- Muslims "Blame Trump" After New York Imam Assassinated In Broad Daylight
A lone gunman opened fire on a Queens' imam and his assistant as the two walked (near Ozone Park mosque in New York) after Saturday afternoon prayers, leaving one dead and the other critically wounded.
As NY Daily News reports, dozens of angry Muslim men gathered at the murder scene, with one exclaiming “That’s not what America is about…we blame Donald Trump for this… Trump and his drama has created Islamophobia.”
The gunshots rang out near the Al-Furqan Jame Masjid Mosque in Ozone Park, leaving both men lying on the ground in their own blood just a block from the house of worship, according to witnesses.
Witnesses described a chaotic scene where the shooter started firing at the two unarmed victims in the middle of a blistering August afternoon.
“We are devastated,” said Kobir Chowdhury, president of a second neighborhood mosque. “We needs to get to the bottom of this. We need to know if they did this just because of our religion.”
Another witness said the gunfire seemingly came from nowhere.
“All of a sudden I heard five shots,” said the witness, who declined to give his name. “I knew it wasn’t firecrackers. And then the commotion of the emergency (vehicles), and that’s when I knew.
“When I came here, they were doing CPR to both of the people on the ground.”
Blame for the assassination was quickly placed squarely on Donald Trump's shoulders…
Dozens of angry Muslim men gathered at the murder scene, making it clear they believed the shooting was a hate crime — with the two religious leaders specifically targeted.
“That’s not what America is about,” said local resident Khairul Islam, 33.
“We blame Donald Trump for this … Trump and his drama has created Islamophobia.”
And with that, the narrative is set for tomorrow's political talk-shows.
- Rethinking The Cold War.. And The New One
Authored by Paul Craig Roberts,
The Cold War began during the Truman administration and lasted through the Eisenhower, Kennedy, Johnson, Nixon, Ford, and Carter administrations and was ended in Reagan’s second term when Reagan and Gorbachev came to an agreement that the conflict was dangerous, expensive, and pointless.
The Cold War did not cease for long – only from the last of Reagan’s second term and the four years of George H. W. Bush’s term. In the 1990s President Clinton restarted the Cold War by breaking America’s promise not to expend NATO into Eastern Europe. George W. Bush heated up the renewed Cold War by pulling the US out of the Anti-ABM Treaty, and Obama has made the war hotter with irresponsible rhetoric and by placing US missiles on Russia’s border and overthrowing the Ukrainian government.
The Cold War was a Washington creation. It was the work of the Dulles brothers. Allen was the head of the CIA, and John Foster was the Secretary of State, positions that they held for a long time. The brothers had a vested interest in the Cold War. They used the Cold War to protect the interests of their law firm’s clients, and they used it to enhance the power and budgets associated with their high positions in government. It is much more exciting to be in charge of foreign policy and covert activity in dangerous times.
Whenever a reformist democratic government appeared in Latin America the Dulles brothers saw it as a threat to the holdings that their law firm’s clients had in that country. These holdings, sometimes acquired with bribes to nondemocratic governments, diverted the country’s resources and wealth into American hands, and that is the way the Dulles brothers intended to keep it. The reformist government would be declared Marxist or Communist, and the CIA and State Department would work together to overthrow it and place back in power a dictator in bed with Washington.
The Cold War was pointless except for the Dulles brothers’ interests and those of the military/security complex. The Soviet government, unlike the US government today, had no world hegemonic asperations. Stalin had declared “Socialism in one country” and purged the Trotskyists, the advocates of world revolution. Communism in China and Eastern Europe were not products of Soviet international communism. Mao was his own man, and the Soviet Union kept Eastern Europe from which the Red Army drove out the Nazis as a buffer against a hostile West.
In those days the “Red scare” was used like the “Muslim terrorist scare” today—to force the public to go along with an agenda without debate or understanding. Consider the costly Vietnam war, for example. Ho Chi Minh was an anticolonist leading a nationalist movement. He was not an agent of international communism, but John Foster Dulles made him one and said that Ho must be stopped or the “domino theory” would result in the fall of all of Southeast Asia to communism. Vietnam won the war and did not launch the aggression that Dulles predicted against Southeast Asia.
Ho had pleaded with the US government for support against the French colonial power that ruled Indo-China. Rebuffed, Ho turned to Russia. If Washington had simply told the French government that the colonialist era was over and that France needed to vacate Indo-China, the disaster of the Vietnam war would have been avoided. But invented threats to serve interest groups had become hobgoblins then as now, and Washington, along with many others, became a victim of its imaginary monsters.
NATO was unnecessary as there was no danger of the Red Army sweeping into Western Europe. The Soviet government had enough trouble occupying Eastern Europe with its rebellous populations. The Soviet Union was faced with an uprising in East Germany in 1953, from Poland and Hungary in 1956, and from the Communist Party itself in Czechoslavia in 1968. The Soviet Union suffered enormous population loss in World War II and required its remaining manpower for post-war reconstruction. It was beyond Soviet ability to occupy Western Europe in addition to Eastern Europe. The French and Italian communist parties were strong in the post-war period, and Stalin had grounds for hope that a communist government in France or Italy would result in the breakup of Washington’s European empire. These hopes were dashed by Operation Gladio.
