Today’s News 8th March 2016

• A Whole Lot of BS Behind Monday`s Oil Move (Video)

  By EconMatters

  

  Reuters News and Genscape Report attributed to today`s Oil Squeeze Move – couldn`t find more BS if you were assigned with cleaning out your horse`s barn stall. Follow the actual Oil Data Metrics and avoid the Rumor Mongering Market Garbage and Hearsay OPEC Gossip marketed as actual “Market Analytics”.

  When OPEC actually gets their collective heads out of the sand and cuts production then this is a newsworthy event, and worth covering from a journalistic standpoint. The big takeaway until proven otherwise is everyone in the Oil Industry is going to make up for lower prices by maximizing volume in any manner possible. There is no such thing as a “fair price” for oil, and OPEC is sure not going to realize this fantasy talk scenario without concrete action, i.e., cutting production from the current daily over-supplied market.

  One is sure not going to achieve a “fair price” for oil from a producer standpoint if one continues to produce over 2 million barrels per day over actual demand. Freezing oil output levels at all-time record levels is just further evidence that OPEC is clueless, myopic and just doesn`t have a handle on the market. Wake me up when OPEC actually cuts production, until then they are the boy that cried wolf far too many times!

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• Helicopter Money Comes To Canada: Ontario Pledges "Basic Income Experiment"

  Earlier today, we explained why so-called “helicopter money” can’t save the world when ZIRP, NIRP, and QE have all failed to revive global demand and boost inflation.

  The reason: QE is helicopter money. That is, we’ve been doing this for 8 years and it hasn’t worked yet.

  Some readers were reluctant to buy this rationale, but the fact is, just because the bank intermediary failed to do its part for Main Street doesn’t thereby mean this entire experiment isn’t still a farce. Think about the mechanics of it: 1) the government prints a liability (a bond), 2) that liability is sold to a primary dealer, 3) the central bank buys that government liability with yet another liability (dollars) that the government also prints.

  That’s a scam. It’s deficit financing with one (very tenuous) degree of separation. The fact that the middlemen (the banks) didn’t pass along the benefits to you doesn’t make the mechanics of it any less ridiculous.

  But if that’s helicopter money “v.1,” Main Street thinks it didn’t work out so well. Banks recovered, Jamie Dimon and Lloyd Blankfein became billionaires, financial assets soared, and everyday people got Gene Wilder’d.

  Well if helicopter money “v.3” entails flying around and raining actual banknotes onto the hapless masses, then we suppose we should at least try “v.2” first, and “v.2” is what many have called a “basic income.”

  The idea is to send everyone a monthly check that would either supplement or replace altogether, complex systems of state benefits thereby making households better off and saving the government money in the process.

  As The Independent notes, Ontario is set to become the latest locale to float the idea: “Ontario has announced it could soon be sending a monthly cheque to its residents as it plans to launch an experiment testing the basic income concept.”

  Here are some excerpts from Ontario’s budget statement:

  “The pilot project will test a growing view at home and abroad that basic income could build on the success of minimum wage policies and increases in child benefits by providing more consistent and predictable support in the context of today’s dynamic labour market.

   

  “The pilot would also test whether a basic income would provide a more efficient way of delivering income support, strengthen the attachment to the labour force, and achieve savings in other areas such as health care and housing supports. The government will work with communities, researchers and other stakeholders in 2016 to determine how best to implement a Basic Income pilot.”

  Right. So basically they have no idea how this is going to work or how to go about implementing it.

  But don’t think Ontario is alone.

  “Finland plans to outline a basic income plan for its citizens later this year, while the Dutch city of Utrecht launched an experiment in January, involving welfare recipients, to see what effect a basic income would have,” Huff Post wrote, late last month. And don’t forget, “the Swiss will vote in a referendum in June to decide whether to implement a basic income of some C$3,200 per month.”

  We profiled the upcoming Swiss vote here, noting that the plan could make the country the first in the world to pay all of its citizens a monthly basic income regardless if they work or not. 

  Amusingly, the Swiss said something similar to the Canadians about the link between the basic income and work. “The initiative’s backers say it aims to break the link between employment and income,” The Daily Mail wrote, of the Swiss plan. Much as Ontario thinks a basic income would “strenghten the attachment to the labor force.” 

  Those statements are so counterintuitive as to be laughable. 

  As long as federal and local governments are running a surplus that can account for these programs while staying in balance we suppose that’s fine, but what happens when people simply stop working and tax revenues fall? Do you then tax the basic income to pay for the basic income? That seems silly. And if not, do you sell bonds to the central bank to fund the program? And wouldn’t those bonds be claims on tax revenues which would only keep falling as the incentive to work decreases?

  Who knows, but we’re sure smarter people than us have thought it through. Or not.

  Or maybe we’re asking too many questions and the government would just say this:

  As an aside, with property prices soaring as they are in Ontario, they’d better start handing out basic incomes or they’ll have a homeless epidemic on their hands.

  

  

  

  

  

• China Trade Balance Plunges To 11-Month Lows As Exports Crash Over 25%

  Worse than expected is an understatement.

  Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline – the longest ever. Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows.

   

  

   

  So much for that whole "devalue yourself to export growth" idea…

  

   

  As Bloomberg notes,

  China’s exports in yuan terms fell 20.6% year on year in February, down from a 6.6% drop in January, and missing expectations of an 11.3% fall. Imports were down 8.0%, an improvement from January’s 14.4% drop. The trade surplus came in at 209.5 billion yuan ($32 billion), down from 406.2 billion yuan.

   

  The Chinese New Year holiday, which fell at the start of February in 2016 and in the middle of February in 2015, distorts the data in unpredictable ways. Holiday effects mean the outsize drop in February exports overstates the weakness in China’s factory sector.

   

  Even so, looking at a year-to-date figure for the first two months of the year, the picture is only slightly less gloomy. In the year through February, exports are down 13.1%.

  The policy response has already been announced. The National People’s Congress set a target for 13% growth in money supply in 2016, up from 12% in 2015, and a 3% of GDP fiscal deficit, up from 2.3%. In other words: more lending and more public spending to provide a boost to demand. In the short term, that shores up confidence in the growth outlook. Medium term, of course, there is a price to be paid.

  Stocks are mounting a modest rebound on this terrible data (moar stimulus hopes) but after $1 trillion of new credit in 2 months, is there seriously anyone left who thinks moar will help?

  We leave it to Borat to explain the Chinese authorities take on this data…

   

  

  

  

  

  

• Just Shut Up & Vote: The Futility Of Representative Government In An Age Of Robber Barons

  Submitted by John Whitehead via The Rutherford Institute,

  “That's the way the ruling class operates in any society. They keep the lower and the middle classes fighting with each other… Anything different—that's what they're gonna talk about—race, religion, ethnic and national background, jobs, income, education, social status, sexuality, anything they can do to keep us fighting with each other, so that they can keep going to the bank!”

   

  – Comedian George Carlin

  “We the people” have been utterly and completely betrayed.

  The politicians “we the people” most trusted to look out for our best interests, protect our rights, and ensure that the nation does not slip into tyranny have cheated on us, lied to us, swindled us, deceived us, double-crossed us, and sold us to the highest bidder.

