any other major financial event in the past, take TIME to set in.  Not to mention, they seem oblivious to the implications of oil struggling to move comfortably beyond $40 a barrel.

    Remember, oil was around $60 (WTI) six months ago, and had held over $100 (WTI) for years before then.  The crash in oil markets has ALREADY happened, folks.  What we are witnessing today is the last vestiges of that crash playing out in extreme volatility.  Now we wait for equities to fall and meet oil, as they did at the beginning of 2016, and as they eventually will again.

    Are stocks tracking oil prices? It may not be an absolute correlation, and they do tend to decouple at times, but the overall trend has been consistent; when oil falls, stocks loosely follow.

    The Doha meeting was always a farce; that much was obvious before it even took place. Bloomberg along with other media outlets were planting rumors of backroom deals between Russia and Saudi Arabia before the Doha event which would solidify a production freeze. Numerous mainstream “experts” claimed an agreement was essentially a sure thing. Even some skeptics within the liberty movement were doubtless that a deal was certain because “the internationalists would never allow oil prices to continue to drag on the public perception of the economy.”

    First, I am not a believer in the idea that global economic decisions are really made at these meetings. Any nation that has a central bank that is tied to the Bank of International Settlements and the International Monetary Fund is a CONTROLLED nation. Period. Economic arrangements are handed down from on high, not debated spontaneously in open forums. Read Harper’s 1983 article on the BIS titled “Ruling The World Of Money” for more information on how globalists control the economic policies of nations.

    Second, even if a person believes that such vital economic decisions as a global oil production freeze are decided in closed meetings while the press waits just outside, why would anyone buy into the Doha event?

    I am not quite sure why some people were gullible enough to think that after 15 YEARS of oil producers refusing to come together on any form of meaningful agreement they would suddenly shake hands this year. The only hope markets had was the possibility that the Doha meeting would result in an empty deal that they could spin in the mainstream news as a legitimate “production freeze.” Apparently they won’t even be getting that.

    The Doha talks ended in failure. All the signs said this would happen. As I wrote in my article “Lost Faith In Central Banks And The Economic End Game”:

    For anyone who was betting on oil markets to continue their rally past the $40 per barrel mark, there was a lot of bad news. Saudi Arabia crushed optimism by announcing that it would not be entertaining a “production freeze” proposal unless ALL other oil producing nations, including Iran, also agreed to it.

     

    Iran then doubly crushed optimism by announcing an increase in production rather than committing to a freeze.

     

    Russia then administered the final blow by releasing data showing that their oil output had risen to historic levels, indicating that they will not be entering into any agreement on a production freeze.

     

    Besides a recent overly optimistic (and rather suspicious inventory draw) which has caused a short term rebound, all indicators show that oil will be headed back to the lows seen at the beginning of this year.

    The effects of the Doha failure were delayed by a convenient labor strike in Kuwait, which caused algo trading computers to buy en masse despite the negative news.  As I pointed out on Monday, though, the Kuwait situation would be very short lived.  Now, it is time to watch and wait for Saudi Arabia and Iran to begin battling over market share and increasing production even more.  These things take a little time to develop.

    Currently oil has dropped back below $40(WTI) and markets are extremely volatile. I do not believe the failure of the Doha meeting alone will translate to a fantastic drop in stocks. But, I do believe that it is a very heavy straw added to the camel's back, and there is a negative trend developing before our very eyes that will become apparent in the next couple of months.

    As I have said in the past, a market entirely supported by rumors and hearsay can rally quickly, but also lose all gains at the drop of a hat. What the Doha debacle represents is a signal that the establishment is incrementally abandoning support for market systems.  This is translating to a loss of faith in central banks and major financial institutions.

    On top of this, look at the incredible amount of misinformation and misdirection that went into Doha, now completely exposed. The truth is crystal; the MSM lied and obfuscated helping the establishment to drive up oil prices and stocks, all for a mere six to eight weeks of market security.  As soon as these lies were revealed, volatility began to return.

    If the oil market bubble can implode (as it already has) in such a way due to the striking of fundamentals, then stocks can also be destabilized as well. It will happen, and I believe 2016 is the year it will happen.

    There are those out there that miscalled how the Doha meeting would end because they were blinded by a particularly dangerous bias; they have assumed that central banks and internationalists want or need to continue propping up markets indefinitely. This is not necessarily true. In fact, I have outlined time and again evidence showing that they are planning the opposite. That is to say, they are planning to deliberately bring down markets in a controlled manner.

    Oil was the most recent system to be undermined, and stocks will likely follow before the year is out. The fall in oil and the circus at Doha signals a change in strategy by the globalists. It signals a shift towards the controlled demolition of our economy and the centralization of fiscal power into a single global administrative entity. Order out of chaos.

    There is a steady stream of events in the next few months that can be used as a steam valve for sinking global markets. Watch the April Fed meeting carefully. The Fed recently held two “emergency meetings” along with a third surprise meeting between President Barack Obama and Fed Chair Janet Yellen. The last time such a meeting occurred the Fed hiked rates less than a month later. I expect that the Fed will raise rates once again either this month or in June.

    Also, watch for the Brexit (the British exit from the EU) referendum in June. Such a development would greatly shock an already unsteady Europe as well as the rest of the West.

    And, of course, watch for trends in oil and stocks, but do not get caught up in the day-to-day mindlessness of ticker tracking. It is pointless and will not help you to understand what is happening economically. In any economic crisis, stocks are the LAST indicator to turn negative and daily analysis by itself is in no way a crystal ball.

    The next couple of months should be very interesting. Stay vigilant.

  • George Soros Warns "China Resembles US In 2008", Hard Landing "Practically Unavoidable"

    China's credit growth in March (and $1 trillion surge in total social financing in Q1) is a "warning sign" according to billionaire George Soros, "because it shows how much work is needed to stop the slowdown." Speaking at an event in new York this evening, Soros commented on "troubling developments" in China, the anti-corruption drive's impact on capital outflows and the real-estate bubble "feeding on itself." His conclusion, rather ominously, was that despite all the naysayers and fiction-peddlers, China "resembles US in 2007-8," before credit markets seized up and spurred a global recession.

    As Bloomberg reports, Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession.

    China’s March credit growth figures should be viewed as a warning sign, Soros said at an Asia Society event in New York on Wednesday. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362 billion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signaling the government is prioritizing growth over reining in debt.

     

    [ZH – f one adds up the Total Social Financing injected in the first quarter, one gets a stunning $1 trillion dollars in new credit, or $1,001,000,000,000 to be precise, shoved down China's economic throat. As shown on the chart below, this was an all time high in dollar terms, and puts to rest any naive suggestion that China may be pursuing "debt reform." Quite the contrary, China has once again resorted to the old "growth" model where GDP is to be saved at any cost, even if it means flooding the economy with record amount of debt.

     

    With China's debt/GDP already estimate at 350%, how much longer can China sustain this stunning debt (and by definition, deposit) growth continue?]

     

    Soros, who built a $24 billion fortune through savvy wagers on markets, has recently been involved in a war of words with the Chinese government. He said at the World Economic Forum in Davos that he’s been betting against Asian currencies because a hard landing in China is “practically unavoidable.” China’s state-run Xinhua news agency rebutted his assertion in an editorial, saying that he has made the same prediction several times in the past.

    Soros then went on to note that China’s capital outflow is a growing phenomenon driven by the nation’s anti-corruption campaign, which makes people nervous and spurs them to pull money out, and added that…

    China’s decoupling of the yuan from the U.S. dollar can help rebalance the currency.

     

    The linking to a basket of currencies is a “very positive, healthy” development for world.

    Finally in an ironic twist for a man who has all too often used the press for his own ends…

    China’s lack of a free press is “troubling development".

    Of course one should bear in mind that Soros is among those who are betting heavily on the eventual devaluation of The Yuan against the USD, and as we noted previously, the cracks are starting to show… As the Chinese corporate bond market begins to break…

     

    At least 64 Chinese firms have postponed or scrapped planned note sales this month, six times more than the same period a year earlier.

    And as BofA's David Cui explains, if poorly handled, they may cause significant financial instability…

    Since 2015, eight SOE bond issuers have run into repayment problems; four since February. We believe that the sharply accelerating pace and the growing chance of genuine defaults are largely behind the recent widening of credit spreads (Bond yield rising, credit spread widening & impact on stocks, Apr 15). In our view, any major SOE bond default would be difficult for the financial system to handle – as it is unexpected, it could lead to panic selling/a credit crunch (2016 Year-Ahead: what may trigger financial instability, Jan 3). At this stage, we expect that most problematic SOE bonds, if not all, will get largely bailed out. But this is a key risk that we need to monitor for the equity market outlook.

    Chart 1 shows the dates when the potential defaults were first reported vs. the credit spread of 5Y AA-rated enterprise bonds (more details on the bonds, Table 1). Among the eight, Tianwei, Erzhong, Sinosteel, China Coal Huayun and China Railway Materials are central SOEs; Guangxi Nonferrous, Yun Feng and Dongbei Special Steel are local ones. The media reported that some of these SOEs actively sought defaults in order to lessen their debt burdens – a few even reshuffled their assets in preparation (Caixin, Apr 18). This clearly raises the chance of genuine defaults in the bond market’s mind, in our view.

     

    Based on our assessment, the dynamics among the key stakeholders are as follows: some SOEs want to default; many local governments may lack the financial resources to save their SOEs from defaulting; the central government has the resources (after all, it can print), but needs to balance short-term financial stability with moral hazard concerns; the bond underwriters, many of them banks that lend to the same SOEs, need to balance financial interests against the risk of reputation damage and potential lawsuits; bond holders may go on a buying strike to force bail-outs.

    At this stage, we expect the central government and the bond underwriters to largely come up with the money to prevent any significant default of SOE bonds. It appears to us that, leading up to the 19th Party’s Congress in late 2017 (when a new group of leaders will be officially announced), a top priority of the central government is to prevent a financial crisis. For banks, the cost of bail-outs could be hidden for quite some time, so the incentive for them to suppress defaults is strong, in our view. Actually, there was at least one case in which a listed bank used its WMP under management to cover a defaulting bond ((Shadow banking default, pace accelerated sharply since mid-2015, Apr 7).

    If our expectation is right, the bond market could calm down as soon as it sees signs that bail-outs are the likely scenario. This would kick the can down the road, using liquidity to paper over a solvency issue.

    If, against our current expectation, the government/underwriters keep in mind:

    Implicit guarantee & contagion risk: SOEs default on loans all the time, but banks don’t “panic” unless there is a deposit run. However, the same stability cannot be maintained as easily in the shadow-banking sector. The shadow-banking sector is largely a market where greed, fear and herd mentality reign supreme. For years, bond buyers believed that bonds issued by any government-related entity, including SOEs and LGFVs, were bullet-proof. If this perceived “implicit” guarantee is broken, at a minimum, credit spreads would widen sharply and, at the worst, panic selling could develop, generating a negative spiral. Moreover, contagion risk could be high: if this “promise” is broken, will the market still believe in perceived government guarantees elsewhere, including those on RMB, the A-share market or housing prices?

     

    Expensive valuation: before the latest widening, credit spreads for AAA and AA+ rated LGFV bonds and enterprise bonds (largely SOEs’) were very narrow, at between 50-100pbs. As a result, the risk of holding on to these bonds is asymmetrical, unless one believes that the government will lower the risk-free rate significantly going forward (Bond yield rising, credit spread widening & impact on stocks, April 18). As a result, the market is biased toward selling at the moment, by our assessment.

     

    Leverage: the more transparent part of bond leverage is via repos and structured funds, which appear manageable at this stage (Bond market: leverage & potential defaults, 23 Oct 2015). However, a risk is that there could be significant amount of hidden leverage. Anecdotally, some banks provide loans to WMPs under their management to buy bonds, so the WMPs can achieve the “promised” returns to WMP buyers (currently, around 4% p.a.)

     

    A lack of transparency: the most important buyers of bonds in China include WMPs managed by banks, brokers and fund subsidiaries, banks themselves, money market funds and bond mutual funds, and insurers. While risk responsibility is clear-cut for most bond buyers, it is not so for the WMPs. Legally speaking, WMP buyers own the downside risk. However, the way that WMPs are sold in China has led many buyers to believe that these products are essentially term deposits. As a result, if financial institutions decide to pass on some of the default losses to these buyers, they may stop buying en masse, essentially generating a “bank” run in the shadow-banking sector (Risk of bank-run WMPs is rising, Feb 28). By the way, if the financial institutions, including banks, allow some SOE bonds to default, they will most likely pass on at least some of the losses. If they have to bear the losses themselves, they’d be much better off bailing out the bonds in stealth before the defaults, both financially and politically.

    Even without a panic, if the bond market becomes more cautious as a result of SOE bond defaults, there could be negative implications on credit flow, credit cost, economic growth, commodity demand, the RMB and the stock market.

  • Does Saudi Arabia Have $750 Billion In Assets To Sell?

    As we reported over the weekend, based on NYT info, the Saudi finance minister said the kingdom would sell up to $750 billion in Treasury securities and other assets if Congress passed a bill that would allow the Saudi government to be held responsible for any role in the September 11, 2001 terror attacks. Senators Chuck Schumer of New York and John Cornyn of Texas introduced the “Justice Against Sponsors of Terrorism Act (JASTA) last fall, but the legislation seemed to gain some new traction after a related segment on 60 Minutes earlier this month.

    The punchline, of course, was that Saudi officials indicated they would sell its dollar-denominated assets if the law passed to avoid having those assets frozen by American courts.

    But does Saudi Arabia even have $750 billion of assets to sell?

    For the answer we go to Stone McCarthy who note that while they can’t answer that question definitively – recall that the exact amount of Saudi Treasury holdings remains a mystery as it is not broken out separately – here’s what they do know from the Treasury International Capital (TIC) data.

    First, the Treasury doesn’t specifically report Saudi Arabia’s holdings of U.S. securities. Instead, Saudi Arabia’s holdings are combined with the holdings of the following countries into a category called Asian exporters: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar and United Arab Emirates.

     

    At the end of January, Asian oil exporters held $563.6 billion of U.S. securities, with Treasuries and U.S. equities accounting for 92.2% of the total. Treasury holdings totaled $268.2 billion.

     

     

    These figures reflect holdings that Treasury can directly attribute to the Asian oil exporting countries. Regular readers of our updates on the TIC data know that foreign investors often hold securities at custodial institutions in other countries. For example, in February, the five major custodial centers held $1.1 trillion of Treasury securities. It’s possible that Saudi Arabia has holdings of securities parked in custodial accounts, but there’s no way to know that for sure from the TIC data.

     

    Also keep in mind that as we have previously reported, the Saudis were said to have been one of the most aggressive sellers of US-denominated assets in late 2015 and early 2016 to fund the country’s budget deficit as Petrodollar revenues collapsed.

    So, in short, the answer is nobody knows for sure, but if the Saudis did have $750 billion several months ago, they probably have far less as of this moment.

  • The 2016 "Rage, Fear, & Anger" Election: Ron Paul's Deep Dive Into The Real Issues

    Ron Paul offers his detailed assessment of the 2016 presidential campaign this far. This is no candidate play-by-play, but a look at the strong undercurrents in society that are driving the debate. The people are very angry. But why? And what should be done about it?

     

    Full Speech (via RonPaulLibertyReport.com), [yes it's long but grab a glass of wine – or bottle of scotch – and comprehend what America faces]

    THE MIDDLE-CLASS RAGE, FEAR AND ANGER

    The middle class, which as defined by politicians now includes almost everyone, is angry, fearful, and filled with rage. When politicians address this group it’s frequently defined as “populism,” of which there are many varieties. Whether liberals, conservatives, libertarians, socialists, or authoritarians, when the people become restless and angry, demanding change, the politicians pay attention. This reflects a need to appeal to the masses, and a populist message is well received. But there is never real agreement on the analysis and suggested solutions to the problems. Instead, scapegoats are easily found. Economic understanding is not of high priority, and demagoguery is a useful tool for politically mobilizing the “victims.” Since there are real reasons given for the conditions that exist, competition arises among those who want to take charge of the crisis and benefit politically. This only increases the anxiety and anger of the people, who see themselves as victims of an unfair system.

    Until the political economic crisis became readily apparent, most politicians were unaware of the rapidly increasing distortions in wealth distribution. The dangers are conveniently ignored because most people live for the short term. If one is doing well financially, even though the system is financed with the whole country living beyond its means, worrying about preparing for a rainy day seems like wasted energy. However the payment is now coming due, and because few plan or understand it, any threat to benefits – both earned and unearned – creates great anxiety. Fear of being squeezed out of a share of the benefits that come with government intervention becomes the driving force for the whole country. The one group that seems the least worried about current conditions is the “one percent” who are financially secure by living off the special interest financial system. This does not include the wealthy who are financially rewarded for providing products and services that consumers choose to buy.

    But even the one percent who benefit from government programs and the monetary system are concerned that the current uprising will interfere with their privileged position.

    The size, determination, and anger of the current populist uprising is signaling that huge changes are coming both politically and economically. This generates a competitive blame-game when politicians get involved and try to benefit from the chaos. Republicans blame the Democrats and the Democrats blame the Republicans for the problems. It’s never an issue of philosophy but rather partisanship, personalities, or simply blaming poor management. False perceptions are commonplace as a consequence of government-controlled education that steers people away from the sad realities of economic planning that the people have blindly accepted for many decades.

    The fear and anger are only increased by the combination of a failed but never-questioned economic policy, and the demagogues, either ignorant or malicious, who provide magical promises to erase the injustices that are clearly visible.

    Though the nature of the breakdown is an economic issue caused by excessive government, those suffering – and the politicians who claim they can restore prosperity – demand more government intervention in our lives and in the economy.

    The entitlement mentality is now seen as a fundamental right even though it depends on government use of force to transfer wealth from one group to another. The liberal mantra has always been that the use of force backed up by guns is legitimate and moral. This is accepted as being morally superior to voluntarism for helping the poor. The irony is that it’s precisely this philosophy that impoverishes the middle class, increases the poverty of the poor, and provides the unearned benefits of the crony capitalists who were the recipients of the great bailout in 2009.

    We are witnessing the end of an era, but since denial and ignorance prevails few are aware of it. The current special interest entitlement system is on its last legs, but the recipients and the political power brokers believe a change in leadership is all that is needed. It’s not the system that’s at fault, they argue, it’s only better management that is required. It is readily apparent that the failure of this approach is leading to more fear and anger. 

    Too often the anger is thought to be a partisan issue. The claim is either that it’s all President Obama’s fault or George W. Bush’s fault – yet both parties have followed the same false philosophy of interventionism in both domestic Keynesianism and international empire-building, putting them both at fault.

    The people searching for answers conclude the government constantly lies to them. It’s easy to see the system rewarding those who control political power. Concern and understanding the inequities in wealth distribution are not authentic. Ignorance prevails even for the well-intentioned, which results in a deadly erosion of middle class wealth. Debt and deficits are not a serious concern, and both parties continue the endless wasteful spending that only aggravates the pervasive economic inequities that drive the people’s fears.

    Most Americans, now more than ever, have become aware of the terrible conditions the Federal Reserve has caused by its policies that result in ever more distortions in the transfer of wealth to the very wealthy at the expense of the middle class. Many people remain apathetic as to the details of Federal Reserve policy, but others recognize that the Fed is the financier of the welfare state and the endless wars that consume wealth. Our ability to issue the reserve currency of the world gives us a free ride for unlimited spending, debt, and borrowing. 

    Middle class anger results because the evidence is now available that the system is failing and the politicians offer only vague platitudes and rash promises that few citizens believe. The factions that compete for government benefits become more competitive and angry as they see the financial pie shrinking and the ability of government to deliver on their promises failing.

    When benefits, seen as entitlements, shrink, the recipients become fearful and angry and demand political action. This means more handouts, whether it’s for the rich or poor, without any understanding as to why the system is failing. The demagogues, who are aware of the problem, are quick to use this discord to gain greater political power while ignoring the true nature of the problem and the changes needed.

    It’s easy for presidential candidates to respond to legitimate concerns that have prompted the anger and fear. But if there is little understanding of the true nature of the problem and the proposed solutions, this won’t help to quiet the disgruntled electorate. The groups that claim they are being mistreated more than others will continue to be varied and increasing in numbers.

    Slogans and clichés, though they have been helpful to the politicians in the past, will not be believed and will only increase the anger. This leads the candidates to compete to be the most authoritarian in their promises to take care of everybody’s demands.

    The problems have been developing for almost 100 years. Progressivism, which was accepted in the early part of the 20th century, cannot be reversed by any single election. Vague political promises to patch up the system currently being used will no longer suffice.

    Real wages and the standard of living of the average American family have dropped in the 21st century and are almost where they were back in 1971 – the year we completely abandoned the gold standard. The ongoing crisis is deeply structural and not a management problem. Those who still spout the idea that stopping waste, fraud, and abuse in order to finance the perpetual demands of the people without a major overhaul of our political and economic system have no credibility and the people know it. Too many remain convinced that debt is not a problem and more debt and more monetary inflation is what is needed to restore economic growth. The masses have been taught and conditioned to believe that unlimited government spending and debt is the solution and not a cause of the crisis.

    But, it is a problem. As long as our politicians and the American people remain in denial, the problems will get much worse, the anger will accelerate, and violence in our cities will increase.

    The current ongoing destruction of the middle class and the anger it causes are the big issues we face. Economic conditions are the overriding issue, but the least understood. Most Americans are aware that the politicians are in over their heads and are not providing any sensible answers to the dilemma. Believing that a left or right wing noisy demagogue will save us is wishful thinking.

    Ignorance of economics has allowed years of excessive spending, but that is coming to an end. The entitlement mentality claims it’s a strictly moral issue for the government to take care of people in need. A combination of bad economic policy and confused morality has created the conditions that are threatening us today – not only in the US but worldwide as well.

    We must wake up and realize that much of the wealth the average American has enjoyed for decades has been an illusion, built on debt and a bizarre form of money. But the payment is now coming due and no one wants to accept the obvious: we are unable to pay for our extravagant spending on domestic welfare to both the rich and poor, while maintaining an unaffordable world empire. The result has only been anger. There is no understanding that market forces are now required and that the debt must be liquidated in order to restore economic growth to the system.

