• Endgame for Corporation USA without Trump

  Money doesn’t exist – as we explain in Splitting Pennies.  Money is an idea, an abstraction – a belief system.  A dogma.  So is a country.  In fact, a country IS a currency.  EU nations have given up their sovereignty to join the Euro (and we see how well that’s working out for them).

  Brexit made a lot of money for FX traders, but planted a seed in the masses that change is possible (we’ll see, if the British government actually goes through with Brexit..)  Countries are born, and die.  As far as countries go, the United States of America (USA) is actually one of the world’s oldest countries.  Actually there’s only a small handful of older countries, such as San Marino (1600), Vatican City (1274), and the United Kingdom (1707).  USA changed the global political landscape in many ways, especially during the 20th century – not only directly (through invasive foreign policy) but by example.  USA was one of the first ‘superstates’ – now such superstates are common (the EU being one).  USA was the first country to detach from cultural or ethnic identity, Americans were a mix of Europeans and others.  So, what has USA become – does Television define what USA is?  No, it’s just a powerful control mechanism.  Millions of Americans don’t watch TV.  In fact, for the majority of residents in USA, they are completely oblivious to how the other 99% live.  Not everyone lives in Midtown and works for a prop shop.  Not everyone lives in the burbs.  But if you do – it seems that – this is America!  We define the outside world by what we see inside our own.  Which is a big mistake, but at least we have freedom to do it (so they tell us).

  Through the evolution of the global system, USA became a big business, a big corporation.  America, Inc. is the largest employer in the world.  What the US government actually does is a mystery to many analysts in the world, but one thing is for sure – they create employment.  US Citizens who can’t find reasonable jobs, and can’t teach, usually end up working for the government.  According to government data (here’s the need for a governemnt job, compiling data on how many jobs), about 4.1 Million work for the government, down from it’s 1970 peak of 6 Million +.  Jimmy Buffet has a song “Everyone has a cousin in Miami” which is basically true for 99% of Americans – also everyone has a cousin that works for the government.  This business runs very well.  It greases all the right palms.  That’s why it exists.  Not because of voters.  Corporation America is a global octopus of trade.  It’s a form of uber Facism – words can’t describe the system we have now in America because frankly, 90% of it is ‘secret’ and so it hasn’t been studied.  So what can make this machine break?  Several social factors, domestic issues.  But the machine can’t break – it’s too big, it’s too involved in every aspect of global empire management.  But it can change.  

  Looking at America as a closed system, inside the walls that have been built by DHS, SEC, CFTC, FBI, CIA, IRS the social fabric of America is polarized.  At the end of the day, all these riots, shootings, what everything comes down to is economics.  People who are employed, don’t take time off work to protest for their rights.  They are happy for their jobs.  Rich people, don’t insinuate riots or shoot people, generally.  Most of the time, your life determines your political views.  If you have a nice life, a good job (about 95 Million Americans) you want the system to continue as it is, you don’t want to lose what you have.  If you have no job, no money, life sucks – you want change.  But at some point, such as we are in now, social factors can become extreme, and a critical mass or ‘tipping point’ is reached, where a sufficient amount of angry people congregate into a mass of really angry people, which can choose to leave and create their own state, their own government- like America did when it was a part of Britain.  Texas, just voted NOT to seced.  These violent elements whether they be racial or other, make all this more extreme.  

  The Establishment in America, for at least 30 years, has thrashed the Constituion, violated their own laws they create, and created a real Oligarchy, banana republic style.  It coincides in parallel with other signficant social trends, such as the demise of the Mafia, and the rise of the robots.  To someone like a Clinton, it’s not what you know – but who you know.  Well, that works in College or maybe to get into a Golf Club but it’s no way to run a country.  Like with any Oligarchy, it is the job of the Oligarchs to allow the system to flourish, and not to take too much bribes for themselves, because it becomes like a cancer, and finally the host dies.  The masses who are unemployed have a strong argument to the Establishment – you’re not doing a good job running our economy because there are unemployed people (i.e. ME).  But you have your fancy haircuts and private jets and so on, so let’s get rid of all of you!  That’s the idea of voting for Trump.  True or not, he’s seen as the anti-Establishment candidate.  The Elite have created such a mess this year, whether by purpose or not it’s irrelevant; the only thing that can save Corporation USA is a Trump Presidency.  It’s not as if Trump will save us from anything, and certainly he is self-serving.  But he’s a businessman, and really the only thing that can keep Corporation America ticking is a businessman.  Probably, he doesn’t even know the good he’ll do in the White House until he gets there.  Simple things can go a long way – such as a trade deal with Russia.  Developing Thorium nuclear reactors.  And most importantly, de-polarizing the population to pre-crisis levels, when we are ‘all Americans.’  Trump can do all this and more without even knowing it.  We need a self-serving Hitler like dictator to run America’s facist enterprise.  It’s just good for business.  The stock market can double.  QE will become QEEEEEE.  Because the alternative is disaster (and no businessman wants to file bankruptcy).  When Trump realizes that Corporation America can actually turn a profit, he’ll cut taxes and at the same time double the size of entitlements, all paid for with a massive budgetary surplus, coupled with a strong dollar and finally 10% interest rates.  Whoa!  There’s just so much opportunity out there, when you look from this perspective, economically speaking.  This was one of Bush talents (and, as a national comedian).  Bush made a business out of his office, and although he made a hefty empire for his family, he also made many other people, many Oligarchs, rich beyond their dreams.

  If a politician like Clinton is elected, based on Cybernetic systemic analysis, that USA will collapse.  Business will move on, but the political system will collapse.  States like Texas and the South will secede first.  California will follow.  Washington will struggle to maintain control.  If you want to see what a new USA might look like, forget ‘futurists’ and just look the Federal Reserve map, they’ve already carved it out:

  

  But, the Fed drew these according to state lines, so more likely, the lines will shift a little, based on demographic trends, and infrastructure geography.  It will probably look more like this:

  

  Probably, Trump will get in and this will be a non-issue.  But if not, we will be faced with a real ‘clash of civilizations’ in America.  This was best described by Noam Chomsky in his book “Hegemony or Survival:”

  Chomsky’s main argument in Hegemony or Survival is that the socio-economic elite who control the United States have pursued an “Imperial Grand Strategy” since the end of World War II in order to maintain global hegemony through military, political and economic means. He argues that in doing so they have repeatedly shown a total disregard for democracy and human rights, in stark contrast to the US government’s professed support for those values. Furthermore, he argues that this continual pursuit of global hegemony now threatens the existence of the human species itself because of the increasing proliferation of weapons of mass destruction.

  Chomsky noted that, during times of economic crisis like the post 9/11 world, the Elite (Oligarchs) decided to invest in weapons and security as opposed to social programs and businesses, such as the CCC.  Meaning that, instead of growing a garden, they decided to build a bunker, and protect themselves from hungry people (or rioters) whether they be the black power movement, or just nomadic flash mobs of brainless teens being told what to do via phone app.  Ironically, Rand corporation doesn’t have scenarios gamed out for collapse USA, maybe DOD does and it’s just private.  If you haven’t read Civil War 2 – it’s a bit dated but will be chilling to any current reader, as it explains how the fabric of society will melt down as it has in last weeks and months.  It’s a great read about the strategem of a collapse scenario, written by a military man.