  Time and again, they have shown in word and deed that their priorities lay elsewhere, that they care nothing about our plight, that they owe us no allegiance, that they are motivated by power and money rather than principle, that they are deaf to our entreaties, that they are part of an elite ruling class that views us as mere cattle, that their partisan bickering is part of an elaborate ruse to keep us divided and distracted, and that their oaths of office to uphold the Constitution mean nothing.

  Incredibly, even in the face of their treachery and lies, the great majority of Americans persist in believing that the politicians have the people’s best interests at heart.

  Despite the fact that we’ve been burned before, most Americans continue to allow themselves to be bamboozled into casting their votes for one candidate or another, believing that this time they mean what they say, this time they really care about the citizenry, this time will be different.

  Of course, they rarely ever mean what they say, they care about their constituents only to the extent that it advances their political careers, and it never turns out differently. We are as easily discarded the day after the elections as we were wantonly wooed in the months leading up to the big day. Those same politicians who were once so eager to pose for our pictures, smile at our jokes, and glad-hand us for our votes will, upon being elected, retreat behind a massive, impenetrable wall that ensures we are not seen or heard from again—at least, until the next election.

  The joke is on us.

  As I point out in my book Battlefield America: The War on the American People, all of the caucuses, primaries, nominating conventions, town hall meetings, rallies, meet and greets, delegates and super-delegates are sophisticated schemes aimed at advancing the illusion of participation culminating in the reassurance ritual of voting.

  It’s not about Red Republicans or Blue Democrats. It’s about Green Donors—i.e, those with money who can afford to pay for access.

  Votes might elect politicians, but as a 2014 field experiment by political scientists at Yale University and the University of California, Berkeley, makes clear, it’s money that talks.

  The experiment went something like this: members of Congress were contacted by constituents requesting meetings about pending public policy issues. As the Washington Post reports, “When the attendees were revealed to be ‘local campaign donors,’ they often gained access to Members of Congress, Legislative Directors, and Chiefs of Staff. But when the attendees were described as only ‘local constituents,’ they almost never gained this level of access.”

  Conclusion: money buys access to politicians who are otherwise deaf, dumb and blind to the entreaties of their constituents.

  It works the same with every politician and every party.

  Indeed, the First Amendment’s assurance of a right to petition the government for a redress of grievances has become predicated on how much money you’re willing to shell out in order to gain access to your elected and appointed officials.

  Then again, money has always played a starring role in American politics.

  The spoils system reared its greedy head under Andrew Jackson, who traded jobs in his administration in exchange for campaign contributions. For $1 million, donors could take part in Warren Harding’s poker parties and enjoy a sleepover at the White House. Lyndon Johnson had a President’s Club that cost donors $1000 a year. Nixon was prepared to sell ambassadorships for $250,000. And Bill Clinton famously allowed top-dollar donors to spend a night in the Lincoln Bedroom at the White House in exchange for roughly $5.4 million in donations to the Democratic National Committee.

  Fast forward to the present day, and a $500,000 donation might get you invited to a quarterly meeting with Barack Obama. For a mere $5,000 donation, lobbyists are being given exclusive invitations to join Congressmen and senators for weekend getaways that include wine tastings, fly fishing, skiing, golfing, hunting, spas, seaside cocktail parties and more.

  If you’re just a lowly citizen with limited cash, however, you’re out of luck.

  Try contacting your so-called representatives without paying for the privilege, and see how far that gets you. I can assure you that you won’t be given the kinds of access that lobbyists, special interest groups and top donors enjoy.

  Having been saddled with a pay-to-play system that provides access only to those with enough cash to grease the wheels of the political machine, average Americans have little to no say in the workings of their government and even less access to their so-called representatives.

  Donald Trump, as he has boasted, might be able to buy and sell politicians of all stripes (including Hillary Clinton), but the average American would be hard-pressed to get the kind of access enjoyed by corporate executives, lobbyists and other members of the moneyed elite.

  Indeed, members of Congress have to work hard to keep their constituents at a distance—minimizing town-hall meetings, making minimal public appearances while at home in their districts, only appearing at events in controlled settings where they’re the only ones talking, and if they must interact with constituents, doing so via telephone town meetings or impromptu visits to local businesses where the chances of being accosted by angry voters are greatly minimized.

  And under the Trespass Bill, passed by Congress in 2012 and signed into law by President Obama, if you dare to exercise your First Amendment right to speak freely to a politician, assemble in public near a politician, or petition a government official for a redress of grievances, you risk a fine or a lengthy stay in prison.

  Talk about self-serving.

  Under the guise of protecting government officials from physical attacks, the Trespass Bill, a.k.a. “the Federal Restricted Buildings and Grounds Improvement Act,” criminalizes First Amendment activity by making it a federal offense, punishable by up to 10 years in prison, to protest anywhere the Secret Service might be guarding someone.

  Mind you, the Secret Service not only protects the president but all past sitting presidents, members of Congress, foreign dignitaries, presidential candidates, and anyone whom the president determines needs protection, but is also in charge of securing National Special Security Events, which include events such as the G8 and NATO summits, the National Conventions of both major parties, and even the Super Bowl.

  The law essentially creates a roving bubble zone where the First Amendment is effectively off-limits, thereby putting an end to free speech, political protest and the right to peaceably assemble in all areas where government officials happen to be present. Thus, simply walking by one of these events could make you subject to arrest.

  “What that means in practice,” as The Intercept rightly points out, “is that campaign rallies for Donald Trump, who was granted Secret Service protection in November, and Hillary Clinton, who will be guarded for life as a former first lady, are the very opposite of free speech zones under federal law. (The restrictions also apply to all appearances by former presidents and first ladies, as well as those of two other candidates, Bernie Sanders and Ben Carson, who are currently protected by the service.)”

  Consider yourself warned: If you do dare to show up to a Trump or Clinton rally and even appear to be the kind of person who might engage in any kind of protest, lawful or otherwise, you could find yourself quickly dispatched to a “free speech zone” out of sight and sound of the candidates. (“Free speech zones” are government-sanctioned areas located far away from government officials, into which activists and citizens are herded at political rallies and events.) In fact, that’s exactly what happened to a group of black students at a recent Trump rally in Georgia. They were escorted by police to “‘free speech zones’ in a field shielded from the venue by a set of tennis courts, or outside a church about a quarter of a mile away.”

  The message is clear: in an age of robber barons, “we the people” are expected to just shut up and vote.

  The powers-that-be want us to be censored, silenced, muzzled, gagged, zoned out, caged in and shut down. They want our speech and activities monitored for any sign of “extremist” activity. They want us to be estranged from each other and kept at a distance from those who are supposed to represent us. They want taxation without representation. They want a government without the consent of the governed.

  They want the police state.

  The system has been so corrupted and compromised that there are few left in the halls of government who hear or speak for us.

  Congress does not represent us. The courts do not advocate for us. The president does not listen to us. And the First Amendment’s assurance of the right to speak freely and petition our government for a redress of grievance no longer applies to us.

  So if representative government has become an exercise in futility, where does that leave us?

