- Is Trump Being Sabotaged By The Pentagon?
Authored by Paul Craig Roberts,
President Trump says he wants the US to have better relations with Russia and to halt military operations against Muslim countries. But he is being undermined by the Pentagon.
The commander of US forces in Europe, General Ben Hodges, has lined up tanks on Poland’s border with Russia and fired salvos that the general says are a message to Russia, not a training exercise.
How is Trump going to normalize relations with Russia when the commander of US forces in Europe is threatening Russia with words and deeds?
The Pentagon has also sent armored vehicles to “moderate rebels” in Syria, according to Penagon spokesman Col. John Dorrian. Unable to prevent Russia and Syria from winning the war against ISIS, the Pentagon is busy at work derailing the peace negotiations.
The military/security complex is using its puppets-on-a-string in the House and Senate to generate renewed conflict with Iran and to continue threats against China.
Clearly, Trump is not in control of the most important part of his agenda—peace with the thermo-nuclear powers and cessation of interference in the affairs of other countries.
Trump cannot simultaneously make peace with Russia and make war on Iran and China. The Russian government is not stupid. It will not sell out China and Iran for a deal with the West. Iran is a buffer against jihadism spilling into Muslim populations in the Russian Federation. China is Russia’s most important military and economic strategic ally against a renewal of US hostility toward Russia by Trump’s successor, assuming Trump succeeds in reducing US/Russian tensions. The neoconservatives with their agenda of US world hegemony and their alliance with the military-security complex will outlast the Trump administration.
Moreover, China is rising, while the corrupt and dehumanized West is failing. A deal with the West is worth nothing. Countries that make deals with the West are exposed to financial and political exploitation. They become vassals. There are no exceptions.
Russia’s desire to be part of the West is perplexing. Russia should build its security on relations with China and Asia, and let the West, desirous of participating in this success, come to Russia to ask for a deal.
Why be a supplicant when you can be the decider?
- Here Are The Countries Where Millennials Will Struggle The Most To Support Retirees
The United States is a demographic time bomb, plain and simple. Over the next 30 years, the U.S. economy will face an unrelenting demographic transition as ~75 million baby boomers exit the highest wage earning years of their life and start to draw down what little retirement savings they’ve managed to tuck away while wreaking havoc on the public “safety net” ponzi schemes, like Social Security, that will almost certainly be insolvent in a decade.
Per the U.S. Census Bureau, over the next 30 years, the number of people in the U.S. over the age of 65 is expected to double while those 85 and up will triple. Needless to say, the overall population growth of the United States is a fraction of that which means that millennials are about to get crushed by their parents….so it’s probably a good thing they already live in mom and dad’s basement.
But, since misery loves company, we figured we would take this opportunity to highlight Bloomberg’s “Sunset Index” which tracks the number of working age people per retiree, by country and confirms that the United States is far from alone in their pending demographic crisis.
While France and Singapore are currently the worst off with only 2.2 workers per retiree, the map below highlights just how pervasive the aging population crisis is around the globe.
The world’s working-age population is shrinking faster than expected, leaving fewer people to support a growing number of seniors, according to the Bloomberg Sunset Index.
As seniors increasingly outnumber people still in the workforce, pressures rise on investment pools, medical systems and funds to build economies for future generations.
“The demographics cannot be ignored, but there are solutions,” said Suzanne Kunkel, director of the Scripps Gerontology Center at Miami University in Oxford, Ohio. “Those solutions need to be cultural, political, economic. There is no magic answer. The reality is China will deal with it differently than Italy.”
Asia could be facing the toughest choices in allocating resources. The Asia Pacific Risk Center estimates the region’s elderly population will rise 71 percent by 2030, compared with 55 percent in North America and 31 percent in Europe.
Of course, the financial burdens placed on young people around the world as a result of aging populations is highly dependent upon the extent of social services that have been promised and just how poorly funded those ponzi schemes are..which doesn’t bode well for the United States.
“There are other-than-alarmist views about population aging,” said David Ekerdt, director of the Gerontology Center at the University of Kansas. “Advanced economies face rather different challenges depending on the social provisions they have promised and the declines in fertility that have occurred in these nations.”
The U.S., for example, has “very high health-care costs for all citizens,” he said. “I would also say, politically, that it’s a large leap to assume that social spending, if reduced for one group, would be applied to another group.”
But, not to worry, we’re sure that markets are adequately discounting these long-term demographic risks that are almost certain to lay waste to the global economy over the next two decades.
- Chicago Violence "Totally Out Of Control" In January; City On Pace For Most Homicides In 2 Decades
Submitted by Joseph Jankowski via Planet Free Will
Chicago is starting the year 2017 much like it did 2016: plagued with violence.
The number of shootings in the month of January nearly duplicated the tally from the start of last year, which was the bloodiest year in Chicago in more than two decades.
According to Chicago police, January ended with 51 murders, one more than last year. Per HeyJackAss!, here is how the daily murder totals trended over the past month:
From ABC 7 Chicago:
Police recorded 51 murders across the city last month, one more than January 2016, the department said. Although, the department said in a release last year that 51 people were murdered in Chicago in January 2016
Three police districts on the city’s South and West sides – the Englewood, Harrison and Austin districts – accounted for about half of the city’s murders last month.
Police counted 234 shooting incidents – eight fewer than in January 2016 – with 299 victims, an increase of eight compared to the same period last year.
