- 19 Signs That American Families Are Being Economically Destroyed
Via Michael Snyder's Economic Collapse blog,
The systematic destruction of the American way of life is happening all around us, and yet most people have no idea what is happening.
Once upon a time in America, if you were responsible and hard working you could get a good paying job that could support a middle class lifestyle for an entire family even if you only had a high school education. Things weren’t perfect, but generally almost everyone in the entire country was able to take care of themselves without government assistance.
We worked hard, we played hard, and our seemingly boundless prosperity was the envy of the entire planet. But over the past several decades things have completely changed.
We consumed far more wealth than we produced, we shipped millions of good paying jobs overseas, we piled up the biggest mountain of debt in the history of the world, and we kept electing politicians that had absolutely no concern for the long-term future of this nation whatsoever. So now good jobs are in very short supply, we are drowning in an ocean of red ink, the middle class is rapidly shrinking and dependence on the government is at an all-time high.
Even as we stand at the precipice of the next great economic crisis, we continue to make the same mistakes. In the end, all of us are going to pay a very great price for decades of incredibly foolish decisions. Of course a tremendous amount of damage has already been done. The numbers that I am about to share with you are staggering. The following are 19 signs that American families are being economically destroyed…
#1 The poorest 40 percent of all Americans now spend more than 50 percent of their incomes just on food and housing.
#2 For those Americans that don’t own a home, 50 percent of them spend more than a third of their incomes just on rent.
#3 The price of school lunches has risen to the 3 dollar mark at many public schools across the nation.
#4 McDonald’s “Dollar Menu & More” now includes items that cost as much as 5 dollars.
#5 The price of ground beef has doubled since 2009.
#6 In 1986, child care expenses for families with employed mothers used up 6.3 percent of all income. Today, that figure is up to 7.2 percent.
#7 Incomes fell for the bottom 80 percent of all income earners in the United States during the 12 months leading up to June 2014.
#8 At this point, more than 50 percent of all American workers bring home less than $30,000 a year in wages.
#9 After adjusting for inflation, median household income has fallen by nearly $5,000 since 2007.
#10 According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.
#11 47 percent of all Americans do not put a single penny out of their paychecks into savings.
#12 One survey found that 62 percent of all Americans are currently living paycheck to paycheck.
#13 According to the U.S. Department of Education, 33 percent of all Americans with student loans are currently behind on their student loan debt repayments.
#14 According to one recent report, 43 million Americans currently have unpaid medical debt on their credit reports.
#15 The rate of homeownership in the U.S. has been declining for seven years in a row, and it is now the lowest that it has been in 20 years.
#16 For each of the past six years, more businesses have closed in the United States than have opened. Prior to 2008, this had never happened before in all of U.S. history.
#17 According to the Census Bureau, 65 percent of all children in the United States are living in a home that receives some form of aid from the federal government.
#18 If you have no debt at all, and you also have 10 dollars in your wallet, that you are wealthier than 25 percent of all Americans.
#19 On top of everything else, the average American must work from January 1st to April 24th just to pay all federal, state and local taxes.
All of us know people that once were doing quite well but that are now just struggling to get by from month to month.
Perhaps this has happened to you.
If you have ever been in that position, you probably remember what it feels like to have people look down on you. Unfortunately, in our society the value that we place on individuals has a tremendous amount to do with how much money they have.
So if you don’t have much money, there are a lot of people out there that will treat you like dirt. The following excerpt comes from a Washington Post article entitled “The poor are treated like criminals everywhere, even at the grocery store“…
Want to see a look of pure hatred? Pull out an EBT card at the grocery store.
Now that my kids are grown and gone, my Social Security check is enough to keep me from qualifying for government food benefits. But I remember well when we did qualify for a monthly EBT deposit, a whopping $22 — and that was before Congress cut SNAP benefits in November 2013. Like 70 percent of people receiving SNAP benefits, I couldn’t feed my family on that amount. But I remember the comments from middle-class people, the assumptions about me and my disability and what the poor should and shouldn’t be spending money on.
Have you ever seen this?
Have you ever experienced this yourself?
These days, most people on food stamps are not in that situation because they want to be. Rather, they are victims of our long-term economic collapse.
And this is just the beginning. When the next major economic crisis strikes, the suffering in this country is going to go to unprecedented levels.
As we enter that time, we are going to need a whole lot more love and compassion than we are exhibiting right now.
As a nation, we have made decades of incredibly bad decisions. As a result, we are experiencing bad consequences which are going to become increasingly more severe.
The numbers that I just shared with you are not good. But over the next several years they are going to get a whole lot worse.
Everything that can be shaken will be shaken, and life in America is about to change in a major way.
- China's Stealth Devaluation Continues Despite Lew Blasting "Unacceptable" FX Practices
"Intervention in foreign exchange markets in order to gain a competitive advantage is unacceptable," proclaims US Treasury Secretary Jack Lew in a strongly worded statement today with regard America's position in the global economy. That we note this comment is only relevant as, despite the apparent "stability" of the Chinese Yuan against the USD, relative to the 13-currency-basket with which China primarily trades, the Yuan has collapsed to 17-month lows – with JPY and EUR appearing to bear the brunt of the pain.
The US Dollar has traded within a relatively "stable" band against the offshore Yuan for much of the last six weeks…
But when compared to the collapse of the Yuan "basket" – as PBOC devalued against the rest of the major trading partners – the 'stealth' devaluation is obvious…
Is it any wonder that JPY is surging – despite all of Kuroda's best jawboning efforts?
As other countries gain greater voice in the international system, they also must accept greater responsibilities. A major one is to engage in responsible foreign exchange practices. Currency fluctuations are a normal and even desirable attribute of the global economy. When the values of currencies are allowed to move according to market forces, the global economy can better adapt to changes in relative economic performance among countries. What is unacceptable, however, is intervention in foreign exchange markets in order to gain a competitive advantage in trade or impede adjustments in the balance of payments.
Competitive devaluation represents a beggar-thy-neighbor fight for a shrinking global pie, not a pathway to stronger global growth.
Strong multilateral institutions such as the IMF and the G-20 are important vehicles for reinforcing norms against predatory currency practices and for mobilizing multilateral pressure against countries that engage in them. At the G-20 meeting in Shanghai this February, members not only committed to using all tools of policy—monetary, fiscal, and structural—to boost economic growth in a time of weak demand. They also committed to refrain from competitive devaluation and, for the first time, to consult on foreign exchange markets to avoid surprises that could threaten global financial stability.
So the question is – Is it ok to "devalue" your currency against other non-reserve-status currencies? As long as the veil of "stability" is maintained against The USD?
- Fleecing The American Taxpayer: The Profit Incentives Driving The Police State
Submitted by John Whitehead via The Rutherford Institute,
“The Founding Fathers never intended a nation where citizens would pay nearly half of everything they earn to the government.” ? Ron Paul
If there is an absolute maxim by which the federal government seems to operate, it is that the American taxpayer always gets ripped off.
This is true whether you’re talking about taxpayers being forced to fund high-priced weaponry that will be used against us, endless wars that do little for our safety or our freedoms, or bloated government agencies such as the National Security Agency with its secret budgets, covert agendas and clandestine activities. Rubbing salt in the wound, even monetary awards in lawsuits against government officials who are found guilty of wrongdoing are paid by the taxpayer.
Not only are American taxpayers forced to “spend more on state, municipal, and federal taxes than the annual financial burdens of food, clothing, and housing combined,” but we’re also being played as easy marks by hustlers bearing the imprimatur of the government.
With every new tax, fine, fee and law adopted by our so-called representatives, the yoke around the neck of the average American seems to tighten just a little bit more.
Everywhere you go, everything you do, and every which way you look, we’re getting swindled, cheated, conned, robbed, raided, pickpocketed, mugged, deceived, defrauded, double-crossed and fleeced by governmental and corporate shareholders of the American police state out to make a profit at taxpayer expense.
The overt and costly signs of the despotism exercised by the increasingly authoritarian regime that passes itself off as the United States government are all around us: warrantless surveillance of Americans’ private phone and email conversations by the NSA; SWAT team raids of Americans’ homes; shootings of unarmed citizens by police; harsh punishments meted out to schoolchildren in the name of zero tolerance; drones taking to the skies domestically; endless wars; out-of-control spending; militarized police; roadside strip searches; roving TSA sweeps; privatized prisons with a profit incentive for jailing Americans; fusion centers that collect and disseminate data on Americans’ private transactions; and militarized agencies with stockpiles of ammunition, to name some of the most appalling.
Meanwhile, the three branches of government (Executive, Legislative and Judicial) and the agencies under their command—Defense, Commerce, Education, Homeland Security, Justice, Treasury, etc.—have switched their allegiance to the Corporate State with its unassailable pursuit of profit at all costs and by any means possible. As a result, we are now ruled by a government consumed with squeezing every last penny out of the population and seemingly unconcerned if essential freedoms are trampled in the process.
