- Is Another 9/11 Necessary To Re-Direct American Anger?
America’s Anger Is Out of Control, Jeffrey Kluger … After the September 11 attacks, TIME’s Lance Morrow wrote a powerful essay titled, “The Case for Rage and Retribution,” in which he argued:
“For once let’s have no fatuous rhetoric about ‘healing.’ A day cannot live in infamy without the nourishment of rage. Let’s have rage. What’s needed is a unified, unifying, Pearl Harbor sort of purple American fury—a ruthless indignation that doesn’t leak away in a week or two…”
As we can see from the above statement, Jeff Kluger has in mind another convulsive episode like Pearl Harbor or 9/11 that will unify the “anger” that Americans feel.
Kluger seems to imply that this anger is stemming from current elections. His concern is that it is spilling over into other areas of life.
If every offensive, unjust or insulting incident turns into a jolt of high-fructose fury mainlined straight to the brain’s amygdala, what’s left when there’s a truly right and righteous reason to rise up in anger? And those important moments do occur.
Kluger seems to be saying that anger has become fashionable and applying anger liberally trivializes it.
Also, if Americans are angry about many things, that makes for a dysfunctional society rather than a unified one.
Kluger obviously wants a unified America. In order for rage to be unifying it needs to be a “purple American fury.”
This is actually a somewhat cynical assessment of how to manipulate anger in our view.
Why do we need another Pearl Harbor or 9/11 just so Americans can feel unified?
Why should “Americans” feel unified anyway? And, really, what is an “American?”
Because the “anger in America” meme is ubiquitous in the mainstream media at the moment, there are many other commentaries on it.
Here’s one from CNN by Michael Smerconish:
Are the voters really mad as hell? … voters, many of them in the GOP, have outsized weight in politics … The anger that threatens Washington based on partisanship is metastasizing. Now is the time to take back control of our political debate.
Remember, when Howard Beale asked Americans to shout outside that they were “mad as hell”, many followed. It’s time for the rest of us to close our windows.
CNN is asking us to “close our windows” and not listen to people who are “angry” about the state of America’s politics and economy.
TIME is hopeful that this anger can be channeled into some horrible, outsized event that will unify the current emotional anarchy.
Both of these editorials seem frightened by anger. But the description trivializes what is going on.
People aren’t just “angry.” Many are extraordinarily upset about certain events taking place in the USA. It’s not simply an inchoate emotion.
Millions upon millions are angry over the reduction in freedoms and the rise of the fedgov political class.
They are worried and anxious about police shootings, gun confiscation and a general trend toward increased authoritarianism all around them.
They don’t recognize America anymore. It feels like a fascist or socialist country.
Like Kluger’s article, Smerconish’s CNN piece suggests ways that the electorate’s anger can be reduced.
His solution to American anger is to change voting laws so that “silent ones” have more impact and are more noticeable.
That would make the anger less visible. Eventually, people would calm down.
We don’t believe in either of these solutions.
It is not a good idea to root for another major national tragedy in order to resolve American anger. And changing voter laws to empower people who are not angry surely does not address the causes of the anger.
Conclusion: What will make people less angry in this case is more freedom. But freedom is rarely given and mostly manipulated. If you want to be free, you will have to do it yourself. Get out of debt. Store gold and silver. Find alternative living arrangements in case of an emergency. Don’t leave it up to mainstream punditry to determine how to deal with what you feel. Inevitably, their solutions will not lessen problems but increase them.
- Entire US Cyber Network Is Already Compromised, Clinton Emails Are The Least Of Our Worries
Hillary Clinton's emails and server misconduct are the least of our worries. The fact that her server was receiving files that passed through or originated on the State Department servers is enough to know she exposed her private system to hackers. The US system is/was/has been compromised, for years, since before Hillary tapped in her new network. Michael McCaul, a Texas Congressman and Chairman of The House Committee On Homeland Security called Clinton "careless" and said she "potentially did harm" to national security. Earlier this week McCaul said this:
One thing is clear from FBI Director Comey’s announcement today—Secretary Clinton was not fully honest in her representation of her use of email to the American people. She was careless with classified and sensitive information and potentially did harm to the United States and our national security. Secretary Clinton will still have to answer to and be held accountable by the American people.
Congressman McCaul has good reason to think that way. According to his website, the Congressman has been:
- The Chief of Counter Terrorism & National Security in the US Attorney's office, TX
- The Led on a Joint Terrorism Task Force charged with detecting, deterring and preventing terrorist activity,
Recall FBI Director Comey commenting "…we asses it is possible that hostile actors gained access to Secretary Clinton's personal email account". With that in mind, listen carefully to this 2011 comment from Michael McCaul, Chairman of the US House of Representatives Committee on Homeland Security speaking at a Cyber Security roundtable hosted by the Council on Foreign Relations (comment at 52:08) in which he responds to a question saying:
This is what keeps you up at night…the intellectual theft is awful and espionage, but the cyber warfare piece can be, the consequences far more damaging than a one-to-two man ISIS operation in the United States. This could literally bring down, you know, the energy grid, you know, the banking institutions, I mean, the stock exchange…cause chaos and enormous damage. I would argue they've [foreign governments] infiltrated many of our data systems already and can turn the switch off. That's the power that they have.
Allow us to repeat that one more time for dramatic effect for that is a heavily weighted comment buried an hour into a video with only 4,319 views:
This could literally bring down, you know, the energy grid, you know, the banking institutions, I mean, the stock exchange…cause chaos and enormous damage. I would argue they've [foreign governments] infiltrated many of our data systems already and can turn the switch off. That's the power that they have."
That's huge! When Hillary began transferring files and connecting emails with the State Department system, she was already compromised. No matter how she felt, what she thought, nothing matters. The open US system is likely why Marcel Lazar, aka Guccifer, said Hillary's server "was like an open orchid on the Internet."
