Dec 21

Today’s News 21st December 2016

  • MTV Removes Racist ‘Hey Fellow White Guy’s Video’; But the Internet Remembers

    I can go a lot of ways with this material. I could trigger many of you to breathe fire over the racist MTV video that mocked and demonized white males, but what’s the point? These people are irrelevant and ineffective. They’re losing the culture wars, targeting the largest group of people (white males) in the country in a feeble attempt to make them feel like shit, and the being mocked to death for it. In this case, following the release of a video which the cucks at MTV figured would be well received, they were roundly humiliated for their lameness and outward hatred for white men — forcing them to remove the video from their infantile channel.

    Remember the days when MTV only played music videos? Those were the good days.

    Now they want to delve into social engineering, but their pedigrees aren’t very good and their cognitive thinking is weak– which is why they lose.

    Tucker Carlson broached the subject this evening, talking about how wrong it was to label any race as bad, etc, etc. All of that is a secondary issue here when discussing the failed agitprop of the left. Bear in mind, this is a party that has shed over 900 legislative seats since 2010 and holds just 18 governorships and no meaningful leadership in both the house and senate.

    The left is failing, worldwide, because they’re weak, ineffective, and intellectually lazy. We can only hope for more MTV videos of this sort, in order to expedite the pushback against establishment shills.

     

     

    Content originally generated at iBankCoin.com

  • 5 Arrested After Egyptian Police Bust Staged Photo Shoot Of "Wounded Aleppo Children"

    Readers who have been following the crisis in Aleppo have seen media reports of videos and photos allegedly originating from innocent children victims, pleading against the advance of the Assad forces. And while there have been various accusations that these clips, like the infamous “chemical attack” YouTube clip from 2013, were staged, such reports were promptly slammed by the mainstream media as “fake news” and roundly ignored. However, if one ever needed a reason to be skeptical of claims, photographs, and/or videos coming out of the region, and the MSM’s appeals to readers emotions based on fabricated facts, Egyptian authorities have just provided it.

    Egyptian police arrested five people in Port Said, Egypt for making staged “wounded children” photos, which they were planning to use to misrepresent on social media as photos of destruction and injured people in Syria’s Aleppo, the Egyptian Interior Ministry said on Monday. The group also made fake videos that purport to show the wreckage of air strikes in Aleppo.

    The shooting team, which included the photographer’s assistants and parents of the children, was detained in the Egypt’s province of Port Said,” the Ministry said on Facebook.

    According to the Ministry, the police witnessed the shooting process, which was taking place near the vestiges of a building destroyed as illegal under the decision of the local authorities. A girl standing in a white dress covered in “blood” that later proved to be paint, drew attention of a police officer driving by. The girl held a teddy bear covered in the same “blood” and had her arm “bandaged”.

    The Facebook statement said the videographer, his assistants, and the parents of two children who appear in the footage were detained after a trail led police to them at a building site awaiting demolition. The five have reportedly admitted they were planning to distribute their footage on social media, which was supposed to show an eight-year-old girl in a white dress and bandages, covered in red stains while holding a teddy bear.

    “A 12-year-old boy is also interviewed about what life is like under intensive Russian-backed Syrian government air strikes,” reported
    The Independent

    The photographer also admitted that he was going to publish these photos on social media as pictures of Aleppo.

    To be sure, this one instance does not mean all footage coming out of the region is fake. It also does not mean every claim made by Russian, Syrian, and Iranian officials about the conflict is true in comparison. Still, the fact remains that journalists aren’t going to rebel-held areas for fear of execution. Instead, they rely on the Syrian Observatory for Human Rights, which is run by one anti-Assad dissident in Coventry, England. So-called Syrian activists and the shady group known as the White Helmets make up the rest of the reports in Syria, even though they both have also been largely criticized and discredited.

    Also troubling is the willingness of the conventional media to accept most of these reports at face value without ever questioning their authenticity.

    The fact the mass media disproportionately focuses on Aleppo while turning a blind eye to the horrendous crimes being committed in Yemen courtesy of the United States, the United Kingdom, and an inexperienced Saudi-led coalition indicates the media’s concerns for human rights in Syria are disingenuous, as the AntiMedia correctly notes.

  • Brandon Smith Warns The System Is Crashing: "Prepare For Bank Confiscations, Shortages, Insurgency"

    Submitted by Mac Slavo via SHTFPlan.com,

    us-army-riot

    Military, police and homeland security units have all long been preparing for riots and widespread civil unrest during a prolonged collapse.

    What is the anatomy of a breakdown?

    The past eight years have been extremely difficult for the real economy. Central bank intervention has propped up the stock market at the expense of the main street economy, at the expense of middle class security, at the expense of jobs.

    And everyone knows that game can’t continue. The question is how it will play out, and how long the game will be.

    The Federal Reserve finally announced rate hikes – planning one incremental increase after another throughout the coming Trump Administration.

