- The Fourth Turning's Neil Howe Warns: We Are In The 1930s, "Winter Is Coming"
From the Balkans to the US, walls are going up, not down, according to demographer and The Fourth Turning author Neil Howe.
Speaking to a packed crowd at Mauldin Economics’ Strategic Investment Conference in Orlando, Howe said we are reliving many of the same trends and changes of the 1930s.
Faith in Democracy Is Fading
“Worldwide, people are losing trust in institutions,” he said. “Trust in the military, small business, and police is still there. But trust in democracies, media, and politicians is dropping.”
“When was the last time we saw these changes and the rise of right-wing populism?” he asked. “The 1930s.”
Howe’s statement is borne out of a June 2016 Gallup poll. When poll takers were asked how much confidence they had in institutions in American society, the results were troubling.
Just 15% said they had a “great deal” of confidence in the US Supreme Court. Banks trailed behind at 11%, followed by the criminal justice system (9%), newspapers (8%), and big business (6%).
Meanwhile, just 16% expressed a “great deal” of confidence in the presidency, with that number plummeting to 3% for Congress.
What Does This Mean for the Future of the West?
In his keynote, Howe shared his forecasting logic:
“My method is to step back and realize one thing: There is something we know about the world in 20 years’ time. The people who live there will be all of us, 20 years older and playing a different role. I call this ‘looking along the generational diagonal.’”
The critical thing to remember about the current crisis period is that what comes next will be an era in which there is a new order.
According to the Strauss-Howe generational theory, as this new order takes root, individualism declines and institutions are strengthened.
“History is seasonal, and winter is coming,” Howe has said. But after winter, comes spring.
As the American Revolution was followed by calm, as the Civil War was followed by reconstruction and a gilded age, and as the Great Depression and World War II were followed by an age of peace and prosperity, so too will this crisis period be followed by a calm, stable era.
It’s simply a matter of time.
- Believing The Russian "Hacking" Claim
Authored by David Swanson via The Strategic Culture Foundation,
Government lies are common when seducing a population to support a war, but the Russian “hacking” claims are unusual in that U.S. officials supply no evidence while the “fact” is just assumed,
When the U.S. public was told that Spain had blown up the Maine, or Vietnam had returned fire, or Iraq had stockpiled weapons, or Libya was planning a massacre, the claims were straightforward and disprovable.
CIA Director John Brennan addresses officials at the Agency’s headquarters in Langley, Virginia. (Photo credit: CIA)
Before people began referring to the Gulf of Tonkin incident, somebody had to lie that it had happened, and there had to be an understanding of what had supposedly happened. No investigation into whether anything had happened could have taken as its starting point the certainty that a Vietnamese attack or attacks had happened. And no investigation into whether a Vietnamese attack had happened could have focused its efforts on unrelated matters, such as whether anyone in Vietnam had ever done business with any relatives or colleagues of Robert McNamara.
All of this is otherwise with the idea that the Russian government determined the outcome of the 2016 U.S. presidential election. U.S. corporate media reports often claim that Russia did decide the election or tried to do that or wanted to try to do that. But they also often admit to not knowing whether any such thing is the case.
There is no established account, with or without evidence to support it, of exactly what Russia supposedly did. And yet there are countless articles casually referring, as if to established fact to the…
“Russian influence in the 2016 presidential election” (Yahoo).
“Russian attempts to disrupt the election” (New York Times).
“Russian… interference in the 2016 U.S. presidential election” (ABC).
“Russian influence over the 2016 presidential election” (The Intercept).
“a multi-pronged investigation to uncover the full extent of Russia’s election-meddling” (Time).
“Russian interference in the US election” (CNN).
“Russia’s interference in the 2016 presidential election” (American Constitution Society).
“Russian hacking in US Election” (Business Standard).”
“Obama Strikes Back at Russia for Election Hacking” we’re told by the New York Times, but what is “election hacking”? Its definition seems to vary widely. And what evidence is there of Russia having done it?
The “Russian interference in the 2016 United States elections” even exists as a factual event in Wikipedia, not as an allegation or a theory. But the factual nature of it is not so much asserted as brushed aside.
Former CIA Director John Brennan, in the same Congressional testimony in which he took the principled stand “I don’t do evidence,” testified that “the fact that the Russians tried to influence resources and authority and power, and the fact that the Russians tried to influence that election so that the will of the American people was not going to be realized by that election, I find outrageous and something that we need to, with every last ounce of devotion to this country, resist and try to act to prevent further instances of that.” He provided no evidence.
Activists have even planned “demonstrations to call for urgent investigations into Russian interference in the US election.” They declare that “every day we learn more about the role Russian state-led hacking and information warfare played in the 2016 election.” (March for Truth.)
Belief that Russia helped put Trump in the White House is steadily rising in the U.S. public. Anything commonly referred to as fact will gain credibility. People will assume that at some point someone actually established that it was a fact.
Keeping the story in the news without evidence are articles about polling, about the opinions of celebrities, and about all kinds of tangentially related scandals, their investigations, and obstruction thereof. Most of the substance of most of the articles that lead off with reference to the “Russian influence on the election” is about White House officials having some sort of connections to the Russian government, or Russian businesses, or just Russians. It’s as if an investigation of Iraqi WMD claims focused on Blackwater murders or whether Scooter Libby had taken lessons in Arabic, or whether the photo of Saddam Hussein and Donald Rumsfeld shaking hands was taken by an Iraqi.