Mind you, as we reported in May, Lazar had been focusing on US political actors for some time:
Lazar was indicted in 2014 on nine felony charges stemming from his alleged hack into the emails of several prominent Americans, including former Secretary of State Colin Powell, a relative of former President George W. Bush and George H.W. Bush, and former Clinton adviser Sidney Blumenthal. A set of Blumenthal's emails were published online in 2013, disclosing a private email address Clinton used. She later changed the address.
What is concerning is that the breached systems, thus far, have only been "patched", like a pothole being covered up. The US and other unsuspecting nations, have made it easy to hack their systems and execute unauthorized directives. In response there appears to be a focus on whether blockchain will be the answer we all are looking for when it comes to verified security around transmission of messages. As Zero Hedge detailed just last month, Blythe Masters is hard at work using HyperLedger as a way to embed herself into the new central banking messenger platform. What we said:
The SWIFT rebuild will likely require the insights of an outlet such as Hyper Ledger, run by longtime Zero Hedge CDS and commodity trading icon, Blythe Masters. Hyper Ledger works with a consortium of organizations and corporations tasked with developing systems to offer protection for messages sent between the world's central banks, which will be based on blockchain technology. A rebuild is still likely 2 years away according to well-placed Zero Hedge sources, which opens new concerns about the current integrity of the SWIFT platform and what problems may be lurking within it that we have yet to discover. The question that remains unanswered currently is: Who still has access to the central banking SWIFT system and is capable, right now, of monitoring message flow between institutions? Something to keep in mind as the EU experiment unravels.
Good question: Who still has access to the central banking SWIFT system and is capable, right now, of monitoring message flow between institutions? Again, we cannot stress this enough, according to Michael McCaul, Chairman of the US House of Representatives Committee on Homeland Security, our cyber systems are already compromised beyond our control. That is scary! We have mass global hacking going on and in the US, the very systems that support the US citizen's day-to-day existence, are believed to be compromised by the Chairman of the US House of Representatives Committee on Homeland Security.
The US is so far behind their adversaries it is shocking that US citizens are not in an uproar over how exposed they are as a nation. Many of us are aware of the typical response to a slow WiFi, screaming and smashing things wondering "why isn't this connecting faster!?". Imagine the vacuum that would form around the US workforce skills-set if they could not use Google Search for a day, let alone weeks, months, or years, because the US power grid was taken down in a coordinated attack and Google's service couldn't reach the end user. Imagine if Citadel had no way to power their orders? Armageddon.
It is time the US citizens stop armchair quarterbacking government through mainstream media cues and begin utilizing the resources available to them to get ahead of the game. The global population would be wise to gather a better understanding of the risks surrounding the Internet of Things and full automation (emails, news, Tesla cars, coffee, etc). Knowing what Michael McCaul thinks about American cyber security protection brings an entire new perspective to the Hillary Clinton email case.
No matter what we learn about Hillary's fate, the simple fact that the US systems are already compromised means Hillary's server was exposed the entire time and more importantly, the entire nation continues to leave the back open for cyber-attacks. The only question remaining is…those hackers that are in the US systems already, why are they waiting to "turn the switch off"?
- How To Fix The FBI's History Of Political Abuse – Abolish It!
Submitted by Ryan McMaken via The Mises Institute,
Like all employees of the FBI, James Comey lives off the sweat of the American taxpayer. His large salary, upon retirement, will be converted into a very generous pension. Like most federal employees in a high ranking position like his, Comey continues to look forward to decades of living at a standard of living far above what is experienced by ordinary people in the private sector.
To maintain this life of comfort, all he had to do was agree to look the other way as a powerful politician clearly — by Comey's own admission — broke federal law.
Naturally, this same treatment would never be afforded to an ordinary taxpayer, who would likely be looking at years in federal prison for offenses similar to that which Hillary Clinton has apparently committed. Moreover, Comey even went out of his way to do his best to ensure no federal prosecutor would proceed with charges when he claimed that "no reasonable prosecutor" would proceed with charges. It wasn't enough for Comey to simply not recommend charges. He had to pre-emptively condemn any prosecutor who might proceed with charges.
Some have claimed that Comey was forced to cave to Obama administration pressure in order to protect his family. Of course, Comey could have resigned his position rather than take a position he regarded as unethical. Then the task of clearing Clinton would have fallen to Comey's successor. There are precedents for this. When ordered by Nixon to fire the special prosecutor in the Watergate scandal, Attorney General Elliot Richardson resigned rather than do what the president mandated. Comey could have done the same, but then he would have had to give up some of his comforts and privileges. To find work, he might have had to move to an unexciting place like Indianapolis or Albuquerque.
Nevertheless, Comey has accidentally done us a great service by publicly exhibiting the true nature of the FBI: it is a political organization that expands the reach and prerogatives of the federal government over citizens and taxpayers, while protecting the powerful.
Of all federal police forces, the FBI is the most romanticized, and every FBI agent is assumed to be the modern embodiment of a fictionalized version of Eliot Ness: incorruptible, professional, and efficient. Decades of pop culture has driven this home with TV series and movies such as The Untouchables, The FBI Story, and This Is Your FBI have long perpetuated the idea that when local police fail, the FBI will step in to be more effective and simply better than every other law enforcement agency. Corruption cannot touch the FBI, we are told, and they apply the law equally to everyone.
A History of Abuse
This was always obviously untrue to anyone not suffering from crippling naïvete, but Comey has helped make the political nature of the Bureau plain for all to see.
The reality and the romance, of course, have always been two totally different things, and it's helpful to remind ourselves that it was the FBI that was in charge of the Waco massacre where 26 children were killed. It was the FBI that led the raid on Randy Weaver's house where an FBI sniper shot a woman dead while she was holding a 10-month old baby. It was the FBI that spied on Martin Luther King, Jr., and targeted peaceful anti-war organizations for political reasons during the 1960s and 70s. It was the FBI that came of age arresting opponents of the First World War.