  The breakup of USA isn’t a new idea, it’s just easily laughed off as content for science fiction.  It’s not a reality, it can’t happen – not in America!  That’s what Briton’s thought before the Brexit vote.  In fact if you look at any new country, it’s always a surprise.  I’m sure looking back, it was a big surprise to King George when the American ruffians decided to be defiant against their home country – England.  All of a sudden, America was a country.  Remember, during this time, Europe’s colonial powers ruled the world, bit by bit.  Revolution is always a surprise:

  Every revolution is a surprise. Still, the latest Russian Revolution must be counted among the greatest of surprises. In the years leading up to 1991, virtually no Western expert, scholar, official, or politician foresaw the impending collapse of the Soviet Union, and with it one-party dictatorship, the state-owned economy, and the Kremlin’s control over its domestic and Eastern European empires. Neither, with one exception, did Soviet dissidents nor, judging by their memoirs, future revolutionaries themselves. When Mikhail Gorbachev became general secretary of the Communist Party in March 1985, none of his contemporaries anticipated a revolutionary crisis. Although there were disagreements over the size and depth of the Soviet system’s problems, no one thought them to be life-threatening, at least not anytime soon. – Foreign Policy

  This time though, it really IS different.  With electronic markets, the system is so robust, America could splinter and life would barely change.  So while the idea of USA collapse seems earth-shattering, as a practical matter, things could very much continue as it were.

  It’s an exciting idea for Forex traders, the ability to trade regional currencies in North America, I’d immediately go long the New England Dollar and short the Cali-peso (sorry, birthplace).  But most people don’t know, there’s already many US Dollar alternatives that are used right now, today, in America (not just Bitcoin):

  1. Bitcoin. The world’s best-performing currency, according to Kemp-Robertson, Bitcoin’s value is tied to the performance of a computer network. It’s “completely decentralized—that’s the sort of scary thing about this—which is why it’s so popular,” Kemp-Robertson says. “It’s private, it’s anonymous, it’s fast, and it’s cheap.” Bitcoin is a case study in the increasing desire to place trust in technology over traditional institutions like banks.
     .
  2. Litecoins. A virtual currency based on the Bitcoin model, Litecoins have a higher limit: “The number of coins that can be mined is capped at 21 million Bitcoins and 84 million Litecoins,” explained a recent Wall Street Journal post, which also noted that Bitcoins are worth more and currently accepted more widely.
     .
  3. BerkShares. While Bitcoin and Litecoins are worldwide currencies, BerkShares are hyper-local: they’re only accepted in the Berkshires, a region in western Massachusetts. According to the BerkShares website, more than 400 Berkshires businesses accept the currency, and 13 banks serve as exchange stations. “The currency distinguishes the local businesses that accept the currency from those that do not, building stronger relationships and greater affinity between the business community and the citizens,” the site reads.
     .
  4. Equal Dollars. Philadelphia is also trying out a local currency with Equal Dollars. When you sign up to participate, you receive 50 Equal Dollars; to earn more, you can offer your own possessions in an online marketplace, volunteer or refer friends.
     .
  5. Ithaca Hours. Another hyperlocal currency, Ithaca Hours—usable only in Ithaca, New York—also hopes to boost “local economic strength and community self-reliance in ways which will support economic and social justice, ecology, community participation and human aspirations.” (For a full list of local currencies in the US, go here.)
     .
  6. Starbucks Stars. Use of Starbucks’ Stars is limited not to a particular geographic locality, but to the corporate ecosystem that is Starbucks. Once you get a Starbucks Card, you can earn Stars—which buy drinks and food—by paying with the card, using the Starbucks app, or entering Star codes from various grocery store products. According to Kemp-Robertson, 30 percent of transactions at Starbucks are made using Stars.
     .
  7. Amazon Coins. Another company-specific currency, Amazon Coins, can be exchanged for “Kindle Fire apps, games, or in-app items.” You get 500 Amazon Coins, worth $5, by purchasing a Kindle Fire, or can buy more Coins at a slight savings.
     .
  8. Sweat. Kemp-Robertson points to a particularly innovative business-specific currency in Nike’s “bid your sweat” campaign in Mexico. Your movements, energy, and calorie consumption are tracked and can be exchanged for goods, ensuring a “closed environment”—only people who (a) own and (b) use their Nike products are welcome.
     .
  9. Tide detergent. This is a barter system that’s about as far from government-backed as you could get: in 2011, it was discovered that across the US, thieves had been stealing 150-ounce bottles of Tide detergent to trade for $5 cash or $10 worth of weed or crack cocaine. An article in New York Magazine from earlier this year details the fascinating story and what it says about Tide’s super-successful branding.
     .
  10. Linden Dollars. Linden Dollars, usable within the online community Second Life, can be bought with traditional currency or earned by selling goods or offering services to other Second Life residents. Many people earn actual Linden salaries—some to the tune of a million Linden Dollars—says this article from Entrepreneur.com.
      .
  11. BONUS: Brownie Points. Granted by the universe as a reward for good deeds. Not exchangeable for tangible goods, just self-satisfaction, which we think is also important.

  To learn more about Forex, checkout Splitting Pennies – Understanding Forex.

  

  (South Carolina, 2016 – undisclosed location)

  

  

• The Italian Banking Crisis (In 1 Simple 'Death Cross' Chart)

  Submitted by Lars Christensen via Market Monetarist blog,

  Today I was interviewed by a Danish journalist about the Italian banking crisis (read the interview here). He asked me a very good question that I think is highly relevant for understanding not only the Italian banking crisis, but the Great Recession in general.

  The question was: “Lars, why is there an Italian banking crisis – after all they did NOT have a property market bubble?”

  That – my regular readers will realise – made me very happy because I could answer that the crisis had little to do with what happened before 2008 and rather was about monetary policy failure and in the case of the euro zone also why it is not an optimal currency area.

  Said, in another way I repeated my view that the Italian banking crisis essentially is a consequence of too weak nominal GDP growth in Italy. As a consequence of Italy’s structural problems the country should have a significantly weaker “lira”, but given the fact that Italy is in the euro area the country instead gets far too tight monetary conditions and consequently since 2008 nominal GDP has fallen massively below the pre-crisis trend.

  That is the cause of the sharp rise in non-performing loans and bad debt since 2008. The graph below clearly illustrates that.

  

  I think it is pretty clear that had nominal GDP growth not fallen this sharply since 2008 then we wouldn’t be talking about an Italian banking crisis today. There was no Italian “bubble” prior to 2008 and there are no signs that Italian banks have been particularly irresponsible, but even the most conservative banks will get into trouble when nominal GDP drops 25% below the pre-crisis trend.

  Therefore, I also don’t think that the “solution” to the crisis is a re-capitalisation of the Italian banks or of the entire European banking sector. Rather the solution is to ensure nominal stability in the euro zone. The best way of doing that would be for the ECB to aggressive increase the money base to ensure 4% NGDP growth in the euro zone (see my recent post on what the ECB in the present situation here and my post from 2012 on a cheap firewall against an escalation of the crisis here.)

  A key problem, however, is that the euro zone is not an optimal currency area. In a good recent blog post my friend Marus Nunes rightly argued that there is a “Northern” part of the euro zone where monetary policy broadly speaking is “right” and a “Southern” part, where monetary policy is far too tight. Italy is part of this latter group.

  This means that the question is whether keeping euro zone nominal demand “on track” is enough to ensure enough NGDP growth in the Southern countries to avoid banking and sovereign debt crisis coming back again and again. Unfortunately the development over the past eight years gives little reason for optimism.

  P.S. There are now also increasing talk about problems in the German banking sector. Given the fact that the German economy has doing quite well compared to most other economies in Europe this is rather incredible. Therefore if we should talk about imprudent banking (due to moral hazard problems) then we might want to point the fingers at the German banks.

