Today’s News 6th March 2016

• Trump Supporters – In Their Own Words

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  I don’t find conversations about how morally repugnant Trump is to be interesting when the rest of the candidates seem to also support imperialistic and fascist policies concerning drone strikes, torture and mass surveillance.

   

  Do I like Trump’s platform? No, I think most of it is silly and misguided, but at least it is not the same bullshit casserole that has been on the menu in Washington DC for as long as I have been alive.

   

  His candidacy is a happy accident that is currently ripping the soul of America apart, which is something that I think we desperately need (and deserve) at this time in our history, for better or for worse. 

  – From the Guardian article: ‘Not Even My Wife Knows’: Secret Donald Trump Voters Speak Out

  The Guardian recently asked Trump supporters to explain in detail the rationale behind their support. What emerged is one of the most fascinating articles I’ve read all year. Not only are the demographics not what you’d expect, but their reasons for support were much more varied, complex and nuanced than you might imagine.

  One surprisingly common response consisted of people who supported Trump despite the recognition that his presidency could be an unmitigated disaster. Many of them believed the American populace was in need of such a disaster in order to shed its apathy and become politically active.

  Interestingly, I’ve harbored similar thoughts on various occasions. For example, perhaps it will take someone as in your face authoritarian and shameless as Trump to wake certain millennials to the fact there are bigger problems in this world than micro aggressions. It’s a major gamble, but we as a country definitely need to get off our asses and change the direction we’re headed in. It’s possible that Trump could serve as that wake up call, but it’s also a huge risk.

  Also noteworthy was the fact that many Trump supporters expressed admiration for Sanders as well, but would never vote for Hillary. These types could very easily make up a new “silent majority” in American politics.

  Now without further ado, here are some of the more interesting responses. You can read the entire article at The Guardian:

  The Hispanic attorney (29, Florida)
  ‘He has demonstrated that he is, at heart, a caring person’

  On paper, I probably look like a guaranteed Cruz or Rubio vote. I’m a millennial woman, my parents immigrated from Castro’s Cuba, I work as a trial attorney in Miami and I’m a born-again Christian. But I’m voting for Donald Trump, and I’ve convinced all my friends and family to do so as well.

   

  My sister worked for him and has spoken glowingly of him for years, just like everyone else who actually knows the man. I trust her judgment more than any random pundit’s. Actions speak louder than words, and he has demonstrated that he is, at heart, a caring person through his many random acts of kindness. His peers say there are “two Trumps” – the brash character he portrays himself as, and the decent man they know behind closed doors. It’s clearly a strategy; his proclamations have kept him on the front pages for a sustained eight months.

   

  Political correctness is the birthplace of disastrous, un-American policies that will destroy the country in a death by a thousand cuts. But here comes Trump, the first person who didn’t even blink when the machine turns its sights on him.

   

  He didn’t just fight back. He chewed it up and spit it out.

  The scientist who likes both Bernie and Donald (48, California)
  ‘I’m very concerned about radical Muslims’

  I moved to San Francisco from the UK in 2000. I’m a citizen now and I voted for Obama. I am a closet Trump supporter and I haven’t told any of my friends or co-workers. They would think of me as a meat-head if they knew.

  The funny thing is that I like Trump and Sanders, and there’s no party or politician for me.

  There’s that “I like both Trump and Sanders” sentiment. I’ve been writing about this repeatedly in recent days. See:

  Democratic Presidential Candidate Jim Webb Says He Won’t Vote for Clinton, Might Vote Trump

  “Bernie or Bust” – Over 50,000 Sanders Supporters Pledge to Never Vote for Hillary

  Why Hillary Clinton Cannot Beat Donald Trump

  I’m a patriotic socialist, but my strong-borders patriotism wins over my socialism if I have to choose. As Donald says, we either have a country or we don’t.

  This next one is probably my favorite…

  The Occupy protester turned Trump supporter (24, New York)
  ‘His candidacy is ripping the soul of America apart – we deserve it’

  I work in a liberal arts department. I’ve read the works of Karl Marx, Herbert Marcuse, John Stuart Mill, Friedrich Nietzsche, Plato, Judith Butler, Simone de Beauvoir, Michel Foucault and so on. I am more inclined to listen to what Slavoj Žižek or Noam Chomsky have to say about current affairs than Rachel Maddow or Bill O’Reilly. If one were to take account of my demographics, the smart money would be to peg me for a Bernie Sanders supporter.

   

  My interest in politics did not truly develop into an intellectually mature form until 2011, when Occupy Wall Street broke out as a populist leftist grass roots movement to combat the evils of unrestricted robber baron capitalism.

  Early in 2014 I began concealing my political opinions from people, and it was shortly after this time that I began plotting to vote Republican in hopes that the party would send the country so far in the direction of complete unrestricted neoliberalism and libertarian free market superstition that Americans would come to recognize the dangers of these ideologies and eventually reject them.

   

  I don’t find conversations about how morally repugnant Trump is to be interesting when the rest of the candidates seem to also support imperialistic and fascist policies concerning drone strikes, torture and mass surveillance.

   

  I don’t agree with discussions of how Trump is making the national dialogue more base and vulgar when Obama has instated common core standards to gear humanities education in public schooling to be teaching children how to read memos, rather than cultivating critical thinking skills that would allow them to understand subtle arguments.

   

  Do I like Trump’s platform? No, I think most of it is silly and misguided, but at least it is not the same bullshit casserole that has been on the menu in Washington DC for as long as I have been alive.

   

  His candidacy is a happy accident that is currently ripping the soul of America apart, which is something that I think we desperately need (and deserve) at this time in our history, for better or for worse. I support whatever strange gods happen to be behind his candidacy, for, as Martin Heidegger proclaimed in his famous Der Speigel interview, although for slightly different reasons, “Only a God can save us.”

  The casino supervisor (56, Oklahoma)
  ‘We are completely tired of government’

  I am a Democrat but will vote for Trump, because he is not bought and paid for by anyone. We the American people are tired of politicians owing favors to rich businessmen, bankers, oil companies and stock markets. It should be against the law to have lobbyists involved with government.

   

  The middle class and lower class – which I am part of – are completely tired of our government, which treats our veterans like they don’t even exist. These are men and women who have gone to fight for what they think was the right reason, only to see that it was for money or some arms sale that is done behind closed doors. We are also sick and tired of working and paying taxes and then seeing our government send it to other countries to benefit someone else when we have homeless people and vets that need it just as much.

  The yoga teacher (29, Tennessee)
  ‘Don’t publish my name. It would ruin my progressive image’

  Barack Obama talked about hope and change, but I believe he failed to deliver on his promises. His record with drone strikes and prosecutions of whistleblowers are especially troubling (not to mention he didn’t follow-through with prosecutions of those who caused the financial crisis).

   

  As far as Obamacare goes, I’m not buying it, because it seems ignorant to throw money at a problem and hope it will get better. I’m glad more people are covered, but the plans aren’t worth shit, as many of them don’t kick in until you spend thousands on a co-pay. No thanks.

   

  Bernie is a breath of fresh air, but I’m not sure he can beat Hillary. In a match between Bernie and Donald, I’d vote for the former. In a match between Hillary and Donald, I’d vote for the latter. It isn’t a vote for Trump, but rather a vote against the political establishment (which must be removed from office at any cost – even if it means electing a reality TV star for president). The stakes are too high. Hillary cannot win or the oligarchy will continue unabated.

  There’s another “I prefer Bernie to Trump, but I’d take Trump over Clinton” voter. There are more of these than most people recognize.

  And please don’t publish my name, it would ruin the whole “progressive” image (and my girlfriend might kill me).

  I bet a lot of pragmatic sorts are in the same boat …

  The retired biomedical engineer (56, Hawaii)
  ‘It’s too late for a cure’

  Given a chance, I would vote for Bernie. But the only choices will probably be Trump and Clinton. In that case, I will vote for Trump.

  It’s almost getting to be a broken record at this point.

  I believe that Clinton will continue the Wall Street-style march to oligarchy. With her, the eventual demise of democracy will lead to a fascist plutocracy. It is going on right now, and it will continue to be slow, painful and inevitable.

   

  I believe that it is too late for a conventional cure. So, there is Trump. He is indeed a buffoon and a recipe for disaster. If he were to do half of the horrific things he says he would, he would be a catastrophe. He could be a blend of Hitler and Hirohito.

   

  That’s why I would vote for him. The last time we crossed paths with a Hitler and/or Hirohito, the country woke up and fought. And won! He might supply us with the shock we need in order to wake up and fight.

  While risky, you can’t argue with the logic.

  The gay Arab Muslim student (20, Missouri)
  ‘My parents are horrified’

  As a gay muslim, the Republican Party has not been kind to me, to say the least. However the Democrats almost arrogantly expect me to hand my vote to them because of who I am, which insults me.

   

  I am a son of immigrants but we have always followed the law to the letter. Donald Trump’s discussion on immigration is extremely relevant. I even support the temporary ban on Muslims, even though I still have many law abiding family members in Syria who deserve the opportunity to come to the US and escape the horrors of the war. We don’t vet these people properly. To let them in willy nilly is ludicrous.

   

  Trump will break the poisonous bonds that hold America and the cult state of Saudi Arabia. Clinton would never do that; she would continue supporting Saudi Arabia while bombing Islamic countries left and right.

  The anti-PC college professor (50, California)
  ‘I’m angry at forced diversity’

  I’m a liberal-left college professor in the social sciences. I’m going to vote for Trump but I won’t tell hardly anybody.

   

  My main reason is anger at the two-party system and the horrible presidencies of Obama and Bush. But I’m also furious at political correctness on campus and in the media.

   

  I’m angry at forced diversity and constant, frequently unjustified complaints about racism/sexism/homophobia/lack of trans rights. I’m particularly angry at social justice warriors and my main reason to vote Trump is to see the looks on your faces when he wins.

   

  It’s not that I like Trump. It’s that I hate those who can’t stand him.

  The white male early retiree (62, Delaware)
  ‘Trump is a wake up call’

  Trump is a wake up call. A president Trump could be as bad as Hitler, but if he shocks some good people in both the Republican and Democratic parties into realizing that they are ignoring legitimate concerns of a seizable minority, then let him have his four years.

  There’s that same logic again. Get Trump in there as a shock to the system, even if the shock is a dangerous one.

  The manager (52, South Carolina) 
  ‘People would realize democracy is messy’

  Not even my wife knows.