The Deering District, which was one of the city’s top three districts for murders in 2016, saw a 50 percent reduction in murders last month compared to January 2016, police said. The department said 59 of the city’s 77 neighborhoods either remained flat or saw a reduction in murders last month compared to last January.
Officers recovered more than 600 guns last month, an increase of more than 60 percent over January 2016, police said. The department also noted that gun arrests overall have more than doubled compared to January 2016.
At a meeting with members of the African American community on Wednesday, President Donald Trump said that if Chicago officials don’t take steps to curb the violence, “we’re going to solve the problem for them.”
“Because we’re going to have to do something… What’s happening in Chicago should not be happening in this country,” Trump said.
Trump called the violence in Chicago “totally out of control.”
Darrell Scott, an Ohio pastor who campaigned for Trump and who was present at the Wednesday meeting, said that he was talking to members of “top gangs” in Chicago who wanted to sit down and discuss how to lower the body count inside the city. Per CBS Chicago 2:
“They reached out to me, because they’re associating me with you. They respect you. They believe in what you’re doing, and they want to have a sit-down about lowering that body count. So in a couple weeks, I’m going into Chicago,” Scott said. “I said we’ve got to lower that body count. We don’t want to talk about anything else; get that body count down, and they agreed that the principals that can do it – these are guys straight from the streets, no politicians, straight street guys – but they’re going to commit that if they lower that body count, we’ll come in and we’ll do some social programs.”
“It’s a great idea,” Trump said about a possible meeting involving gang leaders and social programs.
On January 24, President Trump tweeted that if Chicago is unable to stop the “horrible carnage” going on, he would be willing to “send in the feds.”
If Chicago doesn’t fix the horrible “carnage” going on, 228 shootings in 2017 with 42 killings (up 24% from 2016), I will send in the Feds!
— Donald J. Trump (@realDonaldTrump) January 25, 2017
Chicago saw a huge surge in violence in 2016: 762 murders, 3,550 shooting incidents, and 4,331 shooting victims, according to police.
- In Other (Disturbing) News…
- A Time For Caution
Submitted by Paul Brodsky via Macro-Allocation.com,
In Contrarianism in 2017 we cited the following macro dynamics that keep us cautious on equities, bullish on Treasuries and gold, and negative on credit:
- already steamy global equity market valuations
- already over-leveraged global balance sheets
- already old and aging global demographics
- already nervous US trade partners with alternative options for trade
- already hostile reactions from potentially belligerent foreign trade partners seeking to replace US global market share
Below, we explore each of these dynamics in depth.
Equity Valuations
Given the current macroeconomic and geopolitical setup (discussed below), the highest nominal and risk-adjusted returns in 2017 and into the foreseeable future will be captured through value investing.
The maps above and below, calculated by StarCapital, show the respective ranges of non-cyclically-adjusted and cyclically-adjusted P/E multiples across equity markets at the end of 2016.
Generally, the largest and most mature equity markets have the most extended P/Es (Graph 1). When those P/Es are cyclically adjusted (Graph 2), fewer equity markets appear to have steamy valuations. (CAPE valuations shown in Graph 2 are P/Es adjusted for the moving average of ten years of inflation-adjusted earnings.) Nominal P/Es strip out past economic trends, such as output growth and inflation, while Cyclically-Adjusted Price Earnings assumes future economic growth will look much like the past.
When CAPEs are significantly higher than P/Es it implies to us that businesses need faster economic growth than is available now to support equity prices. Notably, this is the case in the US and Japan. The performance of equity markets in economies where past output growth and inflation have been higher than they are today, such as Brazil and Australia, tend to look more reasonable when cyclically-adjusted. China appears relatively cheap in nominal terms and less-cheap in CAPE terms. Comparing these metrics is important because it highlights the need to have a strong macro and geopolitical opinion prior to allocating capital.
What if the future does not look like the past, specifically what if global GDP is lower and global inflation is higher? In such a scenario, we think the soundness of balance sheets – not revenues and earnings – would determine the relative performance of equity markets and the winners within them. The map below shows Price-to-Book ratios of global equity markets.
Using this metric, markets such as Russia, China and Brazil seem to be priced most reasonably. All things equal, the implication is that equity markets in some large emerging economies (and Japan) are priced best for a slowing global economy, all things equal.
Of course, all things are not equal. Geopolitics and FX exchange rates will play a significant role in equity performance given changes in global output and inflation. Since output and inflation are the primary drivers of geopolitics and exchange rates, developing a macroeconomic view of the world prior to allocating to world equity markets is critical.
It is also interesting to review valuation metrics across industries on a worldwide basis. We developed the table below from valuation data gathered by StarCapital:
A snapshot of valuations tells us little about the prospects for and industry, and different valuation metrics are more relevant than others depending on the industry. However, the good work provided by StarCapital not only shows that equities are fully valued on a worldwide basis, but also sets a baseline to compare specific geographies and businesses to global valuations. This should come in handy when macro and geopolitical events do not go according to consensus expectations.
Global Leverage
Monetary leverage is technically the quantity of bank assets in relation to the quantity of base money.1 Central banks are only obligated to create enough base money (through QE) to reserve bank assets. Since bank assets are technically created through the bank loan process, the majority of bank assets, which include deposits (i.e., money), is effectively credit extended by central banks.
