Today’s News 10th April 2016

• SHoCKiNG TeCHNoLoGY ReVeaLeD…

  

  

  

  

  

• Why USDJPY Matters (Or The Carry Collapse Cometh)

  The yen’s strength may be tripping up U.S. stocks as the collape of the BoJ-inspired carry trade pressures leverage and risk-taking around the world. As Bloomberg notes, in the last 10 instances the yen rallied at least 1 percent against the dollar, the Standard & Poor’s 500 Index lost 0.8 percent on average, the most since at least 2008.

   

  

  Andrew Brenner, National Alliance Capital Markets' head of international fixed income, confirms the weakness in US equities could be due to a breakdown in what's known as a carry trade, in which investors borrow money in a low interest-rate environment such as Japan’s to fund investments in higher-yielding assets.

  And as Acting-Man.com's Pater Tenebrarum details, a stronger yen usually doesn’t bode well for stocks. We once again should warn that such correlations are never valid “forever”. The only thing one can always expect to happen in financial markets and the economy is constant change.

  Still, given recent experience, we are wary that yen strength could be a sign that the recent party in “risk” will soon be derailed. On the other hand, we have to acknowledge that market internals have greatly improved due to the recent strong bounce in the commodity and industrial sub-sectors. At the same time, defensive sectors have only surrendered very little of their previous gains.

  Options markets are largely in “neutral” mode – there is neither a great deal of enthusiasm in evidence, nor is there much fear. A similarly meaningless backdrop in options could however be observed in the July-August period as well, so this doesn’t necessarily mean much.

   

  

  SPX daily: the SPX has returned into the area of congestion that contained it prior to the January sell-off. Put-call ratios look largely neutral at present, which is quite similar though to what they looked like shortly before the late August break – click to enlarge.

   

  As we noted at the time of the interim lows in early to mid February, there was elevated crash risk due to the market’s proximity to important medium term support levels. However, once this risk had passed, we expected the SPX to rally back close to one of the previously established resistance areas.

  It has in fact gone quite far in the meantime, by moving right back into the congestion zone it inhabited prior to the January breakdown. This continues to be in keeping with the 1962 and Nikkei 1990 analogs, which we have previously discussed (both examples for “unseasonal” market weakness in early January).

  These analogs call for the next interim peak to be established sometime in the March to May period. If these models remains applicable (which is of course far from certain), then we are now in the phase designated “standard rebound from initial sell-off” on the chart below:

   

  

  DJIA, 1961 – 1962: after a bout of weakness in early January, a rebound brings the market nearly back to its previous highs, and then a large selling wave commences – click to enlarge.

   

  Looking back to the February low, one had to look for subtle clues that might indicate whether the lows would or wouldn’t hold, given the heightened crash risk at the time (that the lows would hold was always the higher probability outcome of course, but caution seemed definitely advisable). One of these signs was that previously weak sectors that had been downside leaders started to outperform the rest of the market.

  This was e.g. evident when comparing the DJIA to the Transportation Average. This is worth noting because the two averages have recently diverged again – only, the other way around. Here is a chart illustrating these divergences:

   

  

  Short term divergences between the DJ Industrial Average and the Transportation Average. A bullish divergence occurred at the February lows, whereas a slight bearish divergence is in evidence currently – click to enlarge.

  *  *  *

  Of course, the real question should be – how much longer can this facade be upheld…

  

  

  

  

  

  

• "The Gold Price Has Been Captured By The Modern Banking System"

  Submitted by Alasdair Macleod via GoldMoney.com,

  It is commonly assumed that the gold price and interest rates move in opposite directions.

  In other words, a tendency towards higher interest rates is accompanied by a lower gold price. Like all assumptions about prices, sometimes it is true and sometimes not.

  The market today is all about synthetic gold, gold which is referred to but rarely delivered. The current relationship is therefore one of relative interest rates, because positions in synthetic gold, in the form of futures and forwards, are financed from wholesale money markets. This is why a rumour that interest rates might rise sooner than expected, if it is reflected in forward interbank rates, leads to a fall in the gold price.

  To the extent that this happens, the gold price has been captured by the modern banking system, but it was not always so. The chart below shows that rising interest rates were accompanied by a higher gold price in the 1970s after 1971.

  

  We can divide the decade into four distinct phases, numbered accordingly on the chart.

  In Phase 1, to December 1971, interest rates fell and gold increased in price, much as today's market expectations would suggest, but from then on until the end of the decade a strong positive correlation between the two is clear. So why was this?

  Those of us who worked in financial markets at the time may remember the development of stagflation in the late sixties and into the first half of the seventies, whereby prices appeared to be rising without a corresponding increase in underlying demand for the goods concerned. This put central banks in a difficult position. In accordance with post-war macroeconomic thinking, monetary policy was (as it is to this day) one of the principal tools for promoting economic growth, and so the lack of growth was put down to insufficient stimulus. Therefore, monetary policy was diametrically opposed to the higher interest rates needed to counter increasing price inflation. The result was central bankers wished for low interest rates but were forced by markets into raising them, which they did reluctantly and belatedly. This is the logical reason the gold price rose to discount the increasing rate of price inflation, instead of being suppressed by increasing interest rates. This was Phase 2 on the chart.

  Stagflation was very evident up to the end of 1974. Dollar price inflation measured by the producer price index increased by over 25% that year, reflecting higher oil prices imposed by the OPEC cartel. Inflation measured by the CPI peaked at 12%. Equity markets collapsed, with the Dow halving and London's FT30 falling by over 70% from its 1972 high. In London, the secondary banking crisis, triggered by rising interest rates, led to the failure of banks which had loaned money to property developers, resulting in a financial crash in November 1973. Again, mainstream economists were confounded, because the collapse in demand following that crisis should have led to deflation, but prices kept on rising.

  The gold story was not just a simple one of belated and insufficient rises in interest rates, as the economic runes suggest. The riches endowed on the Middle East from rising oil prices benefited, in western terms, a backward society which invested a significant portion of its windfall dollars in physical gold. This was natural for the Arabs, who believed gold was money and dollars were a sort of funny paper. Investing in physical gold was also recommended to them by their Swiss private bankers. The recycling of petrodollars into gold routinely cleaned out the US Treasury's gold auctions, which failed to suppress the rising gold price.

  The financial crisis and the associated collapse of stock markets in 1974 lead us into Phase 3 on the chart. Interest rates declined after the stock markets began to recover from the extreme depths of negative sentiment at that time. The gold price also declined, with the price almost halving from just under $200 in December 1974 to just over $100 in August 1976. It had become apparent that the financial world would survive after all, so bond yields fell while stockmarkets recovered their poise during that period. Fear subsided.

  Again, the gold price had correlated with interest rates, this time declining with them. We then commenced Phase 4. From 1976 onwards, economic activity stabilised and price inflation picked up later that year, with the dollar CPI eventually hitting 13% in 1980. Interest rates rose along with price inflation, and gold ran up from the $100 level to as high as $850 at the London PM fix on 21 January 1980. For a third time, the gold price correlated with rising interest rates.

  From the history of the 1970s, we have learned that today's non-correlating relationship between gold and interest rates cannot be taken as normal in future market relationships. Admittedly, derivative markets and the London bullion market were not as well-developed then as they are today. But they certainly were in gold's next bull market, from the early 2000s to 2011. However, the comparison with the seventies is the more interesting, particularly given the emergence of stagflation at that time.

  While official inflation figures today show the relative absence of price inflation, much of that is down to changes in the way it is calculated. John Williams of ShadowStats.com estimates that inflation today, calculated as it was in the eighties, runs consistently higher than official figures suggest. He reckons it is currently at about 5%. And the Chapwood Index, compiled quarterly including 500 commonly bought items in 50 American cities, records price inflation at 1970s levels, closer to 9%.

  As always, official statistics such as the CPI should be treated with immense caution, as John Williams's and the Chapwood inflation estimates confirm. But even the suppressed official CPI is likely to rise beyond the Fed's 2% target within a year from now, if the recent increases in prices of raw materials and energy hold. This is because the negative factors that have suppressed the index, such as the oil price, will soon be dropping out of the back-end of the statistic, giving the CPI an upward boost. Furthermore, rising raw material and energy prices will have little to do with the level of economic demand in the US, because the US economy is no longer the driver for commodity prices. That role now belongs to China, which plans to use vast quantities of raw materials for domestic economic and Asia-wide infrastructure development, and accordingly is beginning to stockpile them.

  On this simple analysis, we can see how domestic US prices could record a significant rise without any increase in domestic demand. In other words, the conditions now exist for the stagflation that became so pernicious from the late 1960s onwards. The question then arises as to how the Fed will respond.

  One thing hasn't changed over the decades, and that is central bankers' assumptions that prices are tied, however loosely, to demand. This is the text-book basis of the inflation target, which assumes that a 2% inflation rate is consistent with sustainable economic growth. There is, in conventional macroeconomics, no explanation for stagflation, despite evidence the condition exists.

  No one is more surprised than the forward-thinking members of the Fed's policy-making committees, who anticipate the same dilemma that their predecessors faced in Phase 2 of our chart of the 1970s. The US economy will be stagnating, while price inflation is rising. The Fed will be torn between the need to keep interest rates low to stimulate credit demand, and raising interest rates to control price inflation. Only this time, a rise in interest rates and bond yields averaging no more than two per cent could be curtains for the Fed itself, because the losses on its bond investments, acquired in the wake of the financial crisis and through quantitative easing, will easily exceed its so-called capital.