   

  I voted for Trump with the faint hope that his election would actually be good for the country. If he were elected, it would perhaps teach more to the country than all the high school civics lessons in the our nation’s brief history.

   

  If elected, Trump would accomplish very little to none of his vacuous agenda. His congressional agenda would be as dead on arrival as that of Bernie Sanders’s. So what good could result? Perhaps more people would begin to realize that members of Congress, governors, mayors, and members of the state houses have the real power. That the framers of the Constitution created this wonderfully balanced system in which no one person holds the kind of power that Trump claims he could wield. That democracy is messy and frustrating. That change involves more hard work than just voting for somebody who says the right things.

  This article results in only one obvious conclusion as pertains to the 2016 election. Sanders could put up a very strong fight against Trump and possibly win. In contrast, Hillary is an extraordinarily weak and vulnerable candidate, and could get demolished in a head to head matchup with Trump.

  

  

  

  

• Voices Of Reason In An Unreasonable World – Meet The Free-Market Economist That Stood Up To Hitler

  In the current time of unprecedented central-planner-focused monetary-policy experimentation and a growing bias towards collectivist and socialist attitudes, the similarities to what Wilhelm Ropke – the European economist who stood up to Hitler – had some seemingly ominous and prescient persepctives in 1933 before everything collapsed:

  The loss of traditional human connections, the dehumanization of man in mass society, and the corruption of the political and economic marketplaces, Röpke argued, had created the sociological and psychological conditions for the emergence of and receptivity to the collectivist idea and its promise of a new community of man, a transformation of the human condition, and a better society designed according to a central plan.

   

  All these were false promises and hopes. Collectivism, whether of the fascist or communist sort, meant the end of a rational economic order, threatened the loss of freedom and the end to human dignity, and required the reduction of man to the status of an insect in what Röpke often referred to as the socialist “termite state.”

  Any of that ring any bells? Social media? Inequality? SuperPACs? Rigged Markets? … Bernie Sanders' Socialism? Collectivist resignation to central planner authority?

  It did not end well then and will not end well this time.

  Submitted by Richard Ebeling via EpicTimes.com,

  Sometimes there are men of principle who live their values and not merely speak or write about them. People who stand up to political evil at their own risk, and then go on to say and do things that help to remake their country in the aftermath of war and destruction. One such individual was the German, free-market economist, Wilhelm Röpke.

  Born on October 10, 1899, Wilhelm Röpke died half a century ago on February 12, 1966. It seems appropriate to mark the fifty-year passing of one of the great European economists and advocates of freedom during the last one hundreds years.

  In the dark days immediately following the rise to power of Adolf Hitler and his Nazi movement in Germany in January 1933, Röpke refused to remain silent. He proceeded to deliver a public address in which warned his audience that Germany was in the grip of a “revolt against reason, freedom and humanity.”

  Nazism as the Destruction of Decent Society

  Nazism was the culmination of Germany’s sinking into ”illiberal barbarism, Röpke said, the elements of which were based on: (l) “servilism,” a “longing for state slavery,” with the state becoming the “subject of unparalleled idolatry”; (2) “irrationalism,” in which ”voices” in the air called for the German people to be guided by “blood,” “soil,” and a “storm of destructive and unruly emotions”; and (3) “brutalism,” in which “The beast of prey in man is extolled with unexampled cynicism, and with equal cynicism every immoral and brutal act is justified by the sanctity of the political end.” Röpke warned that, “a nation that yields to brutalism thereby excludes itself from the community of Western civilization.” He hoped Germany would step back from this abyss before its people had to learn their mistake in the fire of war.

  Röpke also spoke out against the Nazi dismissal of Jewish professors and students from German universities, which began in April 1933. The Nazis denounced him as an “enemy of the people” and removed him from his professorship at the University of Marburg. After an angry exchange with two SS men sent to “reason” with him, Röpke decided to leave Germany with his family, and accept exile rather than live under National Socialism.

  A Man of Courage and Principle

  Wilhelm Röpke was a leading intellectual figure of twentieth-century Europe. He combined conservatism with classical liberalism to develop a political philosophy he called a market-oriented “middle way” between nineteenth-century capitalism and twentieth-century totalitarian collectivism. He also became a spiritual guide and political-economic architect of Germany’s “social market economy” in the post-World War II era. As the famous Austrian economist, Ludwig von Mises, wrote when Röpke died in 1966 at the age of 66,

  “For most of what is reasonable and beneficial in present-day Germany’s monetary and commercial policy credit is to be attributed to Röpke’s influence. He [is] rightly thought of as [one] the intellectual authors of Germany’s economic resurrection . . . The future historians of our age will have to say that he was not only a great scholar, a successful teacher and a faithful friend, but first of all a fearless man who was never afraid to profess what he considered to be true and right. In the midst of moral and intellectual decay, he was an inflexible harbinger of the return to reason, honesty and sound political practice.”

  Röpke grew up in a rural community of independent farmers and cottage industry craftsmen. His father was a country doctor. That upbringing can be seen in his later belief that a healthy, balanced, small community is most fit for human life.

  The event, however, that shaped his chosen purpose in life was his experience in the German army in the First World War. War was “the expression of a brutal and stupid national pride that fostered the craving for domination and set its approval on collective immorality,” Röpke explained. The experience of war made him decide to become an economist and a sociologist when the cannons fell silent. He entered the University of Marburg, from which he earned his doctoral degree in 1921. In 1929 he was appointed professor of economics at the University of Marburg, a position he held until his expulsion by the Nazi regime in 1933.

  After leaving Germany in 1933 he accepted a position at the University of Istanbul, Turkey, In 1937 he was invited to become a professor of international economic relations at the Graduate Institute of International Studies in Geneva, Switzerland, a position he retained until his untimely death on February 12, 1966.

  After the German occupation of France, Röpke was three times offered a teaching position at the New School for Social Research in New York (in 1940, 1941, and 1943) as a means of escape from Nazi-occupied Europe. But each time he turned down the invitation to leave neutral Switzerland, having decided to continue to be a voice for freedom and reason in a totalitarian-dominated Europe.

  In the 1950s, after the war, he was an economic adviser to the government of West Germany. He also was one of the leading figures of a group of market-oriented German economists who in the postwar period became known as the Ordo-liberals; their purpose and goal was the construction of a “social market economy” that assured both an open, competitive order and minimal social guarantees.

  Monetary Mismanagement and the Great Depression

  In the 1920s and for part of the 1930s, a primary focus of Röpke’s writings was business-cycle theory and policy. His most significant work in this field was his 1936 volume Crises and Cycles. Röpke argued that a complex division of labor with a developed structure of roundabout methods of production, held together by the delicate network of market prices for finished goods and the factors of production, had the potential to occasionally suffer from the cyclical waves of booms and depressions.

  The cause of such cycles was periodic imbalances between savings and investment in the economy. While not completely following the “Austrian” theory of the business cycle, Röpke’s approach moved along similar lines, arguing that a monetary expansion that kept the market rate of interest below the level that could maintain a balance between savings and investment would feed investment projects and cause misdirections of labor and resources into production processes in excess of the savings available to sustain them in the long run.

  Röpke’s particular contribution to the analysis of the business cycle was his theory of what he called the “secondary depression.” When the boom ended, an economic downturn was inevitable, with the investment excesses of the upturn having to contract and be readjusted to the realities of available savings and the market-based patterns of supply and demand. But while serving on the German National Commission on Unemployment in 1930–1931, he came to the conclusion that there were negative forces at work at that time far beyond any normal type of post-boom adjustment.

  The failure of cost prices to promptly adjust downward with the decline of finished-goods prices was causing a dramatic collapse of production and employment. Rising unemployment resulted in declining incomes that then created a new round of falling demands for goods in the economy, which in turn brought about another decrease in production and employment. At the same time, growing unprofitability of industry made businessmen reluctant to undertake new investments, resulting in the accumulation of idle savings in the financial markets. Such a sequence of events generated a cumulative contraction in the economy that kept feeding on itself.

  Röpke concluded that this secondary depression served no healthy purpose, and the downward spiral of a cumulative contraction in production and employment could only be broken by government-induced credit expansion and public works projects. Once the government introduced a spending floor below which the economy would no longer go, the market would naturally begin a normal and healthy upturn that would bring the economy back toward a proper balance.

  In 1933, when Röpke published in English an article explaining the findings of the German Commission on Unemployment, John Maynard Keynes expressed to Röpke his “great satisfaction” that German economists were reaching the same conclusions as he had, namely, that government needed to take an active role in steering the economy.

  But Röpke had no sympathy for Keynes’s belief that the market was inherently unstable and permanently in need of government management of “aggregate demand.” In Röpke’s view the Great Depression represented a “rare occurrence” of an “exceptional combination of circumstances” that required “a deliberate policy of additional ‘effective demand’ into the economic system.”

  But, Röpke continued, Keynes’s construction of a “general theory of employment” based on the exceptional circumstances of the early 1930s was a “counsel of despair” and an extremely dangerous one, because it created a rationale for continuous government tinkering and a strong inflationary bias harmful to the stability of the market economy in the long run. Indeed, Röpke became a leading critic of Keynesian economics after World War II.

  The Crisis of Western Civilization

  But the central issue that absorbed almost all of Röpke’s intellectual and literary efforts in the 1930s and 1940s was what he considered the crisis of Western civilization, the most stark and terrible symptom of which was the rise of totalitarian collectivism as represented by Soviet communism, Italian fascism, and German National Socialism.

  But the heart of Röpke’s critique of the decay of Western civilization and the path for its renewal was in a trilogy published during the war: The Social Crisis of Our Time 1942), Civitas Humana (1944), and International Order (1945). This was followed at the end of the war by The Solution of the German Problem (1945). And a further reformulation of his conception of a properly ordered and balanced society was offered in A Humane Economy: The Social Framework of the Free Market (1958).

  The achievements of the eighteenth century, in Röpke’s view, were the use of reason for a balanced understanding of both the natural and social world; the awakening of an insight into the possibilities of a free, spontaneous order of market relationships; a conception of man that looked at him in proportionate human terms; and a sense of humanity in appreciating and wanting to improve the human condition. One of these insights was that a free-market order that both liberated man from the status and caste society of the past and dramatically improved his standard of living; and the liberal, democratic ideal in which the individual possessed rights to life, liberty, and property, and in which peace and tolerant political pluralism replaced imperial violence and political absolutism.