    Close to a decade of stimulus, quantitative easing, zero interest rates and easy money for those on top is coming to an end. For all those who have borrowed, it means that the burden of debt is coming due – and the biggest borrower of all, the U.S. government, will face huge new costs in the form of increased interest on $14 trillion in debt:

    Rising interest rates help savers and hurt borrowers. As the biggest borrower on the planet, the U.S. government will soon begin paying more to investors holding roughly $14 trillion in Treasury debt.  “As debt continues to grow and interest rates return toward more normal levels, interest spending is slated to be the fastest growing part of the budget.” (source)

    This crunch could impact state, businesses, municipalities and individual households in a big way as well. Meanwhile, the presidency of Donald Trump has changed the surface of the political landscape entirely, and no one is quite sure what will happen – though plenty on the left have been casting Trump as a neo-Hitlerian figure.

    Brandon Smith, who runs Alt-Market.com, may not know the future either, but he has developed a very strong track record for predicting the “surprise” victories for Brexit in the UK, and for Trump in the U.S.

    But he didn’t just predict their win at the polls, but that these new signposts of the conservative, populist uprising would be used by the elite – who allowed these electoral changes – in order to scapegoat the coming financial collapse.

    As things continue to play out, he has been so far proven stunningly accurate, and should not be readily ignored.

    Will Trump’s presidency be better understood in hindsight as what has already been dubbed: ‘Operation Shift Blame’?

    Here’s what Brandon Smith said a couple of weeks ago in a focused interview with the X22 Report:

    The Elite Already Have The Collapse Planned, ‘Operation Shift Blame’ Is A Go: Brandon Smith

    As Brandon Smith argues in the interview, the Trump presidency, if he is right, is all about having a scapegoat for the crash of the economy during his watch.

    If the populists, nationalists, and conservatives are blamed, then their views are discredited, and momentum to control the aftermath – and restore order to the system – falls back to the establishment that has, until now, been the target of growing disdain by a population over-run by the status quo and its series of disasters.

    But with Trump – undeniably a spectacle to all Americans – the elite have a narrative that will keep people fighting among themselves, divided by race, gender, politics and ideology.

    Though President Obama and the circles in Washington keep insisting the economy is recovering, improving and providing, nothing could be further from the truth.

    The economy has been “kept on life support” since 2008, when there should have been a bigger crash… but that, too, will come due. They’ve been artificially propping up the system with stimulus measures, and simply stopping that intervention will usher in a collapse. According to Brandon Smith:

    “They’re setting it up to where a crash occurs during a Trump presidency, and Trump and conservatives are blamed in the process.”

    It won’t happen overnight. The economic collapse is a “process, not an event” – one that takes place over the course of several years, even a decade. According to Brandon Smith, 2017 will likely see a major acceleration of that collapse.

    As the fiscal situation becomes more and more untenable, and the government more desperate to pay the bills, we will likely see government pensions confiscated, promises benefits reduced or delayed, and other measures to pay debts.

    On the pretext of sustaining the financial stability of the system, banks may end up “locking out” accounts, seizing funds and account holders and investors could face severe haircuts.

    America may well see credit freezes, shortages on the shelves, deliveries could stop, and people could lose their minds as ordinary life is interrupted. As Smith argues,

    “Removing stimulus and ‘turning off the spigot’ will initiate collapse on its own…. and end up being worse than the Great Depression

     

    Smith: “Whatever’s going to happen is going to happen between now and early 2018, because that’s their window of time to create enough chaos and desperation in order to convince people, to rationalize the idea of switching to a global currency system. After that, I would expect there would be a process of acclimating the public to this new system, and I would expect that a lot of countries would be in third world conditions for a while after that.”

    A combination of hyperinflation, and deflationary pressures could further wreck the economy, and even decimate the value of the dollar. Further consequences could spiral out of control from there.

    Already, there are plans on the books for government to use its nearly-unlimited powers to seize private assets at a personal or institutional level in order to meet the needs, perceived or real, of society. Numerous executive orders give fiat authority to the executive branch to wield dictatorial control and violate private property and personal assets – not the least of which will be private holdings in gold and silver.

    The elites have long suggested that the rise of a truly global currency will replace the crash of the dollar system, and the severe economic decline of the United States.  This has been in the works for a long, long time.

    The system is going to crash regardless… so, arguably, this is how they are planning for it to play out.

    The only question left, is: how will you prepare?

    For those who want to survive, and be as unscathed as possible, that means building up a supply of food, water, guns, gold, alternative heating and power, medicine, barter items and other essential supplies. It also means preparing psychologically to deal with the loss of income, the breakdown of groceries, supplies and easily-available goods; and it means to distancing oneself from the most vulnerable – and potentially unstable – segments of society.

    In particular, it may be wise to leave major urban centers, or have a viable exit strategy to a place that is both rural and self-sustaining. Of course, these are major preparations that have to be made according to the individual needs of each family.

    However, the time is past to pretend that these things are not happening; it is time to make some very serious plans for what you will do during what happens next.

    Just look to Venezuela or India for a glimpse of how raw things can become once the fiat paper currency ceases to flow freely, or provide for the life that most have become accustomed to living.

    As Brandon Smith argues:

    “I think the plan is to kill the dollar’s world reserve status, and that will severely limit the dollar’s value on the global market. We’ll still have our green dollars, with the presidents, but the value will no longer be controlled by the Federal Reserve… I think the Federal Reserve will step aside for the IMF, and the IMF will become the new global mediator of currency values.”

