Jul 08

Today’s News 8th July 2016

  • Lagarde Flip-Flops Again On Brexit, Warns Of "Disastrous" Trump-Style Protectionism

    Submitted by Michael Shedlock via MishTalk.com,

    Ahead of the vote on Brexit, IMF head Christine Lagarde warned of a prolonged period of uncertainty.

    After the vote, Largarde said Brexit provided the EU a better opportunity for reform.

    Today Largarde is certain of disastrous consequences if another large county turns protectionist. In doing so, she pointed her finger at Donald Trump.

    Lagarde's Changing Tune on Brexit

    Lagarde Points Finger at Trump

    Please consider Lagarde Warns Trump-Style Protectionism Would Hit World Economy.

    Britain’s vote to leave the EU is already casting a shadow over international growth, the International Monetary Fund chief said in an interview, adding that the imposition of new trade barriers in another large economy could have ruinous effects.

     

    “I think it would be quite disastrous, actually. Well I don’t think I should say disastrous because that is an excessive word and I should refrain from excessive words. But it would certainly have a negative impact on global growth,” she told the Financial Times.

     

    [Mish Comment: So is it quite disastrous or simply negative? Her meaning is uncertain]

     

    Any uncertainty surrounding a Trump presidency would probably yield more instability in financial markets, similar to the upheaval in the wake of last month’s UK referendum, she said in response to a question. But the IMF chief took care to avoid singling out any politician or referring to Mr Trump by name.

     

    [Mish comment: Lagarde took care to avoid singling out Trump, while singling out Trump]

     

    Ms Lagarde said “waves of protectionism” in the past had “preceded many wars” and that protectionism “hurts growth, hurts inclusion and hurts people”.

     

    Ms Lagarde said she did not want to get involved in the political debate in the US, the IMF’s biggest shareholder. But she made clear her dim view of the policies of Mr Trump, who has proposed punitive tariffs on goods from China and Mexico and ripping up US trade pacts such as the North American Free Trade Agreement.

     

    [Mish comment: Lagarde does not want to get into the political debate in the US, but hands Hillary campaign talking points on a silver platter]

     

    The IMF’s assessment of the impact of the Brexit vote on the UK economy depends heavily on what sort of trade relationship with the EU a new government would be able to negotiate, she said.

     

    Should a deal preserve access to the single market — such as Norway now enjoys — then the UK economy would be only 1.5 per cent smaller by 2019 than would be the case if Britain remained part of the EU. Were a deal to lead to the UK’s access to the EU’s 27 other economies being subject to tariffs under World Trade Organisation rules, it would cost the UK 4.5 per cent growth.

     

    The IMF had not modelled the economic impact of a scenario in which the UK’s exit from the EU drags on and uncertainty continues for a year or more, Ms Lagarde said, but the political crisis set off by the vote could make such events likely.

     

    [Mish comment: The IMF warned of a prolonged period of uncertainty but did not model the result even though the “political crisis set off by the vote could make such events likely”. How likely? The following paragraph provides the answer]

     

    “Do we have a forecast and scenario with prolonged uncertainty, total lack of clarity, no triggering of Article 50 [the official notification required to leave the EU], things staying in limbo for a long period of time? No. We don’t have that. We doubt that it would be sustainable politically, geopolitically,” she said.

     

    [Mish comment: Prolonged uncertainty is both likely and unlikely]

     

    For the July 19 update of the IMF’s World Economic Outlook, Ms Lagarde said the organisation was looking at presenting a variety of possible scenarios for the global economy depending on the outcome of Brexit discussions — a departure from its usual format.

     

    [Mish comment: I can hardly wait. Until then, the uncertainty is nearly killing me]

    Waves of Protectionism

    If Lagarde wanted to make a positive contribution she should have embraced free trade, totally and completely.

    She is correct on one thing. And it’s a very big thing: “Waves of protectionism in the past had preceded many wars. Protectionism hurts growth, hurts inclusion and hurts people“.

    The solution is so simple it’s beyond Lagarde’s comprehension.

    The EU, US, and Asia ought to work out a genuine free trade agreement not a mind-numbing set of rules and regulations that encompass the EU, nor secret agreements like Obama’s proposed Trans Pacific Partnership (TPP) that has little to do with free trade.

    A genuine free trade agreement would consist of a single statement: “Effective immediately, all tariffs and subsidies, on all goods and services, are removed.”

    For more on TPP, Tariffs, the WTO, and free trade, please see …

    Lagarde finally issued a statement on trade that made sense. But it was buried in a series of flip-flops and conflicting ideas that makes it clear she really does not understand what free trade means.

    Nonetheless, her warning about trade is correct. A global trade war could indeed have disastrous consequences. And it’s not just Trump who could start one.

    Clinton, Trump and Sanders have all made similar statements on trade. For details, please see Today’s Quiz: Donald Trump, Bernie Sanders, Hillary Clinton – Who Said It?.

  • What Are You Going To Do About It?

    Authored by StraightLineLogic's Robert Gore via The Burning Platform blog,

    Even small children recognize injustice, especially when they are its victims. “No fair” is the common schoolyard refrain. A sense of justice undoubtedly serves a host of evolutionary purposes. Imagine a world where the unjust, the wrong, always triumphed. Thieves prospered as crime went unpunished, the few stalwarts hewing to honesty and rectitude were marginalized or eliminated, and this social order evoked commendation rather than condemnation. How long would such a society survive? Cynics will say we are there now. That’s overblown, but they have a point.