  

  

• Central Bank Wonderland is Complete and Now Open for Business — The Epocalypse Has Fully Begun

  The following article by David Haggith was first published on the Great Recession Blog.

  

  Summer vacation is here, and the whole global family has arrived at Central-Bank Wonderland, the upside-down, inside-out world that banksters and their puppet politicians call “recovery.” Everyone is talking about it as wizened traders puzzle over how stocks and bonds soared, hand-in-hand, in face of the following list of economic thrills: 

   

  • Britain voted to exit the EU, and a handful of other nations are talking openly along similar lines. One major crack in the European Union just happened, and others are forming. (Brexit is the name of this new Earthquake ride near the gates of Wonderland.)
  • Italy’s oldest bank (also the world’s oldest bank, Banca Monte dei Paschi di Siena) faces bankruptcy unless it gets bailed out. The bank that has survived the greatest tests of time (founded in 1472 before Columbus sailed the ocean blue) is going down unless it finds a savior! Italy’s prime minister is screaming for tax-payer bailouts. At the same time, one of Germany’s oldest banks and one of the largest — Deutsche Bank — has just about become a penny stock and faces the likelihood of imminent collapse if not bailed out, too. (Welcome to Wonderland’s zombie freak show of the world’s oldest walking-dead banks dying again.)
  • Gold and silver have been soaring as though people are fleeing to safety (in Wonderland’s Bouncy House of Coins).
  • People are also fleeing to safety in bonds, bringing the US 10-year bond down to a 1.318% yield, its lowest yield in history. (Hit me on the head with a hammer like a pop-up gopher, and watch me smile.)
  • In many nations around the world, government bonds have been selling hotter than bombs in Syria even with negative interest rates, meaning you lose money every day you hold them. (The bonking game of bigger gophers for the near-sighted so that Wonderland remains handicap accessible.)
  • In Switzerland, people are cuing up in the ticket line to give the government their money to hold for a fifty year ride now that the Swiss 50-year bond has turned negative. (Wonderland’s biggest gopher for the totally blind. You don’t just hit this one; it takes you the ride of your life for the rest of your life. We call it “Gopher Broke.”)
  • US jobs crashed in May, causing stocks to drop, but rebounded in June, causing stocks to rise, so that May is now seen as an unexplained anomaly. (Welcome to Ripley’s House of Unexplained Economic Mysteries.)
  • The Great Britain Pound crashed to a thirty-year low against the dollar. (Enjoy your ride on the currency bumper cars!)
  • Japan’s decade of quantitative wheezing has accomplished so little that they’re going to cough up more of the same all over again because it was so much fun the first five times. (House of Bodily Humors and Horrors.)
  • Central banks in Europe say they need to and will crank their own quantitative easing back up, so effective have all previous rounds been. (And, so, the merry-go-round spins and the calliope plays its happy music in Euro Dizzyland.)
  • Falling oil prices, which contributed significantly to January’s spectacular stock market plunge, are going back down the pipeline while oversupply is building rapidly at the bottom again with the buildup reaching its highest point in ten weeks. (Wonderland’s log ride through oil with more than one crude splash.)
  • Venezuela and Brazil are collapsing into economic chaos. (It’s more fun than that bungy-jumping vehicle for two at the carnival.)
  • Etc. (I know, darn! Just as he was on a roll. Well, hang on…)

   

  Yet, the S&P 500 and Dow have soared to all-time record highs! Whoohoo! Hold onto your safety harness and try not to choke on your popcorn for the fun never ends in Bankster Wonderland!

   

  What’s up with stocks and down with bond yields?

   

  US Stocks are flying high at the same time demand for sovereign bonds is soaring and precious metals are experiencing a bull market. That says to me that money is fleeing to safety, and the apparent irrational exuberance in the stock market, considering all the flights to safety, is partially fueled by foreign investors fleeing to US investments now that Europe’s cracks are showing like Frankensteins body seams.

  This chart from David Stockman’s Contra Corner shows how people are piling into bonds right now:

   

  

   

  As a result, US bond interest rates are the lowest they have been in the history of this nation! Here’s another chart from Contra Corner:

   

  

   

  Whoohoo! Two massive records in one week. Highest stock market prices and lowest bond rates in the history of the United States! Does it get any better than this? Geez, I love this place!

   

  We have never seen anything like this

   

  Stocks are setting all-time record highs, and interest on US bonds is hitting all-time record lows. Money is running to gold and silver. Money is running to long-term sovereign bonds. And money is running to the US stock market all at the same time. Heck, money is running all over the place! What is there not to be happy about?

  However, before you think, Whoo! the stock market is going up; there’s no crash happening, ask yourself what the heck is happening. We’ve never before seen either of these two extremes where stocks are free of all bondage and all bonds are free of their stocks. Only during the years of quantitative easing and zero-interest-rate policy have we seen bonds and stocks play together, but never to this extreme. So, when all the gauges on the instrument panel are pegging their needles past the red zone, including the one that says “We’re going super fast now,” you might want to say, “Whoa! What’s going on?” Maybe the engineer on this train has fallen dead over the throttle.

  As Jesse Felder said on Contra Corner, “We’re witnessing the greatest dichotomy in the history of financial markets.” Interest rates on bonds have now gone below any low of any recession … ever. Far, far below. We’re digging out the sub basement to find where the money is buried. If you were to gauge the economy’s future based on where bonds have gone, you’d have to say, “This must be the scariest future ever because there has never been such a flight to presumably safe vehicles at any cost.”

  At the same time, stocks have never been more overpriced than they are today. They hit their highest price ever during a period in which earnings have been flagging for many months. So, they’re not rising because, “Woohoo! Businesses are making bank!” No, they’re making new heights in spite of the fact that sales are down, profits are down, and wholesale inventories have remained locked in a highly backed-up position that is comparable only to the Great Recession and the dot-com crash … and while things are not looking generally good in the world economically. So, there is not a lot of reason to think sales will grow to fit the high stock values. In other words, median price-to-sales ratio (price of stocks compared to sales of the businesses) has also hit an all-time record high.

  Three all-time records in one week! This is the funnest place in the universe!

  Is this irrational euphoria among investors? Is it even people who are buying the bonds? Is it people who are buying the stocks? Or is it entities like central banks and their proxies — not buying them as investments, but buying them in mass to shore up the entire global economy and stop the crash that started right after Brexit … or that started right after December 16, 2015? (It’s just one crash right after another here at Wonderland’s National Demolition Derby.) Are central banks firing up all engines to stop a crash in its tracks with a massive coordinated salvo of purchases?

   

  So, what is happening as central bankers watch each other in mutual admiration?

   

  

  Says Jeff Cox of CNBC,

  The reason anyone would buy negative-yielding debt is actually pretty simple: Because they have to. They are central bankers looking to help promote economic growth. They are insurance companies, pension funds and money managers who have to match liabilities with assets. They are not, by and large, retail investors who are so afraid of risk that they’re willing to pay for the privilege of lending money to a government. Together, those buyers have helped build a nearly $12 trillion funnel of negative-yielding sovereign debt — unprecedented in world history.

   

  Gee, there are a lot of things breaking historic world records this week. That must mean it’s a great week!

  Cox thinks the big buyers of bonds are central banks, pushing down interest rates to stimulate the economy. No surprise there. Central banks have been going pedal-to-the-metal to hold interest rates to the floor for almost a decade, so why not continue? The record highs in bond sales (with corresponding lows in interest) and high in stock sales most likely are due to rapid pressure being applied to the accelerator as a counter-measure to the concerns governments and bankers have had about Brexit.