Naturally, in all of these cases, the FBI has actively covered up the facts and denied wrongdoing.
James Bovard reported in his 2012 article "A Stasi for America":
A ripple of protest swept across the Internet in late March after the disclosure that the Federal Bureau of Investigation was teaching its agents that “the FBI has the ability to bend or suspend the law to impinge on the freedom of others.” This maxim was inculcated as part of FBI counterterrorism training. The exposure of the training material—sparked by a series of articles by Wired.com’s Spencer Ackerman—spurred the ritual declaration by an FBI spokesman that “mistakes were made, and we are correcting those mistakes.” No FBI officials were sanctioned or fired for teaching lawmen that they were above the law…At least the FBI has been consistent. Since its founding in 1908, the bureau has rarely let either the statute book or the Constitution impede its public service. Tim Weiner, the author of a superb exposé of the CIA (Legacy of Ashes) has delivered a riveting chronology of some of the FBI’s biggest crimes with his new book, Enemies.
Violating the rights of ordinary people has been standard policy at the FBI for decades. But, who can be surprised that the FBI now seeks to protect powerful politicians from the same laws that the FBI would enthusiastically use to prosecute and imprison ordinary citizens?
The FBI Is Unconstitutional and Ineffective
Thanks to the enduring view that federal police would tip the balance too far in favor of the federal government, many Americans opposed federal agencies like the FBI throughout the nineteenth century. It was feared that federal police would turn into secret police forces such as those known to be used in imperial Russia. Certainly, the Constitution does not mandate any federal police force. Consequently, it was not until the twentieth century that federal agencies like the FBI gained traction, thanks to a rising tide of pro-federal sentiment brought on by war and hysterical fear of "anarchists."
Thanks to war hysteria during World War I, the FBI rose to prominence as Woodrow Wilson's shock troops against "dissidents" (i.e., peaceful opponents of the war). Indeed, persecuting and prosecuting political enemies of the American state would become something of the forte of the FBI, with the role of the agency being expanded ever more during times of perceived national crisis. The idea of the FBI as a crime-fighting organization — the primary message of fawning treatments of the FBI such as The Untouchables and The FBI Story — for decades served as cover for the FBI's political activities. As Foreign Policy pointed out in 2014, though, the FBI quietly dropped its claims of being a crime fighting organization and began declaring itself a "national security" organization. Down the memory hole goes the FBI's original claimed raison d'etre. In its current Q and A, the FBI now acts as if it had never claimed to be a crime fighting organization at all:
Is the FBI a type of national police force?
No. The FBI is a national security organization that works closely with many partners around the country and across the globe to address the most serious security threats facing the nation.
No longer tied down by the need to waste its valuable time — as the FBI sees it — on mundane, real, and concrete crime such as kidnapping, the FBI can now focus on the far-more-amorphous "national security." Never mind the fact, of course, that the FBI's record on preventing terrorist acts such as 9/11 and the Orlando shooting is abysmal, and the terrorist plots it has "prevented" in recent years were actually facilitated by the FBI itself. Predictably, after the FBI was criticized in the wake of the Orlando shooting, James Comey declared to the press that the FBI did a fine job:
"We are also going to look hard at our own work to see whether there is something we should have done differently,” Comey said. “So far, the honest answer is: I don’t think so."
The FBI Was Created to Compete with Successful Private Agencies
It should be noted that the FBI was not created to fill a hole in law enforcement needs. On the contrary, it was created to usurp and displace a highly-efficient and effective private police force that already existed: the Pinkerton National Detective Agency.
Writing in Private Investigation and Security Science: A Scientific Approach, Frank Machovec notes that "The FBI, founded in 1908, was modeled from Pinkerton's organization and methods," while Marie Gottschalk writes in The Prison and the Gallows that "In its early years, the FBI modeled itself after the Pinkertons and other private police agencies."
In fact, government-run police organizations had long been shown to be inefficient and prone to corruption, which is why the private sector turned to private security instead. Gottschalk continues:
The unreliability of metropolitan police, with their strong local and partisan ties, prompted major businesses and industrialists to establish the Pinkertons and other private police forces. The Pinkertons ultimately functioned as a de facto national detective and policing service until the 1920s, when the FBI finally came into its own.
By the early twentieth century, the Pinkertons and other private investigative organizations had established themselves as reliable and effective. It's why the Pinkertons repeatedly show up in popular culture as the highly-efficient and dangerous enemies of beloved Old-West outlaws like Butch Cassidy.
As early as 1857, politicians were already noting the public's favorable perceptions of private police over public police, with Chicago mayor John Wentworth noting:
Our police system has been gradually falling into disrepute; and it is a lamentable fact that, whilst our citizens are heavily taxed to support a large police force, a highly respectable private police is doing a lucrative business. Our citizens have ceased to look to the public police for protection, for the detection of culprits or the recovery of stolen property.
The federal government, however, wanted a similar force that it could directly control, and thus turned to a federal police force instead. The desire to present the new agency as like the Pinkertons can be seen in the decision to call FBI investigators "agents" just as many private sector investigators were addressed (as opposed to "deputy" or "officer").
The Pinkertons were primarily interested in property crime with actual victims (i.e., train robbing). The FBI, however, could be used to go after political enemies, protesters, supposed draft dodgers and others who ran afoul of government regulations created to benefit the government itself. Over time, the FBI would crowd out the Pinkertons as a national police force (although, unfortunately, government organizations were known to contract with the Pinkertons).
This was all to the good according to many critics of the Pinkertons who wanted a government-controlled national police force that could be used against the private sector, rather than be controlled by it.