We had the Cold War because it served the Dulles brothers and the power and profits of the military/security complex. There were no other reasons for the Cold War.
The new Cold War is even more pointless than the first. Russia was cooperating with the West, and the Russian economy was integrated into the West as a supplier of raw materials. The neoliberal economic policy that Washington convinced the Russian government to implement was designed to keep the Russian economy in the role of supplier of raw materials to the West. Russia expressed no territorial ambitions and spent very little on its military.
The new Cold War is the work of a handful of neoconservative fanatics who believe that History has chosen the US to wield hegemonic power over the world. Some of the neocons are sons of former Trotskyists and have the same romantic notion of world revolution, only this time it is “democratic-capitalist” and not communist.
The new Cold War is far more dangerous than the old, because the respective war doctrines of the nuclear powers have changed. The function of nuclear weapons is no longer retaliatory. Mutually Assured Destruction was a guarantee that the weapons would not be used. In the new war doctrine nuclear weapons have been elevated to first-use in a preemptive nuclear attack. Washington first took this step, forcing Russia and China to follow.
The new Cold War is more dangerous for a second reason. During the first Cold War American presidents focused on reducing tensions between nuclear powers. But the Clinton, George W. Bush, and Obama regimes have raised tensions dramatically. William Perry, Secretary of Defense in the Clinton regime, recently spoke of the danger of nuclear war being launched by false alarms resulting from such things as faulty computer chips. Fortunately, when such instances occurred in the past, the absence of tension in the relationship between the nuclear powers caused authorities on both sides to disbelieve the false alarms. Today, however, with constant allegations of pending Russian invasions, Putin demonized as “the new Hitler,” and the buildup of US and NATO military forces on Russia’s borders, a false alarm becomes believable.
NATO lost its purpose when the Soviet Union collapsed. However, too many careers, budgets, and armaments profits depended on NATO. The neoconservatives seized on NATO as political cover and an auxillary military force for their hegemonic ambitions. The purpose of NATO today is to implicate all of Europe in Washington’s war crimes. Since all are guilty, European governments cannot turn on Washington and accuse the Americans of war crimes. Other voices are too weak to be of consequence. Despite its vast crimes against humanity, the West still retains the position of “a light unto the world,” a defender of truth, justice, human rights, democracy, and individual liberty. This reputation persists despite the destruction of the Bill of Rights and police state repression.
The West does not represent the values that the world has been brainwashed to believe are associated with the West. For example, there was no need to attack Japanese civilian cities with atomic weapons. Japan was trying to surrender and was holding out against the US demand for unconditional surrender only in order to spare the emperor from execution for war crimes over which he had no control. Like the British sovereign today, the emperor had no political power and was a symbol of national unity. Japan’s war leaders were fearful that Japanese unity would dissolve if the emperor, the symbol of unity, was removed. Of course, the Americans were too ignorant to understand the situation, and so, little Truman, bullied all his life as a nonentity, glorified in his power and dropped the bombs.
The atomic bombs dropped on Japan were powerful. However, the hydrogen bombs that have replaced them are far more powerful. The use of such weapons is inconsistent with life on Earth.
Donald Trump has said the only hopeful thing in the presidential campaign. He called into question NATO and the orchesrated conflict with Russia. We don’t know if we can believe him or whether his government would follow his direction. But we do know that Hitlery is a warmonger, an agent of the neoconservatives, the military-security complex, the Israel Lobby, the banks too big to fail, Wall Street, and every foreign interest that will make a mega-million dollar donation to the Clinton Foundation or a quarter million dollar fee for a speech.
Hitlery declared the President of Russia to be the Ultimate Threat—“the new Hitler.”
Could it be any more clear? A vote for Hitlery is a vote for war. Despite this most obvious of all facts, the US media, united as one, are doing everything in their power to drive Trump into the ground and to elect Hitlery.
What does this tell us about the intelligence of the “Unipower,” “the world’s only superpower,” the” indispensible people,” the “exceptional nation”? It tells us that they are as dumb as shit. Creatures of The Matrix created by their own propagandists, Americans see imaginary threats, not real ones.
What the Russians and Chinese see are a people too brainwashed and ignorant to be of any support for peace. They see war coming and are preparing for it.
- German President Booed, Attacked; Claims "The People Are The Problem, Not The Elites"
Revolution is closer than you think…
Following Angela Merkel's earlier calls for German CEOs to hire refugees, and as Martin Armstrong notes, Germany has raided its healthcare funds to support the refugee crisis…
The government passed a law that allows them to take 1.5 billion euros from the liquidity reserve of the public health care fund (10 billion euros in total, paid by all members and additionally by the taxpayer) and to give that money to refugees / asylum seekers.
What would you call this? Insane?
We thought a reminder of the tensions that are bubbling under the surface in Germany.
As VoxDay noted appropriately, Germany's elite is going to get a well-deserved one soon as German President Joachim Gauck was booed and attacked in the streets of Sebnitz, Saxony after he blurted out the following unbelievbable statement:
“The elites are not the problem, the people are the problem.”