    The question of who must pay is a major political and economic one. Currently the middle class is aware of a major problem, but doesn’t have the foggiest understanding as to the causes or the solutions. So far the penalty has fallen on the shoulders of the middle class with a loss of good jobs, inflation, and a lot lower standard of living – something the government is unwilling to acknowledge. The fact that there’s a lack of understanding of economic policy contributes to the growing socio-economic crisis and the fear and anger that continue to worsen.

    The politicians are scurrying around searching for those they can blame for the crisis. Actual answers from the candidates are secondary to who achieves the political power to distribute a shrinking economic pie.

    WHO’S TO BLAME?

    Who gets blamed depends solely on the political persuasion of the accuser. If it comes from a leftist politician it’s always free markets, profits, not enough government transfer payments to the poor, not enough government spending, and of course, greed – regardless of how one’s money was earned. The solution is always to raise taxes.

    If it comes from a right or populist politicians, it’s immigrants, China’s unfair trade and currency policies, threats of terrorism, Mexico border policies, and an urgent need to sacrifice liberty for safety, xenophobia, or not enough militarism. Too often the blame is couched only in partisan terms – it’s the Democrats fault; it’s the Republicans fault; or it’s all Obama’s fault or George W. Bush’s fault. Philosophic views are not important, only effective demagoguery is.

    Too often it leads to a desire for a tyrannical type of government, coming from both the far left and the far right, that makes rash promises as to the ease with which the problems will be solved. We’re constantly being told that what we need is a new tougher boss who will get things done, without knowing exactly what policies will be pursued.

    It’s easy to find scapegoats – either racially motivated or based on faulty economic thinking. Little blame is placed at the door of the Federal Reserve’s ridiculous monetary policy, which has been so destructive. Negative interest rates are not topics in the presidential debates or the campaigns. Simply, one side blames economic downturn on the free market and another side blames the lack of tariffs and too much labor competition. Political changes are much easier to bring about by placing blame than by getting people to understand the true cause of our economic problems. The sad part is, it’s the economic explanation of poverty and the unfair distribution of wealth that is the issue that drives all political rhetoric while searching for scapegoats. The answers are out there, but we have a long way to go to convince the citizens and the leadership in this country who claim that more government is the solution.

    The fear of ISIS is used to justify the dangerous foreign policy we follow – a policy that has significantly contributed to the economic crisis, with trillions of dollars spent in recent decades on unwise militarism. Blaming foreign terrorism for our economic and debt crisis may have been a goal of Osama bin Laden, but only we can take the responsibility for the spending excesses for which we are now being forced to pay.

    There’s been little disagreement among the candidates that sacrificing personal liberty under today’s circumstances is required to provide security. It’s easy for the politicians to blame too much liberty – both economic and civil – as the problem. There should be little doubt that our crisis does not come from too much freedom, yet this issue is of no concern for the candidates.

    Some blame the crisis on inefficiency in government management and claim that ridding the system of waste, fraud, and abuse will be enough to solve our fiscal problems and control the deficits. Therefore nothing needs to be cut, or so they say. There’s no recognition that government by its very nature is based on theft, threat of violence, and control by the privileged few.

    Blaming various social groups instead of flawed policies is a frequent exercise. Racial distinctions are convenient for gaining a special benefit and are the source of social and economic friction. There’s no incentive to objectively see cause-and-effect in the problems that generate fear and anger. This makes it very difficult to unemotionally solve the injustices that our system of government planning has generated.

    Equal justice under the law is constantly being abused. It’s easy to blame racism for all the problems while ignoring the war on drugs and true causes of poverty, which are the major contributing factors to our dilemma.

    The authoritarians cannot resist blaming free markets and sound money for our economic ills and they never make an effort to distinguish between free markets and crony capitalism in their accusations. Ignorance and a desire to increase the role of government in our everyday life provide a convenient argument for a bigger and more intrusive government. Today even declared socialists are well received with their promises of unlimited “free stuff.”

    The defenders of central economic planning, a powerful central bank, sacrificing liberty for security, and foreign interventionism to maintain an empire will never blame themselves for their contributions to the crisis. Therefore, expect anger and fear to accelerate. Do not expect the 2016 election to enlighten the people or the politicians.

    Big government enthusiasts are always looking outward and for others to blame. But without some introspection it is guaranteed that the social friction now building will get worse. False blame creates bad solutions.

    Terrorism is a real threat. The consensus of both Republicans and Democrats is that the only cause is “radical Islam.” Any other suggestion elicits charges of un-Americanism and a willingness to ignore danger. It is suggested that any support for those who seek a peaceful resolution to international problems are unpatriotic and endangering our country. Claiming our foreign policy of occupation and preemptive war significantly contributes to the danger of terrorism is unthinkable, but suggesting that we carpet bomb countries in the Middle East draws loud cheers. This is hardly a setting for making our country safe from terrorism. Blaming others for our failed policy of maintaining a world empire while never looking at our own shortcomings is acceptable to most Republicans and Democrats.

    Not only do the demagogues blame others for our foreign policy failings, they also blame others for our weak economy. The threat of terrorism, that we helped to create, is also used to justify our government’s attack on civil liberties here at home. The politicians never assume responsibility for our out-of-control budgets since neither party truly believes that deficits are a serious problem. In fact, both sides cooperate in spending and ignoring the deficits because both sides want to increase spending. Sometimes it’s for domestic welfare and other times the spending is for “rebuilding” the military; most of the time they want both.

    The most significant economic problems we face today – the $210 trillion of unfunded liabilities, the $19 trillion national debt, along with our overblown foreign debt – are dealt with by ignoring them as the platitudes and excuses flow.

    The financial markets will eventually make it clear that the debt has become the most significant issue. It’s crucial that proper blame is placed on the spenders and Keynesian apologists who argue it’s not a problem. Without proper blame, understanding how to achieve economic growth is impossible. The people are justified in being fearful and angry because the magnitude of the crisis is becoming more evident every day, and they no longer believe what the leaders of the country have been telling them. Wishful thinking for a political savior to rise up and rescue us is just that: wishful thinking.

    Lack of knowledge and understanding of the crisis has ignited hatred between the factions seeking to take charge, escape blame, and satisfy the demands of the current victims. As the truth of the seriousness of our crisis becomes more apparent, only a few are reassured that there is a politician who has an answer. It has been suggested that the description of what we’re facing is that one party is a party of “know nothings” and the other is a party that knows all the “wrong things.”

    REAL ISSUES IGNORED

    Since there has been a lot of blame and no understanding, no serious solutions have been offered. The big problem is that in spite of different rhetoric coming from the two parties, there’s little difference in fundamental political and economic beliefs. With the dramatic personal charges being made by the candidates, the important issues are avoided. This must be on purpose. Since no one has answers, it’s best not to draw attention to their ignorance and to the total failure of both political parties to solve the problems.

    The issues avoided are numerous, including especially the debt and the $210 trillion of unfunded liabilities. And even as our as our economy steadily weakens, no serious debate occurs. When the subject comes up it’s for narrow political reasons and no solutions are offered. It’s abundantly clear that to both sides, debt is not of enough concern to actually lead them to entertain the idea that spending should be reduced. That would be bad politics. Both sides support “rebuilding the military” by increasing military spending. Though there is no real threat, we continue to spend about as much as everyone else put together. Domestic welfare spending is treated the same way. Some will continue to claim that cutting waste, fraud, and abuse will provide the funds necessary to continue our spendthrift ways. That’s been talked about for decades to appease the people, without success. There are far too many “debt danger deniers” in Washington to expect spending limitations to emerge.

    The US can still borrow from foreign sources since we are the issuer of the world’s reserve currency. Reality declares that this will come to an end – and soon if we yield to the temptation of placing exorbitant tariffs on our trading partners and starting a trade war.

    For us to continue our spendthrift ways, it will require the Federal Reserve to monetize the debt at an accelerating rate without loss of confidence in the dollar. In the campaign there’s no talk of getting rid of our central bank, as Andrew Jackson did in 1833. Today the authoritarian big spenders on both sides are totally dependent on the Fed in the short run to constantly create massive amounts of new money out of thin air. Yet it’s the middle class that suffers the most from this policy. No one is talking about how the Fed created the crisis, nor do they realize what lies ahead for us as a consequence.

    The ignorance regarding monetary policy makes it impossible to understand the problems of recessions, depressions, inflation, huge debt, massive mal-investments, unfair distribution of wealth between rich and poor, and how the cost of excessive government gets dumped on the middle class and increases the poverty rate. A lack of desire to help is not the problem. The problem is the politicians’ ignorance of the business cycle and their obsession with resisting corrections of the mistakes that are a natural consequence of interest rate manipulation by the Fed. One can only imagine the mistakes that will evolve from negative interest rates! The only saving grace will be that market forces will eventually overwhelm and the needed correction will come, but unfortunately with a lot more pain and suffering.

    So far the only solutions that are offered are more of the same policies that have created this current crisis – a crisis that has generated anger and class warfare, more spending, more debt, more taxes, more regulations, and more warfare. This will lead to a lot less freedom for everyone. Without understanding the problem, anger will continue to build and will result in greater violent confrontations.

    The systematic attack on our privacy, private property rights, and other civil liberties is not an issue getting any significant attention in the 2016 election. The politicians don’t talk about it because they have chosen to ignore it. It’s just not a serious problem from their perspective. Too many people have come to accept the principle that safety and security are far more important than worrying about personal liberty. The 9/11 attacks and a hyped-up fear of ISIS have pushed this false idea that sacrificing liberty for security is necessary. The American people for a long time have been accepting this principle and have come to believe that it’s a fair trade-off. 

    The sad consequence of our foreign policy of interventionism, which has been supported by both Democrat and Republican politicians, has drawn no significant debate in 2016. The only argument has been over management style. No one makes the case for rejecting the notion that we have a moral duty to be the policeman of the world. Our military presence in over 130 countries is of little concern to the candidates. The burden of a $1 trillion per year military budget has elicited no warning that this spending is excessive and a tremendous economic burden to our economy.

    The contest unfortunately is to see who can sound the toughest and most jingoistic regarding dealing with the al-Qaeda and ISIS. This has led to the xenophobic targeting of Islam and refusing to even consider that our bipartisan foreign policy of preemptive war, occupation, and sanctions is a contributing factor in stirring the hatred that indeed makes us all less safe.

    Logic should tell us that continuing the same policy that has stirred up hate and retaliation, that serves as a recruiting tool for the radical jihadists, will only put us in greater danger. The financial burden, the attacks by our own government on our civil liberties, and the greater threat to our national security are all related to our radical interventionist foreign policy, which has been endorsed by both Republican and Democrats for decades.

    There’s been no concern expressed about the collapse of the current Keynesian economic system. This huge financial and social event will significantly increase the fear and anger the American people are already experiencing. Therefore there is no reason to expect any positive changes as a consequence of this year’s election, regardless of who wins the presidency. Unrealistic promises and blaming various scapegoats for our problems will only result in more anger and violence. A better understanding of the problems we face is vital if we expect to preserve both liberty and prosperity.

    Failing to recognize the significance of a major era ending is compounded by the lack of concern and ignorance regarding the “deep state” or the shadow government. This is the unidentifiable special interest groups and individuals who are actually in control of our government – regardless of whether the Republicans or Democrats are nominally in charge. If the American people understood this, they would realize that elections mean little more than pacifying the electorate with the false belief that the people actually have a say in the affairs of state.

    Great concerns about the threat of al-Qaeda and ISIS help direct attention away from the real crimes committed within our borders, like the ill-conceived war on drugs and a justice system out of control. Asset forfeiture is ignored as a serious problem and is strongly supported by law enforcement agencies.

    The original Constitution listed essentially six federal crimes. Today there are 4500 federal crimes on the books and over 400,000 regulations – most written illegally by the executive branch – and we hear nothing about this horrendous legal problem. Our courts do not provide equal justice, which justly infuriates the victims of this system of injustice. Militarization of the police and police brutality are out-of-control, yet the recipients of stolen goods known as “government benefits” have no compunction in demanding the use of violence to get what they have been taught they have a right to have. The result is that inner city violence is not going to be reduced with this election. 

    As the economic crisis worsens and the cities explode, with different factions competing for the handouts, there will be calls for military force and initiating martial law. This is a non-issue in the current political debate and without understanding the significance of this problem will not be recognized. It will only get worse. Most of the candidates have indicated that they would use whatever military force is needed to quell domestic unrest regardless of the Constitution. 

    If there’s a discussion of danger within the United States, the demagogues will say the threat comes from ISIS and is the reason they demand an increase in military spending. They remain in denial that our presence in the Middle East is precisely why there’s a threat here. Unfortunately the worse the conditions get here at home, the greater will be the demand for a more authoritarian leader to take charge and solve the problems they don’t understand. The campaign of 2016 will not bring about any significant improvement in the problems that precipitated the anger and generated our political and financial crisis that they have ignored.

    THE ANSWER

    A philosophic revolution is required. The American electorate is very angry and is demanding changes. Though the anger is justified, the exact cause and correction for it is poorly understood. Economic conditions are a driving force but are not recognized as such. There is no realization that the cataclysmic events that will be associated with an end to the current era require revolutionary changes in our economic and political thinking.

    Since the problems are poorly understood it was guaranteed that a blame game by all concerned – the politicians, the voters, the victims, and the political parties – would result. Scapegoats are found and blamed – guilty or not. All this prompts a variety of answers with wild promises made by socialists and crony capitalists. Demagogues with magic solutions are everywhere to be found.

    Ignorance, along with a struggle for power by those who claim they have the answers, ignores the actual causes of the social divide that are not readily apparent in the current election.  Some are pleased with this lack of discussion since it could identify those responsible for the mess and the failed ideas that need to be rejected.

    A serious discussion about the role of government is needed in order to redirect the failed course upon which we find ourselves. Different types of governments reflect the degree to which the people choose to live in a free society. The form of government that was proposed by the Founders is no longer recognizable. This fact explains the conditions that have generated the anger and fear that is prevalent today. Nobody likes to hear it, but the answers are not available to us unless we change the people’s attitudes about the role the government should play in our lives, the economy, and in the world.

    The only real answer to a failed interventionist/authoritarian system is to replace it with a system of nonintervention and voluntarism. It has to be based on the moral principle of liberty and non-aggression permitting all things peaceful. The false moral principle of government-directed “humanitarianism” must be intellectually refuted as a false God.

    Utilitarianism and pragmatism are code words for avoiding all viewpoints held by those who love liberty and only want to be left alone. Unregulated non-violent voluntarism is rejected as not being beneficial to the “common good.” It is argued that government-mandated equality is superior to any desire for individualism and self-reliance.

    Utilitarianism, pragmatism, and economic planning go together, which always leads to dependency and corruption of economic and political power. Sadly the result is that only the powerful and wealthy special interests thrive. A society that condones even a small amount of authoritarianism is compromised by rejecting the basic tenants of liberty. The system then grows like a cancer until that society is destroyed, which we are now in the process of doing to ourselves.

    When virtue becomes a government mandate, it makes it impossible for individuals to achieve it, which further destroys the social and economic order. Instead the result is: taxes to force people to be charitable; torture to protect the state; drug wars to improve behavior; elimination of privacy to protect government secrecy; thousands of laws and regulations to monitor our every action, all of which are performed in a non-virtuous manner. Only when efforts to improve oneself and others are done in a voluntary and nonviolent manner does it represent virtue. Government efforts, whether it’s to improve one’s personal behavior, legislate economic fairness, or direct the affairs of other countries only serves to inhibit virtue. This leads to society’s collapse, along with war and poverty. For liberty to work society must have a virtuous people who reject the use of all aggressive force, especially when it’s used by government in the name of humanitarianism.

    Even the 400,000 federal regulations and the 4500 federal laws cannot save a system of mandates that violates the moral standards that are vital to a moral society. Free markets are superior to government economic planning. Government rules on personal behavior cannot instill moral standards. Bombs, sanctions, and occupations of other countries cannot make the world safe or more prosperous.

    All these efforts result in the loss of liberty. Under these conditions a republic cannot exist. The system will always fail and the people will suffer. The solution will then have to be in the form of a revolution, hopefully peaceful, and with the insistence on recognizing the natural right to life and liberty.

    The worse the conditions get the louder the demagogues’ promises become. Competition between demagogues produces sharp rebuttals, and supporters of different candidates become overtly competitive and violence is threatened. With no understanding of the cause of the problems, arguments over solutions will vary. Since real evaluations and authentic solutions are absent it only incites more anger.

    Since the 2016 election distracts from the real issues, the correct solutions will not be believable. The system is broken and not fixable. Attempts to do so only lead to frustration that further divides the people. Under these conditions the guilty don’t want to hear the truth and deny it if they do.

    Whistleblowers like Edward Snowden and John Kariakou are despised for telling the truth and are more likely to be punished than those who were criminally negligent.

    H.L. Mencken had it right: “The most dangerous man to any government is the man who is able to think things out for himself,” and come to recognize that, “the government he lives under is dishonest, insane, and intolerable.” But will the campaign of 2016 answer these concerns?  Remember that while living in an empire of lies, pursuing truth is considered treasonous.

    Simple anger is not equivalent to understanding the predictable evil of authoritarian government. It’s the fear of losing the immoral benefits along with corrupt government that stirs their anger. The failure of the current system reveals the lies, the senseless wars, and the disdain for the people’s rights to life liberty, and property that generates the anger now being expressed by the masses.

    If the people continue to deny that government by its very nature throughout the ages has been notoriously inept, immoral, and corrupt, a solution is not possible. The only result will be a new government based on the same immoral principles. Nothing positive will occur. Basic moral principles of liberty, self-reliance, and strict limits on government power, are required if progress for peace and prosperity is to be achieved.

    This type of government cannot exist without a philosophical revolution regarding the proper role of government in a moral society. The election of 2016 will not guide us in that direction. It doesn’t even deal with the crucial issues of our time, and certainly not with the moral principles underpinning a free society. The conflict between candidates and parties is superficial and personal – without substance. The 2016 election will change nothing. It’s a great distraction from the policies that have delivered the current crisis to us. This is done on purpose since there is general agreement in both parties on the major issues and it’s not to their advantage for the people to understand this.

    The major issues that both parties and their candidates agree upon include: the central bank’s monetary policy; welfarism; federal government involvement in education and medicine; the drug war; privacy abuse; preemptive war; foreign interventionism; and the US as the policeman of the world with increased spending for the military.

    The 2016 election won’t make any difference in any of these areas. The American people continue to be deceived into believing elections are serious affairs that affect our future. The Deep State will remain in charge regardless of the outcome and few will even be aware of the invisible fist that rules over us.

    The whole process is a charade and no policy of substance is debated. The election will turn out like all the rest. The momentum toward bigger and more intrusive government will continue. The process distracts from what is really going on; sometimes out of ignorance and sometimes just out of wishful thinking; sometimes on purpose. The process has everyone looking in all the wrong places for the answers. The answers can only be found in an intellectual revolution that refutes the authoritarians who sanction government-directed aggression in all areas of society. What we need is to define and endorse the proper role of government in a free society. There is no serious talk in the campaign of the crucial issues that need corrected if we expect to escape from the mess we’re in.

    Following are a few of those concerns that should be addressed. 

    There is:

    • No talk of liberty and its moral foundation;
    • No talk of how conservatives and liberal authoritarians are equally harmful;
    • No challenge to the entitlement mentality;
    • No challenge to the bipartisan support for empire;
    • No challenge to the unsustainable debt accumulation;
    • No challenge to government secrecy and the government’s violation of the people’s privacy;
    • No concern for the violation of private property rights;
    • No understanding of how our foreign policy endangers our security;
    • No understanding of how free markets regulate economic activity for the purpose of serving the consumers;
    • No concern for government aggression in controlling habits, people’s bodies, thoughts, economic choices, prices, or wages;
    • No condemnation of the current doctrine of preemptive war;
    • No concern for our participation in worldwide organizations that cede political power to the elites at the expense of national sovereignty;
    • No mention of why sanctions are a prelude to war;
    • No demands that the insane war on drugs be ended;
    • No understanding that personality clashes and name-calling is a substitute for dealing with the issues;
    • No awareness of the need for a philosophic answer to our crisis.

    When it’s discovered that excessive government interference in voluntary and peaceful activities is the culprit, it will become clear that the solution can only come by successfully presenting the case for liberty. It will follow that reining in the government will be a necessity – not an option.

    The awakening will arrive when we face a total societal breakdown – once it’s realized that the accumulation of massive debt is unsustainable and the dollar suffers the consequences, which will negatively affect all Americans and many throughout the world. But it also provides an opportunity to open the door to a free society. Without the cost of war and welfare in a new system that accepts the moral principle of free markets, sound money, private property, and voluntary contracts, prosperity and peace will break out.

    The limited role for government in a republic is to provide equal justice for all, including the protection of life, liberty, and property. It becomes destructive when governments overreach and instead become the greatest threat to liberty and justice – something from which we are suffering today.

    Sadly these issues will not cross the minds of the leaders of either major political party at this time in our history. But they will when an upcoming generation of young people, enthusiastic about the cause of liberty and with a growing awareness of the problems, concludes that:

    ?LIBERTY IS THE ANSWER!

  • "Sleepy" ECB Preview: What Every Bank Thinks Draghi Will Do Tomorrow

    Tomorrow's ECB meeting "looks set to be sleepy" according to Saxo Bank's Mads Koefed as Draghi is largely cornered into confirmation he will do "whatever it takes" and some additional details on the corporate bond purchase plan. Most of the sell-side's research suggests the same, as Bloomberg notes, ECB will probably leave the door open for further cuts if needed; but any downside risk for the euro is seen limited, as Draghi stays on hold by reinforcing its dovish stance after the mix of easing measures announced in March with some defense of the efficiency of his policies after recent criticism by Germany.

    The bund market appears to once again pricing in some further deposite rate cuts (deeper into negative territory), but has been disappointed twice now…

     

    And as Saxo's Mads Koefed notes, unlike the explosion of announcements that was the March ECB meeting, today's meeting of the governing council promises to be dull.

    Inflation has ticked up to 0% year-over-year in March from minus 0.2% when looking at the headline series while core inflation climbed back to 1% last month from a one-month visit to 0.8% in February.