A general trend away from empirical evidence has been extensively noted and discussed. There is no more public evidence that Seth Rich (a Democratic National Committee staffer who was murdered last year) leaked Democratic emails than there is that the Russian government stole them. Yet both claims have passionate believers.
Still, the claims about Russia are unique in their wide proliferation, broad acceptance, and status as something to be constantly referred to as though already established, constantly augmented by other Russia-related stories that add nothing to the central claim. This phenomenon, in my view, is as dangerous as any lies and fabrications coming out of the racist right.
- US Deploys Third Aircraft Carrier Toward North Korea
One month ago, when we first discussed that in addition to the CVN-70 Carl Vinson aircraft carrier group, the US was deploying two more carriers toward the Korean peninsula, some took the Yonhap-sourced report skeptically: after all, what’s the incremental symbolic impact of having three, or even two aircraft carriers next to North Korea when just one would more than suffice. Then, two weeks ago, the report was proven half right when US officials announced that in addition to the first US carrier already on location, the US Navy is moving the USS Ronald Reagan aircraft carrier to the Korean Peninsula, where it would conduct dual-carrier training exercises with the USS Carl Vinson.
Aircraft carrier CVN-76 Ronald Reagan
After completing its maintenance period in Yokosuka, Japan, the USS Ronald Reagan departed for the Korean Peninsula on Tuesday, according to the Navy. “Coming out of a long in-port maintenance period we have to ensure that Ronald Reagan and the remainder of the strike group are integrated properly as we move forward,” Rear Adm. Charles Williams said in a press release. Once it arrives in the region, the carrier will conduct a variety of training exercises but primarily focus on certifying its ability to safely launch and recover aircraft, the service said. In other words, training for combat missions involved the North Korean capital.
We concluded our report from mid-May by saying that the US Navy may soon “further deploy the CVN-68 Nimitz, which was the third carrier reported to be eventually making its way toward Korea.”
We didn’t have long to wait, because on Friday the Kitsap Sun confirmed what we reported initially over a month ago, namely that the USS Nimitz will depart Naval Base Kitsap-Bremerton on Thursday on its first deployment since 2013. Official details of the deployment were hazy, with spokeswoman Theresa Donnelly saying that The Nimitz-class aircraft carrier is expected to be in the western Pacific for six months with visits to the Middle East and Asia-Pacific, “though plans could change in response to world events.”
However, a subsequent report from VOAnews confirms that the ultimate destination is none other than the country the US will almost certainly attack next, North Korea:
The United States is sending a third aircraft carrier strike force to the western Pacific region in an apparent warning to North Korea to deter its ballistic missile and nuclear programs, two sources have told VOA. The USS Nimitz, one of the world’s largest warships, will join two other supercarriers, the USS Carl Vinson and the USS Ronald Reagan, in the western Pacific.
The Nimitz will lead Carrier Strike Group 11, which includes guided-missile destroyers USS Shoup and USS Kidd from Naval Station Everett, guided-missile destroyers USS Howard and USS Pinckney and guided-missile cruiser USS Princeton from San Diego, and a conglomeration of aircraft squadrons that comprise Carrier Air Wing 11, including Naval Air Station Whidbey Island-based Gray Wolves of Electronic Attack Squadron 142.
Aircraft carrier CVN-68 NimitzAfter returning from its last deployment, the Nimitz underwent a 20-month maintenance and modernization period at Puget Sound Naval Shipyard that was completed in October. It has spent most of the past seven months at sea undergoing training and inspections in preparation for deployment. Now the ship and crew are ready to go, said commanding officer Capt. Kevin Lenox.
“I am so incredibly proud of the entire Nimitz team and the terrific coordination and support across the entire strike group, especially in such a condensed training cycle,” he said in a news release. “The crew stepped up to the plate, and I’m confident we’re ready to meet whatever challenges lie ahead on our upcoming deployment.”
While it is rare for the U.S. military to deploy two carriers in the same region at the same time, it is almost unheard of to have three aircraft carriers in close proximity to each other absent current or imminent military action. Which may be the case soon: as VOA notes, North Korea’s growing nuclear and missile threat is seen as a major security challenge for Trump, who has vowed to prevent the country from being able to strike the U.S. with a nuclear missile.
Sitting alongside Japanese Prime Minister Shinzo Abe, Trump said on Friday prior to the start of the G-7 meeting in Sicily that world leaders would have a “particular focus on the North Korea problem.” The White House issued a statement on Friday which said the two leaders have agreed to “enhance sanctions on North Korea” in an attempt to prevent the further development of North Korea’s ballistic missile and nuclear programs.
Meanwhile, as reported on Friday, the U.S. military will test a system to shoot down an ICBM for the first time next week. It is intended to simulate a North Korean ICBM aimed at the U.S. The Missile Defense Agency said it will test an existing missile defense system on Tuesday to try to intercept an ICBM. The Pentagon has used the Ground-Based Midcourse Defense (GMD) system to intercept other types of missiles, but never an ICBM. The GMD has been inconsistent, succeeding in nine of 17 attempts against missiles without intercontinental range capability since 1999.