Official German State TV and State Radio reported that "a handful of right wing extremists" have attacked the president and disturbed the otherwise peaceful and welcoming reception of the President. This is simply not the case, as seen in the video…
The people repeatedly shouted "Traitor!", "Get out!", "We don't want STASI Pigs" and "We are the people!".
One man, carrying his young son on his shoulders, appears to have spit on him whilst exclaiming insults. Other citizens were heard saying "You killed our children" and "What have you done to us?". They were blocked by police in riot gear, to whom they said "You are protecting warmongers, shame on you!"
The situation escalated and the riot police was forced to use pepper spray.
Heiko Maas, the German Justice Minister, called the attackers "cowards who insult the president because of their personal frustration". He himself was booed off the stage as a traitor by hundreds of Germans at the annual Labor Day celebration on the 1st of May. He said that they will be persecuted immediately, as "it cannot be allowed that such a tiny minority has influence on the political climate in Germany".
Writing in The Wall Street Journal, Peggy Noonan explained perfectly…
The larger point is that this is something we are seeing all over, the top detaching itself from the bottom, feeling little loyalty to it or affiliation with it.
It is a theme I see working its way throughout the West’s power centers.
At its heart it is not only a detachment from, but a lack of interest in, the lives of your countrymen, of those who are not at the table, and who understand that they’ve been abandoned by their leaders’ selfishness and mad virtue-signalling.
- A Stunning Admission From Deutsche Bank Why A Shock Is Needed To Collapse The Market, And Force A Real Panic
In what may be some of the best, and most lucid, writing on everyone’s favorite topic, namely “what happens next” in the evolution of the financial system, Deutsche Bank’s Dominic Konstam, takes a look at the current dead-end monetary situation, and concludes that in order for the system to transition from the current state of financial repression, which has made a mockery of all asset values due to central bank intervention, to a semi-credible system driven by fiscal stimulus, there will have to be a crash, one which jolts policymakers out of their stupor that all is well simply because stocks are at all time highs.
And since a legitimate fiscal stimulus is what is needed to re-ignite the economy, US and global GDP will continue declining, even as stocks keep rising to new all time highs, not on fundamentals (which are all pointing in the opposite direction), but due to even more central bank intervention and financial repression, thus a Catch 22, which ultimately – according to DB – ends in the only possible way: with a major crash.
As Konstam puts it, “the status quo could continue for several years yet – if nothing “breaks” in the system” but “without an external economic shock it is hard to see policymakers being prepared to take dramatic, fiscal action to jumpstart the global economy and bounce it out of a financial repression defined by low and falling real yields to one that at least initially is defined by rising nominal yields through higher inflation expectations.”
As for the conclusion, or why a financial shock is long overdue, KOnstam says that “ironically the shock that is needed would require a collapse in risk assets for policymakers to then really panic and attempt dramatic fiscal stimulus. “
This is critical – and inevitable – as only a shock can lead to an “unwind of the falling yield/rising equity market where all financial assets trade badly.”
In other words the end of financial repression will see price levels fall so that yields once again look attractive, or said otherwise, there will be a demand for Treasuries, even without the perpetual implicit backstop of central bank purchases.
For such a move to be sustainable itself requires the economic fundamentals to shift – inflation needs to be more secure against an underlying backdrop of robust real growth. Most people now understand that this is not a job for monetary policy alone. Yet the current reach for yield simply prolongs the status quo for policy disappointment.
Which brings us full circle: recall that over the past few months virtually every prominent investment bank, from JPMorgan to Goldman Sachs have warned clients that a selloff is coming. Now, Deutsche Bank has taken it to a whole new level, explaining why a financial crash has to happen to purge the system from the toxic aftereffects of 7 years of financial repression, and to kickstart a fiscal stimulus that will not happen unless markets tumble in the first place.
And while Konstam’s line of reasoning is absolutely correct, we doubt just how his employer would look upon a market plunge that wipes out 30%, 40%, or even 50% of global equity values: would Deutsche Bank even survive such a crash? As such we doubt that the strategist’s analysis and forecast, correct as it may be, will be endorsed by his employer, even if by now it is clear to all that only a major crash, i.e. a global reset, can kick start the world out of its zombie-like, centrally-planned existence, into the long overdue phase of whatever it is that comes next.
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Below is Konstam’s full must read analysis:
Stocks must fall for yields to rise – but unlikely to happen anytime soon
It is pretty much understood that we are in full on financial repression mode, as witnessed by super benign core yields lead by lower real yields with more recently the further downward drift in euro peripheral yields, including the UK. The new high in equities is consistent with our view of financial repression that necessarily has yield returns on all assets being incrementally replaced by price returns – stretched relative valuations follow already increasingly stretched absolute valuations. The last round of economic data does little to suggest any change in this dynamic. As we highlighted last week the conundrum for the US is how an overly strong labor market without meaningful wage inflation resolves itself against markedly weak productivity data with a GDP cake that if anything seems to be stagnating.