  The dynamics behind the gold market are however different now from the early seventies. Debt levels today are so high they risk destabilising the whole financial system, making it impossible for the Fed to raise interest rates much without causing a financial wipe-out. Asian governments, such as the Chinese and the Russians are known to have been accumulating strategic positions in physical gold, and the Chinese and Indian populations along with other Asian people have also exhibited notable appetites for physical metal. Instead of starting from a position where the US Treasury on its own in 1969 still held 14% of estimated above-ground stocks, its holding is officially at less than 5% of them today. That is, if you believe it still has the stated 8,134 tonnes.

  This time, the gold price is likely to be driven by physical shortages in the old world, as American and European investors wake up to stagflation, their central bank's interest rate dilemma, and the loss of physical liquidity from their vaults.

  Today's market set-up, particularly if Chinese demand for energy and commodities materialises in accordance with her new five-year plan, looks like replicating the early stage of Phase 2 in the introductory chart to this article. Gold increased fivefold from $42 to a high of about $200 in three years. The circumstances today have notable differences, not least the launch-pad of negative interest rates. But we can begin to see why, despite the near infinite growth of derivatives as a price-control mechanism, it could be mistaken to assume that the link between interest rates and gold is normally one of non-correlation, and will continue to be so.

  

  

  

  

  

• Department Of Education – Our Work Here Is Done

  Submitted by Jim Quinn via The Burning Platform blog,

  It appears a few children were left behind.

  The Department of Education was created in 1979 and now has an annual budget of $73 billion, with 5,000 government bureaucrats roaming its hallways. When you include all Federal, State and Local spending on public education it totals about $700 billion per year, or $13,000 per student. The Department of Education was created to improve the education of our children.

  After 37 years and trillions of dollars “invested” in our children, see below what they have achieved. The public school teachers who have been on the front lines for the last 37 years work 9 months per year, earn above average salaries, get awesome benefits, and have gold plated pension plans – all at the expense of taxpayers. And look what they have accomplished.

  The tens of millions of illiterate drones think they deserve $15 per hour because it’s fair, even though they can’t count to fifteen or spell fifteen.

  

  STAGGERING ILLITERACY STATISTICS

  California

  • According to the 2007 California Academic Performance Index, research show that 57% of students failed the California Standards Test in English.
  • There are six million students in the California school system and 25% of those students are unable to perform basic reading skills
  • There is a correlation between illiteracy and income at least in individual economic terms, in that literacy has payoffs and is a worthwhile investment. As the literacy rate doubles, so doubles the per capita income.

  The Nation

  • In a study of literacy among 20 ‘high income’ countries; US ranked 12th
  • Illiteracy has become such a serious problem in our country that 44 million adults are now unable to read a simple story to their children
  • 50% of adults cannot read a book written at an eighth grade level
  • 45 million are functionally illiterate and read below a 5th grade level
  • 44% of the American adults do not read a book in a year
  • 6 out of 10 households do not buy a single book in a year

  The Economy

  • 3 out of 4 people on welfare can’t read
  • 20% of Americans read below the level needed to earn a living wage
  • 50% of the unemployed between the ages of 16 and 21 cannot read well enough to be considered functionally literate
  • Between 46 and 51% of American adults have an income well below the poverty level because of their inability to read
  • Illiteracy costs American taxpayers an estimated $20 billion each year
  • School dropouts cost our nation $240 billion in social service expenditures and lost tax revenues

  Impact on Society:

  • 3 out of 5 people in American prisons can’t read
  • To determine how many prison beds will be needed in future years, some states actually base part of their projection on how well current elementary students are performing on reading tests
  • 85% of juvenile offenders have problems reading
  • Approximately 50% of Americans read so poorly that they are unable to perform simple tasks such as reading prescription drug labels

  (Source: National Institute for Literacy, National Center for Adult Literacy, The Literacy Company, U.S. Census Bureau)

  *  *  *

  All that's needed now is a "Mission Accomplished" banner and this is yet another perfect example of the failure of government intervention.

  

  

  

  

  

• "The People Aren't Stupid" – Germany Takes Aim At The ECB, May Sue Draghi: Spiegel

  One month ago, when Mario Draghi unveiled his quadruple-bazooka QE expansion, which for the first time ever included the monetization of corporate bonds, the German press, in this case Handelsblatt, had a swift reaction. It did not approve.

  

  

   

  Fast forward a month later when the ECB is now contemplating the final monetary gambit, launching helicopter money, and Germany’s most respected (in official circles) financial media, Spiegel, is out with an article titled “Germany Takes Aim at the European Central Bank”, in which – as expected – we read that relations between Germany and the Frankfurt-based ECB have just hit new lows:

  There was a time when the German chancellor and the head of the European Central Bank had nice things to say about each other. Mario Draghi spoke of a “good working relationship,” while Angela Merkel noted “broad agreement.” Draghi, said Merkel, is extremely supportive “when it comes to European competitiveness.”

   

  These days, though, meetings between the two most powerful politicians in the euro zone are often no different than their face-to-face at the most recent summit in Brussels. She observed that his forced policy of cheap money is endangering the business model of Germany’s Sparkassen savings banks and retirement insurance companies. He snarled back that the sectors would simply have to adapt, just as the American financial sector has.

  This is nothing new: we have been hearing laments by Europe’s biggest bank, Germany’s Deutsche Bank, that the ECB has gone too far for over two months now (initially in “A Wounded Deutsche Bank Lashes Out At Central Bankers: Stop Easing, You Are Crushing Us“). But for Merkel to take her feud in the open, and seeking to once again freeze relations between Germany and the ECB at this fragile juncture for the future of Europe, when Draghi has once again failed to stimulate inflation, when he has crushed European banks, but at least has unleashed a massive debt issuance spree, is troubling.

  Spiegel has much more:

  The alienation between Germany and the ECB has reached a new level. Back in deutsche mark times, Europeans often joked that the Germans “may not believe in God, but they believe in the Bundesbank,” as Germany’s central bank is called. Today, though, when it comes to relations between the ECB and the German population, people are more likely to speak of “parallel universes.”

  The reason for German anger: rates.

  ECB head Draghi doesn’t understand why he is getting so much resistance from the country that has profited from the euro more than any other. Yet Germans blame Draghi for miniscule yields on savings accounts and life/retirement insurance policies. Frustration is growing.

   

  Draghi has pushed the prime rate down to zero and now even charges commercial banks a fee for parking their money at the ECB. He has also bought almost €2 trillion worth of bonds from euro-zone member states, making the ECB one of the largest state creditors of all time.

   

  During his most recent appearance before the Frankfurt reporter pool, he went even further. The idea of pumping money directly into the economy, he said, was a “very interesting concept,” with a helicopter to distribute the money across the country if necessary, as economists have half-jokingly recommended. Doing so is seen as a way of boosting the economy. German money being thrown out of a helicopter: It would be difficult to find a more fitting image to show people that the money they have set aside for retirement may soon be worth very little.

  If you want to get Germans angry, really angry, just suggest hyperinflation which is what helicopter money always leads to. They are really angry now; and an angry electorate is something Merkel, who has seen her popularity crushed as a result of Germany’s grotesque refugee experience, does not need..

  The criticism of Draghi had already been significant, but his public ruminations about so-called “helicopter money” have magnified it to extreme levels. Even economists that tend to back the ECB, such as Peter Bofinger, who is one of Merkel’s economic advisors, are now accusing Draghi of constantly “pulling new rabbits out of the hat.” Leading representatives of the banking and insurance sectors are openly speaking of legal violations. And strategists within Merkel’s governing coalition, which pairs her conservatives with the center-left Social Democrats (SPD), are concerned that Draghi is handing the right-wing populist Alternative for Germany (AfD) yet another issue where they can score points with the voters. There is hardly any other issue that enrages Germans at town meetings and political party conventions as much as the disappearance of their savings due to the “unconventional measures” adopted by the ECB in Frankfurt.

  Then again, just like when Draghi launched QE over Merkel’s protests, not even the Chancellor is prepared to openly oppose the former Goldman employee.

  By now, the growing dismay has been registered in the Chancellery. Merkel is also critical of Draghi’s zero percent interest policy, but she is afraid of making public demands that she may not be able to push through. Still, she is convinced that Draghi must give greater weight to German concerns, so she has resorted to telephone conversations and closed-door meetings to make her case.

   

  Economics Minister Sigmar Gabriel, who is also head of the SPD and vice chancellor, has likewise refrained from publicly criticizing Draghi. Instead, he says it was the “inaction of European heads of government” that has transformed the ECB into “a kind of faux economic government.” But Draghi’s most recent decision to make money in the euro zone even cheaper has been heavily criticized within Gabriel’s Economics Ministry. “It jeopardizes the trust of all those who work hard to establish a small degree of prosperity or a nest-egg for retirement,” says one ministry official. “Plus, the cheap money hasn’t helped get the economy back on track.”

  There is only one person who is not worried about offending the Italian central banker: Germany’s finance minister, Wolfi Schauble.

  

  To wit:

  Most dangerous for Draghi, however, is the displeasure from the German Finance Ministry. A few weeks ago, Finance Minister Wolfgang Schäuble warned the ECB head that his ultra-loose monetary policies could “ultimately end in disaster.” The fact that Schäuble said anything at all is rather surprising, as were the words he chose. Out of respect for the ECB’s independence, finance ministers tend not to comment on decisions made by the central bank.

  And here we get to the key point – according to Spiegel, the German finance minister is preparing to block the ECB’s helicopter money by any legal means possible:

  ECB independence is also of vital importance to Schäuble as well. But that is no longer the case when the bank’s policies exceed its legal mandate. It is a boundary that Schäuble believes Draghi and his people have crossed, which explains why the minister does not have a bad conscience about abandoning traditional reserve. “We have to initiate this dialogue about monetary policy,” says a Finance Ministry official.

