Sep 16

Today’s News 16th September 2018

  • Martin Armstrong Asks: "Will Global Warming Sink the Netherlands?"

    Submitted by Armstrong Economics

    A friend of mine was taking a class in geography in university for the credits. The professor was all about brainwashing the class about Global Warming. The pitch was that with reducing air pollution from cars, it would be possible to save the Netherlands otherwise the seas will rise and the country will vanish from the face of the earth.

    I find it really incredible how these people promote that everything on the planet is somehow our fault. Most of the ancient city of Alexandria, Egypt, from the time of Cleopatra is under water. Sure, that must have been caused by too many chariots in rush hour and the farting of horses like cows that the EU regulates.

    Then there is the discovery of ancient sea fossils in the middle of Australia which shows that obviously, Australia was once under water. Dinosaur-age fossilized remains of extremely tiny organisms that are found in the sea have been discovered in the center of the arid Australian desert. This confirms that this area was, at least for a short time, under by sea water some 40 million years before Australia’s large inland sea existed.

    I grew up in New Jersey. One of the few memories I have as a child was going down to the clay pits with the boys in search of dinosaurs since they had found one in the area. Sort of a pre-Indiana Jones excursion. But they also found ancient sea creatures in the area. During the Precambrian period, New Jersey was covered by a shallow sea that was home to stromatolite forming bacteria. During the early part of the Paleozoic, New Jersey was still under water. Fossils of various sea creatures were discovered in New Jersey. The state was home to creatures like brachiopods and trilobites. By the Silurian period, the northern part of the state was home to a river system. Sea levels rose and fell throughout the remainder of the state’s Paleozoic rock record long before people existed. There are no local rocks of Carboniferous or Permian age and then during the Triassic, the state became a terrestrial ecoregion. Then there were local lakes which became the home to various crustaceans. On land, dinosaurs left behind footprints and continued to do so into the Jurassic period. Much of the state was covered by sand which became known as the Pinelands.

    The rise and fall of land have been going on for millions of years. It is part of the ecosystem itself and we are a bunch of narcissists to think that we are somehow even capable of changing the climate. We are no more than a flea on the back of a dog that can be shaken off when we become too annoying. When my friend texted me what the professor said that if we stopped driving our cars we could save the Netherlands, I texted back the ancient source I had read back in school.

    There was a Greek geographer and explorer by the name of Pytheas of Massalia, but no copies of this work have survived. Nonetheless, we have others who have quoted Pytheas who recorded an account of the Low Countries, or what we call the Netherlands.  Pytheas passed the Low Countries on his way to Heligoland around c. 325 BC.  He wrote that “more people died in the struggle against water than in the struggle against men”. This is our earliest account of the region. Then we have the Roman author Pliny from the 1st century AD who wrote:

    There, twice in every twenty-four hours, the ocean’s vast tide sweeps in a flood over a large stretch of land and hides Nature’s everlasting controversy about whether this region belongs to the land or to the sea. There these wretched peoples occupy high ground, or manmade platforms constructed above the level of the highest tide they experience; they live in huts built on the site so chosen and are like sailors in ships when the waters cover the surrounding land, but when the tide has receded they are like shipwrecked victims. Around their huts they catch fish as they try to escape with the ebbing tide. It does not fall to their lot to keep herds and live on milk, like neighboring tribes, nor even to fight with wild animals, since all undergrowth has been pushed far back.

    Going back about 2,000 years ago, much of the Netherlands was covered by extensive peat swamps. The coastal dunes formed a natural embankment which prevented the swamps from draining. The first inhabitants were attracted to the rich soil compared to the peat swamps and sandy soil. They appear to have begun to protect themselves against floods by constructing their homes on artificial hills they created of which Pliny wrote about. Archeological evidence suggests that there was a cycle to the region between 500BC and 700AD where there were periods of habitation and abandonment as the sea level rose and fell.

    It was not until the 9th century when the sea level rose again which forced people to raise their artificial hills higher. These small hills began to be connected forming villages and they began to construct dikes when communities could act in unison. It was not until after 1000AD that the population began to grow dramatically. This created more labor but a demand for more land. This is when we see the construction of dikes become more widespread. By 1250 most dikes had been connected into a continuous sea defense.

    The Edict of Expulsion was a royal decree issued by King Edward I (1272-1307) of England on July 18th, 1290, expelling all Jews from the Kingdom of England. Why? The Jews were the king’s personal property, and he was free to tax them at will whereas British citizens could not be taxed without their consent which was obtained from Parliament. Edward I borrowed extensively from the Jews and taxes them to the point that they were no longer a source of revenue. He then expelled them and they were not allowed to take their property so it was the final confiscation to fund his war with France. Meanwhile, it was Philip IV (1268-1314AD) of France who seized the Knights Templar, the Catholic Church moving it to Avignon installing a French Pope, and confiscating the assets of Italian bankers who were lending money to Edward I. This greed for taxation contributed to the first migration of the Jews to the Low Countries.

    Sephardic Spanish Jews had once constituted one of the largest and most prosperous Jewish communities in the world and were regarded as the unquestioned leader of the Jewish world. During this period Sephardic Spanish Jews ended definitively with the anti-Jewish riots of 1391 about 100 years after the 1290 expulsion from England. Then about 100 years later, there was in Spain the Alhambra Decree of 1492 against the Jews. It seems that every time society could not repay the Jewish bankers,  the borrowers suddenly discovered they were OMG Jewish. Consequently, the majority of Jews in Spain around 200,000 converted to Catholicism after the Alhambra Decree. Those who refused were forced into exile and migrated to the Netherlands where they began insurance and trading of commodities, bonds, and stocks in Amsterdam.