The FBI Is a Product of Anti-Capitalist Movements
Indeed, the rise of the FBI is very much the product of left-wing and labor unionist movements to curb the power of the Pinkertons in favor of the FBI and similar agencies.
A recent example of this line of thought can be found in Elizabeth Joh's 2006 article "The Forgotten Threat: Private Policing and the State."
As explained by Joh, the left was highly critical of the Pinkertons in the late nineteenth and early twentieth centuries for their role in combating striking workers and for being employed by private organizations. While federal police forces such as the FBI would work only in the "public interest" it was assumed, organizations like the the Pinkertons functioned at the morally base level of seeking "profit."
The Pinkerton's however, never functioned with the sort of firepower, manpower, and legal immunity enjoyed by federal agencies today. Indeed, in some cases, the Pinkertons surrendered to their "victims" as in the case of the Homestead Riot of 1892 where, according to Joh, "[o]utnumbered, the Pinkerton guards surrendered, and were beaten by an angry mob."
Three workers were killed in the melee, making the Homestead Riot a peaceful affair by FBI standards. Under the leadership of the FBI, federal agents killed 17 times as many people at Waco, including children. However, unlike Waco, which produced no sanctions or sustained public reactions against the FBI, the Homestead Riot became the high tide for anti-Pinkerton scrutiny and a flashpoint for action against private security agencies. For example, following an investigation of private security agencies at the time, the US Senate's investigatory committee declared that private security is illegitimate and that "use of private armed men is an assumption [that is, usurpation] of the State's authority by private citizens." Indeed, the Senate committee declared, the use of private arms to secure private property will lead to "anarchy."
For decades afterward, government committee and pro-labor groups worked together to condemn, investigate, and discredit private security agencies. Government agencies, it was maintained, would be responsive to elected officials and the public at large. If private policing agencies could be done away with, the public was told, no more would police organizations function in their own self-interest.
Such views have always been impressively naïve, although the public has long fallen for these claims. Moreover, one of the primary benefits of private security has been that it is subject to a totally separate and often hostile (to private security) legal system. Unlike the FBI, which enjoys a variety of government-granted immunities from responsibility for abuses and wrongful deaths, private security is legally subject to the same laws as everyone else. Even worse, agencies like the FBI can directly tap into nearly limitless funds through their taxpayer-funded budgets. Unlike private security firms that are constrained by real-world budgets, government prosecutors and police agencies face no such limitation. Obviously, this places defendants at an even more lopsided economic disadvantage than when dealing with powerful private firms.
Today, federal police organizations, federal courts, and federal prosecutors are all part of a single organization. Naturally, these organizations tend to favor each other in their proceedings. On the other hand, if there is a distrust of private security within the court system (or vice versa) that's all for the best, since as a result of this tension, checks and balances are likely to actually mean something. The same cannot be said for the current system which unifies policing and court proceedings within a single organization and in which a sizable number of government judges are former government prosecutors.
The Triumph of Federal Police in Public Opinion
The war on private security has now been so successful that few Americans would even entertain the idea of doing away with federal police agencies like the FBI in favor of private security organizations. It is now simply accepted that federal police officers may function unimpeded in every community in America, independent of local law enforcement (such as democratically-elected sheriffs), with powers to enforce everything from laws on what we eat, what we grow in our backyards, and whom we can hire. The FBI functions with an immense amount of insulation from the voting public and requires only the approval of the president and the attorney general to function unimpeded. The Hillary Clinton affair has shown how easy it is to choose between serving the White House, or serving the public, which has no power over the FBI.
Nevertheless, the FBI continues to benefit from decades of pop culture and government whitewashing which portrays the FBI and other federal agencies as professional and effective. Always a product of left-wing and Progressive desires for more government intervention and a weakened private sector, the FBI continues to benefit from the perception that it functions in the service of the "public."
With James Comey's recent demonstration of the FBI's political motivations and origins, we have gained yet another insight into how the FBI works, and public service has very little to do with it.
- Charting The Epic Collapse Of The World's Most Systemically Dangerous Bank
It’s been almost 10 years in the making, but the fate of one of Europe’s most important financial institutions appears to be sealed.
After a hard-hitting sequence of scandals, poor decisions, and unfortunate events,Visual Capitalist's Jeff Desjardins notes that Frankfurt-based Deutsche Bank shares are now down -48% on the year to $12.60, which is a record-setting low.
Even more stunning is the long-term view of the German institution’s downward spiral.
With a modest $15.8 billion in market capitalization, shares of the 147-year-old company now trade for a paltry 8% of its peak price in May 2007.
Courtesy of: Visual CapitalistTHE BEGINNING OF THE END
If the deaths of Lehman Brothers and Bear Stearns were quick and painless, the coming demise of Deutsche Bank has been long, drawn out, and painful.
In recent times, Deutsche Bank’s investment banking division has been among the largest in the world, comparable in size to Goldman Sachs, JP Morgan, Bank of America, and Citigroup. However, unlike those other names, Deutsche Bank has been walking wounded since the Financial Crisis, and the German bank has never been able to fully recover.
It’s ironic, because in 2009, the company’s CEO Josef Ackermann boldly proclaimed that Deutsche Bank had plenty of capital, and that it was weathering the crisis better than its competitors.
It turned out, however, that the bank was actually hiding $12 billion in losses to avoid a government bailout. Meanwhile, much of the money the bank did make during this turbulent time in the markets stemmed from the manipulation of Libor rates. Those “wins” were short-lived, since the eventual fine to end the Libor probe would be a record-setting $2.5 billion.
The bank finally had to admit that it actually needed more capital.
In 2013, it raised €3 billion with a rights issue, claiming that no additional funds would be needed. Then in 2014 the bank head-scratchingly proceeded to raise €1.5 billion, and after that, another €8 billion.