   

  Were the ECB, as Draghi has indicated it might, to open the monetary policy gates even wider — with, for example, helicopter money — the German finance minister would view it as a breaking point. Such a policy would see the ECB bypass the banking sector and distribute money directly to companies, consumers or states, all of which would stand in violation of the central bank’s own statutes. Should it come to that, sources in the German Finance Ministry say, Berlin would have to consider taking the ECB to court to clarify the limits of its mandate. In other words: the German government and Draghi’s ECB would be adversaries in a public court case. 

   

  Such a legal battle between the government and a central bank would be a first in German history. It could lead to a constitutional crisis of unprecedented severity or to currency turbulence — which is why it is extremely improbable that the two sides would allow the conflict to escalate to such a degree.

  Actually, the outcome would be far less dramatic. Remember Draghi’s imaginary OMT program, the “deus ex” contraption he had to conceive to validate his 2012 threat of doing “whatever it takes?” Well, that led to a few lawsuits, the German constitutional court it wasn’t exactly good… and then washed its hands and punted to Brussels which promptly agreed with the ECB. Why would this time be any different.

  We do agree with Spiegel, however, that the threat of legal action indicates how powerless Germany’s ruling party suddenly feels: “the very fact that senior officials in the German Finance Ministry are considering their legal options makes it clear just how great the frustration with Draghi has become.”

  Next, Spiegel does its best attempt at humor by saying that “the ECB head’s ever more imaginative ideas for increasing the money supply, say Finance Ministry officials, indicate that he is only concerned about the psyche of the international financial markets and not about average German savers.“

  Uhm… yes. The ECB’s head is not concerned about German savers and yes, he is only concerned about financial markets. Did you really need the ECB to launch helicopter money to tell you that?

  But beyond the merely theatrical, one thing neither Draghi nor Merkel seem to have grasped, is that just like everywhere else around the globe, so in Germany the vast majority of the population is now openly angry with monetary policy, even if they can’t explicitly name the person behind their anger (around 70% of Americans think the Federal Reserve is a national park):

  During a recent visit to his constituency, Kauder’s deputy, economics expert Michael Fuchs, experienced first-hand just how concerned voters are about the interest-rate issue. One enraged man screamed at him during an event that Merkel is to blame for the low interest rates. Such anger is fertile soil for the AfD. “On this issue, it isn’t easy to counter the AfD,” Fuchs says. “The criticism of the ECB is justified.” Merkel’s coalition, he says, “must clearly say that it finds Mr. Draghi’s interest rate policy to be incorrect. We haven’t been loud enough.”

  That’s right, because you are terrified of being loud. Because while the ECB’s NIRP means a slow death for Deutsche Bank, should the ECB cut off Germany in a full blown vendetta, that would mean the death of Europe’s biggest bank overnight.

  Meanwhile other politicians are seeing cracks in Merkel’s facade and are eager to capitalize on the fury against low rates (and the ECB):

  Bavarian Finance Minister Markus Söder has already set the tone: “The zero-interest policy is an attack on the assets of millions of Germans, who have placed their money in savings accounts and in life insurance policies,” he says.

   

  Söder believes that emphatic critique of the ECB will bring political benefits. The ECB may be independent, but it isn’t omnipotent, he says. “We need a debate in Germany about the erroneous policies of the ECB,” he says. “The German government must demand a change in direction on monetary policy. If things continue as they have, it will be a boon for the AfD.” Ahead of a July conclave of the Bavarian state cabinet, Söder has been charged with developing ideas for what can be done to counter Draghi’s course.

  It’s not just politicians: take Nikolaus von Bomhard.

  Politically correct to a fault, but with a deep sensitivity to the mood of the people, Bomhard is the head of global reinsurance giant Munich Re. He recently launched a savage attack on the ECB. Because its loose monetary policy has driven up stock and real estate prices, he said, it is primarily benefiting the wealthiest people in the country. He said it was serving to redistribute wealth to the upper classes and it had become impossible to sit back and say nothing. “The people of Germany aren’t stupid,” he said, adding that political leadership was required.

  As a reminder, this is the same Bomhard who as we reportedly previously, recently revealed that Munich Re had set aside gold and also cash in the company’s safes. “It is a move that many normal Germans have already made. According to banking associations, the demand for safes and lockers has gone up as people are apparently concerned that they may soon have to pay negative interest rates to their banks, just as commercial banks must now pay the ECB.” At least unlike Japan, where the scramble for cash is so great the Finance Ministry has had to print additional ¥10,000 bills, so far Germany hasn’t run out of physical money.

  So far.

  Meanwhile, instead of at least pretending to hear German concerns, “Draghi has become increasingly annoyed by the constant criticism coming from Germany. He feels unjustly targeted and has insisted even more stubbornly on the correctness of his policies as a result – such as during a recent speech to German stock traders just outside of Frankfurt. What haven’t his German critics tried in their efforts to shed doubt on the measures he has taken, Draghi complained. They have warned of mega-inflation and of a red ECB balance sheet, the ECB head continued, but none of it has come to pass. “Repeatedly, those who have called our decisions into question, have been proven wrong,” Draghi said. It was the Mario Draghi that many of his German listeners were all too familiar with: the man who is never wrong.”

  * * *

  In the end, it is absolutely clear that Draghi will be wrong, just as Bernanke was wrong when he said “subprime was contained” or that “there will be no recession” months after one had started, and hundreds of other things the former “I am the smarest man in the world and i know it” was wrong about, but the question whether his error will bring not only Europe, but the entire world to hyperinflationary ruin, may depend on just one thing: whether the Germans succeed in reining him in.

  For now, however, we doubt it.

  Hours after the Spiegel article hit, Reuters cited the German finance ministry which “denied that it would consider taking legal action if the European Central Bank resorts to “helicopter money” distributions to euro zone citizens, an extreme form of monetary easing.”

  And so Germany retreats once more, terrified to openly engage the European Central Bank.

  * * *

  As senior German conservative lawmaker Ralph Brinkhaus was quoted by Spiegel, Germany needed to “put the ECB under pressure to provide justification” because “otherwise nothing will change.”

  It is clear enough that, at least for the time being, nothing will change and that helicopter money is indeed coming. Trade accordingly.

  

  

  

  

  

• Meanwhile In Germany, An Unexpected Ad Appears

  During a leisurely stroll around Germany, one may encounter many strange sights but nothing would stranger than the following ad (courtesy of Peter Barkow) which promises negative 1% interest rates for consumer loans up to 24 months.

  

   

  Here is the quick and dirty: take out a loan and pay 1% less.

  For the fine print we go to Santander Consumer Bank AG, which has this to which has this to say about this self-amortizing (if only in the beginning) loan.

  

   

  -1.0% FINANCING

   

  Finance now with 0% and is pay 1% off the purchase price.

   

  An exclusive designer bed for only 78 euros a month, or a designer dining table for only 88 euros a month – what are you waiting for?

   

  Fulfill your desires today and pay conveniently in small monthly installments – and get this money back yet!

   

  To mark the 20 years of existence of WHO’S PERFECT, we offer the whole of April at a negative interest rate financing. 

   

  This means that you get refunded after delivery of your goods 1% of the amount of funding of the purchase contract.

   

  Purchase in all our stores and of course here in the online shop you can easily and conveniently fund. So luxury is made easy!

   

  Now -1.0% financing for 24 months (in monthly installments)

   

  Santander Consumer Bank, Santander-Platz 1, 41061 Mönchengladbach

  Sorry, no refugees allowed. Here are the conditions:

  For financing the following requirements must be satisfied in principle:

  • You must be of legal age
  • You must have your primary residence in Germany
  • You must have a checking account at a bank in Germany
  • You must have a steady income
  • You must have a valid identity card or passport with registration card
  • In case of non-EU citizens are further evidence as residence and work permit and a current registration certificate required

  Jest aside, what this ad does is scream deflation. Or maybe that’s the German banks screaming:recall that as shown earlier this week, European bank stocks have been tracking the 10Y Bund lower tick for tick. Why? Because the lower rates go, the lower the interest margin profit.

   

  

  And when rates go negative, so do profits. At that point all banks can hope for is to charge customers one off “violation” fees to offset the NIM losses in a world in each every loan assures an at least 1% loss for the first 24 months of the loan.

  What is more troubling is that now that one bank is offering such loans (to stimulate demand) all other banks will follows suit, and what is initially a 24 month promo period will quickly become set for the duration of the loan. And then we will see an even more unexpected ad, when -2% rates emerge, then -3%, until finally the bank “market test” of where the equilibrium consumer loan demand is to be found provides an answer.

  Meanwhile, even more deflation will be unleashed across Europe as both short and long-term consumer expectations for inflation plunge and instead everyone is looking forward to the latest and greatest negative rate loan which not only pays itself off but reduces the purchase price.

  All of this will continue until the ECB does one or all of the above: i) forces banks to cut deposit rates negative; ii) eliminates cash; iii) starts the money helicopter.

  As we write, Mario Draghi is already working on all of the above.

  

  

  

  

  

• The Complete Story Behind Payroll Gains In Just One Chart

  The following tweet by Eurofaultlines is the best, and most concise, summary of the recent “improvement” in nonfarm payrolls. 

  • Declining average weekly hours and rising part-time employment.

  

  That, for all non-fiction peddlers, is all you need to know.

  

  

  

  

  

• These 2 Charts Show The Next Recession Will Blow Out The US Budget

  By John Mauldin of Mauldin Economics

  These 2 Charts Show the Next Recession Will Blow Out the US Budget

  The weakest recovery in modern history has stretched on for 69 months.

  By 2017, it will be the third-longest recovery without a recession since the Great Depression. By 2018, it will be the second longest.

  Only during the halcyon economic days of the 1960s have we seen a longer recovery; but that record, too, will be eclipsed sometime in 2019—if we don’t see a recession first.