    So to me, to even listen to some university professor claim that we can save the Netherlands by reducing CO2, I just cannot believe we have such idiots who know nothing and ignore history entirely while professing to students what amounts to just propaganda. And they want tens of thousands of dollars annually per student to be brainwashed. Unbelievable! Tell a lie often enough, it become a fact and then truth.

  • These Four Predicted The Global Financial Crisis; Here's What They Think Causes The Next One

    A different kind of hurricane slammed into the American East coast, the nation and ultimately the world ten years ago today. 

    Amidst the multiple introspective columns and soul searching that naturally occurred this week, which looked back on the missed warning signs behind the 2008 financial collapse exactly a decade ago this weekend, there is a small group of people whose opinions are actually worth paying attention to.

    Though arguably no single individual accurately called all aspects of the crisis in its entirety, precipitated by the implosion of Lehman Brothers, some did very publicly predict key facets with prophetic clarity. As Market Watch’s Howard Gold explains in his profile of four analysts the world should have been listening to: “People warned about subprime mortgage loans, derivatives, and too much leverage, but nobody, to my knowledge, said a bursting housing bubble would cause a global crisis that would lead to the demise of venerable financial firms, require trillion-dollar taxpayer bailouts, and cause a recession that rivaled only the Great Depression in its magnitude.”

    Trouble is like many religious prophets of ancient history, they were rejected at the time, cast as dour harbingers of gloom and doom.

    Clockwise from upper left: Gary Shilling, Jim Stack, Raghuram Rajan and John Mauldin. Via MarketWatch

    Here are four names and their very public warnings that attempted to jolt the financial and banking sectors out of their sleepy stroll toward the abyss before 2008, as well as their predictions for the next big one, and what to look out for. 

    Howard Gold interviewed each, and laid out the key quotes summarizing then and now…

    Economist A. Gary Shilling

    President of consultancy A. Gary Shilling & Co., he started writing about a housing bubble in the early 2000s which Greg Lippmann (of “The Big Short” fame), credits with giving him the idea to bet against subprime mortgages. Describes Gold, “he warned his newsletter subscribers about a housing bust and wholesale deleveraging of household debt that would hobble the economy for years.”

    And this epic anecdote from the interview: 

    John Paulson contacted Shilling in August 2006. “He talked about credit default swaps. I didn’t know what they were,” Shilling recalled.

    Shilling did some consulting for Paulson’s hedge fund and even invested what “was for the Shillings a major piece of money in this.” Paulson, of course, loaded up on CDS’s and made $4 billion in what has been called “the greatest trade ever.” “We made 15 times our money,” Shilling says.

    His predictions pre-2008: 

    “Subprime loans are probably the greatest financial problem facing the nation in the years ahead.” —January 2004

    “The [speculative housing] bubble’s break will cause widespread pain…and be much worse economically than the 2000-2002 bear market.”—June 2006

    “We continue to forecast a 25% fall in median single-family house prices nationwide.” —November 2006. 

    What he says now: 

    “The ultimate thing that brings down financial markets is excess leverage … So, you look where’s the big leverage, and right now I think it’s in emerging markets.”

    Shilling is particularly worried about the $8 trillion in dollar-denominated emerging-market corporate and sovereign debt, especially as the U.S. dollar rises along with interest rates. “The problem is as the dollar increases,” he said, “it gets tougher and tougher for them to service [that debt] because it takes more and more of their local currency to do so.” Of that, $249 billion must be repaid or refinanced through next year, Bloomberg reported.

    * * *

    Money manager Jim Stack

    President of Stack Financial Management, which manages $1.3 billion, and InvesTech Research, a newsletter he launched in 1979, Jim Stack as a young analyst first gained some notoriety for calling the 1987 stock market crash. Describes Gold, “As housing prices kept rising, Stack built a proprietary tool called the Housing Bellwether Barometer. He called housing a bubble a year before it peaked and warned of bigger problems ahead for the economy and the markets.”

    His predictions of a new bear market coming were issued even as stocks were hitting all-time highs. 

    His predictions pre-2008: 

    “We are officially calling it a dangerous bubble…I see a trillion+-dollar government bailout of the mortgage industry at some point over the next decade.”—July 2005

    “Our Housing Bubble Index has dropped into a freefall that rivals the dot-com bust of the late 1990s… We are moving to a full bear market defensive mode.”—July 2007

    “We are nowhere near the bottom…It’s only a matter of time…until the housing debacle and credit crisis adversely impact the overall economy, increasing the likelihood of a recession.”—Interview with Equities magazine, November 2007

    What he says now: 

    That housing-related stocks “saw a parabolic run-up” in 2016-17, but in January his index “peaked and now it’s coming down hard.” And this spells “bad news on the housing market looking 12 months down the road.”

    Per Howard Gold’s interview:

    But the biggest danger, Stack told me, is from low-quality corporate debt. Issuance of corporate bonds has “gone from around $700 billion in 2008 to about two and a half times that [today].”

    And, he added, more and more of that debt is subprime. Uh-oh.

    In 2005, he pointed out, companies issued five times as much high-quality as subprime debt, but last year “we had as much subprime debt, poor quality-debt issued, as quality debt on the corporate level,” he said, warning “this is the kind of debt that does get defaulted on dramatically in an economic downturn.”