    Inflation
     
    Economic activity has remained subdued since the last ECB meeting though the flash manufacturing PMI has climbed to 51.6 from 51.2. The services PMI index declined to 53.1 from 53.3 and overall data – for example, the EuroCOIN series – suggest GDP growth of around 0.3% q/q for Q1.
     
    This comes on the back of a similar print of 0.3% in both Q3 and Q4 of last year.
     
    Lending to households accelerated to 2.2% y/y in February from 1.9% in January with consumer credit climbing at a 5.2% annual rate, the highest level seen since early 2008. Lending to corporations, meanwhile, is evolving more tepidly with growth of just 0.6%.
     
    The M3 measure of the money supply climbed 5% y/y through February, unchanged compared to January.
     
    Lending

     
    Turning to the markets, EURUSD has strengthened by 1.5% since the March 10 meeting to around 1.1340 following a 1.6% move higher on the day. More generally, however, the euro has traded sideways against a basket of currencies (EURJPY, for example, is down 1.9%), but this excludes the 1.2% move during March 10.
     
    Stocks (STOXX50) are 4.8% higher while EURIBOR has fallen.
     
    Taking it all into account, the meeting of the governing council looks to be a sleepy affair with not much new coming to the surface. We may get some additional details on the corporate sector purchase programme (part of the €80bn monthly purchases), but otherwise the stage is set for Draghi to reiterate that the ECB stands ready to combat low inflation while expressing confidence in the measures announced last month. 
     
    The ECB meeting always has the potential to be a market-mover, but this particular one looks destined to be a non-event.
     
    Will Draghi surprise? Again? Most of the sell-side thinks not…
     

    Goldman Sachs (Dirk Schumacher)

    • ECB to keep rates unchanged, Draghi will express confidence that package unveiled in March will help steer CPI toward target
    • Draghi also likely to express ECB’s willingness to respond if downside risks to growth and CPI materialize
    • Draghi will also clarify that further rate cuts remain part of monetary toolbox after his comments in March were interpreted by many as closing the door for further rate cuts
    • Some further details on new CSPP may be published
    • Expects CSPP to be conducted in similar fashion to covered bond and asset-backed securities program, and purchases to take place in primary and secondary market; ECB will decide in discretionary way how much corporate debt to buy
    • Expects an extension of APP to Sept. 2017 from March 2017 currently

    JPMorgan (Greg Fuzesi)

    • No action expected this week; see next round of easing to focus on extending QE program beyond March 2017
    • Chances of further rate cuts may be higher than initially thought
    • ECB concerned about pressure of negative rates on banks and about fueling currency war; that said, incremental deposit-rate cuts still seem possible, as does a tiered reserve charging system; Draghi is likely to clarify the message around this at this week’s press conference

    BofAML (Gilles Moec, Athanasios Vamvakidis)

    • Expect Draghi to defend ECB this week; he could also remind markets that QE is open-ended and won’t stop as long as ECB is missing CPI target
    • Draghi also likely to clarify that another depo-rate cut remains available
    • Expect Draghi to sound dovish but do not see a sustained market impact
    • More sustained EUR weakness requires a critical mass of strong U.S. data and stable global markets allowing Fed to sound more confident
    • Continue to forecast EUR/USD at parity by end-2016, expecting two Fed hikes this year

    BNP Paribas (Ken Wattret)

    • ECB should reiterate this week that it stands ready to take action to deliver on price-stability mandate
    • While expect the door to be left more open to further cut in policy rates than during Q&A session on March, there is limited room for maneuver
    • CSPP details possible but may take longer
    • Expect ECB to follow the template used for current asset-backed security and covered-bond purchase programs, suggesting no specific numeric target for monthly volume of purchases, buying in both primary and secondary markets, and opting for risk sharing

    Citigroup (Guillaume Menuet)

    • Don’t expect any new measure this week
    • Look for more policy measures in coming months including a refi rate cut by 5bp each in Sept., Dec. and March 2017
    • Also expect a QE extension by another 6 months in Sept., adjustment to issue/issuer limit for PSPP to ~40% and 10bp depo-rate cut in March next year

    HSBC (Karen Ward)

    • Draghi to convey the message that ECB can still do more
    • During Q&A, expect questions related to progress with Greece and IMF and on what might happen to Portugal’s access to QE if DBRS downgrades the country on April 29
    • Expects Draghi’s answers to be elusive

    UBS (Reinhard Cluse)

    • Expects a debate on limits of monetary policy, ‘helicopter money’, corporate bond purchases and credit conditions at this week meeting
    • Base-case scenario remains that ECB is “done” now and that it won’t add more stimulus over coming months

    Morgan Stanley (Elga Bartsch)

    • It might be too early yet to get full formal details on planned buying of corporate debt under new CSPP
    • Don’t expect any additional policy measures before 3Q
    • Expect another depo-rate cut of 10bp in 2H and see a near even chance of ECB upping and extending QE

    Natixis (Johannes Gareis)

    • Draghi likely to address recent EUR strength by downplaying comments made at March meeting that policy rates may already have reached the lower bound
    • More details about future corporate-bond purchases and TLTROs in focus this week
    • ECB will take a wait-and-see approach over coming months; from a long-term perspective, CPI might be too weak for ECB to remain on hold; the most likely easing step is an extension of QE program beyond March 2017

    UniCredit (Marco Valli)

    • ECB’s focus remains on implementing several measures already announced; expect a strong, open-hearted defense of ECB policies
    • This week’s meeting is unlikely to generate a meaningful impact on euro
    • ECB is very likely to be unhappy with stronger EUR; however, there is not much Draghi can do about it, at least for now

    Commerzbank (Bernhard Gruenaeugl)

    • Probably too early to add substantial detail on CSPP with still about two months to go before the actual start of the program
    • The question of whether insurance corporations’ seniors could be bought or not should remain a matter of lively debate for now

    Credit Suisse (Peter Foley)

    • ECB is likely to leave the door open to additional policy measures in future if economic situation deteriorates

    Nordea (Aureljia Augulyte)

    • Keep long EUR/USD
    • Market is pricing close to a full 10bps cut in year ahead, so EUR needs a really big surprise to get knocked

    ABN Amro (Nick Kounis)

    • Focus in April meeting will be on details of corporate- bond scheme; ECB will probably reveal a relatively large eligible universe of ~EU750b
    • It would include traditional non-financial corporates as well as “financial corporations other than credit institutions”
    • In this category, there are many funding entities of normal corporates, real-estate corporates and insurers
    • Expects ECB to also include floating-rate notes, bonds that mature within 1 year and those with an amount outstanding less than EU500m

    ING (Petr Krpata)

    • Negative impact on EUR should be very limited as any strong pre-commitment to further easing should be absent
    • It’s increasingly difficult for ECB to materially weaken EUR
    • Despite no real action, there would probably be some dovish comments, whereby ECB stresses downside risks to economic outlook

    BBVA (Roberto Cobo Garcia)

    • Draghi will likely stress that ECB keeps the door open to adopt further easing measures if needed; he will probably remark that further rate cuts aren’t out of the table
    • Expect ECB meeting outcome to be negative for EUR; also expect more details on CSPP

    Credit Agricole (Manuel Oliveri, Valentin Marinov)

    • ECB may not mention EUR but will keep the door wide open to more accommodation
    • While EUR may recover in immediate aftermath, the longer-term risks for currency should be on downside

    Finally we note that EURUSD did drop quite notably today…though still remains considerably stronger post-March meeting…

    “The euro has looked a bit vulnerable," said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. "There has been some speculative selling ahead of the ECB on the view that Draghi will not do anything tomorrow policy-wise but might sound dovish, and could open the door to lower rates again."

  • The Shocking Reason For FATCA… And What Comes Next

    Submitted by Nick Giambruno via InterntionalMan.com,

    If you’ve never heard of the Foreign Account Tax Compliance Act (FATCA), you’re not alone.

    Few people have, and even fewer fully grasp the terrible things it foreshadows.

    FATCA is a U.S. law that forces every financial institution in the world to give the IRS information about its American clients. Complying with it is a huge financial and administrative burden, measured in hundreds of billions of dollars. It’s a paper shuffler’s dream come true.

    FATCA is the reason the vast majority of banks, brokerages, and other financial institutions outside of the U.S. shun American clients.

    I was just in Singapore, which has one of the soundest banking systems in the world. I can personally attest that banks there treat potential American clients as radioactive liabilities to be avoided.

    This is how FATCA makes it much more difficult to move money outside of the U.S. Combined with other costly, extraterritorial U.S. regulations, the law amounts to de facto capital controls.

    It’s no surprise so few people understand FATCA. Governments and institutions often give their most dangerous laws and schemes dull and opaque names to cloud their true purposes.

    The Federal Reserve is an excellent example of this. After two central banking experiments failed to take root in the 1800s, anything associated with a central bank became deeply unpopular with the public. So, central bank advocates tried a fresh branding strategy.

    Rather than call their new central bank the Third Bank of the United States (the previous two were named the First and Second Bank of the United States, respectively), they gave it a vague and boring name to hide it in plain sight from the average person. They named it the Federal Reserve.

    Unfortunately, these smoke and mirrors worked pretty well. Nearly 100 years later, most Americans don’t have the slightest clue what the Federal Reserve is, what it does, or how it affects them.

    I think the same dynamic is at work with FATCA.

    Ostensibly, FATCA is about cracking down on offshore tax evasion. But I think the U.S. government has another, more sinister motive.

    Let’s peel back the layers of this onion…

    FATCA should bring in around $900 million per year, on average, and that’s an optimistic estimate. However, $900 million would only be a drop in the bucket (around 0.2%) next to the federal government’s $438 billion deficit.

    Even if the U.S. moderately reduces the federal deficit, FATCA revenue would still be a small pittance in comparison.

    This begs the question: Why would the U.S. government go to the enormous cost and trouble of implementing FATCA for such a relatively meager amount of money?

    FATCA on Steroids

    FATCA’s real purpose is not to collect money. It’s to pave the way for a global FATCA, informally known as GATCA.

    You see, complying with FATCA often breaks privacy laws in other countries. To get around this, the U.S. government has negotiated bilateral agreements with pretty much every country in the world. But it’s not practical for each and every country to create its own version of FATCA and accompanying web of bilateral agreements. That would be slow and tedious.

    So, the central economic planners at the G20 and OECD have devised a new “global standard” for the automatic exchange of financial information between governments. It’s called GATCA, and it’s modeled on FATCA.

    In other words, bureaucrats from these supranational institutions are foisting a “FATCA on steroids” on the world.

    This would have been impossible if the U.S. hadn’t cleared the path with FATCA. The G20 and OECD needed the U.S.—the sole financial superpower (for now at least)—to cram its privacy-killing measures down the throats of the rest of the world. No other country could have done it.

    FATCA is only possible because the U.S. carries a big stick: the ability to refuse access to its financial system and the world’s premier reserve currency. Don’t sign up for FATCA, and your country can forget about the vast majority of international trade.

    It didn’t take long for most of the world to fall in line.

    When Russia and China signed on to FATCA, it became a fait accompli. There are no other meaningful countries left to resist it.

    This set the stage for GATCA.

    Unfortunately, GATCA will likely be an irreversible reality in the not-so-distant future. It’s also highly probably that the OECD, the G20, and other organizations will sanction or otherwise blackmail countries that don’t comply. That pressure would likely be too enormous for the vast majority of countries to bear.

    In the end, this means a permanent record of every penny you have ever earned, saved, borrowed, or spent anywhere in the world will be instantly available for analysis and scrutiny by countless government agencies, regardless of any actual or suspected wrongdoing.

    But wait, there’s more!

    If FATCA wasn’t the end game, don’t expect GATCA to be either.

    Let’s peel back the next layer of the onion.

    What Comes Next

    Did you really think all these governments would go through all the trouble of creating the architecture to gather all this financial data… and then just sit on it?

    Of course not.

    They’re going to leverage the data as much as possible. This will have terrifying consequences for the individual.

    It’s no secret that advocates of big government have long fantasized about creating a global tax. Whether it’s the global carbon tax, a worldwide tax on financial transactions, or a UN tax on air and sea travel, all prior attempts haven’t really worked. The infrastructure wasn’t in place.

    However, that could all change with GATCA, which could ultimately make the disturbing dream of a global tax a reality.

    Bankrupt governments, like France and the UK, are also on board with GATCA. It would allow them to fleece and control their citizens more efficiently.

    Strangely, you never hear financially sound countries, like Switzerland, Singapore, or Hong Kong, advocating for FATCA, GATCA, or a global tax. It’s only the failed welfare states drowning in debt. And that’s no coincidence.

    Old Wine in New Bottles

    The government is selling FATCA the same way it originally sold the income tax to Americans: as a measure targeted only at the “rich.”

    Of course, once you give politicians an inch, they take a mile.

    When the federal income tax was introduced in 1913, individuals making up to $20,000 (around $475,000 today) were only taxed at 1%. The top bracket kicked in at $500,000 (around $12 million today) with a tax rate of only 7%.

    Of course, once the infrastructure was in place for the federal income tax, politicians naturally couldn’t resist ramping it up. Eventually, it snowballed into the monster we have today, which thoughtless Americans passively accept as “normal.”

    Expect a similar dynamic and gradualism with FATCA, GATCA, and a global tax.

    What You Can Do

    The government used obscure and boring wording to conceal the true purpose of the Federal Reserve from the average American. It’s done the same thing with FATCA.

    In reality, FATCA is all about setting up the architecture for a global tax.

    Politicians around the world see citizens as milk cows… They merely exist to be squeezed to the last drop.

    That’s why they’re so eager to kill financial privacy with FATCA and GATCA. They’re building a giant tax farm and erecting electric fences to keep the cows—and their milk—from escaping.

    Welcome to the new feudalism.

    Unfortunately, there’s little any individual can do to change the trajectory of this trend. You can only try to save yourself from the consequences of this stupidity.

    Politicians around the world are working hard to build this emerging prison planet. But it’s still possible to escape.

    We recently released a video to show you how. Click here to watch it now.

  • The Smoking Gun: "Document 17" Links Saudi Embassy In Washington To Sept 11

    With the topic of Saudi Arabia’s involvement in the Sept 11 attack on everyone’s lips, if certainly not those of president Obama who is currently in Riyadh where he is meeting with members of Saudi royalty in what may be his last trip to the Saudi nation as US president, many have been clamoring for the information in the suddenly notorious “28-pages” (following the recent 60 Minutes episode) to be released to the public so the US population can finally relegate all those “conspiracy theories” surrounding the real perpetrator behind the Sept 11 terrorist attack to the “conspiracy fact” pile.

    It won’t have to wait that long.

    As The Times writes today, new evidence has come to light of a definitive link between Saudi Arabian officials and the 9/11 terrorist attacks “further raising tensions as President Obama travels to the kingdom.”

    According to the report, Ghassan Al-Sharbi, a Saudi who became an al-Qa’ida bomb maker, is believed to have taken flying lessons with some of the 9/11 hijackers in Arizona but did not take part in the attacks on New York and the Pentagon that killed 3,000 people in 2001.

    He was captured in Pakistan in 2002 and has since been held at Guantanamo Bay. According to a US memo, known as document 17, written in 2003 and quietly declassified last year, the FBI learnt that he had buried a cache of papers shortly before he was captured.

    Think of “Document 17” as a mini version of the “28 pages” whose content has yet to be revealed. The document was written by two US investigators examining the possible roles of foreign governments in the attacks.

    One detail leapt out at the FBI agents from the papers that Sharbi had tried to hide: his US flight certificate was in an envelope from the Saudi embassy in Washington.

    A car pulls into the Saudi Arabian embassy in Washington, AP Photo

     

    And there is your smoking gun, which has been fully available to the US government for the pat 13 years. It should have also been available to the American public.

    Understandably, Brian McGlinchey, the activist who uncovered document 17, asked a simple question: “The envelope points to the fundamental question hanging over us today: to what extent was the 9/11 plot facilitated by individuals at the highest levels of the Saudi government?”

    Here is the problem. As the Times puts it, “president Obama is expected to meet on Wednesday with King Salman, whose kingdom is under pressure from low oil prices, an emboldened Iran and Washington’s tougher stance. The Saudi government threatened last week to dump $750 billion in US Treasury securities and other American assets if congress passes a bill that would clear a path for the families of 9/11 victims to file lawsuits against the kingdom.”

    In other words, Obama will not ask any questions of King Salman, let alone the “fundamental” one.

    So perhaps it is time to get a president who will ask the question: Hillary Clinton and Bernie Sanders, the Democratic presidential candidates, backed the bill, which Mr Obama has signaled he will veto. Donald Trump and Ted Cruz, the leading Republicans in the race, have warned Saudi Arabia that its relationship with the US must change. “Friends do not fund jihadists that are seeking to murder us,” Mr Cruz said.

    Sp even as all of Obama’s potential replacements have at least promised to investigate further, we wonder: just why is Obama so terrified of the US public getting access to the truth?

    If he is so worried about the Saudi liquidation threat, he shouldn’t be: after all the Fed would be deliriously happy at the opportunity to monetize another $750 billion in assets and inject three-quarters of a trillion in fresh “reserves” aka liquidity into the system.

    Meanwhile, Obama has other problems: the US president also faces calls to release a redacted 28-page portion of a joint congressional report on the 9/11 attacks, produced in 2002 and thought to link senior Saudi figures to the plot. He suggested on Monday that a decision was imminent.

    We are confident his “decision” in this matter will be to likewise prevent the truth from emerging, because as Congressman Thomas Massie, a Republican from Kentucky, said: “I had to stop every couple of pages … to rearrange my understanding of history.” No further comment necessary.

    Meanwhile the lies go on.

    Bob Graham, a former chairman of the US senate intelligence committee, has alleged that Saudi Arabia was the principal financier of 9/11. “The effect of withholding [the pages] has been to embolden Saudi Arabia to be a continuing source of financial and human terror resources,” he said.

    Document 17, written by Dana Lesemann and Michael Jacobson, will deepen suspicions. Ms Lesemann is said to have been sacked from the 9/11 commission after she circumvented her boss to access the 28 pages.

    Mr Jacobson was the principal author of the 28 pages, and document 17 hints at his suspicions. “How aggressively has the US government investigated possible ties between the Saudi government and/or royal family and the September 11th attacks?” it asks.

    The answer: not at all. It’s about time the American people asked why not.

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Today’s News 20th April 2016

  • Government Officials Admit to ECONOMIC False Flag Operations

    False flag attacks don’t just involve physical deaths and wars

    They also involve faked economic events and financial casualties.

    For example, two officials of the International Monetary Fund said last month that they needed the threat of an imminent financial catastrophe to force other players into accepting its measures such as cutting Greek pensions and working conditions, and – as the Greek government put it (via Bloomberg) – the IMF was “considering a plan to cause a credit event in Greece and destabilize Europe.”

    High-level officials also admitted to intentionally destroying their own nations’ economies in order to “justify” structural economic reforms.

    For example, Japanese Prime Minister Junichiro Koizumi and Japanese central bank officials admitted that they kept Japan’s economy in a deflationary crisis to promote “structural reform” which would allow the Japanese economy to be looted by foreign interests. Japanese central bank officials admitted the same thing.

    Japan Times noted in 2003:

    Official statements by BOJ executives [reveal]: The BOJ can be helpful by not being helpful. The princes recognized that such structural change was so opposed to the special and general interests of most Japanese — citizens, businessmen, bureaucrats and politicians — that it could be achieved only by crippling the economy and preventing its recovery.

    Something similar happened in Thailand and the EU.

    Indeed, the former head of the Bank of England said  last month that the depression in the EU was more or less a “deliberate” policy choice.

    And an economist at insurance giant AIG – and former head of the European Commission’s unit responsible for the European Monetary System and monetary policies – said in 2008 that what European leaders wanted was to create a crisis to force introduction of “European economic government.”

    Indeed, Greece (more), Italy, Ireland (and here) and other European countries have all lost their national sovereignty to the ECB and the other members of the Troika.

    ECB head Mario Draghi said in 2012:

    The EU should have the power to police and interfere in member states’ national budgets.

     

    ***

     

    “I am certain, if we want to restore confidence in the eurozone, countries will have to transfer part of their sovereignty to the European level.”

     

    ***

     

    “Several governments have not yet understood that they lost their national sovereignty long ago. Because they ran up huge debts in the past, they are now dependent on the goodwill of the financial markets.”

    Threats of Economic Terrorism

    The Saudis said they would sell $750 billion in U.S. treasury securities and other assets in the United States if an investigation of Saudi involvement in 9/11 is allowed to occur. This sound like the mafioso who asks: “We wouldn’t want anybody to get hurt, now would you?”

    American banks have carried out the same type of terrorist blackmail. For example, the Tarp bank bailouts in the U.S. were passed using apocalyptic – and false – threats. And they were not used for the stated purpose.

    As I’ve previously reported:

    The New York Times wrote last year:

    In retrospect, Congress felt bullied by Mr. Paulson last year. Many of them fervently believed they should not prop up the banks that had led us to this crisis — yet they were pushed by Mr. Paulson and Mr. Bernanke into passing the $700 billion TARP, which was then used to bail out those very banks.

    Indeed, Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn’t passed:

     

    That is especially interesting given that the financial crisis had actually been going on for a long time, but – instead of dealing with it – Paulson and the rest of the crew tried to cover it up and pretend it was “contained”, and that it was obvious to world leaders months earlier that it was not a liquidity crisis, but a solvency crisis (and see this).

     

    Bait And Switch

     

    The Tarp Inspector General has said that Paulson misrepresented the big banks’ health in the run-up to passage of TARP. This is no small matter, as the American public would have not been very excited about giving money to insolvent institutions.

     

    And Paulson himself has said:

    During the two weeks that Congress considered the [Tarp] legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets—our initial focus—would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.

    So Paulson knew “by the time the bill was signed” that it wouldn’t be used for its advertised purpose – disposing of toxic assets – and would instead be used to give money directly to the big banks?

    Senator McCain also says that Paulson pulled a bait-and-switch:

    Sen. John McCain of Arizona … says he was misled by then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. McCain said the pair assured him that the $700 billion Troubled Asset Relief Program would focus on what was seen as the cause of the financial crisis, the housing meltdown.