  And note that we were growing at well over 3% in the 1960s, not the anemic 2% we have averaged during this recovery and certainly not the positively puny 1.5% we have endured lately.

  Global growth is slowing down.

  Given the limited number of arrows left in the Federal Reserve’s monetary policy quiver, the US is going to have a difficult time dealing with the fallout from a recession.

  Even worse, a number of factors are coming together that will require serious crisis management.

  The US’ fiscal reality

  Next year, the US national debt will top $20 trillion. The deficit is running close to $500 billion, and the Congressional Budget Office projects that figure to rise.

  Add another $3 trillion or so in state and local debt. As you may imagine, the interest on that debt is beginning to add up, even at the extraordinarily low rates we have today.

  Sometime in 2019, entitlement spending, defense, and interest will consume all the tax revenues collected by the US government. That means all spending for everything else will have to be borrowed.

  The CBO projects the deficit will rise to over $1 trillion by 2023. By that point, entitlement spending and net interest will be consuming almost all tax revenues, and we will be borrowing to pay for our defense.

  Let’s look at the following chart, which comes from CBO data:

  

  By 2019, the deficit is projected to be $738 billion. There are only three ways to reduce that deficit: cut spending, raise taxes, or authorize the Federal Reserve to monetize the debt.

  At the numbers we are now talking about, getting rid of fraud and wasted government expenditures is a rounding error. Let’s say you could find $100 billion here or there. You are still a long, long way from a balanced budget.

  But implicit in the CBO projections is the assumption that we will not have a recession in the next 10 years. Plus, the CBO assumes growth above what we’ve seen in the last year or so.

  What a budget might look like if we have a recession

  I asked my associate Patrick Watson to go back and look at the last recession and determine the level of revenue lost, and then to assume the same percentage revenue loss for the next recession.

  We randomly decided that we would hypothesize our next recession to occur in 2018. Whether it happens in 2017 or 2019, the relative numbers are the same.

  Here’s a chart of what a recession in 2018 would do. 

  

  Entitlement spending and interest would greatly exceed revenue.

  The deficit would balloon to $1.3 trillion. And if the recovery occurs along the lines of our last (ongoing) recovery, we will not see deficits below $1 trillion over the following 10 years—unless we reduce spending or raise revenues.

  The situation is merely hopeless, but not critical. Next week, I’m going to outline some of the policies that I think have the potential to save the US budget.

  I can guarantee you that some of my proposals will annoy almost everyone, but that is the nature of a compromise—nobody gets everything they want.

  

  

  

  

  

• War On Cash Escalates: Japan Starts Testing Fingerprints As "Currency"

  The war on cash just got serious, and of course, it is the extreme policy experimenters of Japan that are pushing the boundaries. Having dived headlong into negative interest rates, Japanee policymakers recognize full well the historical reaction of "hording cash" will not 'create' the nirvana of 2% inflation and break the 'deflation mindset' that they so long have waited for. So, following in the footsteps of Venezuela, as Japan News reports, starting this summer, the government will test a system which will enable people to buy things at stores using only their fingerprints – thus enabling full monitoring (and inevitable control) of spending (or saving).

   

  

  The government hopes to increase the number of foreign tourists by using the system to prevent crime and relieve users from the necessity of carrying cash or credit cards.

  The experiment will have inbound tourists register their fingerprints and other data, such as credit card information, at airports and elsewhere.

   

  Tourists would then be able to conduct tax exemption procedures and make purchases after verifying their identities by placing two fingers on special devices installed at stores.

   

  …

   

  The government plans to gradually expand the experiment by next spring, to cover areas including tourist sites in the Tohoku region and urban districts in Nagoya.

   

  It hopes to realize the system throughout the country, including Tokyo, by 2020.

   

  …

   

  Data concerning how and where foreign tourists use the system will be managed by a consultative body led by the government, after the data is converted to anonymous big data.

   

  After analyzing tourists’ movements and their spending habits, the data is expected to be utilized to devise policies on tourism and management strategies for the tourism industry.

  However, there are concerns that tourists will be uneasy about providing personal information such as fingerprints. The experiment will examine issues including how to protect one’s privacy and information management.

  And finally, the system has already begun use in one bank's ATM systems…

  By the end of this month at the earliest, Tokyo-based Aeon Bank will become the first bank in Japan to test a system in which customers will be able to withdraw cash from automatic teller machines using only fingerprints for identification and omitting the use of cash cards.

   

  “The system is also superior in the area of security, such as preventing people from impersonating our customers,” an official from the bank said.

  While the idea of fingerprint ID-ing authorization makes perfect sense from a security perspective, the requirement of fingerprinting an entire nation (or those who want to spend or retrieve cash) is yet one more step towards the totalitarian control of the final step in the central planners' arsenal – your consumption habits.

  

  

  

  

  

• "The Greater Depression Has Started" – Comparing 1930s & Today

  Submitted by Doug Casey via InternationalMan.com,

  You've heard the axiom "History repeats itself." It does, but never in exactly the same way. To apply the lessons of the past, we must understand the differences of the present.

  During the American Revolution, the British came prepared to fight a successful war—but against a European army. Their formations, which gave them devastating firepower, and their red coats, which emphasized their numbers, proved the exact opposite of the tactics needed to fight a guerrilla war.

  Before World War I, generals still saw the cavalry as the flower of their armies. Of course, the horse soldiers proved worse than useless in the trenches.

  Before World War II, in anticipation of a German attack, the French built the "impenetrable" Maginot Line. History repeated itself and the attack came, but not in the way they expected. Their preparations were useless because the Germans didn't attempt to penetrate it; they simply went around it, and France was defeated.

  The generals don't prepare for the last war out of perversity or stupidity, but rather because past experience is all they have to go by. Most of them simply don't know how to interpret that experience. They are correct in preparing for another war but wrong in relying upon what worked in the last one.

  Investors, unfortunately, seem to make the same mistakes in marshaling their resources as do the generals. If the last 30 years have been prosperous, they base their actions on more prosperity. Talk of a depression isn't real to them because things are, in fact, so different from the 1930s. To most people, a depression means '30s-style conditions, and since they don't see that, they can't imagine a depression. That's because they know what the last depression was like, but they don't know what one is. It's hard to visualize something you don't understand.

  Some of them who are a bit more clever might see an end to prosperity and the start of a depression but—al­though they're going to be a lot better off than most—they're probably looking for this depression to be like the last one.

  Although nobody can predict with absolute certainty what this depression will be like, you can be fairly well-assured it won't be an instant replay of the last one. But just because things will be different doesn't mean you have to be taken by surprise.

  To define the likely differences between this depres­sion and the last one, it's helpful to compare the situa­tion today to that in the early 1930s. The results aren't very reassuring.

  CORPORATE BANKRUPTCY

  1930s

  Banks, insurance companies, and big corporations went under on a major scale. Institutions suffered the consequences of past mistakes, and there was no financial safety net to catch them as they fell. Mistakes were liquidated and only the prepared and efficient survived.

  Today

  The world’s financial institutions are in even worse shape than the last time, but now business ethics have changed and everyone expects the government to "step in." Laws are already in place that not only allow but require government inter­vention in many instances. This time, mistakes will be compounded, and the strong, productive, and ef­ficient will be forced to subsidize the weak, unproductive, and inefficient. It's ironic that businesses were bankrupted in the last depression because the prices of their products fell too low; this time, it'll be because they went too high.

  UNEMPLOYMENT

  1930s

  If a man lost his job, he had to find another one as quickly as possible simply to keep from going hungry. A lot of other men in the same position competed desperately for what work was available, and an employer could hire those same men for much lower wages and expect them to work harder than what was the case before the depression. As a result, the men could get jobs and the employer could stay in business.

  Today

  The average man first has months of unemployment insurance; after that, he can go on welfare if he can't find "suitable work." Instead of taking whatever work is available, especially if it means that a white collar worker has to get his hands dirty, many will go on welfare. This will decrease the production of new wealth and delay the recovery. The worker no longer has to worry about some entrepreneur exploiting (i.e., employing) him at what he considers an unfair wage because the minimum wage laws, among others, precludes that possibility today. As a result, men stay unemployed and employers will go out of business.

  WELFARE

  1930s

  If hard times really put a man down and out, he had little recourse but to rely on his family, friends, or local social and church group. There was quite a bit of opprobrium attached to that, and it was only a last resort. The breadlines set up by various government bodies were largely cosmetic measures to soothe the more terror-prone among the voting populace. People made do because they had to, and that meant radically reducing their standards of living and taking any job available at any wage. There were very, very few people on welfare during the last depression.

  Today

  It's hard to say how those who are still working are going to support those who aren't in this depression. Even in the U.S., 50% of the country is already on some form of welfare. But food stamps, aid to fami­lies with dependent children, Social Security, and local programs are already collapsing in prosperous times. And when the tidal wave hits, they'll be totally overwhelmed. There aren't going to be any breadlines because people who would be standing in them are going to be shopping in local supermarkets just like people who earned their money. Perhaps the most dangerous aspect of it is that people in general have come to think that these programs can just magically make wealth appear, and they expect them to be there, while a whole class of people have grown up never learning to survive without them. It's ironic, yet predictable, that the programs that were supposed to help those who "need" them will serve to devastate those very people.

  REGULATIONS

  1930s

  Most economies have been fairly heavily regulated since the early 1900s, and those regulations caused distortions that added to the severity of the last depression. Rather than allow the economy to liquidate, in the case of the U.S., the Roosevelt regime added many, many more regulations—fixing prices, wages, and the manner of doing business in a static form. It was largely because of these regulations that the depression lingered on until the end of World War II, which "saved" the economy only through its massive reinflation of the currency. Had the government abolished most controls then in existence, instead of creating new ones, the depression would have been less severe and much shorter.