     

    The United States will be hit the hardest, with the reliance upon the dollar’s reserve currency status…. “and an extreme shift from first world down to third world living conditions. It will be a disaster, there will be people who will die during this process, [just as people did] during the Great Depression. It’s going to be a disaster.”

    Because people in the general public aren’t prepared even to sustain a few days without power, food and water, people will be pushed into extremes – desperate, rioting, looting, violence, and other destructive behaviors that are hallmarks of a breakdown.

    In short, the United States will see a debased situation that is unprecedented in its more than 200 year history. Even the Great Depression could be eclipsed by the extreme events to come – but again, it won’t happen overnight.

    “Some will react violently, but I think the elites have staged the situation in such a way that a lot of people will be confused as to who to blame. And that’s the great advantage that they have, is that they’ve staged the situation to where, especially people on the left, they have an automatically built-in bias to blame either Donald Trump, or Republicans, or conservatives in general. On the right, I think you’re going to have a lot of conservatives blaming the left as [for] sabotaging Trump and ruining his chances of fixing things.”

     

    “You’re also going to have all kinds of different, I think, events in between – black swan events, terrorist attacks – that really keep people confused and looking every other direction, except at the global bankers. That’s what they want… they don’t want anyone focused on them. They’re going to create as much gas as possible during all this to keep people at each other’s throats. They’re going to be sitting on the Riviera… and watching.”

     

    “Because we are getting to a point in history where the globalists are more exposed than ever before – their schemes, who they are, the organizations they’ve built. If the general public becomes aware of who they are, and the fact that they’re behind this crash, it would be all over for them. You’re talking torches and pitchforks – so they need to keep mass confusion, and keep everyone focused on each other, and not them, or the entire apparatus falls apart.”

     

    “If we can get enough people aware of, and focused on the bankers first… then we might be able to, at least, remove them from the picture and rebuild in a proper manner. What this is really all about is who is going to rebuild. The system is going to crash regardless, but we still can determine who rebuilds afterwards. If it’s them rebuilding, then we’re kind of done for, because they’re going to use the crisis as a rationale for centralizing everything into their one world system. If we can remove them from the picture, then we might have the chance to rebuild a freer system.”

    If things get bad enough, there could be an actual civil war again in America – in fact, it may become unavoidable.

    People are at extremes right now, and the divisions between the left and right are, in many respects, deeper than they have ever been.

    Those who are addicted to government assistance are in for a rude awakening, and those who work for a living face the very real possibility of seeing the American Dream crushed once and for all, in an era from which there will be no turning back.

    But the pages of history have not been written, and if they have, they still stand to be edited by real world events. If people get their heads wrapped around what is really happening, perhaps the true villains can be addressed, and power can be kept out of the hands in whom it is most dangerous.

    Perhaps, there is a chance that liberty could one day be restored, but first, people must prepare to endure a long, hard fight.

  • 71% Of Americans Don't Believe Russia Was Responsible For Election-Related Hacks

    The mainstream media has orchestrating a month-long propaganda blitz to convince the American people that “Russian hackers,” led by Vladimir Putin, stole the election from Hillary Clinton.  They endlessly quoted “anonymous sources” from inside the CIA, while never actually presenting a single shred of tangible evidence, to advance their narrative.

    But, in an epic illustration of just how little credibility the mainstream media has, despite their best efforts, over 70% of the American public still doesn’t think Russia influenced the 2016 election. Per a new poll conducted by Morning Consult, only 29% of Americans feel they “know with near certainty that Russia is responsible” for the hacking of DNC and Podesta emails…of course, we would question how anyone could possibly know with “near certainty” given that no actual evidence has been presented but we’ll take their word for it.

    Russia Influence

     

    Not surprisingly, results were largely split along party lines with only 14% of Republicans attributing the election hacks to Russia versus 50% of Democrats. 

    Meanwhile, “Democrats in Congress” won the prize for the “least trusted” group in Washington D.C. while the CIA, NSA and FBI are still viewed as credible organizations by nearly two-thirds of Americans…so much for Snowden’s efforts to reveal the massive illegal spy operations conducted by the NSA on pretty much every American citizen on a daily basis…no one seems to care much anymore.

    Morning Consult Poll

     

    So, does this story now qualify as “fake news” given that the mainstream media failed to present a single page of tangible evidence and 71% of Americans don’t believe it?

  • US Population Grows At Slowest Pace Since The Great Depression; Residents Flee Illinois Again

    According to data released by the US Census, in 2016 the U.S. population grew at the lowest rate since the Great Depression, while the state of New York shrank for the first time in a decade. The biggest loser, again, was Illinois which shrank for a third consecutive year, losing 38,000 people, mostly from the Chicago area.

    The overall slowdown was due to uptick in deaths, a slowdown in births and a fractional drop in immigration, all of which damped American population growth for the year ended July 1. The 0.7% increase, to 323.1 million, was the smallest on record since 1936-37, according to William Frey, a demographer at the Brookings Institution.

    New York State, whose loss of 1,900 people put its population at 19.7 million, is shrinking because residents are leaving for other states. It has an aging population that is retiring in warmer places such as Florida, or staying put and dying, as the WSJ put it. “As a state that has more people leaving than going [in], that is not a good thing,” said Jan Vink, a researcher at Cornell University’s program on applied demographics. “People claim it’s about the taxes, it’s about the weather. There are many reasons.”