  One of the key ingredients in maintaining democratic government is the right of citizens to freely speak their minds to those who represent them. In fact, it is one of the few effective tools we have left to combat government corruption and demand accountability.

  If there is to be any hope of righting the wrongs that are being perpetrated against the American people, we must make them—our elected officials—hear us.

  But where to begin?

  Start by opening up a dialogue within your own community about what’s wrong with this country. Stop focusing on the issues that divide, and find common ground with your fellow citizens about issues on which you can agree. Focus less on politics and more on principles. Stop buying into the false and divisive narratives that are being promulgated by political windbags and start thinking and speaking for yourselves.

  Once you’ve found that common ground, whatever it might be, make enough noise at the local level—at your city council meetings, in your local paper, at your school board meetings, in front of your courthouses and police stations—and the message will trickle up. Those in power may not like what they hear, but they will hear you.

  Remember, there is power in numbers.

  There are 319 million of us in this country. Imagine what we could accomplish if we actually worked together, presented a united front, and spoke with one voice?

  The police state wouldn’t stand a chance.

  

  

  

  

  

• AsiaPac Stocks Tumble After Japan GDP As China Trade Data Looms

  Following a modest revision to Japanese GDP (still -1.1% and recession-y) and with all eyes glued to China’s trade data, Chinese and Japanese stocks are not folowing the panic-buying short-squeeze-driven lead of US equities. Both are down hard in the early AsiaPac trading (with China down for the first time in six days post-G-20).

  It’s not working Mr Kuroda…

  

   

  And the markets are starting to realize it…

  

  

   

  This is China’s first losing day in 6 since the G-20 meeting ended such a dud…(and the world rallied on ECB hope)

  

   

  Charts: Bloomberg

  

  

  

  

  

• The Danger Of Media Blackout

  Submitted by Jeff Thomas via InternationalMan.com,

  Recently, Russian Foreign Minister Sergey Lavrov held a press conference with about 150 journalists from around the world, including representatives of the western media.

  Mister Lavrov was brief and concise; however, the question period lasted for some two hours. A breadth of topics was discussed, including the re-convening of the Syrian peace talks in Geneva, diplomatic relations in Georgia and, tellingly, the increasingly fragile relations with the US. This has not been reported on in Western media.

  This followed close on the heels of reports (again, not to be found in Western media) that the US has quadrupled its budget for the re-armament of NATO in Europe (from $750 million to $3 billion), most of which is to be applied along the Russian border. The decision was explained as being necessary “to combat and prevent Russian aggression.”

  It should be mentioned that this decision, no matter how rash it may be, is not a random incident. It’s a component of the US’ decidedly imperialist Wolfowitz Doctrine of 1992. This doctrine, never intended for public release, outlined a policy of military aggression to assure that the US would reign as the world’s sole superpower and, in so-doing, establish the US as the leader within a new world order. In part, its stated goal is,

  “[That] the U.S. must show the leadership necessary to establish and protect a new order that holds the promise of convincing potential competitors that they need not aspire to a greater role or pursue a more aggressive posture to protect their legitimate interests.”

  Of particular importance here is the term, “legitimate interests.” With this term, the doctrine reveals that its goal is the suppression of other nations, regardless of whether their ambitions are reasonable or not. All that matters is US hegemony over the world.

  Clearly, relations are reaching a dangerous level. The Russian message has repeatedly been, “Stop, before it’s too late,” yet Washington has reacted by stepping up its threat of hegemony. If the major powers do not call “time out”, world war could easily be on the horizon. Yet, incredibly, it appears that the Russian press conference has received zero coverage in the West. No British, French, German, or US television network has made a single comment. As eager as the Russians have been to get the word out as to their concerns, there has been a complete blackout of reporting it in the West.

  Russia Insider has published an article on the internet, but little else appears to be available.

  Today, the internet allows us to tap into information from every country in the world. Both official and non-official versions of the reports are available, if we know where to find them. And for those who have the time to do so, and take the time to do so, it’s possible to stay abreast of The Big Picture, although, admittedly, it’s a major undertaking to do so.

  Separating the wheat from the chaff is the greatest difficulty in this pursuit; however, as events unfold, a trend is being revealed – that the world is becoming divided with regard to information. In most of the world, there’s an expanse of available information, but, increasingly, the US, EU, and their allies are revealing a pattern of information removal. Whatever does not fit the US/EU position on events never reaches the public.

  A half-century ago, this was the case in the USSR, China, and several smaller countries where tyranny had so taken hold that all news was filtered. The people of these countries had a limited understanding as to what was truly occurring in the world, particularly with regard to their own leaders’ actions on the world stage.

  However, in recent decades, that tyranny has dissipated to a great degree and those countries that had been isolationist with regard to public information are now opening up more and more. Certainly, their governments still prefer that their press provide reporting that’s favourable to the government, but the general direction has been toward greater openness.

  Conversely, the West – that group of countries that was formerly called “the Free World” – has increasingly been going in the opposite direction. The media have been fed an ever-narrower version of what their governments have been up to internationally.

  The overall message that’s received by the Western public is essentially that there are good countries (the US, EU, and allies) and bad countries whose governments and peoples seek to destroy democracy. Western propaganda has it that these bad countries will not stop until they’ve reached your home and robbed you of all your freedoms.

  The view from outside this cabal is a very different one. The remainder of the world view the attacks by US-led forces (Afghanistan, Iraq, Yemen, Libya, Somalia, Syria, etc.) as a bid for world dominance. In examining the Wolfowitz Doctrine, this would seem to be exactly correct.

  This is not to say, however, that the people of the NATO countries are entirely on-board with this aggression. In fact, if they were allowed to know the ultimate objective of the NATO aggression, it’s entirely likely that they would oppose it.

  And, of course, that’s exactly the point of the blackout. A country, or group of countries, that seeks peace and fair competition, with equal opportunity for all, need not resort to a media blackout. The average citizen, wherever he may live, generally seeks only to be allowed to live in freedom and to get on with his life. Whilst every country has its Generals Patton, its Napoleons, its Wolfowitzes, who are sociopathically obsessive over world domination, the average individual does not share this pathology.

  Therefore, whenever we observe a nation (or nations) creating a media blackout, we can be assured of two things.

  First, the nation has, at some point, been taken over (either through election, appointment, or a combination of the two) by leaders who are a danger to the citizenry and are now so entrenched that they have little opposition from those remaining few higher-ups who would prefer sanity.

   

  Second, the sociopathic goals of those in power are a clear and present danger to the peace and well-being of the population.

  In almost all such cases, the blackout causes the population to go willingly along each time their leaders make another advance toward warfare. They may understand that they will be directly impacted and worry about the possible outcome but, historically, they tend to put on the uniform and pick up the weapon when the time comes to “serve the country.”

  Trouble is, this by no means “serves the country.” It serves leaders who have become a danger to the country. The people themselves are the country. It is they, not their leaders, who will go off to battle and it is they who will pay the price of their leaders’ zeal for domination.

  

  

  

  

  

• China Goes Full "Minority Report", Creates "Pre-Crime" Program

  By now, the world is largely familiar with Chinese President Xi Jinping’s fabled “Tigers and Flies” campaign.