  Today

  The scores of new agencies set up since the last depression have created far more severe distortions in the ways people relate than those of 80 years ago; the potential adjustment needed is proportionately greater. Unless government restrictions and controls on wages, working conditions, energy consumption, safety, and such are removed, a dramatic economic turnaround during the Greater Depression will be impossible.

  TAXES

  1930s

  The income tax was new to the U.S. in 1913, and by 1929, although it took a maximum 23.1% bite, that was only at the $1 million level. The average family’s income then was $2,335, and that put average families in the 1/10^th of 1 percent bracket. And there was still no Social Security tax, no state income tax, no sales tax, and no estate tax. Furthermore, most people in the country didn't even pay the income tax because they earned less than the legal minimum or they didn't bother filing. The government, therefore, had immense untapped sources of revenue to draw upon to fund its schemes to "cure" the depression. Roosevelt was able to raise the average income tax from 1.35% to 16.56% during his tenure—an increase of 1,100%.

  Today

  Everyone now pays an income tax in addition to all the other taxes. In most Western countries, the total of direct and indirect taxes is over 50%. For that reason, it seems unlikely that direct taxes will go much higher. But inflation is constantly driving everyone into higher brackets and will have the same effect. A person has had to increase his or her income faster than inflation to compensate for taxes. Whatever taxes a man does pay will reduce his standard of living by just that much, and it's reasonable to expect tax evasion and the underground economy to boom in response. That will cushion the severity of the depression somewhat while it serves to help change the philosophical orientation of society.

  PRICES

  1930s

  Prices dropped radically because billions of dollars of inflationary currency were wiped out through the stock market crash, bond defaults, and bank failures. The government, however, somehow equated the high prices of the inflationary '20s with prosperity and attempted to prevent a fall in prices by such things as slaughtering livestock, dumping milk in the gutter, and enacting price supports. Since the collapse wiped out money faster than it could be created, the government felt the destruction of real wealth was a more effective way to raise prices. In other words, if you can't increase the supply of money, decrease the supply of goods.

  Nonetheless, the 1930s depression was a deflationary collapse, a time when currency became worth more and prices dropped. This is probably the most confusing thing to most Americans since they assume—as a result of that experience—that "depression" means "deflation." It's also perhaps the biggest single difference between this depression and the last one.

  Today

  Prices could drop, as they did the last time, but the amount of power the government now has over the economy is far greater than what was the case 80 years ago. Instead of letting the economy cleanse itself by allowing the nancial markets to collapse, governments will probably bail out insolvent banks, create mortgages wholesale to prop up real estate, and central banks will buy bonds to keep their prices from plummeting. All of these actions mean that the total money supply will grow enormously. Trillions will be created to avoid deflation. If you find men selling apples on street corners, it won't be for 5 cents apiece, but $5 apiece. But there won't be a lot of apple sellers because of welfare, nor will there be a lot of apples because of price controls.

  Consumer prices will probably skyrocket as a result, and the country will have an inflationary depression. Unlike the 1930s, when people who held dollars were king, by the end of the Greater Depression, people with dollars will be wiped out.

  THE SOCIETY

  1930s

  The world was largely rural or small-town. Communications were slow, but people tended to trust the media. The government exercised considerable moral suasion, and people tended to support it. The business of the country was business, as Calvin Coolidge said, and men who created wealth were esteemed. All told, if you were going to have a depression, it was a rather stable environment for it; despite that, however, there were still plenty of riots, marches, and general disorder.

  Today

  The country is now urban and suburban, and although communications are rapid, there's little interpersonal contact. The media are suspect. The government is seen more as an adversary or an imperial ruler than an arbitrator accepted by a consensus of concerned citizens. Businessmen are viewed as unscrupulous predators who take advantage of anyone weak enough to be exploited.

  A major financial smashup in today's atmosphere could do a lot more than wipe out a few naives in the stock market and unemploy some workers, as occurred in the '30s; some sectors of society are now time bombs. It's hard to say, for instance, what third- and fourth-generation welfare recipients are going to do when the going gets really tough.

  THE WAY PEOPLE WORK

  1930s

  Relatively slow transportation and communication localized economic conditions. The U.S. itself was somewhat insulated from the rest of the world, and parts of the U.S. were fairly self-contained. Workers were mostly involved in basic agriculture and industry, creating widgets and other tangible items. There wasn't a great deal of specialization, and that made it easier for someone to move laterally from one occupation into the next, without extensive retraining, since people were more able to produce the basics of life on their own. Most women never joined the workforce, and the wife in a marriage acted as a "backup" system should the husband lose his job.

  Today

  The whole world is interdependent, and a war in the Middle East or a revolution in Africa can have a direct and immediate effect on a barber in Chicago or Krakow. Since the whole economy is centrally controlled from Washington, a mistake there can be a national disaster. People generally aren’t in a position to roll with the punches as more than half the people in the country belong to what is known as the "service economy." That means, in most cases, they're better equipped to shuffle papers than make widgets. Even "necessary" services are often terminated when times get hard. Specialization is part of what an advanced industrial economy is all about, but if the economic order changes radically, it can prove a liability.

  THE FINANCIAL MARKETS

  1930s

  The last depression is identified with the collapse of the stock market, which lost over 90% of its value from 1929 to 1933. A secure bond was the best possible investment as interest rates dropped radically. Commodities plummeted, reducing millions of farmers to near subsistence levels. Since most real estate was owned outright and taxes were low, a drop in price didn't make a lot of difference unless you had to sell. Land prices plummeted, but since people bought it to use, not unload to a greater fool, they didn't usually have to sell.

  Today

  This time, stocks—and especially commodities—are likely to explode on the upside as people panic into them to get out of depreciating dollars in general and bonds in particular. Real estate will be—next to bonds—the most devastated single area of the economy because no one will lend money long term. And real estate is built on the mortgage market, which will vanish.

  Everybody who invests in this depression thinking that it will turn out like the last one will be very unhappy with the results. Being aware of the differences between the last depression and this one makes it a lot easier to position yourself to minimize losses and maximize profits.

  *  *  *

  So much for the differences. The crucial, obvious, and most important similarity, however, is that most people's standard of living will fall dramatically.

  The Greater Depression has started. Most people don't know it because they can neither confront the thought nor understand the differences between this one and the last.

  As a climax approaches, many of the things that you've built your life around in the past are going to change and change radically. The ability to adjust to new conditions is the sign of a psychologically healthy person.

  Look for the opportunity side of the crisis. The Chinese symbol for "crisis" is a combination of two other symbols – one for danger and one for opportunity.

  The dangers that society will face in the years ahead are regrettable, but there's no point in allowing anxiety, frustration, or apathy to overcome you. Face the future with courage, curiosity, and optimism rather than fear. You can be a winner, and if you plan carefully, you will be. The great period of change will give you a chance to regain control of your destiny. And that in itself is the single most important thing in life. This depression can give you that opportunity; it's one of the many ways the Greater Depression can be a very good thing for both you as an individual and society as a whole.

  

  

  

  

  

• "It's Just An Illusion" Santelli & Schiff Slam Fed-Watchers' "Blind-Eye" To Yellen's "Phony Recovery"

  "This economy would have to improve dramatically to get to mediocre," warns Schiff, otherwise, as Santelli rages they would be hiking rates and talking confidently, adding that either Fed-watchers are "going along with it to earn a paycheck"  – just as they did in 2008 – or "they are ignorant."

  "The Fed can't raise rates because they don't want to poke too many holes in this bubble. This recovery was never real, it's phony, it's just another Federal Reserve bubble just like the one that popped in 2008, only this one is even bigger.

   

  What we really should be talking about is not when The Fed will hike rates, but when they wll admit the economy is a lot weaker than they expected and when the next rate cut and when they will launch QE4?"

  After just over 3 minutes of painful reality checks, Schiff sums up it all up perfectly, reflecting on the Sanders-Trump phenomena, "behind all those phony jobs numbers are a lot of angry Americans as everyone pretends this is a legitimate recovery."

  "Why are so many Americans so upset if the 5% unemployment rate is correct? It's not!!"

   

  And opining on the collapse of practically every other data point aside from "jobs", Santelli sarcastically screams "yeah but they are all out of the norms and should be ignored…" adding that it's "shoot the messenger" on any data item or story that does not fit The Fed's narrative…

  Enjoy the following 200 seconds of truth – they don't come around too often nowadays…

  

  

  

  

  

• "Rotten To The Core"

  Submitted by Bill Bonner of Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

  Poison Money

  We live in a world of sin and sorrow, infected by a fraudulent democracy, Facebook, and a corrupt money system. Wheezing, weak, and weary from the exertion of trying to appear “normal,” the economy staggers on.

   

  

  Staggering on….

   

  Last week, we gained some insight into the ailment. Something in the diagnosis has puzzled us for years: How is it possible for the most advanced economy in the history of the world to make such a mess of its most basic bodily functions – getting and spending?

  By our calculations – backed by studies, hunches, and deep research – the typical American man (it is less true for women) earns less in real, disposable income per hour today than he did 30 years ago.

  He goes to buy a car or a house, and he finds he must work longer to pay the bill than he would have in the last years of the Reagan administration. How is that possible? What kind of economic quackery do you need to stop capitalism from increasing the value of workers’ time?

  What kind of policies and circumstances are required to stiffen its joints… clog up its innards… and rot its brain? Globalization? Financialization? Bad trade deals? Too much red tape? Too many cronies? Too many zombies?

   

  

  We can identify at least one source of the quackery…

   

  All of those things played a role. But our answer is simpler: poison money. The bigger the dose… the sicker it got. When you say you “have some money,” you usually believe that there is, somewhere, an electronic database in which it is recorded that you are the owner of some amount of currency.