Graph 4 shows the history of US dollar leverage. (Were the graph to go back to 1970, there would be virtually no leverage, as bank assets were effectively backed by gold.) As we can see, the Fed’s bank reserve creation beginning with QE in 2009 began to de-leverage the US banking, which stands at about a 4:1 ratio presently. We can assume that the onset of another recession would be treated by the Fed in the same way – a reversion to QE that further de-leverages the banking system. The limit of Fed QE that creates bank reserves is another $12 trillion. Reliable monetary leverage data across the world is difficult to come by, but we believe US dollars are among the least levered of all major currencies.
It is critical to understand that central bank responses to economic adversity – adversity that threatens the value of collateral supporting bank asset values – are devoted to saving its primary constituency, the banking system. There is no formal obligation to support the value of non-bank credit.
Economic leverage includes bank assets plus credit extended outright by bondholders and other, less formal creditors. The great majority of economic leverage is not technically the obligation of central banks because it is credit extended and debt held outside the banking system. This includes sovereign and provincial debt, household consumer, mortgage and school loan debt, and corporate debt.
US dollar leverage, when calculated by formal debt obligations versus base money, stands at over 15:1. (Even if we were to use formal debt obligations over deposits, leverage would still be about 5:1.) This leverage level gets closer to capturing the practical burden of outstanding debt. The burden comes in the form of debt service and eventual repayment.
To be clear, there is no need to repay debt as long as central banks have unlimited balance sheets; they can legally purchase all outstanding debt denominated in the currency they issue. In fact, throughout this long leveraging phase of the current super-leveraging cycle, aggregate debt has never been reduced, and indeed is growing at a parabolic pace as the cycle ages. To make matters even more threatening, there are obligations that are not captured in Graph 5 – off-balance sheet obligations such as unfunded entitlement obligations that analysts suggest place total dollar-denominated debt at well over $100 trillion (current dollars). This would bring the total US economic leverage ratio to over 25:1.
Finally, as it relates to defining the level of systemic leverage, debt is almost always issued at interest, meaning that for every dollar of debt issued it takes more money to repay it, depending upon its duration and the interest rate attached to it. The magnitude of all this dollar-denominated debt is not out of context with debt denominated in other currencies. As the graphs clearly illustrate, there is nowhere near enough money – formal or otherwise – to cover leverage levels across bank and non-bank balance sheets.
The bottom line is that credit – which is ultimately a claim on base money (not assets that collateralize debt) – is the mother of all bubbles, perhaps the biggest worldwide bubble ever. This is truly not hyperbole. The 17th century tulip craze in Holland, for example, in which 12 acres of land was exchanged for one Semper Augustus bulb, ultimately led to a crash in the price of assets and a debasement of guilders. Other currencies, however, were not nearly as affected. Today, all currencies are leveraged and ultimately tied only to the US dollar, the hegemonic global currency. As with all bubbles, the current currency bubble can only be remedied by either debt deflation, currency inflation, or both.
So then what should investors expect? Does there have to be an event that triggers a decline in confidence of global currencies or the dollar? We do not think so. At some point, money needed to service and repay debt should crowd out money available to pay for needs and wants. Where is that point?
There is no way to know for sure, however, the graph below shows worldwide credit in relation to private sector output through 2015. The continually rising ratio broke downward in 2000 when it exceeded 130% and again in 2006 and 2009 when it approached 130%. We assume the ratio is above that level now, especially since private sectors in the US, China, Europe and other economies continue to add debt amid slowing output growth rates. The idea that debt-funded government spending will support overall output growth is the latest hope among the growth-at-all-costs crowd. As it relates to this discussion, such a pursuit would be pointless if it does not extinguish private sector debt.
Finally, the graph below shows “what’s different this time”. In 1971, banks were able to begin expanding their balance sheets in relation to their economies once the global monetary system went off a fixed-rate of exchange to gold and political economists setting central bank credit policies were able to keep a perpetually accommodative lending environment.
The bottom line is that in the current global monetary regime money is a political concept without boundaries. (What could possibly go wrong…?)
Aging Demographics
In 1981, when the global economy was just about to embark on the leveraging phase of the super-leverage cycle, the average baby boomer in the US was 27 years-old. Today, the average baby boomer is 60. The same demographic shift holds true, more or less, across the largest advanced and advancing economies. In 1981, household debt levels were also much lower, and so household balance sheet were leverage-able. Interest rates off which bank loans and mortgages are priced were around 15%. Total mortgage debt was less than $1 trillion in the US.
As interest rates began to decline in 1982, young, aspirational baby boomers began to borrow to buy homes (which also allowed them to invest in risk assets). The technology-led growth in the mortgage backed securities market and the secular decline in interest rates further allowed them to continually refinance their debt and upsize their homes. Home mortgages in the US peaked at about $10.7 trillion in 2008, and has since declined by about a $1 trillion over the last eight years (see Graph 8 below).
The demand for risk assets at current prices, including homes and equity, is declining rapidly among the largest holders of them. This trend should accelerate in the coming years as baby boomers across all large economies get older, re-imagine their aspirations, and reduce consumption. The critical point is that while it is possible that past and current consumption of older populations will be replaced by their children, it is not possible for parents to pass down their assets at current values. Why? Because those assets are encumbered with debt that must be either extinguished or assigned (and taxed) upon death. There will be a growing supply of risk assets relative to new borrowings that would fund purchases of them.