  But as Röpke saw it, many of these achievements and successes had been twisted in the nineteenth century. The use of reason had become “unreasonable,” as there emerged a hyper-rationalism that claimed to have the power to discover the secrets for social engineering. The triumphs of the natural sciences in mastering the physical world had fostered a “cult of the colossal,” in which there was a worship of the things of the material world and the desire for the creation of objects bigger than human life. This cut man loose from all the societal moorings of family, community, and the harmonies of local life, And the ideal of democratic pluralism had been undermined and reduced, increasingly, into an arena of special-interest political plunder.

  Collectivism and the Termite State

  The loss of traditional human connections, the dehumanization of man in mass society, and the corruption of the political and economic marketplaces, Röpke argued, had created the sociological and psychological conditions for the emergence of and receptivity to the collectivist idea and its promise of a new community of man, a transformation of the human condition, and a better society designed according to a central plan. All these were false promises and hopes. Collectivism, whether of the fascist or communist sort, meant the end of a rational economic order, threatened the loss of freedom and the end to human dignity, and required the reduction of man to the status of an insect in what Röpke often referred to as the socialist “termite state.”

  Röpke was uncompromising in his insistence that only the market economy was consistent with both freedom and prosperity. Only the market, with its system of private property rights, provided the framework to harness individual incentives and creativeness for the benefit of society. Only the market could generate the competitive process necessary for the formation of prices that could successfully coordinate supply and demand. Only the market gave each individual the freedom to be an end in himself while also serving as a voluntary means to the ends of others through the mechanism of exchange.

  Yet in Röpke’s view the market by itself was not enough. The humane society required going “beyond supply and demand,” to the construction of an institutional order that incorporated the market in a wider social setting. The market economy needed strong ethical moorings to give a sound moral foundation to market order. Röpke held views concerning the role of government in a free society that were wider than many free market advocates today might consider necessary and appropriate.

  But beginning in the 1950s, Röpke argued that the growing politicization of economic and social life through an expanding interventionist-welfare state undermined the possibility for a successful international order based on peace, mutual prosperity, and a rational allocation and use of the resources of the world. International order required countries to practice sound policies at home: respect for private property, enforcement of contracts, protection for foreign investments, limited government intervention, and non-inflationary monetary policies.

  Networks of international trade and investment would then naturally and spontaneously connect the world through private market relationships. For this reason, Röpke was doubtful that European economic and monetary integration could be successfully imposed as long as the member states were unwilling to follow the necessary domestic policies of limited government and open, competitive market capitalism. Tensions and conflicts were inevitable in an age dominated by collectivist and interventionist ideas.

  A Voice of Reason in an Unreasonable World

  Wilhelm Röpke was more than just an economist. During some of the darkest decades of the twentieth century, he sounded more like an Old Testament prophet warning of the dangers from a loss of our moral compass. Collectivism had few opponents in our century with as much of a sense of ethical purpose.

  Precisely because he was an economist by training, Röpke understood the indivisibility of personal, political, and economic freedom in a way that many other critics of socialism in its various forms could never articulate. The appreciation of history and the historical context in his analyses only enriched the persuasiveness of his message. The rebirth of the market economy in Germany and in other parts of Europe after 1945 owes a great deal to his intellectual efforts and legacy.

  

  

  

  

  

• "Lesbians" vs "Step Sisters" – Most Popular Porn Searches Reveal A Surprising Pattern

  In a nation as ‘distracted‘ as America where virtual relationships seem more popular than real ones, it appears different states ‘attention‘ is drawn to very different methods of entertainment.

  In 30 states in the West, Midwest and East, “lesbian” was on top as the most commonly searched term. And the term was most popular in California where there were 187,000 searches for the word in January.

   

  Looking north, “step sister” took the crown in states such as Wyoming, Montana, Minnesota and Ohio, while “step mom” was a winner in Alaska, Washington, Kentucky and New Hampshire.

   

  In states with the highest proportion of African American residents—Mississippi, Louisiana and Georgia—”ebony” was preferred.

   

  One state with unique taste was Rhode Island where people were searching for “MILF” videos.

  

  Source: Pornhub

   

  Which might explain this…

  

   

  And this…

  

  

  

  

  

  

• Visualising America's "Irrelevant" Exports & Imports

  The U.S. Census Bureau recently released its data on U.S. trade in goods by selected countries and world region for 2015. HowMuch.net built three maps to provide a proportional visualization of the trade that occurs between the U.S. and other countries.

  Exports are represented in green, imports are represented in red, and the balance (exports – imports) is represented by red or green depending on whether the U.S. has exported more or less goods than it has imported. For instance, if a country’s imports exceeds its exports, the country will experience a trade deficit, which represents an outflow of domestic currency to foreign markets.

  Based on the data, the U.S. exported over $1.5 trillion and imported over $2.2 trillion in goods throughout 2015. This leaves leaves the U.S. with a negative balance of $735 billion!

  Largest Balances by Country

  

  Take a look at the top 5 countries with the largest balances (positive and negative):

  Top 5 Positive Balances

  • Hong Kong: $30.5 billion

  • Netherlands: $24.0 billion

  • Belgium: $14.6 billion

  • Australia: $14.2 billion

  • Singapore: $10.4 billion

  Top 5 Negative Balances

  • China: $365.7 billion

  • Germany: $74.2 billion

  • Japan: $68.6 billion

  • Mexico: $58.4 billion

  • Ireland: $30.4 billion

  Top 5 Countries for Exports

  

   

  Take a look at the top 5 countries that the U.S. has exported goods to:

  • Canada: $280.3 billion

  • Mexico: $236.4 billion

  • China: $116.2 billion

  • Japan: $62.5 billion

  • United Kingdom: $56.4 billion

  Together the top 5 countries make up about 50% of all U.S. exports.

   

  Top 5 Countries for Imports

  

  Take a look at the top 5 countries that the U.S. has imported goods from:

  • China: $481.9 billion

  • Canada: $295.2 billion

  • Mexico: $294.7 billion

  • Japan: $131.1 billion

  • Germany: $124.1 billion

  Together the top 5 countries make up about 59% of all U.S. imports.

  Maintaining a Balance in Trade

  Looking at the data by area shows that South/Central America, OPEC and Africa are the only regions with positive balances, whereas North America, Europe, and Pacific Rim areas show a negative balance. Interestingly, China, which as a negative balance of $365.7 billion represents ~80% of the negative balance attributed to the Pacific Rim countries and ~50% of the overall negative balance! To put this into perspective, the continent of Europe represents only ~23% of the overall negative balance for selected countries.

  *  *  *

  So the next time someone comes on TV and proclaims that the collapse in world trade volumes is irrelevant to the US equity market and US economy… perhaps point them in this direction.

  

  

  

  

  

• Legalizing Weed Has Done What 1 Trillion Dollars And A 40 Year War Couldn't

  Submitted by Nick Bernabe via TheAntiMedia.org,

  The Mexican drug cartels are finally meeting their match as a wave of cannabis legalization efforts drastically reshapes the drug trafficking landscape in the United States. It turns out that as states legalize cannabis use and cultivation, the volume of weed brought across the border by Mexican drug cartels dramatically decreases — and is putting a dent in their cash flow.

  A newly-released statistical report from the U.S. Border Patrol shows a sharp drop-off in cannabis captured at the border between the United States and Mexico. The reduction in weed trafficking coincides with dozens of states embracing cannabis use for both medical and recreational purposes.

  In fact, as the Washington Post reports, cannabis confiscations at the southern border have stumbled to the lowest point in over a decade — to only 1.5 million pounds. That’s down from a peak of four million pounds in 2009.

  Speaking to Anti-Media, Amir Zendehnam, host of the popular cannabis show, “In the Clear with Amir” on Z420.tv, told us what he thinks of these new statistics:

  “The economics of the cannabis industry show us that with healthy competition in the market, prices drop, quality rises, violence diminishes, and peaceful transactions increase. As constant new research emerges detailing the plant’s benefits, the negative stigma of using cannabis, both medicinally and recreationally, is diminishing, raising the demand for high quality product.

   

  “Colorado, for example, is experiencing an economic boom that has never been seen in the state. The biggest issue in Colorado today is what to do with the huge amounts of revenue and economic success the state is gaining as a result of legalization. The Colorado model has proven that legalization reduces crime rates, cuts prices, pushes unfavorable competition out of the market, provides cleaner products with heightened transparency, and increases the standard of living for society as a whole.

   

  “The only people hurt by continued societal acceptance and legalization of cannabis are the cartels and their friends, who have flourished for decades as a result of drug prohibition.

   

  “As legalization spreads across the U.S. and the rest of the world like wildfire, I predict the industry will soon become one of the most dominant and beneficial industries humanity has ever seen.”

  And the new competition from legal states has taken a big bite out of the entire illicit Mexican marijuana food chain. “Two or three years ago, a kilogram [2.2 pounds] of marijuana was worth $60 to $90,” a cannabis farmer in Mexico said in an interview with NPR. “But now they’re paying us $30 to $40 a kilo. It’s a big difference. If the U.S. continues to legalize pot, they’ll run us into the ground.”

  Consumers are also starting to see the difference. Cheap low quality Mexican cannabis has become almost impossible to find in states that have legalized, while prices for high quality home-grown have steadily decreased.

  This is good news for Mexico. A decreasing flow of cannabis trafficking throughout the country will likely lead to less cartel violence as revenues used to buy weapons dry up. Drug war-related violence in Mexico was responsible for an estimated 27,000 deaths in 2011 alone — outpacing the entire civilian death toll of the United States’ 15-year war in Afghanistan.

  These developments reinforce criticism of the War on Drugs as a failed policy. Making substances like cannabis illegal simply drove the industry underground, helping make America the largest incarcerator in the world.

  Legalizing cannabis will also save the United States a great deal of money. As Mint Press News reported:

  “Since Richard Nixon declared a war on drugs in June 1971, the cost of that “war” had soared to over $1 trillion by 2010. Over $51 billion is spent annually to fight the drug war in the United States, according to Drug Policy Alliance, a nonprofit dedicated to promoting more humane drug policies.”

  Early reports from Colorado’s cannabis tax scheme show that revenues that will ostensibly help schools and rehabilitation efforts by flooding the state with cash. In fact, Colorado became the first state to generate more tax revenue from cannabis than alcohol in one year — $70 million.