    Banker Raghuram Rajan

    Previously the IMF’s chief economist and former head of the Reserve Bank of India, Rajan famously presented a paper at the Federal Reserve Bank of Kansas City’s annual retreat at Jackson Hole, in August 2005. To illustrate the general obsequiousness and self-congratulatory atmosphere of those times, Rajan recalled that some papers at the conference “focused on whether Alan Greenspan was the best central banker in history, or only among the best.”

    Per Howard Gold: 

    Rajan turned out to be a party pooper, questioning whether “advances” in the financial sector actually increased, rather than reduced, systemic risk. Former Treasury Secretary Larry Summers called him a Luddite. “…I felt like an early Christian who had wandered into a convention of half-starved lions,” he wrote. But though delivered in genteel academic lingo, his paper was powerful and prescient.

    His predictions pre-2008: 

    “Managers…have greater incentive to take risk…because the upside is significant, while the downside is limited.”

    “Moreover, the linkages between markets, and between markets and institutions, are now more pronounced. While this helps the system diversify across small shocks, it also exposes the system to large systemic shocks…”

    “The financial risks that are being created by the system are indeed greater… [potentially creating] a greater (albeit still small) probability of a catastrophic meltdown.”

    What he says now: 

    “There has been a shift of risk from the formal banking system to the shadow financial system.” He also told me the post-crisis reforms did not address central banks’ role in creating asset bubbles through accommodative monetary policy, which he sees as the financial markets’ biggest long-term challenge.

    “You get hooked on leverage. It’s cheap, it’s easy to refinance, so why not take more of it? You get lulled into taking more leverage than perhaps you can handle.”

    And what might be coming:

    Rajan also sees potential problems in U.S. corporate debt, particularly as rates rise, and in emerging markets, though he thinks the current problems in Turkey and Argentina are “not full-blown contagion.”

    “But are there accidents waiting to happen? Yes, there are.”

    * * *

    Writer John Mauldin

    Best known for his free weekly e-letter “Thoughts from the Frontline,” the Dallas-based chairman of Mauldin Economics, John Mauldin began worrying about housing very early, sometimes featuring commentary from Gary Shilling during the run-up to the crisis. Described by Gold, he “said a housing bust would lead to a drop in consumer spending, a bear market, and a recession (though at first he thought it would be a mild one), and that credit default swaps (CDSs) posed a systemic risk.”

    His predictions pre-2008: 

    “A slowing of the housing market, and thus the economy, is in our future… This in turn suggests that as growth in consumer spending slows, a bear market in equities is a high-probability outcome.”—March 2006

    “…The stock market is going to be under considerable pressure next year. The average drop of the markets is about 40% before and in a recession….Dow 9,000 is a real possibility, if not probability”—December 2006. (The Dow bottomed at 6,547.05 in March 2009.)

    “The one true risk that is simply not knowable at this point is in the Credit Default Swap (CDS) market….The CDS market is huge, in the hundreds of trillions of dollars and growing dramatically… There is no agency overseeing counter-party risk. This is the one true systemic risk that I see.”—July 2007.

    What he says now: 

    “I think the choice of Europe is… going to have to put [all the debt] on the balance sheet of the European Central Bank. If they don’t, then the euro zone breaks apart and we’re going to get a 50% valuation collapse.”

    “Greece…is a rounding error. Italy is not…. And Brussels and Germany are going to have to allow Italy to overshoot their persistent debt, and the ECB is going to have to buy that debt.”

    “If it doesn’t happen, the debt triggers a crisis in Europe, [and] that triggers the beginning of a global recession” but… “there are so many little dominoes, if they all start falling, one leads to the next.”

    Comments Howard Gold,

    Mauldin estimates the world has almost “half a quadrillion dollars,” or $500 trillion, in debt and unfunded pension and other liabilities, which he views as unsustainable.

    But the flashpoint for the next crisis is likely to be in Europe, especially Italy, he maintains.

  • Wilmington Police Arrest 5 In Post-Hurricane Family Dollar Store Looting After Footage Goes Viral

    Update (8 pm ET): Wilmington police have arrested five suspects after locals broke into and raided a Family Dollar store on Greenfield Street. The store, which is located near a housing project, was the center of some controversy earlier in the day after a video of several suspects fleeing from the store with armfuls of stolen goods went viral.

    Looters

    Police warned that they will pursue any suspects identified via camera footage “to the fullest extent of the law,” according to a message posted on the Wilmington PD Facebook page. The store’s management had initially asked police not to pursue charges, but after consulting with the DA, they have apparently changed their mind…

    “Earlier this afternoon dozens of individuals went into the Family Dollar Store at 1318 Greenfield St and stole numerous items from the store. The looting was captured on social media and by a local news team which notified local police,” the police wrote on Facebook. “When officers arrived they notified store management who did not want to pursue charges initially… After consulting the District Attorney and Family Dollar Management charges will be filed against looters. Moments ago officers arrested five individuals who broke in and looted the Dollar General at 5th & Dawson Streets. Charges are pending and those details will be released as they become available.”

    The town has also instituted a mandatory curfew for the area surrounding the store.

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    A news crew that filmed some of the looting said they were told to stop filming by some of the looters, and that they heard gunshots, according to Raw Story.

    Watch the video of the incident below:

    The names of those arrested have not been released.

    * * *

    Unfortunately for the hundreds of thousands of people fleeing Hurricane (now Tropical Storm) Florence, the rash of empty properties and businesses left behind represent prime targets for criminals seeking to take advantage of the disaster conditions to pull off a few big scores. Residents of Houston endured a wave of looting during Hurricane Harvey last summer, and now it appears that a similar storm-inspired crime wave is afflicting several badly-hit counties in North Carolina.