Finally, it is well-known that 2.1 children per woman is the neutral fertility rate at which the global population neither grows nor contracts. As Graph 9 shows, world fertility rates are right at this level and fertility rates of women in high income economies are currently below it. So, it seems unlikely that consumer demand for goods and services can be sustained at current prices. Asset values that depend on demand and output growth derived from population growth should become stressed.
Trade
World trade rose significantly following the opening of China and the Russian bloc. Trade began to moderate as infrastructure and costs of production in emerging economies began to mature. Trade is once again more economic, more a function of debt-driven supply feeding debt-driven demand.
Meanwhile, consumers in importing economies ran up debts and became less able to provide sufficient demand for exporters. The net effect has been declining trade volumes, which used to grow at double the rate of GDP growth. Now, global trade struggles to grow at all.
Trade data released for November 2016 popped higher unexpectedly. (Graph 13 above only runs through October 2016.) This suggests that the reversal of the significant decline in the price of oil from mid-2014 through 2015 might now be pushing trade volume higher. If so, increasing trade volume from more oil exports should not be considered beneficial, as higher oil prices provides a further economic headwind.
As trade channels matured, exporters managed the exchange value of their currencies lower to make their goods and services cheaper to consumers in importing economies. This made the dollar appear stronger.
A very long term graph of the dollar (below) puts everything in perspective and implies much, in our view. The story it tells is a global economy struggling to grow organically and a monetary exchange system struggling to survive.
The graph begins in 1973 when the current flexible exchange rate monetary system officially began. The new regime centered on the US dollar as the global hegemonic currency rather than the dollar’s convertibility to gold at a fixed exchange rate, which had been the Bretton Woods model since 1945. The dollar’s exchange rate vis-à-vis other global currencies fell from 1973 through 1978, most likely due to the need to increase the supply of dollars to satisfy global trade. The dollar then began a long march higher, not peaking until 1985. This dollar strength fed on itself, and was likely due in large part to high interest rates and increasing demand for US Treasuries, which had risen meaningfully in 1980, and US equities, which had begun what would become a thirty year bull market.
The early 1980s experience showed that managing economies and trade in a flexible exchange rate system could work. US policy makers would maintain the exchange value of the dollar in a reasonably narrow range vs. the currencies of its trade partners, and in return it would be able to greatly influence global pricing of goods and services and offer its enormous consumer base for world consumption. The US economy, meanwhile, would benefit from importing capital to its financial markets.
The dollar declined from 1985 to 1995, but not so much as to threaten the viability of the regime. During this period, the US ran up significant budget deficits, which reduced the dollar’s relative attractiveness. This deficit spending coincided with lower income taxes and domestic incentives to invest. Significant capital was formed in the US and around the free world. US and NATO armaments were expanded and stockpiled. The flexible exchange rate monetary system had been used to outspend and open formerly closed and belligerent cold war economies that were not part of the regime, like China and Russia.
The dollar then strengthened from 1995 through early 2002, peaking near its long-term mid-range. No doubt dollar strength was influenced greatly by the substantial increase in equity prices that attracted global capital. The dollar again began to decline as the US and its allies went to war.
The war on terror remains a very difficult thing to analyze, perhaps because it is ostensibly not driven by economics. Anything contrary to the narrative centering on religious zealotry is considered a conspiracy theory. We accept that, but will argue the source of radical Islamic terror is economic just the same. There are two simple reasons for our skepticism.
First, economically content societies do not tend to produce broad religious fundamentalism that includes a culture of suicide. Second, an outright revolt from OPEC in the 1970s helped define the current finance-based monetary system. The system gave crude exporters the ability to exchange their natural resources for value in the form of a stable dollar and dollar- sterling- and then euro-denominated financial assets. Islamic societies abiding by Sharia law without natural resources to exchange were left out in the cold. The finance/leverage/inflation-based post-Bretton Woods monetary system impoverished them.
The dollar declined from 2002 to 2011 as America extended its deficit spending and the euro, sterling and gold provided reasonable alternative stores of value. It again found strength in 2011, and continues strong today. Why is the dollar’s exchange value vis-à-vis other currencies gaining now? We think it is more a function of other economies’ and currencies’ relative weakness. Simply, the prospects are dimmer for maintaining further balance sheet leveraging and economic growth in Europe, China, Japan, the UK and other major economies than they are in America. As Graph 16 shows, the US dollar index is experiencing lower highs and lower lows. This suggests a system in decline.
We have argued the current monetary regime is in its evanescence, and that the Fed is trying to raise rates to attract global wealth to dollars and dollar-denominated assets as global leverage, demand and output growth declines. If we are right, then we should not expect other economies to sit by idly.
Global Reaction
The final macro dynamic we discuss is the geopolitical challenge to US dominance over the post-Bretton Woods monetary system, NATO, and global trade. This is comprised of a complex range of issues that we cannot (and are not qualified to) fully explore; however we will touch on a few major issues that may be interesting to investors.
We begin with Donald Trump. His victory implies a near-majority of Americans recognized the domestic economy was not serving them. They were angry and sentimental and to them it was a desperate act.
Donald Duck would have defeated Hillary Clinton if he squawked about overturning globalization, which she helped create. It was inevitable that the effects of globalization would lead to revolt within the empire. Mr. Trump’s ultimate message was to scorch the power structure – Washington and media – and to replace it with something that better served, respected and reflected Americans. He is unlikely to satisfy his backers sufficiently for reasons discussed above.