So, perhaps as a contingency plan, the US will soon have not one, not two, but three aircraft carriers in the proximity of the Korean peninsula “just in case.” The trip from Naval Station Everett is expected to take several weeks. Meanwhile, here is the latest deployment of US naval forces around the globe as of May 25, courtesy of Stratfor.
- Visualizing The Expanding Universe Of Cryptocurrencies
Bitcoin is the original cryptocurrency, and its meteoric rise has made it a mainstay of conversation for investors, media, and technologists alike.
In fact, as Visual Capitalist's Jeff Desjardins details, the innovation of the blockchain is changing entire markets, while causing ripples with central banks and the financial industry. At time of publication, the bitcoin price now hovers near US$2,200, a massive increase from this time last year.
But the true impact of Bitcoin is actually far more reaching than this – it’s actually helped to birth new markets for over 800 other cryptocurrencies and assets that are available for online trading. And while the market for bitcoins is worth nearly $40 billion itself, the rest of these cryptocurrencies are actually worth even more in combination.
Courtesy of: Visual CapitalistTHE ALTCOIN UNIVERSE
For the first time since Bitcoin was founded, it now makes up the minority of the entire cryptocurrency market at about 47.9% of all coins and assets.
So what are the other altcoins that make up the rest of this universe, and where did they come from?
Litecoin
Litecoin is one of the first altcoins, and it is nearly identical to Bitcoin after being “forked” in 2011. Litecoin aims to process blocks 4x faster than Bitcoin to speed up transaction confirmation time, though this creates several other challenges as well. At time of writing, Litecoin’s market capitalization is worth $1.3 billion.
Ethereum
Ethereum, launched in 2015, is the largest coin by market capitalization aside from Bitcoin. However, it is also quite different. While Bitcoin is designed to be a payments protocol first, Ethereum enables developers to build and deploy decentralized applications, while also enabling smart contracts. The tokens used to power the network are called Ether, but they can also be traded online. At time of writing, Ethereum’s market capitalization is $15.4 billion.
Also interesting: the Ethereum network actually split into two in 2016. It’s a complicated situation, but read about it here. There is now a separate Ethereum, based on the original Ethereum blockchain, trading as “Ethereum Classic” with its own market capitalization of $1.4 billion.
Ripple
Ripple (XRP) is the native currency of the Ripple Protocol – a broader catch-all for an open-source, global exchange. It’s already being used by banks such as Santander, Bank of America Merrill Lynch, UBS, and RBC. It solves a different problem than Bitcoin, allowing for settling payments between different currencies and even different payment systems. Today, Ripple’s native coin (XRP) has a market cap of $10.9 billion.
LEARN MORE
With over 800+ altcoins or assets out there, there’s plenty of information to absorb.
Here’s a short 20-minute course on the history of altcoins that might provide useful context, as well as in-depth explanations of Ethereum and Ripple that may help you learn about the important parts of a rapidly growing altcoin universe.
- Matt Taibbi: "Gianforte's Win Confirms The Democrats Need A New Message"
Authored by Matt Taibbi via RollingStone.com,
Democrat Rob Quist was beat by Greg Gianforte in Thursday's special election in Montana
The story of Greg Gianforte, a fiend who just wiped out a Democrat in a congressional race about ten minutes after being charged with assaulting a reporter, is déjà vu all over again.
How low do you have to sink to lose an election in this country? Republicans have been trying to answer that question for years. But they've been unable to find out, because Democrats somehow keep failing to beat them.
There is now a sizable list of election results involving Republican candidates who survived seemingly unsurvivable scandals to win higher office.
The lesson in almost all of these instances seems to be that enormous numbers of voters would rather elect an openly corrupt or mentally deranged Republican than vote for a Democrat. But nobody in the Democratic Party seems terribly worried about this.
Gianforte is a loon with a questionable mustache who body-slammed Guardian reporter Ben Jacobs for asking a question about the Republican health care bill. He's the villain du jour, but far from the worst exemplar of the genre.
New Yorkers might remember a similar congressional race from a few years ago involving a Staten Island nutjob named Michael Grimm. The aptly named Grimm won an election against a heavily funded Democrat despite being under a 20-count federal corruption indictment. Grimm had threatened on camera to throw a TV reporter "off a fucking balcony" and "break [him] in half … like a boy." He still beat the Democrat by 13 points.
The standard-bearer for unelectable candidates who were elected anyway will likely always be Donald Trump. Trump was caught admitting to sexual assault on tape and openly insulted almost every conceivable demographic, from Mexicans to menstruating women to POWs to the disabled; he even pulled out a half-baked open-mic-night version of a Chinese accent. And still won.
Gianforte, Trump and Grimm are not exceptions. They're the rule in modern America, which in recent years has repeatedly demonstrated its willingness to vote for just about anybody not currently under indictment for serial murder, so long as that person is not a Democrat.
The list of winners includes Tennessee congressman Scott Desjarlais, a would-be "family values" advocate. Desjarlais, a self-styled pious abortion opponent, was busted sleeping with his patients and even urging a mistress to get an abortion. He still won his last race in Bible country by 30 points.
Scott Desjarlais
The electoral results last November have been repeated enough that most people in politics know them by heart. Republicans now control 68 state legislative chambers, while Democrats only control 31. Republicans flipped three more governors' seats last year and now control an incredible 33 of those offices. Since 2008, when Barack Obama first took office, Republicans have gained somewhere around 900 to 1,000 seats overall.