As with most things, if you want to know the real motives behind any government program, follow the money trail.
When you dig down far enough, as I document in my book Battlefield America: The War on the American People, you quickly find that those who profit from Americans being surveilled, fined, scanned, searched, probed, tasered, arrested and imprisoned are none other than the police who arrest them, the courts which try them, the prisons which incarcerate them, and the corporations, which manufacture the weapons, equipment and prisons used by the American police state.
Examples of this legalized, profits-over-people, government-sanctioned extortion abound.
In the schools: The security industrial complex with its tracking, spying, and identification devices has set its sights on the schools as “a vast, rich market”—a $20 billion market, no less—just waiting to be conquered. In fact, the public schools have become a microcosm of the total surveillance state which currently dominates America, adopting a host of surveillance technologies, including video cameras, finger and palm scanners, iris scanners, as well as RFID and GPS tracking devices, to keep constant watch over their student bodies. Likewise, the military industrial complex with its military weapons, metal detectors, and weapons of compliance such as tasers has succeeded in transforming the schools—at great taxpayer expense and personal profit—into quasi-prisons. Rounding things out are school truancy laws, which come disguised as well-meaning attempts to resolve attendance issues in the schools but in truth are nothing less than stealth maneuvers aimed at enriching school districts and court systems alike through excessive fines and jail sentences for “unauthorized” absences. Curiously, none of these efforts seem to have succeeded in making the schools any safer.
On the roads: It has long been understood that police departments have quotas for how many tickets are issued and arrests made per month, a number tied directly to revenue. Likewise, red light camera schemes—sold to communities as a means of minimizing traffic accidents at intersections but which in fact are just a vehicle for levying nuisance fines against drivers often guilty of little more than making a right-hand turn on a red light—have been shown to do little to increase safety while actually contributing to more accidents. Nevertheless, these intrusive, money-making scams, which also function as surveillance cameras, are being inflicted on unsuspecting drivers by revenue-hungry municipalities, despite revelations of corruption, collusion and fraud.
In the prisons: States now have quotas to meet for how many Americans go to jail. Increasing numbers of states have contracted to keep their prisons at 90% to 100% capacity. This profit-driven form of mass punishment has, in turn, given rise to a $70 billion private prison industry that relies on the complicity of state governments to keep the money flowing and their privately run prisons full, “regardless of whether crime was rising or falling.” As Mother Jones reports, “private prison companies have supported and helped write … laws that drive up prison populations. Their livelihoods depend on towns, cities, and states sending more people to prison and keeping them there.” Private prisons are also doling out harsher punishments for infractions by inmates in order to keep them locked up longer in order to “boost profits” at taxpayer expense. All the while, the prisoners are being forced to provide cheap labor for private corporations. No wonder the United States has the largest prison population in the world at a time when violent crime is at an all-time low.
In the endless wars abroad: Fueled by the profit-driven military industrial complex, the government’s endless wars is wreaking havoc on our communities, our budget and our police forces. Having been co-opted by greedy defense contractors, corrupt politicians and incompetent government officials, America’s expanding military empire is bleeding the country dry at a rate of more than $57 million an hour, and that’s just the budget for the Dept. of Defense for 2016, with its 1000-plus U.S. military bases spread around the globe. Incredibly, although the U.S. constitutes only 5% of the world's population, America boasts almost 50% of the world's total military expenditure, spending more on the military than the next 19 biggest spending nations combined. In fact, the Pentagon spends more on war than all 50 states combined spend on health, education, welfare, and safety.
In the form of militarized police: The Department of Homeland Security routinely hands out six-figure grants to enable local municipalities to purchase military-style vehicles, as well as a veritable war chest of weaponry, ranging from tactical vests, bomb-disarming robots, assault weapons and combat uniforms. This rise in military equipment purchases funded by the DHS has, according to analysts Andrew Becker and G.W. Schulz, “paralleled an apparent increase in local SWAT teams.” The end result? An explosive growth in the use of SWAT teams for otherwise routine police matters, an increased tendency on the part of police to shoot first and ask questions later, and an overall mindset within police forces that they are at war—and the citizenry are the enemy combatants. Over 80,000 SWAT team raids are conducted on American homes and businesses each year. Moreover, government-funded military-style training drills continue to take place in cities across the country. These Urban Shield exercises, elaborately staged with their own set of professionally trained Crisis Actors playing the parts of shooters, bystanders and victims, fool law enforcement officials, students, teachers, bystanders and the media into thinking it’s a real crisis.
In profit-driven schemes such as asset forfeiture: Under the guise of fighting the war on drugs, government agents (usually the police) have been given broad leeway to seize billions of dollars’ worth of private property (money, cars, TVs, etc.) they “suspect” may be connected to criminal activity. Then—and here’s the kicker—whether or not any crime is actually proven to have taken place, the government keeps the citizen’s property, often divvying it up with the local police who did the initial seizure. The police are actually being trained in seminars on how to seize the “goodies” that are on police departments’ wish lists. According to the New York Times, seized monies have been used by police to “pay for sports tickets, office parties, a home security system and a $90,000 sports car.”
Among government contractors: We have been saddled with a government that is outsourcing much of its work to high-paid contractors at great expense to the taxpayer and with no competition, little transparency and dubious savings. According to the Washington Post, “By some estimates, there are twice as many people doing government work under contract than there are government workers.” These open-ended contracts, worth hundreds of millions of dollars, “now account for anywhere between one quarter and one half of all federal service contracting.” Moreover, any attempt to reform the system is “bitterly opposed by federal employee unions, who take it as their mission to prevent good employees from being rewarded and bad employees from being fired.”
Among defense contractors: Over the past two decades, America has become increasingly dependent on private defense contractors in order to carry out military operations abroad (the government’s extensive use of private security contractors has surged under Obama). In fact, the United States can no longer conduct large or sustained military operations or respond to major disasters without heavy support from contractors. As a result, the U.S. employs at a minimum one contractor to support every soldier deployed to Afghanistan and Iraq. With paid contractors often outnumbering enlisted combat troops, the American war effort has evolved from the “coalition of the willing” into the “coalition of the billing.”
By the security industrial complex: Not only is the government spying on Americans’ phone calls and emails, but police are also being equipped with technology such as Stingray devices that can track your cell phone, as well as record the content of your calls and the phone numbers dialed. The DHS has distributed more than $50 million in grants—again, paid by taxpayers—to enable local police agencies to acquire license plate readers, which rely on mobile cameras to photograph and identify cars, match them against a national database, and track their movements. Relying on private contractors to maintain a license plate database allows the DHS and its affiliates to access millions of records without much in the way of oversight. That doesn’t even touch on what the government’s various aerial surveillance devices are tracking, or the dangers posed to the privacy and safety of those on the ground.
The bottom line?
These injustices, petty tyrannies and overt acts of hostility are being carried out in the name of the national good—against the interests of individuals, society and ultimately our freedoms—by an elite class of government officials working in partnership with megacorporations that are largely insulated from the ill effects of their actions.
This perverse mixture of government authoritarianism and corporate profits has increased the reach of the state into our private lives while also adding a profit motive into the mix. And, as always, it’s we the people, we the taxpayers, we the gullible voters who keep getting taken for a ride by politicians eager to promise us the world on a plate.
This is a far cry from how a representative government is supposed to operate. Indeed, it has been a long time since we could claim to be the masters of our own lives. Rather, we are now the subjects of a militarized, corporate empire in which the vast majority of the citizenry work their hands to the bone for the benefit of a privileged few.
Adding injury to the ongoing insult of having our tax dollars misused and our so-called representatives bought and paid for by the moneyed elite, the government then turns around and uses the money we earn with our blood, sweat and tears to target, imprison and entrap us, in the form of militarized police, surveillance cameras, private prisons, license plate readers, drones, and cell phone tracking technology.
All of those nefarious deeds that you read about in the paper every day: those are your tax dollars at work. It’s your money that allows for government agents to spy on your emails, your phone calls, your text messages, and your movements. It’s your money that allows out-of-control police officers to burst into innocent people’s homes, or probe and strip search motorists on the side of the road. And it’s your money that leads to innocent Americans across the country being prosecuted for innocuous activities such as raising chickens at home, growing vegetable gardens, and trying to live off the grid.
Just remember the next time you see a news story that makes your blood boil, whether it’s a police officer arresting someone for filming them in public, or a child being kicked out of school for shooting an imaginary arrow, or a homeowner being threatened with fines for building a pond in his backyard, remember that it is your tax dollars that are paying for these injustices.
So what are you going to do about it?