A SERIES OF UNFORTUNATE EVENTS
In recent years, Deutsche Bank has desperately been trying to reinvent itself.
Having gone through multiple CEOs since the Financial Crisis, the latest attempt at reinvention involves a massive overhaul of operations and staff announced by co-CEO John Cryan in October 2015. The bank is now in the process of cutting 9,000 employees and ceasing operations in 10 countries. This is where our timeline of Deutsche Bank’s most recent woes begins – and the last six months, in particular, have been fast and furious.
Deutsche Bank started the year by announcing a record-setting loss in 2015 of €6.8 billion.
Cryan went on an immediate PR binge, proclaiming that the bank was “rock solid”. German Finance Minister Wolfgang Schäuble even went out of his way to say he had “no concerns” about Deutsche Bank.
Translation: things are in full-on crisis mode.
In the following weeks, here’s what happened:
- May 16, 2016: Berenberg Bank warns that DB’s woes may be “insurmountable”, noting that DB is more than 40x levered.
- June 2, 2016: Two ex-DB employees are charged in ongoing U.S. Libor probe for rigging interest rates. Meanwhile, the UK’s Financial Conduct Authority says there are at least 29 DB employees involved in the scandal.
- June 23, 2016: Brexit decision hits DB hard. The bank is the largest European bank in London and receives 19% of its revenues from the UK.
- June 29, 2016: IMF issues statement that “DB appears to be the most important net contributor to systematic risks”.
- June 30, 2016: Federal Reserve announces that DB fails Fed stress test in US, due to “poor risk management and financial planning”.
Doesn’t sound “rock solid”, does it?
Now the real question: what happens to Deutsche Bank’s derivative book, which has a notional value of €52 trillion, if the bank is insolvent?
Source: Visual Capitalist
- 3 Things stock investors need to know about FX
The stock market cap in the United States is about $22 Trillion. The amount of money in Managed Currency strategies is unknown, but it’s very small, even by CTA standards. According to data based on CTAs listed with Barclay Hedge, there’s about 19 Billion in Currency Strategies. That’s a lot of money, but not a drop in the bucket when compared with equities. And remember that although money in equities isn’t all ‘managed’ – all money in equities is an investment of some kind – because people don’t need equities like they need FX. To contrast it with FX, all money in FX is NOT managed, to the contrary – most money in FX is hedged, or transactional. FX as an asset class per se is a growth emerging asset class, and may be the ‘stock market’ of the 21st century, what the stock market was to the 20th century. But at the moment, the idea of investing in FX as an asset class – is just in its infancy. The more problems associated with stocks, the more that will change. And while the Fed’s been doing a great job propping the stock market, inflating assets artificially usually doesn’t end well.
Here’s the 3 most important things stock investors need to know about FX:
1) No one has to buy a stock. Businesses need FX. There’s a huge difference.
2) Rich families, old money, always has FX in their portfolio. Yes, it’s partly because of their international exposures, but Soros family office made a hefty mutli-billion profit on “Brexit Day.”
3) Big Wall St. firms that everyone perceives as ‘credible’ – make huge profits in FX. In the case of many banks, not to name names – their FX profits have kept them alive. Some of these banks are being eaten alive like a cancer from the inside, with losses on complex derivatives that no one understands exept a few quants, unable to grow in an environment of ZIRP and NIRP (Negative Interest Rate Policy). In many cases, their FX profits have literally kept them afloat. And to put the icing on the FX cake, many of their FX profits can be flexible for their accounting departments to use them in times of need (i.e. “Currency Headwinds”).
Brexit and its aftermath should be a wake up call to equity people. Some FX traders reported making 9% during Brexit and more.
To learn more about FX as an emerging asset class, checkout the book Splitting Pennies – Understanding Forex – or Dive in! Open an account!
- Beautiful Brexit & The Five Stages Of Grief
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
The post-Brexit ‘conversation’ in Britain is taking on grotesque proportions. Nobody seems to know how to react, at least not in a rational manner. They all look to be stuck in phase one of Kübler Ross’s Five Stages of Grief, i.e. Denial. Phase two is supposed to be Anger, and while there’s plenty of that, the shape it takes makes one think Angry Denial, instead of a progression between phases.
That is to say, I don’t think I’ve seen one voice expressing anger at themselves. It’s all somebody else’s fault. And it just keeps going. After Farage, Johnson, Gove et al had been blamed for all there’s wrong with everyone else’s lives, now the anger is pointed at the two women who are supposed to be competing for the poisoned chalice of UK prime minister. That both belong to the clique which has just been voted down 2 weeks ago doesn’t seem to bother anyone. That is not smart.
But if you must insist on calling 17 million of your neighbors ‘racist’ and ‘stupid’ just to feel better about yourself, perhaps there’s no denying that the Five Stages insist on taking their time. Problem with that is there is no such time, before you know what’s happened the nation will be stuck with another ‘leader’ that far too many people are not going to be listening to. A game of ‘who said what about whom’ is not helping.
A main issue would seem to be the Anglo(-Saxon) disease version 2.0, as I label it: whereas numerous countries around the world have seen new political parties rise to the fore, Britain, the US, Australia etc. are sticking with the same old same old, even if that makes them essentially ungovernable. What Britain needs is Podemos or a Five-Star movement, and so do the US, Canada, Australia.
The global economic system is now collapsing so overtly that nothing incumbent powers do can hide it any longer. A more flexible system, and a less ‘let’s stick with what we got’ view of life, can be very helpful during times like these, because they can ease the friction of established powers losing their power, no matter how painful that process still will be.
In many if not most countries there is hardly any difference anymore between what used to be right and left in politics. Barack Obama, Tony Blair and soon perhaps Hillary Clinton were voted in by what used to be the left wing of their countries, but they might just as well have come from the other side of the aisle. They all represent the establishment, not the people.