  But why stop with cannabis legalization? As more and more drug propaganda is debunked thanks to the legal weed movement, it’s time to also advocate for drug legalization across the board. The drug war’s criminalization of substances has done nothing to stem their use, and has simply turned addicts into criminals, even though plenty of experts agree that addiction is a health issue, not a criminal one.

   

  Maybe it’s time for the U.S., Mexico, and other countries to embrace the Portuguese and Irish model of treating addiction to drugs like an addiction to alcohol or cigarettes, using rehabilitation — rather than incarceration — to confront the problem.

  

  

  

  

  

• Former-PM Admits "Future Existence Of Japan Was At Stake" As Mutations Appear In Fukushima Forest

  "The future existence of Japan as a whole was at stake," admits Japan's prime minister at the time of the 2011 quake and tsunami, revealing that the country came within a "paper-thin margin" of a nuclear disaster requiring the evacuation of 50 million people. Naoto Kan expressed satisfaction at the three TEPCO executives facing charges over negligence, but this shocking admission comes as AFP reports, conservation group Greenpeace warned that "signs of mutations in trees and DNA-damaged worms beginning to appear," while "vast stocks of radiation" mean that forests cannot be decontaminated.

  In an interview with The Telegraph to mark the fifth anniversary of the tragedy, Naoto Kan described the panic and disarray at the highest levels of the Japanese government as it fought to control multiple meltdowns at the crippled Fukushima Daiichi nuclear power station.

  He said he considered evacuating the capital, Tokyo, along with all other areas within 160 miles of the plant, and declaring martial law. “The future existence of Japan as a whole was at stake,” he said. “Something on that scale, an evacuation of 50 million, it would have been like a losing a huge war.”

   

  Mr Kan admitted he was frightened and said he got “no clear information” out of Tepco, the plant’s operator. He was “very shocked” by the performance of Nobuaki Terasaka, his own government’s key nuclear safety adviser. “We questioned him and he was unable to give clear responses,” he said.

   

  “We asked him – do you know anything about nuclear issues? And he said no, I majored in economics.”

   

  “When we got the report that power had been cut and the coolant had stopped working, that sent a shiver down my spine,” Mr Kan said. “From March 11, when the incident happened, until the 15th, the effects [of radioactive contamination] were expanding geographically.

   

  "From the 16th to the 20th we were able to halt the spread of radiation but the margin left for us was paper-thin. If the [fuel rods] had burnt through [in] all six reactors, that would definitely have affected Tokyo.

   

  “From a very early stage I had a very high concern for Tokyo. I was forming ideas for a Tokyo evacuation plan in my head. In the 1923 earthquake the government ordered martial law – I did think of the possibility of having to set up such emergency law if it really came down to it.

   

  “We were only able to avert a 250-kilometre (160-mile) evacuation zone [around the plant] by a wafer-thin margin, thanks to the efforts of people who risked their lives."

  Mr Kan said he had to retreat to an inner room after the atmosphere in the government’s crisis management centre became “very noisy”.

  He said: “There was so little precise information coming in. It was very difficult to make clear judgments. I don’t consider myself a nuclear expert, but I did study physics at university.

   

  "I knew that even based on what little we were hearing, there was a real possibility this could be bigger than Chernobyl. That was a terrible disaster, but there was only one reactor there. There were six here.”

  All of these admissions of the monstrous reality are hitting just as onservation group Greenpeace warned on Friday that the environmental impact of the Fukushima nuclear crisis five years ago on nearby forests is just beginning to be seen and will remain a source of contamination for years to come.

  As the fifth anniversary of the disaster approaches, Greenpeace said signs of mutations in trees and DNA-damaged worms were beginning to appear, while "vast stocks of radiation" mean that forests cannot be decontaminated. As AFP reports,

  In a report, Greenpeace cited "apparent increases in growth mutations of fir trees… heritable mutations in pale blue grass butterfly populations" as well as "DNA-damaged worms in highly contaminated areas", it said.

   

  The report came as the government intends to lift many evacuation orders in villages around the Fukushima plant by March 2017, if its massive decontamination effort progresses as it hopes.

   

  For now, only residential areas are being cleaned in the short-term, and the worst-hit parts of the countryside are being omitted, a recommendation made by the International Atomic Energy Agency.

  Finally, we leave it to Kan to conclude:

  "Next time, we might not be so lucky.”

  

  

  

  

  

• The Most Painful Part Of The Short Squeeze May Be Yet To Come, JPM Warns

  Two weeks ago, we reported that NYSE Short Interest has risen 4.5%, back over 18 billion shares near the historical record highs of July 2008 (and up 7 of the last 9 months).

  

   

  We said that this dynamic means one of two things:

  • Either a central bank intervenes, or a massive forced buy-in event occurs, and unleashes the mother of all short squeezes, sending the S&P500 to new all time highs, or
  • Just as the record short interest in July 2008 correctly predicted the biggest financial crisis in history and all those shorts covered at a huge profit, so another historic market collapse is just around the corner.

  So far not a single central bank or major policy-making institution has intervened with a major (or for that matter, any) stimulus, but the expectation that one will – be it the G-20 last weekend, China this weekend, the ECB next week or the BOJ the week after – has led to precisely one of the two postulated outcomes: as we reported yesterday, the “mother of all short squeezes” was indeed unleashed, and last week the “most shorted” stocks were up a near record 8.7%, the highest since the furious November 2008 bear market rally.

  

   

  So does this mean the short squeeze – whether ordinary course of business or engineered by banks to push the price of both the S&P and oil higher so that energy companies can sell equity and repay secured bank loans (as we speculated last week) – is over? According to JPM, not just yet, even though by now the weakest hands have clearly tapped out. In fact, since there has been virtually no rotation into ETFs, the most brutal part of the squeeze may be just ahead. Here’s why:

  The covering of short equity positions continued over the past week. The short interest in US equity futures declined over the past week as seen in Figure 1.

   

  

   

  But its level remains very negative suggesting there is room for further short covering. The short interest on SPY, the biggest equity ETF, at 4.75% stands below its recent peak of 5.43% but it remains elevated vs. its level of 3.54% at the start of the year. Equity ETFs have not yet seen any significant inflows, suggesting that ETF investors have done little in actively reversing the almost $30bn of equity ETFs sold over the previous two months. CTAs, which have been partly responsible for this year’s selloff, are still short equities and they have only covered a third of the short position they opened in January. In contrast, Discretionary Macro hedge funds, Equity L/S, risk parity funds and balanced mutual funds, appear to be modestly long equities, so they are currently benefitting from the equity rally.

   

  

  Is it possible that the short squeeze can take the S&P another 100 points higher, reaching Goldman’s 2016 year-end target even as GAAP EPS have crashed to just over 90, and which would mean that the market when valued on a GAAP basis would be at 22x earnings and the most expensive it has ever been? Of course it is, even if that will make the S&P500 the most overbought, and overvalued in history, and just ripe for the next wave of short selling.

  So for all those eager to short the S&P but unsure when to do it, keep an eye on the SPY short interest and CTA net exposure. Breakout failures would mean this week’s roundhouse punch to the face of market shorts may be as bad as it gets.  On the other hand, if the covering momentum is only just starting, and now it is the ETFers and CTA’s turn to pick up the baton, the next move higher in this bear market squeeze could easily take the S&P500 to new all time highs.

  

  

  

  

  

• The Afghan War Explained In Two Headlines

  How often do you notice during an average market day that the mainstream financial news media very often seem to run headlines that not only contradict one another entirely but sometimes emanate from the very same news wire?

  Well trust us, it happens all the time. In fact, this type of epic confusion is one of the many “gifts that keeps on giving for us.” For one classic example, see here.

  Well, in case you weren’t aware, this is also the case in war and geopolitics, because if there are two areas where things are more fluid and move faster than a vacuum tube or any microwave, it’s war and backdoor diplomacy.

  In the true spirit of the above, we bring you the following two headlines, the first from Reuters, and the second from WSJ, each of which purport to explain what’s happening in Afghanistan: 

  Reuters

  

  WSJ

  

  And of course, these headlines are both from the same day. 

  

  

  

  

• Alan Greenspan's Pickled Economy

  Submitted by EconomicPrism's MN Gordon, via Acting-Man.com,

  Winter of Discontent

  Former Federal Reserve Chairman Alan Greenspan resurfaced this week.  We couldn’t recall the last time we’d heard from him.  But, alas, the old fellow’s in desolate despair.

   

  

  Unexpectedly rising from the crypt: Alan Greenspan

   

  On Tuesday, for instance, he told Bloomberg he hasn’t been optimistic for “quite a while.”  Obviously, this is in contrast to the perennial Goldilocks attitude he had during the 1990s.  So what is it that has the Maestro playing a low dirge?

  China, the dollar, Dodd-Frank, and associated unknowns are all part of his negative outlook.  But the long winter of his discontent is something else.  Greenspan said he “won’t be [optimistic] until we can resolve entitlement programs.”

  “Nobody wants to touch [entitlements].  But it is gradually crowding out capital investment and that is crowding out productivity and that is crowding out the standards of living,” said Greenspan.

  Indeed, funding entitlement programs is becoming more burdensome by the year.  As a greater percentage of the economy’s GDP goes toward entitlement programs, a lesser percentage goes towards capital investment.  The effect of this negative feedback loop, as Greenspan infers, is quite simple.

   

  

  An enticing lure….

  Less capital investment leads to lower productivity.  Lower productivity leads to slower GDP growth.  Slower GDP growth leads to an economy that can’t keep pace with entitlement programs.  Thus, an even smaller percentage of GDP is, in turn, available for capital investment…to propel future growth.  And so on, and so forth.

   

  

  A 2012 forecast of entitlement spending by the Heritage Foundation. This seems not exactly sustainable – click to enlarge.

   

  What Drives Economic Growth?

  Certainly, this is a basic insight.  But perhaps Greenspan is on to something much larger than just the issue of entitlement programs.  From what we can tell he’s getting at the question of economic growth.  Namely, what drives it?

  Based on Greenspan’s example of entitlement programs, and their effect of crowding out capital investment, productivity, and standards of living, it seems he’s asserting that savings and production drive economic growth.

  This, no doubt, is an important distinction.  For it goes contrary to the mainstream Keynesian economic thought of the day which asserts spending and consumption drive economic growth. Hence, the main purpose of today’s economic policies is to increase spending and consumption to the detriment of savings and production.