    It’s not just New York which saw a modest exodus: the figures showed Americans continue to leave the North for Western states, with Utah, Nevada, Idaho and several others in that region topping the country in percentage growth.  About 593,000 people left the Northeast and Midwest to move to the South and West this year, slightly more than during the prior one-year period, as the retiring cohort gets bigger.

    However, the biggest state loser in population terms by a big margin was Illinois, which lost more residents in 2016 than any other state, losing 37,508 people, which puts its population at the lowest its been in at least a decade. This year marks the third consecutive year in which Illinois is among the few states to lose residents, putting its population at 12,801,539 people. Illinois had only the second-greatest decline rate in 2016, however, as even with the population drop it continues to be the fifth-most populous state. West Virginia had the greatest decline rate this year.

    Illinois’ population first began to drop in 2014, when the state lost 7,391 people. That number more than tripled in 2015, with a loss of 22,194 people, and further multiplied in 2016. The plunge is mainly a result of the large number of residents leaving the state in the past year — about 114,144 in all — which couldn’t be offset by new residents and births, according to census data measuring population from July 2015 to July 2016.

    Making matters worse for the state’s various semi-solvent pension plans which are dependent , by almost every metric Illinois’ population will continue to sharply decline in the coming years as more residents call it quits on the state they call home according to the Chicago Tribune. The Tribune last year surveyed dozens of former residents who had fled within the past five years, and all offered their own list of reasons for doing so. Common reasons included high taxes, the state budget stalemate, crime, the unemployment rate and the weather.

    Census data released last year suggested the root of the problem was the Chicago area, which in 2015 saw its first population decline since at least 1990, having lost 6,263 residents. A simple cause for that could be that, as reported earlier, Chicago’s surging murder rates are single-handedly driving up the overall national average, which in turn is forcing much of the local population to flee.

    In addition to Illinois and New York, a total of eight states saw population outflows this year, including West Virginia, Connecticut, Vermont, Wyoming and Mississippi.

    And then there are the winners, chief among which was Utah, the fastest-growing state this year with a 2% gain, added nearly 61,000 people to lift its population to 3.1 million. Gains in technology and other jobs have led to tighter labor markets, housing shortages and rising school enrollment, said Pamela Perlich, director of demographic research at the University of Utah’s Kem C. Gardner Policy Institute.

    “There is a new economy being created out of the carnage of the Great Recession, and in a lot of those new growth areas, Utah seems to be at the forefront,” Ms. Perlich said. “You roll back 40 years ago, and we were really pretty isolated and much more parochial here.”

    Another big gainer was Texas, whose addition of about 433,000 people accounted for 19% of the country’s growth. The state, with 27.9 million people, grew from a relatively strong flow of immigrants and people relocating there from other states.

    North Dakota, a fast grower in recent years, saw its population barely edge up this year as the state struggles with a slowdown in its oil industry. Among factors weighing on overall population growth is that the number of babies women are having—which plummeted in the 2007-09 recession—hasn’t picked up as much as demographers had expected during the recovery. The mortality rate for Americans is also creeping up, in part due to stalled progress in preventing people from dying of heart disease.

    The Census Bureau revised downward its estimates of immigration for each year since 2010 by an average of 10%. For this year, it estimated that 999,000 immigrants arrived, down 4% from the prior year.

  • Why Trump's "Border Tax Proposal" Is The "Most Important Thing Nobody Is Talking About"

    While the market, and various pundits and economists have been mostly focused on the still to be disclosed details of Trump’s infrastructure spending aspects of his fiscal plan, “one of the least talked about but possibly most important tax shifts in the history of the United States” is, according to DB, House Speaker Paul Ryan’s and President-elect Trump’s “border tax adjustment” proposal.

    This is part of the “Better Way” reform package and also figures prominently in the writings of senior Trump administration officials.

    What is it?

    Put simply, the proposal would tax US imports at the corporate income tax rate, while exempting income earned from exports from any taxation. The reform would closely mirror tax border adjustments in economies with consumption-based VAT tax systems. If enacted, the plan will likely be extremely bullish for the US dollar. What’s more, it would have a transformational impact on the US trade relationship with the rest of the world. Consider the below:

    • A “border tax adjustment” would, roughly speaking, be equivalent to a 15% one-off devaluation of the dollar. Imports would be 20% more expensive, because corporates would have to pay the new 20% corporate tax rate on their value. Exports would be roughly 12% “cheaper”, because for every $33 of earnings earned from $100 of exports (we use the 33% gross margin of the S&P), there would be a 12% tax cost ($33 earnings*35% current tax rate) that would no longer be imposed on corporates. Taking the average impact on the prices of exports and imports is equivalent to a 15% drop in the dollar.
    • A border tax adjustment would be very inflationary. The price of exports doesn’t affect the US consumption basket so would have no impact on CPI. However, the cost of imports would go up by 20%, which based on a simple relationship between import PPI and US inflation would be equivalent to a 5% rise in the CPI. Corporates may of course choose to absorb part of the rise in import costs in their profit margins. But either way, the order of magnitude is large.
    • A border tax adjustment would be very positive for the US trade balance. Similarly to the dollar calculations, a border tax adjustment would be equivalent to an across the board import tariff of 20% and an export subsidy of 12%. Keeping all else constant and applying standard trade elasticity impact parameters to an average of the two estimates results in a more than 2% drop in the trade deficit equivalent to more than 400bn USD, or equivalently, an almost complete closing of the US trade deficit.