Mr. Trump can have an economic impact on the margin. Better trade deals enforced by a stronger military and tougher immigration laws passed on the back of insensitive rhetoric have one thing in common: they evoke the promise of less economic efficiency, which in turn promises to benefit low wage American workers. It is unlikely to work. The World Wide Web, cheap labor, super-ag businesses, cheap energy and real time logistics are here to stay and available to all across the world…unless the political dimension erects barriers.
The natural tendency of economies is price deflation, and so it has become the tacit mission of politicians in advanced, highly leveraged economies to somehow create inflation that supports domestic debt service. This has to be executed through their central banks, which is tricky in Europe. Reviving comparatively high cost labor in advanced economies is even trickier. Protectionist trade policies, flipping off the Internet or starting a war with a major global trader could work in varying degrees, but only temporarily. Pesky economic incentives always win in the end, unless the war brings new resources, which seems highly unlikely in today’s world where resources are shared at the right price.
We believe foreign policy under Trump will be mostly practical and reactive.
Europe is where we see the greatest chance for political upset. The growing sense of aimlessness among indebted and increasingly superfluous labor does not seem to be an American phenomenon. It may explain Brexit and the rising popularity of truly far right politicians in Western Europe like Geert Wilders in Holland and Marine Le Pen in France. A win by one or both would further threaten the euro.
Should an irritated Recep Tayyit Erdo?an open Turkey’s borders and resume the diaspora of hundreds of thousands of Middle East emigrants (more unnecessary labor), Western Europe could take a right turn. Such an unlikely scenario a few months ago is becoming more likely, as Le Pen’s opposition is becoming embroiled in scandal and Great Britain is not releasing funds promised to Erdo?an.
A semi-reasonable scenario that gives Turkey so much power to alter Western European politics is a decent segue to Russia. Former Soviet bloc Eastern European countries may be annexed by Russia in the coming years. Encroaching on a NATO member without a military response, as Russia did in Ukraine, opens the door for an expansion of Russia’s borders. The Trump administration is signaling that deal making takes precedence over hard lines in the sand. We look for Putin and Trump to reach an understanding, potentially giving a pass to Russia to expand its western front in return for help in Syria and other parts of the Middle East.
We see Russia’s geopolitical role in the world as modified cold war realpolitik, which is to say not much different from America’s under Donald Trump. We expect a gradual thaw between Russia and the West made possible by a less hysterical reaction function among western policy makers and media.
Geopolitically, we do not see China playing a major disruptive role. It should continue to expand its influence in areas where there is no international push-back, like mineral rich Africa. The one exception will be the South China Sea, where it will continue to build outposts. It should also continue to let North Korea build and show-off its nuclear arsenal, keeping that card in the hole to be brought out only when it has a big “ask” (e.g., “let us control all shipping lanes in the South China Sea and we will annex and de-militarize North Korea”). A dealmaker in the White House with a penchant for greatness would give way.
China has shown great dexterity over the last twenty years adapting politically to the post-Bretton Woods global monetary system. After all, it is a socialized system perpetuated and overseen by the state. Its cornerstone is fiat money, which is money proclaimed to have value by governments and in which taxes may be exclusively paid. China has benefitted greatly by embracing the idea of boundless credit, running up debts to expand its infrastructure and fund current output growth.
The Peoples Bank of China stands ready – like the Fed and the ECB – to expand its opaque balance sheet to purchase public and private sector debt without recrimination or audit. We do not think China will be labeled a “currency manipulator” in a Trump administration. It is a hollow threat from the West, especially in times when the yuan would otherwise cheapen in FX markets. Branding China a manipulator would open up a Pandora’s Box that would not serve the geopolitical interests of established monetary boards. Beyond tough talk, we expect the Trump administration to accept the slow broadening of the band China uses to fix exchange rates.
- Fascists Shut Down Milo Event at Berkeley
Breitbart columnist, Milo Yiannopoulos, was supposed to give a speech at ultra left wing University at California Berkley — but was shut down by the AntiFA (anti-fascist) weirdos — who, rather ironically, act exactly like fascists by shutting down free speech of anyone they disagree with. It’s worth noting, AntiFA has been at the vanguard of the anti-Trump protests, making them — literally — anti-democratic.
Milo just released this statement, letting people know he was evacuated and that he was safe.
Stay safe everybody. pic.twitter.com/dLeL9BP382
— Stefan Molyneux (@StefanMolyneux) February 2, 2017
Here are some of the domestic terrorists at Berkeley.
I was going to attend Milo’s talk at UC Berkeley, but we heard some “booms”, fire alarms went off & were immediately escorted out #miloatcal pic.twitter.com/j3Ewk8NtPn
— Cassie Jaye (@Cassie_Jaye) February 2, 2017
Didn’t see what happened but a man is on the ground. Looks like he got hit. #Milo pic.twitter.com/AU2Hda4aKp
— Michael Bodley (@michael_bodley) February 2, 2017
RT juliacarriew: A group of antifa are shooting fireworks at the building where Milo is set to speak at Berkeley pic.twitter.com/gFBLhkrPed #…
— Antifa-GB (@Antifa_GB_1) February 2, 2017
#BREAKING?: University of California in Berkeley after protest against Milo Yiannopoulos turns violent ?? pic.twitter.com/teNDCtw7m3
— NIRP Umbrella (@NIRPUmbrella) February 2, 2017
“Milo first, Trump next.” pic.twitter.com/QnDtMTTrHR
— Jenny Luna (@J2theLuna) February 2, 2017
Celebration after Milo at Berkeley was canceled pic.twitter.com/7tW2ka8qcZ
— Julia Carrie Wong (@juliacarriew) February 2, 2017
Content originally generated at iBankCoin.com
- Global Bond Markets – Skydiving Without a Parachute
After almost 10 years of unprecedented accommodative
monetary policy both in the US and abroad, the fixed-income markets are trading
at lofty levels never before seen in history.