With the current status quo, it is clear to us that US yields if anything are still too high – we think they are near the upper bound of a range that pivots closer to 1.25 percent with real yields in particular too high. This probably still reflects a reluctance of investors to get meaningfully long the market although much of the short base has been covered and this in turn reflects a still fairly strong consensus on the economics front that the labor market strength can still resolve itself through higher wages and a virtuous circle of rising demand and productivity – a scenario we would not rule out but not our central view.
More importantly however are what prospects there may be to jolt us out of this financial repression and to what extent regardless of proactive policy, is there a natural end to financial repression – at some point does something have to break in the system. On the former the most likely candidate is obviously some form of global fiscal stimulus. Despite optimism around this in early July we have not exactly had the green light on either helicopter money in Japan or Italian bank bailout. It is still too early to call the US election and stimulus prospects here but the general sense is that it is still difficult to sense the urgency when equities make new highs. Policymakers aren’t used to dealing with financial repression and that unfortunately is one of the defining characteristics of stagnation.
We suspect the fall will be defined by markets looking for dramatic policy news that somehow “responds” to super low bond yields and underwrites rising risk asset prices but only to be disappointed precisely because policymakers don’t bide the urgency. The result is that yields can fall still further even with risk assets still trading well – hanging onto their relative valuation rationale.
The failure of a policy response allows for more financial repression. We are anyway already beyond the point of preemptive policy since preemption is supposed to recognize and avoid looming problems beforehand. It is clear that the nature of those problems are already material including squeezed interest margins for banks, insurance solvency issues etc. But to be fair, the lack of a fiscal response itself bears witness to the perceived fiscal stress during the 2008 crisis and the need to insulate taxpayers. Additional fiscal burdens can be thought of as a variant of financial repression where future inflation and negative real rates do the redistribution as opposed to the structure of the fiscal regime. Helicopter money fuses financial repression from the money side with the fiscal response in a potentially dramatic way whereby the would be spenders get to spend a lot more directly at the expense of the ongoing savers. And while it may have its own political hurdles that ultimately are insurmountable, it offers a perfectly reasonable alternative equilibrium option where the goal is to raise the price level as well as improve the real growth outlook by overcoming excess savings. The fusion of fiscal with monetary policy can also be appreciated in the context of the fiscal theory of price where monetary policy can offer infinite paths for money growth and potential nominal growth but fiscal policy effectively selects which path is realized based on an equilibrium condition that the NPV of all future budget deficits needs to sum to zero.
* * *
The status quo could continue for several years yet – if nothing “breaks” in the system. There are ways of course for either avoiding breaks or at least patching them – mitigating the impact of negative rates on banks is now in vogue with subsidized bank loans for on lending. And we may yet see soft forms of bank bailout still being allowed. This is similar to the use of alternative yield curves for discounting insurance liabilities.
The conclusion is that without an external economic shock it is hard to see policymakers being prepared to take dramatic, fiscal action to jumpstart the global economy and bounce it out of a financial repression defined by low and falling real yields to one that at least initially is defined by rising nominal yields through higher inflation expectations. Ironically the shock that is needed would require a collapse in risk assets for policymakers to then really panic and attempt dramatic fiscal stimulus.
The logic would also fit with the same correlation structure for financial assets – an unwind of the falling yield/rising equity market where all financial assets trade badly. In other words the end of financial repression will see price levels fall so that yields once again look attractive. For such a move to be sustainable itself requires the economic fundamentals to shift – inflation needs to be more secure against an underlying backdrop of robust real growth. Most people now understand that this is not a job for monetary policy alone. Yet the current reach for yield simply prolongs the status quo for policy disappointment.
- Study Finds That Cops Wearing Body Cameras Are Actually More Likely To Kill Civilians
In July 2015, U.S. Senator Tim Scott of South Carolina introduced the Safer Officers and Safer Citizens Act of 2015 which proposed to offer $100mm a year for 5 years to local police agencies to purchase body cameras for their officers. Scott became highly vocal in his support of body cameras after an unarmed, 50 year old black man from his district was killed by a white officer.
There is just one small problem with the bill. A recent study by Temple University researchers found that wearing body cameras was actually associated with a 3.64% increase in fatal shootings of civilians by police officers. Perhaps even more surprising is that no increase in fatalities was noticed in police interactions with Whites/Asians but police were found to be 3.68% more likely to kill Blacks/Hispanics while wearing body cameras. The study suggests that police officers are actually more likely to pull the trigger if they have video evidence to support their use of force.
Per the study (which can be read in its entirety below):
Surprisingly, we found that the use of wearable video cameras is associated with a 3.64% increase in shooting-deaths of civilians by the police. We explain that video recordings collected during a violent encounter with a civilian can be used in favor of a police officer as evidence that justifies the shooting. Aware of this evidence, the officer may become less reluctant to engage in the use of deadly force. We conducted more in-depth analyses with incident circumstances (e.g. whether a subject was armed) and demographics of victims (e.g. race, age), and we obtained more intriguing findings. Notably, the above-mentioned effect of technology use on fatal shootings is more pronounced for (a) African American or Hispanic victims than Whites or Asians and (b) for armed suspects than unarmed civilians.