    In response, police are stepping up efforts to thwart burglaries after police in Brunswick county arrested four young men on burglary-related charges, according to the Charlotte Observer. Another suspect is being sought.

    The Brunswick sheriff’s office posted on Facebook Friday morning that officers had “detained several individuals throughout the night for felony B&E,” prompting sheriff John Ingram to issue a stern warning: Anybody caught looting will be locked up.

    “I want to send a message to the criminal element that’s looking for that opportunity, we’re gonna do everything within our power, to be very vigilant, working with our community, and if you seek to prey upon the citizens of Brunswick County, we’re going to do everything we can to lock you up,” Sheriff Ingram said. “I made sure ahead of time, that we had adequate space for anybody that wanted to try that.”

    The message followed reports that four people were arrested overnight in connection with break-ins of cars and a convenience store.

    Dashaun Smith, 25, and Brandon Bellamy, 30, were jailed on charges of possession of burglary tools and breaking and/or entering after a break-in at Tommy’s Mini Mart in Leland, according to WWAY. Devin Harris, 21, and Justice Harris, 18, were jailed on a charge of breaking and/or entering a vehicle, the station reported.

    All four mug shots were swiftly posted online by the Asheville Citizen-Times:

    Mug

    Mug

    Brunswick isn’t the only county struggling with break-ins. As the Herald pointed out, police in York and Chester counties (in in neighboring South Carolina) also warned that anyone who commits a crime during what likely will be emergency conditions for days during Hurricane Florence will “go to jail.”

    Any attempt during the weather conditions to commit looting, crimes of opportunity at closed businesses or homes, or scams concerning charities or the needy will be investigated and prosecuted, said South Carolina’s police and prosecutors.

    “The York County Sheriff’s Office and all of the local police departments will be extremely vigilant to detect those who will attempt to criminally capitalize on the effects of this storm,” York County Sheriff Kevin Tolson said. “Criminals should know that during weather events such as this, law enforcement is out in full force.”

    Authorities warned any residents remaining in the area to swiftly report any crimes they happen to witness. Under no circumstances should citizens try to handle crimes themselves.

    Chester County Sheriff Alex Underwood said his officers will shuttle emergency health officials to and from Chester’s hospital, assist the elderly and special needs persons, and clear roads and assist flooding victims. But if people commit “awful and intolerable crimes of opportunity” during the emergency, Underwood said there will be “zero tolerance.”

    “Criminals who break the law during this time, when law enforcement is doing all it can to help the public, will go to jail,” Underwood said.

    Tolson and Underwood urge anyone who sees a crime to report it and let law enforcement handle it.

    “Don’t try and handle it yourself,” Underwood said. “Call the law.”

    Meanwhile, the death toll from the storm climbed to at least 5 individuals on Saturday as what is now Tropical Storm Florence slowed to a crawl. Authorities expect torrential rains to continue through the weekend, raising the likelihood of flash flooding and other disasters.

  • California Tops National Poverty Rate As Prime Demographic Plans "Exodus" From State

    Despite efforts by state legislators at creating a socialist utopia, California still has the highest poverty rate in the nation at 19%, despite a 1.4% decrease from last year according to the Census Bureau. 

    Poverty and income figures released Wednesday reveal that over 7 million Californians are struggling to get by in the second most expensive state to live in, according to the Council for Community and Economic Research‘s 2017 Annual Cost of Living Index. 

    And while California has a “vigorous economy and a number of safety net programs to aid needy residents,” according to the Sacramento Bee, one out of every five residents is suffering economic hardship – which is fueled in large part by sky-high housing costs, according to Caroline Danielson, policy director at the Public Policy Institute of California. 

    “We do have a housing crisis in many parts of the state and our poverty rate is highest in Los Angeles County,” she said, adding that cost of living and poverty is often highest in the state’s coastal counties. “When you factor that in we struggle.”

    Silicon Valley residents in particular are leaving in droves – more so than any other part of the state. Nearby San Mateo County which is home to Facebook came in Second, while Los Angeles County came in third.

    “They’re looking for affordability and not finding it in Santa Clara County,” said Danielle Hale, chief economist for realtor.com.

    It’s not just housing prices driving the exodus, of course. Punitive taxes – more than twice as much as some other states, are eating away at disposable income. Nearby Arizona’s income tax rate is 4.54% vs. California’s 9.3%, while the new tax bill may accelerate the exodus.

    As Michael Snyder of the Economic Collapse Blog pointed out in May…

    Reasons for the mass exodus include rising crime, the worst traffic in the western world, a growing homelessness epidemic, wildfires, earthquakes and crazy politicians that do some of the stupidest things imaginable.  But for most families, the decision to leave California comes down to one basic factor…

    Money.

    Mass Exodus

    As you may or may not be aware, we’ve mentioned the flood of various types of Californians fleeing the state for various reasons; be it wealthy families who want to keep more of their income safe from the tax man, or poor residents leaving the Golden State because they are being crushed by the high cost of living. 

    To that end, the Orange County Register notes a significant outmigration of people in their child-raising years – as the largest group leaving the state, some 28%, are those aged 35 to 44. 

    According to IRS data from 2015-2016, the latest available, roughly half of those leaving the state make less than $50,000 per year, while roughly 25% of those leaving make over $100,000. 

    What did the OC register conclude?