  Central banks could do that directly, or they could do it invisibly (since they operate under a cloak most of the time anyway) by offering enticements or pressure to their proxies. (“You want this mega-conglomerating merger to happen: buy ten billion dollars worth of US bonds, and then I’m sure we can get it approved.” If not that, there’s a thousand other ways for central banks to push money into markets now that they are accustomed to doing so in an unbridled fashion. It’s the new norm.)

  That the stock markets are being driven up by central bank purchases can be seen in the following graph:

   

  

   

  Emerging markets (EM) that were crashing at the start of 2016 offloaded assets to raise funds to keep the home front running at the start of the year. That contributed to January becoming the worst January in the history of the US stock market — worse than any start of a year in the Great Depression or the Great Recession. The central Bank of Japan and the European Central Bank increased their buying of those assets to offset that fall, and both recently announced they are going to apply a lot more stimulus.

  Cox goes on to write,

   

  Ostensibly, the global race to the bottom was supposed to stimulate growth, and it may just well keep pushing risk assets [stocks in particular] higher. But what awaits on the other side is adding to the worries of investing professionals. “Ultimately, there will be a day of reckoning,” said Erik Weisman, chief economist at MFS Investment Management…. There remains a pervasive feeling on Wall Street that the risk rally is built on sand, with a price to pay in a world where owning government debt no longer pays but rather costs.

   

  Even central banksters who create money out of nothing cannot create a free lunch.  Somebody pays, but probably you, not them. It’s an ominous feeling really — a sense that there is no underlying reality anymore — that the sands are shifting under your feet.

   

  “There’s no doubt that there are and will continue to be unintended consequences, and the further we move away from something conventional into unconventional, the ratio of unintended consequences to intended consequences will rise,” Weisman said.

   

  We’re seven years on since stimulus responses to the Great Recession began. These have also been the greatest stimulus measures in the history of the world. (No wonder these rides are so thrilling as they reach new world records multiple times a week.) However, outside of flying stocks, we still have a global economy that seems endlessly stuck in the dog days of summer. Or, to change to my old winter metaphor (now that summer has turned abnormally cold here where I write), the longer and harder the snow plows push the snow straight ahead, the more it piles up as an impossible obstacle ahead of them. The louder they get with chained tires clawing and engines roaring and smoking, the less snow they push. The plows are now grinding away at full throttle in the lowest gear they have, and it is looking like they are going to remain stuck in that gear for a very long time — maybe another decade … unless they simply give up the battle.

  The world is buried under the highest mountains of the cheapest debt ever imaginable, and nothing is moving in the overall economy (except financial instruments that are trading places). And that is where I said we would wind up when I wrote my very first articles in my Downtime series on government bailouts and stimulus back at the start of the Great Recession. I said they were pushing all the snow straight ahead, instead of off to the side, so (quite a ways down the road) they would have a mountain of snow so high in front of them that all the plows in the world could push it no further. We are now quite a ways down the road.

  The European banks that are screaming for bailouts are buried in bad debt they pushed forward from the Great Recession. They never wrote it off then because the damage to their balance sheets would have been so severe. As I said back then, such policies only meant the damage to their balance sheets in the future would be even more severe. The problem of bad debt owned by banks in Italy is now four times worse than it was at the bottom of the Great Recession.

  Why did I know that would happen? Because nothing about this “recovery” is recovery. It has all been a forestalling of problems, “kicking the can further down the road,” with the inevitable pay-back time becoming worse the longer we forestall the inevitable write-off of bad debt. My Downtime articles years ago sounded many warnings that everything governments and central banks were doing was making a very bad situation worse just so we could avoid the pain at the time. Such actions resolved none of the true underlying problems that are built right into the foundation of our debt-based economy. Until we stop thinking we can build true monuments of wealth over ever-growing chasms of debt, we will solve nothing at all.

  Europe’s banking troubles are now far deeper than they were at the belly of the Great Recession Part One. Europe endlessly scrambles to solve banking troubles that become harder to solve with each new phase. The snow plows I talked about in my Downtimeseries have not only stopped pushing the snow ahead, but the drift is now avalanching back onto them and pushing the plows backward, even as their wheels are spinning and screeching forward.

  (This is what we do in the parking lots here in Winter Wonderland.)

   

  Why else would the entire financial world be upside down?

   

  Another explanation for the greatest dichotomy in financial history that is now happening in the US is that money is exiting European markets and fleeing to anything in the US because the US remains the best looking corpse in the cemetery; so, if you want to dance with stocks, do so with Stockzilla, bride of Bankenstein. What appears completely irrational is in part a flight of money from one part of the world to the last safe place on earth. (Safe for the moment, but moments count when you’re fleeing an avalanche.)

  Central banks have become the biggest bullies in the playpen. With the biggest bullies pushing their weight around as much as they possibly can, there is no safe place for small investors in the playpen. So, individual investors around the world are fleeing to the safest investments they can think of. With Europe in such volatile flux and China being such an unknown with its own massive upheavals, what more readily comes to mind right now as a final resting place than the good ol’ US of A?

  Naturally, the US will be the last major economy affected by the second avalanche of bank failures, which this time has started in Europe. Brexit isn’t likely to trigger anything in the US directly, other than the immediate panic selling that was seen in stocks right after the vote. Once it was clear that Brexit wasn’t going to destroy the United States, some euphoria within the US probably kicked in and helped push the stock market up rapidly past its long-standing ceiling because that euphoria was accompanied by even larger money flows from outside the nation as people ran for cover.

  Brexit appears to be triggering the failure of banks that were too fat to fail, lest they flounder upon us and squish us all — some of the world’s most established banks. As things fall apart to this unprecedented degree in Europe, money has to run somewhere, and the US casino still has pretty lights that can be seen as far away as the growing darkness in Europe.

  The United States will not remain immune to what is happening in Europe forever, but the hot air coming out of Europe’s balloon may fill the US sails for awhile. For the moment, the US is the beneficiary of Europe’s decline.

  This could be a brief moment, however, as there are likely to be surprising connections (black-swan events) between Europe’s failing banks and US banks that materialize faster than anyone expects. We’re sailing in uncharted territory that looks nothing like anything we’ve seen before, so who knows what comes next in a world where stocks soar in the face of generally gloomy economic news while bond sales also soar at the lowest interest rates in history? (Welcome to our Pirates of the Caribbean boat ride where Mario Draghi plays the part of Jack Sparrow!)

  With Europe reaping the whirlwind as its banks turn out the lights, with China looking lost and confused and sometimes spinning erratically, with Japan ecstatically voting to start its umpteenth round of unsuccessful quantitative easing, with South America breaking into greater anarchy every day of its pitiful, starving life, and with the US in longterm manufacturing decline with corporate profit growth also in continual decline, one cannot seriously think the world is just going to pull out of this!

  That means those who are buying stocks because they believe there’s a new 30% rising bull market just beginning are taking euphoria to new heights, too. They are, in the very least, taking a perilous ride.