    A desire for political change that becomes an actual movement drip-feeds on perceived injustices. No political movement of consequence fails either to wrap its objectives in the mantle of justice or portray its opponents as evil. The Declaration of Independence is a transcendently important work of political philosophy, but it’s also a laundry list of grievances against King George. The aggrieved, not the political theorists, propel revolutions. The straw that breaks the camel’s back is often relatively minor, even trivial. However, it generally has disproportionate symbolic importance. The tea tax exacted on the colonists was a pittance, but it inspired the Boston Tea Party and the revolutionaries’ “No taxation without representation” slogan.

    Eric Hoffer noted that: “What starts out here as a mass movement ends up as a racket, a cult, or a corporation” (The Temper of Our Time, 1967). The government birthed after the revolution has indeed degenerated into a racket, and those not in on it increasing recognize its injustices. It still tries to wrap its objectives in the mantle of justice, but the sole objective of government has become more government.

    When the American welfare state got started during the Depression, it was sold as a humanitarian response to that crisis. That sentiment may have animated some of those who paid for the New Deal back then; those who pay now know they’re getting fleeced. The government is a giant redistributive mechanism (with a substantial portion redistributed to the government), and most of those on the receiving end are not “needy.” They are, however, desirable sources of votes and payola.

    Between the low-class grifts of phony disability and unemployment and the high-class swindles of government contracting, labor racketeering, influence peddling, subsidies, tax breaks, regulatory machinations, spurious litigation, and all the other ways the denizens of America’s richest metropolitan area line their and their cronies’ pockets, those stout souls who still engage in honest and productive labor know they’re being robbed blind. Beneath the shrugs and resignation, fires of anger burn, and cauldrons of resentment bubble.

    Fires and cauldrons dot the landscape. Nobody has forgotten who got bailed out in the last financial crisis—banks, other large financial institutions, and a couple of car companies—and who didn’t—millions of homeowners with underwater homes and foreclosed mortgages. It requires no great perspicacity to recognize who has benefitted from central bank policies since the crisis—leveraged speculators—and who has not—everybody else, with particular harm suffered by savers and those living on fixed incomes. Burn and bubble.

    We’re all supposed to be blind to race, gender, ethnicity, sexual preference, and every other characteristic held to be irrelevant to human worth, except when it comes to government contracting, employment, and admission to institutions of learning. Might that rile those excluded because they didn’t have the right set of irrelevant characteristics? Proponents of such exclusion are invited to make their case directly to the excluded, and are advised to be careful when they do so. Victims don’t like being told they’re being screwed for the greater good.

    That would include the victims of Obamacare, who have seen their medical and insurance choices shrink as their premiums and deductibles rise. Trite homilies that they are helping fund insurance and care for those who previously had none do nothing to assuage their anger, and undoubtedly increase it. Access to quality medical care is a significant concern for the nation’s aging population, and the law’s destructive absurdity, blessed by tortured Supreme Court rationalizations, is now obvious. As the quality of the US medical system deteriorates, people will suffer needlessly, or die when they should have lived. Victims and their survivors will be understandably perturbed.

    Justice and equality are inseparable. Equality here does not mean the fatuous and impossible equality of outcomes that animates collectivists, but equality before the law. Equality of outcomes in all its collectivist guises obliterates equality before the law, the foundation of which is the concept of individual rights. For that concept to have any meaning, each individual must have the same rights, which receive the same protection from the government. Individual, equal rights must be the basis of the law, and when they are not, no justice is possible.

    Law instead becomes a tool wielded by those who control the government against everyone else. This week’s announcement by FBI Director James Comey that the FBI would recommend against charging Hillary Clinton in the email matter is the government wielding the law to protect its own. The fix has been in since at least 1913, when it gave itself permission to steal its constituents’ money (the income tax) and to begin the process of profitably substituting its scrip for gold (the Federal Reserve Act). The Clinton fix is business as usual. The exempt-from-the-law class expect outrage and contemptuously ignore it. Indeed, disclosure of the Loretta Lynch-Bill Clinton meeting may have been designed to rub the noses of the not-exempt in it. Yes, it looks terrible, but we run things, you don’t. You don’t like it? Tough shit, what are you going to do about it?

    The not-exempt are left with the thin gruel of cynicism and the even thinner gruel of resignation. Are we without recourse? There are those burning fires and boiling cauldrons, fueled by Mt. Saint Helens’ magma-builds of righteous rage. Comey’s decision notches up the temperature. As important, there are the manifest weaknesses of the exempt, not the least of which is their arrogance and inability to even recognize, much less acknowledge, them. A not exhaustive list: debt; their anachronistic command and control philosophy; an imperial, costly, stupidly counterproductive, and unsustainable foreign policy; an economy held together by central bank baling wire and illusion; a hollowed-out industrial base; stagnant incomes; a bought off class of savages that must stay bought off to forestall chaos; immigration; terrorism, and cities on the verge of financial collapse.

    King George and cohorts enacted the tea tax with the same insouciance with which the exempt have once again exempted Hillary. They had no idea they were lighting the fuse of revolution. What are we the outraged, the disgusted, the cynical, and yes, even the resigned, to do about this latest depredation? That last, one-too-many evil of the exempt turns ordinary citizens into nothing-to-lose revolutionaries. Don’t say it can’t happen; it has happened, repeatedly throughout history. Power’s inevitable corruption, oppression, and the best of humanity’s refusal to live their lives in chains has extinguished, against daunting odds, many an evil regime… and will continue to do so. Revolutions require revolutionaries. It would be altogether fitting and proper if this travesty—announced one day after Independence Day—was the tea tax to a Boston Harbor-style rebuke of the Clintons and their criminal class come November, and served as a rallying cry for a revolt that doesn’t end until the entire lot of them are overthrown.