    In other words, should the “border tax proposal” pass, it would not only send inflation soaring, while eliminating the US trade deficit – a long-time pet peeve of Trump  – it would also be the trade-equivalent of a 15% USD devaluation, even as it leads to an offsetting surge in the actual value of the dollar.

    To be sure, there are uncertainties related to all estimates above. First, there is a question mark on whether a border tax adjustment based on a territorial corporate tax system (as opposed to VAT) would be allowable under WTO rules. The question is highly complex, but senior Trump advisers have stated they would be willing to take the issue to the WTO.

    It is also not clear what types of goods the new tax would cover – the broader the coverage the bigger the impact and vice versa.

    Second, the impact on trade highlighted above should be considered an upper bound, as the post-crisis responsiveness of current account balances to relative price shifts has proven to be much lower.

    Still, it is hard to argue that such a fundamental shift in tax treatment of US exports and imports would not have a material impact on trade relations and flows with the rest of the world. More importantly, Saravelos argues, the second-order impact of “re-shoring” may be more material given that US corporate activity has been disadvantaged due to the current unfavorable tax treatment of offshore profits.

    * * *

    Taking all of the above into account, the academic literature is unambiguous in its conclusion that the dollar should rally strongly in the event a “border tax adjustment” is put in place. An appreciating dollar would be a natural response to an improving US trade balance and the competitiveness gains achieved by the shift in the relative prices of exports over imports. In extremis, the dollar would rally by 15% to fully offset the price changes caused by the tax. This analysis is partial however, with the knock-on consequences on the Fed, US corporate off-shoring and global trade relations likely making the impact even more material.

    Deutsche Bank concludes that combined with potential changes to the treatment of unrepatriated earnings, “the proposed changes to the US corporate tax code could be one of the most important shifts in US tax and international trade policy in a generation.”

    We wholeheartedly agree with DB’s assessment in this particular case.

  • Is India The Next Venezuela?

    Submitted by Jayant Bhandari via Acting-Man.com,

    India’s Currency Ban, Part VII

    This article continues right where Part VI left off (for earlier updates on the demonetization saga see Part-I, Part-II, Part-III, Part-IV, and Part-V).

    There is still huge support for Modi even among the poor.  A big carrot is dangled before them, which makes many stay numb to their current suffering.  During his election campaign in 2014, Modi promised to deposit more than Rs 1.5 million (~$22,000) in each poor person’s account once the government had seized all black money.

     

    Massive problems have been reported with the new bills. Some have been printed on defective paper and are simply falling apart. The inferior quality of the print job is generally often on the appalling side of deplorable. The new notes are counterfeited with great abandon, quite likely to a much greater extent than they ever were in the past. So much for Modi’s plan to stop counterfeiting.

    Photo credit: The Hindu

    How he arrived at this fantastic figure is anyone’s guess. But given India’s GDP of $1,718 per capita, Modi has promised to deposit 1,300% of annual GDP in individual bank accounts. The total amount would be larger than the entire GDP of the US. Evidently, this does not even remotely add up.

    So what is really motivating the anti-corruption feelings of so many Indians — including the salaried middle class —  simply seems to be a mixture of greed and envy. There have also been hints that India’s income tax might be repealed. This is very appealing to the salaried middle class.

    Banned bank notes must be deposited by 31st December 2016.  Modi supporters widely expect that the windfall he has promised them will be announced soon thereafter. Not only isn’t there going to be any  free stuff, but bank accounts are likely to stay frozen, because the Indian government is incapable of printing all the cash needed to re-liquefy the economy.

    On January 1st 2017,  when members of the salaried middle class start waking up to the reality that they have been scammed, Modi’s support should begin to crumble.  Anecdotal evidence indicates that not only the opposition, but even members of Modi’s own party are unhappy with the demonetization scheme. These politicians have been left holding bags of banned currency, on which they have had to take a cut of 20% to pay for the services of the mafia.

    They cannot oppose Modi openly, as that entails the risk that they might be seen as corrupt and unpatriotic. It seems likely that Modi will eventually lose his political support. But by then he may well have established himself independent of his party. He could easily be an autocrat in the making.

     

    Vegetable prices have declined by 25% to 50%. Electronic transactions fail even in big cities, as connections are often bad. How is this supposed to ever work in rural places, where electricity and internet connections might not even exist? One needs to be mindful of the fact that prices are not going down due to excess supply, but because poor people cannot buy anything. Are they going hungry?

    Photo via indianexpress.com

     

    Is India the Next Venezuela?

    India, the world’s largest democracy, is surrounded by banana republics as the accepted narrative has it: Pakistan, Bangladesh, Nepal, Sri Lanka, Myanmar, Thailand, and Afghanistan. The situation in the Middle East and in Africa is considered yet worse.

    There seems to be a lot to celebrate about India. Its democracy has been sustained over the 70 years following independence. The army has remained  fully under civilian control. Today India is also seen as an information technology juggernaut. It is claimed to be the fastest growing large economy. India is the next China, so the story goes.