  Since taking office in 2013, Xi has embarked on an ambitious effort to root out party corruption and ensure that the directives passed down from on high in the Politburo are executed faithfully among the sprawling rank and file. As The Atlantic wrote last year, the discipline “problem” is “made more urgent by a slowing economy,” an economy which desperately needs to be reformed.

  “Reform, however, requires the ability to enact policy,” The Atlantic flatly adds. “That in turn necessitates bureaucrats who follow the central government’s orders.”

  Publicly there have been more than 1,500 announced cases against party officials. But that’s just “publicly.” Knowing the Party’s reputation for “disappearing” those who “disappoint” or otherwise act in morally objectionable ways, the real number is impossible to know but is likely orders of magnitude higher.

  When China’s stock market began to crash last summer as the country’s margin “miracle” finally buckled under the weight of the millions of illiterate daytrading housewives who poured their life savings into everything from umbrella manufacturers to industrial companies-turned P2P outfits, Beijing extended the corruption probe to those “responsible” for the equity meltdown.

  Soon, the quest for stock market “manipulators” and those (like journalists) who would otherwise seek to harm the national interest by, well, by reporting the facts became part and parcel of a kind of mini Tigers and Flies campaign focused specifically on China’s financial markets. That campaign eventually ensnared quite a few officials, prominent money managers, and eminent businessmen, including Guo Guangchang, a self-styled “Chinese Warren Buffett.”

  But all of this wasn’t good enough for China. No, a “true” police state must be able to monitor all things at all times and prevent transgressions against the prevailing order before they happen. So more “Minority Report” than NSA.

  This is especially true now that Beijing’s quest to rein in “zombie companies” and curb overcapacity is likely to mean hundreds of thousands of industrial job losses and thus quite a bit of grumbling among the downtrodden (and recently jobless) masses.

  Well don’t look now, but China is attempting to use big data, a military contractor, and a camera network known as “Skynet” to predict crimes before they happen.

  “China’s effort to flush out threats to stability is expanding into an area that used to exist only in dystopian sci-fi: pre-crime,” Bloomberg reports. “The Communist Party has directed one of the country’s largest state-run defense contractors, China Electronics Technology Group, to develop software to collate data on jobs, hobbies, consumption habits, and other behavior of ordinary citizens to predict terrorist acts before they occur.”

  

  (“Big Uncle” Xi is watching)

  Make no mistake, China is a fertile testing ground for such an experiment because, well, because the public has no rights.

  “The program is unprecedented because there are no safeguards from privacy protection laws and minimal pushback from civil liberty advocates and companies,” Lokman Tsui, an assistant professor at the School of Journalism and Communication at the Chinese University of Hong Kong, who has advised Google on freedom of expression and the Internet tells Bloomberg.

  Here’s a bit more:

  China was a surveillance state long before Edward Snowden clued Americans in to the extent of domestic spying. Since the Mao era, the government has kept a secret file, called a dang’an, on almost everyone. Dang’an contain school reports, health records, work permits, personality assessments, and other information that might be considered confidential and private in other countries. The contents of the dang’an can determine whether a citizen is eligible for a promotion or can secure a coveted urban residency permit. The government revealed last year that it was also building a nationwide database that would score citizens on their trustworthiness.

   

  New antiterror laws that went into effect on Jan. 1 allow authorities to gain access to bank accounts, telecommunications, and a national network of surveillance cameras called Skynet.

   

  Much of the project is shrouded in secrecy. The Ministry of State Security, which oversees counterintelligence and political security, doesn’t even have its own website, let alone answer phone calls. Only Wu, the engineer at China Electronics Technology, would speak on the record. He hinted at the scope of the data collection effort when he said the software would be able to draw portraits of suspects by cross-referencing information from bank accounts, jobs, hobbies, consumption patterns, and footage from surveillance cameras.

   

  The program would flag unusual behavior, such as a resident of a poor village who suddenly has a lot of money in her bank account or someone with no overseas relatives who makes frequent calls to foreigners.

  But don’t worry, this isn’t a “big data platform” designed to incriminate people before they’ve actually committed a crime (because that would be unequivocally bad, not to mention incredibly frightening).

  This, China Electronics Technology will tell you, is merely “a united information environment.” Where the Politburo knows everything about you. And is watching you. All the time. And while the old system in China would happily scapegoat you for something you haven’t done and make you confess to it in a televised address, the new “united information environment” will convince you that unless you are buried under the jail now, you will do something wrong in the future. 

  Come to think of it, we’re not sure which is worse…

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• The Birthing Of Trump's America: The Swindlers Vs. The Swindled

  Submitted by Howard Kunstler via Kunstler.com,

  Beyond the Kubler-Ross maelstrom of denial, anger, depression, etc., besetting this spavined republic, lies the actual grief provoking it all — especially the shocking loss of national purpose embodied by the muppets and puppets onstage nightly vying to bring out the worst in us in an election season far from just silly. Judging from their demeanor in the so-called debates, the candidates seem not only sick of their opponents but of themselves, a fitting outcome perhaps in a nation that hates what it has become.

  The moment that got me in Sunday night’s Democratic boasting contest, hosted by CNN, was Hillary crowing about the great achievement of Obamacare — getting thirty million uninsured Americans on some kind of health plan! The part she left out, of course, is that most of those plans have deductible ceilings in the multiple thousands of dollars, guaranteeing that the policy holder goes bankrupt if he/she seeks medical help. Who does she think she’s fooling, anyway? This sort of arrant lying is what drives millions into the camp of Trump.

  Even valiant old Bernie muffs every opportunity to explain the death-grip that Wall Street crony politics has on this land: the US Department of Justice did nothing under six-plus years of Attorney General Eric Holder to prosecute criminal misconduct in banking. And then President Obama, who is ultimately responsible, did absolutely nothing to prompt that Attorney General into action or replace him with somebody who would act. Obama’s lame excuse back in the days when informed people were still wondering about this, was that the bankers had done nothing patently illegal enough to warrant investigation — a claim that was absurd on its face.

  Obama didn’t do any better with the regulating agencies that are supposed to make criminal referrals to the Department of Justice, especially the Securities and Exchange Commission (SEC) charged with keeping financial markets honest. There was nothing that difficult about those criminal matters now fading in the nation’s memory: for instance, the bundled bonds (CDOs) of “non-performing” mortgages designed to pay off the issuers handsomely when they failed. A child of ten could have unpacked the Goldman Sachs Timberwolf bond caper. Eventually Goldman and others were slapped with mere fines that could be (and were) written off as the cost of doing business. What a difference it would have made if Lloyd Blankfein and a few hundred other bank executives were personally held accountable and sent to cool their heels in federal prison.

  As the politicians are fond of saying, make no mistake: this was Barack Obama’s failure to act. Likewise, regarding the Citizens United Supreme Court’s decision that equated arrant corporate bribery of public officials with “free speech;” Mr. Obama (a constitutional lawyer by training) had a range of remedies at his disposal, foremostly working with the then-majority Democratic congressional leadership to legislate a new and clearer definition of so-far-alleged corporate “personhood,” its duties, obligations, and responsibilities to the public interest — and its limits! Not only did Mr. Obama fail to act then, but nobody in his own party even coughed into his-or-her sleeve when he so failed. And now, of course, nobody remembers any of that.