There was a time in our history when our forebears said “enough is enough” and stopped paying their taxes to what they considered an illegitimate government. They stood their ground and refused to support a system that was slowly choking out any attempts at self-governance, and which refused to be held accountable for its crimes against the people. Their resistance sowed the seeds for the revolution that would follow.
Unfortunately, in the 200-plus years since we established our own government, we’ve let bankers, turncoats and number-crunching bureaucrats muddy the waters and pilfer the accounts to such an extent that we’re back where we started.
Once again, we’ve got a despotic regime with an imperial ruler doing as they please.
Once again, we’ve got a judicial system insisting we have no rights under a government which demands that the people march in lockstep with its dictates.
And once again, we’ve got to decide whether we’ll keep marching or break stride and make a turn toward freedom.
But what if we didn’t just pull out our pocketbooks and pony up to the federal government’s outrageous demands for more money? What if we didn’t just dutifully line up to drop our hard-earned dollars into the collection bucket, no questions asked about how it will be spent? What if, instead of quietly sending in our checks, hoping vainly for some meager return, we did a little calculating of our own and started deducting from our taxes those programs that we refuse to support?
If we don’t have the right to decide what happens to our hard-earned cash, then we don’t have very many rights at all. If they can just take from you what they want, when they want, and then use it however they want, you can’t claim to be anything more than a serf in a land they think of as theirs.
This was the case in the colonial era, and it’s the case once again.
- Used Car Price Plunge "Could Bring The Whole House Of Cards Down"
When we first warned that something was breaking in the American auto market, the Phil-LeBeau-ians crawled out of the woodwork to explain how everything is still awesome (brushing the weakness in stocks) despite soaring inventories and shrinking credit. Then when used-car prices began to leak lower, a few paid attention and the recent weakness in new car sales has shocked most. Now, however, used-car-prices are plunging at a similar pace to 2008…
With only sports cars and pickups rising in price in the last 15 months…
And RBC's Joseph Spak wonders if declining used vehicle prices (biggest YoY since 2013)…
Is "the card that brings the whole house down."
The reason for concern is lower used vehicle prices have a potential spillover effect to many other industry factors.
If we think about volume, price, mix, credit – all have been incredibly positive and supportive of the recovery. All are also no doubt related, but that’s what makes it a bit scary.
- Volume. Higher used vehicle values means higher trade-in value bringing incremental consumers to the new market.
- Price/Mix. Higher trade-in values allow consumers to “buy” more vehicle. Low rates/term-extension help this too. On mix, greater affordability has pushed consumers into more profitable CUVs or trucks from passenger cars (especially amid low fuel). Putting it all together, it shouldn’t come as a surprise that industry ATPs are up ~15% since 2010.
- Credit. High used values lead to lower monthly payments, but perhaps that credit wasn’t as “strong” as lead to believe. For the OEM's captive finance companies, if the vehicle is leased, that lease is written with a higher residual value thereby lowering the monthly payment. As such, we’ve seen leasing mix as a percent of retail sales rise dramatically during the recovery from 17% in 2010 to 29% in 2015. This is another example of letting the consumer get more vehicle than they otherwise can afford.
Now let’s think about the unwind.
Lower used vehicle values mean lower trade-in value which means lower vehicle affordability. Maybe the consumer is underwater (especially if bought on longer term loans). New volumes could decline if the consumer holds off (or looks to the secondary market). Mix worsens as the consumer affordability is lower. ATPs decline as OEMs incentivize to keep volume and/or mix going. Captive finance companies may write down lease portfolios. In general, monthly payments go higher which raises the credit risk which in turn means auto loan rates could increase which could then stymie demand/mix.
Used vehicle pricing is likely to continue to decline as off-lease volume should increase further from 3.1mm in 2016 to 3.6/4mm in 2017/18.
It should not surprise many then that US Auto Sales (SAAR), via WARD's Automative Group, tumbled 3.5% YoY to end March – the biggest YoY plunge since July 2009 (pre-Cash-for-Clunkers)…
And this price and sales weakness is occurring amid a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years…
None of this should be a surprise to readers, as we noted previously, Tommy Behnke in Mises Daily predicted that auto prices will fall as the bubble bursts from the artificially created demand generated from excessive credit creation.
Behnke pointed out that car production has increased a whopping 100 percent since 2009, but that apologists for government’s monetary stimulus programs see this fact as proof of the success of their Keynesian, aggregate demand hypothesis.
Behnke, on the other hand, took the Austrian perspective that the government has simply substituted a bubble in subprime auto loans for the bubble in subprime home loans. As defaults rise and automobile loan credit tightens, the result will be the same. Namely, a flood of used cars, and falling prices. The same happened with homes following the burst of the last bubble: a flood of “used” houses, and falling prices.
Surprisingly, the article attracted a number of reader comments predicting that used car prices would not fall, allegedly due to increases in complexity of cars or increases in the difficulty of repairing them. Another suggestion was that large dealers will dominate the used car market and simply raise prices at will.
While it’s certainly true that government interference – such as Cash for Clunkers – can raise the prices of cars, it is not true that private dealers (or any other private party) can simply raise the price. More complex and difficult-to-fix cars will not keep prices from falling in an environment in which the inventory of used cars is increasing.
Used Car Dealer or Used Car Collector?
There is one thing that we can know a priori: that an increase in the supply of some good or a drop in its demand will cause its price to be lower than that which it otherwise would be. There is no other way to clear the market.
Mises explained that, eventually, even a monopolist would prefer any price to zero price. Maintaining a price above the market clearing price produces zero revenue. In a flooded used-car market, car dealers must reduce their prices in order to avoid bankruptcy. Otherwise, the used car dealer ceases to be a dealer and becomes a collector. The laws of supply and demand have not been rescinded, even in a world with very expensive-to-build and complex cars. As the automobile bubble bursts, quality used cars will flood the market, creating a buying opportunity for those with cash.
As with houses, it doesn’t matter how big or luxurious or complex you make new cars. When the credit bubble bursts, auto prices will not “always go up.”
- Was Saudi Arabia Behind 9/11: These 28 Pages Have The Answer
Is it sensitive Steve, might it involve opening a bit of can of worms, or some snakes crawling out of there, yes.
That’s how the latest “60 Minutes” segment ended on Sunday.
The comment was in reference to the final chapter of a Congressional investigative report into 9/11 that has been left out of the report due to it being classified. The congressional investigative report is a report that was completed and handed over to the 9/11 commission, who ultimately produced the final “official” report.
The 28 pages that were classified have only been seen by a select few, and allegedly have to do with details around the existence of a possible Saudi support system for the hijackers while they were in the US among other implications of official Saudi involvement.
The push to declassify the documents is being led by then Chairman of the Senate Select Committe on Intelligence, former Senator Bob Grahm (D-FL), who has been a strong advocate of the documents being declassified since the Bush administration classified them due to matters of national security back in 2003.
Point blank, the Democratic senator said the hijackers were “substantially” supported by Saudi government, as well as charities and wealthy people in that country.
“I think it is implausible to believe that 19 people, most of whom didn’t speak English, most of whom never been in the United States before, many of whom didn’t have a high school education, could’ve carried out such a complicated task without some support from within the United States,” Graham said.
For now only a handful of people know for sure: those who have seen the contents of the 28 classified pages. And here are some notable quotes by those that have actually read these 28 pages:
I think it is implausible to believe that nineteen people, most of whom didn’t speak English, most of whom had never been in the United States before, many of whom didn’t have a high school education, could have carried out such a complicatd task without some support from within the United States.
Interviewer: You believe that support came from Saudi Arabia
Grahm: Substantially
Interviewer: When you say the Saudis you mean the government, rich people in the country, charities
Grahm: All of the aboveYou can’t provide the money for terrorists and then say I don’t have anything to do with what they were doing.
In general, the 9/11 commission did not get every single detail of the conspiracy. We didn’t have the time, we didn’t have the resources. And we certainly didn’t pursue the entire line of inquiry in regards to Saudi Arabia.
The papers are currently locked in a guarded vault beneath the Capitol called a Sensitive Compartmented Information Facility (SCIF). Very few people have access to these sites, and visitors are now allowed to bring in cameras or recording devices.
Full 60 Minutes segment here:
- Bernanke's Former Advisor: "People Would Be Stunned To Know The Extent To Which The Fed Is Privately Owned"
With every passing day, the Fed is slowly but surely losing the game.
Only it is not just former (and in some cases current) Fed presidents admitting central banks are increasingly powerless to boost the global economy, even if they still have sway over capital markets. What is far more insidious to the Fed’s waning credibility is when former economists affiliated with the Fed start repeating mantras that until recently were only a prominent feature in the so-called fringe media.