    The reality is very different from the perception of those who only see India through the lens of the international media.  India has a population of 1.34 billion people with a GDP of $1,718 per capita. Almost 50% of India’s citizens have no access to toilets, electricity or running water.  48% of children under the age of five are stunted, a percentage greater than in any other major country in the world.

    Contrary to the perceptions created by the international media, if Africa were a country, it would actually look better than India with respect to these metrics. India has lower GDP per capita and a proportionately greater number of Indian children are exhibiting stunted growth.

    As a second step in trying to understand India, it makes sense to split the population in two parts: the 25% that have benefited — directly or indirectly — from the internet and cheap telephony over the past three decades, and the remaining 75%, whose lifestyle is comparable to a medieval existence, almost animal-like.

    For all intents and purposes, India is a banana republic, a wretched place of poverty and disease. The only difference between India and other well-recognized banana republics is that India has so far avoided overly negative headlines in the international media;  Indian lobbies in the US and the UK work very hard to make India look good. As noted above, this mainly serves to prop up the self-esteem of NRIs.

    It has become fashionable to compare India to China. This comparison seems extremely far-fetched. Chinese GDP per capita is more than five times higher, and is growing more than four-times faster than India’s in absolute terms. If India keeps growing at the recent high rate of 7.5% and China at a mere 6.3%,  it will take India more than 135 years to catch up with China’s economic output in absolute terms.

    People who have been concerned about the demonetization policy have repeatedly asked me if India is the next Venezuela. My response was “I wish it were.” On per capita basis, Venezuela’s GDP is more than seven times that of India. Venezuelans fight when they go hungry. Indians are too weak to even leave their homes. Indians should be fighting, particularly the poor, who have always got a very bad deal.

    When India becomes the next Venezuela, which hopefully won’t take longer than three decades, one would actually have cause to celebrate.

     

    Almost half of Indians have no choice but to defecate in the open. What looks like a simple problem has proved impossible for India’s government to solve. The government nevertheless wants to send probes to Mars and make India the first cashless economy. In due course, Modi will get swept away by India’s realities. The problem is that whoever succeeds him, will very likely be worse. A military general perhaps?

    Photo credit: Keystone / AP

     

    Millennia of human progress in terms of economic transactions have been wiped out  overnight. People have been forced to go back to barter.

     

    Demonetization Continues

    More than 90% of the banned banknotes have reportedly already been deposited in banks. This is widely hailed as a victory of the government. As Mumbai-based economist Mithun B. Dutta explained in a note, the reality is the exact opposite. He argues that demonetization would only have made sense if a large part of the banned currency had never made it into bank deposits.

    Up until recently,  the banned currency was selling for a 20% discount to its face value. Not only has this discount disappeared in recent days, but the remaining banned bills are now trading at premiums of up to 10%.

    The poorest people lack the connections to deposit their cash and get it back out. The queues outside bank branch offices have continued and the mood is increasingly desperate. Businesses are closing, with many too damaged financially to be able to ever restart again. Poor people are losing their jobs.

    Food prices are down by 25% to 50%, leaving farmers without the funds needed to support the next crop planting cycle. Shops remain empty, as discretionary spending is put on hold. Many businesses have suffered sharp declines in sales. Wheat sowing is said to be down sharply as well.

    Who cares when one has problems of one’s own? This half-dead old woman serves as an example for more than 75% of India’s population. She cannot even write her own name, but is expected to learn to use plastic cards. For Modi she does not count if she isn’t paying taxes and isn’t part of the formal economy; but it is Modi who will eventually be thrown out.

     

    Desperate poor people, whose pain is not reflected in any news or statistics.

    Photo credit: Praveen Kumar/HT

     

    Members of the salaried middle class, Modi’s biggest supporters, are slowly starting to face the pinch as well. When they went to their banks on  December 1, 2016 to collect part of their salaries, they had to rub shoulders with the poorest of the country, for whom they have deep-rooted disgust. And then they had to go back home empty-handed or with only part of the cash they had wanted to withdraw.

    They are still hoping that their bank accounts will be unfrozen after the demonetization deadline on December 31 passes. They will soon realize that  their accounts will stay frozen, as simple math shows there is no other possibility. Modi will have to make a new announcement on December 31 to keep his social engineering project on track with yet another patch-up job, and to keep people’s hopes up.

     

    There has been a significant surge in spontaneous outbreaks of violence across the country. Indian police are not sufficiently trained and lack the competence to keep a material increase in social unrest under control.

     

    Conclusion

    No one has explained yet how the currency demonetization policy will lead to less corruption. Most of the outstanding cash has already made it into bank accounts, but despite that, the queues at bank branch offices seem to be never-ending. It is the unbanked, the poorest people, who are most likely to have failed to deposit their currency and get their cash back out.

    The government clearly has the intention of keeping bank accounts frozen after the official deadline of 31st December 2016. The economy will remain stalled at an enormous human cost. Modi is losing his control over his own party. He has isolated himself in a cocoon, surrounded by yes-men; but the middle class, which has so far considered itself to occupy the moral high ground, is starting to experience cash-related problems as well now.

    At the same time, the political opposition is fragmented and weak. Modi probably cannot even imagine losing power, believing himself to be indispensable. If he sees his support dwindling, India could easily end up being pushed toward outright autocratic rule.