   

  “Investors are buying bonds for capital appreciation and stocks for income. The world has turned upside down,” said James Abate, chief investment officer at Centre Asset Management LLC. The shift, according to Abate, has been fueled by central-bank stimulus inflating government-bond prices across the world, pushing yields on nearly $12 trillion of government debt into negative territory. And as bond yields tumble, more and more equities are yielding more than government bonds, spurring demand for companies offering sustainable income in the form of dividend payments. “It is a poison brew that central banks keep serving us,” Abate said. (MarketWatch)

   

  In other words, central banks have taken all rationality out of all financial markets … at least in one sense. Everything everywhere now is contingent upon what central banks are doing. The contagion of their poison is ubiquitous. There is another sense, however, in which this is all rational. I call it the new rationality: central banks have all the money, and money follows money. So, individual investors are doing the best they can in following the money. So, in terms of global economics and politics, its irrational; but in terms of following the makers of money who run the show, it makes perfect sense. It has is own mad mindset.

   

  “There’s a perception there’s a greater fool behind you,” Kohli said, pointing to the strategy of buying a bond with the intention to sell later at a higher price. But the main forces behind the rally, Kohli added, are central-bank purchases that keep fueling demand and propelling prices higher.… What’s more, the recent divergence between the main U.S. equity indexes and benchmark Treasury yields has been flashing “mind the gap” signals that fuel fears of a sharp correction…. So, despite popular belief, the decline in interest rates “should be viewed as a bad sign,” noted BAML’s Global Rates and Currencies Research team, in a report released Monday. “Too often we have heard how declining interest rates are good news and are used as a justification for investors being pushed out the risk spectrum. We disagree and argue this time is different and the decline in rates should be interpreted as a bad sign,” the analysts noted. (MarketWatch)

   

  If Kohli’s first statement doesn’t sound like the definition of a Ponzi scheme, what does?

  In terms of everything that once made sense financially, central banks’ transformation of this world into Wonderland is now complete. In this topsy-turvy world, Mad Hatters may not be so mad as they look. Everyone is simply trying to maneuver around the biggest bullies in the playpen by finding the safest place to play. It’s the new rationality of a world intentionally turned on its head — at last, by nearly everyone’s recognition — even more than it is euphoria. The irrationality has become obvious. What is not so obvious is the rationality of the irrationality.

  In other words, if investors take the bullish gamble on a rising stock market in the US at a time when most of the world is falling apart, they may be right for all the wrong reasons … for now. In Central Bank Wonderland, they have nowhere to fall but up. On a short-term basis (probably very short-term) market bulls could be right only because all the other circling drain holes around the world are dumping into sovereign bonds, precious metals … and the US stocks as the last casino open for business. Everything is now flowing into the extreme zone at the same time.

  You can bet on the wild ride in US stocks, or you can bet on bonds that guarantee you almost nothing (or even less than nothing), or you can bet on precious metals. All three markets are rising together right now. The question is which one is likely to continue rising as Europe disintegrates, the oldest banks in the world crash, China teeters between crashes and stimulus while running the world’s most notoriously cooked books, Japan takes the governor off the throttle and flies with full-hot afterburners blazing into the rarified nozone, and South American economies implode into social chaos?

  This is the crazy new zombie economy I call “The Epocalypse” — a world of economic collapse everywhere, apocalyptic in scale, epic in that it already exceeds the greatest extremes in history, and epoch in that it will come to be known as its own period in time. One word that says it all.

  You have witnessed the beginning of this hideously convoluted world, and it only gets more distorted from here because nothing has been done to right the essential problems that are creating this grotesque chaos while ungoverned greed rules the day.

  The children are no longer asking, “Are we almost there yet?” We’ve arrived, and they’re now asking if they can go home. Welcome to Central Bank Wonderland where Janet Yellen is the Queen of Hearts and all the little carnival riders are Mad Hatters whose moves are rational if you live in a world with irrational rules created by truly mad leaders. Dinner is served in our Zombie Epocalypse Room where only zombie banksters get to dine … and dinner is you! You see, if you were ever able to walk out the back door of Wonderland and look over your shoulder, the sign above the door says “Hotel California.” You are always welcome here … and can never leave.

  Doest it get any more fun than this?

  Sure it does. Wait till you see Act Two, which could be as early as next week!

  

• Paul Craig Roberts Warns "'Adolf Hitler' Is Alive & Well In The US"

  Authored by Paul Craig Roberts, originally posted at Strategic-Culture.org,

  Gestapo America

  FBI Director James Comey got Hillary off the hook but wants to put you on it. He is pushing hard for warrantless access to all of your Internet activity.

  Comey, who would have fit in perfectly with Hitler’s Gestapo, tells Congress that the United States is not safe unless the FBI knows when every American goes online, to whom they are sending emails and from whom they are receiving emails, and knows every website visited by every American.

  In other words, Comey wants to render null and void the Fourth Amendment of the US Constitution and completely destroy your privacy rights.

  The reason Washington wants to know everything about everyone is so that Washington can embarrass, blackmail, and frame on felony charges patriots who stand up in defense of the US Constitution and the rule of law, and dissidents who criticize Washington’s illegal wars, reckless foreign policies, and oppression of American citizens.

  Washington’s demand for power has nothing to do with our security. It has to do with destroying the security that the US Constitution gives us.

  The security that Comey wants to protect is not our security or the national security of the United States. Comey’s intent is to make Washington secure despite its violations of statutory law and the US Constitution. The way Comey intends to do this is by intimidating, harassing, and arresting Washington’s critics.

  Comey wants the unconstitutional power to demand from the providers of telephone and Internet services all records and information about you. These demands are not to be subject to oversight by courts, and the communication companies that serve you are prohibited from telling you that all of your information has been given to the FBI.

  US Senators rushed to stick their swords into the Fourth Amendment. John Cornyn slapped an FBI-written amendment on the Electronic Communications Privacy Act Amendments Act of 2015. This caused the American Civil Liberties Union and Amnesty International to withdraw their support for the act, which caused the act to be withdrawn.

  Senator John McCain rushed to the aid of the FBI. This Constitution-hating senator proposed an amendment to a criminal justice appropriations bill that would use a provision in the unconstitutional PATRIOT Act to grant the unlimited unaccountable power to the FBI to totally destroy your privacy.

  McCain’s amendment failed, but Senate Majority Leader Mitch McConnell (R-KY) changed his vote so that he could negate the Senate’s vote with a vote to reconsider.

  The FBI’s senators will continue with amendments to legislation, related or not, until they deliver to the FBI the power it wants.

  Unfortunately, most Americans today, unlike their forebears, are too ignorant and uneducated to know the value of the privacy rights that our Founding Fathers put in the US Constitution. The imbeciles say nonsense such as: "I haven’t done anything wrong. I have nothing to fear". God help the imbeciles.

  If the American people were sufficiently sophisticated, they perhaps would wonder why such a large chunk of the US Senate had rather represent the FBI than the American people, their constituents who elected them to represent the people in the state, not a police power in Washington.

  Why are so many US senators more responsive to the FBI’s desire for Gestapo police power than they are to the civil liberties embodied in the US Constitution?

  As the Bill of Rights Defense Committee and the Defending Dissent Foundation show, the Orlando shootings, the Dallas shootings and whatever shootings, real or staged, next occur have nothing to do with the FBI’s demand to completely destroy all privacy rights of the American people.

  What’s that I hear? You say you knew nothing about this? Little wonder. Your media consist of people well paid to deceive you and to deliver you into a Police State. To strip you of all constitutional protection and deliver you unprotected to a police state is the function of the New York Times, Washington Post, Fox 'News', CNN, the rest of the presstitute print and TV media and many Internet sites.

  Adolf Hitler is alive and well in the United States, and he is fast rising to power.