This is precisely what happened today when former central bank staffer and Dartmouth College economics professor Andrew Levin, special adviser to then Fed Chairman Ben Bernanke between 2010 to 2012, joined with an activist group to argue for overhauls at the central bank that they say would distance it from Wall Street and make its activities more transparent and accountable to the public.
Levin is pressing for the overhaul with Fed Up coalition activists. Many of the proposed changes target the 12 regional Federal Reserve Banks, which are quasi-private and technically owned by commercial banks in their respective districts.
All of that is not surprising. What he said to justify his new found cause, however, is.
“A lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned, Mr. Levin said. The Fed “should be a fully public institution just like every other central bank” in the developed world, he said in a conference call announcing the plan. He described his proposals as “sensible, pragmatic and nonpartisan.”
Why is that stunning? Because it has long been a bone of contention if only among the fringe media, that at its core the Fed is merely a private institution, beholden only to its de facto owners: not the people of the U.S. but to a small cabal of banks. Worse, the actual org chart of who owns what is not disclosed, even as the vast majority of the U.S. population remains deluded that the Fed is a publicly owned institution.
As the WSJ goes on to note, the former central bank staffer said he sees his ideas as designed to maintain the virtues the central bank already brings to the table. They aren’t targeted at changing how policy is conducted today. “What’s important here is that reform to the Federal Reserve can last for 100 years, not just the near term,” he said.
And this is coming from a former Fed employee and Ben Bernanke’s personal advisor! That in itself is a most striking development, because now that the insiders are finally speaking up, it will be a race among both current and prior Fed workers to reveal as much dirty laundry as possible ahead of what is increasingly being perceived by many as the Fed’s demise.
To be sure, Levin’s personal campaign for Fed transformation will not be easy, and as the WSJ writes, what is being sought by Mr. Levin and the activists is significant and would require congressional action. Ady Barkan, who leads the Fed Up campaign, said the Fed’s current structure “is an embarrassment to America” and Fed leaders haven’t been “willing or able” to make changes.
Specifically, Levin wants the 12 regional Fed banks to be brought fully into the government. He also wants the process of selecting new bank presidents—they are key regulators and contributors in setting interest-rate policy—opened up more fully to public input, as well as term limits for Fed officials.
This would represent a revolution to the internal staffing of the Fed, which will no longer be at the mercy of its now-defunct shareholders, America’s commercial banks; it would also mean that Goldman Sachs would lose all its leverage as the world’s biggest central bank incubator, a revolving door relationship which has allowed the Manhattan firm to dominate the world of finance for the decades.
Levin’s proposal was made in conjunction with the Center for Popular Democracy’s Fed Up coalition, a group that has been pressuring the central bank for more accountability for some time. The left-leaning group has been critical of the structure of the regional banks, and has been pressing the Fed to hold off on raising rates in a bid to make sure the recovery is enjoyed not just by the wealthy, in their view.
The proposal was revealed on a conference call that also included a representative from Bernie Sanders’s presidential campaign, although all campaigns were invited to participate.
The WSJ adds that according to Levin, who knows the Fed’s operating structure intimately, says the members of the regional Fed bank boards of directors, the majority of whom are selected by the private banks with the approval of the Washington-based governors, should be chosen differently. The professor says director slots now reserved for financial professionals regulated by the Fed should be eliminated, and that directors who oversee and advise the regional banks should be selected in a public process involving the Washington governors and local elected officials. These directors also should better represent the diversity of the U.S.
Levin also wants formal public input into the selection of new bank presidents, with candidates’ names known publicly and a process that allows for public comment in a way that doesn’t now exist. The professor also wants all Fed officials to serve for single seven-year terms, which would give them the needed distance from the political process while eliminating situations where some policy makers stay at the bank for decades. Alan Greenspan, for example, was Fed chairman from 1987 to 2006.
As the WSJ conveniently adds, the selection of regional bank presidents has become a hot-button issue. Currently, the leaders of the New York, Philadelphia, Dallas and Minneapolis Fed banks are helmed by men who formerly worked for or had close connections to investment bank Goldman Sachs.
Levin called for watchdog agency the Government Accountability Office to annually review and report on Fed operations, including the regional Fed banks. He also wants the regional Fed banks to be covered under the Freedom of Information Act. A regular annual review hopefully would insulate the effort from perceptions of political interference, Mr. Levin said.
* * *
While ending the Fed may still seem like a pipe dream, at least until the market’s next major crash at which point the population may finally turn on the culprit behind America’s serial boom-bust culture, the U.S. central bank, Levin’s proposal would get to the heart of the most insidious conflict of interest in the US: the fact that the Federal Reserve works not for the people of America, but for its owners – the banks.
Which is also why, sadly, this proposal will be dead on arrival, as its passage would represent the biggest loss for Wall Street in the past 103 years, far more significant than anything Dodd-Frank could hope to accomplish.
- "The Problems Are Unfixable"
Submitted by Howard Kunstler via Kunstler.com,
The mystery is at last revealed: why does the field of candidates for president score so uniformly low in trust, credibility, likability? Why are there no candidates of real substance, principle, and especially of real charm in this scrim of political basilisks? (Surely there are many people of substance and principle elsewhere in America — they just don’t dare seek the job at the symbolic tippy-top of this clusterfuck of faltering rackets.) The reason is that the problems are unfixable, at least not within the acceptable terms of the zeitgeist, namely: the secret wish to keep all the rackets going at all costs.
This is true, by the way, of all parties concerned from the 0.001 percent billionaire grifter class to the deluded sophomores crying for “safe spaces” in their womb-like “student life centers” to the sports-and-porn addled suburban multitudes stuck with impossible mortgage, car, and college loan debts (and, suddenly, no paying job) to the deluded Black Lives Matter mobs who have failed to notice that black lives matter least to the black people slaughtering each other over sneakers and personal slights. None of these groups really want to change anything. They actually wish to preserve their prerogatives.
The interests of the 0.001 percent are obvious: maintain those streams of unearned, rentier, notional wealth as long as possible and convert them as fast as possible into hard assets (Caribbean islands, Cézanne landscapes, gold bars) that will theoretically insulate them from the wrath of history when the center no longer holds. The poor (and ever-poorer) formerly middle class suburban debt serfs, for all their travails, can’t imagine living any other way or putting less of their dwindling capital into the Happy Motoring matrix. The Maoist Social Justice Warrior students are enjoying the surprising power and thrills of coercion, especially as directed against their simpering professors and cringing college presidents anxious to sustain the illusion that something like learning takes place in the money laundering operations of higher ed. The Black Lives Matter crowd just wants to be excused from their failure to follow standards of decent behavior and to keep mau-mauing the other ethnic groups of America for material and political tribute.
It must be obvious that the next occupant of the White House will preside over the implosion of all these arrangements since, in the immortal words of economist Herb Stein, if something can’t go on forever, it will stop. So the only individuals left seeking the position are 1) An inarticulate reality TV buffoon; 2) a war-happy evangelical maniac; 3) a narcissistic monster of entitlement whose “turn” it is to hold the country’s highest office; and 4) a valiant but quixotic self-proclaimed socialist altacocker who might have walked off the set of Welcome Back Kotter, 40th Reunion Special. These are the ones left standing halfway to the conventions. Nobody else in his, her, it, xe, or they right mind wants to be handed this schwag-bag of doom.
On Saturday, the unstoppable Democratic shoo-in Hillary lost her 7th straight contest to the only theoretically electable Vermont Don Quixote, Bernie Sanders. This was a week after it was reported in The Huff-Po that her campaign crew literally bought-and-paid for the entire 50-state smorgasbord of super-delegates who will supposedly compensate for Hillary’s inability to otherwise win votes the old-fashioned way, by ballots cast. Wonder why that didn’t make nary a ripple in the media afterward? Because this is the land where anything goes and nothing matters, and that’s really all you need to know about how things work in the USA these days.
The Republican mandarins are apparently delirious over loose cannon Donald Trump’s flagging poll numbers in the remaining primary states. Should Trump fall on his face, do you think they’ll just hand Ted Cruz the Ronald Reagan Crown-and-Scepter set. (They’d rather lock Ted in the back of a Chevy cargo van with five Mexican narcos and a chain saw.) The GOP establishment insiders are already lighting cigars in preparation for the biggest smoke-filled room in US political history, Cleveland, July 20. But what poor shmo will they have to drag to the podium to get this odious thing done? Who wants to be the guy in the Oval Office when Janet Yellen comes in some muggy DC morning and says, “Uh, sir (ma’am)… that sucker you heard was gonna go down…? Well, uh, it just did.”
As for the Dems: they are about to anoint the most unpopular candidate of our lifetimes. The BLM mobs have promised to deliver mayhem to the streets of the party conventions and don’t think they will spare Hillary in Philary, no matter how many chitlins she scarfed down last month in Carolina. The action in Philly will unleash and reveal all the deadly power of President Obama’s NSA goon squads when the militarized police put down the riots, and Hillary will be tagged guilty by association.