That has worked to an extent so far, but now it is over, simply because too many people have too little left to feel comfortable in their lives. In that regard it’s interesting to see how Labour leader Jeremy Corbyn gets treated by his own party for wanting to take it ‘too far’ to the left, i.e. to represent the people. This may split up the party after all, and Corbyn would and should be happy to be rid of the right wing of the party, but he has caught Anglo Disease 2.0 too.
If Bernie Sanders or Jeremy Corbyn, even Donald Trump for that matter, were Italian, Spanish or even German, they would have started another party, not try to ‘reform’ an existing one. It doesn’t work, or it’s too much trouble trying. The disconnection is too great, between what the parties once stood for and stand for now, and between what they say and what they do.
Anglo Disease 1.0, by the way, is the government-induced blowing of housing bubbles in London, Vancouver, Sydney, Auckland etc etc. Take a good look at this graph and you can see what Beautiful Brexit (think I should patent the term?) is set to do to UK home prices: make then affordable again. Why do so many people apparently think that’s a terrible thing?
And Anglo Disease 1.0 is plenty contagious. Look at private debt levels in the Netherlands, where in the years after the graph below, 2015-6, home prices have kept rising and so have sales. Private debt at 800% (900% now?) of GDP is not a healthy thing no matter how you twist it, but they’ll all tell you they’re making smart investments and money hand over fist.
EA=Euro AreaGovernment and/or central bank induced bubbles are criminal. They make an economy look better temporarily, but people will have hefty prices to pay when they pop. And pop is just what Brexit does with the UK housing bubble. Whether that’s a good or a bad thing is perhaps up to one’s own personal judgment, but no thinking body would say yes when asked if they prefer living in a bubble.
For me, sitting inside a 10-year central bank liquidity bubble, I’m mostly afraid for those who have ever less left. The jobless, pensioners, anyone relying on benefits or fixed income, have yet to realize how much worse off they will be, but they will. ‘Homeowners’ with huge mortgages, even if they’re at low rates, will see ‘values’ plunge to the point where lenders will come with margin calls. And what then? More bank bail-outs?
Central banks and governments have been blowing their bubbles with one goal in mind: to keep incumbent powers in place. That part has succeeded, but it’s the only part, and the price to be paid by everyone else will be horrendous. And in the end the incumbents will be gone regardless, albeit with many pockets full of loot.
The last move the ‘rulers’ have left up their sleeves is perhaps to go to war with Russia, but I don’t see the people of Europe, despite 10+ years of heavy anti-Putin propaganda, allowing it. Europe might instead come to resemble the US, where people have another sort of battle to fight, a domestic one, which if not properly approached could lead to -more and increasing- very ugly confrontations.
Trump may not be the best person to lead his country into that, but the establishment, represented by Hillary, looks a much worse choice. Trump doesn’t owe nearly as much to those behind the curtains who have so much to lose. Hey, I wish there were better people available, but they’re not. Bernie Sanders has been outpropagandized and outmaneuvered, and he’s not perfect either.
America, too, will have to reinvent itself, just like so many nations across the planet. At least Trump will give the country a shot at not being dragged down into another war it can’t win, in or with Russia or China. Still, the art of propaganda on all sides and in all media has reached such dizzying heights and contortions that not a lot will seem obvious anymore.
One thing will though: increasing poverty. That will be the main factor to drive out the old and vote in the new. But the new will have two faces, one of which is Podemos, Sanders, Grillo or Corbyn, and one of which is some form or another of extreme right wing voices. Who come with their own Denial and Anger and other never completed Five Stages of Grief.
* * *
Elizabeth Kübler Ross: On Death and Dying – 1969
1 – Denial. Denial is a conscious or unconscious refusal to accept facts, information, reality, etc., relating to the situation concerned. …
2 – Anger.
3 – Bargaining.
4 – Depression. Also referred to as preparatory grieving. …
5 – Acceptance. - Obama Blames "Easy Access To Guns" For Surge In Violence Between Police And Minorities
Some were wondering how Obama would spin the surge in violence between police and minorities into yet another push for gun control.
We didn’t have long to wait.
Speaking in a news conference in Poland, the US president made the claim that contrary to all evidence, “racial relations have improved during his presidency”, to wit:
Now, when it comes to crime, generally, I think it’s just important to keep in mind that our crime rate today is substantially lower than it was five years ago, 10 years ago, 20 years ago, 30 years ago. Over the last four or five years, during the course of my presidency, violent crime in the United States is the lowest it’s been since probably the 1960s, maybe before the early 1960s. There’s been an incredible drop in violent crime.
So that doesn’t lessen, I think, people’s understandable fears if they see a video clip of somebody getting killed. But it is important to keep in perspective that in places like New York, or Los Angeles, or Dallas, you’ve seen huge drops in the murder rates. And that’s a testimony to smarter policing, and there are a range of other factors that have contributed to that.
Reading from a teleprompter, Obama said he’s tried to get all Americans to listen to each other on matters of race, and added that he believes his voice has “been true in speaking about these issues.” Oddly enough it would appear that all Americans have not listened. What he didn’t say is that under his divisive, race/class/ethnicity-baiting presidency, whether due to his social politics or his disastrous economic agenda which has let the Fed’s market boosting, monetary policy as the only game in town, and led to record wealth redistribution that has transferred trillions from the future to the richest 0.01% now (one look at a chart of the $19.3 trillion in US debt should be sufficient evidence) gun sales under Obama have been absolutely unprecedented, as even the NYT has shown:
As we reported two weeks ago, under Obama, background checks for guns reached 141.4 million through the end of May, amounting to sales of about 52,600 a day, according to the FBI… And 2016 is on pace to surpass last year’s record.