    Thanks to unaffordable housing, California’s moderate wage earners are going to have to leave the state, while only the wealthy and the impoverished residents will remain. 

    But the big enchilada in California — by far the largest source of distortion in living costs — is housing. Over 90 percent of the difference in costs between California’s coastal metropolises and the country derives from housing. Coastal California is affordable for roughly 15 percent of residents, down from 30 percent in 2000 and 30 percent in the interior, from nearly 60 percent in 2000. In the country as a whole, affordability hovers at roughly 60 percent.

    …

    Over time these factors — along with prospects of reduced immigration — will impact severely the state’s future. California is already seeing its population aged 6 to 17 decline. This reflects a continued drop in fertility in comparison to less regulated, and less costly, states such as Utah, Texas and Tennessee. These areas are generally those experiencing the biggest surge in millennial populations. –OC Register

    And according to ULI, 74% of California millennials are considering an exodus. 

    Where to? 

    As we noted in June, these are the top 10 California counties that people are leaving, and where they’re headed (via the Mercury News): 

    1. Santa Clara County

    Out of state destinations: Arizona, Nevada, Texas and Idaho

    In state destinations: Alameda, Sacramento, San Joaquin, Santa Cruz and Placer counties

    2. San Mateo County

    Out of state destinations: Arizona, Nevada, Texas and Washington

    In state destinations: Alameda, Contra Costa, Santa Clara, Sacramento, and San Francisco counties

    3. Los Angeles County

    Out of state destinations: Nevada, Arizona, and Idaho

    In state destinations: San Bernardino, Riverside, Ventura and Kern counties

    4. Napa County

    Out of state destinations: Arizona, Idaho, Nevada, Florida and Oregon

    In state destinations: Solano, Sonoma, Sacramento, Lake and El Dorado counties

    5. Monterey County

    Out of state destinations: Arizona, Nevada, and Idaho

    In state destinations: San Luis Obispo, Fresno, Santa Cruz, Sacramento and San Diego counties

    6. Alameda County

    Out of state destinations: Arizona, Nevada, Idaho, and Hawaii.

    In state destinations: Contra Costa, San Joaquin, Sacramento, Placer, and El Dorado counties

    7. Marin County

    Out of state destinations: Nevada, Arizona, Oregon and Idaho.

    In state destinations: Sonoma, Contra Costa, Solano and San Francisco counties

    8. Orange County

    Out of state destinations: Arizona, Nevada and Idaho

    In state destinations: Riverside, Los Angeles, San Bernardino, San Diego and San Luis Obispo

    9. Santa Barbara County

    Out of state destinations: Arizona, Nevada and Idaho.

    In state destinations: San Luis Obispo, Ventura, Los Angeles, Riverside and Kern counties

    10. San Diego County

    Out of state destinations: Arizona and Nevada

    In state destinations: Riverside, San Bernardino, Imperial, Orange County and Los Angeles

  • Warren Buffett Explains Bubbles: But He Doesn't Know We Are In One

    Authored by Mike Shedlock via MishTalk,

    Buffet explains bubbles: “People see neighbors ‘dumber than they are’ getting rich.”

    Warren Buffett explains Why Bubbles Happen

    Buffett was asked by CNBC’s Andrew Ross Sorkin if he is worried another crisis will happen again.

    “Well there will be one sometime,” Buffett said in an interview for CNBC’s “Crisis on Wall Street: The Week That Shook the World” documentary. The documentary airs Wednesday night at 10 p.m. ET/PT.

    “People start being interested in something because it’s going up, not because they understand it or anything else. But the guy next door, who they know is dumber than they are, is getting rich and they aren’t,” he said.

    “And their spouse is saying can’t you figure it out, too? It is so contagious. So that’s a permanent part of the system.”

    That last paragraph perfectly explains Bitcoin. Most of those investing in cryptos have little idea how they work, or what they are even buying.

    Buffet made no mention of the corporate bond bubble, the equities bubble, or even the crypto bubble. He does not see any bubbles now, at least that he mentioned.

    Symptom or Cause?

    Buffett confuses a symptom (rampant speculation) with the true cause

    • The Fed (central banks in general), keep interest rates too low, too long

    • Fractional reserve lending

    • Moral hazards like bank bailouts

    • Poor fiscal policies and massive government debt

    In short, there is no free market in anything and thus no valid price discovery. There would always be speculation, but Fed policies and fractional reserve lending are the root cause of bubbles.

  • Google Engineers Quit After Secretive China Project Links Phone Number To Searches

    A prototype of Google’s censored search engine for China links users’ searches to their personal phone numbers, “thus making it easier for the Chinese government to monitor people’s queries,” reports The Intercept. 

    Photo: Alex Castro / The Verge

    The search engine, codenamed Dragonfly, revolves around the Android platform and is designed to remove content deemed by government officials to be sensitive or offensive – such as information about protests, free speech, political dissidents, democracy and human rights violations. 

    Sources familiar with the project said that prototypes of the search engine linked the search app on a user’s Android smartphone with their phone number. This means individual people’s searches could be easily tracked – and any user seeking out information banned by the government could potentially be at risk of interrogation or detention if security agencies were to obtain the search records from Google.

    …

    the search platform also appeared to have been tailored to replace weather and air pollution data with information provided directly by an unnamed source in Beijing. The Chinese government has a record of manipulating details about pollution in the country’s cities. One Google source said the company had built a system, integrated as part of Dragonfly, that was “essentially hardcoded to force their [Chinese-provided] data.” –The Intercept

    “This is very problematic from a privacy point of view, because it would allow far more detailed tracking and profiling of people’s behavior,” says Human Rights Watch senior internet research Cynthia Wong. “Linking searches to a phone number would make it much harder for people to avoid the kind of overreaching government surveillance that is pervasive in China.”