  The effects of all this fundamental dishonesty have thundered through our national life to the degree that American society is now divided into the swindlers and the swindled, loosing the monster of collective Id known as Trump on the public. This is what comes of attempting to divorce truth from reality, which has been the principal business of American life for several decades now. When truth and reality become de-linked, a society literally doesn’t know what it is doing. With that goes the collective sense of purpose, replaced with bromides and platitudes such as Trump’s “make America great again,” and Hillary’s “In America, every family should feel like they belong.”

  Unbeknownst to the cable news hustlers, events are in the driver’s seat, not the personalities of the puppets and muppets in the spotlight. Come July, there may not be anything that could be called the Republican Party. And Hillary is the first leading contender for the highest office with a possible indictment looming over her. Yes, it’s really there percolating on the FBI’s front burner. Even if the machinery of justice trips over itself again on that, imagine how the questions behind it will color the final battle for the general election. We also fail to appreciate how, if there is just a little more trouble in banking and financial markets before November 8, we can’t even be certain of holding the general election.

  

  

  

  

  

• "They Blew It All On Hookers, Blow And Fancy Toys" – Hedgie Sees Lower Oil, Soaring Gold, & QE For The People

  Submitted by Mac Slavo via SHTFPlan.com,

  In 2011, as gold prices rocketed to $1900 and oil was trading above $120 a barrel, there were few analysts who saw anything but further gains. But Marin Katusa of Katusa Research had a different opinion. At a major commodity conference Katusa, to boos and jeers from the audience, held strong to his analysis that an imminent deflationary collapse in commodity prices was on the horizon. And collapse they did.

  According to Katusa, who is closely involved in the Canadian resource sector, most people simply assumed the good times would go on forever… because it was different this time. But like any uninhibited party fueled by unlimited cash, the hangover was sure to follow.

  There’s no doubt you had massive high paying jobs. In Canada, the province that benefited the most is Alberta… In the last twelve months they’ve had 70,000 layoffs of jobs paying over a hundred grand a year.

   

  …when I’d go to these oil towns you’d sit down at the casinos with them and these guys were all about the hookers and blow… they were all about their toys… big fancy trucks… snow mobiles… and they’re in the field for two weeks and they make $20,000 and blow it all at the casinos.

   

  You knew it couldn’t last. 

  As Katusa notes in his latest interview with Future Money Trends, though the crash has been brutal for the sector, it’s not over yet and it’s going lower for longer.

   

  They [OPEC] can survive at $20 oil…

   

  For two years everyone’s been saying, “OPEC’s going to cut back.”

   

  The reality here is, why would OPEC cut production? That would only prop up the Russians and the shale sector.

  And while most will argue that low oil prices will wipe out most of America’s shale industry, Katusa has a contrarian view, suggesting that shale sector debt, while significant, is not necessarily going to cause these companies to go under in the immediate future.

  Why?

   

  Because what banker in their right mind wants to get dirty and actually operate an oil field?

   

  So the debt will be amended, extended and then they’ll pretend.

   

  … Because you can’t just shut down an oil field. You have to reclaim those wells, which means you have to shut them down and environmentally reclaim them… and it costs more to do that today than what the actual value is.

   

  The bankers know that.

   

  … With innovation, in the Western world, costs will decrease and the bankers have no choice but to amend, extend and pretend the debt.

   

  So they’re going to go lower for longer.

  In short, going forward we should expect widespread manipulation from the producers and the banks themselves to keep the bankruptcies at bay.

  But recession still looms, and Katusa says that there are two things we can count on in the near future and why people need to rethink their investments:

  The economy is changing… In a zero-interest rate policy world people have to rethink their investments… You’re looking at higher volatility, lower returns, but much higher risk.

   

  With all this going on in the world there are only two things that can happen.

   

  We continue with negative interest rates, which I see the trend globally… 35% of Eurozone countries already have negative interest policies…

   

  And there’s going to be quantitative easing for the people… QE4-P… and that’s the reality here.

   

  Negative interest rates are a tax on wealth… a tax on savers.

  And if you haven’t already guessed, amid all the volatility and debasement of currencies, one asset class, according to Katusa, will survive and counter the coming helicopter drop of freshly printed dollars:

  There’s a great way to make money on this if you get ahead of QE4P… the quantitative easing for the people… and gold is one of the ways to do that.

  In his must-see interview, Katusa expands on this forecast by noting that, on top of all the bailouts, trade tariffs, and quantitative easing to follow, China, in an effort to maintain the perception of stability in their economy and financial markets, will soon begin flooding the global economy with commodities like aluminum, steel, iron ore and coal, which will continue to have a deflationary impact on broader commodity markets.

  But the one sector they can’t flood – precious metals – is the very sector investors should be looking at as a way to not only preserve wealth going forward, but to grow it exponentially as crisis continues to hammer the global marketplace. That’s why Katusa has disclosed he is writing million dollar checks to one specific gold acquisition company, in similar fashion to other noteworthy insiders who are moving heavily into gold including Doug Casey, Eric Sprott, George Soros, Stanley Druckenmiller and Carl Icahn.

  

  

  

  

  

• Why The Fed Will Never Normalize Rates (In 4 Simple Charts)

  It's not the economy, it's the debt, stupid…

   

  

  h/t @NorthmanTrader

  

  

  

  

  

• Goldman Gives Draghi An Ultimatum, But The ECB May Be Finally Ready To Snap

  The G-20 Shanghai summit was a dud; China’s People’s Congress fizzled (even if it unleashed the biggest iron ore rally in history, however brief); and so – in a month full of expectations for major policy stimulus (which have so far been vastly disappointing), we approach the one event that is most actionable: the ECB’s March 10 meeting and press conference, where expectations are, just like back on December 3, so great – some expect up to a 20 bps rate cut to -0.5%, others expect QE to be increased from €60BN to €70BN per month, yet others believe that Draghi will either extend the TLTRO, expand the pool of eligible collateral or introduce tiering in the negative rates schedule like Japan; Credit Suisse believes the ECB will start buying corporate bonds – that the market’s pent up hope for stimulatory relief can only lead to disappointment, especially after a bear market rally as furious as this. 

  Indeed, some such as SocGen, admit as much: as Michala Marcussen says, “our view remains that monetary policy is near the limits of what it can achieve in isolation; structural reform and fiscal stimulus is required next.” 

  Bloomberg’s Richard Breslow was particularly poetic this morning when he wrote that “meddling with the monetary system had its day. The ECB, and the BOJ, among others, are increasingly looking like one trick ponies. Even if you agree it was a really good trick, at some point it losses all impact on the audience. And that is a real danger as the QE transmission mechanism can’t work if it fails to impress. From Davos to Shanghai we have been treated (tortured) with hearing central bankers talk longingly about fiscal policy. And then go off and ramp up monetary policy. The tact they employ in criticizing their governments is utterly the wrong tack.“

  We wholeheartedly agree with this searing observation, because Breslow is 100% correct: even as they blame the fiscal authorities for not doing their job (and the Fed has been particularly vocal in bashing Congress), central bankers do everything in their power to prevent the “risk off” market selloff that could finally force the required fiscal change and awake governments from their stupor. We highlighted this paradox 5 years ago when the Fed was launching QE2 and nothing has changed since even though now both the BIS (whose directors ironically are the same central bankers its economists love to criticize each quarter), and the Davos billionaire set, both agree that central planning has not only gone on for too long, but has lead to unprecedented and adverse consequences.