  

  

• As Chinese Refiners Flood The World, Gasoline Tankers Pile Up In New York City Harbor

  Just over a month ago, when we pointed out that that the gasoline curve was about to shift from contango into backwardation, we said that the gasoline tanker armada off the coast of Singapore was about to start offloading as it would soon become uneconomical to hold product in offshore storage. This meant one thing: China was about to unleash a wave of accelerated gasoline exports across the entire world.

  We pointed out the unprecedented surge in Chinese gasoline stocks…

  

  … and added that as China continues to imports tremendous amounts of both crude and product, far greater than actual demand, this would send “China’s gasoline stocks to even higher record levels. In other words, the global glut is now not only at the crude and distillate level, but also in global gasoline stocks.”

  One month later we find out that this was a correct assessment of the situation. 

  According to the WSJ, while initially China’s demand for oil helped soak up some of the surplus crude sloshing around the world, China is no longer the handy excess supply “buffer” it once was and as a result China’s teapot refiners are now flooding markets with products including diesel and gasoline, in the latest example of how surging Chinese exports are shaking the commodities industry.

  China’s total exports of refined fuels jumped 38% on-year to 4.2 million tons, or roughly 1.02 million barrels a day, in June, according to the latest data released Wednesday by the customs administration. Its refined fuel exports are up 45% overall so far this year. Much of the surge is attributable to a leap in China’s shipments of diesel. In May, China’s exports of the fuel mainly used in heavy industry had quadrupled on-year to 1.5 million tons; detailed data for June is due later this month.

  The sharp rise is merely a confirmation of what many have said all along: in its relentless bailouts of all enterprises, the Chinese government is unleashing a deflationary wave around the globe, which forces Chine to dump its products to any and every buying around the globe, in the process massively undercutting prices. This mirrors similar increases in China’s exports of processed basic materials like steel in recent months, a trend that has provoked anguished complaints from governments and industry bodies across the world.

  Worse, what many thought was stable Chinese domestic demand, ended up being just the filling of every possible container, not to mention the now almost full SPR, in lieu of actual domestic commodity demand. As such, China’s sagging demand as the economy slows once more has left the country’s oil and metal refiners with huge surpluses they are increasingly looking to sell abroad.

  

  “[China’s] demand for diesel continues to disappoint, mainly as a result of slower industrial output compared to [the] same period in 2015,” according to a recent report from the Organization of the Petroleum Exporting Countries. 

  Thus, unable to sell at home, China is aggressively exporting the latest deflation tidal wave, and the flood of Chinese diesel and other refined products spilling outward is bringing down prices in Asia, hitting China’s regional rivals hard. Refining margins—the difference between what refiners pay for crude versus the prices of the refined products they sell—have dropped by a third to around $4 a barrel since the first quarter across Asia, according to a report by J.P. Morgan.

  Gasoline hasn’t proved immune.

  Despite relatively strong demand within China as passenger vehicle sales continue to rise, China has been exporting more, with shipments doubling in May from last year to 780,000 tons.  “[Global gasoline] demand was off the chart last year and margins were in the double digits. All the refiners were incentivized to produce gasoline,” said Michal Meidan, a China specialist at Energy Aspects, a London-based energy research firm. “But demand for this year is not as stellar, so you have a surplus of gasoline everywhere,” she said.

  That is most certainly true not only for China, but as we noted earlier in our post about oil’s “death spiral” in the US as well, where plunging crack spreads likewise confirm that the US also now finds itself with far too much product (albeit due to different dynamics). As we have explained previously, much of the increase in Chinese refined product exports is due to shifts in the way the industry is regulated at home. Beijing has more than doubled the amount it allows refiners to sell abroad this year, according to Energy Aspects data.  The resurgence of China’s independent crude refiners, known as teapots, has also been key.

  Last year, Beijing allowed these teapots to directly import crude from abroad for the first time, rather than having to buy more expensive crude from domestic state-owned oil companies. Their subsequent ramp-up in production has provided big state-owned refiners such as Sinopec and China National Petroleum Corp. with greater competition at home, leading them to sell more abroad.

  But the worst news is that this is just the beginning:

  Teapot refiners could also soon export more too: Some are aiming to ship 50% of their total output abroad within three years, up from around 10% currently, says Nelson Wang, energy analyst at brokerage CLSA, based on recent conversations with a number of such operators.

  But who will they sell too? After all the world is already flooded with gasoline? Well, for a low enough price, they will find buyers. Teapots already often sell refined products at a discount compared to their rivals at home and abroad to attract customers. “This is just the beginning, and the bigger threat [on margins] is yet to come,” Mr. Wang said.

  But the worst possible case is if China’s economy were to hit another major snag. As the Chinese government seeks to steer the economy from an industry-heavy focus to a consumption-based one, domestic demand for refined fuels could wane further, in turn stoking more exports of diesel, analysts say. In turn, analysts say China’s crude imports could also decline: they hit a five-month low in June at 30.62 million tons, though that was still up 3.8% on-year.

  Chinese refineries’ rising output could keep its gasoline exports high too. The country’s gasoline production could outpace domestic demand growth by 9% this year, according to analysts at energy researcher ICIS.

   

  “Exports are still the main solution for China to mitigate the oversupply of gasoline,” said ICIS, forecasting China’s shipments this year to hit 8 million metric tons, or 160,000 barrels a day, a jump of 40%.

  And while Chinese gasoline exports have not hit the US yet (and they well may eventually), the US is already having a major problem with storing all the gasoline the rest of the world has to export. None other than the IEA in its monthly report said that the global gasoline glut is so big that tankers are now storing in New YOrk’s harbor. “Brimming” inventories, concern over gasoline demand in key markets, “weighed down” prices for the fuel in June.  The IEA also adds that some companies “have been forced to turn to floating storage in the New York Harbour area.”

  As Reuters reported last week, at least two tankers carrying gasoline-making components have dropped anchor off New York Harbor for nearly a week, unable to discharge their cargoes in the latest sign that storage for the fuel is running out, traders said. Several tankers with gasoline have also been diverted from the New York region to Florida and the U.S. Gulf Coast in recent days, a rare move that underscores oversupply in the pricing hub for the benchmark U.S. gasoline.

  The 74,000 tonne tanker EMERALD SHINER , carrying a cargo of alkylite from the west coast of India has been anchored off the New York Coast since June 28, according to Reuters shipping data and traders.

   

  The 37,000 tonne ENERGY PROGRESS , with a cargo of reformate from Turkey, has similarly been waiting outside New York since June 28.

   

  Furthermore, at least three cargoes of gasoline from Europe, which heavily relies on exports to the U.S. East Coast, have been diverted in recent days from New York Harbor to Florida and the U.S. Gulf 

  Coast, ship tracking showed.

   

  Those include the tankers ENERGY PATRIOT , SEASALVIA and ANCE.

  “Tanks are full to the brim in New York Harbor,” a trader said.

  

  There is much more on this topic, but at its core it is a very simple story of too much supply and not enough demand.

  And now that the market is finally realizing what happened, the understanding that oil’s “death spiral – edition 2016″ is being catalyzed not just by oil market dynamics, but by oil products such as diesel and gasoline, is finally being appreciated by the market…  just as we predicted would happen back in February.

  

  

• Too Many Laws: Why Police Encounters Escalate

  Submitted by Ryan McMaken via The Mises Institute,

  The debate over the shooting of Philando Castile has ignited the debate over the way the police, generally speaking, often enforce petty, small-time offenses with often overwhelming force. In the case of Castile, the controversy hinges partially on whether or not Castile was being detained as a suspect in a real crime (such as armed robbery), or if he was being stopped and harassed for a small-time non-violent infraction such as drug possession or a broken tail light. 