    Human rights groups have slammed Dragonfly, insisting that it could result in Google “directly contributing to, or [becoming] complicit in, human rights violations.” 

    Google engineers agree – and they’ve been resigning over the ethical concerns with the project

    Approximately 1,400 Google employees have signed a letter circulating within the company, asking executives to explain exactly what the hell is going on. 

    “As a company and as individuals we have a responsibility to use this power to better the world, not to support social control, violence, and oppression,” the letter reads. “What is clear is that Ethical Principles on paper are not enough to ensure ethical decision making. We need transparency, oversight, and accountability mechanisms sufficient to allow informed ethical choice and deliberation across the company.” 

    And as The Intercept noted on Thursday, senior Google research scientist Jack Poulson quit over the project, saying that the project violates the company’s artificial intelligence principles, which state that Google won’t create technologies “whose purpose contravenes widely accepted principles of international law and human rights.”

    In early August, Poulson raised concerns with his managers at Google after The Intercept revealed that the internet giant was secretly developing a Chinese search app for Android devices. The search system, code-named Dragonfly, was designed to remove content that China’s authoritarian government views as sensitive, such as information about political dissidents, free speech, democracy, human rights, and peaceful protest.

    After entering into discussions with his bosses, Poulson decided in mid-August that he could no longer work for Google. He tendered his resignation and his last day at the company was August  31. –The Intercept

    “I’m offended that no weight has been given to the human rights community having a consensus,” said Poulson. “If you have coalition letter from 14 human rights organizations, and that can’t even make it into the discussions on the ethics behind a decision, I’d rather stand with the human rights organizations in this dispute.”

    And Poulson isn’t the only one… six other employees have reportedly quit over Dragonfly, as reported by BuzzFeed News. 

    While current employees declined to provide the list itself or to specify most of the names on it, three sources familiar with the matter confirmed the existence of the list, which is made up largely of software engineers whose experience at Google ranges between one and 11 years. Google declined to comment on the list.

    …

    The revelation of Dragonfly provoked an immediate backlash within the company’s rank and file, who have high expectations for transparency from executives because of Google’s stated corporate values. One employee who’d been asked to work on the project decided to quit, another transferred teams, and internal forums were flooded with thousands of posts, comments, and emails debating the ethics of the project. –BuzzFeed

    Interestingly, sometime between late April and early May, Google dropped their “Don’t be evil” motto of 17 years. Maybe Turkish television has it right?

  • China To Take Over Israel's Largest Port, Could Threaten US Naval Operations

    A top Israeli military and energy official has questioned Israel and China’s growing economic ties just as a Chinese company is set to begin operating Haifa Port as part of a major 25-year contract previously struck in 2015.

    “When China acquires ports,” Israeli Brigadier General Shaul Horev began in an interview this week with national news source, Arutz Sheva, “it does so under the guise of maintaining a trade route from the Indian Ocean via the Suez Canal to Europe, such as the port of Piraeus in Greece. Does an economic horizon like this have a security impact?” 

    Gen. Horev, who has also served as navy chief of staff and chairman of the Atomic Energy Commission, continued to sound the alarm over a Chinese takeover, “We are not weighing that possibility sufficiently. One of the senior American figures at the conference raised the question of whether the U.S. Sixth Fleet can see Haifa as a home port. In light of the Chinese takeover, the question is no longer on the agenda.”

    He is calling for an Israeli security mechanism that that will review and scrutinize Chinese investments in Israel and the Mediterranean to ensure they don’t harm the security interests of Israel or its partners, like the United States. 

    Chinese military ship at Haifa port in 2012.

    The Shanghai International Port Group (SIPG) will manage Israel’s largest port at Haifa as part of a contract to be inagurated in 2021, which will run for 25 years. Meanwhile a separate Chinese firm was recently awarded a contract to construct a new port in the southern Israeli city of Ashdod.

    According to various reports China has been spending roughly $150bn a year in the countries involved in its massive Belt and Road Initiative (BRI) which seeks to link Asia, Europe, and Africa in a vast Chinese-underwritten free trade infrastructure. Mediterranean outposts like Haifa are a key link in this corridor, a corridor which China hopes will be fully established as a “21st century Silk Road” by 2049. 

    But as we’ve noted recently, major multi-billion dollar infrastructural projects in host counties could come at a cost, namely it could open the door to Chinese spying and expanding influence of its security services. 

    Representatives of China’s Shanghai International Port (Group) Co Ltd (SIPG) join hands with Israeli port authorites at a ceremony to sign a deal that empowers the Chinese company to run a new port in northern Israel for 25 years on May 29, 2015. Image source: Xinhua News

    The Israeli military official’s statements came after a major defense conference hosted in the city of Haifa last month, where the issue of Chinese economic expansion into Israel was discussed and debated.

    According to Israel’s Haaretz: 

    The Haifa conference was held in conjunction with the conservative Washington-based Hudson Institute. Several of the American participants were former senior Pentagon and navy personnel. The remarks of the senior figure Horev quoted were sharper than the polite tone he used. The Americans who were at the conference think Israel lost its mind when it gave the Chinese the keys to Haifa Port. Once China is in the picture, they said, the Israel Navy will not be able to count on maintaining the close relations it has had with the Sixth Fleet.