   

  

  How the economy grows. Lower left corner: an outline of the economy’s structure of production in the form of a “Hayekian triangle”; clockwise from the upper left corner: the process of widening and lengthening of the production structure and the growth in output it creates over time, as savings and investment increase (for a more detailed explanation of the concepts involved see our previous brief article “The Production Structure”) – click to enlarge.

   

  To be clear, this was also the approach to monetary policy that Greenspan executed when he was Fed Chairman.  Between 1987 and 2006, while at the command of the nation’s monetary levers, Greenspan implemented these policies of promoting mass consumption.

  Moreover, Greenspan’s dirty fingerprints are all over today’s global economic problems.  For it were Greenspan’s policies of mass consumption that accelerated globalization and a lopsided trade imbalance with China and others.  Practically all the malinvestments, bubbles and busts across the planet that are presently in various stages of reckoning can be traced back to the man.

  We doubt Greenspan will ever take responsibility for the effects of his actions. But we do know that he has full knowledge of his errors.  For while Bernanke and Yellen are true believers in their craft, Greenspan knows central banking is filthy hogwash.  In particular, long before he became the Maestro, there was a time when Greenspan was openly opposed to state intervention.

   

  

  The publication of this book was like the ringing of a bell. It heralded the end of the great boom and it was the last time Greenspan was put on a pedestal by a book author.

   

  Alan Greenspan’s Pickled Economy

  Greenspan, if you didn’t know, once stood firmly behind the gold standard.  He even wrote one of its better defenses.  In his essay Gold and Economic Freedom, published in 1966, Greenspan came to the following conclusion.

  “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.  There is no safe store of value.  If there were, the government would have to make its holding illegal, as was done in the case of gold.  If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods.  The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

   

  “This is the shabby secret of the welfare statists’ tirades against gold.  Deficit spending is simply a scheme for the confiscation of wealth.  Gold stands in the way of this insidious process.  It stands as a protector of property rights.  If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” 

   

  

  Gold: the money of the free market, and guarantor of economic freedom – and consequently hated by etatistes far and wide. Alan Greenspan was well aware of the importance of sound money.

   

  Years later Greenspan put his vanity above his ideals.  During his 18-plus years as Fed chairman he went on to provide the elastic currency that allowed for the national debt to stretch from $2.3 trillion to $8.5 trillion.  That amounts to a 269 percent increase.  Such a dramatic increase would never have been possible under the gold standard.

  Greenspan’s elastic currency also allowed for the nation’s ballooning entitlements, funded via deficits.  Maybe his present despair stems from the full knowledge and remorse of his dirty deeds now coming home to roost.  For in Greenspan’s words, “deficit spending is simply a scheme for the confiscation of wealth.”

   

  

  Total federal public debt: the next update will show a more than $1 trillion jump to a new high above $19 trillion. The current administration has finally succeeded in more than doubling the public debt in just eight years – unsurprisingly, with nothing to show for it – click to enlarge.

   

  Just ask David Stockman.  Greenspan, bar none, perpetuated this wealth confiscation scheme with great proficiency.  Any remorse he now has is too little too late.  Like a pickled cucumber, his actions, and the actions of his predecessors, can never be undone.

  Look around.  Today we’re all living with the exacting consequences of Alan Greenspan’s pickled economy.  Quite frankly, it bites.

  

  

  

  

  

• Why JPMorgan Disagrees With Buffett That "Babies Born Today Are The Luckiest In History"

  JPM’s head quant Marko Kolanovic is best known for timing the market’s inflection points and quantifying – in plain English – the marginal buying and selling technicals at any given moment. In his latest overnight note he does not disappoint, explaining in simple terms “what the fate of the market rally is.” We will give readers his answer… tomorrow.

  For now we wanted to focus on something we have never seen from Kolanovic before: an outright foray into both social commentary and politics with his demolition of Buffett’s insipid, hackneyed, and, according to some, downright idiotic, assessment that “the babies being born in America today are the luckiest crop in history.“

  Here’s why:

  Babies born in America today – the luckiest crop in history?

  This statement has been used recently in the context of the outlook for the US economy (W. Buffet’s annual letter) and upcoming US presidential elections (M. Romney). The statement encapsulates a positive view on the US economy and downplays prospects of significant political changes in the US (it also assumes a link between an individual’s luck and US GDP growth).

   

  While we do not take either a glass half-full or glass half-empty view on the current state of US economy, there are good reasons to believe that ‘the luckiest generation in history’ statement is overly optimistic. US primary results show a very strong lead for D. Trump in the Republican Party, and a surprisingly good showing for B. Sanders. We believe this indicates that a significant part of the electorate disapproves of the current political establishment and feels left behind by the new economy (e.g. voters may not agree with W. Buffet that an average upper-middle class American today has a better living standard as compared to John D. Rockefeller Sr.).

   

  Over the coming months, uncertainty about the US election outcome may result in increased risk aversion and volatility in certain segments of the US Equity market.

  Needless to say, we fully agree with Kolanovic.

  

  

  

  

  

  

• The Nine Horsemen Of The US Recession Apocalypse

  “There are no signs of a US recession anytime soon”… apart from these nine charts that is..

   

  

  Source: @DonDraperClone

  Of course, even The Fed is forced to admit that recession probabilities are rising fast…  

  

  The latest reading
  from last November is higher than all but 3 months (in the last 50
  years) when a recession did not immediately proceed.

  

  

  

  

• Guest Post: What Trumpism Means For Democracy

  Submitted by Andrew Bacevich via TomDispatch.com,

  Whether or not Donald Trump ultimately succeeds in winning the White House, historians are likely to rank him as the most consequential presidential candidate of at least the past half-century. He has already transformed the tone and temper of American political life. If he becomes the Republican nominee, he will demolish its structural underpinnings as well. Should he prevail in November, his election will alter its very fabric in ways likely to prove irreversible. Whether Trump ever delivers on his promise to "Make America Great Again," he is already transforming American democratic practice.

  Trump takes obvious delight in thumbing his nose at the political establishment and flouting its norms. Yet to classify him as an anti-establishment figure is to miss his true significance. He is to American politics what Martin Shkreli is to Big Pharma. Each represents in exaggerated form the distilled essence of a much larger and more disturbing reality. Each embodies the smirking cynicism that has become one of the defining characteristics of our age. Each in his own way is a sign of the times.

  In contrast to the universally reviled Shkreli, however, Trump has cultivated a mass following that appears impervious to his missteps, miscues, and misstatements. What Trump actually believes — whether he believes in anything apart from big, splashy self-display — is largely unknown and probably beside the point. Trumpism is not a program or an ideology. It is an attitude or pose that feeds off of, and then reinforces, widespread anger and alienation.

  The pose works because the anger — always present in certain quarters of the American electorate but especially acute today — is genuine. By acting the part of impish bad boy and consciously trampling on the canons of political correctness, Trump validates that anger. The more outrageous his behavior, the more secure his position at the very center of the political circus. Wondering what he will do next, we can’t take our eyes off him. And to quote Marco Rubio in a different context, Trump “knows exactly what he is doing.”

  Targeting Obama's Presidency

  There is a form of genius at work here. To an extent unmatched by any other figure in American public life, Trump understands that previous distinctions between the ostensibly serious and the self-evidently frivolous have collapsed. Back in 1968, then running for president, Richard Nixon, of all people, got things rolling when he appeared on Laugh-In and uttered the immortal words, “Sock it to me?” But no one has come close to Trump in grasping the implications of all this: in contemporary America, celebrity confers authority. Mere credentials or qualifications have become an afterthought. How else to explain the host of a "reality" TV show instantly qualifying as a serious contender for high office?

  For further evidence of Trump’s genius, consider the skill with which he plays the media, especially celebrity journalists who themselves specialize in smirking cynicism. Rather than pretending to take them seriously, he unmasks their preening narcissism, which mirrors his own. He refuses to acknowledge their self-assigned role as gatekeepers empowered to police the boundaries of permissible discourse. As the embodiment of “breaking news,” he continues to stretch those boundaries beyond recognition.

  In that regard, the spectacle of televised “debates” has offered Trump an ideal platform for promoting his cult of personality. Once a solemn, almost soporific forum for civic education — remember Kennedy and Nixon in 1960? — presidential debates now provide occasions for trading insults, provoking gaffes, engaging in verbal food fights, and marketing magical solutions to problems ranging from war to border security that are immune to magic. For all of that we have Trump chiefly to thank.

  Trump’s success as a campaigner schools his opponents, of course. In a shrinking Republican field, survival requires mimicking his antics. In that regard, Ted Cruz rates as Trump’s star pupil. Cruz is to Trump what Lady Gaga was to Amy Winehouse — a less freewheeling, more scripted, and arguably more calculating version of the original.

  Yet if not a clone, Cruz taps into the same vein of pissed-off, give-me-my-country-back rage that Trump himself has so adeptly exploited. Like the master himself, Cruz has demonstrated a notable aptitude for expressing disagreement through denigration and for extravagant, crackpot promises. For his part, Marco Rubio, the only other Republican still seriously in the running, lags not far behind. When it comes to swagger and grandiosity, nothing beats a vow to create a “New American Century,” thereby resurrecting a mythic past when all was ostensibly right with the world.

  On two points alone do these several Republicans see eye-to-eye. The first relates to domestic policy, the second to America’s role in the world.

  On point one: with absolute unanimity, Trump, Cruz, and Rubio ascribe to Barack Obama any and all problems besetting the nation. To take their critique at face value, the country was doing swimmingly well back in 2009 when Obama took office. Today, it’s FUBAR, due entirely to Obama’s malign actions.

  Wielding comparable authority, however, a Republican president can, they claim, dismantle Obama’s poisonous legacy and restore all that he has destroyed. From “day one,” on issues ranging from health care to immigration to the environment, the Republican candidates vow to do exactly this. With the stroke of a pen and the wave of a hand, it will be a breeze.

  On point two: ditto. Aided and abetted by Hillary Clinton, Obama has made a complete hash of things abroad. Here the list of Republican grievances is especially long. Thanks to Obama, Russia threatens Europe; North Korea is misbehaving; China is flexing its military muscles; ISIS is on the march; Iran has a clear path to acquiring nuclear weapons; and perhaps most distressingly of all, Benjamin Netanyahu, the prime minister of Israel, is unhappy with U.S. policy.