  • What To Expect From Tomorrow's Jobs Report And One Troubling Chart

    Remember all those hyperbolic warnings over the years that “this is the most important jobs report” ever? Well, the one due out tomorrow may not be that, but it certainly is one of the most important ones in the past year, and one that will certainly have an impact if not on the Fed’s future actions then certainly on the market’s (once again erroneous) expectations of what Yellen may do, especially if it is a +/- 60,000 outlier from the consensus estimate of 180,000.

    Recall last month’s “shocking” jobs print, when only 35,000 new jobs were created, the lowest number since September 2010?

    Well, that one print was sufficient to convince the market there would be no more rate hikes in 2016 and most of 2017. A few weeks later, first the capitulatory June Yellen press conference and shortly after the just as “shocking” Brexit, effectively killed the rate hike cycle, with the market now pricing in one full rate hike (that is 0.25bps) all the way in 2018. As LIesman raged, “The Fed Is As Close To Capitulation As I’ve Ever Seen Them.”

    But maybe there is some hope still. If so, it will be revealed in tomorrow’s payrolls report. As Bloomberg says, “the June jobs report will take on even more importance than usual. Economists and policy makers will use it to determine whether the strongest part of the economy slowed sharply even before concerns over global growth intensified, or if the labor market was merely hit by a temporary soft patch.” Ignoring that jobs are among the most lagging economic indicators known, the general (confused) consensus about what payrolls indicate suggests an outsized market response may be forthcoming.

    “There is a potential for a big reassessment on Friday for the outlook,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York. “Given how much views changed after the last report, I get the sense that the anticipation level going into this one is unusually high.”

    Wall Street consensus expects 180,000 jobs to be added in June following the abysmal 35,000 in May. One benefit will come from the return to work of striking employees at Verizon. 35,100 Verizon employees ended their almost seven-week work stoppage on May 31. Once the strikers are factored out, “that does imply some net slowing of the trend,” O’Sullivan said. Still, that rate of hiring “remains more than strong enough to keep the unemployment rate trending down.”

    Another “good” datapoint will be unemployment rate, expected to rise to 4.8% after falling to a more than eight-year low of 4.7% in May. This however was due to an exodus of workers from the labor force, as the participation rate resumed its plunge.

    Earnings will also be closedly watched, with average hourly earnings expected to rise 0.2% in June from the month before and 2.7% Y/Y. However, if that again comes at the expense of yet another decline in hours worked it will be a clear stagflationary sign for the economy. Furthermore, since the wage number weakened in June 2015, a bigger bounce this year may be expected due to a base effect. Looking past that, there still seems to be a nascent acceleration in pay, said Ethan Harris, head of global economics research at BofA.

    There is also the strawman of the Brexit effect. Bloomberg paints it as follows: “Brexit complicates things. With U.S. economic data now being pored over for signs of weakness, there’s extra downside risk associated with a bad payrolls number — anything under 100,000, Harris said. Unfortunately, the report will offer little clarity on how employers reacted to the U.K.’s decision to leave the EU. With the referendum held June 23, any immediate impact to U.S. employment may have been limited, even as investors grew concerned that the global economy’s growth prospects have dimmed.”

    All of this is bunk, as Brexit will have had zero impact on US hiring (and firing) intentions for US corporations in the middle of last month, when the widely accepted probability of an actual Brexit outcome was virtually nil. Indeed, as the latest ISM surveys showed, producers expected a ‘negligible’ impact on their business due to Brexit and signaled they would probably not pare headcounts as a result of the vote.

    And speaking of ISMs, except for the non-manufacturing ISM report, all of the service sector employment surveys declined or were unchanged in June, including the Markit PMI (-0.1 to 52.4), the New York Fed’s Business Leaders survey (-0.2 to +2.0, after our seasonal adjustment), the Dallas Fed services survey (-2.5 to +2.0), and the Richmond Fed services survey (unchanged at +18.0). Today’s collapse in manufacturing jobs per the ADP report was the worst since 2010.

    Then again, and it goes without saying, when one cuts through the chase, the only thing that will matter is what instructions the guy who mans the BLS’ goalseek function is given.

    * * *

    What to expect from the market reaction? Here is a handy breakdown from one of the few voices on Wall Street we respect, BofA’s Michael Harnett:

    • Payroll risk is strong payroll (>225k) which causes relative outperformance of banks at the expense of bonds & quality stocks; strong US labor market & consumer data (note that US mortgage refi activity has been slowly creeping higher) that raises Fed hike expectations from the dead would lead to a short-term unwind of some very extended pair-trades across the world.
    • In contrast, a weak payroll (<125k) removes “terra firma” of US expansion, would in absolute terms be best for gold & volatility, and would ultimately cause further barbell outperformance.

    * * *

    But perhaps the best indicator of what may be really coming tomorrow is the following chart showing the complete collapse in online help wanted ads: as shown below, the Conference Board’s Help Wanted Online (HWOL) report showed another sharp drop in job posting in June, with the index now down 16% from its highs late last year.

     

    On its face, this chart would suggest a collapse in payrolls, incidentally something that we have seen in recent months. But fear not: the intrepid economists at the Federal Reserve who are always and everywhere able, willing and ready to explain away any negative data point, already have a ready explanation – the collapse in online help wanted ads is due to… rising prices for Craigslist ads.