And that is how Kim Kardashian gets elected president.
- Brazil Committee Votes To Begin Rousseff Impeachment Process: What Happens Next
Moments ago, in the first of two closely anticipated and watched votes, a special committee in Brazil’s lower house voted 38 to 27 to begin the impeachment process against president Dilma Rousseff.
The committee voted on a report presented last week that concluded Rousseff bypassed Congress in authorizing credits to mask a growing budget deficit. While the report is not binding, the vote to confirm or reject it is the first real barometer on the prospect for impeachment.
Prepared by committee rapporteur Jovair Arantes, the report says Rousseff broke budget law by signing off on expenditures that had not been previously authorized by Congress, and by agreeing to illegal loans between federal govt and state-owned banks.
A quick reminder of Brazil’s current chaotis situation: as a result of an economic crisis that has plunged Brazil’s economy into a deep depression, cost its its coveted investment-grade rating and led to the corruption scandal known as Carwash that has ensnared leading executives and politicians, the largest Latin Americam nation has been left deeply divided, culminating with a surge in populist anger aimed squarely at president Dilma Rousseff who has become the symbol for many of all that is broken.
However, unlike President Fernando Collor de Mello, who in 1992 was ousted by an overwhelming majority in both houses, Rousseff’s fate seems to be hanging in the balance as many centrist legislators remain undecided on whether to support Rousseff or side with Vice President Michel Temer, who would replace her and whose party left government last month.
In any event, now that a special committee has voted with an overwhelming majority to push forward, things are finally in motion and following today’s vote, the full Chamber of Deputies could vote as early as April 17, either killing impeachment or setting the stage for Rousseff’s ouster in the Senate.
Impeachment would require two-thirds support, or 342 of the 513 lower-house lawmakers, to send the case to the Senate. As Bloomberg reported on Saturday, the pro-impeachment tally rose to 285 on Saturday from 274 on Friday, according to a survey by newspaper O Estado de S.Paulo, while the anti-government group VemPraRua put the count at 282. A group of Rousseff allies, including members of her Workers’ Party, said 127 lawmakers were lined up against the president’s ouster, short of the one-third needed to block her removal.
If there is a majority, and if the Senate accepts charges against Rousseff, she must step down for up to 180 days, with VP Michel Temer taking over. The Senate then holds trial, and votes whether to permanently oust president.
But for now it is up to the House vote where as Bloomberg previously reported, supporters of Rousseff and Temer in recent days have both sought to sway undecided legislators by offering government posts. They have also squabbled over procedural issues that could slow or accelerate the process. The chairman of the impeachment committee has been moving to speed up the debate, for which more than 100 speakers signed up, while government supporters are balking at the fast-track approach.
PSDB, the biggest opposition party, plans to support Temer if he becomes president, Folha de S.Paulo reported Saturday. Though PSDB won’t block members from accepting ministers’ positions, it won’t join a possible Temer administration, the newspaper said, citing unidentified party leaders who met Friday in Sao Paulo.
Attorney General Jose Eduardo Cardozo said he could challenge the impeachment process before the Supreme Court, citing insufficient legal grounds and alleged irregularities in the committee.
Meanwhile, Rousseff, 68, who was imprisoned and tortured during Brazil’s two-decade military dictatorship that ended in 1985, has repeatedly denied wrongdoing and said that an impeachment process without sufficient evidence would amount to a coup.
Bloomberg adds that the government seemed to have clawed back some support earlier this month, but Rousseff’s momentum “has slowed, or even reversed” in recent days, political consulting company Eurasia Group said in a research note on Friday. It put the chances of Rousseff being impeached at 60 percent.
Brazil’s agriculture federation and Evangelical legislators came out in support of impeachment on April 6. A day later, Folha de S. Paulo published fresh allegations that the Andrade Gutierrez construction company financed Rousseff’s re-election campaign in exchange for benefits. The government denied the claims.
Meanwhile, Rousseff’s efforts to bring her predecessor Luiz Inacio Lula da Silva into the government to help muster support in Congress remain stuck in the Supreme Court, and have diminishing chances of being approved before the impeachment vote. In a change of opinion, chief public prosecutor Rodrigo Janot argued on Thursday that Lula shouldn’t be allowed to join Rousseff’s cabinet and thereby gain special legal privileges, because it looked as though his appointment was designed to protect him from a continuing corruption probe.
Then today, according to AP, in yet another twist in the months-long saga, the newspaper Folha de S. Paulo released the audio of an address by Vice President Michel Temer, who would take over if Rousseff were suspended. The audio, which the newspaper said was sent to members of Temer’s Democratic Movement, appears to be a draft of an address that Temer would make to the Brazilian people if the impeachment process were to move forward following a vote in the full Chamber of Deputies.
In the address, Temer speaks as if he had already assumed the top job, saying, “Many people sought me out so that I would give at least preliminary remarks to the Brazilian nation, which I am doing with modesty, caution and moderation.”
* * *
In summary, while the first key step in Rousseff’s ouster has been taken, there is a long road ahead for the process and Dilma will not go quietly or without a fight.
- Average German Bond Yield Crashes To Zero For First Time Ever
“You Get Nothing” is the message for German bond coupon-clippers as for the first time in history, the average yield across the entire bond complex tumbles to zero.
h/t @Schuldensuehner
With the yield curve below zero to 9 years, and 1 month yields at -65bps, it is no surprise that asset managers are extending duration…
- Former IMF Chief Economist Admits Japan's "Endgame" Scenario Is Now In Play
Back in October 2014, just after the BOJ drastically expanded its QE operation, we warned that the biggest risk facing the BOJ (and the ECB, and the Fed, and all other central banks actively soaking up securities from the open market) was a lack of monetizable supply. We cited Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo, who said that at the scale of its current debt monetization, the BOJ could end up owning half of the JGB market by as early as in 2018. He added that “The BOJ is basically declaring that Japan will need to fix its long-term problems by 2018, or risk becoming a failed nation.”
Which is why 17 months ago we predicted that, contrary to expectations of even more QE from Kuroda, we said “the BOJ will not boost QE, and if anything will have no choice but to start tapering it down – just like the Fed did when its interventions created the current illiquidity in the US govt market – especially since liquidity in the Japanese government market is now non-existent and getting worse by the day.”
As part of our conclusion, we said we do not “expect the media to grasp the profound implications of this analysis not only for the BOJ but for all other central banks: we expect this to be summer of 2016’s business.”
Since then, the forecast has panned out largely as expected: both the ECB and BOJ, finding themselves collateral constrained, were forced to expand into other, even more unconventional methods of easing, whether it be NIRP in the case of the BOJ, or the outright purchases of corporate bonds as the ECB did a month ago.
* * *
Then, in September of 2015, the IMF realized the severity of what our forecast meant for Japan, and released a working paper with the non-pretentious title “Portfolio Rebalancing in Japan; Constraints and Implications for Quantitative Easing“, which however had momentous implications because it was a replica of what we had said a year earlier.
In the paper, the IMF said that the Bank of Japan may need to reduce the pace of its bond purchases in a few years due to a shortage of sellers. The paper predicted a world in which, just as we cautioned, “the BoJ may need to taper its JGB purchases in 2017 or 2018, given collateral needs of banks, asset-liability management constraints of insurers, and announced asset allocation targets of major pension funds… there is likely to be a “minimum” level of demand for JGBs from banks, pension funds, and insurance companies due to collateral needs, asset allocation targets, and asset-liability management (ALM) requirements. As such, the sustainability of the BoJ’s current pace of JGB purchases may become an issue.”
The paper’s shocking punchline was how Japan would survive this inevitable phase shift, or as we rhetorically asked, what happens when the regime shifts from the current buying phase to its inverse: The IMF response: “As this limit approaches and once the BoJ starts to exit, the market could move from a situation of shortage to one with excess supply. The term premium could jump depending on whether the BoJ shrinks its balance sheet and on the fiscal deficit over the medium term.
When considering that by 2018 the BOJ market will have become the world’s most illiquid (as the BOJ will hold 60% or more of all issues), the IMF’s final warning is that “such a change in market conditions could trigger the potential for abrupt jumps in yields.”
Or as we put last September, “at that moment the BOJ will finally lose control.”
We even timed it: “But before we get to the QE endgame, we first need to get the interim point: the one where first the markets and then the media realizes that the BOJ – the one central banks whose bank monetization is keeping the world’s asset levels afloat now that the ECB has admitted it is having “problems” finding sellers – will have no choice but to taper, with all the associated downstream effects on domestic and global asset prices.
It’s all downhill from there, and not just for Japan but all other “safe collateral” monetizing central banks, which explains the real reason the Fed is in a rush to hike: so it can at least engage in some more QE when every other central bank fails.