     

    “Obviously, that didn’t happen,” McCain said in a meeting Thursday with The Republic‘s Editorial Board, recounting his decision-making during the critical initial days of the fiscal crisis. “They decided to stabilize the Wall Street institutions, bail out (insurance giant) AIG, bail out Chrysler, bail out General Motors. . . . What they figured was that if they stabilized Wall Street – I guess it was trickle-down economics – that therefore Main Street would be fine.”

    Even the New York Times called Paulson a liar in 2008:

    “First [Paulson’s Department of Treasury] says it has to have $700 billion to buy back toxic mortgage-backed securities. Then, as Mr. Paulson divulged to The Times this week, it turns out that even before the bill passed the House, he told his staff to start drawing up a plan for capital injections. Fearing Congress’s reaction, he didn’t tell the Hill about his change of heart.Now, he’s shifted gears again, and is directing Treasury to use the money to force bank acquisitions. Sneaking in the tax break isn’t exactly confidence-inspiring, either.”

    What tax breaks is the Times talking about? The article explains:

    A new tax break [pushed by Treasury], worth billions to the banking industry, that has only one purpose: to encourage bank mergers. As a tax expert, Robert Willens, put it: “It couldn’t be clearer if they had taken out an ad.”

    The giant banks also essentially threatened to blow up the American economy if any of them were prosecuted for their massive, economy-destroying fraud.

  • FiGHTiNG FoR US!

    FIGHTING FOR US!

  • Blowout Victory For Donald Trump In New York Primary; Hillary Defeats Bernie: Live Stream

    New York Election Night – Live Streams:

     

    The results are in and as expected, Donald Trump has been immediately projected the GOP winner in New York in what was a blowout victory one in which Ted Cruz will finish third; the only question is by how much and whether he will have (well) over 50% of the vote, although judging by the early results which see him with over 60% of support, he will have little trouble to sweep the majority in most districts.

     

     

    On the democrat side, the results were initially far closer with exit polls putting Hillary just 4 points ahead of Bernie, however as the votes came in it became clear that Hillary's lead was insurmountable, and moments ago CNN declared Hillary Clinton the winner of the democratic primary.

     

    And with that we have tonight's two winners, the only question remaining is how much total delegates will Trump pick up as he strives to avoid a contested convention. 

    * * *

    Update 3: with voting set to close shortly, here is a reminder of what the most recent polls said: Hillary Clinton has a 15 point lead over Bernie Sanders, according to the most recent poll coming out of the weekend. That's more than RealClear Politics average of 12 points, but it's also a relatively small sample size. Betting markets have Clinton at a 95 percent chance of winning.

    Not a lot of suspense on the GOP side. Coming out of the weekend, Donald Trump has a 34 point lead with a 98 percent chance of winning according to betting markets.

    * * *

    Update 2: an exit poll among Republican voters

     

    And one of democrats:

     

    * * *

    Update 1: according to Reuters, with just over an hour left until polling ends, voting in New York has been marred by voting irregularities, following official confirmation that more than 125,000 people were missing from New York City voter rolls and reports of other irregularities.

    New York City Comptroller Scott Stringer ordered an audit of the city elections board after it confirmed the names had been removed from voter rolls. The city has roughly 4 million voters considered active for the presidential primaries.

     

    Stringer complained in a letter to the board that it was "consistently disorganized, chaotic and inefficient." He cited faulty ballot scanners, late-opening polling stations and scant staffing.

    It was unclear what the vote rigging was like on the GOP side.

    * * *

    The race for the Presidential nomination runs through the "must win" state of New York today, where Republican Donald Trump will look to sweep his home state and widen his lead over Ted Cruz and John Kasich. For the Democrats, Hillary Clinton will be trying to fend off Bernie Sanders, who's been on an impressive run as of late and seems to have significant momentum heading into this important primary.

    Here is what the delegate breakdown currently looks like.

    For the Republicans

     

    And the Democrats

     

    Here are the most recent poll results in New York, which are currently showing Trump and Clinton as double digit favorites.

    Republicans

     

    Democrats

     

    ***

    Here are five things to watch for, courtesy of The Hill

    The GOP delegates battle by congressional district

    Trump is carrying a 30-point lead in the polls heading into election day, according to the RealClearPolitics average. He has had over 50 percent support in nearly every poll of the state taken in the last month.

    The GOP front-runner is all but certain to finish in first place statewide, earning him 14 of the state’s 95 delegates.

    But Trump needs to maximize the number of delegates he can squeeze out of the state.

    The remaining 81 delegates will be allocated based on the results in each of the state’s 27 congressional districts.

    If any candidate finishes with more than 50 percent of the vote in a district, he’ll take all of the available delegates there.

    Cruz and Kasich will be looking to keep Trump below the 50 percent mark and finish above 20 percent themselves, which would allow them to at least split the delegates at the congressional district level.

    Every delegate matters for Trump at this point in the race.

    Analysts are forecasting that Trump will finish somewhere close to the 1,237 delegates he needs to clinch the nomination before the Republican National Convention in July.

    If Trump falls short of that mark, even by a few delegates, his path to the nomination will become exponentially more difficult at a contested convention.

    Taking only two-thirds of New York’s delegates would be a disappointment for him. A clean sweep of the state would be a huge victory.

    Can Clinton put Sanders away?

    Public polling indicates that Clinton is poised for a double-digit victory in New York .

    Surveys in the state have consistently shown Clinton holding a lead of somewhere between 10 and 17 points in the state. Sanders has yet to climb to within single digits of Clinton in any poll of New York so far this cycle.

    Clinton’s allies have said they hope to have put the nomination out of Sanders’s reach by the end of the month.

    She begins Tuesday with a lead of over 240 pledged delegates. With 247 additional pledged delegates up for grabs, Clinton can put a significant amount of space between her and Sanders if she wins big.

    But perhaps more important, a convincing victory would allow Clinton to shift her gaze to the general election.

    The Democratic race has taken a nasty turn in recent weeks, and the sooner Clinton can move on, the better it will be for her.

    Sanders’s quest for a game-changing victory

    Sanders has so far won in places where he was expected to do well but lost badly in most of the states where Clinton has been the favorite.

    A victory in a state where he’s the underdog would allow him to be seen as a serious challenger going forward.

    While polls show Clinton maintaining a healthy lead in New York, Sanders has at least succeeded in making the contest appear close.

    Sanders, who previously shied away from harsh criticism,  has ratcheted up his attacks against the front-runner recently.

    And he has attracted tens of thousands of supporters to rallies around New York City while high-profile surrogates Spike Lee, Rosario Dawson and Harry Belafonte have been out in force on his behalf.

    A victory on Tuesday could upend the dynamic of the race. A close finish, within a few points of Clinton, would legitimize his insistence on seeing the race through to its conclusion at the Democratic National Convention in July.

    Still, Sanders’s reliance on young voters and independents could doom him.

    The New York primary is closed to independents, and the deadline to register as a Democrat was in October.
     

    Will Cruz’s microtargeting pay off?

    Cruz is on a mission to block Trump from reaching 1,237 delegates.

    That means contesting every single delegate, even if he has to venture into unfriendly territory, something he has done on multiple occasions while campaigning in New York.

    Earlier this month, Cruz campaigned in the liberal borough of the Bronx. The headlines he drew were largely negative. Hecklers greeted Cruz, who was put on the defensive for disparaging “New York values.”

    And a speech Cruz gave at the New York City Republican gala last week drew an icy response from attendees there, further evidence that Northeast Republicans seem to have little interest in Cruz’s brand of conservatism.

    But Cruz is playing a long game, hoping that his efforts in liberal precincts where Republicans rarely tread will help him cut into Trump’s delegates haul at the congressional district level.

    Even a few delegates could mean the difference between Trump winning on the first ballot at the convention and Cruz winning on the second or third.

    Cruz identified pockets within the state where he believes his message could resonate. Cruz notably rolled matzo dough at a bakery in Brooklyn, reaching out to the city’s Orthodox Jewish community.

    He will find out on Tuesday whether those efforts pay off.
     

    Time for Kasich to prove his worth

    Kasich has justified his presence in the race by saying he’ll do better than Cruz with moderate voters in Northeastern states where the electorate is more liberal.

    New York will test that logic.

    Most polls show Kasich running slightly ahead of Cruz in the state.

    He has been campaigning in the state for a full two weeks and has picked up endorsements from The New York Times and the New York Daily News.

    Picking off a substantial number of delegates at the congressional district level would will go a long way to convincing skeptical Republicans that he’s not just sucking support from Cruz and that he’s able to contribute to the anti-Trump efforts.

    ***

    One important thing to note, as we pointed out earlier, is that New York has one of the most archaic primaries in the nation. New York is a closed primary, meaning that you have to be registered as a member of one of the two parties in order to participate.

    As a reminder, 27% of New York State's active voters were not registered in either party as of April 2016, and have missed the March 25th deadline to register. This means they will have no say in the primary.

    From the article

    Unless you’ve been living in a cave, you’ll know that New Yorkers go to the primary voting booths on April 19th. Unfortunately, only a small sliver of the population will actually be able to vote. First, it’s a closed primary, so you have to be registered as a member of one of the two corrupt political parties in order to participate. As the Guardian recently reported, 27% of New York state’s active voters were not registered in either party as of April 2016, meaning these people will have no say in the primary. Even worse, what about all those residents who aren’t active voters, but would very likely vote in this particular election given the increased turnout seen in other states? They’re iced out as well.

    New York has one of the most archaic primaries in the nation. Not only is it one of only 11 states with closed primaries, but if you are a registered voter who wanted to change your party affiliation in order to vote in next week’s primary, you would’ve had to do it by last October. In contrast, if you weren’t yet a registered voter you had until March 25th to register under one of the two parties in order to vote in the primary. So if you live in New York and haven’t registered by now, you can’t vote.

    The polls close at 9pm Eastern, and we will provide updates as they become available.

  • Paul Craig Roberts: How The American Neocons Destroyed Mankind's Hopes For Peace

    Authored by Paul Craig Roberts,

    When Ronald Reagan turned his back on the neoconservatives, fired them, and had some of them prosecuted, his administration was free of their evil influence, and President Reagan negotiated the end of the Cold War with Soviet President Gorbachev. The military/security complex, the CIA, and the neocons were very much against ending the Cold War as their budgets, power, and ideology were threatened by the prospect of peace between the two nuclear superpowers.

    I know about this, because I was part of it. I helped Reagan create the economic base for bringing the threat of a new arms race to a failing Soviet economy in order to pressure the Soviets into agreement to end the Cold War, and I was appointed to a secret presidential committee with subpeona power over the CIA. The secret committee was authorized by President Reagan to evaluate the CIA’s claim that the Soviets would prevail in an arms race. The secret committee concluded that this was the CIA’s way of perpetuting the Cold War and the CIA’s importance.

    The George H. W. Bush administration and its Secretary of State James Baker kept Reagan’s promises to Gorbachev and achieved the reunification of Germany with promises that NATO would not move one inch to the East.

    The corrupt Clintons, for whom the accumulation of riches seems to be their main purpose in life, violated the assurances given by the United States that had ended the Cold War. The two puppet presidents – George W. Bush and Obama – who followed the Clintons lost control of the US government to the neocons, who promptly restarted the Cold War, believing in their hubris and arrogance that History has chosen the US to exercise hegemony over the world.

    Thus was mankind’s chance for peace lost along with America’s leadership of the world. Under neocon influence, the United States government threw away its soft power and its ability to lead the world into a harmonious existance over which American influence would have prevailed.

    Instead the neocons threatened the world with coercion and violence, attacking eight countries and fomenting “color revolutions” in former Soviet republics.

    The consequence of this crazed insanity was to create an economic and military strategic alliance between Russia and China. Without the neocons’ arrogant policy, this alliance would not exist. It was a decade ago that I began writing about the strategic alliance between Russia and China that is a response to the neocon claim of US world hegemony

    The strategic alliance between Russia and China is militarily and economically too strong for Washington. China controls the production of the products of many of America’s leading corporations, such as Apple. China has the largest foreign exchange reserves in the world. China can, if the government wishes, cause a massive increase in the American money supply by dumping its trillions of dollars of US financial assets.

    To prevent a collapse of US Treasury prices, the Federal Reserve would have to create trillions of new dollars in order to purchase the dumped financial instruments. The rest of the world would see another expansion of dollars without an expansion of real US output and become skeptical of the US dollar. If the world abandoned the US dollar, the US government could no longer pay its bills.

    Europe is dependent on Russian energy. Russia can cut off this energy. There are no alternatives in the short-run, and perhaps not in the long run. If Russia shuts off the energy, Germany industry shuts down. Europeans freeze to death in the winter. Despite these facts, the neocons have forced Europe to impose economic sanctions on Russia. What if Russia responded in kind?

    NATO, as US military authorities admit, has no chance of invading Russia or withstanding a Russian attack on NATO. NATO is a cover for Washington’s war crimes. It can provide no other service.

    Thanks to the greed of US corporations that boosted their profits by offshoring their production to China, China is modernized many decades before the neocons thought possible. China’s military forces are modernized with Russian weapons technology. New Chinese missiles make the vaunted US Navy and its aircraft carriers obsolete.

    The neocons boast how they have surrounded Russia, but it is America that is surrounded by Russia and China, thanks to the incompetent leadership that the US has had beginning with the Clintons. Judging from Killary’s support in the current presidential primaries, many voters seem determined to perpetuate incompetent leadership.

    Despite being surrounded, the neocons are pressing for war with Russia which means also with China. If Killary Clinton makes it to the White House, we could get the neocon’s war.

    The neocons have flocked to the support of Killary. She is their person. Watch the feminized women of America put Killary in office. Keep in mind that Congress gave its power to start wars to the president.

    The United States does not have a highly intelligent or well informed population. The US owes its 20th century dominance to World War I and World War II which destroyed more capable countries and peoples. America became a superpower because of the self-destruction of other countries.

    Despite neocon denials that their hubris has created a powerful alliance against the US, a professor at the US Navy War College stresses the reality of the Russian-Chinese strategic alliance.

    Last August a joint Russian-Chinese sea and air exercise took place in the Sea of Japan, making it clear to America’s Japanese vassal that it was defenceless if Russia and China so decided.

    The Russian defense minister Sergey Shoigu said that the joint exercise illustrates the partnership between the two powers and its stabilizing effect on that part of the world.

    Chinese Foreign Minister Wang Yi said that Russian-Chinese relations are able to resist any international crises.

    The only achievements of the American neoconservatives are to destroy in war crimes millions of peoples in eight countries and to send the remnant populations fleeing into Europe as refugees, thus undermining the American puppet governments there, and to set back the chances of world peace and American leadership by creating a powerful strategic alliance between Russia and China.

    This boils down to extraordinary failure. It is time to hold the neoconservatives accountable, not elect another puppet for them to manipulate.

  • London's Rich See The Writing On The Wall: Stop Buying, Start Renting

    When the going gets tough, the rich get going first… and the rest should pay attention. While the smorgasbord of well-heeled wealthy elites will continue to proclaim that all is well in the world at any and every opportunity – for fear of the revolt of the masses – two disturbing headlines from one of the world's centers of money should have the 99% nervous.

    Demand for London homes under construction slumped by 33%, according to Bloomberg, with "very few higher-end expensive sold in the central areas this year."

    The number of homes sold prior to completion in the U.K. capital fell to 5,947 from a record high of 8,927 a year earlier, according to data compiled by Molior London that was seen by Bloomberg News. Molior declined to comment.

     

    “Affordability is still a huge issue for domestic buyers,” said Faisal Durrani, head of research at broker Cluttons LLP. “New builds in the higher price echelons normally appeal to international investors, but lots of uncertainties in their own economies — such as currency issues and the drop in oil prices — have led to a slowdown in purchases from a year ago.

     

    Demand has fallen for new homes in London after the government raised sales taxes, introduced a capital-gains levy for overseas buyers and said it plans to cut tax breaks for the wealthiest landlords. Developers in central London are offering institutional investors discounts of as much as 20 percent on bulk purchases as the tax changes limit demand from private individuals.

     

    “There have been very few higher-end expensive sold in the central areas this year,” said Matthew Jackson, an associate director at real estate broker Chestertons. “Some of the volume has been taken up in the lower price ranges, where we have got investors who are looking well beyond the center.”

     

    Investors who acquired apartments before construction commenced, betting they would rise in value, are seeking to sell the properties before they’re completed and stamp duty has to be paid.

     

    “Developers are competing against their own customers in the presale market, so someone has to either pull back or discount,” Colin Sheridan, an analyst at J&E Davy Holdings Ltd., said by e-mail.

     

    About 6,379 new homes were started in the first three months of the year, 39 percent less than a year earlier and the lowest number for seven quarters, the Molior data shows.

    And then there is this…

    At the same time The FT reports, the number of rental deals on homes worth more than $15m rose almost a third in the year to March 2016 from the previous year.

    After stamp duty increased on expensive homes and prices began falling in the capital’s wealthiest areas, potential buyers of homes worth more than £10m are increasingly opting to become tenants instead.

     

    Agents said uncertainty over the UK’s referendum on EU membership and concerns about the use of offshore companies for property purchases following the Panama Papers leak may add to the shift.

     

    The number of lettings deals on homes worth more than £10m each year has more than doubled since 2011, and rose almost a third in the year to March 2016 from the previous year, according to figures from Knight Frank, an estate agency.

     

    “No one is predicting that homes at the top end will be worth 10 per cent more in the near future and most people think they will be worth less,” said Henry Pryor, a buying agent. “It is much easier to make a decision to rent and make sure that if you do buy it’s something you really want.”

    Translation: Rent, Don't Buy, something is coming… and the elites know it.

  • People As Poultry

    Via EricPetersAutos.com,

    We live in a lunatic asylum .. the lunatics being us.

    For believing we ever lived in a “free” country. As long ago as the reign of His Rotundity – the second president of the United (at bayonet-point) States – people were being dragooned off the street and roughly thrown into cages for having annoyed the powers-that-be. Or who were deemed “dangerous” by the powers-that-be. This was more than 200 years before The Chimp came along with his squinty-eyed pronouncements about “the enemies of freedom” and being either “with us” or “against us.”

     

    Not much is taught in government schools (for the obvious reason) about the Alien and Sedition Acts – or other such clear evidence of a disconnect between what we are told and what actually is.

    For example, why should a free man have to worry about prosecution for “possessing” anything? In what way does the mere fact of “possession” entail a harm caused to some other person?

    How is it that a free man can be told – at gunpoint – what he may not put into his body?

    I refer, of course, to the lunacy that is the “war” on some (arbitrarily decided upon) “drugs.”

    hero

    Of all the many things wrong with America, this is perhaps the most obvious – and yet, the one most people seem to have trouble appreciating. A cop who drinks alcohol – who possesses and consumes this drug – is legally empowered to throw people in a cage for possessing or consuming that drug.

    Or even if not.

    In the video above, a salesman from California traveling through Wichita County, TX is followed by police for nearly half an hour before he is pulled over for a minor traffic violation. One so minor, in fact, the cop who pulls him over initially states that he will only be issuing a warning. But then things escalate – and the driver is advised that a drug-sniffing dog will be brought out and that if this dog “alerts” to the supposed presence of arbitrarily illegal “drugs,” the driver’s vehicle will be searched.

    No surprise, the dog “alerted” – and that was sufficient probable cause for a pair of Drug Warriors to rummage through the man’s vehicle and his personal property in the hopes of finding some arbitrarily illegal “drugs.” Which would have not only resulted in the arrest of the driver but also the likely forfeiture (read, the stealing) of his vehicle, a common practice employed by Drug Warriors and a financial incentive for them to be particularly aggressive in their truffle pig-like sussing out of these arbitrarily illegal “drugs.”

    hero 3

    None were discovered – fortunately for the victim. That is to say, the driver, whose only crime appears to have been that he was an out-of-state driver. This, by itself, is enough to draw the attention of the Drug Warriors. They will ride your ass for as long as it takes for you to let your tire touch the yellow line – or perhaps signal a left turn not quite 100 feet from the road you’re turning onto. Maybe your windows are “tinted.”

    They will find a reason – and then it’s open season.

    The next step is to bring out a dog and let him leap up on your doors and scratch your vehicle’s paint with his claws. Then, like Dr. Doolittle – his handler will converse with the canine and he (the canine) will, through some inscrutable doggy pantomime of yelps and body gyrations, convey to his handler that he smells arbitrarily illegal drugs.

    That’s all it takes. The “word” of… a dog.

    This is considered adequate probable cause to remove you from your vehicle and to then root around through your vehicle and its contents in search of … well… whatever they find.

    hero 4

    Or, plant.

    You not only have no right to confront/cross-examine this “witness” against you… it is an inter-species impossibility. Except for the handler, naturlich – who tells us (and we must believe him) what the dog is thinking (and saying) and whose “testimony” is accepted at face value… both by the side of the road and later on, when you are before a judge.

    You – the defendant – might try yelping and rolling on your back to “question” the “witness.” But the answers are inadmissible.

    All of this over the possession of a substance decreed – arbitrarily – to be verboten to possess. Not even the pretext is offered that some actual harm has been caused to anyone. Or even might be. The government – that is, the people who have somehow assumed ownership over us – simply tell us what we may and may not posses, what we may and may not put into “our” bodies.

    poultry

    Few people stop to think about it. Ponder the nature of this business.

    Grown men – who themselves possess and consume various “drugs” decreed (arbitrarily) to be legal – think nothing of siccing dogs on people, taking their property, throwing them in cages… because they possess or consume some other “drug” just as arbitrarily decreed to be illegal. And are not ashamed or even slightly embarrassed.

    It is husbandry.

    I restrict what my animals may consume – and control what they do – because I own them. They are my property, to do with as I see fit.

    We stand in the same relation to the state as my chickens.

  • China Launches Yuan Gold Fix To "Exert More Control Over Price Of Gold"

    Overnight a historic event took place when China, the world’s top gold consumer, launched a yuan-denominated gold benchmark as had been previewed here previously, in what Reuters dubbed “an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market.” Considering the now officially-confirmed rigging of the gold and silver fix courtesy of last week’s Deutsche Bank settlement, this is hardly bad news and may finally lead to some rigging cartel and central bank-free price discovery. Or it may not, because China would enjoy nothing more than continuing to accumulate gold at lower prices.