    About 60 percent of online advertised vacancies are posted on only five of the largest job boards (?ahin et al., 2014). One of these five boards is Craigslist, which has used a particular business strategy in order to dominate the market for online vacancies. In particular, while its competitors like CareerBuilder or Monster typically charge $250-$500 for a 1-2 month job ad, Craigslist initially entered all geographical markets by allowing employers to advertise job postings for free. As a result, Craigslist “rose from near obscurity in 2005 to become a major contender, if not the leader, in online job posts by 2007” (Kroft and Pope, 2014). However, over time Craigslist gradually moved away from the model of free online vacancies and began charging $25 for a job ad in many metropolitan areas (Table 1). Moreover, at the end of 2015 Craigslist raised fees from $25 to $35 or $45 in selected metropolitan areas. All told, the average price for Craigslist job ads rose substantially, and roughly doubled since the end of 2012 (Figure 2), coinciding with the period when online vacancy posting as measured by HWOL noticeably underperformed the JOLTS vacancy growth.

     

    In this note, we suggest that interpreting the measure of job vacancies from HWOL data requires careful consideration of changes in the quickly-evolving market for online job postings. We have analyzed one such change–rising prices for Craigslist job postings–which explains an important part of the recent divergence between JOLTS and HWOL vacancies. Our finding is reminiscent of similar concerns about the now obsolete Help Wanted Advertising Index of print ads, which was affected by changes in advertising practices and changes in competition within the newspaper industry (Abraham, 1987). Given the critical nature of HWOL data in tracking the health of the US labor market, we believe the adjustments proposed here are a step towards improving analysts’ ability to interpret these data and can lead to a fuller understanding of labor market developments in real time.

    In short, if tomorrow’s jobs report is another epic disaster, we expect that the following blog post on the federal reserve website will mysteriously disappear. On the other hand, if June payrolls soar by 200,000 or more, well, just blame the greedy capitalists at Craigslist.

  • 1 Suspect In Custody After Snipers Kill 4 Cops, Wound 7 More In Downtown Dallas – Live Feeds

    Update – 0055ET: Oakland protesters block main freeway 880…

    Police update on suspect…

    Caught on tape: 1 Shooter kills an officer…

     

    *  *  *

    Update – 0033ET: 1 Suspect in custody – found with suspicious package, person of interest whose picture was displayed turned himself in.

     

     

    *  *  *

    Update 4 – 1155ET

     

     

    Person of Interest Identified…

    Warn of possible bomb…

     

     

     

    *  *  *

    Update 3 – 1130ET – Police Chief confirms 10 Police Officers shot by snipers in Dallas, with at least 3 dead, 2 in surgery, and 3 in critical condition.

     

     

     

     

    • BREAKING NEWS: POLICE CHIEF CONFIRMS 10 POLICE OFFICERS SHOT IN DALLAS, TEXAS.

    *  *  *

    Update 2: According to Breaking 911, the Dallas gunman has been described as a black male wearing green ballistic vest with a long gun. Fox adds that 3-6 officers have been "gravely wounded" while according to the International Spectator there is an active situation at the Omni Hotel in Dallas. There are reports of two suspects.

    "There are three to six officers who are gravely wounded, according to my sources inside the Dallas Police Department," KDFW's Shaun Robb reported, adding, "This is going to be an international story."

    One was a Dallas police officer and the second officer was a Dallas Area Rapid Transit officer, KDFW is reporting. KDFW also reports that police are in negotiations with a second suspect.

    Local Fox-affiliate KTVT relayed police commands that the suspect was armed with a rifle in a nearby alley, after previously, the station had reported that at least one suspect was down, following SWAT officers with shields storming a parking garage.

    * * *

    Update 1: amazing video footage from the scene of the shooting

    * * *

    Earlier today we said that we expected violent retaliations during tonight's numerous rallies to protest the shooting of Philando Castile, and sadly just a few hours later, we were proven right. According to local news sources, several Dallas police officer have been reportedly shot down during a protest, causing the demonstrators to run out to clear the area. The armed suspect is reportedly on the loose, and police are urging people to avoid the area.

    The extent of the injuries are not known.

    The shootings took place as a rally and march in downtown was ending that showed solidarity for communities affected by officer-involved shootings this week in Louisiana and Minnesota.  Several hundred people gathered at Belo Garden Park in Dallas and marched to the Old Red Courthouse near Main and Market streets, where the rally ended just before the shots rang out nearby at about 9 p.m.

    There is no word on whether any civilians have been shot. Police have not released information on any possible suspects in the shooting. DART public transportation service is suspended in downtown due to police activity.

    As KDFW reports, an officer on the scene confirmed that at least two officers were shot but their conditions are unknown. The shooting happened just before 9 p.m. as the protesters were marching near Lamar and Main St.

    A uniformed officer confirmed that two officers were shot, a Fox News reporter on the scene has reported. G.J. McCarthy of the Dallas Morning News caught video just after shots were fired.

     

    Live feeds below

     

  • As Gun Violence Drives Sales, Shooting Ranges May Aid Local Education Efforts

    Emotions are running high in the US following a recent spate of violence at home and abroad. The gun debate, as exhausting as it has been, continues to rage on. Data shows us that the percent of total households who claim to have a gun has been declining, down to 36% in June from 53% back in January 1994.  