Let that sink in for a moment. Never
before. Not during world wars, not
during global depressions, never.If you think this is a case of scare mongering or me doing
my best Chicken Little imitation, it’s not. One third of global fixed-income bonds were recently trading
at a negative yields! The global bond
market has never been in a more perilous position, and I am surprised that
there are so few publications ringing the alarm bells. We are reminded on a daily basis of such
trivial risks that have no bearing on our everyday. But it’s tough to understand why there is such
limited press highlighting such glaring risks. This is especially alarming since we lived
through a fixed-income debacle in 2008 and know how devastating it was for
those unprepared.The world is fully invested and on the same side of this one-trick
global bond market trade. The hysterical
purchases that drove bond yields so low by governments, sovereign wealth funds,
banks, insurance companies and hedge funds seem to have abated and sales have just
begun. Who becomes the marginal buyer of
global bonds at these inflated prices? The
world has become accustomed to bond selloffs getting backstopped by global
central banks. This parachute of low
funding and outright government bond purchases that investors had relied upon as
protection from losses is largely behind us.The Fed has begun a rate rise cycle which will include
allowing purchased bonds to roll off and not be replaced as they mature. It appears other central banks are planning on
winding down their quantitative easing programs as well. Banks have largely finished hundreds of
billions in regulatory mandated bond purchases. Sovereign wealth funds and pension funds are
selling bonds to dip into needed cash for spending. Governments that have amassed trillions in
bond portfolios as a result of managed currency programs are shrinking these
portfolios as well. And hedge funds that have recently grown assets into the
hundreds of billions, investing in these overvalued bonds, trying to convert 1%
yields into 7% plus returns with the use of leverage, are starting to see
redemptions. One could always hope for a
negative shock such as a recession to bring out the marginal buyers at these
prices. But there are no signs of a
recession on the horizon nor would that be a guarantee of buyers entering the
market at these levels.Limited global bond buyers outnumbered by new issue bond
sellers should lead to higher bond yields going forward. If there was a trigger that encouraged the over
100 trillion bond market to start selling, prices could adjust lower
rapidly. And there are many triggers on
the horizon. With housing prices increasing over 5% annually, health care
prices expected to rise steeply, global food costs rising at the fastest pace
in years and wage pressures just beginning to percolate, inflation is poised to
surprise to the upside. Fiscal spending (or at least promises of such from our
Presidential candidates) is expected to increase, leading to higher growth
rates and reducing the allure of bonds. And
recently announced redemptions from large hedge funds who are typically
leveraged and long the bond market will lead to pressure on bond prices. We will see if these hedge funds’
outperformance was the result of those magical algorithms or just good old-fashioned
leverage in a market that was trending straight up. Most importantly, removal of accommodation
from monetary policy will deflate assets that are greatly inflated.But how overvalued could bonds possibly be? It’s been years since bonds have had any
losses and most traders and portfolio managers have never experienced a bear
market in bonds. When any market moves
in only one direction for almost a decade to such lofty levels, there is not
much preparation for a market reversal. Anyone
positioned for a market reversal over the past 10 years has long since been
blown out of their trades, fired or worse. There is a reason why betting on normalized yields
in the bond market has been called the “widow maker” trade. Today’s perception that bonds are a safe
investment is a mirage. The bond market
has roughly doubled in size in the last 10 years and any selling could be
catastrophic. Bond yields are much lower
and prices higher than during the onset of the 2008 bond market debacle. This is a benchmark for overvalued bond prices
and what to expect from a resulting market correction. If that’s not enough to get you to take pause,
let’s look at a real life example. Longer
dated bond yields historically average around 2% to 3% above inflation. Given today’s level of inflation, longer dated
bonds should yield closer to 5% instead of the current 2%. If long bonds normalize up to that 5% yield
level any time soon, the resulting price drop would equate to market losses of
40% or more!Now you know bond prices are in the outer stratosphere. You’ve been warned of the risks if you have
been counting on a monetary policy parachute to give you a safe landing. The central banks have started to take the
parachutes out of the planes. Beware if
you plan on skydiving.Michael Carino is the CEO of Greenwich Endeavors, a
financial service firm, and has been a fixed-income fund manager and owner for
more than 20 years.
- Dollar Dumps Most In 30 Years As Trump Raises Doubt Over "Strong Dollar Policy"
The US dollar is having its worst start to a year in decades…
As the Trump Administration is breaking from a long-standing, bipartisan policy of supporting a strong dollar, the greenback has fallen against its peers by 2.7%, the worst start to a year since 1987, after Ronald Reagan engineered a decline in the dollar to combat a flood of Japanese imports.