  And while there appears to be a disturbing, and 7 years late, break out of common sense among even the tenured “intellectual oligarchy”, one bank refuses to hand over control, and instead has released a note telling Mario Draghi in no uncertain terms, that it is “Time for the ECB to step it up.”

  In the note by Robin Brooks, whose abysmal FX recommendations in past few months, and whose epic, and just as overoptimistic misread of the December ECB meeting left Goldman clients with billions in losses, have made many ask if he is the next incarnation of the inimitable Tom Stolper, he admits that “one year since the start of ECB QE, the program is in trouble.” What he means is that his recommendation for EURUSD parity, and even as low as 0.90 by the end of 2017, is in just as big trouble.

  So, in order to avoid disappointing his former employer – recall that Draghi himself worked as Goldman when he was selling Greece those infamous currency swaps – once again, this is what Goldman’s FX strategist recommends the ECB should do.

  But first, this is how Goldman suggests Draghi pitch his case to his ECB peers:

  On perhaps the most important metric – inflation – we are almost back to where we started, with core near last year’s low of 0.6 percent. Looking through the lens of the inflation mandate, sequential (month-over-month) inflation needs to triple from its pace over the past year for the ECB to meet its already low forecast for core of 1.3 percent in 2016 (Exhibit 1). Put another way, our European economics team forecasts core at just 0.9 percent this year. There is therefore little doubt in our minds that the ECB is missing its mandate and – given the miss on core – that this is not just a story about lower oil prices. Instead, the Phillips curve in the Euro zone may have shifted down, which would explain why core has failed to pick up even as the unemployment gap has closed (Exhibit 2). The fact that this downshift originates in southern Europe, as we have shown, suggests that structural reforms are pushing wages and prices lower, giving a deflationary bias to the periphery, such that Euro zone inflation is now lower ceteris paribus. If this is true, low inflation is a more serious problem than the ECB believes and requires forceful action. In this FX Views, we lay out scenarios for EUR/$ for different outcomes on Thursday. Above all, after a year of mixed messages, the ECB needs to signal that it is serious about pursuing its inflation mandate, including via a stepped up pace of monthly QE purchases.

   

  

   

  Or else? And here is where it gets good, because Goldman basically lays out, point for point, what Draghi should do on Thursday if he wants to remain in his cephalopod master’s good graces:

  There is little doubt in our minds that the ECB wants to surprise this week, not just because of the inflation picture, but also because it disappointed in December, inadvertently tightening financial conditions materially. The question is whether it will choose to do that on the deposit rate and/or sovereign bond buying. From the perspective of EUR/$, we think it is helpful to go back to first principles. The main goal of any QE program is to encourage a portfolio shift from the safe haven asset – Bunds in the Euro zone – to risky assets, including foreign currencies. The sharp Bund sell-off a year ago, not to mention the volatility since then (Exhibit 3), have impaired the functioning of ECB QE, as can be seen from the pull-back in residents’ portfolio outflows following President Draghi’s comment that “markets should get used to periods of higher volatility” at the June press conference (Exhibit 4). Our first preference is therefore for the ECB to simply stabilize Bund yields at a relatively low level, similar to what the BoJ has done since the start of QQE. This is the most powerful option for Euro down and would require the Bundesbank to adjust the maturity of its Bund purchases to market conditions. A shift from Bunds to more periphery debt, for example by relaxing the capital key, is next up in our list of preferred measures, where our rule of thumb is that an EUR 100 bn surprise is worth one big figure downside in EUR/$. Another cut in the deposit rate is our least preferred option, because we see the effect from negative interest rates as relatively limited. We think a 10 bps surprise is worth two big figures downside in EUR/$. Given how much is priced and the negative perception of tiering, this is the least powerful option.

   

  

  Goldman has spoken and it demands more QE. NIRP is its least favorite option.

  In the next paragraph, the vocal “urges” of what the ECB should do continue, and here we find that according to Goldman, that major Bund selloff of last April, was precisely at the behest of the ECB as we suggested, and as many accused us of the usual tinfoilhattery. We were right.

  Any QE program has distributional consequences, by penalizing savers at the expense of debtors. At the ECB, the interests of savers (and the financial sector that serves them) are represented by the Bundesbank, perhaps the single most important constituency within the central bank. As we showed last year, the Bund sell-off in April/May coincided with the Bundesbank reducing the maturity of its purchases (when to anchor yields it should have done the opposite), so that – in our minds – the sell-off was partly a policy decision. We see this as a form of “financial dominance,” with savers impeding forceful QE, a concept our European team discussed in early 2014. Meanwhile, shifting purchases towards periphery debt is less powerful for Euro downside, especially if it coincides with a steeper and more volatile Bund curve, because it more closely resembles a quasi-fiscal operation, helping the periphery sustain large debt burdens, aka “fiscal dominance.” Finally, the debate over tiering, which aims to shield banks from the adverse fall-out of negative interest rates, is just another example of “financial dominance.” The fact that monetary policy is subject to lobbying from different vested interests is of course nothing new. But in the case of the ECB, this is coming at the expense of “monetary dominance,” meaning that policy is not quick and forceful enough to boost inflation back to the mandate (Exhibit 5). Ultimately, we think monetary dominance will reassert itself, given that the ECB has only inflation as its target. That is the underlying reason why we continue to hold to our 0.95 forecast for EUR/$ in 12 months.

   

  

   

  Goldman’s conclusion is that “the ECB needs to surprise this week, not because of markets, but because – given the trend in core inflation – the existing policy mix is behind the curve.” Translation: the ECB has to surprise because of markets.  Brooks continues:

  Given the political economy within the ECB and what is now priced in money markets, we think the biggest margin for surprise will be to step up monthly purchases and signal that “scarcity” is not a constraint [ZH: even though it clearly is]  including via shifting away from the capital key. Our rule of thumb is that an EUR 100 bn surprise on sovereign bond buying translates into one big figure down in EUR/$. Most important, beyond specific measures, we believe it is time for the ECB to step it up and reassert “monetary dominance” over all other interests.

  Which is how Goldman lays down its ultimatum to a central banker whom it itself spawned.  Then again, Draghi already defied Goldman once in December. Would he dare to do it twice? For one thing, Robin Brooks career at Goldman would certainly be over if he were to once again lead Goldman’s muppets into the ECB slaughter. Another 3-4 big figure search in the EURUSD, and Goldman wouldn’t have to fire Brooks: his former clients may just take matters into their own vigilante hands.