     

    At the same time, we have been witnessing YoY increases to the number of FBI background checks, aka NICS. Even though some polls show ownership rates are declining, it's not surprise to see gun sales increasing.  As we have covered in prior posts, using the FBI background checks – or NICS as they are known – we can reasonably deduce the demand for weapons in the US (excusing the fact that the dataset is incomplete given that we cannot track private gun sales which account for a material amount of overall sales).

    We have an increase of repeat buyers. And this cycle only grows as each violent event brings about increased government chatter of more regulation which then sparks fear in gun-owners and results in a spike in background checks and typically boosts sales.

    This morning Bloomberg noted the surge in background checks following the Orlando nightclub shooting:

    They also supplied an annotated chart of seasonally adjusted background checks:

    The rub here lies within education and maintenance of self-defense awareness. In 2015 IBIS published a report on shooting ranges in the US. Oddly, the areas with a greater concentration of shooting ranges relative to the population concentration in that region there was a lower degree of gun-related violence.  

    The following image shows regional concentration in percent of the total population of Establishments (shooting ranges) and the US population.  

    The southeast has roughly 25% of the US population concentrated there but only about 22% of the total Establishment (shooting range) population in the US is located in that same region. New England, Plains, Rocky Mountains all have a greater concentration of the total Establishments (shooting ranges) relative to their overall concentration of the US population.  

    Compared that with the next chart from the LA Times, one wonders if proper gun-owner education is what we should all be discussing since the areas with a higher human population and lower relative shooting range population appear have a higher level of gun violence:

    It is not as if the ranges lack use either.  Shooting ranges bring in about $1.3 billion in revenue annually and there are about 2100 businesses operating. Those are locations where education should and often does take place. People are influenced by other responsible gun-owners and safety always comes first. These are the places on the corner of your neighborhood near the county thruway maybe or in the commercial district just minutes away from a neighborhood. Amid swelling gun interest and sales, we have a way to not only control the upside insanity to what is legally allowed to be sold, but also have a way to work with those already packing heat and can help promote intelligent self-defense if only the current population of localized shooting ranges could be used more efficiently.

  • What's Starting Now Will Overturn The Entire System: "Complete Collapse of Everything"

    Submitted by Mac Slavo via SHTFPlan.com,

     

    “There’s too much of everything…” The debt, the currency collapse, the global economy, and the institutions we’ve all taken for granted.

    All of it is head for prolonged collapse, and revolution.

    economic-collapse-consequence

    Michael Krieger of Liberty Blitzkrieg warns about the immense scale of the problems that have been triggered by the Brexit – and could lead to the complete disintegration of the European Union.

    The status quo is being disrupted, and a major, major event is coming. This one may well be big enough to wipe everyone out, that is those who aren’t able to duck out and survive.

    As Michael Krieger tells Greg Hunter at USA Watchdog:

    Former Wall Street analyst and journalist Michael Krieger contends the recent so-called “Brexit” chaos is signaling something much bigger than coming economic trouble. Krieger explains, “I think the biggest thing with Brexit, and I think it is far bigger than an economic downturn, is the disintegration and ultimately the overthrow of the entire status quo regime, the entire post WWII establishment. That’s way bigger than an economic decline. It’s way bigger than the economic decline in 2008 and 2009. When you think about it, since 1945, we’ve had all kinds of economic declines. We’ve had bear markets and bull markets, but the status quo, the establishment, the basic principles that have been guiding the world for, let’s say 80 years now, those are what are going to be overthrown, and that is a way bigger deal than an economic downturn, in my opinion.”

     

    On the odds of a financial crash, Krieger contends, “In my writings, when I first came out of Wall Street, I focused on debt, I focused on economics and I focused on financial markets. I did all of that stuff, but I stopped doing that for one simple reason.

     

    It was obvious to me . . . that this thing had only one way to go, which is a complete collapse of everything. We’re going to need to start over. There’s too much debt. There’s too much corruption. There’s too much BS. There’s too much war. There’s too much everything that is bad in this world, and debt is one aspect of it. Are we going to have to wipe out the debts one way or the other? Of course, we will. I guess the reason I have stopped talking about that and writing about that is because it is so obvious. So, what I have been doing over the last three years is getting people aware and engaged on everything, not just the economics, but the political corruption. Every single industry in this world is basically hitting peak corruption, peak shadiness, peak violence and peak everything. So, it’s not just the debt or the economies that are going to collapse, it’s everything, the political establishment and the social fabric. All of these things we have been living under our entire lives will be replaced by something else. . . . The only question is, are we going to get something better or are we going to get something worse?”

    Things have reached fever pitch, and the populists are fed up with the system, and ready to revolt. Technology has changed all the arrangements, and literally everything, not only in economics, but in politics, and throughout society, is about to change in a transformative way.

  • Europe's Bank Crisis Arrives In Germany: €29 Billion Bremen Landesbank On The Verge Of Failure

    When most recently reporting on the latest European banking crisis, yesterday we observed a surprising development involving Deutsche Bank, namely the bank’s decision to quietly liquidate some of its shipping loans. As Reuters reported, “Deutsche Bank is looking to sell at least $1 billion of shipping loans to lighten its exposure to the sector whose lenders face closer scrutiny from the European Central Bank. 

    “They are looking to lighten their portfolio and this includes toxic debt. It makes commercial sense to try and sell off some of their book,” one finance source said. Deutsche Bank, which has around $5 billion to $6 billion worth of total exposure to the shipping sector, declined to comment.”