  People instinctively know there is a real difference between the situations. Moreover, it is a safe assumption that in the case of armed robbery, someone has actually requested the services of the police, while it is extremely unlikely that any citizen complained about, or was harmed by, a broken tail light or the possession of marijuana. If it proves to be true that Castile was, in fact, stopped for a small-time infraction, then the escalation to a situation in which Castile was shot dead can be shown to be all the more unnecessary and needlessly violent. 

  But, of course, we don't need the Castile case to prove our point. Everyday, people are stopped and detained by police for what should be regarded as peaceful non-criminal activities. But those situations often escalate to tense confrontations, and even in some cases to violent interactions. 

  It doesn't have to be this way.

  Police Didn't Always Patrol Areas Looking for People to Arrest  

  Modern policing is largely a nineteenth-century invention, and prior to modern urban police forces, state agents were generally called in to deal only with episodes of general social unrest. 

  Prior to the age of the modern police patrol in English-speaking countries, state agents — often a sheriff-like official — were used primarily to compel named defendants to appear in court when another citizen had made a complaint in court against that person, usually to demand restitution for some wrong inflicted. It wasn't until the twentieth century that police agents routinely patrolled an area looking for places to intervene. In the United States, for example, as Jack Greene notes, "the American police service was originally cast as a reactive force, not as a preventive of interdicting force. … America's police were to provide assistance on request, not to proactively intervene in the lives of the community." 

  In England, the tradition of legal action only beginning in response to a private complaint is very old, and law enforcement agents were expected to act only in response to court orders. Michael Giuliano writes: 

  Since early medieval England, long before the Norman invasion of England, criminal actions had been instituted by aggrieved private parties. They were primarily settled by compensation or restitution, and not imprisonment, capital punishment, or even the blood-feud that was common in much of Europe. For most offenses, specific civil fines and compensation were established. … The affirmative role of the victim or next of kin initiated the legal process. Particularly heinous offenses requiring more than “mere” intentional homicide, were often excluded from the realm of compensatory remedy. As process, judges were appointed to preside over the courts and enforce the decisions made by the assembled freemen of a district. Policing and law bore elements of democracy.

  This reliance on a private restitution-based model continued into the late nineteenth century, and was hotly defended by many of the English on the presumption that a shift to "public" prosecutions — prosecution initiated by the state itself — would lead to a destruction of English civil liberties. Giuliano continues: 

  The formal transition from private to public prosecution in England did not occur until 1879 and years passed before it could be implemented in practice. The English gentry had long been suspicious of both a public prosecution system and a professional police force.

   

  Indeed, the private initiation of criminal prosecution in England was a curiosity to visitors. Among them was the French jurist Charles Cottu, who like many was unaware of the “traditional arguments of English gentlemen against a constabulary and state prosecution,” according to legal historian Douglas Hay. Those Englishmen believed, in Hay’s characterization, that the power of prosecutorial institutions could lead to a “political police serving the Crown.” This opposition to public prosecution has been cast by law professor Bruce P. Smith as an example of old England's “national commitment to civil liberties.”

  Obviously, today, we see few traces of a legal system that even resembles the English Common Law system that relied on there being an actual victim for a crime to have taken place. Today, police actively patrol neighborhoods looking for potential offenders even if no one has requested the "service."

  In response, this has led to some observers to suggest that the police should function instead on a "fire department model" in which police respond only to actual complaints, rather than seek out "offenders" on their own. 

  Certainly, this could potentially be a step in the right direction, but the larger problem lies in the fact that not only can arrests and prosecutions be initiated in the absence of any complaint or victim, but the list of offenses for which a person can be arrested and imprisoned has grown disastrously long. 

  Every Police Encounter Is an Opportunity for Arrest and Criminal Prosecution 

  Dealing with violent crime constitutes only a small minority of what police deal with on a daily basis. For example, in 2014, out of 11,205,833 arrests made nationwide (in the US), 498,666 arrests were for violent crimes and 1,553,980 arrests were for property crime.

  That means 82 percent of arrests were made for something other than violent crime or property crime. 

  Moreover, many of these non-violent offenses — such as drug use, liquor violations, carrying an illegal knife, or other infractions that should be regarded as small-time offenses can result in serious jail time or prison time, as well as steep fines and lost earnings. 

  For instance, the highly publicized death of Eric Garner at the hands of police officers was a conflict precipitated by the sale of untaxed cigarettes by Garner. The police officers who killed Freddie Gray in custody in Baltimore later claimed the arrest was necessary because Gray possessed a knife that violated city ordinances. 

  And then there are the countless cases of non-criminals who have been stopped, searched, arrested and imprisoned for petty drug offenses such as possession. 

  Indeed, police departments spend an immense amount of time and resources on these non-violent offenses. In their book, The Challenge of Crime, Henry Ruth and Kevin Reitz observe: 

  [W]e do know that the effort to stem the tide of illicit drugs has been massive — and expensive. On the local level, 93 percent of county police agencies and 82 percent of all municipal agencies with more than one hundred police officers contained a full-time drug enforcement unit, as did about 60 percent of the state police agencies, and almost 70 percent of all sheriffs' departments. New York City alone in 1997 reported over 2,500 police officers dedicated to drug units and task forcese. More than 90 percent of all these police agencies received money and property forfeited by drug sellers for use in law enforcement opertations. …

   

  State and local police made about 1.6 million arrests for drug abuse violations in 2000, four-fifths of them for drug possession. … And in 1998, drug offenders were 35 percent of all felons convicted in state courts.

  In Gangs and Gang Crime, Michael Newton Reports: "In 1987, drug offenses produced 7.4 percent of all American arrests, nearly doubling to 13.1 percent by 2005."

  As Ruth and Reitz note, there are financial incentives to police agencies to pursue drug offenders. The nature of drug offenses also gives the police more reason to make arrests in general. As explained by Lawrence Travis in Introduction to Criminal Justice:

  With increased emphasis on drug crimes, agents and agencies of the justice system have uncovered offenses that have been present for years. Because drug offenses have gone unreported in the past, Zeisel (1982) noted that they present an almost limitless supply of business for the police. changing public perceptions of the seriousness of drug offenses has supported increased drug enforcement efforts.

   

  [Peter] Kraska observed that with drug offenders, police "can seek actively to detect drug crimes, as opposed to violent and property crimes, for which they have little choice but to react to complaints." Thus, the volume of drug offenders entering the justice system is more a product of police activity than is that of violent or property offenders.. Political pressure to treat drug offenses more seriously, coupled with giving incentives such as profit from seizing the property of drug offenders, spurs more aggressive police action."

  In other words, rather than react to complaints about violent crime or property crime, drug enforcement provides the police with nearly limitless opportunities to search, question, and arrest suspects for any number of offenses related to drugs. Moreover, if the police attempt to stop and search a person, and the person becomes uncooperative, police may then be able to justify an arrest for "resisting arrest" or similar offense even if no drugs are found. 

  Arrests in turn then bolster a police officer's career, even though little time has been spent on investigating violent crime or recovering stolen property. 

  The results of this emphasis among law enforcers can be seen in the incarceration data. Erinn Herbermann and Thomas Bonczar report that, of the 3,910,647 adults on probation in the US at the end of 2013, 25 percent (approximately 977,662 people) had a drug charge as their most serious offense.

  According to the Justice Policy Institute: "approximately one-quarter of those people held in U.S. prisons or jails have been convicted of a drug offense. The United States incarcerates more people for drug offenses than any other country. With an estimated 6.8 million Americans struggling with drug abuse or dependence, the growth of the prison population continues to be driven largely by incarceration for drug offenses."