  Here, too, the Republican candidates see eye-to-eye and have solutions readily at hand. In one way or another, all of those solutions relate to military power. Trump, Cruz, and Rubio are unabashed militarists. (So, too, is Hillary Clinton, but that’s an issue deserving an essay of its own). Their gripe with Obama is that he never put American military might fully to work, a defect they vow to amend. A Republican commander-in-chief, be it Trump, Cruz, or Rubio, won’t take any guff from Moscow or Pyongyang or Beijing or Tehran. He will eradicate "radical Islamic terrorism," put the mullahs back in their box, torture a bunch of terrorists in the bargain, and give Bibi whatever he wants.

  In addition to offering Obama a sort of backhanded tribute — so much damage wrought by just one man in so little time — the Republican critique reinforces reigning theories of presidential omnipotence. Just as an incompetent or ill-motivated chief executive can screw everything up, so, too, can a bold and skillful one set things right.

  Juan and Evita in Washington?

  The ratio between promises made and promises fulfilled by every president in recent memory — Obama included — should have demolished such theories long ago. But no such luck. Fantasies of a great president saving the day still persist, something that Trump, Cruz, and Rubio have all made the centerpiece of their campaigns. Elect me, each asserts. I alone can save the Republic.

  Here, however, Trump may enjoy an edge over his competitors, including Hillary Clinton and Bernie Sanders. With Americans assigning to their presidents the attributes of demigods — each and every one memorialized before death with a library-shrine — who better to fill the role than an egomaniacal tycoon who already acts the part? The times call for strong leadership. Who better to provide it than a wheeler-dealer unbothered by the rules that constrain mere mortals?

  What then lies ahead?

  If Trump secures the Republican nomination, now an increasingly imaginable prospect, the party is likely to implode. Whatever rump organization survives will have forfeited any remaining claim to represent principled conservatism.

  None of this will matter to Trump, however. He is no conservative and Trumpism requires no party. Even if some new institutional alternative to conventional liberalism eventually emerges, the two-party system that has long defined the landscape of American politics will be gone for good.

  Should Trump or a Trump mini-me ultimately succeed in capturing the presidency, a possibility that can no longer be dismissed out of hand, the effects will be even more profound. In all but name, the United States will cease to be a constitutional republic. Once President Trump inevitably declares that he alone expresses the popular will, Americans will find that they have traded the rule of law for a version of caudillismo. Trump’s Washington could come to resemble Buenos Aires in the days of Juan Perón, with Melania a suitably glamorous stand-in for Evita, and plebiscites suitably glamorous stand-ins for elections.

  That a considerable number of Americans appear to welcome this prospect may seem inexplicable. Yet reason enough exists for their disenchantment. American democracy has been decaying for decades. The people know that they are no longer truly sovereign. They know that the apparatus of power, both public and private, does not promote the common good, itself a concept that has become obsolete. They have had their fill of irresponsibility, lack of accountability, incompetence, and the bad times that increasingly seem to go with them.

  So in disturbingly large numbers they have turned to Trump to strip bare the body politic, willing to take a chance that he will come up with something that, if not better, will at least be more entertaining. As Argentines and others who have trusted their fate to demagogues have discovered, such expectations are doomed to disappointment.

  In the meantime, just imagine how the Donald J. Trump Presidential Library, no doubt taller than all the others put together, might one day glitter and glisten — perhaps with casino attached.

  

  

  

  

  

• EU Bombshell: The Balkan Route To Germany Is Closed

  Late last month, Norwegian PM Erna Solberg proclaimed that if she became convinced that Sweden’s refugee crisis was set to spiral out of control or “break down” (as she called it), she may be prepared to close her country’s borders altogether in what would quite possibly amount to a contravention of Norway’s duties under the Geneva Convention and a move that would almost surely trigger a rash of human rights violations. 

  

  (Solberg)

  It underscored how desperate some Europeans had become and indeed, it was just days later when EU migration commissioner Dimitris Avramopoulos warned that the bloc has just 10 days to implement a plan that will bring about “tangible and clear results on the ground” or else “the whole system will completely collapse.”

  The 10-day “countdown” is a reference to the leadup to an EU/Turkey Summit where Erdogan, as usual, stands in the way of progress.

  He’s determined to extract money and political concessions from Brussels in exchange for his country’s help in stemming the flow of Asylum Seekers from neighboring Syria. A transcript from a leaked discussion between himself and European Commissioner Jean Claude Juncker and President of the European Council Donald Tusk on 16th November 2015 during the G20 Summit in Antalya suggests that Erdogan told Juncker that Turkey can simply: :put them [the migrants] on buses.” That’s a rather thinly-veiled  threat to simply pass the migrants straight through to the gates (and we mean “gates” both that figuratively and literally at this juncture) of the Balkan rout noth.

  

   

  The Summit begins on Monday and we don’t have much in the way of hope. After all, in order to guard the bloc’s external border you need buy in from Erdogan (when he’s actually looking for buy out quite literally), and somehow poor Alexis Tsipras is expected to control the bottleneck after having been left for broke by the very same Brussels Eurocrats who now want (no, demand) his help.

  As KeepTalkingGreece puts in thousands of refugees and migrants wandering from Athens to Idomeni without knowing where to sleep and what to eat, where to lay their kids and elderly to sleep. What happens when they get to Idomeni, you ask? Well they try to beat down border gates with homemade bettering rams. Like so: 

   

  If they can’t break through and make a run for it north, the end up simply stranded in Greece.

  Victoria square #athens #greece #refugeesGr #RefugeesCrisis #refugees pic.twitter.com/wYD6x9KM4K

  — prezatv (@prezatv) February 28, 2016

  This has infuriated Athens, who last month recalled their Ambassador to Austria after the country held a series of meetings with Balkan countries without inviting the Greeks.

  So don’t hold your breath for a solution (or for a harrowing raft ride across the Mediterranean) to the “safe shores” of Europe. The is one crisis that is simply going to fester until it boils over. The Barbarians (and no, not in the pejorative sense, in the classic literary sense) are the gates – and they’re coming “home” Frau Merkel, whether you like it or not.

  But in any event, below is a draft document obtained by Der Standard.at (Googel translated) which suggests EU officials are now set to mark a turning point: “The Closure of The Balkan Route.”

  *  *  * 

  Thomas Mayer. At the EU summit on Monday the immediate termination of the illegal flow of migrants and by Wave of Greece should be explained to Germany as a top priority of EU policy. This goes forth from one to the STANDARD present draft. Athens must immediately 50,000 places for potential asylum realize Greece gets “any help” the Union. Migrants with no chance of asylum should also be deported immediately to Turkey.

  The EU summit with Turkey on Monday in Brussels and subsequent meetings of the 28 heads of state without the Turkish Premier Ahmed Davutoglu is expected to bring a dramatic change in the current policy and in dealing with refugees and migrants. This is at least the result of a yet secret declaration that Saturday evening was coordinated between the government headquarters in the capital cities. In the paper, which is pending before STANDARD, it literally means: “The irregular flow of migrants along the West Balkan route comes to an end this route is closed from now..”

  Fine tuning still needed

  The final declaration of the EU-28 will be voted on today in Brussels in the group of EU ambassadors still fine. At the core of the decisions will, however, change anything, according to diplomatic sources. Many of the measures that will be implemented immediately after the meeting train to train, based on agreements to be concluded with the Turkish side. Despite the excitement about the actions of the Turkish government against an opposition newspaper on Friday, the storm of the editorial by police, you go in Brussels expect that Davutoglu will appear on Monday and negotiated in recent days Agreements are then confirmed.

  Repatriation agreements planned with Turkey

  Nuclear case will be that Turkey immediately constructively participates in controlling the EU’s external borders in the Aegean and those migrants who can not hope to seek asylum in Europe, will resume in the course of recycling. The plan is a private repatriation EU-Turkey agreement, which should be in force from 1 June. Before that you will operate on the basis of the bilateral agreement of Greece. As reported, also the EU-Turkey action plan be promoted. The EU member states undertake the special summit to the Resettlement – to start – the direct settlement of Syrian refugees from Turkey in EU countries.

  With regard to the measures in the area of ??Union, in forceful language describes the explanation of the Government a package of measures to be set in the coming weeks. To the consequences of closing the Balkan route, catch the jam thousands incoming refugees, the EU agreed to “do the maximum to assist Greece in this difficult moment.” If it were “a collective responsibility of the community, which requires fast and efficient mobilization of all available resources”, but “also the contributions of the Member States”.

  A billion for refugee assistance

  The Arenberg by the European Commission last week “emergency plan” for humanitarian aid is unconditional support of the government. For 700 million euros have been earmarked, 300 million in 2016. The Council of Ministers should decide the plan before the next EU summit on March 18 and take shape, according to the statement. Together with all previously agreed measures so could be invested in aid to refugees in the coming months about one billion euros from the EU.

  strengthen Frontex

  The second major issue is security. The EU will send over their border protection agency Frontex once more officials to Greece, which will be based on the borders with Macedonia and Albania. They should also ensure that the reception centers (hotspots) function in Greece, where the refugees are first recorded and prepared for the allocation of EU countries where they are to get proper asylum procedure. Until later than 1 April, the EU countries should make more, going beyond existing commitments officials for Frontex available. Europol is to strengthen the fight against smuggling. In March summit in ten days, the progress will be evaluated.

  divide refugees in EU countries

  Until then, the Government hope under its declaration to the fact that the hitherto has come in transition “Distribution Program” of refugees operates in the Member States. It is apparently planned with regard to states not in Eastern Europe, that not all countries have the same time by starting with the “relocation”. For in the secret document is also talk that some states are encouraged to voluntarily offer higher rates of refugees as provided. In any case, the burden on Greece would be alleviated if more immigrants coming into the country.

  Finally, the EU summit will ensure that by the end to “a Back to Schengen” is coming. Until then, no later than intended in accordance with the recent proposals of the European Commission which checks at internal borders, as they are currently conducted in eight states, again belonging to the past. (Thomas Mayer from Brussels, 03/05/2016) 

  

  

  

  

  

• "The Bounce Has Run Its Course" Bob 'The Bear' Janjuah Warns S&P Heading To 1700s

  Nomura's Bob Janjuah warend in January that "the bubble implosion can't be fixed this time," and, as he explains in his latest note, he is pleased with all six of his key forecasts for 2016…

  In particular on Commodities, with his expectation that crude would trade below $30 (the price per barrel fell from $37 in early January to a low so far of $26 in February).

   

  And on Rates, the 30yr UST yield fell from 2.95% in early January to a low so far of 2.49% in February, below his 2.5% target for 2016, and the 10yr UST yield fell from 2.2% in early January to a low so far of 1.66% in February, in line with his expectation over 2016 of a move in yields down from 2% towards 1.5%.