The study suggests that a smarter approach would be to arm police with more data. The study found that providing police officers with improved intelligence reports via smartphones actually reduced fatal shootings by 2.46%
Smartphone use by officers is also associated with a 2.46% reduction in the shooting-deaths of civilians. This is consistent with our theoretical prediction (Proposition 1) that crime intelligence obtained by statistical analyses and access to the intelligence via smartphones lead to a decrease in fatal shootings by the police. In contrast, the number of crime records (Records) and the categories of data accessible by patrol officers (Access) are not significantly related to the incidents of civilian deaths.
Don't you just hate it when data gets in the way of legislation?
- 18 Years Later – Pam Martens Sends Another Warning To The Fed & The Clintons
It is the same players that we saw enabling reckless behavior in 1998: Citigroup, the Fed, and the Clinton-led Wall Street Democrats. And, as Jesse notes, here we are again, almost eighteen years later, watching the same short term, selfish characteristics by the big money banks putting the entire economy of productive individuals at risk again…
"There’s something big and scary going on behind the scenes but, as usual, the public isn’t reading about it on the front pages of the newspapers." Pam Martens and Russ Martens warn that big banks and big insurers send scary signals…
Yesterday, the broad stock market, as measured by the Standard and Poor’s 500 Index, declined a modest 0.29 percent while big Wall Street banks like Citigroup and JPMorgan Chase fell by triple that amount. Bank of America, which bought the big retail brokerage firm, Merrill Lynch, in the midst of the 2008 crash, fell by 8.6 times the rate of the decline in the S&P to give up 2.50 percent.
Equally noteworthy, two major insurers, MetLife and Prudential Financial, saw percentage market losses far in excess of the S&P. MetLife declined by 2.74 percent while Prudential Financial lost 1.68 percent. Prudential Financial has been named a Systemically Important Financial Institution (SIFI) by the Financial Stability Oversight Council. MetLife had received the same designation but won a court battle to rescind the designation. The U.S. government is appealing.
The vote of no confidence on down market days in the complex U.S. banks that hold both insured deposits from Mom and Pop savers while also making huge derivative gambles is a repeat of the action we saw earlier this year. On February 3, 2016, four big Wall Street banks (Bank of America, Citigroup, Goldman Sachs and Morgan Stanley) set 12-month lows in intraday trading – far outpacing the declines in the broader market index as measured by the S&P 500. The banks have recovered some since then but are nowhere near setting record highs as the broader market indices have of late.
These mega banks should be a barometer of the overall health of the stock market and the U.S. economy. After all, these are the banks that are making corporate loans, underwriting corporate stock and bond issues, and doling out credit to consumers. If the mega banks are experiencing air pockets of buying interest in declining markets, this does not bode well for either the market or the U.S. economy.
The price performance of MetLife should also be a red flag that perhaps the Financial Stability Oversight Council got it right when it designated the firm a SIFI.
There is at least one potential concern that is contaminating market perception of the stability of these banks. That’s the fact that despite all of the promises that the Dodd-Frank financial reform legislation would rein in the Wild West derivative trading at these banks, no such thing has happened.
Dodd-Frank was supposed to push the derivatives out of the commercial banks which hold the insured deposits to prevent another taxpayer bailout, the so-called “push out” rule. But in December of 2014, Citigroup was able to sneak legislation into the must-pass spending bill to keep the government running that overturned the push-out rule. The Congressman who placed the provision into the spending bill on behalf of Citigroup was Kevin Yoder of Kansas. The non-partisan Center for Responsive Politics shows “Securities and Investment” as the number one industry contributing to Yoder’s campaign committee and leadership PAC.
Using its insured bank’s balance sheet as ballast, Citigroup’s bank holding company now ranks as the largest holder of all derivatives in the U.S. According to the Comptroller of the Currency, the very bank that blew itself up in 2008 and received the largest taxpayer bailout in history, now holds $55 trillion in notional amount of derivatives.
But far more alarming is the type of derivatives Citigroup appears hell bent on gaining market share in trading. Last week we reported that Citigroup is plowing into credit default swaps, the very derivatives that blew up the big insurance company, AIG, in 2008 and forced a government bailout of AIG to the tune of $185 billion. We noted on August 4:
“According to the data, Citigroup now has $2.08 trillion in Credit Derivatives (the vast majority of which are Credit Default Swaps). Only JPMorgan is bigger with $3.1 trillion in credit derivatives. Equally frightening, the vast majority of these are private contracts between financial institutions (Over-the-Counter) where regulators lack the granular details of the deals. President Obama falsely promised the American people that derivatives would be moved onto exchanges with proper capital and transparency following the Dodd-Frank financial reform legislation in 2010. That has not happened. The vast majority of all derivatives are still traded in the dark.
“Not only are Citigroup’s Federal regulators allowing it to engage in this high risk trading but they are actually allowing Citigroup to purchase the high risk positions of a deeply troubled bank – Deutsche Bank. Risk Magazine reports… that Citigroup bought $250 billion of Credit Default Swaps from Deutsche Bank in 2013. Bloomberg News also reported on the $250 billion Citigroup purchase from Deutsche Bank.”