    This confirms what had long been speculated, if not confirmed, namely that German banks have been some of the biggest lenders to the shipping sector, a sector which has since found itself in significant trouble as a result of the ongoing slowdown in global trade.

    And now, it appears that some shipping loans gone very bad could be the catalyst for Europe’s banking crisis to finally breach the most impenetrable border of all, that of Germany.

    Because it is in Germany where we find what may be the next domino to fall as part of Europe’s latest banking crisis incarnation: Bremen Landesbank.

    Several weeks ago, the FT reported that the German Landesbank NordLB was considering taking full control of its smaller peer Bremer Landesbank (BLB), which is struggling under the weight of a portfolio of bad shipping loans. BLB, in which NordLB already owns 54.8%, warned last week that it would have to take a €400m writedown on its shipping portfolio, and that as a result it was facing a “mid-triple-digit million loss” this year.

    As the FT added, the admission prompted concerns about the health of the Bremen-based bank, which had €29bn in assets at the end of 2015, and BLB’s owners have since been holding talks on how to bolster the stricken lender’s capital position.

    In a statement made one month ago, NordLB’s chief executive, Gunter Dunkel, and Bremen’s finance minister, Karoline Linnert, said that BLB’s owners — NordLB, the city of Bremen, and the savings banks association in Northrhine Westphalia — had agreed to keep BLB’s capital “intact at an appropriate level”. “The form and size of the capital increase are currently being intensively discussed,” NordLB and the city of Bremen said. “The necessary decisions will be carried out by the end of 2016.”

    The market quickly read, and internalized the news, then promptly moved on: after all, with a bigger backer set to rescue the bank, there is nothing to worry about.

    Just one problem: that may no longer be the case.

    In an article released moments ago by Germany’s Handelsblatt titled a “Capital increase for ailing Landesbank is questionable“, the German paper writes that “shipping loans have brought Bremer LB into distress and the bank can not survive without government help, but a direct capital injection from Lower Saxony now looks unlikey.”

    The punchline, and where the narrative veers dramatically from the smooth sailing scenario presented last month by the FT, is that according to “Lower Saxony’ President Stephen Weil, a capital increase by his state and Bremen for the ailing bank is currently not realistic. “The classic method, namely when partners provide the necessary capital, does not seem to work,” the Prime Minister said to the “Weser-Kurier”. But, he added, “we will make every effort to save the Bremer Landesbank.“

    Bremer LB’s sudden fall from bailout grace appears to be the latest result of political conflict, because as Handelsblatt notes, Weil was responding to remarks by his colleague Carsten Sieling (SPD), who excluded capital support for the BLB. In a scenario that Italy is all too familiar with, Sieling said that such an action would not be in line with EU requirements.

    In other words, Germany may now find itself in the ironic situation that its own bailout intransigence will force it to engage in a bail in for one of its bigger banks.

    To be sure, it is possible that a solution is found, and Merkel will need to concede to not only a Bremen LB bailout, but one of Italy as well, as the two would go hand in hand. On the other hand, it just may be the case that Germany refuses to save even one of its own.

    And while the final outcome remains uncertain, the market quickly read between the lines and responded in preparation for a worst-case outcome: in intraday trading the bank’s “equity-like” 9.5% Contingent Convertible bond of 2049 has plunged by almost half from 120 to 73 in minutes, a move which has likewise spooked broader global markets.

  • The Number One Goal to Own Gold and Silver is NOT What You Think It Is

    The number one reason to buy physical gold and physical silver (not paper gold and paper silver, which is not the same thing) is very likely not what you think it is. I can deduce the number one reason why most people buy gold and silver simply from the disproprotionate amount of questions I receive about buying gold and silver whenever gold and silver prices are rising significantly versus when gold and silver prices are falling. In other words, most people believe that that top reason they should buy gold and silver is to profit from rising prices. However, this is far from the best reason to buy physical gold and physical silver. The number one reason to buy physical gold and silver, bar none, is the global currency rot that is happening today, that is relentless, and that Central Bankers are now helpless to stop (though they are responsible for creating it). Of course, some may say that benefiting from rising fiat currency prices of gold and silver is the same reason as protecting onself against currency rot, but in reality, these two reasons for buying gold and silver are as different as night and day, and here’s why. Of those that want to benefit from rising fiat currency prices of gold and silver, the vast majority are looking for a quick score, and they buy gold and silver for this reason without even taking the time to truly understand the value of gold and silver. Those seeking a quick profit from ownership of gold and silver typically fail to understand that:

    (1) the true value of gold and silver is immutable and defined by its weight in grams or troy ounces;

    (2) that gold and silver should never even be priced in terms of illegitimate fiat currencies; and

    (3) during periods of time when fiat currency prices of gold and silver drop, a dropping fiat currency price is only indicative of an incredible opportunity to buy similar values (weights) of gold and silver while spending less fiat currencies to do so.

    As an example of this incorrect mindset, a the end of this past May, I informed a couple of friends that gold was making a short-term low at about $1200 and silver was doing likewise at $16. Because both PMs have risen considerably in fiat currency prices since then, one of these friends incredulously asked me at the start of this week if he should sell his gold and silver because both PMs had moved significantly higher in such a short time-span. In hearing this inquiry, I realized that he didn’t understand the number one reason to buy physical gold and physical silver in the first place – the protection it affords all of us against Central Banker-induced global currency rot.