    The first Chinese benchmark price, derived from a 1 kg-contract traded by 18 participants on the Shanghai Gold Exchange (SGE), was set at 256.92 yuan ($39.69) per gram on Tuesday, equivalent to $1,234.50/ounce.

    China’s gold benchmark is the culmination of efforts by China over the last few years to reform its domestic gold market in a bid to have a bigger say in the bullion industry, long dominated by London where the global spot benchmark price is currently set. As is well known, as the world’s top producer, importer and consumer of gold, China has balked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold.

    The new benchmark may not be an immediate threat to London, but industry players say over time China could set the price of the metal, especially if the yuan become fully convertible.

    Cited by Reuters, Pan Gongsheng, deputy governor of the People’s Bank of China which has been disclosing gold purchases every month since last summer, said that “the Shanghai gold benchmark will provide a fair and tradable yuan-denominated gold fix price … will help improve yuan pricing mechanism and promote internationalization of the Chinese gold market.”

    The mechanics of the Shanghai fix are comparable to those of London: the benchmark price will be set twice a day based on a few minutes of trading in each session. The London benchmark, quoted in dollars per ounce, is set via a twice-daily auction on an electronic platform with 12 participants.

    The 18 trading members in the yuan price-setting process includes China’s big four state-owned banks, foreign banks Standard Chartered and ANZ, the world’s top jewelry retailer Chow Tai Fook and two of China’s top gold miners.

    When discussing the Chinese gold fix previously, World Gold Council CEO Aram Shishmanian said that “it is a stepping stone to a new multi-axis trading market consisting of London, New York and Shanghai and signals the continuing shift in demand from West to East.”

    “As the market expands to reflect the growing interest in gold by Chinese consumers, so too will China’s influence increase on the global gold market.”

    It may already be working: according to Reuters, one reason for today’s spike in silver is due to “heavy buying of silver in Shanghai, and that has triggered buying in gold as well,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

    Finally, when Chinese capital capital flight into Canadian real estate and offshore tax havens is curbed, we expected that gold could well follow the path of bitcoin, which has doubled since our article presenting it as an attractive alternative to avoiding Chinese capital controls.

  • "Swimming Naked" – Chinese Corporate Bond Market Worst Since 2003

    A week ago we highlight the "last bubble standing" was finally bursting, and as China's corporate bond bubble deflates rapidly, it appears investors are catching on to the contagion possibilities this may involve as one analyst warns "the cost has built up in the form of corporate credit risks and bank risks for the whole economy." As Bloomberg reports, local issuers have canceled 61.9 billion yuan ($9.6 billion) of bond sales in April alone, and Standard & Poor’s is cutting its assessment of Chinese firms at a pace unseen since 2003. Simply put, the unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel.

    As Bloomberg notes, China’s leaders face a difficult balancing act.

    On one hand, allowing troubled companies to default forces money managers to pay more attention to credit risk and accelerates government efforts to curb overcapacity.

     

    The danger, though, is that investor panic leads to tighter credit conditions, dealing a blow to President Xi Jinping’s plan to keep the economy growing by at least 6.5 percent over the next five years.

    However, as we pointed out previously, economic figures for March reveal a growing dependence on debt. China’s aggregate financing — a broad measure of credit that includes corporate bonds – grew by over $1 trillion in Q1…

     

    And yet even that wasn’t enough to save the seven Chinese companies that reneged on bond obligations this year. Three of those were part-owned by China’s government, seen not long ago as a provider of implicit guarantees for bondholders.

    The reaction has been swift in China’s 18.8 trillion yuan corporate bond market (a figure that excludes certificates of deposit). The extra yield investors demand to hold seven-year onshore corporate bonds with top ratings over similar-maturity government notes has jumped by 28 basis points from an almost nine-year low in January, to 91 basis points as of Monday.
     

     

    At least 64 Chinese firms have postponed or scrapped planned note sales this month, six times more than the same period a year earlier.

     “As more and more issuers default, lenders and investors will reassess their portfolio and lending, and that will cause yields to rise,” said Christopher Lee, chief ratings officer for Greater China at Standard & Poor’s in Hong Kong. “If the onshore market has any dislocation, that will have a spillover effect in the offshore market.”

     

    Rising defaults are actually healthy for China’s bond market, said Xia Le, the chief economist for Asia at Banco Bilbao Vizcaya Argentaria SA in Hong Kong.

     

    “It shows the government is taking away the implicit guarantee,” Xia said. “Now risk awareness is rising, so we will see which issuers are swimming naked.”

    While bond yields in China are still well below historical averages, a sustained increase in borrowing costs could threaten an economy that’s more reliant on cheap credit than ever before. The numbers suggest more pain ahead:

    Listed firms’ ability to service their debt has dropped to the lowest since at least 1992, while analysts are cutting profit forecasts for Shanghai Composite Index companies by the most since the global financial crisis.

    As Qiu Xinhong, a Shenzhen-based money manager at First State Cinda Fund Management Co. said…

    “The spreading of credit risks is only at its early stage in China."

    We leave it to Xia Le to conclude,

    "The equity rout merely reflects worries about China’s economy, while a bond market crash would mean the worries have become a reality as corporate debts go unpaid," said Xia Le, the chief economist for Asia at Banco Bilbao. "A Chinese credit collapse would also likely spark a more significant selloff in emerging-market assets."

     

    "Global investors are looking for signs of a collapse in China, which itself could increase the chances of a crash… This game can’t go on forever."

  • Stocks Are In "A Far More Precarious State Than Was Ever Truly Believed Possible"

    Submitted by Jeffrey Snider via Alhambra Investment Partners,

    As the major stock indices overtake or threaten psychological round numbers again (S&P 500 2,100; DJIA 18,000), they have done so with the same problem as occurred in 2015. Stocks have been overvalued for some time in historical comparison especially after QE3 and QE4, but it was supposed to be in anticipation of the full recovery that QE would make. For the longest time, that narrative actually seemed plausible at least in earnings. In June 2014, analysts estimated that total as-reported earnings for the calendar year of 2015 would close out around $144 per share. At an index level of 2,100, it would represent a seemingly low valuation multiple of 14.5 (low because, we were told, low discounting from historically low interest rates, favorable fixed income comparisons, and then high expected growth especially in areas like tech and consumer-related industries).

    Analysts’ estimates are always overly optimistic and have the hardened habit of being lowered as each particular quarter draws closer, but what happened with 2015 was something else entirely. Instead of $144 per share, 2015 ttm EPS for the index is going to be about $86.50. Rather than leave stock investors assured in their valuations, it meant the S&P 500 was trading around 24 times actual EPS. Worse, than that, the downdraft in earnings wasn’t apparent to analysts until it actually happened (believing in “transitory” as they did) and companies reported.

    ABOOK Apr 2016 EPS 2015 PE

    ABOOK Apr 2016 EPS Actual 2015 ttm

    As late as March 2015, analysts had been mugged by the events of late 2014 and the first parts of last year but were still predicting that earnings would grow by about 9% for the full year, including a return to “normal” growth by Q4. Even in November 2015, though the downtrend had been established in almost perfect uniformity, analysts were still expecting Q4 and then Q1 2016 to start a very strong turnaround.

    From that perspective you can understand why stock investors suddenly became more than a little nervous where only certainty and confidence had existed. On the whole, it was figured that the economy would provide a solid if not historically so valuation floor for stocks that would be pushed up relentlessly by the recovery that economists and the FOMC were describing all the way into the middle of 2015 – only to find by the end of the year that the stock market may have been overvalued by as much as 40% to actual earnings (assuming a multiple of 15 represents “fair value”).

    As optimism returns again, all that nasty business and “unexpected” uncertainty is being left behind as nothing more than scholarly conjecture suitable only for historians; 2016 is again on the march, or so it might seem. The surge in stocks during this “dollar” interregnum seems to be (outside of raw momentum and risk chasing) resurrecting the same assumptions as early 2015. “Transitory” has regained form only refashioned from a few months deviation to more than a year – but still to the same effect with only a delay in reaching the long-promised recovery.

    ABOOK Apr 2016 EPS Projections

    Reality still intrudes, however, on two fronts.

    Despite analysts’ renewed faith (which sets aside all doubts that should have been their working guesses this whole time) in where earnings will fly in 2016 that still doesn’t recreate the recovery that was once the hardened baseline for projections. The current ttm EPS for 2016 is not even $110 whereas last year was supposed to be $144. It is a huge disappointment even though in relative circumstances $110 is better than $86 – and that is where the focus has returned though it should remain on the recovery’s now nearing permanent disappointment (and thus overvaluation).

    The second problem is the familiar downgrade which is already severe, more so than “usual” (though less, so far, than 2015). In other words, $110 may be better than $86 but a year ago it was thought to be $124. The difference in valuation is again quite striking.

    ABOOK Apr 2016 EPS 2016 PE

    A forward PE using March 2015 estimates would have been somewhat expensive at about 17 times earnings but is already now more than 19 even as EPS continues to fall. Over just the last month (March to April), 2016 ttm EPS has dropped by almost $3 which again suggests that when all is completed this year a multiple of 19 will be almost certainly the best and least likely case. That would mean the assumed valuation floor is far lower for a second consecutive year, and we still have no idea just how low it may yet reach.

    ABOOK Apr 2016 EPS Multiples

    Where the S&P 500 may have been overvalued by perhaps 40% or more based on actual, as-reported 2015 EPS, the current annual EPS estimates suggest only a return to the 1,600 range not 2,100 or better (for the full year 2016 EPS; current estimates still plug “fair value” as something like 1,330 on the index meaning it will take a surge in earnings growth later this year just to get “fair value” back to 1,600!). As you can plainly observe above, had the 2014 version of recovery worked out the actual trajectory of the index would have been at “fair value” (though in this counterfactual it is very likely that the index and all stocks would have kept going up and up rather than sideways to lower these past nearly two years now) or close to it. Instead, the “transitory” weakness in 2015 has opened a gulf that only entrenches the high degree of overvaluation even under scenarios where 2016 isn’t so bad. That would leave stocks especially vulnerable to any further swings in sentiment as the assumed valuation “floor” quite “unexpectedly” remains quite distant.

    While momentum and risk chasing take about pushing the various indices in the near term, longer term (actual) investors will be forced to reckon with this huge disparity – that prices surged after QE4 in anticipation of the recovery happening and justifying what would have been only temporary overvaluation due to the giddiness of actual discounting. The fact that earnings are now nowhere near vindicating those expectations is a fundamentally different proposition altogether, including that QE was itself a lie. I believe it is this incongruence that explains the very curious and conspicuous sideways behavior in stocks as remnants of the old QE-driven hopes remain but are no longer in such unison or enjoy such widespread support.

    Doubt is the operative condition now, though especially variable in its short run expressions. It is in shorter supply today but that is no more the case than November 3 when the S&P last closed above 2,100 (just days before more “unexpected” hit) or even August 17 with the S&P 500 at 2,102 and already a week past the great Chinese warning of the intensified “dollar” run and only a week before the mini-crash of August 24 that run fulfilled.

    ABOOK Apr 2016 EPS Historyb

    Even if the events of 2015 and early 2016 turn out to be the end of it, it still means that full recovery in earnings and the real economy has been pushed several years farther into the future – a far more precarious state than was believed to ever be truly possible. To figure, then, that there is now much, much more than a trivial chance of still more disruption and contraction does not mix well with such durable overvaluation.

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Today’s News 19th April 2016

  • Obama: We Can't Let Truth Come Out About Saudi Involvement In 9/11, Or Else America's Terrorism Will Be Revealed

    Obama told CBS News today that we can’t allow bipartisan legislation subjecting the Saudis to potential liability for terrorism … or else other countries could retaliate against the US (starting at 0:40):

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    Similarly, White House spokesman Josh Earnest said today:

    “The whole notion of sovereign immunity is at stake,” Earnest told reporters Monday. “It could put the United States, and our taxpayers, and our service members and our diplomats at significant risk, if other countries were to adopt a similar law."

    As Cal Thomas points out at the Washington Times:

    The intent of the Senate bill is to clarify the immunity normally given to foreign governments. It says such immunity should not apply when nations are found culpable of committing terrorist attacks that kill Americans on U.S. soil.

    Why would the U.S. be worried about retaliation by other countries … being held accountable for terrorism?

    Well, the director of the National Security Agency under Ronald Reagan – Lt. General William Odom – noted:

    By any measure the US has long used terrorism. In ‘78-79 the Senate was trying to pass a law against international terrorism – in every version they produced, the lawyers said the US would be in violation.

    And – while Saudi Arabia is certainly a huge sponsor of terrorism worldwide – experts from the right and the left agree that the U.S. is actually the world's largest sponsor of terrorism. And see this.

     

    Postscript:  Of course, it would be nice if everyone – including both the Saudis and Americans – moved past this and stopped committing terror.

    But it doesn't seem like either country is willing to commit to that …

  • Saint Or Sinner – Government Eyes Are Watching Every Move You Make

    Submitted by John Whitehead via The Rutherford Institute,

    The way things are supposed to work is that we’re supposed to know virtually everything about what [government officials] do: that’s why they’re called public servants.

     

    They’re supposed to know virtually nothing about what we do: that’s why we’re called private individuals. This dynamic – the hallmark of a healthy and free society – has been radically reversed. Now, they know everything about what we do, and are constantly building systems to know more. Meanwhile, we know less and less about what they do, as they build walls of secrecy behind which they function. That’s the imbalance that needs to come to an end. No democracy can be healthy and functional if the most consequential acts of those who wield political power are completely unknown to those to whom they are supposed to be accountable.” ? Glenn Greenwald

    Government eyes are watching you.

    They see your every move: what you read, how much you spend, where you go, with whom you interact, when you wake up in the morning, what you’re watching on television and reading on the internet.

    Every move you make is being monitored, mined for data, crunched, and tabulated in order to form a picture of who you are, what makes you tick, and how best to control you when and if it becomes necessary to bring you in line.

    Simply by liking or sharing this article on Facebook or retweeting it on Twitter, you’re most likely flagging yourself as a potential renegade, revolutionary or anti-government extremist—a.k.a. terrorist.

    Yet whether or not you like or share this particular article, simply by reading it or any other articles related to government wrongdoing, surveillance, police misconduct or civil liberties is enough to get you categorized as a particular kind of person with particular kinds of interests that reflect a particular kind of mindset that might just lead you to engage in a particular kinds of activities.

    Chances are, as the Washington Post reports, you have already been assigned a color-coded threat score—green, yellow or red—so police are forewarned about your potential inclination to be a troublemaker depending on whether you’ve had a career in the military, posted a comment perceived as threatening on Facebook, suffer from a particular medical condition, or know someone who knows someone who might have committed a crime.

    In other words, you might already be flagged as potentially anti-government in a government database somewhere—Main Core, for example—that identifies and tracks individuals who aren’t inclined to march in lockstep to the police state’s dictates.

    The government has the know-how.

    As The Intercept recently reported, the FBI, CIA, NSA and other government agencies are increasingly 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.

    Now all it needs is the data, which more than 90% of young adults and 65% of American adults are happy to provide.

    When the government sees all and knows all and has an abundance of laws to render even the most seemingly upstanding citizen a criminal and lawbreaker, then the old adage that you’ve got nothing to worry about if you’ve got nothing to hide no longer applies.

    Apart from the obvious dangers posed by a government that feels justified and empowered to spy on its people and use its ever-expanding arsenal of weapons and technology to monitor and control them, we’re approaching a time in which we will be forced to choose between obeying the dictates of the government—i.e., the law, or whatever a government official deems the law to be—and maintaining our individuality, integrity and independence.

    When people talk about privacy, they mistakenly assume it protects only that which is hidden behind a wall or under one’s clothing. The courts have fostered this misunderstanding with their constantly shifting delineation of what constitutes an “expectation of privacy.” And technology has furthered muddied the waters. However, privacy is so much more than what you do or say behind locked doors. It is a way of living one’s life firm in the belief that you are the master of your life, and barring any immediate danger to another person (which is far different from the carefully crafted threats to national security the government uses to justify its actions), it’s no one’s business what you read, what you say, where you go, whom you spend your time with, and how you spend your money.

    Unfortunately, privacy as we once knew it is dead.

    George Orwell’s 1984—where “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”—has become our reality.

    We now find ourselves in the unenviable position of being monitored, managed and controlled by our technology, which answers not to us but to our government and corporate rulers.

    Consider that on any given day, the average American going about his daily business will be monitored, surveilled, spied on and tracked in more than 20 different ways, by both government and corporate eyes and ears. A byproduct of this new age in which we live, whether you’re walking through a store, driving your car, checking email, or talking to friends and family on the phone, you can be sure that some government agency, whether the NSA or some other entity, is listening in and tracking your behavior.

    As I point out in my book Battlefield America: The War on the American People, this doesn’t even begin to touch on the corporate trackers that monitor your purchases, web browsing, Facebook posts and other activities taking place in the cyber sphere.

    For example, police have been using Stingray devices mounted on their cruisers to intercept cell phone calls and text messages without court-issued search warrants.

    Doppler radar devices, which can detect human breathing and movement within in a home, are already being employed by the police to deliver arrest warrants and are being challenged in court.

    License plate readers, yet another law enforcement spying device made possible through funding by the Department of Homeland Security, can record up to 1800 license plates per minute. Moreover, these surveillance cameras can also photograph those inside a moving car. Reports indicate that the Drug Enforcement Administration has been using the cameras in conjunction with facial recognition software to build a “vehicle surveillance database” of the nation’s cars, drivers and passengers.

    Sidewalk and “public space” cameras, sold to gullible communities as a sure-fire means of fighting crime, is yet another DHS program that is blanketing small and large towns alike with government-funded and monitored surveillance cameras. It’s all part of a public-private partnership that gives government officials access to all manner of surveillance cameras, on sidewalks, on buildings, on buses, even those installed on private property.

    Couple these surveillance cameras with facial recognition and behavior-sensing technology and you have the makings of “pre-crime” cameras, which scan your mannerisms, compare you to pre-set parameters for “normal” behavior, and alert the police if you trigger any computerized alarms as being “suspicious.”

    State and federal law enforcement agencies are pushing to expand their biometric and DNA databases by requiring that anyone accused of a misdemeanor have their DNA collected and catalogued. However, technology is already available that allows the government to collect biometrics such as fingerprints from a distance, without a person’s cooperation or knowledge. One system can actually scan and identify a fingerprint from nearly 20 feet away.

    Developers are hard at work on a radar gun that can actually show if you or someone in your car is texting. Another technology being developed, dubbed a “textalyzer” device, would allow police to determine whether someone was driving while distracted. Refusing to submit one’s phone to testing could result in a suspended or revoked driver’s license.

    It’s a sure bet that anything the government welcomes (and funds) too enthusiastically is bound to be a Trojan horse full of nasty, invasive surprises. Case in point: police body cameras. Hailed as the easy fix solution to police abuses, these body cameras—made possible by funding from the Department of Justice—will turn police officers into roving surveillance cameras. Of course, if you try to request access to that footage, you’ll find yourself being led a merry and costly chase through miles of red tape, bureaucratic footmen and unhelpful courts.

    The “internet of things” refers to the growing number of “smart” appliances and electronic devices now connected to the internet and capable of interacting with each other and being controlled remotely. These range from thermostats and coffee makers to cars and TVs. Of course, there’s a price to pay for such easy control and access. That price amounts to relinquishing ultimate control of and access to your home to the government and its corporate partners. For example, while Samsung’s Smart TVs are capable of “listening” to what you say, thereby allowing users to control the TV using voice commands, it also records everything you say and relays it to a third party, e.g., the government.

    Then again, the government doesn’t really need to spy on you using your smart TV when the FBI can remotely activate the microphone on your cellphone and record your conversations. The FBI can also do the same thing to laptop computers without the owner knowing any better.

    Drones, which are taking to the skies en masse, are the converging point for all of the weapons and technology already available to law enforcement agencies. In fact, drones that can listen in on your phone calls, see through the walls of your home, scan your biometrics, photograph you and track your movements, and even corral you with sophisticated weaponry.

    Technology has upped the stakes dramatically.

    All of these technologies add up to a society in which there’s little room for indiscretions, imperfections, or acts of independence—especially not when the government can listen in on your phone calls, monitor your driving habits, track your movements, scrutinize your purchases and peer through the walls of your home.

    In such an environment, you’re either a paragon of virtue, or you’re a criminal.

    This is the creepy, calculating yet diabolical genius of the American police state: the very technology we hailed as revolutionary and liberating has become our prison, jailer, probation officer, Big Brother and Father Knows Best all rolled into one.

    Thus, to be an individual today, to not conform, to have even a shred of privacy, and to live beyond the reach of the government’s roaming eyes and technological spies, one must not only be a rebel but rebel.

    As Philip K. Dick, the visionary who gave us Minority Report and Blade Runner, advised:

    If, as it seems, we are in the process of becoming a totalitarian society in which the state apparatus is all-powerful, the ethics most important for the survival of the true, free, human individual would be: cheat, lie, evade, fake it, be elsewhere, forge documents, build improved electronic gadgets in your garage that’ll outwit the gadgets used by the authorities.

    There is no gray area any longer.

  • Boston Fed Says "Markets Are Wrong," Rates Are Going Higher, Sooner

    Gold and bond prices dropped and stocks popped as yet another open-mouth operation went underway this evening from none other than Boston Fed president Eric Rosengren. Ahead of next week's FOMC meeting, and just days after another Fed president said no April hike, Rosengren spewed firth that "I don't think financial markets have it right." Of course, what this preacher means is that while stock markets are perfectly efficient (and correct), bonds and rate futures areclearly inefficient and "investor outlooks for Fed rate hikes are too pessimistic," because "the US economy is fundamentally sound."

    • *ROSENGREN: GRADUAL FED RATE INCREASES `ABSOLUTELY APPROPRIATE'
    • *FED'S ROSENGREN SAYS U.S. ECONOMY `FUNDAMENTALLY SOUND'
    • *ROSENGREN: INVESTOR OUTLOOK FOR FED RATE HIKES TOO PESSIMISTIC

    Seriously!!