There are a lot of reasons for this. But there's no way to spin some of these numbers in a way that doesn't speak to the awesome unpopularity of the blue party. A recent series of Gallup polls is the most frightening example.
Unsurprisingly, the disintegrating Trump bears a historically low approval rating. But polls also show that the Democratic Party has lost five percentage points in its own approval rating dating back to November, when it was at 45 percent.
The Democrats are now hovering around 40 percent, just a hair over the Trump-tarnished Republicans, at 39 percent. Similar surveys have shown that despite the near daily barrage of news stories pegging the president as a bumbling incompetent in the employ of a hostile foreign power, Trump, incredibly, would still beat Hillary Clinton in a rematch today, and perhaps even by a larger margin than before.
If you look in the press for explanations for news items like this, you will find a lot of them. Democrats may have some difficulty winning elections, but they've become quite adept at explaining their losses.
According to legend, Democrats lose because of media bias, because of racism, because of gerrymandering, because of James Comey and because of Russia (an amazing 59 percent of Democrats still believe Russians hacked vote totals).
Third-party candidates are said to be another implacable obstacle to Democratic success, as is unhelpful dissension within the Democrats' own ranks. There have even been whispers that last year's presidential loss was Obama's fault, because he didn't campaign hard enough for Clinton.
The early spin on the Gianforte election is that the Democrats never had a chance in Montana because of corporate cash, as outside groups are said to have "drowned" opponent Rob Quist in PAC money. There are corresponding complaints that national Democrats didn't do enough to back Quist.
Greg Gianforte
A lot of these things are true. America is obviously a deeply racist and paranoid country. Gerrymandering is a serious problem. Unscrupulous, truth-averse right-wing media has indeed spent decades bending the brains of huge pluralities of voters, particularly the elderly. And Republicans have often, but not always, had fundraising advantages in key races.
But the explanations themselves speak to a larger problem. The unspoken subtext of a lot of the Democrats' excuse-making is their growing belief that the situation is hopeless – and not just because of fixable institutional factors like gerrymandering, but because we simply have a bad/irredeemable electorate that can never be reached.
This is why the "basket of deplorables" comment last summer was so devastating. That the line would become a sarcastic rallying cry for Trumpites was inevitable. (Of course it birthed a political merchandising supernova.) To many Democrats, the reaction proved the truth of Clinton's statement. As in: we're not going to get the overwhelming majority of these yeehaw-ing "deplorable" votes anyway, so why not call them by their names?
But the "deplorables" comment didn't just further alienate already lost Republican votes. It spoke to an internal sickness within the Democratic Party, which had surrendered to a negativistic vision of a hopelessly divided country.
Things are so polarized now that, as Georgia State professor Jennifer McCoy put it on NPR this spring, each side views the other not as fellow citizens with whom they happen to disagree, but as a "threatening enemy to be vanquished."
The "deplorables" comment formalized this idea that Democrats had given up on a huge chunk of the population, and now sought only to defeat and subdue their enemies.
Many will want to point out here that the Republicans are far worse on this score. No politician has been more divisive than Trump, who explicitly campaigned on blaming basically everyone but middle American white people for the world's problems.
This is true. But just because the Republicans win using deeply cynical and divisive strategies doesn't mean it's the right or smart thing to do.
Barack Obama, for all his faults, never gave in to that mindset. He continually insisted that the Democrats needed to find a way to reach lost voters. Even in the infamous "guns and religion" episode, this was so. Obama then was talking about the challenge the Democrats faced in finding ways to reconnect with people who felt ignored and had fled to "antipathy toward people who aren't like them" as a consequence.
Even as he himself was the subject of vicious and racist rhetoric, Obama stumped in the reddest of red districts. In his post-mortem on the Trump-Clinton race, he made a point of mentioning this – that in Iowa he had gone to every small town and fish fry and VFW hall, and "there were some counties where I might have lost, but maybe I lost by 20 points instead of 50 points."
Most people took his comments to be a dig at Clinton's strategic shortcomings – she didn't campaign much in many of the key states she lost – but it was actually more profound than that. Obama was trying to point out that people respond when you demonstrate that you don't believe they're unredeemable.
You can't just dismiss people as lost, even bad or misguided people. Unless every great thinker from Christ to Tolstoy to Gandhi to Dr. King is wrong, it's especially those people you have to keep believing in, and trying to reach.
The Democrats have forgotten this. While it may not be the case with Quist, who seems to have run a decent campaign, the Democrats in general have lost the ability (and the inclination) to reach out to the entire population.
They're continuing, if not worsening, last year's mistake of running almost exclusively on Trump/Republican negatives. The Correct the Record types who police the Internet on the party's behalf are relentless on that score, seeming to spend most of their time denouncing people for their wrong opinions or party disloyalty. They don't seem to have anything to say to voters in flyover country, except to point out that they're (at best) dupes for falling for Republican rhetoric.
But "Republicans are bad" isn't a message or a plan, which is why the Democrats have managed the near impossible: losing ground overall during the singular catastrophe of the Trump presidency.
The party doesn't see that the largest group of potential swing voters out there doesn't need to be talked out of voting Republican. It needs to be talked out of not voting at all. The recent polls bear this out, showing that the people who have been turned off to the Democrats in recent months now say that in a do-over, they would vote for third parties or not at all.