    To properly understand all the undercurrents, it is best to consider first principles. India is an extraordinarily irrational, tribal and superstitious place. Despite the country’s long association with Britain, which by now has lasted over 300 years, it has failed to adopt the concept of reason. India and its institutions as they exist today were constructed by the British. It was inevitable that they would crumble, as India lacks the will and human capabilities needed to maintain them.

    A society lacking in rationality cannot be expected to be able to differentiate between right and wrong. It cannot have respect for the individual, or develop moral instincts. Its people will be lacking in empathy and compassion, as demonstrated by the indifference of members of the middle class to the suffering of their desperately poor fellow citizens.

    When such people are given western education, it merely sits in their minds as yet another belief system. Evidently, they don’t even understand that an ethical society cannot possibly be compatible with a government reneging on the contract that is printed on its currency.

    Even poor people suffer in silence, or even worse, are fighting among themselves. They too lack the necessary understanding of moral principles to feel revulsion when they are mistreated. Instead of directing their anger at those responsible for their plight, they take out their frustrations on the nearest persons weaker than themselves.

    With the passage of time, Indian institutions are necessarily mutating to accommodate India’s irrational culture. Culture cannot be changed through education alone, and changing it takes a very long time. India is likely to disintegrate at some point, fragmenting into tribal units or several smaller countries. Institutional decay has been underway for the past 70 years, but with Modi as a catalyst, its pace is picking up. The story of many countries in South Asia, the Middle East, Africa and large parts of South America is quite similar.

    What should investors do? Ultimately India is likely to turn out to be a terrible investment destination. Indian savers should consider moving their wealth abroad. Indians are still permitted to transfer $250,000 per year, but eventually capital controls are bound to be instituted. Keeping in mind that Indian savers are already paying premiums of 30% or more to purchase US dollars or British pounds, there seems hardly a good reason for foreigners to send money to India.

     

  • Krugman: "To Join Trump Administration You Have To Be A White Nationalist, Conspiracy Theorist"

    Paul Krugman wants you to know that, in his view, the markets are misinterpreting "Trumponomics" and because he is far smarter than you, the markets, and pretty much anyone else, it's important to pay attention.

    Of course, this shouldn't be terribly surprising as Trump could literally announce that he found a cure for cancer and Krugman would immediately take to the New York Times to pen an op-ed defending malignancies, and how its eradication would mark the end of "hope" for mankind.

    In any event, Krugman posted a short article to his twitter account this afternoon warning that the markets' interpretation of "Trumponomics" is all wrong.  While the confused Keynsian would ordinarily praise aggressive infrastructure plans, like the one proposed by Trump, in this case he's willing to make an exception and notes that the plan looks more like a "privatization scheme" than an "actual plan to boost public investment."  And while Krugman has never before seen a budget deficit that he didn't criticize for being too small, Trump's "privatization scheme" combined with "tax cuts for the rich" suddenly has him extremely worried about federal debt balances. 

    Financial markets seem to have decided that the Siberian candidate will pursue strongly expansionary macroeconomic policy. Long-term interest rates have risen sharply; expected inflation is also up, although not as much.

     

    But are the markets getting this right? I suspect not: fiscal policy probably won’t be expansionary as expected (or maybe at all), and Trump’s economic team is looking like a gathering of goldbugs, who will if anything push for deflation.

     

    On the fiscal side, I’m still seeing people talking about a huge infrastructure push. But there’s no indication that Republicans in Congress are at all eager to get moving on this push; their priorities seem to be repealing Obamacare and tax cuts for the rich, perhaps especially the estate tax. And in any case what we know about that supposed infrastructure push is that it looks much more like a privatization scheme than an actual plan to boost public investment.

     

    So what we’re really looking at is a combination of tax cuts and spending cuts. Overall, this will surely increase budget deficits. But the tax cuts will go to the wealthy, who won’t spend much of their windfall, while the spending cuts will fall on the poor and struggling workers, who will be forced into sharp cutbacks in spending. The overall effect on demand is therefore likely to be negative, not positive.

    For proof of his view on "Trumponomics," Krugman provided the following tweet storm, for your reading pleasure, highlighting the "gathering of gold bugs" known as Trump's cabinet.  Apparently Mnuchin "hangs out" with John Paulson so he's guilty by association.  Meanwhile, Mulvaney had the audacity to imply that the Fed's 0% interest rate policy might result in a weak USD.  And Larry Kudlow, well everyone knows that he is under the perpetual illusion that we're still living in the 1970's.

     

    While Krugman blasts the Trump tax plan as a blatant gift to rich people he ignores that people of all tax brackets would get breaks under Trump's plan.  Trump Tax Plan:

    Trump Taxes

    Current 2016 Tax Brackets:

    2016 Taxes

    He also ignores the reduction in corporate taxes that will impact 1000's of small businesses around the country and the expectation that the new administration will slash regulations which is nothing more than a massive, conservative form of fiscal stimulus. But lets not allow facts to get in the way of a good narrative.

    Finally, Neeraj Agrawal wins the award for "most outstanding response" to Krugman's latest rant:

    And finally, not satisfied with his almost-insane allegations, Krugman played the race-card

  • Uber's Massive Cash Burn Problem: 2016 Loss Set To Hit A Record $3 Billion

    With a valuation of $68 billion as of December 2016 – more than GM and Twitter combined – Uber is, according to the WSJ’s Unicorn Database, the most valuable private company in the world.