The ink was barely dry on our article when the very next day, Bloomberg News reporters Jeff Voegeli and Donal Griffin wrote that Citigroup had “purchased a portfolio of credit-default swaps from retreating rival Credit Suisse Group AG” which had a notional value (face amount) of $380 billion.
To many rational minds, $250 billion here, $380 billion there, pretty soon you’re talking about real money – and real potential for blowups like those seen in 2008.
On March 8 of this year, the Office of Financial Research, which was created under the Dodd-Frank legislation to monitor the buildup of systemic financial risks, released a study on Credit Default Swaps. Its findings were deeply troubling.
The report effectively suggested that the Federal Reserve was conducting its stress tests all wrong. The researchers noted that the Fed’s stress test is looking at only the bank holding company’s “direct counterparty concentrations” for credit default swaps rather than the indirect fallout. The authors found that “indirect effects can be as much as nine times larger than the direct impact” on the bank holding company, and ignoring that reality “could understate the stress on banks.”
That study may have sent a shot across the bow of the Fed, alerting it to nip in the bud any cascading effect from loss of confidence in the European banks that are holding credit default swaps. Both European banks that sold Citigroup their credit default swaps (Deutsche Bank and Credit Suisse) have seen their share price implode over the past 12 months. Deutsche Bank’s stock has lost 56 percent of its value over the past 12 months while Credit Suisse is down by 58 percent based on mid morning trading.
But if the Fed is attempting to ring fence credit default swaps by allowing Citigroup to be the buyer of last resort, that has the potential to spread panic not contain it. Citi is, after all, the bank that brought us this mess by muscling through the repeal of the Glass-Steagall Act.
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Below is the testimony of Pam Martens to the Federal Reserve on June 26, 1998, imploring it not to support the repeal of the Glass-Steagall Act and usher in an era where Wall Street banks like Citigroup could own both insured deposits at its commercial bank as well as engage in high risk trading at its investment bank…
- "Politically Correct" Rio Olympics Amid Anti-Russia Cold War Hysteria
Submitted by Finian Cunningham via Strategic-Culture.org,
In absurd reality-disconnect, Brazilian authorities are trying to maintain a «politically correct» image during the Rio Olympics, while the entire games are imbued with nasty Cold War politics.
By «politically correct» we mean the apparent absence of politics. But that absence is partial, unilateral and false, and the forced measure is itself a very political act.
The Brazilian Olympics organizers are claiming that it is against the charter of the International Olympics Committee to allow any form of political expression within the sporting venues. And so, they claim, in the interest of public decorum and decency, the Olympics venues must be kept «politics free» in order to not discommode other spectators or global television audiences.
Hence, sports fans have been reportedly bounced out of stadiums by burly police squads at the slightest hint of disturbance. Several Brazilian spectators have been ordered to leave venues for daring to shout out «fora Temer» – a Portuguese reference to interim president Michel Temer, demanding that he quit office.
Fans have even been expelled for silently holding up written posters bearing the same words. Or, ingeniously, sitting in a row with T-shirts spelling out the individual letters of the protest slogan.
But hold on a minute. The entire 2016 games in Rio are being held amid a spectacular backdrop of sinister politics.
Brazil’s elected president Dilma Rousseff was suspended from office back in May after rightwing parliamentary opponents accused her of illegal accounting practices. She denies the allegations, saying that the budgetary measures she took were legal, and that she is being forced from office illegally, which in turn disenfranchises more than 54 million voters. In the opening week of the games, the Brazilian Senate voted to press ahead with Rousseff’s impeachment.
Rousseff’s leftwing Workers Party supporters claim that she has been ousted by a parliamentary coup. Michel Temer, the rightwing coalition vice president, has since assumed her office as the country’s acting president. Temer is accused of orchestrating the de facto putsch. He is also closely aligned with Washington’s anti-leftist agenda in Latin America targeting Venezuela, Bolivia, Chile, Nicaragua and Cuba, among others.
During the opening Olympic ceremony, Temer was roundly booed by Brazilians and appeared to cut his speech short.
Ahead of the opening, the Olympic torch parade was disrupted by angry street protests, with crowds complaining about the high cost of holding the games amid economic hardship for millions of Brazilians. The Rio games are estimated to cost $13 billion. Riot police fired rubber bullets and teargas to disperse protesters and get the Olympic torch into the stadium.
Low ticket sales indicate that for most Brazilians, the Rio games are off-limits, with the price of individual tickets ($100-350) being equivalent to half a month’s salary for many Brazilian workers.
Given the absurd disconnect of sporting extravagance and growing economic hardship for the population combined with the wide perception that Temer and his rightwing supporters have usurped an elected president, it is little wonder that Brazilians have much to protest about. And it is especially galling that the alleged usurpers of state power are now invoking political correctness and the «spirit of the games» to suppress any form of dissent – in the name of «keeping politics out of sport».
Supporters of Rousseff are saying, with good reason, that the democratic right to peacefully protest is simply being crushed under the cover of supposed Olympian ethics.
The absurdity is underscored by the bigger political backdrop of the games being held hostage by a renewed and contrived Cold War agenda against Russia.