  You have $100,000 in your account, right?   Does it mean that there is a little cubbyhole somewhere, with your name on it, in which you will find a stack of 1,000 Ben Franklins? Nope. Not even close. No cubbyhole. No stack of money. No nothing.

  Does it mean the bank is carefully guarding some 1s and 0s, digital information proving that it at least “stores” your money in its database? Nope again! What it means is there is a financial institution of uncertain integrity… with a complex electronic balance sheet of uncertain accuracy… listing alleged financial claims and contracts of uncertain quality…

  …and that you are one of the many thousands of entries on the debit side… with a claim to a certain number of dollars… which the institution may or may not have, each of uncertain value.

   

  

  When prolific American bank robber Willie Sutton was asked why he robbed banks, he reportedly said “Because that’s where the money is”. Not anymore, not really.

   

  Today, banks – and this could be said of the entire financial system – no longer have “money.” They have credits and debits. Your deposit is your bank’s liability and your asset.

  But look at the balance sheet. You don’t know how many of the claims shown on the left are right… or whether, when the other creditors get finished with it, any of the assets shown on the right are left. All you know is that the system works. Until it doesn’t.

   

  System Seizure

  For many months, we have urged readers to prepare themselves for problems. One day, the accumulation of contradictions, misinformation, and plain old “trash” in the system will cause a seizure. You will go to the ATM, and it won’t work.

  That day, your life could take a big turn to the downside… depending on how widespread the problem is… the cause of it… and how you prepared for it. Of course, we don’t know for sure that that day will ever come. We are always in doubt, especially about our own forecasts.

   

  

  And then, one morning…

   

  Still, the potential problem seems likely enough… and grave enough… to justify some minimal precautions. You might cross the street blindfolded without getting run down, but it is still a good idea to look both ways. Usually, we look to the right… where we see the problems inherent in a credit-based money system.

  The feds can create all the credit they want. But real people can’t pay an infinite amount of debt service. Like a junkyard dog reaching the limit of his chain, the credit cycle has a way of jerking people back to reality.

   

  Real Money

  But there are other potential problems coming from the left. An electronic, credit-based money system is fragile. It can be hacked by thieves. It can be attacked by terrorists. It can be shut down by accident. Even a “bug” could bring it to its knees.

  And then what? How will you get money? How will you spend it? How will you buy gasoline or food? Our advice: Keep some cash on hand. Make sure you own some gold, too – real gold, coins that you can hold in your hand and you can flip to your grandchildren.

  “Hey kid,” you say with a knowing and superior air, “take a look at this. This is real money. You don’t have to plug it in.” By the way… Gold just had its best quarter in 30 years. Do buyers know something? Maybe.

   

  

  Do the buyers know something? Maybe they do… – click to enlarge.

  

  

  

  

  

• "This Is Devastating News For Republicans": Poll Finds Denying Trump Nomination Would Crush GOP

  In the latest shock for the GOP, which in recent weeks some have speculated is willing to scuttle the entire republican presidential campaign if it means not having Trump as the candidate, according to a just released Reuters poll, one  third of Republican voters who support Donald Trump could turn their backs on their party in November’s presidential election if he is denied the nomination in a contested convention.

  Or, as The Hill puts it, “blocking Donald Trump from the Republican presidential nomination with a contested convention would spell disaster for the GOP” because instead Trump supporters would vote Democrat, vote third-party or sit out the election.

  Just 66% of Trump supporters, which as of this moment are the most numerous of any presidential candidate, said they would support the GOP’s nominee anyway. 

  Should it get to a contested convention, the GOP could be hurt even more in November because 58% of Trump supporters said they would stay with the party, while 16% would leave and 26% responded they didn’t know, yet.

  The results are bad news for Trump’s rivals as well as party elites opposed to the real estate billionaire, suggesting that an alternative Republican nominee for the Nov. 8 presidential race would have a tougher road against the Democrats.

  “If it’s a close election, this is devastating news” for the Republicans, said Donald Green, an expert on election turnout at Columbia University.

  The Reuters/Ipsos poll conducted March 30 to April 8 asked Trump’s Republican supporters two questions: if Trump wins the most delegates in the primaries but loses the nomination, what would they do on Election Day, and how would it impact their relationship with the Republican Party?

  This is what the respondents said:

  

   

  Meanwhile, 58 percent said they would remain with the Republican Party. Another 16 percent said they would leave it, and 26 percent said they did not know what they would do with their registration. The online poll of 468 Republican Trump supporters has a credibility interval of 5.3 percentage points.

  Trump, whose supporters have remained loyal even as he rankled women, Hispanics, Muslims, veterans and others with his fiery rhetoric on the campaign trail, predicted last month there would be riots outside the convention if he was blocked.

  “If they broker him out, I’ll be fed up with the Republicans,” said Chuck Thompson, 66, a Trump supporter from Concord, North Carolina, who took the poll .

  Cited by Reuters, Thompson, a lifelong Republican, said he admires Trump’s independence from big campaign donors and takes that as a sign that the front-runner will be able to think for himself if he were to become president.

  If Trump loses the nomination, Thompson said he would quit the party. “The people want Donald Trump. If they (Republicans) can’t deal with that, I don’t need them,” he said.

  Green said the departure of even a small number of Republicans would make it tough for the party to prevent the Democrats from winning the White House, especially if the election is again decided by razor-thin margins in a handful of battleground states.

  What is paradoxical, is that Trump and Cruz both trail Democratic front-runner Hillary Clinton among likely general election voters in a hypothetical general election matchup, but not by much, according to the latest Reuters/Ipsos polls. The only Republican candidate who, again according to polls, can best Hillary Clinton is Kasich, the one candidate who has virtually no shot of becoming the candidate.

  In other words, the GOP is likely damned if it goes to convention, and damned if it doesn’t.

  Then again, the death of the GOP would not have to wait until November: if and when it does get to the contested convention one can call the time of death.

  Generally, a convention battle is a bad sign for the health of a political party, said Elaine Kamarck, a senior fellow at the Brookings Institution. “When a party gets to a point when it has a contested convention, it almost always hurts them,” Kamarck said. “It’s a confirmation of some really deep fissures within the party that were unable to be dealt with during the primary season.”

  And then there are hard core Trump supporters such as Elizabeth Oerther, 40, of Louisville, Kentucky, who would go all the way, saying she would switch parties and vote for the Democratic nominee if the Republicans denied Trump the nomination.

  “If you don’t give it to him, I’m going to vote against them,” said Oerther, who took the poll. “They want to take away the choice of the people. That’s wrong.”

  

  

  

  

  

• Caught On Tape: Cameraman Attacked At Greek Neo-Nazi Party "Anti-Islamization" Protests

  Despite proclamations from Europe's leaders that Greece was is fixed thanks to its latest round of bailouts and austerity, leaving aside The IMF's hatchet job, and growth is set to return any quarter now; unemployment remains mid-20%, capital controls continue to be in place (ATM caps), and the growing refugee 'problem' leaves social unrest rearing its ugly head once again.

  As KeepTalkingGreece reports, the following shocking video footage captures the moment when a member of the right-extremists of Golden Dawn runs and raise an iron stick against the cameraman of a private television channel covering a GD meeting in the streets of Piraeus. The attacker is wearing a helmet.

  “At the very last moment, the cameraman managed to escape the attack,” the Live News presenter explains in the video adding “it was a miracle that the cameraman went unharmed”.

  According to Live News presenter’s website NewsIt.gr, “present at the incident were also two MPs from Golden Dawn, I. Kasidiaris and Y. Lagos.”

  

  Live News and NewsIt speak of “murder attempt” against the cameraman and wonders why the police did not detain the ‘bully’.

  The incident occurred on Friday afternoon, during a Golden Dawn meeting in Piraeus “against the country’s Islamization” as the racist party said in a poster. An anti-Fascist protest was organized at the same time.

  Minor incidents occurred between the two groups,  riot police intervened with sound flares, one anti-fa protester has been slightly injured.

  There have been apparently two detentions but it is not known who has been detained and why.

  

  

  

  

  

• The End Is Near For Brazil's Ultra-Corrupt Government

  Submitted by George Greenwood via The Foundation For Economic Education,

  Brazil has faced a sharp change in its economic fortunes. Graft, mismanagement of growth dividends and protectionism has put dreams of a seat at the top table on hold.

  At the heart of this regression has been the beleaguered president Dilma Rousseff.

  Last Wednesday, her main coalition partner, the Brazilian Democratic Movement Party, left government. Its ministers resigned their posts and party members left over 600 positions in government.

  An official in the Brazilian government explained the significance of the move.

  “It’s going to be a big blow. The last blow that brings down the government or the last straw before the impeachment process begins.”

  The current constitutional crisis has been the product of a number of interlocking problems besetting the Brazilian government.

  The Brazilian economy shrank four percent this year, and looks set to lose another four percent in the next.

  Rousseff reneged on commitments to liberalisation, and instead tried to protect the industries that her core electoral support occupied. But this has spectacularly backfired, with government money wasted on subsidies, trade hit by tariffs and growth sharply slowing.

  “We could lose a decade of economic growth in three or four years,” the official explained.

   

  “In other words, a decade of growth would be lost during Dilma’s mandate if she continues on as president.”

  This recession, and concurrent high inflation, has been magnified by the biggest scandal in political memory.

  Petrobras, Brazil’s oil giant and the largest company in Latin America, was found to have been engaged in corruption, including illegal political campaign funding, to the tune of 30 to 40 billion dollars.

  While the scandal has embroiled all political parties, it has hit those in power the hardest.

  Lula de Silva, the wildly popular former president considered Brazil’s most important political figure, has been being found to be at the heart of it.

  “Companies that worked for Petrobras were cross financing Lula, buying apartments for him, a ranch for him. They paid him 200,000 dollars a lecture. He earned 40 to 50 million dollars in just 2 or 3 years,” the official explained.