     

    Of course, after a day of oil/stock rebounds on dismal disappointment in Doha, this makes perfect sense…

    Federal Reserve Bank of Boston President Eric Rosengren issued a stark warning to markets Monday, telling traders and investors they are seriously underestimating how many rate rises the U.S. central bank is likely to deliver over the next few years.

     

    "I don't think the financial markets have it right," Mr. Rosengren said in a speech given in New Britain, Conn., at Central Connecticut State University.

     

    "While I believe that gradual federal-funds rate increases are absolutely appropriate, I do not see that the risks are so elevated, nor the outlook so pessimistic, as to justify the exceptionally shallow interest rate path currently reflected in financial futures markets," he said.

    yeah you are probably right – what is wrong with this US economy?

     

    Ignore this though he say – it's wrong too!!

    • *ROSENGREN: 1Q GROWTH DISAPPOINTING, JOBS DATA MORE OPTIMISTIC

    As WSJ notes, however, Rosengren, currently an FOMC voter, has long skewed toward the dovish end of the Fed scale.

    While he's been on board with the Fed raising rates he's definitely banged the drum for moving slowly. So his speech this evening is notable because he puts markets on warning for holding what he views as the wrong outlook on rates.

     

    He says nothing about the April FOMC, but that said, if Mr. Rosengren thinks markets are underestimating what the Fed will do, investors and traders might want to listen.

    There was some reaction in markets…

     

    So – interest-rate markets are wrong; macro data is mostly wrong (apart from the jobs data); and The Fed is right?

    As we showeed in our discussion of the Fed’s forecasts, these predictions have continued to fall short of reality.

    “Besides being absolutely the worst economic forecasters on the planet, the Fed’s real problem is contained within the table and chart below. Despite the rhetoric of stronger employment and economic growth – plunging imports and exports, falling corporate profits, collapsing manufacturing and falling wages all suggest the economy is in no shape to withstand tighter monetary policy at this juncture.”

    FOMC-Economic-Forecasts-031616

    “Of course, if the Fed openly suggested a ‘recession’ could well be in the cards, the markets would sell off sharply, consumer confidence would drop and a recession would be pulled forward to the present. This is why “what the Fed says” is much less important than what they do.”

    And here is Alan Greenspan meeting with Dixie Noonan et al on March 31, 2010:

    This is a reason why the Board is getting an unfair rap on this stuff. We didn’t forecast better than anyone else; we regulated banks that got in trouble like anyone else. Could we have done better? Yes, if we could forecast better. But we can’t. This is why I’m very uncomfortable with the idea of a systemic regulator, because they can’t forecast better.

    This comes from the person in charge of the most powerful central bank in the world; a world which now is reliant exclusively on central bankers for its day to day pretend existence.

  • Florida Airport Gives TSA The Boot, Will Outsource Screening To Private Company

    It goes without saying that if the people of any country want something done efficiently, and in the most cost-efficient manner, they do it themselves or outsource it to private third-party service providers, instead of entrusting it to a bunch of bureaucrats and unmotivated government workers.

    Finally, airports in the United States are starting to come to that realization as well. So far, private security agents monitor at least 22 airports in major cities like San Francisco and Kansas City. The latest airport to replace the TSA is the Punta Gorda Airport in Florida.

    As Sputnik reports, Florida’s Punta Gorda airport has begun to privatize security, taking the keys away from the what according to many is America’s most inept, inefficient and often, grotesquely demeaning governmental organization, the TSA, and handing them over to a firm called ISS Action, a security company out of Queens, New York.

    Sadly, ISS Action and similar private companies won’t take complete control of security operations at airports they operate in. Government oversight will still be in place to ensure proper safety checks are being made. 

    Nonetheless, the move to privatize airport screening will prove to be better for both travelers and taxpayers, as a private organization cannot afford to be inefficient and wasteful, or it will soon find itself out of business.

    Pam Seay of the Charlotte County Airport Authority said the move will save the airport money, while making security more efficient and perhaps friendlier. In other words, it will eliminate government workers.

    In a congressional report released in 2012, it was found that among other things, the TSA was wasting hundreds of millions in taxpayer money as it purchased expensive technologies and forgot to use them. And certainly ignore the countless accusations of groping and abuse of personal privacy by the same “entitled” members of this organization.

    Perhaps this money and all future cost savings can be redeployed to those who are getting social security taken away from them so the government can “save money.”

     

    We can only hope that just like UnitedHealth’s amicable departure from Obamacare exchanges (now out of five states and growing by the day), the example set by Punta Gorda will be followed by most other airports who

  • Malaysia CDS Spike After Abu Dhabi Puts Scandal-Ridden 1MDB In Default

    Over the better part of the past year, we’ve documented the curious case of 1MDB, Malaysia’s government investment fund founded in 2009.

    It’s a long and exceptionally convoluted story that doesn’t exactly lend itself to a concise summary but suffice to say that the development bank was something of a black box right from the beginning and in 2013, some $680 million allegedly tied to 1MDB ended up in Malaysian PM Najib Razak’s personal bank account just prior to an election.

    There are any number of twists and turns in the 1MDB story including two bond offerings facilitated by a Goldman banker with ties to Najib and his wife, some shenanigans with a subsidiary of an Abu Dhabi sovereign wealth fund, a questionable Cayman Islands account or two, a dispute with KPMG, and an Australian firm that specialized in Malaysian penny stocks, but at the end of the day, Malaysians just want to know what exactly will come of an investigation into how Najib ended up with nearly three quarters of a billion dollars.

    A quick reminder on the Abu Dhabi connection. Back in September, as the WSJ reported, the corruption scandal around 1MDB spilled beyond the country’s borders, as officials at a United Arab Emirates state investment vehicle rose questions about more than a billion dollars in money that they said is missing.

    Abu Dhabi had long been a source of support for the fund, 1Malaysia Development Bhd., which was set up six years ago by Malaysian Prime Minister Najib Razak to develop new industries in the Southeast Asian country. Then, in September, as 1MDB tries to fend off a cash crunch, its backers in Abu Dhabi are asking what happened to a $1.4 billion payment the fund said it made but which they never received, two people familiar with the matter said.

    The disputed payments were related to the purchase of power plants around the world by the Malaysian fund in 2012. A state investment fund in Abu Dhabi, the International Petroleum Investment Co., or IPIC, guaranteed the $3.5 billion in bonds that 1MDB issued to finance the purchase, according to the bond offering documents. In return, IPIC was to receive options to buy a 49% stake in the power plants as well as collateral for the bond.

    According to 1MDB’s financial statements, the Malaysian fund made a collateral payment of $1.4 billion. A draft report into 1MDB’s activities by Malaysia’s auditor general said the payment went to a subsidiary of IPIC called Aabar Investments PJS.

    The problem is that IPIC’s consolidated financial statements contain no reference to the receipt of the payment. Two people familiar with the matter said IPIC and Aabar never received the money. It isn’t clear what happened to the funds. 1MDB didn’t respond to requests for comment.

    Since then, even as more news revealed just how extensive the embezzlement and corruption surrounding 1MDB truly were with the explicit involvement of Malaysian PM Najib Razak, the Abu Dhabi money was never found.

    * * *

    Fast forward to today, when 6 months later, the question of Abu Dhabi’s missing money has resurfaced with a bang, and suddenly threatens to drag down not only 1MDB but the entire Malaysian state.

    As the FT reports, the dispute between an Abu Dhabi sovereign fund and Malaysia’s troubled state fund 1MDB over more than $1bn in missing payments hit a crescendo on Monday when the Emirates investment vehicle said its Malaysian counterpart was “in default” on an agreement between the two and terminated the deal.

    The catalyst was a filing on the LSE made on Monday according to which the Gulf emirate’s abovementioned International Petroleum Investment Company (IPIC) ended its relationship with its Southeast Asian counterpart. 

    The Abu Dhabi fund said 1MDB and Malaysia’s ministry of finance were in default on the deal, including an obligation to pay $1.1bn plus interest, and that 1MDB continued to be bound by its commitments under the agreement.

    In short, Abu Dhabi wants its money and is willing to push 1MDB in default to get it.

    Ipic was now considering options to remedy the alleged default, including referring the matter to the appropriate dispute resolution forum, it added in its regulatory filing. 

    Furthermore, Ipic and its Aabar subsidiary issued a London Stock Exchange statement last week in which they denied ownership of Aabar Investments PJS Ltd, a company that received billions of dollars in payments from 1MDB.  Ipic and Aabar said in the filing that they were aware of reports that “substantial payments” were made to that company, which is incorporated in the British Virgin Islands, another offshore tax haven. They also said they had received no payments from the company and received no liabilities on its behalf.

    * * *

    The move is the latest twist in an affair that has buffeted Malaysia’s government and prompted investigations in at least five countries including the US and Switzerland.

    To be sure, the case shouldn’t be very difficult to prosecute since Malaysia appears to have run out of goodwill with another critical counterparty, Switzerland after Swiss authorities said they have found “serious indications” that about $4bn has been misappropriated from Malaysian state companies. They widened their investigation last week to look at the roles of two former officials with responsibility for Abu Dhabi sovereign funds.

    For its part, the FT adds, 1MDB said in a that interest was payable on Monday on its $1.75bn 2022 bonds. The Malaysian fund said that a “dispute has recently arisen” between the two funds and that Ipic had not paid the interest.

    The 1MDB statement went on: “1MDB wishes to make clear that it and its group entities will meet all of their other obligations under any other financing arrangements and have ample liquidity to do so.”

     

    Malaysia’s finance ministry said in a statement on Monday that it would “continue to honour all of its outstanding commitments in the financial markets”.

    In short, nobody really knows what is going on as Christian de Guzman, a credit analyst at Moody’s in Singapore, confirmed. “There’s a lot of uncertainty about what’s going on, but one thing is clear — progress on 1MDB’s debt rationalisation has been cast into doubt.”

    Alas, the situation will only deteriorate from here.

    As a reminder, it is none other than Najib Razak, Malaysia’s prime minister, who heads 1MDB’s advisory board. The PM has battled allegations centred on $681m transferred to his personal bank account, which critics claim is linked to 1MDB. Both Mr Najib and 1MDB deny wrongdoing and the prime minister has been cleared by Malaysia’s attorney-general. Which means that for any resolution to be reached on the missing funds it would involve the implication of the prime minister, which would therefore mean that creditors of 1MDB have an awkward choice: write off their exposure, or pursue the funds with the risk of unleashing another political crisis.

    To get a sense of just how deep the Malaysian corruption rabit hole goes, consider that Nazir Razak, Najib’s brother, announced on Monday that he was taking a voluntary leave of absence from his role as chairman of CIMB, Malaysia’s second-biggest bank by assets, while a review took place into transfers into his own personal account. The move follows reports that he received $7m ahead of the 2013 elections in Malaysia.

    In other words, everyone was stealing, the only question is how much, and whether those who actually owe the money will come looking for it.

    And while bankers in Kuala Lumpur say that while the alleged default is unlikely to threaten Malaysia’s sovereign rating, as the risk from 1MDB is already factored in, it will hamper efforts to contain the political scandal around the affair.

    Markets, however, beg to differ and following the news of 1MDB’s alleged default, Malaysia 5 year CDS spiked by 11 bps, the most since March 21, to 163 bps as the market starts to quietly ask whether this ongoing scandal may just drag down the entire Malaysian state.

  • One Trader Finally Loses It

    Over the weekend, Bloomberg View’s quasi-economist wrote his latest laughable article, one which supposedly “explained” how “Everyone Worries Too Much About ‘Black Swans‘”, which in addition to being a rambling, meandering stream of consciousness that as is regularly the case with this particular author, made little sense, sparked a Twitter feud with the Nassim Taleb, the person who made the concept of a Black Swan into a household name.

    We were therefore very amused to note that none other than former FX trader and fund manager, Richard Breslow who also writes for Bloomberg, seemingly had an epileptic fit upon reading the abovementioned drivel and wrote his own scathing reaction from the perspective of an actual trader, a rection which not only threw up on every argument of the so-called economist’s logic, but on everything else that now is passed off simply as, well, “the new normal.”

    Here is Richard Breslow:

    No One Worries Enough About Black Swans

     

    Trading is a hard business. The world is becoming a more complicated place: a number out of China may do more to the price of your U.S. shares in a retailer than, well, U.S. retail sales. Yet creeping, dangerously, into the investment advice dialog is the argument that buying and holding no matter what the event is the winning strategy. 

     

    If you ever needed a “past results don’t guarantee…” disclaimer it’s especially true now.

     

    It’s not surprising that such shallow reasoning is becoming commonplace. Sure beats staying late at the office doing cash-flow analysis. Bad things happen and the Fed will cut rates. Worked time and again. Presto chango, that financial crisis was a buying event, stupid. It’s gotten much worse post the latest financial crisis, as it’s assumed asset prices are the main (sole) focus of the all powerful central banks.

     

    To buy (pun intended) into this you have to presuppose that Black Swan events are easily controllable episodes that last short amounts of time. That the authorities have unlimited firepower to counteract every natural and man-made disaster.

     

    Equally scary, academics as well as analysts have taken to arguing that investors are overestimating the probability of crisis events. You don’t need to be a Taleb or Mandelbrot to calculate that we have been having once in a hundred year events on a regular basis for the last thirty years. Did a crisis happen, if you made money?

     

    This flawed logic argues not only buy every dip, but why waste money on hedges? It assumes unlimited deep pockets and the nerve of a non-sentient computer. Just go “all in.” Looking more like today’s world all the time. Portfolio theory thrown right out the window. Perhaps Harry Markowitz will have his Nobel revoked.

     

    A portfolio built to only withstand stress thanks to central bank intervention is one destined to blow-up spectacularly. The embedded flaw in this new logic is that central banks give investors perfect foresight. And nothing can go wrong. Re-read the Investment Process section of those prospectuses.

    * * *

    Thanks Richard, and to this we can only add the following: while there is no longer any doubt that it is constant central bank intervention that continues to prop and push up markets both in the US and around the globe, these same central planners must be getting very confused: why are traders angry if we continue to push markets higher and help everyone make money?” One day they will get it.

  • The Whole System Is Built Upon Lies And "We're In The Terminal Phase"

    Submitted by Mac Slavo via SHTFPlan.com,

    At this point, despite major highs in U.S. stock markets and reassurances from no less than President of the United States himself that the economy is sound, one only need to look around to understand that we are on the cusp of what researcher and collapse strategist Michael Snyder of The Economic Collapse Blog calls the “early chapters of a total meltdown.” In his latest interview with Future Money Trends Snyder notes that the fundamental economic problems we face can be seen across the globe. The United States, Europe, Asia, and South America are all crashing and no one will be immune to what comes next.

    We’re in the terminal phase of the greatest debt bubble in all of human history… The crisis that happened last time around… it was just a warning signal of what would happen if we didn’t fix our problems… and of course we didn’t fix them.

     

    It’s not sustainable… There’s going to be a permanent, massive adjustment and a loss of faith in the current system… as it unravels and implodes we’re going to see economic pain on a scale that is historic, like we’ve never seen before… when this thing finally blows it’s going to bring the existing system down.

    Full Interview via Future Money Trends:


    (Watch at Youtube)

    While most Americans think that near-record breaking stock markets are a sign of recovery and revival in the U.S. economy, Snyder goes on to warn that what we’ve seen in Greece, Cyprus, and Argentina, and what’s happening right now in Venezuela, is a coming reality to Americans.

    That could mean everything from bank holidays wherein governments authorize the seizure of account holders’ deposits, to a full-on collapse scenario like Venezuela where food, toilet paper and basic necessities become totally unavailable.

    Michael Snyder explains that the one asset class to protect and preserve wealth in the midst of crisis is precious metals and well known billionaire investors have been rapidly acquiring everything they can their hands on in recent months. And as we’ve seen just this year, when panic is the order of the day capital shifts into gold and silver as a crisis hedge.

    But that’s not all you can do to prepare for the next wave, says Snyder, and diversifying your approach to collapse-proofing your life will be critical because we simply don’t know exactly how events will play out over coming months and years:

    There’re are different strategies that are required to get through a period of crisis, even if it’s just a recession, but especially if it escalates to a full-blown historic financial crisis.

     

    For example. if people have money in financial markets they may want to evaluate what their risk is… because if things start crashing are they going to be able to survive if their investments crash to a 40% or 50% decline… can you weather that? Can you survive that?

     

    A lot of people are moving into gold and silver as a way to insulate themselves, to protect their wealth during a time of crisis.

     

    Of course, not everyone’s in the markets. One thing I really recommend to people is to have an emergency fund in the case you lose your job or there’s a business reversal… you just look back at 2008 and all of a sudden there was a huge downturn and millions of people lost their jobs…

     

    We’re already seeing corporate revenues fall… corporate profits fall… Job cut announcements by major firms in the United States were up 32% in the first quarter of 2016… We’re already starting to see it happen… people are going to lose their jobs.

     

    And because more than 60% of all Americans are living paycheck-to-paycheck when people lose their jobs they don’t have anything to fall back on… they can’t pay the mortgage… they can’t pay the bills… then we start seeing people lose their homes…  foreclosures go up..

     

    People go from living a very comfortable lifestyle to being on the street very rapidly.

     

    You’ve got to have that cushion… you’ve got to have that emergency fund.

    But an emergency fund may not be enough, because when the global economy detonates it could bring serious monetary and financial problems with it. And that means supply chains for core essentials like food could dry up because of credit freezes like we saw in Greece. Or, your money will be worth so little because of hyperinflation that you simply won’t have enough of it to put food on the table. And that’s why Snyder advocates owning alternative hard assets and supplies:

    In the longer-term… we do believe in storing up food and basic supplies… We don’t think we’re going to need them in the next week or the next month… or even in the short-term time frame… but in the mid- or long-term we believe those things are going to start to come into play…

     

    We’re just in the early chapters… we’re just seeing the early shaking.

     

    As it all plays out we believe we’re going to see a total meltdown.

     

    So, for example, if some day you can go to the bank and can’t get money out of the ATM, what are you going to do?

     

    That’s one of the reasons why we recommend not having your eggs in one basket. Spread your assets around to different banks… different types of investments, whether it’s precious metals or different types of hard assets.

    Having your assets spread around in different places makes it harder, if there is an emergency or crisis, for you to be in a situation of hardship because you can’t get access to what you need. 

    The whole system is built upon lies. And while the powers that be tout stability, what they’ve created is anything but.

    And when the house of cards comes tumbling down you can be sure that the elite will be safely tucked away in their bunkers watching it all play out live on their satellite feeds.

    They’ve already started preparing for the meltdown by diversifying into precious metals, buckets of food, personal defense armaments and other tangible assets that will be impossible to find during a crisis event.

  • Days After Wells Fargo Admits Defrauding The Government, NY Fed Rewards It With Primary Dealer Status

    Back on April 9 we described the latest example of how criminal Wall Street behavior leads to zero prison time and just more slaps on the wrist, when Warren Buffett’s favorite bank, Wells Fargo, admitted to “deceiving” the U.S. government into insuring thousands of risky mortgages.  According to the settlement, Wells Fargo “admits, acknowledges, and accepts responsibility” for having from 2001 to 2008 falsely certified that many of its home loans qualified for Federal Housing Administration insurance.

    In short: it admitted that is deceived and defrauded the government.

    Its “punishment” – a $1.2 billion settlement of a U.S. Department of Justice lawsuit, the highest ever levied in a housing-related matter.

    And now, having suffered so much trauma which led to precisely nobody going to prison, less than two weeks later it’s time for Wells to get its reward: as Bloomberg reported earlier, the “bond market’s most exclusive clubs got a new member” when the NY Fed granted the criminal Wells Fargo Primary Dealer status. 

    The brokerage arm of Wells Fargo & Co., the third-biggest U.S. bank by assets, was designated a U.S. primary dealer by the Federal Reserve Bank of New York on Monday. It’s the first addition to the list since February 2014, when the U.S.-based brokerage of Toronto-Dominion Bank was included. The roster of primary dealers has grown to 23 firms from as low as 17 in 2008, although it remains below its 1988 peak of 46.

    “A long process of working with the Fed has come to a conclusion,” Elise Wilkinson, a spokeswoman for San Francisco-based Wells Fargo, said by phone. “The scope and scale of what we’ve been doing, it’s been at the level of a primary dealer for a long time.” The process took years, Wilkinson said, declining to elaborate.

    We dread to ask just what that is.

    Others were quick to jump on board and congratulate Wells: “Inclusion of a well-capitalized, well-rated firm onto the primary dealer list can only be a positive for the Treasury market,” Kevin McPartland, head of research for market structure and technology at financial-services consulting firm Greenwich Associates, said in an e-mail.

    Of course, the only reason why Wells was granted PD status is because as Bloomberg reminds us, Wells Fargo has been expanding its lineup of bond-trading businesses as its competitors shrink. The bank has plans to start trading single-name credit default swaps, people with knowledge of the matter said last month.

    And what better way to get an implicit stamp of approval than by saying it is a Fed primary dealer, a position which also grants its direct Treasury auction access.

    Primary dealers are required to make “reasonably competitive” bids for a pro-rata share of every U.S. debt auction, according to the New York Fed. Last year, a total $2.1 trillion of Treasury bills, notes and bonds were issued, according to Sifma. The firms also trade with the Fed as it implements monetary policy, and provide market commentary for the New York Fed’s trading desk.

    Wells Fargo is moving up the ranks in investment banking and being a primary dealer in Treasury instruments signifies their rising importance in finance,” Bill Smead, chief executive officer at Seattle-based Smead Capital Management, which holds Wells Fargo shares and manages about $2.4 billion, said by e-mail.

    “This is important when other sources of revenue are scarce and will be one more way higher interest rates would be helpful to overall profits,” he said.

    Sure is, and now if only Wells can pull a Goldman and “Lehman” one of its key competitors, its revenue potential will be unmatched by almost any other bank.

  • Nine Meals From Anarchy

    Submitted by Jeff Thomas via InternationalMan.com,

    In 1906, Alfred Henry Lewis stated, “There are only nine meals between mankind and anarchy.” Since then, his observation has been echoed by people as disparate as Robert Heinlein and Leon Trotsky.

    The key here is that, unlike all other commodities, food is the one essential that cannot be postponed. If there were a shortage of, say, shoes, we could make do for months or even years. A shortage of gasoline would be worse, but we could survive it, through mass transport or even walking, if necessary.