The banning of some 100 Russian athletes from participating in the games over allegations of doping has the suspicion of politics being very much injected into the world’s biggest sporting event.
Russia was allowed at the last minute to send a national team after the International Olympic Committee ruled that allegations against individual athletes did not justify a collective ban. But the allegations themselves were controversial, being based on Western media reports and the Western-dominated World Anti-Doping Agency. The latter parlayed much of its claims on those of Russian so-called whistleblowers, who may or may not have been seeking personal rewards.
The tendentious contention leveled by WADA, and taken up by Western media with gusto, is that alleged Russian doping is «state-sponsored». However, Russian authorities were not consulted nor given a fair hearing to rebut the claims. The claims were merely made into an article of faith and driven by a Western political agenda of isolating Russia, as in several other areas of international relations over the past two years, including the downing of a Malaysian civilian airliner over eastern Ukraine in July 2014. No-one knows the cause of that tragedy, but Western media have sought to blame it on Russia without any evidence, as they have with regard to «state-sponsored doping» in sports.
The 2016 Olympics are thus being conducted in a toxic atmosphere of geopolitics redolent of the old Cold War between the West and the Soviet Union.
Vladimir Salnikov, a former Russian Olympic swimming star, in an interview with the Reuters news agency said that the Rio games are reminiscent of the Cold War years in the 1980s when the US and Soviet Union boycotted each other’s events.
«I think the atmosphere is very strange,» said Salnikov, who is in Rio as president of the Russian Swimming Federation.
Salnikov, who won four golds during the 1980s, said it was regrettable that Russian athletes are receiving such a hostile attitude from some spectators and fellow competitors on the basis of the doping allegations.
In particular, he referred to nasty public comments made by the American swimmer, Lilly King, who won the gold this week in the women’s 100-meter breaststroke. King said that her Russian rival, Yulia Efimova, who came second to win silver, should not have been even allowed to participate because she had been previously banned for taking performance enhancing drugs. Efimova was since cleared and reinstated by the international Court of Arbitration for Sports to take part in Rio.
Salnikov said: «Efimova has been through a very severe ordeal, and in an atmosphere of distrust and uncertainty I think she showed very strong character – resilience and focus – and so I think she deserved her medal. She has come through very tough times and I’m sure she will cope».
Apparently, the Russian female swimmer was not able to sleep for two weeks before the Olympics due to the stress caused by the doping scandal.
Presumably, the entire Russian delegation of 270 other athletes – 70 per cent of the full team, the smallest in decades – have likewise been affected by the political cloud that has been imposed over their performance at Rio – in what should be the pinnacle of their sporting careers.
The point is that Russia has been unfairly demonized through doping allegations that have been whipped up on dubious grounds by Western media serving a geopolitical agenda – the same tawdry agenda that has been deployed over Ukraine, Syria, European security, trade sanctions, and so on.
The Rio Olympics have thus been turned into an anti-Russian morality play whose purpose is a base politicized objective.
The heavy-handed suppression of legitimate Brazilian protests against an unconstitutional would-be imposter-president – in the name of «keeping politics out of sports» – is absurdly conducted amidst an international spectacle of subverting the very same Olympic games into a Russia-bashing event.
Like bread and circuses of ancient Rome, we are expected to believe that the «great and good» are nobly entertaining the masses with sporting fun – with an event that has been thoroughly contaminated by toxic politics.
- Goldman Warns CLO Investors To Beware The LIBOR Squeeze
Yesterday Goldman Sachs analyst Bridget Bartlett issued a warning to CLO investors to beware of the “LIBOR squeeze.” As the note points out, over 90% of the $900BN levered loan market has a LIBOR floor set at an average rate of 100bps. LIBOR floors in levered loans became popular in the aftermath of the “great recession” as a way to entice loan investors in a “lower-for-longer” interest rate environment that drove LIBOR rates down to 25bps.
For CLO investors, the LIBOR floor was a beautiful thing with CLOs owning roughly 60% of the $900BN levered loan market. Investments in levered loans carried a LIBOR floor of 100bps while the liability side of the CLO structure floated at 25bps providing 75bps of excess spread. With CLO structures levered at 10x the extra 75 bps of spread boosted equity returns by 7.5% annually. But with the recent spike in LIBOR, that excess margin is fading away.
Rising Libor rates has most directly affected holders of CLO equity tranches, who have benefited from the “subsidy” gained from the spread between Libor rates and the Libor floor on the asset side, while liabilities “float,” and are paid without Libor floors. In the low Libor environment over the past few years, CLO equity investors have benefited from this disconnect between assets and liabilities. A year ago, for example, the 75bp subsidy from the asset side of equity CLOs—calculated as the differential between the spot Libor rate (25bp in July last year) and the average Libor floor (100bp)—would increase total cash payments to equity holders by 7.5% on an annualized basis for CLO equity investors that are 10x levered.
However, as Libor has increased recently, the income that CLO equity investors have earned on the floor vs. Libor arb has stagnated. With only a 20bp differential between Libor spot (80bp) and Libor floors (still at 100bp), the equity distribution from the Libor floor decreases to only 2% per annum compared with7.5% a year ago. CLO equity investors are only negatively affected on the way up to the Libor floor level as the yield pick-up squeezes, but the effect will be neutralized once Libor passes the average 1% floor and the asset side would then float.