But there’s no rush: remember to give the market and the media the usual 6-9 month head start to grasp the significance of all of the above.
Sure enough, it took the market about 6 months to finally grasp that the BOJ is out of ammo: the result has been a dramatic surge in the Yen coupled with a plunge in the Nikkei, meanwhile Kuroda is left scratching his head what he can do in a world in which the G-20 have specifically prohibited him from easing and making the dollar stronger as that will lead to a return of China’s weak currency-driven, capital outflow crisis.
As for our other forecast from October 2014 in which we said “expect the media to grasp the profound implications of this analysis not only for the BOJ but for all other central banks: we expect this to be summer of 2016’s business” this too was quite prescient. Because while summer is just around the corner, earlier today the mainstream media, in this case the Telegraph’s Ambrose Evans-Pritchard, finally caught up with a piece titled: “Olivier Blanchard eyes ugly ‘end game’ for Japan on debt spiral.” In it he cites none other than the IMF’s former chief economist, Olivier Blanchard who left the IMF just at the time the IMF’s study from last September was made public.
The content of Pritchard’s piece should be familiar to anyone who has followed our musings on this topic for the past two years.
In it, he says that “Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately be forced to inflate away its debt in a desperate end-game, one of the world’s most influential economists has warned.“
From the article:
Olivier Blanchard, former chief economist at the International Monetary Fund, said zero interest rates have disguised the underlying danger posed by Japan’s public debt, likely to reach 250pc of GDP this year and spiralling upwards on an unsustainable trajectory.
Prof Blanchard said the Japanese treasury will have to tap foreign funds to plug the gap and this will prove far more costly, threatening to bring the long-feared funding crisis to a head.
“If and when US hedge funds become the marginal Japanese debt, they are going to ask for a substantial spread,” he told the Telegraph, speaking at the Ambrosetti forum of world policy-makers on Lake Como.
Analysts say this would transform the country’s debt dynamics and kill the illusion of solvency, possibly in a sudden, non-linear fashion.
That moment in which the illusion dies, is precisely the phase shift which we descibed in September as the moment “market conditions could trigger the potential for abrupt jumps in yields.“
Said otherwise, from plummeting deflation Japan would be faced with soaring yields and hyperinflation as the last recourse buyer, the BOJ, is swept aside.
Prof Blanchard, now at the Peterson Institute in Washington, said the Bank of Japan will come under mounting political pressure to fund the budget directly, at which point the country risks lurching from deflation to an inflationary denouement.
“One day the BoJ may well get a call from the finance ministry saying please think about us – it is a life or death question – and keep rates at zero for a bit longer,” he said.
Pritchard here catches up to what we said in October of 2014, namely that the “BoJ is soaking up the entire budget deficit under Govenror Haruhiko Kuroda as he pursues quantitative easing a l’outrance.” Incidentally, this is the same Pritchard who several years ago was lauding Japan’s QE.
He next points out something we have also warned about for year: “the central bank owned 34.5pc of the Japanese government bond market as of February, and this is expected to reach 50pc by 2017.”
This is us circa last September.
What comes next is the scary part, the part we have been focusing on for years:
Prof Blanchard did not elaborate on the implications of Japan’s woes for the global financial system, but they would surely be dramatic and there are growing fears that this could happen within five years. Japan is still the world’s third largest economy by far. It is also the global laboratory for an ageing crisis that the rest of us will face to varying degrees.
Once markets begin to suspect that Tokyo is deliberately engineering an escape from its $10 trillion public debt trap by means of an inflationary ‘stealth default’, matters could spin out of control quickly.
It might lead to an abrupt reappraisal of sovereign debt risk in other parts of the world, especially in Europe with its own Japanese pathologies of low-growth and bad demographics. Roughly $7 trillion of debt is trading at negative yields worldwide, an accident waiting to happen for the bond market.
After Japan comes Europe:
Prof Blanchard said the risk for the eurozone is the election of populist “rogue governments” that let rip with spending in defiance of Brussels. “Investors would have serious thoughts about buying their sovereign bonds,” he said. The European Central Bank would be legally prohibited from activating its back-stop mechanism (OMT) to prevent yields soaring since these governments would not be in compliance with EU rules. “Some of them have very high debt and presumably would have to default,” he said.
Perhaps, or the ECB will simply unleash the first helicopter money if it can get over the loud German chorus of disagreement. Although once Europe launches Helicopter money, it will be promptly followed by the US as the global monetary devaluation round enters the final sprint. It is no coincidence that earlier today none other than Ben Bernanke admitted that “Helicopter Money May Be The Best Available Alternative.”
What shape the final stand of failed monetary policy takes, is irrelevant. What is relevant, is that for the first time, not only is the Japanese doomsday scenario finally in the mainstream press, but it is acknowledged by none other than one of the Keynesian luminaries AEP is so impressed by:
Prof Blanchard is one of the world’s top theoretical economists over the last quarter century and might have won the Nobel Prize by now if he had not been cajoled into IMF service by his fellow Frenchman, Dominique Straus-Kahn.
He transformed the IMF into a brain-trust of progressive ‘Keynesian’ thinking, much to the fury of Berlin. A leaked document from the German finance ministry said the institution should be renamed the ‘Inflation Maximizing Fund’.
Evans-Pritchard’s conclusion:
“Professor Blanchard has had the last laugh on that joke. Seven years after the Lehman crisis the eurozone is in outright deflation and yields on 10-year German Bunds are trading at an historic low 0.11pc. Touché.”
Actually let’s check back in another 7 years, because now that even one of the world’s “top theoretical economists” acknowledges that the endgame for trillions in debt ends in a hyperinflationary supernova, and not a deflationary black hole, all those years of sliding interest rates around the globe are about to be flipped on their head. At that point it will be the Germans who are laughing last.
Sadly, there will be nothing else to laugh about as the Keynesian “progressive thinkers” will have finally reached the inevitable and disastrous “end-game” of their failed religion.
- White House Issues Following Statement After Meeting Between Obama And Yellen
The closed-door meeting between Obama, Biden and Yellen has concluded, and moments ago the White House released the following statement:
“The President and Chair Yellen met this afternoon in the Oval Office as part of an ongoing dialogue on the state of the economy. They discussed both the near and long-term growth outlook, the state of the labor market, inequality, and potential risks to the economy, both in the United States and globally. They also discussed the significant progress that has been made through the continued implementation of Wall Street Reform to strengthen our financial system and protect consumers.”
Of course, for the actual transcript of what was said, we will have to rely on some conscientious White House leaker putting it on BitTorrent, but here is our modest attempt at translating what was and what was not said: no market crashes allowed until November.
- A Tale Of Two Car Companies
Here’s a tale of two start-up car companies: Elio Motors and… Tesla.
One execrable, the other admirable.
Elio is developing a low-cost ($6,800 to start) very high mileage (80-plus MPG) commuter car.
Tesla builds expensive toys.
This – the building of toys – is not of itself an execrable activity. Lamborghinis and Porsches are toys, too.
They are expensive, impractical things.
As is the Tesla – including the new Model 3. It’s expensive ($35k to start; probably closer to $40k once all is said and done) and impractical. Not a car for cold places or long trips … unless you don’t mind long waits.
Not that there’s anything wrong with that… if that’s what you’re into.
Lambos are also finicky and not good for very much except going very fast and advertising that you’ve got funds.
The execrable element is that Tesla expects you to pay for its toys. Not for yourself. But so that other people – affluent people – can play with them.
It’s exactly like giving – being forced to give – your orthodontist a fat check so he can go out and buy a new 911 or Gallardo.
Elio, in contrast, merely offers its cars – which you’re free to buy or not. And if you don’t want one, they’re not gonna force you (via Uncle) to “help” other people buy one.
So, which one gets the press? The adulation of the press? The seal-clapping encomiums on Today and Good Morning America and such?
How many people have even heard of Elio Motors?
How many have not heard of Tesla?
The reason for this disparity is easy enough to grok:
Tesla makes collectivism sexy – and that makes Tesla popular with collectivists.
Selling the Green Agenda has not been easy because it seems pretty dreary. Pay more for shittier things. But the Tesla looks good. This allows preening.
It is quick – which allows bragging.
And – so they say – it is green, too.
This renders cost no object.
It doesn’t matter that the entire venture is a Jenga castle of crony capitalism; that every “sale” entails an extortion payment extracted from a real car company – a “carbon credit” that is “sold” to offset the less-than-Teslian characteristics of functionally viable but “greenhouse gas” producing conventional cars… that it is necessary to bribe even rich people who have money to burn on toys with thousands of dollars of tax write-offs (the costs for these written off onto the backs of those who pay the taxes) in order to complete each transaction.