But ignore all that. Instead, Obama pledged on Saturday to seek ways to calm racial tensions and reduce divisions between police and minorities during his final months in office, but he warned that easy access to guns nationwide exacerbated the problem. “The proliferation of guns among the U.S. citizenry contributes to lethal encounters between minorities and police, heightening the danger law enforcement officers face in even routine interactions with the public,” Obama said.
Odd: no comments about “Obama’s city”, Chicago, where “only” 10 people being shot on any given weekend is considered a victory. The same Chicago which has ultra strict gun laws, that is.
Just like Hillary Clinton, Obama also blamed YouTube clips:
“with respect to, finally, the issue of police shootings, there’s no doubt that the visual records that we’re seeing have elevated people’s consciousness about this. And the fact that we’re aware of it may increase some anxiety right now, and hurt and anger. But it’s been said, sunshine is the best disinfectant. By seeing it, by people feeling a sense of urgency about it, by the larger American community realizing that, gosh, maybe this is a problem — and we’ve seen even some very conservative commentators begin to acknowledge this is something maybe we need to work on — that promises the possibility of actually getting it done. So, it hurts, but if we don’t diagnose this we can’t fix it. “
It hurts even more if the president makes a disastrously wrong diagnosis of what is causing it – a diagnosis that conveiently ignores Obama’s own contribution to this soaring social violence.
As Reuters adds, Obama spoke at the end of a week in which five policemen were killed by a sniper in Dallas and two black men were killed by police in Minnesota and Louisiana. He said he would bring together civil rights and law enforcement leaders for talks at the White House next week after returning from a trip to Europe.
Continuing his push to pivot from last week’s events to another push for more gun control, Obama said that “part of what’s creating tensions between communities and the police is the fact that our police have a really difficult time in communities where they know guns are everywhere,” Obama said adding that “If you care about the safety of our police officers, then you can’t set aside the gun issue and pretend that’s irrelevant.“
Like in Obama’s native and very strictly gun-controlled Chicago, for example?
* * *
Ok fine, lots of guns, we get it. But is that the disease or the symptom of something far more rotten inside US society?
Not according to the president, who said that the violence isn’t a sign of deeper divisions in the U.S. “America is not as divided as some have suggested.”
So there you have it: guns kill people, not tens of millions of desperate, unemployed people who increasingly have nothing to live for
Obama’s comments came one day after Donald Trump said that “racial divisions have gotten worse, not better” during Obama’s eight years in office. “Too many headlines flash across our screens every day about the rising crime and rising death tolls in our cities,” Trump said in a video message.
Sticking to his only strong suit, rhetoric written by others, Obama preached unity in the face of rising anger sparked by the killings of black men at the hands of police in Louisiana and Minnesota, and a massacre of five law enforcement officers in Dallas one day later: a combustible escalation from which there is no way out, and certainly which empty words will do nothing to resolve.
“Americans of all races and all backgrounds are rightly outraged by the inexcusable attacks on police, whether it’s in Dallas or anyplace else,” Obama said. “We cannot let the actions of a few define all of us,” he said, calling the shooter in Dallas a “demented individual” without using his name.
Obama said that it was “very hard to untangle the motives” of Dallas shooter Micah Johnson, a 25-year-old military veteran who told a police negotiator he was upset by police killings of black men, including those in the past week.
Actually no, Johnson’s motives were quite clear – he told police he wanted to kill white people and especially white police officers, even though the police officer who killed Philando Castile, Jeronimo Yanez, was hispanic. Johnson was then quickly killed by a bomb delivered by drone.
Obama noted that protests against the police in many cities over the killings of Alton Sterling in Louisiana and Philando Castile in Minnesota have been “almost uniformly peaceful” and that “you’ve seen, uniformly, police handling those protests with professionalism.”
Indeed, if one sticks their head in the sand and ignores the numerous and rapidly rising incidents across the country where either cops of blacks were shot in just the past 24 hours, then Obama is correct.
Perhaps the most troubling part of Obama’s message was the following: “You’re not seeing riots and you’re not seeing police go after” peaceful protesters, he said, drawing a contrast with civil unrest of the 1960s. All else equal, we would expect the number of riots to surge.
* * *
After delivering this speech, Obama cut his foreign trip short and elected to return to Washington on Sunday night after visiting Spain. He will visit Dallas early next week, with the goal of bridging divisions between police and minority communities, the White House said.
Obama’s full press conference below, and the full transcript can be found here:
- Deutsche Bank Gives Up: "We Can't Think Of A Time The S&P Was More Disjointed From Everything"
When sellside strategists, such as Deutsche Bank’s David Bianco, throw in the towel and the best they can come up with is a 100 word admission that nothing makes sense anymore, and that the S&P has never been “more disjointed from other assets”, it’s either a time to sell everything… or buy anything.
From DB:
For many years we’ve watched a set of market based indicators across seven major asset classes to help gauge cyclical conditions and S&P reward/risk. We can’t think of a time the S&P was more disjointed from these other asset class price moves than in recent days. While we believe interest rates have shifted structurally and thus discount falling rates and a flatter curve as signs of recession, indeed many of our signal criteria need recalibration, recent swings across asset classes still warrant caution and do have direct negative implications for S&P EPS. Offsetting PE upside is unlikely until norms are reestablished and the economic relationships better understood.
And here are some random charts to make it seems like there is some signal in the infinite noise that the Fed has created with its constant meddling.
And this is what DB’s 7 cross-asset “signals” indicate:
- End All The Myths – The Demise Of Draghi's Self-Delusion
Submitted by Jeffrey Snider via Alhambra Investment Partners,
As it turns out, Mario Draghi is no stranger to blanket promises. In October 2008 as head of the Bank of Italy, Draghi joined Italian Finance Minister Giulio Tremonti in promising “as much as necessary” for Italian banks via a 5-year government guarantee of their bonds. The government standby would be available all the way through the end of 2009, giving Italian banks sufficient time and financial cover, it was thought, to get control in their own balance sheets. On the monetary side, Draghi’s central bank added €40 billion in Italian government bills for use in bank refis against failed collateral for eurosystem liquidity; a telling sum as to the scale of Italian banking missteps.