    Critical voices of Israel’s closer relations with China noted that such decisions as the Haifa port deal with the SIPG were made solely under the oversight of the Transportation Ministry and the Ports Authority, but reportedly had no involvement of the the National Security Council or Israel’s navy.  

    USS Iwo Jima docks in the Port of Haifa, via YNet News

    This is concerning, critics say, as President Trump has ratcheted up his rhetoric over China’s threat to American business and interests at home and overseas. 

    The US military for example, routinely conducts exercises with the Israeli Defense Forces (IDF), and docks ships and carriers at Israeli ports, including Haifa Port — soon to be operated by a Chinese company. 

    This is also worrisome considering China’s increased ties with Iran and refusal to abide by White House sanctions on Tehran and Trump’s demand that countries should stop importing Iran’s oil. 

    China had jumped at the opportunity to be a prime mover in Iran’s economy since international sanctions were lifted in January 2016 as part of the 2015 nuclear deal brokered by the United Kingdom, United States, France, Russia, China, and Germany, but which the Trump White House pulled the US out of last May. 

    Relations between China and Iran began to thaw from the moment Chinese President Xi Jinping took office in 2012, and by January 2016 – at the moment sanctions were lifted – Xi visited Tehran, meeting with Supreme Leader Ali Khamenei and President Hassan Rouhani – which marked the first time a Chinese president visited Iran in 14 years.

    Critics of the Chinese takeover of Haifa port say this will grow increasingly awkward for Tel Aviv, which has an official position that Iran seeks to wipe Israel off the map.

    Iran’s President Rouhani and Xi have since the Israel-China Haifa port deal signed agreements related to the Belt and Road. This included 17 multi-billion-dollar deals covering areas of energy, finance, communications, banking, culture, science, technology, and politics, with a further ten year road map of broader China-Iran cooperation. In total this could see trillions pumped into the Iranian economy over the coming decades while physically connecting China with Europe and Africa on an infrastructural level and in an expanding trade relationship.

    And this all brings back the original questions: if China is to play a crucial lifeline for Iran as it attempts to survive aggressive US sanctions, and if Israel is growing economically closer to China, won’t such an alignment be dangerous to Israel’s long term security and its tied-at-the-hip relations to Washington?

    Or perhaps trade and free markets will produce the opposite effect: soften tensions, turn nations away from war and toward pragmatism, and bring greater regional stability.  

  • Kerry Trashes Trump Amidst Iran Row: "8-Year Old Boy With The Insecurity Of A Teenage Girl"

    At the end of a week in which former Secretary of State John Kerry’s unauthorized meetings with top Iranian officials have taken center stage, and in which both President Trump and current Secretary of State Mike Pompeo have publicly thrashed Kerry’s “unheard of” and “illegal meetings” with Iran that “undercut” the White House, Kerry has gone on his own anti-Trump rant. 

    Appearing on HBO’s Real Time with Bill Maher Friday night, Kerry slammed the president as having “the maturity of an 8-year-old boy with the insecurity of a teenage girl” in remarks that are sure to continue the ongoing war of words. 

    Kerry has come under fire for discussing the Iran nuclear deal behind Trump’s back. 

    Of course, the usual ultra-liberal Bill Maher and his audience ate it up as Kerry is on a media tour selling his newly published memoir, Every Day is Extra, and Kerry will likely milk as much of the attention as he can from his spat with Trump. 

    “He’s the first president that I know of who spends more time reading his Twitter ‘likes’ than his briefing books or the constitution of the United States,” Kerry said on the HBO show.

    “He’s got the maturity of an 8-year-old boy with the insecurity of a teenage girl,” Kerry added to the laughter of the audience. 

    Previously in the week upon news of John Kerry’s Wednesday Hugh Hewitt Show radio interview in which he admitted meeting with Iranian Foreign Minister Javad Zarif “three or four times” since Donald Trump took office, President Trump slammed the “illegal meetings” as serving to “undercut” White House diplomatic dealings with Iran.

    Trump further hinted that Kerry violated the Logan Act by rhetorically asking whether Kerry is officially registered as a foreign agent.

    https://platform.twitter.com/widgets.js

    The president tweeted: John Kerry had illegal meetings with the very hostile Iranian Regime, which can only serve to undercut our great work to the detriment of the American people. He told them to wait out the Trump Administration! Was he registered under the Foreign Agents Registration Act? BAD!

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    When asked about the White House’s potential threats of legal inquiry into the meetings, Kerry dismissed: “There’s nothing unusual about it. The conversation he really ought to be worrying about is Paul Manafort with Mueller.”

    “Unfortunately, we have a president, literally, for whom the truth, the whole truth and nothing but the truth is three different things, and you don’t even know what they are,” Kerry added.

    We can only imagine how Trump is going to respond, whether on Twitter, or perhaps by announcing a legal inquiry over Kerry possibly breaking the Logan Act and failing to register as a foreign agent, as Trump’s Thursday evening tweet suggested. 

  • Is Trump About To Fire "Moderate Dog" Mattis?

    At long last, amateur political strategists can finally add Defense Secretary James Mattis’ name to the growing list of Trump administration officials who are expected to leave – or rather, be pushed out – after the midterms.

    At last count, that list already included John Kelly, Jeff Sessions and Wilbur Ross. But according to the New York Times and Politico, Trump’s relationship with his purported one-time favorite has been strained, perhaps beyond repair, thanks to Mattis’ continued defiance of administration policies like the ban on transgender service members, torture for terrorist detainees and the continued importance of NATO.