  Consequently, more than one-fifth of prisoners (21 percent) in state prisons are held due to drug violations, while more than half (55 percent) of prisoners in federal prisons are held due to drug violations. This does not include offenders in county jails for shorter non-prison sentences. 

  The Effects of an Expansive Criminal Code on Police-Suspect Interactions 

  The effects of these trends should be predictable. 

  Imagine, for example, a world in which the only offenses that brought significant jail terms or large fines were violent criminal acts and property crimes. Obviously, in this case, the range of action open to the police would be greatly reduced, and citizens stopped by the police would have little to worry about in terms of stiff jail sentences. The possession of a switchblade or a certain type of cigarette would be of little concern to either the police or the suspect. Even if policymakers could not bring themselves to legalize these activities but only de-criminalize them, the stakes would be much lower in police-citizen interactions when citizens fear only a citation and fine instead of prison time for any offense that does not involve thievery, fraud, violence, or destruction of property. 

  When suspects know they are unlikely to be arrested or face a serious criminal charge, they are unlikely to panic and resist the police in a way that may lead to escalation of violence. 

  Moreover, given the relative rarity of real crime versus mere drug offenses and other small-time violations, police would be forced to concentrate their efforts on violent crime and property instead.

  After all, given the reality of scarce resources for any endeavor, including policing, the opportunity cost of pursuing drug offenses leads to fewer police resources being devoted to recovering stolen property and pursuing violent criminals.

  Contrary to un-serious and absurd claims that the police "enforce all laws," police use their discretion all the time as to what laws to enforce and which to not enforce. Those laws that are enforced are often laws that can lead to profit for the police department — such as drug laws which leads to asset forfeiture — or laws that can make for easy arrests — such as loitering and other small time laws — which improve a police officers' arrest record.

  If we want to be serious about scaling back the degree to which police interactions with the public can lead to violent escalations, we must first scale back the number of offenses that can lead to serious fines and imprisonment for members of the public, while shifting the concentration of police efforts to violent crime and property crime. The emphasis must return to crimes that have actual victims and which are reported by citizens looking for stolen property and violent criminals. Not only will this increase the value of policing, but will also improve relations with most of the public while reducing the footprint of the state in the lives of ordinary people.

  

  

• FBI Agents Were Told To Sign A "Very, Very Unusual" NDA In Hillary Email Case

  The State Department restarted their investigation into Hillary Clinton’s emails following the DoJ’s unanimous recommendation that Attorney General Loretta Lynch not pursue criminal charges for Hillary’s negligence in handling classified documents. FBI insiders now believe a deal was struck when Bill Clinton met Loretta Lynch on a Phoenix airport tarmac in June. Agents have also said they were forced to sign a document that went above and beyond the typical NDA signed when performing investigations

  When news broke of the infamous tarmac Lynch-Clinton meeting we said: “Well then, if Lynch says it was a completely random encounter with Hillary Clinton’s husband on a tarmac (admit it, that happens often to most people), and nothing was discussed that pertains to official business, then that certainly must be the truth.”

  We were sarcastic. We may also have been right.

  According to The New York Post, which not only cited a source saying that “FBI agents believe there was an inside deal put in place after the Loretta Lynch/Bill Clinton tarmac meeting”, but it also reports that FBI agents had been required to sign a Case Briefing Acknowledgment Addendum. To wit:

  In an unusual move, FBI agents working the Hillary Clinton email case had to sign a special form reminding them not to blab about the probe to anyone unless called to testify.

  As for what that “special form” is:

  Sources said they had never heard of the “Case Briefing Acknowledgment” form being used before, although all agents must initially sign nondisclosure agreements to obtain security clearance.

  A retired FBI Chief opined on agents signing a Case Briefing Acknowledgment saying:

  “This is very, very unusual. I’ve never signed one, never circulated one to others”

  Zero Hedge searched for “Case Briefing Acknowledgment” throughout various databases and found no credible hits relating to such a document. Which is odd in light of that by-chance meeting on a tarmac because the document was acknowledged in a July 1 letter from Stephen Kelly, the top legislative affairs official for the FBI in a response to Chairman Charles Grassley’s letter requesting more information about the Case Briefing Acknowledgment.

  The Clintons continue to display an uncanny ability for creating the best timed coincidences.

   * * *

  Stephen Kelly, Asst. Director Office Congressional Affairs Letter To Grassley
  

  

  

• We Just Found Out Who Has Been Buying All These Record-Low-Yielding Bonds

  When your nation’s bonds are trading with a record low 28bps negative yield (10Y JGBs), everything else in the world (aside from Swiss 10Y) is a relative ‘value’…

  

   

  Which appears to have driven Japanese investors to panic-buy a record 2.549 Trillion Yen of foreign bonds – an all-time record (in Yen and USD)…

  

   

  A week after near-record sales of JGBs…

  

   

  So now we know who (among others) was responsible for sending global developed sovereign bond yields to their record lows at 40bps last week…

  

   

  And if The BoJ cuts rates deeper into negative territory this week – what do you think Japanese investors will do?

  Charts: Bloomberg

  

  

• "$2 Billion A Year" – Illegal Immigrants Get More Food Stamp Benefits Than Poor American Citizens

  Submitted by Mac Slavo via SHTFPlan.com,

  There’s a reason Americans are angered over illegal immigration and despite what liberal-leaning socialists like Hillary Clinton and the Huffington Post may suggest, it has absolutely nothing to do with racism.

  It’s an economics issue, plain and simple.

  

  And as highlighted by a new report from the Washington Examiner, it’s actually American citizens who are feeling the brunt of the pain and being treated unfairly, not the other way around:

  Illegal immigrant households tapping into the federal food stamp program are receiving $1.4 billion to $2.1 billion a year despite their ineligibility, according to a new analysis of the Agriculture Department program.

   

  And rules guiding who can get food stamps favor households with illegal immigrants over all-U.S. citizen homes, according to the detailed report from the Center for Immigration Studies released Monday morning.

  David North of cis.org explain how the scam works:

  Let’s say that the all-citizen family consisted of three people, employed father, stay-at-home mother, and a small child. Dad makes $2,400 a month. The family’s income is too high for food stamps since the maximum monthly income is $2,177 for a family of three.

   

  Then next door there is a mixed family, also three people, with the father being the only worker, also earning $2,400 a month. The difference is that the father is an ineligible alien and so, under many states’ regulations, one-third of the family’s income is ignored (prorated is the word in SNAP circles), leaving the family with a nominal income of $1,600 a month that allows the family to get a food stamps allotment, but only for the two citizens, not for all three in the family.

   

  There is thus a band of households of three with earnings in the range of $2,177/mo. at the bottom to $2,589/mo. at the top that would be eligible for food stamps but only if the wage earner is a non-eligible alien in the eyes of USDA; all-citizen households in this band would not be eligible for food stamps. (Here’s the math: $2,589 = 150 percent of $1,726, the maximum income allowable for a family of two when there is a 33.3 percent discount on the illegal’s wages).

  That $2 billion a year in free food offered to people who shouldn’t be in this country in the first place is only part of it.

  An already overburdened American taxpayer is also forced, by way of the gun, to pay for illegal immigrants’ health care, college tuition, and other social services.

  But if you argue against illegal immigration or the “free” services they consume you are a racist.

  We’d argue you’re a realist, especially if you understand that all of these free services only work until the government runs out of other peoples’ money.

  

  

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