No. The Tesla is a long-legged, G-string-wearing planet-saving sex machine… and can do no wrong. Sense is blind to the realities behind the flash in the same way that men’s reason is often blinded – and their judgment impaired – by a hot piece of ass. No matter her liabilities.
The Elio is not sexy. It is a thumb in the eye to everything the Tesla is and stands for.
It is practical; an ideal city car/commuter car well-suited to Froggering around in busy urban traffic and which can be parked pretty much anywhere a motorcycle fits.
It is cheap. A new car for just under $7k – or about half the price of the typical economy compact sedan and about a fifth the cost of a Tesla 3.
Which also means it costs less to insure.
Most of all – and unlike the Tesla – the Elio is economical. Eighty-plus MPG renders the cost of gas a near-irrelevance, even if it doubles. And makes the Tesla look ridiculous, if the criteria is economy.
Or even “saving the planet.”
How much less energy goes into making an Elio? It does not have hundreds of pounds of lethally noxious chemical batteries that required Earth rape to obtain. Nor does it depend upon C02-producing utility plants for its motive power.
But most of all, it is a car that many people could simply write a check for – that is, bought outright, no loan. No debt. And that is anathema to the Banksters who run the country and who push Teslas via the media they own, the bought-and-paid-for parrots who read the Tele-e-Prompters and know what the Talking Points are.
Can’t have people not chained to beefy monthly payments for the next seven years. Can’t have a car that doesn’t include multi-leveled kickbacks of other people’s money (i.e., “incentives”) to make each “sale.”
The Elio is sane.
A car ideally suited to every consideration of our times.
The Tesla, insane.
It touts the fact that it uses no gasoline, so no worries about the cost of gas. But you pay (with “help” from Uncle) $35,000-plus to “save” on the cost of fuel.
It touts performance – quick acceleration. But if its ability to accelerate quickly is used much, the car’s range is reduced a lot. What good is a quick car that can’t go very far?
But it’s sexy – and it’s “green” – and that makes it politically appealing, even if it’s utterly ridiculous as an economic proposition, absurd as a machine and noxious as as an example of the most grotesque manifestation of crony capitalism I’m aware of – exceeding even the effrontery of the ethanol lobby.
Cue the Zapruder film….
- BofA Warns "Europe Looks Frightening" – Trades Like 2001, 2008
"Europe looks concerning" warns BofAML's Stephen Suttmeier, pointing out, rather ominously that the broad European index – STOXX 600 – is trading like it did in 2001 & 2008.
The STOXX Europe 600 (SXXP) is trending below declining and bearishly positioned 26 and 40-week moving averages. ECB quantitative easing has not reversed this bearish trend.
The 2016 set-up is similar to early 2001 and early 2008 with 350 important resistance and 300 important support. Both 2001 and 2008 saw rebounds into bearishly positioned and falling 26/40-week MAs that formed important lower tops in May.
We think this pattern could repeat or at least rhyme moving into May 2016. The breaks below 300 in September 2011 and June 2008 led to much deeper weakness and a similar break in 2016 could see the SXXP trend down toward 200.
Source: BofAML
- As Ukraine Collapses, Europeans Tire Of US Interventions
Submitted by Ron Paul via The Ron Paul Institute for Peace & Proseprity,
On Sunday Ukrainian prime minister Yatsenyuk resigned, just four days after the Dutch voted against Ukraine joining the European Union. Taken together, these two events are clear signals that the US-backed coup in Ukraine has not given that country freedom and democracy. They also suggest a deeper dissatisfaction among Europeans over Washington’s addiction to interventionism.
According to US and EU governments – and repeated without question by the mainstream media – the Ukrainian people stood up on their own in 2014 to throw off the chains of a corrupt government in the back pocket of Moscow and finally plant themselves in the pro-west camp. According to these people, US government personnel who handed out cookies and even took the stage in Kiev to urge the people to overthrow their government had nothing at all to do with the coup.
When Assistant Secretary of State Victoria Nuland was videotaped bragging about how the US government spent $5 billion to “promote democracy” in Ukraine, it had nothing to do with the overthrow of the Yanukovich government. When Nuland was recorded telling the US Ambassador in Kiev that Yatsenyuk is the US choice for prime minister, it was not US interference in the internal affairs of Ukraine. In fact, the neocons still consider it a “conspiracy theory” to suggest the US had anything to do with the overthrow.
I have no doubt that the previous government was corrupt. Corruption is the stock-in-trade of governments. But according to Transparency International, corruption in the Ukrainian government is about the same after the US-backed coup as it was before. So the intervention failed to improve anything, and now the US-installed government is falling apart. Is a Ukraine in chaos to be considered a Washington success story?
This brings us back to the Dutch vote. The overwhelming rejection of the EU plan for Ukrainian membership demonstrates the deep level of frustration and anger in Europe over EU leadership following Washington’s interventionist foreign policy at the expense of European security and prosperity. The other EU member countries did not even dare hold popular referenda on the matter – their parliaments rubber-stamped the agreement.
Brussels backs US bombing in the Middle East and hundreds of thousands of refugees produced by the bombing overwhelm Europe. The people are told they must be taxed even more to pay for the victims of Washington’s foreign policy.
Brussels backs US regime change plans for Ukraine and EU citizens are told they must bear the burden of bringing an economic basket case up to European standards. How much would it cost EU citizens to bring in Ukraine as a member? No one dares mention it. But Europeans are rightly angry with their leaders blindly following Washington and then leaving them holding the bag.
The anger is rising and there is no telling where it will end.
In June, the United Kingdom will vote on whether to exit the European Union. The campaign for an exit is broad-based, bringing in conservatives, populists, and progressives. Regardless of the outcome, the vote should be considered very important. Europeans are tired of their unelected leaders in Brussels pushing them around and destroying their financial and personal security by following Washington’s foolish interventionism. No one can call any of these recent interventions a success and the Europeans know it.
One way or the other, the US empire is coming to an end. Either the money will go or the allies will go, but it cannot be sustained. The sooner the American people demand an end to these foolish policies the better.
- Wait for a Pullback after Earning`s Season to Buy Energy Stocks (Video)
By EconMatters
Generally I don`t think the Energy stocks are in line with the fundamentals of the sub $60 oil environment. Be patient wait for a market pullback either in the summer or early fall to find value in Energy Stocks.
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- "Mr. Yen" Warns USDJPY May Hit 100 By Year-End
Having correctly predicting the yen’s advance beyond 115 and then 110 per dollar, former Japanese Finance Minister Eisuke Sakakibara now says Japan’s currency may strengthen to 100 by year-end.
As Bloomberg reports, having been in charge of currency intervention in Japan, Sakakibura was dubbed Mr. Yen for his ability to influence the exchange rate in the 1990s, seems to suggest – uinlike Suga overnight – that intervention is unlikely (or unlikley to be successful).
The yen has renewed its highs despite increased rhetoric from Japanese officials in the past week aimed at restraining its advance. Bank of Japan Governor Haruhiko Kuroda said Monday financial markets continue to be volatile, and he is watching the effect on the economy.
Chief Cabinet Secretary Yoshihide Suga reiterated the government is watching foreign-exchange movements “with vigilance,” and will take appropriate action if necessary. A weaker currency has been a linchpin of Prime Minister Shinzo Abe’s program to stoke a recovery and exit deflation.
A yen at 105 per dollar is “no problem” for Japan’s economy, the 75-year-old Sakakibara, who is currently a professor at Aoyama Gakuin University, said in a Bloomberg Television interview.
Any currency intervention can only be done with agreement from the U.S. and other counter parties, he said.
While noting that 105 would be "no problem" for Japan's economy, we suspect the implied drop in the S&P 500 to 1550 would be a problem for the world's "economy".
- Silver Soars, Stocks Slump As Equity "Fear" Hits All-Time Record High
"smooth sailing", right?
Something is going on beneath the covers…
Last week saw the biggest addition of shorts across the Treasury Bond Complex in over 3 years (with record ultra shorts)…
And CSFB's "Fear Barometer" just hit an all-time high…
As CS' Mandy Xu notes, typically, an increase in the CSFB is caused by a combination of higher put demand and lower call demand. Interestingly, this time, the entire move was driven by the call-side. The derivatives market is assigning less than 1% probability the market will rise by 10% in the next three months vs. 17% probability it will fall by 10%.
* * *
And so while stocks tried (twice) to ramp in the face of faux-ness, they couldn't… Despite a well placed Italian headline into the close…
- *ITALY FIN. INSTITUTIONS, CDP AGREE TO SET UP FUND FOR BANKS
Just as we predicted…
Time for another "Italian bank bailout" headline
— zerohedge (@zerohedge) April 11, 2016
Which totally failed.. as stocks dumped into the red!