     

    Everywhere you look, there are stories from every continent in the world regarding currency collapse and the hundreds of millions of lives ruined by Central Banker-created currency rot. Of course, you will never hear of this critical global issue promoted by the  banker-bought-and-paid-for mainstream media even though these unfolding tragedies should be front and center on page 1 as these are critical stories of which everyone should be aware. And because these stories are largely ignored by the banker-bought-and-paid-for mainstream financial media, this is the number one reason most people are shockingly unaware of the global currency rot that is happening right now. Fortunately, with a tiny bit of effort and just a little bit of research online, one can easily track down and uncover these stories.

     

    If you haven’t been asleep for the last five years, if one knows nothing else about this super important story of global currency rot,  the main story of currency rot everyone knows about is the rapid collapse of the Russian ruble from about mid-2014 to the end of 2015. Since then, the ruble has recovered slightly, but not enought to save anyone that stored large amounts of their wealth in rubles during this time period. Many times, people make the mistake of thinking that because their domestic currency has only devalued slightly up until now, that there will always be time to exit the currency and move to a sound currency like physical gold and physical silver. Thus, they endlessly delay executing strategies they know they should have executed at least a year ago, due to this “slow burn” that can be quite deceptive. For example, from early 2012 to the end of 2013, over 2 years, the Russian ruble lost 3% of valuation against the US dollar, a “slow burn” that tricked many Russians into remaining complacent about their faith in an unsound fiat currency. And in the first 7 months of 2014, the ruble lost another 3%. Again, many Russians were unhappy with the devaluation of the ruble, but they felt as though they could live with such devaluation and would take action if it became necessary, thinking they could front-run the event, even though warning after warning and red flag after red flag in the form of ongoing devaluations had already occurred that should have prompted every ruble-owning Russian to convert their fiat currencies into the sound money of physical gold that was far more stable. Then, while most Russians were still ignoring all the previous warning signs from July to the end of the year in 2014, the ruble fell off a cliff and collapsed, rapidly lost a massive 50% in purchasing power, and unfortunately, for the procrastinators,  rapidly destroyed their savings in the process. In other words, by the time the “event” happened for which Russians were waiting to trigger action, it was already too late to act. What about those that converted rubles to gold in mid-2013 because they had the foresight to plan for the time in which Central Bankers would ruin the ruble fiat currency? From mid-2013 to present day, their gold, priced in rubles, has risen by about 120%, more than enough to preserve their purchasing power in their home country and more than enough to help them avoid the fate of most of their fellow countrymen that lost much of their life savings in a very short period of time.

     

    Though there are literally dozens more examples I can provide that are comparable to the story above and I will provide one more example in this article of a failing emerging market fiat currency, people that live in industrialized nations tend to believe that there domestic currencies are “safe” because they fail to understand that Central Bankers are ruining currencies in every single country in the world today. They make a huge mistake of thinking “I don’t live in an emerging market, and that problem in Russia is an emerging market and third world country problem that will never happen in my country.” They further mistakenly believe, “A 50% devaluation of my fiat currency in 6 months can never happen. That is a problem of emerging markets and not industrialized, ‘modern’ markets.” Thus, they mistakenly conclude, with great confidence, that the process of fiat currency devaluation in their country will be much less volatile, and therefore provide them with much more time to react to the problem when it develops.  In other words, they believe that there is no need to plan because they can just react to warning signs in the future without realizing that multiple red flags and warning signs are already here. The free fall in purchasing power of the Ukranian hyrvnia, the Russian ruble, the Venezuelan bolivar and the very significant 20% to 30% devaluations of fiat currencies in several industrialized nations and dozens of other emerging markets ARE the red flags for which residents of industrialized countries are waiting, but have failed to identify.

     

    Let’s use Canada as an example to make my point. No one ever thinks of Canada as anything but a modern, industrialized nation that would not suffer the same fiat currency problems as an emerging market country, and indeed, if you are not Canadian, you may be entirely unaware of the real and very significant struggles that have afflicted the Canadian dollar, or looney, in recent years. Like the Russian ruble, for the past two years, the Canadian dollar suffered some fairly significant swings in value against the US dollar but nothing that concerned most Canadians, though these swings should have been massive red flags to all Canadians of the already unstable nature of the looney. In 2011, the Canadian dollar swung 5% higher and nearly 7% lower from its starting point against the USD during the year but by year’s end was nearly unchanged, so most Canadians did not believe there was any need to diversify out of the Canadian dollar into a sound form of money like physical gold. The following year in 2012, during the course of the year, more red flags materialized as the volatility of 2011 continued, but again, the year closed with the Canadian dollar nearly unchanged against the USD, so most Canadians continued to ignore the massive red flag of currency volatility and instability, falsely believing that they still had time to respond reactively, instead of proactively, to the unstable Canadian dollar. However, as was the case with the Russian ruble, the fall came quick and hard for the Canadian dollar and in just 2-1/2 years, from mid-2013 to the end of 2015, the Canadian dollar plunged by more than 30% against the USD. Again, for those Canadians that understood that Central Bankers are destroying fiat currency valuations in ALL countries and consequently moved out of the Canadian dollar into gold before this significant currency rot happened, their gold appreciated significantly in Canadian dollars over this same time period, helping to preserve their purchasing power versus the substantial losses in purchasing power they would have suffered had they continued to hold devaluing Canadian dollars. If one needs to be reminded of how quickly a “strong” fiat currency (an oxymoron of word association) can unravel, merely recall the successful Brexit vote last month that caused the British pound fiat currency to plunge to 31-year lows in a single day.