  The reasons for his latest note are:

  1.     To reiterate my bearish views on risk assets for H1 2016 – I continue to see much lower equity prices, lower core bond yields, wider credit spreads, and weakness in EM and commodities over the next four months (at least). In January I said that the S&P500 would fall from 2000/2050 to the 1500s as my target over 2016. I reaffirm this view. I note with interest that at the global equity market ”lows” so far in 2016, seen earlier in February, virtually all major global stock markets were in official bear market territory. For example, the Eurostoxx 50 fell over 30% from its 2015 high to its (so far) 2016 low. The MSCI World fell 20% from its 2015 high to its (so far) 2016 low. The key exception to this move into official bear market territory has been the major US indices, but I expect this to correct itself over the next four months or so.

   

  2.     To highlight that, in my view, stocks’ countertrend bounce off the February lows has now run its course and I believe we are – in early March – likely to see the onset of the next leg weaker in risk, vs stronger in core duration. I expect this next leg of weakness to last three to five weeks and to result in new lows so far in this cycle in stocks (S&P500 into the 1700s) and new lows in core government bond yields (target 1.5% in 10yr USTs). It is important to remember that in bear markets the strength is to the downside, the violence is to the upside, with countertrend rallies in bear markets often being the most painful. Markets simply do not go down (or up) in straight lines. But if I am right that this bounce is over, we should continue to see a series of lower lows and lower highs in stocks around the globe.

   

  

   

  To protect against being wrong, particularly with respect to timing, it is prudent to put in place a stop loss, triggered if/when we see a consecutive weekly close in the cash S&P500 index above 2040.

   

  3.     To admit that even I am a little surprised by the desperation already evident among central bankers. As per my January note, I expected the BOJ to ease in Q1, but going straight to negative rates has seriously harmed the BOJ’s credibility and the credibility of Abenomics. ECB QQE has clearly failed to create the inflation Mario Draghi promised us, but I have no doubt the ECB will ease again this month. And even the Fed is now “drip-feeding” negative rates into the market through its usual channels. The Fed has made a major policy error already, and I remain convinced that the Fed will be easing by the end of the year. But I would not be surprised if Fed hubris “forces” it to tighten once more before end-June. Focusing so much on an extremely lagging and “technically created” number like the unemployment rate is at the root of this policy error. The Fed is simply not focusing enough on important issues like weak earnings, poor quality jobs, imported deflation, weakness in investment spending, weakness in corporate revenue and profit (not EPS) growth, and deeply scarred consumer behaviour. I could go on, but suffice it to say that I think the Fed has backed itself into a corner, and will only be able to free itself to get ahead of the curve (rather than as it is now, way behind the curve) once the data and markets truly hit some form of capitulation bottom. As I have written in the past, I don’t see a “Fed put” until the S&P500 trades down into the 1500s.

   

  4.     To stress that central bank credibility is draining fast and, assuming that the BOJ and ECB go again this month, I now see a risk of a breakdown in markets and outcomes that are the opposite of what central bankers are trying – and have been failing for over seven years now – to achieve, i.e. nominal GDP at 5%, EVEN IF THIS 5% CONSISTS OF 0% REAL AND ALL 5% FROM INFLATION. We are entering an extremely worrying time and we have got here even faster that I had feared – a place where monetary policy and central banks become the problem and not the cure. As discussed above, the Fed is in a hole of its own making by using self-serving metrics to fix a debt and asset bubble crisis with a policy that relies on more debt and even bigger asset bubbles. But in the short term – this next month – I am concerned that markets will react badly and contrary to policymaker expectations when both the BOJ and the ECB attempt to ease further this month. I suspect the ECB and the BOJ are – as far as markets are concerned – “damned if they do, and damned if they don’t” with any residual credibility likely to decay away this month. But both institutions should realise this is down to their own mistakes, whereby (like the Fed) they have sought to fix the ills of excessive debt, asset bubbles and a lack of competitiveness thorough policies which merely result in a zero-sum outcomes (FX wars) and/or which rely on the “greater fool” theory requiring “someone” to take on more debt to continually speculate on an un-burstable asset price bubble. Sadly, of course, mankind has so far failed to create un-burstable bubbles, especially where the underlying foundations are so flimsy. This competitiveness issue is global and critical. Since the global financial crisis (GFC) very little production capacity reduction has been allowed to occur in the DMs (courtesy of QE and ZIRP, which together facilitate the avoidance of default cycles, which are central to reducing capacity). At the same time, globally, particularly in places like China and in industries like Energy and Shipping, we have seen significant production capacity added since the GFC. Again, in part due to QE and ZIRP policies in DMs. Of course, this would be less of a problem if global aggregate demand growth had increased strongly over the last seven years, but this has clearly not happened. In particular, the debt-driven consumption frenzy of the years leading up to the GFC in the DMs has barely come back, while at the same time demand growth in the EM sphere has been much slower than hoped for (and needed), and latterly severe economic downturns in places like Russia, China, the Middle East and Brazil have hampered this handover even more. So the response to all of this has been the zero-sum game referred to above, FX wars, which merely operate to allow temporary and transitory relative shifts in competitiveness but with severe (unintended?) consequences.

   

  5.     To stress that, in a world of NIRP and QE, and where the bid for liquidity in markets is many multiples of the levels of liquidity the sell-side can offer, I find it extremely difficult to get any visibility in FX markets. FX markets are the most exposed to central bank credibility and are also where significant flows can drive markets most immediately, more so than in other markets like Rates or Equities. My bias is to believe that the USD is the least worst “long” until the Fed flips on its current policy path. But as with the BOJ's recent easing and the market’s response (the opposite of what was trying to be achieved), the credibility issue of central banks in general, and of some central banks more than others at any given time, has now become a major uncertainty factor. As such, I feel that this is an extremely difficult market to call on anything other than a very medium-term basis. I am not alone here – the 20% rally in gold since December testifies to this. My key message for 2016 remains unchanged in terms of FX markets (strong USD until the Fed reverses course), but I am increasingly inclined to look at gold again as a safe haven for 2016, and am increasingly inclined to avoid tactical calls on FX markets.

  Janjuah concludes by noting that his inclination when thinking about this note was to consider even more bearish targets for risk assets/even more bullish targets for core bond yields.

  For now, I have decided to stick with what I published in January, but now I think we are facing an even more difficult 2016 than I had anticipated at the outset of this year.

   

  The over-reach of central bankers and their failed policies is not news to me. What is news to me, especially after the BOJ's easing in January, is that markets are now either at or very close to losing all confidence in the post-GFC policy response crafted by the Fed/ECB/BOJ et al much earlier in 2016 than even I had expected.

  

  

  

  

  

• Currency Analysis – British Pound versus USD Cross (Video)

  By EconMatters

  

  The British Pound has a Brexit Referendum on Thursday the 23rd of June which is putting downward pressure on the currency. The ideal trading scenario would be the United Kingdom votes to leave the European Union, the Pound gets hammered in the short term after this event, and this represents a long term value going forward, a strong buy in my book.

  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle    

  

  

  

  

• Hey St. Louis Fed, See How The Bank Of Japan's Assets Are Growing?

  Moments ago, for some unexplained reason, the St.Louis Fed – which recently issued a research report which “discovered” that “Consumers Across The Country Are Borrowing More To Buy Cars And Go To School” – on its twitter account asked a simple question: “See how the ECB’s assets are growing?”

  See how the European Central Bank’s assets are growing https://t.co/cjQBj8y2VP pic.twitter.com/ozbnMU7Kh0

  — St. Louis Fed (@stlouisfed) March 5, 2016

  The answer, clearly, is yes of course, we do: after all the ECB has been doing QE for over a year now, monetizing €60BN per month (a number which may grow to €70BN next week), and the result has been a massive growth in its balance sheet, even if European inflation expectations have recently hit record lows.

  Regardless of the ECB’s asset growth, whether visible or not, we retorted to the St. Louis Fed (whose president James Bullard flip flops from hawk to dove and back to hawk depending on what side of 2000 the S&P is at any given moment) as follows:

  You should show the assets of that central bank success story, the Bank of Japan https://t.co/V3dBdJLTxR

  — zerohedge (@zerohedge) March 5, 2016

  Then again, even the St. Louis Fed would have a problem asking anyone “if they see” how the BOJ’s assets are rising, because that question would be trolling at best, and proof of idiocy at worst. So, to avoid the St. Louis Fed that particular embarrassment, we take upon ourselves to ask: “See How The Bank Of Japan’s Assets Are Growing.”

  The answer is shown in the chart below.

  

   

  Which incidentally brings us to a point which Evercore ISI brought up in their Daily Economic Report in a slide titled, simply enough, “Scary.” This is what it said:

  What’s scary about this huge balance sheet expansion, is that it’s not having a bigger impact (although we don’t have a counterfactual). Indeed, the Nikkei is down -11% ytd and the yen has strengthened +6%.

  

  And then, of course, this:

  

  Well, if it didn’t work when the BOJ’s balance sheet rose by 250%, then it surely will work when the BOJ’s balance sheet rises by another 2.5x, at which point it will be just shy of 1 quadrillion yen.

  At that point we doubt we would even have to ask the St. Louis Fed “if it sees” how the BOJ’s assets are growing…

  

  

  

  

  

• "It's A Depression" – The Disturbing Email A Houston CEO Sent His Soon To Be Laid Off Employees

  This is the email that David Little, Chairman and CEO of Houston-based DXP Enterprises sent to his employees to explain why, “due to bank obligations and to continue a positive cash flow profile” the company has to freeze 401(k), why it is cutting pay in some cases as much as 60% and  why many employees are about to lose their jobs in the middle of what is an “oil and gas depression.” It is a disturbing read.

  Dear DXPeople,

   

  As you well know, these are very challenging times for everyone in the oil & gas industry and other industrial markets. We are working hard to navigate both the challenges in oil & gas and an industrial recession plus what appears to be continuing softening. Normally, when upstream oil and gas is down the rest of the industrial market is booming, not this time!

  This past Friday, we announced our fourth quarter and year-end results. Our revenues were down 17% from a year ago and 27% from the fourth quarter of 2015 versus the fourth quarter of 2014. Fiscal year 2016 has started off even weaker than we anticipated with January sales down an additional 12% from December. Oil and gas related companies across the country have reported sales declines as high as 50% – 60%. All of this in the midst of declining industrial confidence and performance. Furthermore, the forecast by experts suggests the oil & gas economy will get worse before it gets better. We are currently 20 months into this oil & gas down cycle which is also unusually long for a correction.