Finally, remember, nothing lasts forever…
As we noted previously, history did not end with the Cold War and, as Mark Twain put it, whilst history doesn’t repeat it often rhymes. As Alexander, Rome and Britain fell from their positions of absolute global dominance, so too has the US begun to slip. America’s global economic dominance has been declining since 1998, well before the Global Financial Crisis. A large part of this decline has actually had little to do with the actions of the US but rather with the unraveling of a century’s long economic anomaly. China has begun to return to the position in the global economy it occupied for millenia before the industrial revolution. Just as the dollar emerged to global reserve currency status as its economic might grew, so the chart below suggests the increasing push for de-dollarization across the 'rest of the isolated world' may be a smart bet…
The World Bank's former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.
"The dominance of the greenback is the root cause of global financial and economic crises," Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. "The solution to this is to replace the national currency with a global currency."
- 'Unrest' Is The Only Growth Industry Left
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
Benoît Hamon won the run-off for the presidential nomination of the Socialist party in France last weekend. The party that still, lest we forget, runs the country; current president François Hollande is a Socialist, even if only in name, but he did win the previous election. Hamon ran on a platform of shortening the workweek from 35 to 32 hours, legalizing cannabis and ‘easing’ the country into a universal basic income of €750/month per capita. He’s way left of Hollande, who has a hilariously low approval rating of 4%.
Hamon doesn’t appear to have much chance of winning the presidency in the two voting rounds taking place on April 23 and May 7, but we all know how reliable election predictions are these days, and in that regard France is as volatile as the next country. With conservative runaway favorite François Fillon accused of having paid his wife $1 million for doing nothing and Marine Le Pen, already desperately short on funds, targeted by the EU over money, who knows what and who will decide the election? Hamon may simply be the only one left standing on the day after the vote.
I bring up Hamon, about whom I know very little, not least because he was more or less a late minute addition to the field that was supposed to have been an easy win for his former boss Manuel Valls, I bring up Hamon because he confirms something I’ve been talking about for a while. That is, the fact that ‘leftist France’ chooses to go even more left than expected, goes a way towards proving my ‘theory’ that voters in many if not most western countries will move away from their respective political centers, and towards extremes.
This is an inevitable consequence of traditional, less extreme, politicians and parties having all become clustered together in shapeless and colorless blobs in the center, both in the US and in most European countries, combined with the fact that all of their policies -especially economic ones- have spectacularly failed vast amounts of people (or voters, if you will).
The failure of their policies has been hidden from sight by interest rates squashed like bugs, ballooning central bank balance sheets, real estate bubbles, fabricated economic data, and fantasy stories in their media that seem(ed) to affirm the ‘recovery’ tales, but they all ‘forgot’ to -eventually- line up reality with the fantasies. They never made 99% of people actually more comfortable. The entire politics-economics-media deus ex machina has failed because it was/is based on lies and fake news, meant to hide economic reality (i.e. negative growth), and this will have grave consequences.
People have started noticing this despite the official and media-promoted data. And they’re not going to “un-notice”. Not only don’t people -once they find out- like having been lied to for years, they dislike worsening living conditions even more. And that’s all they get; the only people who get it better are the rich, because without that the machinery can’t continue pumping up the ‘official’ numbers.
And what do you get? People complain about Trump. And they focus on one of his -seemingly- crazy ideas: temporarily closing US borders to refugees from nations with large Muslim populations. Which is a fine thing to resist, because yes, it’s a pretty silly idea, but why haven’t they paid similar attention to how they’ve been lied to for years on both the economy and on Syria, on how Obama became the Drone King and how many innocent people lost their lives because of that?!
To how favorite all-American gal Hillary screwed up Northern Africa when she declared We Came We Saw He Died and the death of Libya’s Gaddafi, who gave his country the highest living standards in the region, free education and free health care, but was murdered by Hillary’s US troops, co-created the chaos that led to so many people wanting to flee their homelands in the first place?
Why is that? Why are there protests when people are halted at an American border crossing but not when American and British and French and Australian forces blow the very same people’s homes to smithereens? Could that have something to do with where the protesters get their information? With how much they know about what’s happening in the world before it reaches their doorsteps?
Yes, people are suffering, and it’s very unfair what’s happening to many caught in the Trump Ban, but does anyone really believe that that’s where it started, that this is the first time (or even a unique time) that protest is warranted, or more so? And if not, why is it happening? Because people only notice stuff when it hits them in the face, I would presume, but who among the protesters would volunteer to agree they live their lives with blinders on? Not many, I would venture. So why do we see what we do? Where were you when Obama ordered yet another child, a family, which hadn’t yet made it to a US airport but might as well have, to be collateral damage?
I get why you’re protesting the Trump ban, but I don’t get why that’s your prime focus. I am guessing that most of the protesters would not have voted Trump in the first place, and would have been much happier -to put it mildly- for Hillary to be president right now. But if you would have paid attention in history class, you would know that it was Hillary who brought the refugees to your welcome mats to begin with.
Take it a step further, like to the January 21 women’s march, and you would realize that the vast majority of the refugees would have much preferred to stay where they grew up, where the women in their families, their sisters and aunts and daughters used to live. Most of whom are gone now, they’re either dead or diaspora-ed to Jordan, Turkey, Alberta, Sweden, Greece. All on account of Obama and his crew. Who of course blamed it on Assad and Putin. “I killed 1000 children, but I had to because those guys are so dangerous….”