People need a reason to be excited by politics, and not just disgusted with the other side. Until the Democrats figure that out, these improbable losses will keep piling up.
- Albert Edwards: "What On Earth Is Going On With US Wages"
When Albert Edwards predicted in late 2016 that a surge in wage inflation was imminent, we were confused by this prediction from the world’s preeminent deflationist: after all, not only had not a single economic indicator validated a tighter labor market despite unemployment just above 4%, but as we have have repeatedly demonstrated what little wage inflation existed, was attributable to managerial-level, supervisory positions while the bulk of job creation remained with minimum-wage jobs, which have continued to see virtually no wage growth. Even Morgan Stanley, a far greater bull than Edwards, one month ago admitted that “wage growth is leveling off, may be slowing.“
Which is why we have to give Edwards credit: some 6 months after his initial call, he had the courage to do what is never easy and admit he was wrong, and that contrary to his expectations wages are not going up after all.
Talking about wrong, I have to put my hands up. I have been expecting US wage inflation to roar ahead over the past three months to well above 3%, yet every data release has surprised on the downside. Wage inflation, as measured by average hourly earnings, has actually levelled off at close to 2½% while wage inflation for ‘the workers’ is actually slowing (see chart below)! Strictly speaking, “the workers” are defined (by the BLS) as “those who are not primarily employed to direct, supervise, or plan the work of others. Hey, that’s me!
So with the concession aside, Edwards is left with even more question, starting with “What on earth is going on with US average hourly earnings?”
Three consecutive Employment Reports have seen this key measure of wage inflation surprise by its weakness. I feel especially foolish as I had written that wages were set to accelerate sharply, forcing the Fed to tighten aggressively and thereby driving both bond yields and the dollar higher. Doh! While many commentators last year, including the Fed, expressed surprise that US wage inflation had been so quiescent despite a tight labour market, I thought there was a simple explanation. I believe that nominal wages had not accelerated more rapidly through 2016 primarily because headline CPI inflation had been so subdued, staying in a 0-1% range for most of the last couple of years. Hence nominal wages did not need to accelerate rapidly for workers to be much better off as 2-2½% nominal wage inflation translated into strong real wage rises of around 1½-2% – the most rapid for years (see circled area in chart below).
As headline CPI inflation surged this past six months, rapid real wage growth turned into real wage stagnation (see chart above). I believed that a tight labour market would prompt an aggressive reaction from “the workers” to maintain the previous 1½-2% rate of real wage inflation they had enjoyed and got used to through 2015 and 1H 2016. Hence I expected nominal wage inflation would roar upwards in 1Q this year. How wrong I was!
There is even more confusion in the data, because Edwards points out another disconnect: while the BLS’ measure of hourly earnings has gone nowhere, and real earnings have in fact tumbled, the employment cost index has spiked, “with wage and Salaries jumping from a 0.5% rise in 4Q to rise by 0.8% in 1Q 2017 ? the fastest quarterly rise since 2007. On a yoy basis, this measure of wage inflation still showed a 45 degree upward trajectory into 1Q 2017 (see left-hand chart below). Adding benefits to wages and salaries, total compensation also rose by 2½%.”
Then there is the issue of declining productivity, because when calculating productivity and unit labour cost growth, the BLS estimates non-farm businesses saw their workers compensation jump from the 3% average rate seen in 2016 to just shy of 4% yoy in 1Q 2017?. This has implications on corporate profits:
“Together with sluggish 1% productivity growth, this means that unit labour costs are rising by almost 3% yoy, well in advance of the rate by which corporates are able to raise their output prices (see right-hand chart above). The bottom line is that US corporate margins are suffering a savage squeeze and have been for some time. What then do I make of the heady 1Q company reporting round? Not much.”
Perhaps in retrospect, between the divergent AHE and ECI data, Edwards was not entirely wrong, as he suggests:
The truth is that the closely watched average hourly earnings measure of wage inflation has not accelerated in response to a surge in headline CPI in the way I had expected. So strictly speaking I have been wrong and as such I must throw myself upon your bountiful mercy. But let me say in my defence that other measures of wage inflation have shown exactly the acceleration I had expected. The fight-back by labour to secure their rightful share of the economic pie is ongoing, but it seems likely that the savage downward trend in the share of labour compensation that had been in place since the 2001 recession seems to have at last been broken (see chart below). The laws of economics have not been abolished after all ? at least not in the US.
Yet while the jury may still be out on US wages between two contradictory data sets from the BLS, when one looks outside the US, things are clear: despite years of QE, there is no wage growth. For evidence, look no further than Japan. Edwards again:
Japan is becoming an economic enigma. Last week saw some truly astonishingly weak wage inflation data ? so weak that it sent the yen sharply lower on expectations that the Bank of Japan might need to step up their already ridiculously outsized QE programme to even higher levels. Wages for March fell by 0.4% yoy, well below both the expected 0.5% gain and February’s 0.4% rise. Even the far less erratic underlying wages (excluding overtime and bonus payments) weakened sharply and declined yoy in March. In real terms, total cash earnings were miserable too, falling by 0.8% from a flat reading in February (see charts below). Certainly on this measure Abenomics has been a total and utter failure.