    But food is different. If there were an interruption in the supply of food, fear would set in immediately. And, if the resumption of the food supply were uncertain, the fear would become pronounced. After only nine missed meals, it’s not unlikely that we’d panic and be prepared to commit a crime to acquire food. If we were to see our neighbour with a loaf of bread, and we owned a gun, we might well say, “I’m sorry, you’re a good neighbour and we’ve been friends for years, but my children haven’t eaten today – I have to have that bread – even if I have to shoot you.”

    But surely, there’s no need to speculate on this concern. There’s nothing on the evening news to suggest that such a problem even might be on the horizon. So, let’s have a closer look at the actual food distribution industry, compare it to the present direction of the economy, and see whether there might be reason for concern.

    The food industry typically operates on very small margins – often below 2%. Traditionally, wholesalers and retailers have relied on a two-week turnaround of supply and anywhere up to a 30-day payment plan. But an increasing tightening of the economic system for the last eight years has resulted in a turnaround time of just three days for both supply and payment for many in the industry. This a system that’s still fully operative, but with no further wiggle room, should it take a significant further hit.

    If there were a month where significant inflation took place (say, 3%), all profits would be lost for the month for both suppliers and retailers, but goods could still be replaced and sold for a higher price next month. But, if there were three or more consecutive months of inflation, the industry would be unable to bridge the gap, even if better conditions were expected to develop in future months. A failure to pay in full for several months would mean smaller orders by those who could not pay. That would mean fewer goods on the shelves. The longer the inflationary trend continued, the more quickly prices would rise to hopefully offset the inflation. And ever-fewer items on the shelves.

    From Germany in 1922, to Argentina in 2000, and to Venezuela in 2016, this has been the pattern whenever inflation has become systemic, rather than sporadic. Each month, some stores close, beginning with those that are the most poorly capitalised.

    In good economic times, this would mean more business for those stores that were still solvent, but in an inflationary situation, they would be in no position to take on more unprofitable business. The result is that the volume of food on offer at retailers would decrease at a pace with the severity of the inflation.

    However, the demand for food would not decrease by a single loaf of bread. Store closings would be felt most immediately in inner cities, when one closing would send customers to the next neighbourhood seeking food. The real danger would come when that store also closes and both neighbourhoods descended on a third store in yet another neighbourhood. That’s when one loaf of bread for every three potential purchasers would become worth killing over. Virtually no one would long tolerate seeing his children go without food because others had “invaded” his local supermarket.

    In addition to retailers, the entire industry would be impacted and, as retailers disappeared, so would suppliers, and so on, up the food chain. This would not occur in an orderly fashion, or in one specific area. The problem would be a national one. Closures would be all over the map, seemingly at random, affecting all areas. Food riots would take place, first in the inner cities then spread to other communities. Buyers, fearful of shortages, would clean out the shelves.

    Importantly, it’s the very unpredictability of food delivery that increases fear, creating panic and violence. And, again, none of the above is speculation; it’s a historical pattern – a reaction based upon human nature whenever systemic inflation occurs.

    Then … unfortunately … the cavalry arrives

    At that point, it would be very likely that the central government would step in and issue controls to the food industry that served political needs rather than business needs, greatly exacerbating the problem. Suppliers would be ordered to deliver to those neighbourhoods where the riots are the worst, even if those retailers are unable to pay. This would increase the number of closings of suppliers.

    Along the way, truckers would begin to refuse to enter troubled neighbourhoods, and the military might well be brought in to force deliveries to take place.

    But why worry about the above? After all, inflation is contained at present and, although governments fudge the numbers, the present level of inflation is not sufficient to create the above scenario, as it has in so many other countries.

    So, what would it take for the above to occur? Well, historically, it has always begun with excessive debt. We know that the debt level is now the highest it has ever been in world history. In addition, the stock and bond markets are in bubbles of historic proportions. They will most certainly pop, but will that happen in a year? Six months? Next week?

    With a crash in the markets, deflation always follows as people try to unload assets to cover for their losses. The Federal Reserve (and other central banks) has stated that it will unquestionably print as much money as it takes to counter deflation. Unfortunately, inflation has a far greater effect on the price of commodities than assets. Therefore, the prices of commodities will rise dramatically, further squeezing the purchasing power of the consumer, thereby decreasing the likelihood that he will buy assets, even if they’re bargain priced. Therefore, asset holders will drop their prices repeatedly as they become more desperate. The Fed then prints more to counter the deeper deflation and we enter a period when deflation and inflation are increasing concurrently.

    Historically, when this point has been reached, no government has ever done the right thing. They have, instead, done the very opposite – keep printing. A by-product of this conundrum is reflected in the photo above. Food still exists, but retailers shut down because they cannot pay for goods. Suppliers shut down because they’re not receiving payments from retailers. Producers cut production because sales are plummeting.

    In every country that has passed through such a period, the government has eventually gotten out of the way and the free market has prevailed, re-energizing the industry and creating a return to normal. The question is not whether civilization will come to an end. (It will not.) The question is the liveability of a society that is experiencing a food crisis, as even the best of people are likely to panic and become a potential threat to anyone who is known to store a case of soup in his cellar.

    Fear of starvation is fundamentally different from other fears of shortages. Even good people panic. In such times, it’s advantageous to be living in a rural setting, as far from the centre of panic as possible. It’s also advantageous to store food in advance that will last for several months, if necessary. However, even these measures are no guarantee, as, today, modern highways and efficient cars make it easy for anyone to travel quickly to where the goods are. The ideal is to be prepared to sit out the crisis in a country that will be less likely to be impacted by dramatic inflation – where the likelihood of a food crisis is low and basic safety is more assured.

    Editor’s Note: Unfortunately most people have no idea what really happens when a currency collapses, let alone how to prepare…

    We think everyone should own some physical gold. Gold is the ultimate form of wealth insurance. It’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.

    But if you want to be truly “crisis-proof” there's more to do…

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Today’s News 18th April 2016

  • China Ocean Freight Index Collapses to Record Low

    Wolf Richter   wolfstreet.com

    The amount it costs to ship containers from China to ports around the world, a function of the quantity of goods to be shipped and the supply of vessels to ship them, just dropped to a new historic low.

    The China Containerized Freight Index (CCFI) tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. It reflects the unpolished and ugly reality of the shipping industry in an environment of deteriorating global trade.

    For the latest reporting week, the index dropped 0.6% to 636.14, its lowest level ever. It has plunged 41% from the already low levels in February last year, and 36% since its inception in 1998 when it was set at 1,000. This chart shows the continuing collapse of containerized freight rates from China to the rest of the world:

    China-Containerized-Freight-Index-2016-04-15

    The Shanghai Containerized Freight Index (SCFI), which tracks spot-market rates (not contractual rates) of shipping containers from Shanghai to 15 destinations around the world, dropped 3.6% for the latest reporting week to 472, after another failed price recovery. It’s down 58% from February last year.

    Rates to Europe plunged $20 per twenty-foot equivalent unit container (TEU) to $271; to the Mediterranean, rates plunged $29 to $409 per TEU. To the US West Coast, rates plunged 9.3% or $79 to $770 per forty-foot equivalent unit (FEU).

    A year ago, the spot rates to the West Coast had already fallen 10% year-over-year, and there had been a lot of hand-wringing about them. At the time, they were $1,932 per FEU. Now they’re at $770 per FEU. In one year, these spot rates have collapsed by 60%!

    During the big plunge last year and earlier this year, the saving grace was the price of bunker fuel, which was plunging along with the price of oil. For example, according to Platts, bunker of the grade IFO380 in Los Angeles had hit a low of $118 per metric ton in mid-January. But it has since soared 91% to $225!

    Bunker prices differ, depending on grade and location around the world, and not all made this sort of break-neck snap-back price reversal. For example, IFO380 in Rotterdam soared “only” 61% from $109/mt in mid-January to $176/mt. Other locations and grades experienced lower price increases. But all bunker prices everywhere have risen sharply.

    So the ballyhooed notion that carriers, under pressure from competition, are simply passing on their fuel savings to their customers has now died an ignominious death. Instead, their margins are getting crushed.

    But there are some real reasons for the collapse in freight rates from China to destinations around the world: China’s exports have plunged. For the January through March period – to iron out the monthly volatility associated with the Lunar New Year holiday – exports are down 9.6% year-over year. Specifically:

    • To the US -8.8%
    • To Hong Kong -6.5%
    • To Japan -5.5%
    • To South Korea -11.2%
    • To Taiwan -3.7%
    • To the countries in the ASEAN -13.7%
    • To the EU -6.9%
    • To South Africa -29.6% (!)
    • To Brazil -47.2% (!!)
    • To Australia -1.9%
    • To New Zealand -12.4%.

    Exports ticked up just a tiny bit to only two major countries: India (+0.2%) and Russia (+0.2%).

    So demand for transporting containers from China to other parts of the world has withered, just when the supply of container ships has reached catastrophic levels of overcapacity.

    Last year, what had already been an overcapacity problem turned into a self-inflicted nightmare for carriers. They’d assumed ever since the bouts of QE and zero-interest-rate policies started that central banks had their back. They’d smelled the lure of cheap money. And they’d fallen for the central-bank propaganda that “bold” monetary policies could actually stimulate the real economy, the goods-consuming economy. And so, imagining years of big-fat growth, they ordered ships, including the newest mega-sized container ships. And as these new ships were delivered over the past couple of years, carriers embarked on a fight for market share by cutting prices.

    This culminated in 2015 with the delivery of new ships that added a record 1.7 million TEU of capacity to the global fleet, just when growth in global trade was grinding down. At the same time, according to Drewry, the amount of capacity scrapped in the year plunged by nearly half, with only 195,000 TEU of global capacity taken out.

    Why? “Because demolition prices were less attractive….”

    Like so many things in this world where free money created overcapacity, the rates paid for ships to be scrapped has plunged from around $475 per ldt (light displacement tonnage, the weight of the vessel including hull, machinery, and equipment) in 2012 to around $290/ldt recently.

    So far this year, scrapping activity has picked up. And everyone is hoping that this will alleviate the problem. But it’s not going to help much, according to Drewry:

    As we have highlighted before scrapping alone does very little to redress the supply-demand imbalance – last year’s scrapping total was equivalent to just 1% of the cellular fleet….

    Now carriers are hoping that the huge general rate increases they announced for May 1 – in some cases more than doubling current rates – will stick. But they tried that last spring, when overcapacity wasn’t nearly as bad, and it didn’t work. So will they have more luck this year? The Journal of Commerce put it this way: “Conditions are hardly optimal for raising rates.”

    The Chinese have among the highest savings rates in the world. But 75% of their wealth is in real estate. They’ve overinvested in one illiquid and bubbly asset that they wrongly believe can only go higher. But when prices break down, it will devastate consumer demand and reverberate around the world. Read… This Will Be Largest Evaporation of Wealth in Modern History

  • The Real Reason Hillary Clinton Refuses To Release Her Wall Street Transcripts

    Submitted by Mike Krieger via Liberty Blitzkrieg blog,

    “It was pretty glowing about us,” one person who watched the event said. “It’s so far from what she sounds like as a candidate now. It was like a rah-rah speech. She sounded more like a Goldman Sachs managing director.”

     

    – From the post: What Clinton Said in Her Speeches – “She Sounded More Like a Goldman Sachs Managing Director”

    We’ve seen bits and pieces emerge from Hillary Clinton’s infamous $225,000 speech to Goldman Sachs in October 2013, but an article published by the Huffington Post yesterday adds some additional perspective. In a nutshell, the author believes that a release of these transcripts would be so damaging it would end her bid for the presidency. 

    Here are a few excerpts from the Huffington Post piece:

    The reason you and I will never see the transcripts of Hillary Clinton’s speeches to Wall Street fat-cats — and the reason she’s established a nonsensical condition for their release, that being an agreement by members of another party, involved in a separate primary, to do the same — is that if she were ever to release those transcripts, it could end her candidacy for president.

     

    In fact, it appears they’d cause enough trauma that Clinton would rather publicly stonewall — to the point of being conspicuously, uncomfortably evasive — in public debate after public debate, to endure damning editorial after damning editorial, and to leave thousands and thousands of voters further doubting her honesty and integrity, all to ensure that no one outside Goldman Sachs, and certainly no voter who wasn’t privy to those closed-door speeches, ever hears a word of what she said in them.

     

    The real experts on this topic are the friends and acquaintances of Hillary’s who, for whatever reason, have chosen to be candid about what they believe is in those speeches. And it’s only that candor that helps explain the longest-running mystery of the Democratic primary — a mystery that’s been ongoing for over seventy days — which is this: why would anyone pay $225,000 for an hour-long speech by a private citizen who (at the time) claimed to have no interest in returning to politics?

     

    Mr. Sanders has implied that there are only two possible answers: (a) the money wasn’t for the speeches themselves, but for the influence major institutional players on Wall Street thought that money could buy them if and when Clinton ran for President; or (b) the speeches laid out a defense of Wall Street greed so passionate and total that hearing it uttered by a person of power and influence was worth every penny.

     

    Per Clinton surrogates and attendees at these speeches, the answer appears to be both (a) and (b).

     

    Now here are a few examples of what we’ve heard from others:

     

    1. Former Nebraska Governor and Senator Bob Kerrey (Clinton surrogate)

    “Making the transcripts of the Goldman speeches public would have been devastating….[and] when the GOP gets done telling the Clinton Global Initiative fund-raising and expense story, Bernie supporters will wonder why he didn’t do the same….[As for] the email story, it’s not about emails. It is about [Hillary] wanting to avoid the reach of citizens using the Freedom of Information Act to find out what their government is doing, and then not telling the truth about why she did.”

     

    2. Goldman Sachs Employee #1 (present at one of the speeches)

    “[The speech] was pretty glowing about [Goldman Sachs]. It’s so far from what she sounds like as a candidate now. It was like a ‘rah-rah’ speech. She sounded more like a Goldman Sachs managing director.”

     

    3. Goldman Sachs Employee #2 (present at one of the speeches)

    “In this environment, [what she said to us at Goldman Sachs] could be made to look really bad.”

     

    4. Goldman Sachs Executive or Client #1 (present at one of the speeches)

    “Mrs. Clinton didn’t single out bankers or any other group for causing the 2008 financial crisis. Instead, she effectively said, ‘We’re all in this together, we’ve got to find our way out of it together.’”

     

    5. Paraphrase of Several Attendees’ Accounts From The Wall Street Journal

    “She didn’t often talk about the financial crisis, but when she did, she almost always struck an amicable tone. In some cases, she thanked the audience for what they had done for the country. One attendee said the warmth with which Mrs. Clinton greeted guests bordered on ‘gushy.’ She spoke sympathetically about the financial industry.”

     

    6. Goldman Sachs Employee #3 (present at one of the speeches)

    “It was like, ‘Here’s someone who doesn’t want to vilify us but wants to get business back in the game. Like, maybe here’s someone who can lead us out of the wilderness.’”

     

    7. Paraphrase of Several Attendees’ Accounts From Politico

    “Clinton offered a message that the collected plutocrats found reassuring, declaring that the banker-bashing so popular within both political parties was unproductive and indeed foolish. Striking a soothing note on the global financial crisis, she told the audience, ‘We all got into this mess together, and we’re all going to have to work together to get out of it.’”

     

    The problem with the quotes above is not merely their content — which suggests a presidential candidate not only “gushingly” fond of Wall Street speculators but unwilling to admonish them even to the smallest degree — but also that they reveal Clinton to have been dishonest about that content with American voters.

     

    Last night in Brooklyn Mrs. Clinton said, “I did stand up to the banks. I did make it clear that their behavior would not be excused.”

     

    Yet not a single attendee at any of Mrs. Clinton’s quarter-of-a-million-dollar speeches can recall her doing anything of the sort.

    During last week’s debate in New York, Hillary demanded that Bernie release his tax return, and he produced it the very next day.

    As far as Clinton’s speech transcripts, we’re still left with the following:

    Screen Shot 2016-04-16 at 12.04.35 PM

  • What If Nobody Showed Up To Vote?

    Submitted by Dan Sanchez via AntiWar.com,

    What if a presidential candidate threw a political rally, and nobody came? What if a government held an election, and nobody voted? What if that same government started a war, and nobody participated, whether in body or in spirit?

    These questions are related.

    Election season is trudging on, as are the wars. Many fans of peace hold out hope that if the former turns out a certain way, the latter may at last be mitigated.

    Some are terrified of Hillary Clinton. And who can blame them? As Secretary of State, “Dick Cheney in a pantsuit” was midwife to so many of the disasters that wrack the world with bloodshed and chaos to this day. Many anti-war folk of a left-leaning persuasion are flocking to Bernie Sanders.

    Others are more concerned with finally toppling the neocons from their perches of power. And who can blame them? The roots of our geopolitical plight reach back to before Clinton’s executive tenure, when the Bush administration neocons were launching their plans to remake the Greater Middle East. Many anti-war folk of the right-leaning persuasion are looking to Donald Trump to be their neocon-slayer.

    But is this really the best we can do?

    At the end of the day, Sanders is a moderate foreign interventionist who isn’t all too interested in foreign policy in the first place. Must anti-interventionists really settle for that in order to oppose hyper-interventionist Clinton?

    And Trump actually out-hawks many Republicans when it comes to torture, the security state, civilian casualties, and blood-for-oil. Is such a man really to be the anti-war movement’s appointed champion against the neocons?

    Thankfully, there is no need to support lesser warmongers in order to oppose greater ones.

    Imagine if all the anti-war progressives now supporting Sanders, plus all the America-firsters now supporting Trump, were to stop flooding the internet and social media with electoral polemics. What if all that passion and digital ink was redirected to the message of peace.

    Imagine “Stop the War on Yemeni Babies!” blazoned across the web instead of “Stop Hillary!” Or “Don’t Let the CIA Arm Al Qaeda in Syria” instead of “Don’t Let the Establishment Steal the Nomination from Trump.”

    An intense focus on policies over personas could really turn public sentiment against the actual combat of war, and divert public attention away from its obsession with the theatrical combat of political Wrestlemania.

    You may wonder, what about the consequences of the peace camp abandoning its stations in the electoral battle against the worst war hawks? What if as a result Hillary or Ted Cruz’s neocon allies sweep to victory?

    A clique may seize office, but the new administration will not govern in a vacuum. All regimes must strive to preserve public legitimacy. And no regime can afford to flout too blatantly the prevailing spirit of the times. The new president may have won a majority of votes. But if only a small proportion of the country actually voted in the first place, that translates into a rather shrunken mandate.

    And if the non-voting bulk of the public is stridently anti-war, that especially diminishes the president’s foreign policy mandate in particular. Faced with a sizable segment of the public intransigently opposed to war, even a militaristic president will be constrained, and may even need to draw back.  Even Richard Nixon ended a war when public opinion demanded it.

    Throughout history, most reductions in tyrannical violence have had nothing to do with the ideology or virtue of office-holders. Instead, such reforms were the result of shifts in public sentiment. Under such conditions, to be a “reformer,” a politician need no redeeming quality other than being self-serving enough to shift with the wind. And if Hillary Clinton, Ted Cruz, or any other politician are anything, it is self-serving.

    I’m not saying we should hope Hillary or Ted will win. I’m saying that who wins doesn’t matter nearly as much as the public’s attitude toward war and toward the Washington war machine itself.

    On election day, if fewer people lined up dutifully to choose between aspiring elective emperors, and more people assembled defiantly to decry the empire itself, peace would have much better prospects.

  • Visualizing The History Of Credit Cards

    Today, credit cards are one of the most important sources of big bank profits. However, a look at the history of credit cards shows that things weren’t always that way.

     

    As VisualCapitalist's Jeff Desjardins points out, while it may seem today that credit is impersonal and calculated, credit was once a privilege built around personal trust and long-lasting relationships. In the late 19th century, stores began offering credit to their best and most trustworthy customers. Instead of paying each time they visited the shop, a regular could defer payments to the future by using store-issued metal coins or plates that had their account number engraved. Shops would record the purchase details, and add the cost of the item bought to the customer’s balance owed.

    By the 1920s, shops started issuing paper cards instead of metal plates, but even these became cumbersome. Consumers had to hold different cards for each shop, and this made the sector ripe for disruption.

    Diners Club, the first independent credit card company in the world, did just that in the 1950s. Their cards allowed people to make travel and entertainment purchases, even with different vendors.

    Bank of America took this idea and ran with it, forever changing the history of credit cards. They launched the “BankAmericard” in Fresno, California, by sending it out to all 60,000 residents at once. Soon all consumers and vendors in the city were using the same card, and the concept of mass-mailing cards to the public spread like a wildfire.

    After these risky mass mailings of credit cards eventually culminated in the Chicago Debacle of 1966, they were outlawed in the 1970s for causing “financial chaos”. With no applications required, many people including compulsive debtors, crooks, and narcotics addicts were able to receive easy credit. By the time such mass airdrops became illegal, 100 million cards had already been unleashed on the U.S. population without a need for an application.

    In 1976, the BankAmericard system eventually became Visa. It was soon after this point that credit cards would enter their golden age for banks: as savings rates fell in the early 1980s, the interest rates on debt did not. Credit cards became a “cash cow”, and they’ve been a key source of bank profits ever since.

    Today, 80% of U.S. households own multiple cards, and they account for just under $1 trillion of consumer debt.

  • What Is The Worst-Case Outcome Of Helicopter Money: Deutsche Bank Explains

    Now that the next and final phase of unorthodox monetary policy, i.e., helicopter money, has had the blessing of both Mario Draghi and Ben Bernanke, and is virtually assured, there are three questions: how to trade it; where will it be implemented first (and certainly not last), and how will it all end.

    We covered the first part, how to trade it, late on Friday, courtesy of a Deutsche Bank report titled, don’t laugh, “Helicopters 101: your guide to monetary financing

     

    The next question then is: who will be (un)lucky enough to draw the first straw. The answer, according to DB, will be the same bank that as we shockingly reported at the end of January, was peer pressured into NIRP by Davos bankers, the Bank of Japan.

    Global monetary policy is at a cross-roads. Japan’s experience this year demonstrates the limits of central bank policy with the bank running out of government bonds to buy, negative rates reaching their limits and inflation expectations having almost completely unwound their Abenomics move higher…. with Japan fast approaching the limits of its existing policy response to deflation, developments need to be followed closely for signs of the next global policy innovation.