    Mattis

    Politico started the conversation earlier this week when they off-handedly mentioned in a story about – of all things – Sessions’ long-rumored dismissal that Mattis was also on his way out.

    The problem for the White House extends beyond filling the top job at the Justice Department. Trump has for months been mulling the prospect of replacing Defense Secretary Jim Mattis, who is now expected to be dismissed or to resign after the midterm elections, too. Once enamored of the retired Marine general and his nickname, “Mad Dog,” the president bragged to donors, “The guy never loses a battle, never loses.” But Trump has slowly come to realize that Mattis’ political views are more moderate than his sobriquet suggests, and the president has taken to referring to him behind closed doors as “Moderate Dog.”

    The White House’s short-list of prospective replacements for Mattis includes two Republican senators who have signaled they aren’t interested in the job, Tom Cotton of Arkansas and Graham, both of whom are up for re-election in 2020, according to people familiar with the matter. And Cotton has already announced his campaign for reelection.

    And the New York Times kept the rumor mill churning with a story by Pentagon correspondent Helen Cooper, who recounted how the relationship between Mattis and Trump has reportedly soured over the past year. Where once Mattis and Trump would huddle in the residence and talk national security policy over a couple of hamburgers, the two men barely speak, as Trump has reportedly largely tuned out his national security staff since the beginning of his second year in office as he’s gained confidence in his own judgment.

    But the burger dinners have stopped. Interviews with more than a dozen White House, congressional and current and former Defense Department officials over the past six weeks paint a portrait of a president who has soured on his defense secretary, weary of unfavorable comparisons to Mr. Mattis as the adult in the room, and increasingly concerned that he is a Democrat at heart.

    Nearly all of the officials, as well as confidants of Mr. Mattis, spoke on condition of anonymity to discuss the internal tensions — in some cases, out of fear of losing their jobs.

    In the second year of his presidency, Mr. Trump has largely tuned out his national security aides as he feels more confident as commander in chief, the officials said. Facing what is likely to be a heated re-election fight once the 2018 midterms are over, aides said Mr. Trump was pondering whether he wanted someone running the Pentagon who would be more vocally supportive than Mr. Mattis, who is vehemently protective of the American military against perceptions it could be used for political purposes.

    White House officials said Mr. Mattis had balked at a number of Mr. Trump’s requests. That included initially slow-walking the president’s order to ban transgender troops  from the military and refusing a White House demand to stop family members from accompanying troops deploying to South Korea. The Pentagon worried that doing so could have been seen by North Korea as a precursor to war.

    Of course, quotes from Bob Woodward’s book “Fear” that were attributed to Mattis – particularly allegations that Mattis once complained that Trump had the aptitude of a fifth grader while lamenting Trump’s purported inability to grasp the gravity of national security policy – haven’t helped matters, according to the Times. Meanwhile, suspicions that the author of the anonymous NYT op-ed came from within the administration’s national security camp have only aggravated the situation.

    But then again, this wouldn’t be the first time the mainstream media has published a story claiming the imminent departure of a senior administration figure only for said official to obstinately remain in their position past their expected expiration date. According to the NYT, the appointment of Deputy National Security Advisor Mira Ricardel is one sign that the administration is moving to oust Mattis, given his reportedly long-standing bad blood with Ricardel. But then again, how many members of Trump’s inner circle can honestly say they like each other on a personal – or even a professional – level?

    The arrival at the White House earlier this year of Mira Ricardel, a deputy national security adviser with a history of bad blood with Mr. Mattis, has coincided with new assertions from the West Wing that the defense secretary may be asked to leave after the midterms.

    Furthermore, even if he isn’t pushed out, Mattis might opt to leave anyway, since he’s reportedly growing tired of constantly pushing back against his boss’s impulses.

    Mr. Mattis himself is becoming weary, some aides said, of the amount of time spent pushing back against what Defense Department officials think are capricious whims of an erratic president.

    The defense secretary has been careful to not criticize Mr. Trump outright. Pentagon officials said Mr. Mattis had bent over backward to appear loyal, only to be contradicted by positions the president later staked out. How much longer Mr. Mattis can continue to play the loyal Marine has become an open question in the Pentagon’s E Ring, home to the Defense Department’s top officials.

    Then, of course, there’s the issue of how the market might react to Mattis’ departure. Would investors mourn the loss of one of the fabled “adults in the room” by dumping stocks?

    The fate of Mr. Mattis is important because he is widely viewed — by foreign allies and adversaries but also by the traditional national security establishment in the United States — as the cabinet official standing between a mercurial president and global tumult.

    “Secretary Mattis is probably one of the most qualified individuals to hold that job,” Senator Jack Reed of Rhode Island, the top Democrat on the Senate Armed Services Committee, said in an interview. His departure from the Pentagon, Mr. Reed said, “would, first of all, create a disruption in an area where there has been competence and continuity.”

    At this point, it’s certainly possible that we may never find out. Because if Democrats gain even the slightest margin in the Senate, they would have enough votes to sink future Trump nominees – effectively leaving Trump stuck with his cabinet. However, if Republicans successfully fend off the much-hyped blue wave, Trump would have some more leeway to do another round of house cleaning.

    Then again, Trump’s often-tempestuous relationships with members of his inner circle have been so widely documented, it’s virtually impossible to say whether the relationship between the two men might soon recover. Which is why it’s somewhat surprising that the NYT is still running stories like this one, given that nowhere in the text does it say that Mattis’s departure is imminent.

    But of course, the “Crazytown” narrative isn’t going to fuel itself…

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