According to an article published in Leveraged Finance News, Moody’s has previously warned that rising LIBOR rates would have a negative impact on CLO excess spreads which would put them “at risk for downgrades in their credit ratings.”
Rising interest rates could reduce an important form of credit enhancement for U.S. collateralized loan obligations, potential putting them at risk for downgrades in their credit ratings, according to Moody’s Investors Service.
In its October CLO Interest report, Moody’s said that increases in short-term rates, widely expected to take place next year, would be a “credit negative” event for U.S.-based CLOs because of the resulting reduction in credit enhancement called excess spread. This is the difference between the interest rate on the notes issued by CLOs and the interest rates on the loans that they acquire. Interest rates on both their liabilities and assets are expressed as a spread over the London Interbank Offered Rate, or Libor.
Well, it was fun while it lasted…at least someone found a way to make a little money off misinformed Fed policies.
- Generation Screwed Fights Back
Submitted by Pieter Diekmeyer of SprottMoney
Generation Screwed Fights Back: Investment Implications
Numerous data points suggest that Western youth are increasingly disenfranchised, mal-educated and in debt. How that will affect investment outlooks is unclear. The good news is that some Millennials – in Canada of all places – are starting to fight back.
So says Aaron Gunn, executive director of Generation Screwed, a movement sponsored by the Canadian Taxpayer Federation. The group will be conducting its annual retreat of volunteer student coordinators later this month in Quebec City.
There they will upgrade their strategic planning, team building, and activism skills, which they can bring back to campuses across the country to raise awareness of critical issues, such as government debts, unfunded liabilities, and unfavorable demographics facing today’s young.
“We call ourselves “Generation Screwed” because governments are spending money but leaving the bills behind for the young to pay,” says Gunn. “Apathy is our biggest challenge. Many youth are so burdened with the demands of getting a start in life, they are unaware of the lousy hand they are being dealt.”
The key driver of Generation Screwed’s popularity is the country’s rising national debt, which according to the organization’s debt clock , now exceeds $600 billion. And that doesn’t include provincial and municipal obligations. Worse, according to Gunn, the federal government’s 2016 budget projects $99 billion in new borrowing during the coming four years.
Less sex, but "screwed" in so many ways
“Generation Screwed” seems like an odd name for a generation which, according to a recent Washington Post article, is having less sex than previous generations. That said, the movement Gunn leads is particularly timely because Millennials are – to the use the CTF’s term – being “screwed” in so many ways.
The average U.S. student debt is now USD $27,000 – $1.2 trillion overall, according to the Economist Magazine .
Worse, due to the power of academic interest groups, teachers’ unions, and the politically correctness movements, students’ education is increasingly disconnected from reality and poorly adapted to the job market. Most students learn essentially nothing about money management, for example: one of the most important life skills.
Upon graduation, students enter what Donald Trump calls a “rigged” economy, where older workers are entitled to union, government, academic, and other jobs with benefits that are protected by a slew of credentialism strategies. The young get stuck with unpaid internships, work part-time, or do contract work.
Given their poor financial, employment and educational circumstances, not surprisingly, more than half of 18-34 year olds live with their parents, according to Pew Research .
Three quarters of declining productivity: a “new normal,” secular stagnation … or decline?
Lack of new blood in many protected sectors, ranging from governments, “too big to fail” banks, and the automotive industry, will almost certainly hit productivity. In fact, that may be happening already. Recent U.S. GDP data show that productivity fell for a third straight quarter in Q2, a first in more than three decades.
Bill Gross, a portfolio manager at Janus, has described today’s economy of rising trade barriers, household deleveraging and increased government regulations as a “new normal.” Larry Summers, a former US Treasury Secretary and others suggest the US economy is in a period of “secular stagnation.”
For long-term planners who worry about funding pension plans, managing government debt (nobody talks about paying it back anymore) or building careers, the stakes are high. That’s because things are likely far worse than even Gross and Summers, both of whom are restricted in what they can say due to the institutions they represent, will admit.
According to a range of researchers – including Laurence Kotlikoff, John Williams of Shadow Statistics, and the Fraser Institute, – the United States and Canadian governments regularly use massaged data and off balance sheet liabilities, to paint a brighter picture than actually exits.
No sympathy from governments
Gunn and Generation Screwed remain undeterred. This despite the long odds, and tough opponents – particularly seniors’ groups lined up against them (in the United States, the powerful American Association of Retired People lobby group, for example, will stop at nothing to protect members’ existing entitlements – the country’s youth are an afterthought).
Nor are Millennials likely to get much sympathy from governments, which increasingly resemble hospital geriatrics wards. The average age of a U.S. Congressman is 61. That of a Canadian Senator is 65. The average age of a U.S. Supreme Court Justice will be 75 by the end of the current U.S. Presidential cycle.
“I know the odds are long,” says Gunn. “But changing mentalities is a slow process. We just keep focused on doing it one person at a time.”
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