  And therein lies the rub, because implied threats or not, according to MarketNews, the possibility of an ECB disappointment is all too real. This is what MNI reported last week:

  The European Central Bank is likely to add a further deposit rate cut to its fight against low inflation and tepid growth in the currency area next week, but multiple conversations with a variety of Eurosystem sources indicate little or no consensus yet for action beyond a ‘plain vanilla’ rate move. While market expectations of a comprehensive easing package from the Governing Council are on the rise, policymakers from the world’s biggest economies warned last week at the G20 meeting in Shanghai that monetary efforts alone cannot address the issues of confidence and demand that are currently stifling growth.

  Oops. If true, and going back to Breslow’s point, that would mean that Draghi will disappoint on purpose, precisely to stimulate a fiscal intervention and to keep the monetary toolkit at bay. If so, Goldman is in for a huge disappointment.

  Against that backdrop, conversations with several senior Eurosystem sources indicate that while most are open to moves that can ignite growth and inflation without creating further risks to the region’s financial stability, there remains a great deal of uncertainty with respect to the viability of specific policy options and much will depend on both the Executive Board’s proposals and the new staff macroeconomic forecasts to be presented at the meeting.

  The quotes confirm as much:

  “I don’t think that monetary policy has reached its limits, but it’s a question of whether it marginally adds to the efficiency of what we’re doing with the instruments we have,” said one senior Eurosystem source. “There is a pretty much unlimited arsenal of instruments we can use. But the question I see and always ask myself is whether we are hitting the right buttons.”

  To be sure, nobody doubts the ECB can do more, the question is whether it should do more:

  Multiple conversations with Eurosystem sources revealed some concern with respect to the limits of monetary policy, although a large majority agreed there were still plenty of options for the Governing Council, even as they lamented the lack of fiscal support from Eurozone governments.

   

  “Monetary policy isn’t paralyzed, but it’s not the only game in town,” said a second senior Eurosystem source. “Within our limits and competencies, I think we do have influence, and we have proven efficient in terms of reducing long-term interest rates, improving credit conditions and stabilizing inflation expectations.”

   

  “The huge handicap I’m seeing now is the European political environment; Europe is going through one of its major crises, I’m afraid, with even Schengen on the table.” The first source agreed.

  And herein lies the rub: even the ECB realizes that the time for passing the buck to Frankfurt is over.

  “I had hoped the ‘Juncker Plan’ would be there already, but it’s not yet,” the source said, referring to the E315 billion European Fund for Strategic Investments championed by Commission President Jean-Claude Juncker. “And every month that the Plan is not there, we are missing opportunities to have an impact from it. I have no idea what the European Commission is doing about that.”

   

  The same source also indicated a certain degree of remorse with respect to market expectations and the burden being placed on central bankers – largely as a result of the Bank’s previous activism.

   

  “There is a refugee crisis; what could the ECB do? There is climate change; oh, the ECB needs to do something. I have the hiccups; oh, the ECB should do something … it’s crazy,” the source said. “I find this completely ridiculous and irresponsible. But we got ourselves into this.“

  Yes, an ECB source said that, and he or she is right: you got yourselves into this, and there is only one way to get out – by demonstrating that you will no longer operate at the markets’ every whim and allow Brussels to punt at a time when they have to make decisions. To do that you will have to disappoint not only the market, but the banks that is confident it owns your boss.

  Will the ECB finally have the guts to say no to Goldman? We doubt it, but just in case, we are going long the EURUSD if only for symbolic support value…

  

  

  

  

  

• EU, Turkey Agree To Keep Talking On Refugee Crisis, Will Reconvene Next Week

  Update: Monday came and went, and here, courtesy of Bloomberg’s bullets, is what we got in terms of what amounts to a “draft of a draft”:

  • Draft doesn’t refer to additional 3 billion euros for Turkey as had been requested
  • EU leaders warmly welcomed additional proposals made by Turkey today to address migration issue
  • Draft refers to agreement to work on basis of following principles:
    • to return all new irregular migrants crossing from Turkey to Greek islands with EU covering costs
    • to resettle, for every Syrian readmitted by Turkey from Greek islands, another Syrian from Turkey to EU
    • accelerate visa liberalization roadmap with view to lifting visa requirements for Turkish citizens by end June at latest
    • speed up disbursement of EU 3bln to ensure first projects funded before end March, and decide on additional funding for Refugee Facility for Syrians

  Next pretend “D-Day”: March 18, the last day of the European Summit. Martin Selmayr, chief-of-staff to European Commission President Jean-Claude Juncker, tweeted: “Deal. Breakthrough with Turkey.” 

  Yeah, sure.

  *  *  *

  On Monday, officials from the EU and Turkey are gathered in Brussels to do some talking about the refugee crisis that threatens to tear Europe apart at the seams. And make no mistake, “talk” is probably all they’ll do.

  Last year, Europe and Turkey agreed on a so-called “joint action plan” which essentially amounted to Turkish President Recep Tayyip Erdogan extorting €3 billion from Brussels in exchange for a promise to curb people smuggling and stem the flow of migrants into Western Europe. As The Guardian notes, “several months on, the pact remains little more than a piece of paper.”

  Although the check has been cut, it’s not entirely clear where the money went (surprise) and now that the effective closure of the Balkan route has created a severe bottleneck of refugees in Greece, Athens is very near to losing its mind.

  As of Sunday, as many as 14,000 men, women, and children were stranded on Macedonia’s border which has been sealed and which migrant men have at various times tried to breach with homemade battering rams.

  

  Now, Macedonia wants to extend the 19-mile, Orban-style razor wire fence to a 200-mile barrier complete with guards armed with tasers, a plan unveiled in Brussels over the weekend detailed.

  

  Needless to say, Alexis Tsipras is at wit’s end.

  First Brussels forced Athens to accept a third sovereign bailout that carried draconian terms and all but guaranteed the country will remain a debt serf of Berlin for the next five decades. Now, Austria has effectively conspired with the Balkan countries to close the route north to Germany leaving Greece on its own to handle the influx. “Europe is in the midst of a nervous crisis, primarily for reasons of political weakness,” said he said on Sunday.

  

  (A man looks at the Greek island of Lesbos from the Turkish coastline)

  “About 13,000-14,000 people are trapped in Idomeni, while another 6,000-7,000 are being housed in refugee camps around the region,” Al Jazeera reports, citing Apostolos Tzitzikostas, governor of Central Macedonia province.

  “It’s a huge humanitarian crisis. I have asked the government to declare the area in a state of emergency,” he said during a visit to Idomeni on Saturday to distribute aid to the Red Cross and other non-governmental organisations.

  

  For her part, the Iron Chancellor claims “rumors” that the Balkan route has been closed “do not conform to the facts” (to quote China’s NBS):

  #BREAKING Closure of Balkans refugee route ‘speculation’: Merkel spokeswoman

  — AFP news agency (@AFP) March 7, 2016

  Coming back to Monday’s summit, “the crucial point is to know if Turkey is a player on our side, because up to now they declare they are on our side, but they don’t do anything to prove that,” Miltiadis Kyrkos, a Greek MEP who is the vice-chair of the European parliament’s joint committee with Turkey, said.