Suffice to say, it didn’t work.
Not quite four years later, Italian banks were again in a lot of trouble. Joined by their “southern” cousins around the PIIGS part of Europe, the threat was judged universally to be existential to the euro. Despite the massive “money printing” of the LTRO’s earlier in 2012, it still seemed as if Europe was destined for a monetary-themed breakup. And so Draghi made another blanket promise.
What he actually said in late July 2012 was, “within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” It was the second sentence more than the first that got everyone’s attention; the (assumed) power behind the promise. The technicality, however, cannot be overlooked in the first part; “within our mandate.” What Draghi meant by that he explicitly stated:
To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate.
In other words, to save the euro the ECB would do whatever it takes to bring down interest rates all over Europe so that transmission channels would open and full and healthy recovery would begin. It was always full-throated recovery that would permanently hold together the currency union. There can be no doubt as to success in the first part of that equation; bond yields all through Europe are lower now than they have ever been. But that is the problem even if the media and indeed policymakers don’t know it, or at least will not admit it.
Just one year after making his promise, Draghi congratulated himself, saying, “It’s really very hard not to state that the OMT has been probably the most successful monetary policy measure undertaken in recent time.” Again, however, he was only speaking to the first half of the stated goal – sovereign interest rates. The rest remained to be seen, but no matter what it was taken as a matter of faith. Just six months after that, former euro-skeptics like Paul Krugman were praising Draghi. In January 2014, Krugman gushed,
Draghi did the bulk of it. It’s pretty clear that the ECB has been decisive in alleviating the European situation.
In the context of 2016, these are pretty damning statements. What did they actually do? It is an article of orthodox faith that low interest rates mean “stimulus” and success, but history is proving yet again otherwise.
Though it had been under criticism for not taking to full-blown QE fast enough, in reality the ECB has been in almost constant motion. Whether in accommodation via liquidity, or in unused promises like Draghi’s July 2012 declaration, the ECB was never short of busy. Yet, the effects of all that busyness stopped far short of its full achievement. There is the clear interest rate effect, but then nothing.
One technical note for the chart above: ECB QE actually takes place on the National level, meaning that the effect on Net Autonomous factors is to skew it deeply negative as bonds purchased via the PSPP are shipped to the required NCB for holding (credit risk born by individual nations of the bonds purchased). To get at least some sense of both QE and the CBPP3 (and now the Corporate Bond Purchase Program) since 2014 we have to filter out the movement between the NCB’s and the ECB:
The chart immediately above isn’t a completely accurate statement of “liquidity” per se, but it does offer a sufficient representation of the ECB’s level of activity in banking and bank reserves. What you’ll notice is that sovereign interest rates weren’t very much affected by the first two groupings, the 2008-10 activity and then the LTRO’s; though the initial decline in rates did begin coincident to the announcement of the LTRO’s in late 2011.
There was an initial positive response but then throughout the rest of the first half of 2012 another threatening backup in rates occurred despite all the “liquidity.” It wasn’t until Draghi’s promise that sovereign benchmark yields began their multi-year descent in Italy and elsewhere. In the context of that promise, it was all taken as “stimulus” when that may never have been the case. Draghi, at best, might have removed the default risk of Italy or even the greater risk of the euro’s breakup, but that wasn’t the same as “stimulus” in monetary terms as implied within his promise.
The “tight money” regime that followed stands in sharp contrast to the ECB’s activities (including what all flows over to the NCB’s in QE). This is easily observed by the behavior and size of the Italian banks themselves. Bank balance sheets here bear no resemblance to monetary policy, including the expansion in the size and depth of Italy’s mammoth NPL problem.
In July 2012, the total assets reported by the combined Italian banking system were €3.54 trillion. In April 2016, the latest data available, total assets were €3.48 trillion. Worse for Draghi, of those assets, Italian banks have nearly doubled their holdings of government securities. In other words, the ECB through his promise did not actually encourage monetary expansion into credit expansion but rather front-running into government debt at the expense of total lending. The reason for that is obvious; with Draghi’s promise in their pocket, Italian banks as banks all over Europe found an outlet for “risk free” profit in buying government bonds at huge discounts. It was not an economic consideration. The mechanism for making good on Draghi’s promise was, in essence, a (deeply) negative factor on the further expected monetary transmission!
Once again we find this dichotomy between what the ECB classifies as liquidity expansion and the lack of true money expansion in the real economy. The interest rate fallacy holds; lower rates are accompanied by visibly “tight” banking/money conditions regardless of the level, acceleration or promises for ECB activity.
Orthodox economics takes so much of itself on faith alone that it cannot distinguish negative signals from its own self-delusions. Draghi congratulated himself on a job well done without ever considering whether that was actually the case, or what was actually happening. He took low rates as if they were the foregone conclusion of all his blustery magic. Instead, no matter how high the ECB piles its various connected balance sheet factors, the real economy never responds. The most charitable economic description is that Europe has experienced an absence of further recession so far, but given the trillions spent intent on something far better than that it adds up to a colossal failure.
For almost eight years, Italy has been saying that it is going to fix its banks; Draghi included in all those promises. Four years ago, the end of the threat to the euro was taken as proof nothing more was necessary. Yet, here we are all over again with Italian banks plastered as headlines all over the world for all the same wrong reasons. Nothing ever changes no matter how big or in what monetary form.
And it is the very same failure that we find all over the world. There is no money in monetary policy, but central bankers still don’t seem to realize what they are missing. The economy, however, sure does; a fact that bond markets have been increasingly pricing.
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