  Beyond personal buy offs Petrobras construction subsidiaries had deals to complete construction projects at inflated prices. The illegal proceeds of these deals were used to finance the People’s Party and its leaders among other parties.

  While blackening the names of many, the investigation has also made some unlikely public champions.

  “Judge Sergio Moro has been conducting the whole investigation. Many consider him a hero for breaking down this corruption,” the official said.

  Among the Brazilian political elite, the scandal has been compared to Italy’s “Mani Pulite” programme, a huge judicial investigation that swept a generation of corrupt politicians out of office for their illegal dealings in the 1990’s.

  For Dilma Rousseff, the allegations are not direct. There is no “money in her pocket”.

  But, the public is keenly aware that she benefited from these networks of corruption. They provided the funds to elect her and her party. Her net negatives in opinion polling are approaching the 90 per cent mark. Her attempts to protect Lula from prosecution with a ministerial position have only worsened this opposition, before they were struck down by the courts.

  “It is considered common sense now that she will be impeached. Only a miracle can save her. All the factors are pushing that way,” the official explained.

  Vice President Michel Temer has certainly not missed this fact. Having ordered his PMDP party to leave government, he is now working hard to impeach her, and to assume the presidency himself. However, even the blatant way in which he has acted has not put the Brazilian public off a change of face.

  “I think people want to see Rousseff impeached.

   

  “I think we should really have a new general election. It wouldn’t be ideal to have a new vice president entering office though the impeachment process.

   

  “People don’t think the vice president is honest person, not at all. He’s seen as a savvy political operator, but people just don’t want Dilma anymore. They just want her to leave, to have a fresh start. No matter with whom. People want a symbol, they might want something more,” the official concluded.

  While Temer’s assumption of the presidency would be constitutional, its legitimacy would be on more rocky ground because of his own party’s role in the scandal.

  Practically, however, impeachment seems just over the horizon. Rousseff has barely enough leverage to limp on in office, and this is draining by the hour.

  A Brazilian president needs only a third of votes in either house of congress to block an impeachment. They could block an impeachment’s admission in the lower house, or by winning the “trial” in the upper house, with this level of support.

  As such, the public is just not buying the complaints from her supporters of foul play.

  “If a serving president cannot find the support of a third of these two bodies, it is quite reasonable to say she does not have any support,” the official said.

  That said impeachment is unlikely to be a long term solution.

  “I don’t think it will bring political stability to Brazil. The opposition is going to make it hard for the Vice President even if he does take over.”

  However the official did not think that Brazil risked a radical lurch in response to public outcry over the scandal.

  “I doubt it.  Brazil, is pretty centrist. We do have some right wing parties in pushing for impeachment as well. Jair Bolsonaro for example, is a very radical guy, who has advocated military take overs, is against abortion and is very homophobic. While he hasn’t been touched by the political scandal, I don’t think he’d have a chance in an election. He’s no Brazilian Trump.

  Brazil clearly wants new blood in government, and the writing appears to be on the wall for Dilma Rousseff and the People’s Party.

  Whether she makes it a swift clean end to allow a fresh start is another matter.

  

  

  

  

  

• "It Been Horrendous" – Investor Tries To Pull Cash From Valeant-Heavy Fund, Gets Shares Instead

  When people talk about the historic collapse of Valeant’s stock price (down 65% this year), the first name that usually comes to mind is that of Bill Ackman whose Pershing Square has been one of the biggest investors in VRX stock and also one of the biggest losers, wiping out billions in assets under management as a result of Valeant’s unprecedented unwind late last summer.

  But while the flamboyant Ackman, who enjoys basking the spotlight when his 100+ page slideshows lead to en immediate eruption (or collapse) in a given company’s stock price but certainly not when the winds blow against him, is the most popular holder of Valeant stock, another name, with over 35 million shares, is a far greater bagholder.

  We are of course talking about the highly concentrated and far lower profile, Sequoia Fund, which at one point last year had more than 30% of its portfolio invested in Valeant, and whose most recent publicly disclosed AUM was roughly $5.5 billion. That, to be sure is not the latest assets under management because as Morningstar has hinted in the past few weeks there has been a run on the suddenly disappointing fund, which according to the WSJ has seen more than $500 million in redemption requests.

  Indeed, while Ackman has allegedly so far avoided an influx of withdrawals from Pershing Square despite being down over 20% in 2016 following a comparable return in 2015, Sequoia’s LPs have been far less merciful and have been scrambling to get their cash out. The problem is that, as the curious case of Tom Bentley shows, Sequoia has been unable to satisfy their cash out demands, and instead has been meeting redemption demands “in kind” by shooting over stock equivalents.

  As the WSJ reports, when Tom Bentley tried to pull his money from a mutual fund troubled by its large stake in Valeant Pharmaceuticals International Inc., he instead received shares in a Springfield, Mo. auto-parts retailer.

   Sequoia Fund Inc. sent the retired computer hardware engineer about 5% of his money in cash and the rest was stock in one company–O’Reilly Automotive Inc. Mr. Bentley said he sold the shares as soon as they appeared in his account on April 7, but they had already dropped in value. 

  Typically, mutual fund investors expect cash instead of stock when they ask for their money back. But investors seeking to pull large sums from Sequoia are getting a combination, according to people familiar with the matter.

  “It has been pretty horrendous,” Mr. Bentley said.

  It is also a surprising approach to make, yet one which Sequoia is entirely in its right.

  As the WSJ notes, Sequoia’s repayment approach, called a “redemption in kind,” is part of a longstanding fund policy that allows it to give shareholders mostly stock if they are pulling out $250,000 or more. A person close to the firm said it has done thousands of in-kind transactions over many years and that the majority are done for redemptions in excess of $1 million.

  “It’s a perfectly legitimate strategy,” said Jeffrey Sion, a partner at Dechert LLP, who specializes in investment funds and tax.

  But the move has come as a surprise to some investors and their advisers. While it is common for mutual funds to reserve the right to hand out a basket of securities to large, sophisticated institutional investors, it is rare for managers to use them to redeem individual investors, lawyers and analysts say.

  The move is even more surprising because unlike illiquid junk bonds or bank loans (or increasingly investment grade corporate bonds), stocks remain quite liquid (mostly when one is selling in a rising market). As such for Seuqoia it is merely a matter of taking a few minutes to cash out existing holdings as a courtesy to its investors, not a case of prudently respecting your fiduciary duty.

  Indeed, as the WSJ adds, “it is less common for managers of stock funds to redeem in-kind because equities, which trade on exchanges, are more easily bought and sold than less liquid fixed-income assets.”

  So why do it? “In-kind” redemptions have benefits for funds such as Sequoia that are experiencing redemptions. Unlike with sales for cash, the fund doesn’t have to recognize a capital gain on such transactions. As a result, remaining investors don’t bear the tax implications of sales associated with exiting shareholders, according to fund and tax lawyers.

  For investors who expect an in cash liquidation, it can be not only a surprise but also a hassle: “If you’re a retail investor, who wants to get stocks? If you’re getting out of fund, presumably you’re selling because you want cash,” said Michael Rosella, a partner at Paul Hastings LLP, who specializes in investment management. “Most funds have the right to do it, but you’re not going to do it if you don’t have to,” he said.

   

  Meeting redemptions with shares also keeps managers from having to sell stock to raise cash, which fund analysts say can weigh on performance.

  More importantly, in an illiquid market in which traders become aware of the need to liquidate profitable positions, they can frontrun the selling of such positions as happened with Bill Ackman when all of his other holdings were slammed once fears swirled he would need to short up capital several weeks ago.  In some extreme cases, one may be completely unable to liquidate as bid/ask spreads swell and selling even profitable positions results in a loss.

  To be sure, one can’t blame Sequoia: it has been vocal about warning shareholders that it is “highly likely” that they will receive all or part of their withdrawal in securities if they are pulling more than $250,000 from the fund, regardless of whether they have a bank or brokerage account to which stocks can be delivered. For many, ending up with stock that can not be sold is a very unpleasant option, especially if seeking prompt liquidity.

  According to the WSJ, the fund has seven days to meet redemption requests and determines which stocks investors will receive. The firm typically pays out in stocks with high unrealized capital gains that trade often, and it advises redeeming shareholders to sell the securities they receive at market close on the day they exit the fund, said a person close to the firm.

  It gets worse for the investors: such redemptions often shift risk and burdens from the fund to its selling investors, especially if they hold the fund in a taxable account. Those who receive all or most of their assets in stock may not have enough cash to pay taxes due on the redemption without selling the stock.

  In addition, funds don’t necessarily give investors a pro-rata basket of stocks, which can expose the newly given holding to market risk from lack of diversification. The stock shares also may rise or fall in value after the investor receives them, producing capital gains and losses. In this case, the taxable gain or loss is measured from the value of the stock on the day of the redemption, according to Robert Willens, an independent tax expert based in New York.

  Finally, selling those shares will also incur transaction costs that can be steeper for individual investors than large investors that benefit from longstanding relationships with banks and brokers and economies of scale.

  The bottom line is that gimmicks such as the one attempts by Sequoia as it scrambles to meet its redemption obligations, will only make the bloodletting worse, and not only because the fund is down 11% year to date through Thursday. Having tipped its hands that when push comes to shove, Sequoia’s troubled principals will trample their investors, will hardly inspire confidence in those other shareholders who have not yet submitted redemption requests.

  In short, we expect many more stories of unhappy investors ending up with unsolicited stock instead of cash in the accounts, even as Sequoia’s AUM dwindles and ultimately hits a low enough level where it has no choice but to get its remaining investors.