The idea was simple, QE (or QQE as the Japanese call it) would as an indirect consequence send the yen sharply lower (as it did in 2013/14), which would push up headline CPI inflation (also buoyed by the 2014 VAT hike) and drive wages higher in what was a tight labour market.
And when I say tight, I mean properly tight. This is not the US, where most commentators agree there is likely to be more slack than the low headline unemployment numbers suggest due to the sharp decline in the participation rate since the last recession. By contrast, the Japanese labour market is unambiguously as tight as it ever has been in history (see left-hand chart below). Yet wage inflation remains moribund.
Without any real cost-push wage pressures, and with the initial inflationary impulse on headline and core CPI of the declining yen of 2013-14 receding into a distant memory, core CPI inflation (ex food and energy) has begun to fall once again (for this see right-hand chart above, and note that headline and CPI ex-food are rising moderately only because the yoy impact of the oil price has gone from negative last year to positive this year). So after all the trillions of dollars of QE and huffing and puffing, Abenomics has failed to deliver its much touted exit from the deflationary mire.
And before readers respond with “there is always more QE”, the problem is that for both the ECB and BOJ, the answer is increasingly, “there isn’t” as both central banks are just months away from running out of eligible bonds to buy, beyond which point the entire bond market may simply lock up, or the central banks will have to even more actively start buying equities, with both outcomes effectively a nationalization of capital markets. And the last time we checked with the USSR, that strategy did not work out too well…
- Federal Bureaucrats To The Public: Be Afraid!
Authored by Ryan McMaken via The Mises Institute,
States have always thrived on the fear of the taxpayers, and states have always justified their existence in part on the idea that without the state, we'd all be overrun by barbarians, or murdered by our neighbors. Charles Tilly, a historian of the state, frequently noted that the modern state as we know it, was born out of war, and was created to wage war. War and the state are inseparable.
Moreover, support for the state is so central to maintaining continued funding and deference to the state's monopoly power, that Randolph Bourne famously went so far as to say that "war is the health of the state."
By extension, agents of the state — whether elected officials or bureaucrats — fancy themselves as guardians of prosperity and civilization. Without them, they apparently believe, life would be barely worth living.
Thus, one should hardly be surprised when government bureaucrats spread fear as a means of self-promotion.
Keeping this tradition alive is Department of Homeland Security John Kelly who recently claimed that people would "never leave the house" if they "knew what I know about terrorism."
This, incidentally, introduces a new variation on the time-worn they're-coming-to-get-us propaganda that the state has relied on for centuries. Nowadays, we're not even allowed to know what the threat is.
"It's a secret, so just trust us." is the refrain. "They're coming to kill us. We swear it's true."
Kelly then punctuated his comments with an advertisement for the federal government, concluding
The good news is, for us in America, we have amazing people protecting us every day, DHS, obviously, FBI, fighting the away game is DOD Department of Defense, CIA, NSA, working with these incredible allies we have in Europe and around the world.
What counts as "protecting us every day," is apparently a bit different for Kelly than for more astute observers.
James Bovard recently described how the FBI has been doing such a great job keeping us safe:
Before the 9/11 attacks, the FBI dismally failed to connect the dots on suspicious foreigners engaged in domestic aviation training. Though Congress had deluged the FBI with $1.7 billion to upgrade its computers, many FBI agents had old machines incapable of searching the Web or emailing photos. One FBI agent observed that the bureau ethos is that "real men don’t type. … The computer revolution just passed us by."
The FBI’s pre-9/11 blunders "contributed to the United States becoming, in effect, a sanctuary for radical terrorists," according to a 2002 congressional investigation. (The FBI also lost track of a key informant at the heart of the cabal that detonated a truck bomb beneath the World Trade Center in 1993.)
"Everyone makes mistakes!" Might be what the FBI's-backers claim. True enough. But few organizations get paid 8 billion dollars per year of the taxpayers' money to not stop terrorists.
So, it's unclear what Kelly is referring to in how we'd all be dead were it not for federal agents.
Perhaps he's referring to the CIA. The same CIA that planned the disastrous Bay of Pigs invasion, and then spent decades paying spies to report on how the Soviet economy was growing impressively, estimating the Soviet economy to be three times the size of what it actually was. The implication, of course, was that the USSR was a powerhouse that could defeat the US in an arms race.
One can guess what CIA agents were saying at the time: "If you knew what we know about the Soviet economy, you'd never leave the house!"
Kelly also refers to the NSA. This is the same NSA that allowed Edward Snowden to walk off with countless numbers of their own top-secret documents. And its lack of control over its own information enabled this month's malware attack that infected computers in 99 countries. The attack was not stopped by the NSA, of course.
These are those "amazing people" that keep us safe, according to Kelly.
And then there's the Department of Defense. The centerpiece of a military establishment that hasn't won a major conflict since 1945. The "victory" in Iraq in 1991 wasn't even complete enough to end the economic sanctions imposed on Iraq before the war started. Those sanctions persisted until 2003. 12 years after the first "victory" the US then attacked Iraq again, thus promoting the spread of Islamic extremism and causing a civil war that led to the near-destruction of Iraq's few remaining Christian communities.
"Before the United States invaded Iraq, Al Qa’ida was on the ropes…" the Brookings institution concluded in 2007. "The invasion of Iraq breathed new life into the organization."
Meanwhile, the Pentagon doesn't know what it did with six trillion dollars.