Who could have seen that coming? An EU banking bailout rumor headline-driven rally and USDJPY ramp crushed by crude's collapse on Russia "no freeze" headlines…
Post-Payrolls, stocks are red but crude is soaring with gold and bonds also bid…
But again all that mattered was 2043.94… (YTD unch) – VIX tagged 16.00 and was quickly dropped to get S&P back over 2043.94…
Goldman was bid on a $5.1bn settlement… (imagine if it had been $51 billion?)
Stocks are beginning to wake up to the credit and bond decoupling…
Treasury yields ended the day practically unchanged – swinging from bid to offered in the EU session and rallying (lower yields) during the US session…
The USD Index ended modestly lower on the day but rallied back during the US session (after the EU close) after some shenanigans around the Silver fix time…
And finally, Commodities all ended positively (even copper just) but it was silver that stood out…
As the precious metal inched back towards the $16 level…
Charts: Bloomberg
Bonus Chart: With Alcoa kicking off earning season, we suspect this won't end well…
- Behold Accounting Magic 101: This Is How Alcoa Just "Beat" Consensus EPS
Some companies are notorious for buying back billions in stock in order to mask the decline in their earnings by reducing the number of shares outstanding. Alcoa, which still has a major debt overhang from the last financial crisis, is unable to do that as it simply does not have the free cash flow to dedicate to shareholder friendly activities. Instead, Klaus Kleinfeld’s company is forced to resort to an even more primitive form of EPS fudging: massive quarterly EPS addbacks.
And as we showed last quarter, AA’s addbacks just hit an all time high.
We were curious if as a result of this “bathwater” quarter, Alcoa would finally cease this deceptive practice.
The answer: not even close.
Moments ago, Alcoa reported adjusted EPS of $0.07, or $108 million in adjusted net income, beating consensus expectations of $0.02 handily (nevermind that it missed consensus revenues of $5.2 billion by a whopping $250 million, a drop of 15% from a year ago).
There is, alas, a problem with these adjusted “earnings”, because on a actual, GAAP basis, Alcoa actually reported its latest GAAP whopper, according to which GAAP EPS was actually… $0.00, thanks to a paltry $16mm in net income.
How did Alcoa “fill the gap?” Simple: with its usual millions in “one-time” charges, in this case $61 million.
But it is on an LTM basis that the company has absolutely outdone itself.
Here, things get downright comical, because whereas Alcoa’s GAAP Net Income for the LTM period ended December 31 was a net loss of $501 million, when one adds back all the charges incurred over the past 12 months, the “net income”, on a non-GAAP Basis of course, soars to a ridiculous $532 million. The plug? “One-time, non-recurring” addbacks and various other restructuring charges amounting to over $1 billion for the LTM period!
Said otherwise, more than all of Alcoa’s earnings in the last 12 months were the result of “non-recurring” addbacks, “one-time” charges, and other proforma changes to the non-GAAP net income number.
And that, ladies and gentlemtn, is non-GAAP accounting magic 101.
Oh, we almost forgot: here is the history of Alcoa’s $0.02 EPS “consensus” which the company had to take a record addback in order to “beat”…
And the cherry on top? This:
The business reduced its workforce by 600 positions in the first quarter and plans a further reduction of 400 positions. Additionally, given the current market environment, it is evaluating another reduction of up to 1,000 positions.
What current market environment? Isn’t everything recovering now? And are those GAAP or non-GAAP jobs?
Finally, some tangential observations. It appears the company’s treasurer is so busy, he can’t even check the company’s primary excel spreadsheet.
And then remember when Alcoa beat last quarter on non-GAAP EPS of $0.07? Well, that was just quietly revised to $0.04.
- "Credit-Dollars" – The Fatal Flaw In The System
Submitted by Bill Bonner of Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),
The Hard Rocks of Real Life
The Dow dropped 174 points on Thursday, the biggest fall in six weeks. Not the end of the world. Maybe not even the end of this year’s bounce-back bull run. As you’ll recall, stocks sold off at the beginning of the year, too. Then, investors were buoyed up after central banks got to work – jimmying the credit market on their behalf.
The Fed swore off any further “normalization” until later in the year. Central banks in Europe, Japan, and China all took bolder and more reckless action… with the Bank of Japan following some European banks by going into “full retard” mode with negative interest rates.
DJIA, 10-minute candles; the red rectangle bounds Thursday’s market action. A rebound attempt on Friday failed to go very far – click to enlarge.
Now, according to the narrative popular in the financial press, investors are beginning to worry that central banks are not very effective after all. As to that last point, they’re right; central banks can only do so much. They made the situation what it is. Now, they can only make it worse. How? By adding more of what made it bad in the first place. All they can do is add more debt to a world already drowning in it.
If anyone knows of a different way this story might unfold, we’d like to hear it. But for all the puzzling and preposterous guesswork and wondering, it is still the same tale: Debt builds up; debtors can’t pay; they go broke. It happens all the time.
In a healthy economy – with real money and honest banking – people make mistakes. They go broke. The bankruptcies are absorbed and disposed of in good order. Assets go on the block. Hungry investors and entrepreneurs snap them up… and put them to good use.
The system cleans out errors, taking money from “weak hands” and moving it to stronger, more capable management. But now, the whole system is mismanaged. Thanks to credit-based money – and modern central bank guidance – the normal ebbs and flows of the credit market have become treacherous tidal waves, lifting up assets to absurd deliriums, and then crashing them down on the hard rocks of real life.
Borrowers’ Busted Boards
Here’s a group of surfers whose boards have been busted recently: young people. In the news this week was this interesting item from the Wall Street Journal:
“40% of Student Borrowers Aren’t Making Payments”
Student debt (federal and private credit combined) amounts to over $1.2 trillion, and 43% of borrowers are by now delinquent, in default or “in postponement” (i.e., they have a waiver allowing them to be delinquent) – click to enlarge.
According to the WSJ, $200 billion in loans are running behind schedule. The Journal says this is good news; last year, it was 46% of borrowers who weren’t keeping up. And Bank of America tells us that corporate borrowers, too, are soon going to wash up on the beach. Here’s the report from Bloomberg:
“When the next corporate default wave comes, it could hurt investors more than they expect. Losses on bonds from defaulted companies are likely to be higher than in previous cycles because U.S. issuers have more debt relative to their assets, according to Bank of America Corp. strategists. Those high levels of borrowings mean that if a company liquidates, the proceeds have to cover more liabilities.
“We’ve had more corporate debt than ever, and more leverage than ever, which increases the potential for greater pain,” said Edwin Tai, a senior portfolio manager for distressed investments at Newfleet Asset Management.
Loss rates have already been rising… In bad times, corporate bond investors, on average, lose about 70 cents on the dollar when a borrower goes bust. In this cycle, that figure could be closer to the mid-80s [when losses approached 80 cents on the dollar], Bank of America strategists said. Those losses would be the worst in decades…”
Since peaking in late 2011 just above 70%, recovery rates from corporate defaults have been in a steady downtrend – a sign that the quality of assets underlying corporate debt has worsened considerably. This could is guaranteed to make the next major economic downturn especially painful – click to enlarge.
Credit Money
We warned that there is a fatal “flaw” in the system. We talked about the lack of real, physical dollars. In a credit crisis, we argued, the U.S. would quickly run out of real dollars. ATMs would shut down. The whole system would seize up. But there’s more…
We are still figuring out how it works, but this appears to be one of the most intriguing nuances of the whole cockamamie story. You see, credit has a particularity that real money doesn’t.
If I lend you a real dollar, you will have the dollar to spend, and I won’t. Then, when you pay it back, I will have the dollar to spend, and you won’t. Either way, the money supply is unchanged.
The credit dollar is different. When the banks lend you a credit dollar, they “make” it out of thin air with a few keystrokes on a computer. Then, the dollar you have to spend didn’t exist before. So far, so good. But when you pay it back, what happens? It disappears as if – well – as if it never existed. The money supply contracts.
Out of whack: Total US credit market debt outstanding (blue line) = $63.4 trn.; Total US bank credit (incl. mortgages) outstanding (red line) = $22.3 trn.; US broad true money supply TMS-2 (black line) = $11.4 trn.; Currency in circulation (purple line) = $1.37 trn. – click to enlarge.
We should say, “even if you pay it back, the money supply contracts.” Because there are other ways the money disappears. Negative interest rates, for example, cause people to hoard cash, or even increase bank savings, as they are doing in Japan. Either way, money disappears from circulation… reducing the “velocity of money”… and dropping the available money supply. Spending goes down, not up.
The effect is the exact opposite of what the policymakers promise. Again, we see the proof that something isn’t working. Not for Janet Yellen nor for any of her delusional central banker buddies around the world. Their tricks no longer work.They just make the tidal wave higher.
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