  * * *

  But the worst news for Sequoia in the near future may have nothing to do with a surge in redemption requests, but the future value of its core investment, which may be even further impaired in the coming weeks following news out of Bloomberg that a Senate committee may start contempt proceedings against Valeant’s soon to be former CEO, Michael Pearson, for failing to appear to give testimony related to an investigation on drug pricing.

  “Michael Pearson was under subpoena to appear for a deposition today related to the Senate Special Committee on Aging’s drug pricing investigation, and he did not comply with that subpoena,” Senators Susan Collins and Claire McCaskill said in a statement late Friday. “It is our intent to initiate contempt proceedings against Mr. Pearson.” Collins, a Republican, is the chairwoman of the panel and McCaskill is the ranking Democrat.

  Pearson was subpoenaed to testify at an April 27 hearing, the latest in a series of congressional probes into how drugmakers price medications. And while a Pearson lawyer said the executive will appear at the hearing in three weeks, the deposition subpoena was unfair in both timing and scope. The “committee hasn’t been clear about what topics and documents he’ll be questioned about,” attorney Bruce E. Yannett of Debevoise & Plimpton LLP said. Without that, “the committee’s demand would expose him to an inherently unfair process for which we cannot adequately prepare him under the circumstances,” according to the letter.

  As a result, Pearson decided he would rather risk contempt than saying something which may be used against him soon in what is almost certain to be an avalanche of both civil and criminal cases in the coming months. 

  It is almost as if he suddenly has something to hide. Or maybe he had something to hide for a while. Recall that at the February hearing before the House Committee on Oversight and Government Reform, it was Valeant’s former CFO, ex-Goldmanite Howard Schiller, who was then interim CEO while Pearson was on medical leave, testified for the company.

  Since then Valeant has had a dramatic falling out with Schiller, whom it implicitly accused of cooking the books and asking to resign from the Board which he refuses to comply with.

  Perhaps he should testify again, now, some two months later. Considering the dramatic change in his relationship with his former employer, we have a feeling this new testimony would be far more interesting and exciting…

  

  

  

  

  

• Hillary Reeling As Sanders Makes It Seven In A Row – Wins Wyoming Caucus

  Bernie Sanders wins Wyoming Democratic caucus, defeating Hillary Clinton, according to AP, extending his win-streak to seven states in a row. This brings the delegate count to Hillary 1292 vs Bernie's 1044 excluding super-delegates, which as we noted here, are far from a "lock" for Clinton if the Bernie Bus continues to show this kind of momentum.

  Seven In A Row for Bernie – Idaho, Utah, Alaska, Hawaii, Washington, Wisconsin, and now Wyoming.

  

   

  While Wyoming won’t significantly change delegate math for either campaign, as it is one of smallest contests and awards 14 pledged delegates and 4 superdelegates, the trend is very much Bernie's friend right now.

  And, as we concluded previously, if Sanders continues to win primaries, rack up delegates, raise tens of millions of dollars a month in campaign contributions, draw massive crowds to his rallies, and score double-digit leads against Clinton in demographics the party needs to win the general election – they will have to ask themselves some hard questions if the final count is close.

  Who will lead the Democratic Party in the general election is a political question, not a mathematical one. If Sanders’s momentum continues to grow, the superdelegates would ignore that fact at their peril.

  

  

  

  

  

• First Denmark, Now Belgium Is Paying People To Take Out A Mortgage

  Back In January of 2015, we asked "who will offer the first negative rate mortgage?"

  Who will offer the first negative rate mortgage

  — zerohedge (@zerohedge) January 30, 2015

  We didn't have to wait long before Denmark's Nordea Credit unleashed this idiocy. And now two banks in Belgium have followed suit, paying instead of charging interest on mortgages to a handful of customers.

  Thanks to Mario Draghi's generosity with "other generations' slavery", the negative rate mortgage is now a reality. As Het Nieuwsblad reports (via Google Translate),

  Getting paid to borrow money for your house. It seems too good to be true, but for some clients of BNP Paribas and ING is not a dream but reality. The interest rate on their home loan is dropped below zero and so they get money from the bank.

   

  For those who in 2012 closed a mortgage loan with a variable rate at BNP Paribas Fortis or ING are now very lucky. Due to a decline in interest rates, the interest rate on their home loan has also fallen below zero. In other words, the banks pay their customers rather than collect interest. This writes the newspaper De Tijd.

   

  When a loan with fixed interest rate you pay a fixed rate for the duration of your loan. But at a variable interest rate, the interest rate can change at any time, depending on the conditions on capital markets. The rate is now so low that is below the zero interest rates for some customers.

   

  The European Central Bank (ECB) lowered its deposit rate below zero, after all, and also buys bonds en masse to push market interest rates down.

  Careful not cause a stampede of desperate "Belgian Dream" homebuyers (we hear apartments are cheap in Molenbeek), the banks note that it's 'limited' to some clients…

  It's okay but for a limited number of customers. BNP Paribas Fortis is about "a few dozen customers" and ING also speaks of a "very limited number of contracts." Other banks do not have a customer with a negative interest rate.

  And just like that, as we warned in January, what started in Denmark has spread to Belgium, and soon everywhere else in Europe, a situation has now emerged where savers who pay the bank to hold their cash courtesy of negative deposit rates, are directly funding the negative interest rate paid to those who wish to take out debt. In fact, the more debt the greater the saver-subsidized windfall.

  That all this will end in blood and a lot of tears is clear to anyone but the most tenured economists, however in the meantime, we can't wait to take advantage of the humorous opportunities that Europe (and soon Japan and the US) will provide in the coming months, as spending profligacy will be directly subsidized and funded by the insolvent monetary system, while responsible behavior and well-paid labor will be punished, first with negative rates and soon thereafter: with threats, both theoretical and practical, of bodily harm.

  

  

  

  

  

• Hillary’s Bold Predictions: No Doubt She’ll Win, Not Even Remotest Chance She Ends Up In Handcuffs

  On Friday, Hillary Clinton sat down with Matt Lauer for a wide ranging interview. A number of topics came up, from Bernie Sanders, to Donald Trump, to walking a fictional tree lined street in Brooklyn.

  

  Regarding Bernie Sanders’ ability to continue pushing her in the race for the Democratic nomination, Hillary as expected played it cool. However, as we reported previously, there are signs within the Clinton camp that indicate she’s grown increasingly worried about the direction of the race, and becoming quite irritated with Sanders’ surprising staying power.  With Sanders raising record amounts of money online (read: not millionaires and super-PACs) as well as handing Hillary loses in seven out of the last eight primaries, there is good reason for Hillary to be concerned. 

  Lauer pushes the topic later in the interview by saying that although they must be licking their chops, Democrats can’t solely focus on readying Hillary for the general election yet because she can’t shake Bernie Sanders. To which Hillary responded: 

  “That’s the way it always is. When my husband in 1992 secured the democratic nomination, it was in California, he lost a lot of the spring contests. I remember because we were hearing exactly the same kinds of questions like it’s over, you’ll never make it. I don’t have any doubts, I don’t have any concerns. We’re going to win the nomination.”

  Ignoring for a moment that those were statements and not questions that she heard on Bill’s campaign trail, the fact that those kinds of comments are leaking into Hillary’s inner circle are a tell of just how much she’s concerned about Bernie Sanders and his recent winning streak. Furthermore, Bill’s dramatic  falling out with Black Lives Matter activists as documented on Friday suggests that there is the all too real danger Hillary may alienate one of her core constituencies.

  Hillary continues, saying in essence that it’s nice that Bernie has so much support, but she knows that due to the delegate system, both traditional (which are often proportional to percent of the vote the candidate receives – more here), and just as importantly super delegates (those that can throw their support behind whoever they choose, regardless of underlying votes from the citizenry), she has no doubt she’ll win.

  “We have a significant delegate lead, and at the end of the day that’s what’s going to matter”

  Unlike the circus that is the GOP race though, she did say that if she were to lose, she wouldn’t hesitate to endorse Bernie:

  “I will take Bernie Sanders over Donald Trump or Ted Cruz anytime”

  One thing that caught our attention was in discussing Bernie and his groundswell of support for his continued hammering away at crony capitalism and income inequality, Hillary said she too shares that concern. “[Sanders] has a very clear, passionate message about income inequality. I happen to share that.”

  Does she share that passionate message? Well, we can’t know for sure, but somehow we suspect she doesn’t really care much about anything related to income inequality. 

  As you recall, Hillary has been paid tens of millions for putting her work boots on each morning at 6 am and shuffling off to give… speeches.

  

   

  Quite often, the speeches were made to Wall Street, something which by now escapes nobody.

  

   

  And finally, the interview finds itself at perhaps the most contentious of topics for Hillary (outside of Benghazi), the infamous email scandal.

  Of course, the issue was teed up for Hillary so that should could frame as some sort of political issue, as opposed to a serious criminal investigation that has 147 FBI agents working around the clock to get to the bottom of the matter. 

  When asked about whether or not the email scandal will end in handcuffs for her, Hillary provided yet another epic response, along the lines of “what difference does it make”, by saying boldly that there isn’t even the remotest chance that it’s going to happen.

  Here is the exchange

  Lauer: “They [Republicans] are clinging to the hope that at some point between now and the end of the election, that they will get to see Hillary Clinton in handcuffs.”

   

  Clinton: “Matt they live in that world of fantasy and hope, because they’ve got a mess on their hands on the Republican side. That is not gonna happen, there is not even the remotest chance that it’s going to happen. They’ve been after me for twenty five years.”

  And so in summary, she begins with downplaying the people’s voice in her party, clearly calling out for someone, anyone to reign in crony capitalism, and ends with letting everyone know, unequivocally, that she is in fact above the law. Sorry peasants, you lose yet again.

  You can see the full interview here:

  

  

  

  

  

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