Fortunately for us, the US's most implacable enemy today is ISIS, which has no air force, no navy, and is composed largely of depressed outsiders whose deadliest weapons outside of Iraq and Syria are delivery trucks.
It doesn't take an army, or an FBI, or a CIA to stop crazies from driving trucks into crowds on Bastille day, as one did in 2016. It requires that police keep unauthorized trucks off pedestrian malls during festivals.
Nor are secret police required to keep people from carrying bombs into crowded theaters. Competent security guards can do the trick. The same might be said of maniacs carrying semi-automatic rifles into night clubs.
But of course Kelly would likely claim that the government is preventing far greater attacks than these. He just can't tell us what any of them might be, or give any details at all.
Nevermind that in situations like this, the burden of proof is always on the government agency that wants more tax dollars and more power to keep doing what they're doing. The claim of necessary secrecy offers a convenient excuse from having to provide an evidence at all.
But, there's always enough violence and mayhem in the world to try to convince people that the world is falling apart. Although the chances of being murdered in an American city are at a 50-year low (unless you're in certain neighborhoods of Chicago and Baltimore) many Americans believe crime is worse than ever. Pew has noted that at the homicide rate was cut in half over the past 20 years, Americans persist in the idea that crime is getting worse.
Moreover, under the Obama administration, the feds claimed that mass-shootings were sweeping the country. In fact, the odds of dying in a mass shooting are so low that they might as well be zero.
The hysteria over shootings, however, was a convenient justification for the federal government's ongoing attempts to regulate firearms.
"If you knew what I know about gun violence" Obama might have said. "you'd never leave the house!"
Creative arithmetic is also being used to justify public fear over terrorism. Kelly's comments invoked this week's massacre in Manchester where 22 people (not including the attacker) were murdered. But, if you're worrying about homicides in England, you'd might want to look to street crime instead. After all, in England and Wales, homicides increased by 121 (21 percent) from 2015 to 2016, largely fueled by stabbings and shootings of the traditional variety.
Unfortunately, many Americans have been trained to believe whatever they're told by higher authorities. The specifics vary according to one's politics. Leftists appear ready to believe whatever some federal bureaucrat says about global warming — provided it fits into the leftwing narrative.
Rightwingers are primed to believe whatever some government agents says that confirms their narrative about national security.
To illustrate the skepticism one should bring to comments such as those made by Kelly, let's use the same format, and apply it to claims that might be made from across the ideological spectrum:
"If you knew what I know about the state of our lakes and rivers, you'd never drink any water!" said the director of the EPA…
"If you knew what I know about our economy, you'd never trust private industry!" said Senator Elizabeth Warren…
"If you knew what I know about kidnappings, you'd never let your children out of your sight!" said FBI director…
"If you knew what I know about global warming, you'd never drive a car again!" said President…
And so on.
When confronted with a blanket claim that it's obvious to those "in the know" that hysterical fear is warranted, we might be inclined to demand more convincing evidence. But, if what is said just supports our existing biases, then no evidence is necessary. The self-serving opinion of a government bureaucrat is all that's required.
- The Golden Conspiracy
Authored by Jim Rickards via The Daily Reckoning blog,
Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.
There is statistical evidence piling up to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.
I’ve spoken to members of Congress. I’ve spoken to people in the intelligence community, in the defense community, very senior people at the IMF. I don’t believe in making strong claims without strong evidence, and the evidence is all there.
I spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can’t mention the fund’s name but it’s a household name. You’ve probably heard of it. He looked at COMEX (the primary market for gold) opening prices and COMEX closing prices for a 10-year period. He was dumbfounded.
He said it was is the most blatant case of manipulation he’d ever seen. He said if you went into the aftermarket, bought after the close and sold before the opening every day, you would make risk-free profits.
He said statistically that’s impossible unless there’s manipulation occurring.
I also spoke to Professor Rosa Abrantes-Metz at the New York University Stern School of Business. She is the leading expert on globe price manipulation. She actually testifies in gold manipulation cases that are going on.
She wrote a report reaching the same conclusions. It’s not just an opinion, it’s not just a deep, dark conspiracy theory. Here’s a PhD statistician and a prominent market expert lawyer, expert witness in litigation qualified by the courts, who independently reached the same conclusion.
Now, where is the manipulation coming from?
There are a number of suspects but you need look no further than China.
China wants to do what the U.S. has done, which is to remain on a paper currency standard but make that currency important enough in world finance and trade to give China leverage over the behavior of other countries.
The best way to do that is to increase its voting power at the IMF and have the yuan included in the IMF basket for determining the value of the special drawing right (SDR).
China accomplished that last September when the IMF added the yuan to its basket of currencies.
The rules of the game also say you need a lot of gold to play, but you don’t recognize the gold or discuss it publicly. Above all, you do not treat gold as money, even though gold has always been money.
The members of the club keep their gold handy just in case, but otherwise, they publicly disparage it and pretend it has no role in the international monetary system. China is expected to do the same.
Right now, China officially does not have enough gold to have a “seat at the table” with other world leaders. Think of global politics as a game of Texas Hold’em.
What do want in a poker game? You want a big pile of chips.
Gold serves as political chips on the world’s financial stage. It doesn’t mean that you automatically have a gold standard, but that the gold you have will give you a voice among major national players sitting at the table.