     

    Next, let’s look at the currency disaster that has afflicted citizens of Venezuela to provide a warning to everyone as to what they need to do to preserve their wealth during the continuing great currency rot and worldwide fiat currency collapse that is currently under way. In 2002, a USD could be exchanged for 1.6 Venezuelan bolivars. In April of 2016, many media sources reported that a dollar could be exchanged for more than 1,000 Venezuelan bolivars on the Venezuelan black market. Here’s how such a steep and rapid devaluation translates into real world problems. As of April 2016, Venezuelan media reported that a one kg bag of rice cost two days of wages for the average wage earner. And as of last month, the dailycoin.org reported that the average Venezuelan worker,  if they wished to buy a plane ticket to leave the country to escape this massive currency rot, would need to save two years of wages to purchase such a ticket! In other words, fiat currency collapse has ruined the life of the average Venezuelan. But what about those Venezuelans that took their cues from the currency rot events that had already been unfolding all around them and exchanged their bolivars into gold?  Within the past 5-1/2 years, gold priced in Venezuelan bolivars has soared by more than 444%, and this is just in terms of “official” government-set forex rates, which due to multiple “official” exchange rates, bizarrely range from 9 or 10 bolivars to several hundred bolivars per dollar. However, because the black market rate, as of Q1 2016, frequently reached in excess of 1000 bolivars per dollar, in essence, if one had changed bolivars into physical gold in Venezuela, and then sold some of this gold for US dollars to later be exchanged back into Venezuelan bolivars, not only would one be totally unaffected by the collapse of the Venezuelan bolivar, one would be prospering in such an environment of fiat currency collapse simply by having had the foresight to exchange intrinsically near-worthless bolivars into gold before the bolivar collapsed. And if no one wants Venezuelan bolivars, which is quite common, then one still owns gold, accepted as a universal money everywhere, or one can exchange gold into another fiat currency that is accepted. With the Venezuelan bolivar, this fiat currency is merely in the process of returning to its intrinsic value of zero, as is the destiny of all fiat currencies. In case one believes one is safe from our current orgy of Central Banker-induced fiat currency implosion by holding US dollars, remember two points.

     

    One, the strongest option among a bunch of bad options is not a good option, and two, the destiny of all fiat currencies is to return to their intrinsic value of nothing, including the US dollar.

     

    As I’ve stated above, procrastination is the enemy of wisdom, as procrastination in exchanging fiat currencies into sound money literally translated into an extreme difference between financial suffering and misery and financial prosperity in Venezuela today in less than a 6-year time span. Who will be the next country to become the next Venezuela? Most likely it will be another emerging market, but this probability does not negate the likely probability that these same problems will find their way back home to the industrialized nations that started these very problems as well (well, at least to the nations of the Central Bankers that rule these industrialized nations). And when it does, as we have all learned from the example of Venezuela above, you will either be prepared for it before it happens or try to react as it happens, but react too late,  and be wiped out financially.

     

    The Central Banker destruction of all fiat currencies in every country of the world today demands a proactive approach and a reactive approach will fail.  

     

    The example of Venezuela has taught us that we all have been provided ample and adequate warning to prepare for currency rot before it truly escalates in our own nation, but that shockingly, only a few among us will take the necessary actions  to survive it when currency rot rapidly escalates in our own country. Unfortunately, even those that see the beginning and intermediate stages of what has happened in Venezuela happening in their own countries, as is the currently the case in Canada, Australia, the UK, Portugal, Greece, Italy, Spain, Ireland, Kenya, Brazil, and on and on, likely will still ignore these red flags, simply because banker propaganda has prevented most of us from realizing the simplest of solutions – converting fiat currencies into the sound money of physical gold and physical silver.

     

    In other words, not only is it human nature to not believe something can happen until it actually does happen,but it is also human nature to incredibly discredit an event as it unfolds before us, as long as it does not directly impact us significantly, until it invades our own personal space, directly affects us and denial of the truth is no longer plausible.

     

    If you have read this article and are still skeptical, I urge you to study the current cases of fiat currency collapse that have happened/ and are happening right now in Venezuela, Russia, Mexico, Colombia, Argentina and Brazil. Studying and understanding the timeline of these currency collapses should truly awaken you to the very sobering probability of severe fiat currency devaluation and/or collapse in your country, no matter where you live.  Please refer to our prior two articles, “Three Charts that Show We’re Just Getting Started in the Second Leg Higher For All Gold and Silver Assets”, and “Why Intelligent Gold and Silver Mining Company CEOs are Deferring Sales of Current Production” to gain a fuller understanding of the global currency crisis.

     

    To listen to a recent interview about where silver is heading, given by our Managing Director, JS Kim, to the SGT Report, click here.  Click here to learn more about the best junior gold and silver mining stocks in our Platinum Membership (mainly for accredited investors) and click here to learn about our flagship Crisis Investment Opportunities portfolio, up more than 16% in just the past month (3 June to 6 July). To be informed of our articles when we first release them (we originally released the above article on our website on 2 July 2016), please subscribe to our SmartKnowledgeU RSS feed. For occasional unpublished content, similar to this article, and unavailable anywhere else, sign up for our free newsletter.

  • Measuring America – 30-Year-Olds: Then & Now

    A lot has changed for 30-year-olds in the last 40 years… apart from median incomes…

     

    In 1975, nearly 3 in 4 30-year-olds had married, had a child, had left school, and lived on their own. In 2015, just 1 in 3 30-year-olds have these characteristics.

    And as Census.gov details, that's not all…

    Measuring America: 30-Year-Olds: Then and Now

    [Source: U.S. Census Bureau]

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