   

  It goes without saying but over the past twelve months, we have all made efforts to contain costs and improve operations where possible. All, while focusing on growth. For this, we thank all of you for the sacrifices, discipline and effort you are making each and every day. But I am sorry to say that because of bank obligations and to continue our positive cash flow profile, we have to do more. The leadership team and I have been reviewing line-by-line every location, budget and expense, on how we can reduce costs while considering every decision through the prism of our values, culture and priorities. While we fulfilled a $2.9 million company match to our U.S. 401 (K) savings plan for 2015, we have determined it should be frozen immediately for the remainder of 2016. The Board of Directors, senior management and leaders in management positions will participate in a 10% reduction in base pay effective March 14th. Additionally, DXP as a whole company will require that we right size the company for our expected sales volume. This is in an effort to reduce labor costs while preserving as many DXPeople as possible in this uncertain economic environment.

   

  We have all taken pay reductions over the last year with some of us taking reductions as high as 50% – 60% (via commission or bonus declines) including senior management. It is unfortunate, but the prolonged oil and gas depression and industrial recession has left us with no other choice but to make these difficult and unwanted moves and decisions.

   

  The fastest and biggest cure to the health of DXP is more sales. Your expectations and mine are that the sales management, sales professionals and everyone else that touches our customers is working smart and diligently as we are all counting on you! DXP has given you some great weapons to be successful with and we are supporting and counting on your efforts to win each order. I am not going to list all the tools you have to win with, you should know what they are and understand how to use them already, but to use the “Hunter” and “Farmer” label you have to do both. “Farm” existing accounts to capture more of each customer wallet/spend and “Hunt” for new customers. We have the customer value propositions to sell and you have the selling skills to succeed.

   

  Over the last several months, we have seen countless companies announce layoffs and in isolated incidents even bankruptcies. I point this out to try and put in context that the oil and gas depression is affecting more than DXP and is further reaching than many would have initially thought when this started over 2 years ago. The decisions we make are about preserving the future of DXP. DXP is a great company that is accustom to winning and we will win again. I can promise you that the leadership team will do all that we can to put us in a position to emerge stronger on the other side while staying true to our values and culture. Thank you for your understanding.

   

  Respectfully,

   

  David Little
  Chairman & CEO
  DXP Enterprises, Inc

  And here is some more context, courtesy of the WSJ:

  

  

  

  

  

  

• CBOE Signals VIX "Death Cross"

  While it may not be the traditional (50/200DMA) signal, CBOE's Russell Rhoads points out that the so-called 'fear index' VIX has just signalled the first Death Cross since its apocalyptic warning in November 2007.

  Yesterday (3/4) was the first time the 1 year average closing price for VIX crossed over the 5 year average since November 16, 2007.

  

   

  With VIX having plunged to 2016 lows…

  

   

  VIX Term Structure near its steeps..

  

   

  VIX volatility at post-QE3 lows…

   

  

   

  And VIX remaining decoupled from credit risk…

  

   

  Complacency seems extreme by any measure.. The 'death cross' may be worth paying attention to once again as the ides of March strike.

  

  

  

  

  

• "Everything's Interconnected"

  Everything happening today is in some ways interconnected: popularity of ‘non-establishment’ political candidates; ineffectiveness of central bank policy in lifting inflation; economic pessimism; weak capital spending (from handcuffed capitalism); and angst due to perceptions of inequality.

  Scotiabank's Guy Haselmann explains…

  Business investment and capitalism are being held back by a lack of visibility on what a future return might generate from an investment in a capital project. Not only are future economic forecasts cloudy and highly-uncertain, but the rules governing business engagement are changing too frequently. Capitalism and entrepreneurship are simply being hand-cuffed by unclear and overly-burdensome regulation.  Small businesses in particular do not have the economies of scale necessary to keep up under these conditions.

  Domestic and global uncertainties always exist, but most would agree that they are unusually elevated. The strange and unpredictable political environment – and uncertainties over who will be the next President and what his/her policies will be – further restrains capital investment.  Understandably, determining the present value of a future cash flow is impossible when the tax code and health care costs are in flux.

  Stimulative monetary policies cannot offset these powerful forces. In the past, I have referred to this dynamic as “Great Aunt Addy Policy” in honor of my aunt who drove with one foot on the accelerator and a heavy foot on the brake. Restrictive regulatory and fiscal policies are one reason why massive amounts of global central bank stimuli have underwhelmed. In addition, artificially low official interest rates distort financial asset valuations, which further harm the ability to properly assess the value of a future stream of cash flows.

  Fed officials often cite Japan’s economic malaise as the basis for their own concerns and the basis for providing and maintaining highly accommodative policy. In my opinion, Japan’s quagmire should absolutely not be used as the prototype for Fed policy justifications. The reasons are beyond the scope of this note.  However, Japan has had sustained 0% rates since 1999 (and conducted various QE programs). Yet, it has had more success over that period raising debt than lifting inflation. Why then do other central banks follow their lead?

  If there is a lesson from Japan, it is that low inflation is a function of high rates of savings, caused by low interest rates, rising VAT taxes, harmful economic and regulatory policies, poor demographics, and a falling population. Comparisons to Japan and associated deflationary fears are unfitting. By mis-diagnosing the reasons for subpar nominal GDP, and by taking the lead to offset its weakness, central banks have veered too far from their true capabilities without proper regard for the long run consequences and risks to financial stability.

  Profitability has become ever more challenged in a ‘new normal’ world of slow growth and tepid pricing power. In such an environment, worker anger cultivates as a ‘labor vs capital’ battle ignites. Worker resentment and blame targets both employers and government officials.

  Hence, the Fed is right to be concerned about stagnating wage growth, high levels of under-employed and rising inequality. Unfortunately, Fed officials have failed to fully comprehend that fixing those issues is beyond the scope of their policy tools.  More importantly, they have not realized how their well-intentioned policies have actually contributed to those problems, helping to fuel the anger witnessed in voting polls.

  I will elaborate on this point in more detail, but first it would be helpful to review the past to see where we are now and where we might be headed.  For several decades, economic prosperity was powered-forward by credit-based initiatives. The lower stair-stepping of official interest rates has allowed consumption, economic activity and debt to grow sufficiently to drive economic advancement and prosperity. 

  I believe this cycle has reached a tipping point; basically, an end of the road.  Due to fiscal and regulatory constraints and general indebtedness, economies may no longer be able to generate the growth rate necessary to sustain improvements in prosperity; or even to adequately service existing high debt levels.

  The proceeds from the massive amount of debt issuance during the last six years have gone mostly into financial market speculation, rather than into capital projects meant to generate future cash flows. Yield seeking is widely known, but is now ending. Debt has truly borrowed from the future mainly for today’s benefit.

  The ‘portfolio effect’ – or purposeful encouragement of risk-seeking behavior – was supposed to create a wealth effect that spilled into the broader economy. A main reason for the Fed’s ‘gradual’ retreat from stimulus is to try to prevent the reversal of this effect from occurring too quickly (after all, there is no free lunch).

  However, as central bank officials drop rates into negative territory, is it possible that the easing move actually has the actual net impact of a tightening through a negative wealth effect?  After all, a bond with a negative yield has a guaranteed loss for the buyer who holds it to maturity.

  Some people ask why someone would buy a bond with a negative yield.  Speculators buy them when they believe they can be sold back to the market or to the central bank (via QE) at a higher price.  An investor might make money from a negative yielding bond if financing can be locked up for the life of the bond at a rate lower than the negative coupon.  Lastly, some benchmark asset managers are forced to buy them by law.

  The intention of the negative rate move by the Bank of Japan was to influence banking behavior away from deposits and toward lending. Everyone should question why the markets had such an extreme and unexpected market reaction following the modest BoJ move. (Nikkei fell by 14%, and $/Y by 6% in the span of two weeks).

  Without fixing the root causes of economic ailments, risk-seeking behavior today is playing an ever more dangerous ‘game of chicken’.  Investor behavior has shifted from ‘FOMU’ to ‘TINA’: from Fear Of Missing the Upside to There Is No Alternative.

  Multi-asset portfolio managers (and others) prefer an equity investment (with perceived upside) and with, say, a 5% or greater dividend, over a bond with minimal yield, or a ‘sticker-shock yield’ near zero (or negative).  In other words, investors continue to chase the riskiest part of the capital structure; and do so, at potentially the worst possible time.

  Voter outrage has not risen simply because most feel they are not participating in higher financial asset prices. A great article explaining voter frustrations can be found here. In this note, author Peggy Noonan writes about the “unprotected American” who has “limited resources and negligible access to power”. I will let her article speak for itself, but will transition her same argument into how the effects of Fed policies are felt by voters.

  QE, money printing, and low (or negative) rates work against the “unprotected American” in a similar manner to something called “The Cantillon Effect”.  Just like inflation is a tax on money, and negative rates are a tax to the lender, money printing and QE are a stealth tax on those who get the money last.

  If the government mailed a large tax bill to each household, there would be immediate outrage. By stealthily doing it through QE, money printing and inflationary policies, the government is doing that same thing in a different and more subtle manner.  However, the average voter may not clearly see it, or be able to express their outrage in economic terms.  Yet, it is quite obvious by watching the news that they are feeling it.

  In summary, monetary policy and credit-fueled growth may have reached the end of their practical limits. Evidence of such is percolating. Providing monetary accommodation is the easy part, but taking it away has historically been problematic.  Not enough focus has been given to central bank exit strategies.

  When and if banks in countries with negative yields begin to pass negative rates onto their depositors, then a whole new Pandora’s box will open. I will save that for another note.  In the meantime, watch Gold, buy long Treasuries, raise cash and move to capital preservation strategies.

  The best thing the Fed can do is to raise rates in March.  You heard that right. To wait risks even bigger problems down the road.  A Fed hike in March would help pull other central banks away from the abyss of negative rates.  It should start with the Fed; the country behind the world’s reserve currency.  If the FOMC were truly ‘data dependent’, then they would hike.

  “If you do not change direction, you may end up where you are heading” – Lao Tzu

  For some weekend reading, we have attached a note that Haselmann wrote in January 2014 called, “2014 and Beyond”, which still has many themes relevant today.

  

  

  

  

  

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