For example, Russia has one-eighth the gold of the United States. It sounds like they’re a small gold power — but their economy’s only one-eighth as big. So, they have about the right amount of gold for the size of their economy. And Russia has ramped up its gold purchases recently.
The U.S. gold reserve at the market rate is under 3% of GDP. That number varies because the price of gold varies. For Russia, it’s about the same. For Europe, it’s even higher — over 4%.
In China, that number has been about 0.7% officially. Unofficially, if you give them credit for having, let’s say, 4,000 tons, it raises them up to the U.S. and Russian level. But they want to actually get higher than that because their economy is still growing, even if it’s at a much lower rate than before.
Here’s the problem: If you took the lid off of gold, ended the price manipulation and let gold find its level, China would be left in the dust. It wouldn’t have enough gold relative to the other countries, and because the price of gold would be skyrocketing, they could never acquire it fast enough. They could never catch up. All the other countries would be on the bus while the Chinese would be off.
When you have this reset, and when everyone sits down around the table, China’s the second largest economy in the world. They have to be on the bus. That’s why the global effort has been to keep the lid on the price of gold through manipulation. I tell people, if I were running the manipulation, I’d be embarrassed because it’s so obvious at this point.
The price is being suppressed until China gets the gold that they need. Once China gets the right amount of gold, then the cap on gold’s price can come off. At that point, it doesn’t matter where gold goes because all the major countries will be in the same boat. As of right now, however, they’re not, so China has though to catch-up.
I’ve described some catastrophic scenarios where the world switches to SDRs or goes to a gold scenario, but at least for the time being, the U.S. would like to maintain a dollar standard. Meanwhile, China feels extremely vulnerable to the dollar. If we devalue the dollar, that’s an enormous loss to them.
China has recently sold a portion of its dollar reserves to prop up its own currency, which has come under tremendous pressure. But it still holds a large store of dollar reserves.
If China has all paper and no gold, and we inflate the paper, they lose. But if they have a mix of paper and gold, and we inflate the paper, they’ll make it up on the gold. So they have to get to that hedged position.
China has been saying, in effect, “We’re not comfortable holding all these dollars unless we can have gold. But if we are transparent about the gold acquisition, the price will go up too quickly. So we need the western powers to keep the lid on the price and help us get the gold, until we reach a hedged position. At that point, maybe we’ll still have a stable dollar.”
The point is that is that there is so much instability in the system with derivatives and leverage that we’re not going to get from here to there. We’re not going to have a happy ending. The system’s going to collapse before we get from here to there. At that point, it’s going to be a mad scramble to get gold.
The price of gold will go significantly higher in the years ahead. But contrary to what you read elsewhere, gold won’t go higher because China is confronting the U.S. or launching a gold-backed currency.
It will go higher when all central banks, China’s and the U.S.’ included, confront the next global liquidity crisis, worse than the one in 2008, and individual citizens stampede into gold to preserve wealth in a world that has lost confidence in all central banks.
When that happens, physical gold may not be available at all. The time to build your personal gold reserve is now.
We need to mention Russia here too. Russia is also amassing gold. And since Russia and China aspire to be true gold powers, it’s not enough to have physical gold. It’s also critical to create gold exchanges and gold markets for price discovery and trading.
Currently the price of gold is set in two places. One is the London spot market, controlled by six big banks including Goldman Sachs and JPMorgan. The other is the New York gold futures market controlled by COMEX, which is governed by its big clearing members, also including major western banks.
In effect, the big western banks have a monopoly on gold prices even if they do not have a monopoly on physical gold. But that could be about to change.
Russia and China are not only building up physical reserves and exploring for more, they are building trading systems that allow for price discovery and leveraged trading in gold.
It may take a year or so to attract liquidity, but once these new exchanges are fully functional, the physical gold market will regain the upper hand as a price maker.
Then gold will commence its march to monetary status, and its implied non-deflationary price of $10,000 per ounce.
The time to buy is now, before that happens.
- Fed Fail? Traders Cut Rate-Hike Bets By The Most In History Last Week
The last two weeks have seen speculators cover over $710 billion worth of Fed rate-hike bets – the biggest move in Eurodollar futures history as Trump concerns and Fed Minutes reignite lost faith in the ebullient future that sparked the creation of a record $3 trillion bet that The Fed will be right this time.
Macro data has done nothing but collapse since The Fed hiked rates in March…
And perhaps traders are starting to realize this is anything but 'transitory' as they covered a net 711,000 Eurodollar futures in the last two weeks – the most ever…
And while Specs covered ED shorts, they also added to Treasury longs – pushing the aggregate Treasury complex net speculative position to its longest since August 2014 (which ended with the 30Y yield crashing from over 3.00% to below 2.25% in 3 months)
They added 122K contracts in TY taking their net longs to 363K contracts, the highest since 2007 and turned net long by 47K contracts in US, buying 54K contracts.
They also pared net shorts in FV by 46K contracts and increased net longs in TN by 22K contracts. However, they sold 43K contracts in TU futures over the week.
Additionally, according to BofA, the buy-side is positioning for a June hike but with fewer follow-up hikes – they sold record 2-yr treasury, bought the most 30-yr since Oct. 2014.
Away from bond-land, the buy-side bought the most WTI Crude and Gold futures since late February. Net positon in commodities was not stretched.
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