    And yet, despite its eye-popping valuation courtesy of a growth curve which until recently was truly unprecedented (at least until the company’s sudden withdrawals from China), Uber has a big problem: an unprecedented cash burn, which if not getting worse with every passing quarter, is certainly not getting better.

    Back in August, Bloomberg reported that Uber’s first half loss was roughly $1.4 billion ($580MM in Q1 and well over $800MM in Q2) on just over $2 billion in revenue ($960MM in Q1 and $1.1BN in Q2): it was burning approximately $1.6 dollars in costs and overhead (mostly in the form of an ongoing attempt to price the competition out of business by subsidizing drivers using VC cash).

    This follows a loss of $2 billion in 2015, and had, as of Q2, lost at least $4 billion in the history of the company. Of this, however, Uber reportedly lost at least $2 billion in China as a result of a failed attempt to penetrate the local market which it abandoned later in the summer, which while sapping growth potential in China, also supposedly stem losses associated with the Chinese market.

    Furthermore, the H1 loss came at a time when its fortunes in the US were said to be changing, and the company vowed it was turning a profit in Q1, only to revert back to its money losing ways in Q2 and onward.

    As Bloomberg said at the time, “It’s hard to find much of a precedent for Uber’s losses. Webvan and Kozmo.com—two now-defunct phantoms of the original dot-com boom—lost just over $1 billion combined in their short lifetimes. Amazon.com Inc. is famous for losing money while increasing its market value, but its biggest loss ever totaled $1.4 billion in 2000. Uber exceeded that number in 2015 and is on pace to do it again this year.”

    Fast forward three months, when overnight Bloomberg reported that Uber’s cash burn problems continued, and in the third quarter, Uber lost another $800 million, bringing its total loss for the first nine months of the year to “significantly more” than $2.2 billion. The good (and bad) news is that even as its cash burn grew, so did Uber’s revenue which rose even leaving the world’s most populous country, and is said to have generated about $3.76 billion in net revenue in the first nine months of 2016, or about $1.7 billion in Q3 revenue and, according to Bloomberg, is on track to exceed $5.5 billion this year. The problem – if only from a cash burn basis – is that when 2016 closes in ten days, Uber is also expected to have burned a record $3 billion.

    Another problem, one which comes as less of a surprise, is that growth in Uber’s bookings – the total combined value of the fares that riders pay – is slowing down: these came in at $5.4 billion in the third quarter, an increase from $5 billion in the second quarter and $3.8 billion in the first. The slowdown in Uber’s bookings growth can at least partially be explained by the company’s decision to leave China. Uber said on Aug. 1 that it came to an agreement with Didi Chuxing to exit China in exchange for 17.5 percent of the Chinese company. As part of the deal, Didi invested $1 billion in Uber. Uber’s third-quarter financials don’t include the business in China, which were part of the previous quarterly results.

    But the biggest problem is that despite the growth in revenues, Uber’s losses continue to gross in a proportional manner, suggesting that the company has little if any control over its bottom line: as noted above, in Q1 the loss was about $580 million and by Q2 it significantly exceeded $800 million, including China. That number is likely far higher.

    Even in the U.S., Uber’s home market, the company continues to lose money. After turning a slight profit in the in the first quarter of this year, Uber lost $100 million in the U.S. in the second quarter. The loss increased in the third quarter, the person said. Lyft, Uber’s largest U.S. competitor, has promised investors that it will keep its losses below $150 million a quarter.

    What does all of the above mean? During Uber’s Q2 presentation with investors, the company’s head of finance, Gautam Gupta said that subsidies for Uber’s drivers are responsible for the majority of the company’s losses globally. Which means that Uber continues to cut prices in an aggressive attempt to gain market share. While for now this plan has worked, and Uber has become a dominant player in most venues in which it operates (except, perhaps, the most important one of all China), this strategy only works as long as Uber has has to, literally, burn to capture market share (something which in the end backfired dramatically on Saudi Arabia in a similar experiment over the past two years), and as long as its investors are willing to keep writing equity checks to the company at ever higher valuations – a down round for Uber would be the beginning of the end.

    For now, however, the company’s main competition – established taxi and transportation companies – are proving resilient, and despite the aggressive cost pressures from Uber, few have been bankrupted, and while the price of a Yellow Cab medallion has plunged from $1.3 million in 2014 to just $250,000 recently, New York City is still not only dominated by taxis, Uber still has a long way to go before it can get even close to catching up to its competition in terms of volume.

    Meanwhile, Uber’s success will go on only as long as the company has blow billions in hopes it puts its competitors in bankruptcy before its cash runs out. Alas, a few more years like 2015, in which the company burned a whopping $3 billion despite a rising top-line, and Uber’s prospects are suddenly starting to look rather shaky. Meanwhile, the winner in this massive “deflationary” battle to the bottom is the consumer, for whom transportation prices have rarely been lower. So dear Venture Capitalists, please continue to fund Uber and subsidize deflation for consumers in at least this part of the economy: it’s clear that between the Fed and Trumpflation, there aren’t many such deflationary hiding spots left.

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