    Well, “policy innovation” sure is a polite way of putting “last ditch monetary idiocy” (the same idiocy which we predicted all the way back in March 2009 will be the ultimate endgame) but besides that we agree with Deutsche Bank: Japan will be the first nation to unveil helicopter money. After all, if it isn’t monetary or Keynesian experimentation, then simple demographics will destroy the nation… unless the Fukushima fallout doesn’t do it first.

    Finally, how would helicopter money failure look like? Here are some ideas from DB’s George Saravelos:

    A “successful” helicopter drop, defined as generating higher growth and inflation expectations but without a permanent overshoot of the inflation target, should lead to higher and steeper yield curves, a weaker currency (at least initially) and higher equity valuations.

     

    This notwithstanding, it is important to emphasize that there are alternative equilibria too. At one extreme, if the policy is not perceived as sufficient in size and impact, then the supply/demand imbalances in fixed income may be exacerbated (less issuance and debt outstanding) without a corresponding move higher in inflation expectations. This would lead to a market reaction similar to the one that followed the BoJ cut to negative rates earlier this year: lower yields, weaker equities and a stronger currency. At the other extreme, if the long-term commitment to the inflation target is challenged and central bank credibility is lost, long-dated yields would spike higher, capital flight would ensue and risk assets would substantially underperform.

    In other words, at one extreme, if the market perceives the policy as a failure, credit risk and demand/supply imbalances are likely to dominate, putting even further downward pressure on yields. At the other extreme, if the policy is perceived as a loss of monetary discipline, inflation expectations would spike, leading to an aggressive re-pricing of yields higher.

    Simply said: too little, and the deflationary vortex will swallow all; too much, and yields will explode.  DB continues:

    A “successful” helicopter drop may therefore be easier said than done given the non-linearities involved: it needs to be big enough for nominal growth expectations to shift higher and small enough to prevent an irreversible dis-anchoring of inflation expectations above the central bank’s target. Either way, the behavior of the latter is the key defining variable both for the policy’s success as well as the asset market reaction.

    Which brings us to DB’s politically correct conclusion: “under the assumption of policy “success” without fears of hyperinflation, we would conclude that bond yields rise“… the same success which DB also says “will be easier said than done”, which then means, drumroll, that the dominant outcome will be one in which “fears” of hyperinflation are justified.

    In which case, please go ahead and sell your gold to Goldman: the vampire squid has repeatedly said it will buy everything you have to sell.

  • Rousseff Party Admits Impeachment Vote Is Lost; Brazil ETF Surges

    Update 2: While the official voting process continues and still about another 40 or so votes are needed before the formal threshold to impeach Dilma Rousseff of 342 is crossed, moments ago the leader of Rousseff’s lower house party, Gumaraes, threw in the towel and admitted the vote is lost:

    • ROUSSEFF’S LOWER HOUSE LEADER SAYS IMPEACHMENT VOTE IS LOST
    • BRAZIL’S GUIMARAES: THE COUP PLANNERS WON IN THE LOWER HOUSE

    What happens next? The Senate showdown, and Rousseff who as we warned previously, will not go quietly:

    • GUIMARAES: IT WILL BE A SLOW, GRADUAL, SECURE, PROLONGED WAR

    For now however, bizarro world continues and as Brazil is about to plunge into an even deeper political crisis, the Brazilian stock ETF has surged 4.5% in Japan trading on hopes the removal of Rousseff will somehow fix the Brazilian economy overnight. It won’t, and if anything the 2016 Olympic games now appear more in jeopardy than ever.

    * * *

    Update: moments ago the Brazilian Congress began its impeachment vote. 504 members of the lower house of Congress are present for the vote, with nine absent.  It appears that the 500+ members of Brazil’s lower house will vote 1-by-1, giving little mini-speeches each time.As we reported earlier below, newspaper surveys showed the opposition has only a few votes more than the two-thirds majority needed among 513 deputies to put Rousseff to trial in the Senate. 

    * * *

    As reported on Friday afternoon, ahead of Dilma Rousseff’s impeachment vote to be held in Brazil’s Congress later today, a critical threshold was passed when, according to local Folha newspaper, more than the required 342 votes had been gathered.

    Sure enough, today all the main Brazilian newspapers dedicate their entire covers to impeachment, with Folha and Estado bringing nominal list of lawmakers’ expected votes for and against, Bloomberg reports. Furthermore, according to the latest tallies from Folha, Estado and Globo the “For” impeachment vote is currently anywhere between 347 and 350 votes, above the 342 needed.

    But while the popular sentiment is largely in the pro-impeachment camp (even if many of those standing to benefit from Rousseff’s ouster have been alleged to be as corrupt with participation in either the Carwash scandal, or to have funds parked in various offshore accounts), Rousseff refuses to go without a fight and earlier today Attorney General Jose Eduardo Cardozo wrote an op-ed in Folha saying the impeachment won’t pass if lower house respects constitution, adding that “whatever decision lower house makes today won’t solve Brazil’s political, economic and moral issues” and that many lawmakers show they don’t know the crimes on which impeachment request is based.

    He is probably correct.

    Meanwhile, PP, the party on which govt was relying on after PMDB split, may have 100% of its votes against Rousseff.

    Bloomberg notes that if Rousseff survives the impeachment vote today, Rousseff plans calling meeting with opposition leaders including PSDB’s Aecio Neves and Fernando Henrique Cardoso, and adds that if the govt loses, it will likely focus attacks on Temer to try and stop process in the Senate.

    For now however it is all about the Congressional vote, whose impeachment session started moments ago with the following headline:

    • BRAZIL LAWMAKERS IN SHOVING MATCH AS IMPEACHMENT SESSION STARTS

    Expect more of the same for the next several hours.

    Live feed from Brazil’s capital Brasilia below where thousands are already gathering ahead of tonight’s session which is expected to continue until around 10pm local time according to Eduardo Cunha, president of the chamber of deputies.

  • Absurdity: When The Con Believes The Con

    Authored by Mark St.Cyr,

    There are many infamous con games that have been foisted upon the public for millennia. Probably none more enduring than that of Charles Ponzi which bears his name as its moniker. Yet, there’s also been another who was also just as “daring” when it came to finding ways as to extract monetary gains by ill-gotten means: Victor Lustig.

    Lustig is best known as “The man who sold the Eiffel Tower.” However, it was one of his other cons that came to mind as I was thinking about the current state of monetary policy we now find ourselves in.

    Lustig’s other con was a device he slated would print $100 bills. But it had a problem.

    Unbeknown to his mark, this problem was also part of the deception. The problem was (as stated by Lustig) – it could only print 1 bill every 6 hours. The genius was; located within the machine it contained two genuine $100 bills. After that – blanks. You could be long gone, and quite far with that kind of head start back then. Yet, it’s once the con, ruse, or scam is finally exposed one thing is certain: You don’t want to still be around or found.

    As with any con game the perpetrator knows it’s all a con. In other words, “Duh!” Yet, if you listen closely to both past as well as present Fed. members you can’t help but notice by way of their current arguments, as well as, proposals for future monetary policy. The one’s who’ve truly bought into “the con” is: themselves!

    Nowhere has this been on display more than the current public writings and musings of former Fed. Chair Ben Bernanke.

    If you read his latest (which I’ve tried but can’t bear that much comedy in one sitting) he lays out what he thinks (or believes) should now take place involving Congress, the Administration, and the Fed. His great idea? Create and “fill” some arbitrary account which only the Fed. or its appointed designates have control of as to “empty” or “fill” as “Congress and Administration” see fit. But here’s the punchline, ready?

    “Importantly, the Congress and Administration would have the option to leave the funds unspent. If the funds were not used within a specified time, the Fed would be empowered to withdraw them.” (Insert laugh track here)

    Remember, this is coming not only from the former Chair, but also, one who is quite possibly the most emblematic of current thought residing throughout central bank policy makers with an additional caveat: He’s no longer bound by the position where his thoughts need to be guarded as a voting member of such policy lunacy. In other words: he can now speak his mind openly. To which I’ll muse – that’s no laughing matter when you consider how prevalent Keynesian economics now dominate.

    The latest from Bernanke exposes just how far down this “rabbit hole” central bankers have gone. So far I’ll contend – its frightful. e.g., They actually believe this subterfuge.

    When I’m giving a talk, or engaged in conversation, I often use the term “con game” when describing current monetary policy and its effect on business and more. Often the term “con” at first seems to put people on the defensive as if I’m using hyperbole, or trying to make a point by using over the top styled rhetoric.

    The problem is (I’ll explain) it is exactly that. e.g., Many forget “con” stands for confidence in con-game. And now that the $Dollar along with just about every other currency is all fiat based: confidence is the only variable that supports it in a fiat system. Period. And once it’s lost just as with any “con” – it ends with blinding speed and consequences.”

    This is the current danger now inherent after years of QE, NIRP, ZIRP, and every other acronym that represents some form or another of central bank intervention within the markets. So adulterated have the markets now become with central bank meddling; describing them without using quotes such as “markets” seems reckless. For these are far from the markets once thought to represent free market capitalism. Today they are “markets” in name only. For just like currencies – they’re no longer backed by anything once considered tangible like gold or actual net profits via 1+1=2 accounting.

    At some point printing ad infinitum, as well as, companies reporting (ad infinitum!) losses of Billions in sales and revenue while declaring “We’re killing it!” via Non-GAAP accounting will make even the most ardent supporter of Keynesian thinking question this new reality. The absurdity can only go on for so long, because, to keep up the ruse (just like suckers) more absurdity is needed. We may be reaching that end point after all these years. And the latest clue might be in the absurd recommendations emanating from central bankers themselves. For it’s becoming clearer by the day if one reads Bernanke’s latest: they think this all makes perfect sense. Talk about absurdity.

    Let me pose this question: Does anyone for a moment think China would (or will) allow the Federal Reserve along with the U.S. government carte blanche as to create “piggy banks” that can be used to help bolster its position without calling into attention the absurdity of it? Especially as it holds $TRILLIONS of U.S. debt on its own books? Imagine all this while not only the U.S. but the world of central bankers and other governments push, or brow beat Chinese current policies? Or, question their numbers for authenticity? How about Russia? Or Brazil? Or __________(fill in the blank.) Think they’ll all just stand idly by as their economies teeter on the brink of insolvency as the West just prints and points fingers?

    If you listen to the musings emanating from many of the central bankers today whether currently holding an active position, or one which has returned to the “private” sector. One would have to construe that they believe exactly that. i.e., Don’t worry – they’ll buy it because that’s what we want them too. And that absurdity is a glaring warning sign from my viewpoint.

    This shows just how far down this absurdity “rabbit hole” we’ve gone. And it can be directly contrasted with the con games of old. For it was always a given: for the ruse to work for the benefit of the perpetrator – one must have both the sense as well as alertness to “get outta Dodge” and not to be seen again as the game blows up. Today?

    So enamored with the ruse they now fall all over themselves whether on TV, radio, or print, professing what absurdity should take place next to any and all that will listen. Again, even Lustig knew printing money ex nihilo was a con. Yet today, central bankers regard that as: prudent monetary policy. The difference for a contrast in the absurdity?

    Before; it landed you a session in jail. Today? It lands you a speaking gig for $250K a session.

  • Saudi King And Princes Blackmail The U.S. Government: What Happens Next

    Submitted by Eric Zuesse, author of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

    Saudi King & Princes Blackmail U.S. Government

    Saudi Arabia, owned by the Saud family, are telling the U.S. Government, they’ll wreck the U.S. economy, if a bill in the U.S. Congress that would remove the unique and exclusive immunity the royal owners of that country enjoy in the United States, against their being prosecuted for their having financed the 9/11 attacks, passes in Congress, and becomes U.S. law.

    As has been well documented even in sworn U.S. court testimony, and as even the pro-Saudi former U.S. Secretary of State Hillary Clinton acknowledged privately, "Donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide.” She didn’t name any of those “donors” names, but the former bagman for Osama bin Laden, who had personally collected all of the million-dollar+ donations (all in cash) to Al Qaeda, did, and he named all of the senior Saud princes and their major business-associates; and, he said, "without the money of the — of the Saudi you will have nothing.” So, both before 9/11, and (according to Hillary Clinton) since, those were the people who were paying virtually all of the salaries of the 19 hijackers — even of the four who weren’t Saudi citizens. Here’s that part of the bagman’s testimony about how crucial those donations were:

    Q: To clarify, you’re saying that the al-Qaeda members received salaries?

    A: They do, absolutely.

    So: being a jihadist isn’t merely a calling; it’s also a job, as is the case for the average mercenary (for whom it doesn’t also have to be a calling). The payoff for that job, during the jihadist’s life, is the pay. The bagman explained that the Saud family’s royals pay well for this service to their fundamentalist-Sunni faith. Another lifetime-payoff to the jihadists is that, in their fundamentalist-Sunni culture, the killing of ‘infidels’ is a holy duty, and they die as martyrs. Thus, the jihadist’s payoff in the (mythological) afterlife is plenty of virgins to deflower etc. But, the payers (the people who organize it, and who make it all possible) are the Saud family princes, and their business associates — and, in the case of the other jihadist organizations, is also those other Arabic royal families (the owners of Qater, UAE, Kuwait, Bahrain, and Oman). However, 9/11 was virtually entirely a Saudi affair, according to Al Qaeda’s bagman (who ought to know).

    The report of the threat by the Saud family comes in veiled form in an April 15th news-story in The New York Times, headlined, “Saudi Arabia Warns of Economic Fallout if Congress Passes 9/11 Bill.” It says that the Saud family’s Foreign Minister is “telling [U.S.] lawmakers that Saudi Arabia would be forced to sell up to $750 billion in [U.S.] treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.” The NYT says that this threat is nothing to take seriously, “But the threat is another sign of the escalating tensions between Saudi Arabia and the United States.” While the carrying-out of this threat would be extremely damaging to the Saud family, the NYT ignores the size of the threat to the Sauds if their 9/11 immunity were removed — which could be far bigger. Consequently, this matter is actually quite a bit more than just “another sign of the escalating tensions between Saudi Arabia and the United States.”

    Russian Television is more direct here: “Saudi Arabia appears to be blackmailing the US, saying it would sell off American assets worth a 12-digit figure sum in dollars if Congress passes a bill allowing the Saudi Government to be held responsible for the 9/11 terrorist attacks.” (The Saudi Government is owned by the Saud family; so, even that statement is actually a veiled way of referring to the possibility that members of the royal Saud family — the individuals name by the bagman — could be held responsible for 9/11.) 

    Even immediately in the wake of the 9/11 attacks, there had been some mentions in the U.S. press of the U.S. Government making special allowances for Saud Prince Bandar al-Saud, a close friend of the Bush family (and he was also one of the Saudi Princes mentioned specifically by the bagman), to fly out of the country to avoid being sought by prosecutors. Furthermore, Newsweek’s investigative journalist, Michael Isikoff, headlined on 12 January 2001, “The Saudi Money Trail”, and he reported statements from royal Sauds, that they didn’t really mean for their donations to be going to such a thing as this. (Perhaps those individuals didn’t, but Bandar almost certainly did, because he was the Saud Ambassador to the U.S. at the time of 9/11.) However, now that the U.S. Government is relying heavily upon Saudi money to pay for the U.S. weapons and to help to organize the operation to overthrow Bashar al-Assad in Syria and to replace him with a fundamentalist-Sunni leader, there is renewed political pressure in the United States (from the victim-families, if no one else), for the arch-criminals behind the 9/11 attacks to be brought to American justice. After fifteen years, this process might finally start. That would be a drastic change.

    Clearly, the threat from the Sauds is real, and the royal response to this bill in the U.S. Congress reflects a very great fear the owners of Saudi Arabia have, regarding the possible removal of their U.S. immunity, after 15 years. 

    Prosecution of those people will become gradually impossible as they die off. But a lot more time will be needed in order for all of the major funders of that attack to die natural deaths and thus become immune for a natural reason — the immunity of the grave. The U.S. Government has protected them for 15 years; but, perhaps, not forever. 

    To say that this threat from the Sauds is just “another sign of the escalating tensions between Saudi Arabia and the United States” seems like saying that a neighbor’s threat to bomb your house would constitute just “another sign of escalating tensions” between you and your neighbor. The passing-into-law of this bill in Congress would actually constitute a change from the U.S. Government being a friend and partner of the Sauds, to becoming their enemy.

    Obviously, there is little likelihood of that happening; and, on April 20th and 21st, U.S. President Barack Obama is scheduled to meet with Saudi King Salman al-Saud. Without a doubt, this topic will be on the agenda, if it won’t constitute the agenda (which is allegedly to improve U.S. relations “with Arab leaders of Persian Gulf nations” — not specifically with Saudi King Salman and with his son Prince Salman). 

    If President Obama represents the American public, then the Sauds will have real reason to fear: the U.S. President will not seek to block passage of that bill in Congress. However, if the U.S. President represents instead the Saud family, then a deal will be reached. Whether or not the U.S. Congress will go along with it, might be another matter, but it would be highly likely, considering that the present situation has already been going on for fifteen years, and that the high-priority U.S. Government foreign-policy objective, of overthrowing Bashar al-Assad, is also at stake here, and is also strongly shared not only by the Sauds but by the members of the U.S. Congress. Furthermore, the impunity of the Saud family is taken simply as a given in Washington. And, the U.S. Government’s siding with the Sauds in their war against Shia Muslims (not only against one Shiite: Assad) goes back at least as far as 1979. (Indeed, the CIA drew up the plan in 1957 to overthrow Syria’s Ba’athist Government, but it stood unused until President Obama came into office.)

    Furthermore, the U.S. Government is far more aggressive to overthrow Russia-friendly national leaders, such as Saddam Hussein, Muammar Gaddafi, Bashar al-Assad, and Viktor Yanukovych, than it is to stop the spread of fundamentalist Sunni groups, such as Al Qaeda, ISIS, etc.; and, a strong voice for U.S. foreign policy, the Polish Government, even said, on April 15th, that as AFP headlined that day, “Russia 'more dangerous than Islamic State', warns Poland foreign minister”; and Russia itself is, along with Shiite Iran, the top competitor against the fundamentalist Sunni Arab royal families in global oil-and-gas export markets. So, clearly, the U.S. Government is tightly bound to the Saud family. Terrorism in Europe and America is only a secondary foreign-policy concern to America’s leaders; and the Saud family are crucial allies with the U.S. Government in regards to what are, jointly, the top concerns of both Governments.

    Consequently, there is widespread expectation that some sort of deal will be reached between U.S. President Barack Obama and the Saudi leaders, King and Prince Salman, and that the Republican-led Congress will rubber-stamp it, rather than pass the proposed bill to strip the Saud family’s immunity.

  • "This Will All Blow Up In The Fed's Face," Schiff Warns "Trump's Right, America Is Broke"

    Euro Pacific Capital's Peter Schiff sat down with Alex Jones last week to discuss the state of the economy, and where he sees everything going from here.

    Here are some notable moments from the interview.

    Regarding how bad things are, and what's really going on in the economy, Schiff lays out all of the horrible economic data that has come out recently, as well as making sure to take away the crutch everyone uses to explain any and all data misses, which is weather.

    "It's no way to know exactly the timetable, but obviously this economy is already back in recession, and if it's not in a recession it's certainly on the cusp of one"

     

    "We could be in a negative GDP quarter right now, and I think that if the first quarter is bad the second quarter is going to be worse"

     

    "The last couple years we had a rebound in the second quarter because we've had very cold winters. Well this winter was the warmest in 120 years so there is nothing to rebound from."

    On the Fed, and current policies, he very bluntly points out that nothing is working, nor has it worked, but of course the central planners will try it all anyway. He also takes a moment to agree with Donald Trump regarding the fact that the U.S. is flat out, undeniably broke.

    "The problem for the fed is how do they launch a new round of stimulus and still pretend the economy is in good shape."

     

    "Negative interest rates are a disaster. It's not working in Japan, it's not working in Europe, it's not going to work here. Just because it doesn't work doesn't mean we're not going to do it, because everything we do doesn't work and we do it anyway. It shows desperation, that you've had all these central bankers lowering interest rates and expecting it to revive the economy. And then when they get down to zero, rather than admit that it didn't work, because clearly if you go to zero and you still haven't achieved your objective, maybe it doesn't work. Instead of admitting that they were wrong, they're now going negative."

     

    "The United States, no matter how high inflation gets, we'll do our best to pretend it doesn't exist or rationalize it away because we have a lot more debt. America is broke, if you look at Europe and Japan even though there is some debt there, overall those are still creditor nations. The world still owes Europe money, the world still owes Japan money, but America owes more money than all of the other debtor nations combined. Trump is right about that, we are broke, we're flat broke, and we're living off this credit bubble and we can't prick it. Other central banks may be able to raise their rates, but the Fed can't."

    On how he sees everything unfolding from this point, Peter again points out that the economy is weak and it's only a matter of time before this entire centrally planned manipulation is exposed for what it is, and becomes a disaster for the Federal Reserve. He likens how investors are behaving today to the dot-com bubble, and the beginning of the global financial crisis.

    "The trigger that's going to really send us into a higher gear is going to be the admission by the Fed that the economy is weak or the markets figure it out on their own. There's not a lot of stimulus left, all they've got is potentially negative rates and a huge round of quantitative easing, and this thing is going to blow up in the Fed's face."

     

    "Investors still just don't get what's going on. For the past several years everybody has been positioned as if this recovery were real, that it was sustainable, and that the Fed could normalize interest rates and everything was going to be fine. The first quarter of this year investment returns, it was the worst quarter in eighteen years for actively managed funds."

     

    "The federal reserve has not solved our problems, but exacerbated them."

     

    "You've got big banks like Goldman Sachs shorting gold, telling their clients to short gold. A lot of people unfortunately listen to Goldman Sachs, and they're doing the wrong thing. A lot of times the markets are just mis-priced, because so many people don't get it. Just like all the people who were buying the subprime mortgages before the bottom dropped out of the market, or all the people who were buying thos dot-com stocks for several years before they collapsed. The same thing is going to happen now."

    ***

    Full Interview Here

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