This generation of refugees, of the huddled masses that the Statue of Liberty is supposed to teach you about, didn’t come to America because it’s the promised land; they came because America turned their homeland into a giant pile of rubble surrounded by garbage heaps and minefields. I don’t know if you’ve ever seen pictures of Aleppo before it was destroyed, but I dare you to tell me there is even one existing American city today that’s more beautiful than Aleppo was before Americans and their allies reduced it to dust. Here you go. This is Aleppo before America got involved in Syria:
There’s very little left of that beautiful city, with its highly educated people and their lovely happy children. And none of that has anything at all to do with Donald Trump! I don’t want to give you pics of what Aleppo looks like now. I want you to remember how lovely it was before ‘we’ moved in, years go. Sure, what you hear and see in the west is that Assad and Putin are the bad guys in this story. But now that the US/EU supported ‘rebels’ are gone, dozens of schools are reopening, and medical centers, hospitals. Who are the bad guys now?
And yeah, Trump is an elephant, and elephants are always awkward and they’re messy and they tend to kick things over and when they make mistakes those tend to be huge, but how much valuable china does the US really have left anyway? Isn’t it all perhaps just a sliver off target, the demos, the outrage and indignation? Is the idea that your army can destroy people’s living environments with impunity without you protesting in anything approaching a serious way, and that then you get to demand, through protest, that those same people are allowed entry into your country? That’s way too late to do the right thing.
I started out making the point that as our politico-economic systems are failing, voters will move away from the center that devised and promoted those systems, and that this will happen in many countries. The US could have had Bernie Sanders as president, but the remaining powers in the center made that impossible. Likewise, many European countries will see a move towards either further left or further right.
Since the former is mostly dormant at best, while the latter has long been preparing for just such a moment, many nations will follow the American example and elect a right wing figurehead. This will cause a lot of chaos, but that’s not necessarily a bad thing. People need to wake up and become active. The recent US demonstrations may be a first sign of that, even though they look largely out of focus. More than anything else, people need a mirror, they need to acknowledge that because they’ve been in a state of mindless self-centered slumber for so long, they have work to do now.
And that work needs to consist of more than yelling at the top of your lungs that Trump and Le Pen and Wilders are such terribly bad people. For one thing because that will only help them, for another because they were not the people who put you to sleep or were supporting mindless slaughter in faraway nations or were making up ‘official’ numbers as your economies were dumped into handbaskets on their way to hell. So ask yourselves, why did you believe what Obama was saying, or Merkel, or Cameron, Sarkozy, Rutte, you name them, while you could have known they were just making it all up, if only you had paid attention?
Why? What happened? Why did the term ‘fake news’ only recently become a hot potato, even though you’ve been bombarded with fake and false news for years? Is it because you were/are so eager to believe that your economy is recovering that any evidence to the contrary didn’t stand a chance? If so, do realize that for many people that was not true; it’s why they voted for the people you now so despise. Is it perhaps also because you’re so eager to believe your ‘leaders’ do the right thing that you completely miss out on the fact that they’re not? And whose fault is that?
In yet another angle, people claim that the planet’s in great peril because Trump doesn’t ‘believe’ in climate change. But it’s not Trump’s who’s the danger when it comes to climate change, you are, because you’re foolish enough to believe that things like last year’s infinitely bally-hood Paris Agreement (CON21) will actually ‘save’ something. That belief is more dangerous than a flat-out denial, because it lulls people into sleep, while denial keeps them awake.
It’s the idea that there’s still time to rescue the planet that’s dangerous, because it’s the perfect excuse to keep on doing what you were doing without having to feel too much guilt or remorse. You’re not going to save a single species with your electric car or whatever next green fad there is, the only way to do that is through drastic changes to your society and your own behavior.
That’s not only true with respect to the climate, it’s just as valid with respect to the refugees on your doorstep. If you want to rescue them, and those who will come after them, the only thing that makes any difference is making sure the bombing stops, that the US and European war machines are silenced. If you don’t do that, none of these protests are of any use. So sure, yeah, by all means, protest, but make sure you protest the real issues, not just a symptom.
That doesn’t mean you should shut the door in the face of these frail forms fainting at the door, that’s just insane, but it does mean that after welcoming your guests, you will also have to make sure what brought them there must stop. If you stop killing and maiming these people, and help rebuild Aleppo and a thousand other places, they won’t need to come to your door anymore.
As for the political field, unrest will continue and grow because the end of economic growth means the end of centralization, and our entire world, politically, economically, what have you, is based on these two things. Today, unrest is the only growth industry left. And it’s not going away anytime soon. It’s a new day, a new dawn, it’s just that unfortunately this is not going to be a pretty one.
Still, none of it is unexpected. The Automatic Earth has been saying for years, and with us quite a few others, that this was and is inevitable. Of course there are those who say that we cried wolf, but we’ll take that risk any day. Saw a nice very short video of Mike Maloney saying in 2011 that Obama would have to double US debt between 2008 and 2016 just to keep the entire system from starting to collapse, running to stand still, Alice, Red Queen and all. And guess what?
There’s the recovery as it’s been sold to you. It’s all been borrowed, to the last penny. Will Donald Trump double US debt once again? Will the EU countries do the same? How about Japan and China? And to think that federal debt isn’t even the worst threat, personal debt is, and so many of us carry so much of that, and try to pass off our mortgaged homes as assets, not debt. An increasingly desperate game on all fronts.
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