  As for Turkey, you can say what you will about Erdogan’s belligerence, but the country is not only on the frontlines of the refugee crisis, but on the frontlines of the war itself. The pressure is palpable to say the absolute least.

  Take the tiny town of Kilis for instance, which has more than doubled in size from the refugee influx. Incidentally, the town (which WSJ notes was previously “best known as a place for truckers to pick up pistachio-encrusted pastries before crossing the nearby Syrian border”), is up for a Nobel Peace Prize for its efforts.

  

  “To encourage refugees to stay, Ankara is now allowing millions of Syrians to legally work in Turkey, ending a policy in place since the start of the war. But the new regulation comes with restrictions,” WSJ goes on to document. “The restrictions, along with the often-convoluted bureaucratic challenges, make it hard for Syrian families to stay.”

  In other words, some Turkish towns with big hearts are doing their part (and more), but Ankara hasn’t even begun to implement the type of measures that will stop refugees from fleeing to Western Europe and besides, Turkey isn’t that much safer than Syria these days. “Using Turkey as a ‘safe third country’ is absurd,” said Amnesty’s director for Europe and Central Asia, Gauri van Gulik. “Many refugees still live in terrible conditions; some have been deported back to Syria and security forces have even shot at Syrians trying to cross the border.” And that’s if they don’t get blown up by the very same groups blowing them up in Syria, groups that are armed and funded by Erdogan.

  As The Guardian goes on to say, “resettlement was Angela Merkel’s last gambit for solving the refugee crisis. In mid-February, the German government confidently presented a plan in which a “coalition of the willing” – including Austria, Germany, Sweden and the Benelux trio – would take 300,000 refugees from Turkey a year [but] the renegade actions of Austria and the western Balkan states have forced Merkel into a rethink.”

  “It’s our damned duty,” she insisted last week. “And no I don’t have a Plan B.”

  Well, she had better get one, before the German electorate goes with “Plan B” for chancellor.

  As for whether Erdogan will suddenly step up to the plate – don’t hold your “damned” breath. “Turkey’s diplomacy [is like] an eastern bazaar,” the aforementioned Miltiadis Kyrkos said. And it’s not just money Ankara wants. Turkish PM Ahmet Davutoglu is looking to trade concessions on migrants for fast-track membership to the EU. “I am sure these challenges will be solved through our cooperation and Turkey is ready to work with the EU,” Davutoglu said. “Turkey is ready to be a member of the EU as well. Today I hope this summit will not just focus on irregular migration but also the Turkish accession process to the EU.”

  But Europeans aren’t exactly thrilled about Ankara’s latest move away from democratic norms. “Media freedom is a non-negotiable element of our European identity,” European Parliament President Martin Schulz said he had told the Turkish Premier, referring to Erdogan’s move to seize control of The Daily Zaman.

  And sure enough, as FT reports, Turkey is asking for more concessions: “Ahead of crunch summit between EU leaders and the Turkish prime minister on Monday, Ankara has called for an increase on the €3bn in aid previously promised by the EU, faster access to Schengen visas for Turkish citizens and accelerated progress in its EU membership bid.” One imagines a long list of eleventh hour demands could well cause the whole thing to collapse.

  Although for another EUR3 Billion in EU cash we’ll try hard https://t.co/wRyTeED6gW

  — zerohedge (@zerohedge) March 6, 2016

  Perhaps Dutch prime minister, Mark Rutte put it best: “[This] is not the summit that will change anything.”

  

  

  

  

  

• 12 Ways Your Tax Dollars Were Squandered In Afghanistan

  Everyone knows America’s campaign in Afghanistan has been an enormous foreign policy success.

  The Taliban harbored al-Qaeda before and after 9/11 so naturally, the US had to oust Mullah Omar and company on the way to chasing Osama bin Laden through the mountains whilst laying waste to whatever civilization existed prior to the American invasion.

  But the $133.1 billion spent on the war was well worth it. Bin Laden was captured in a matter of months, the Taliban was driven into relative obscurity, a stable government was elected by the people for the people in Kabul, and today, Afghanistan stands as a democratic oasis in an otherwise strife-ridden wasteland.

  Oh, wait.

  Actually it took a decade to find Bin Laden, the country is still mired in violence, Mullah Omar finally died with his one eye but it wasn’t part of some dramatic US raid, the Taliban is resurgent and now controls more territory than it has since before 9/11, and in October, Obama had to backtrack on his pledge to pull American troops out of the country.

  

  Accoring to Afghan government sources there was a “secret” meeting in Doha in February between the Taliban and officials from Kabul where, according to the government, “they [the Taliban] wouldn’t simply reject that they’re going to meet [us] face to face [for the talks in March].” If that doesn’t sound promising to you, you’re a pragmatist and should be praised for it.

  So that of course means more taxpayer dollars will continue to be plowed into this misadventure and before you know it, American boots will have been on Afghan ground for longer than some of the soldiers fighting there will have been alive.

  For those who enjoy seeing how their tax dollars are wasted on Washington’s perpetually wrong-footed Mid-East foreign policy, NBC has the following hilarious (and remarkably candid, considering the source) tribute to utter military frivolity.

  *  *  *

  From NBC

  NBC News spoke to SIGAR’s Special Inspector General John F. Sopko about 12 of the most bizarre and baffling cases highlighted by his team’s investigations.

  

  1. $486 million for ‘deathtrap’ aircraft that were later sold for $32,000

  “These planes were the wrong planes for Afghanistan,” Sopko told NBC News. “The U.S. had difficulty getting the Afghans to fly them, and our pilots called them deathtraps. One pilot said parts started falling off while he was coming into land.” Sopko called the planes “one of the biggest single programs in Afghanistan that was a total failure.”

  

  2. $335 million on a power plant that used just 1 percent of its capacity

  The “modern” diesel plant exported just 8,846 megawatt hours of power between February 2014 and April 2015, SIGAR said in a letter to USAID last August. This output was less than 1 percent of the plant’s capacity and provided just 0.35 percent of power to Kabul, a city of 4.6 million people.

  

  3. Almost $500,000 on buildings that ‘melted’ in the rain

  U.S. officials directed and oversaw the construction of an Afghan police training facility in 2012 that was so poorly built that its walls actually fell apart in the rain. The $456,669 dry-fire range in Wardak province was “not only an embarrassment, but, more significantly, a waste of U.S. taxpayers’ money,” SIGAR’s report said in January 2015.

  

  4. $34.4 million on a soybean program for a country that doesn’t eat soybeans

  “They didn’t grow them, they didn’t eat them, there was no market for them, and yet we thought it was a good idea,” Sopko told NBC News.

  

  5. One general’s explanation why 1,600 fire-prone buildings weren’t a problem

  The U.S. Army Corps of Engineers built some 2,000 buildings to be used as barracks, medical clinics and fire stations by the Afghan National Army as part of a $1.57-billion program. When two fires in October and December 2012 revealed that around 80 percent of these structures did not meet international building regulations for fire safety, Sopko said he was “troubled” by the “arrogant” response from a senior USACE chief.

  

  6. A $600,000 hospital where infants were washed in dirty river water

  “Because there was no clean water, staff at the hospital were washing newborns with untreated river water,” SIGAR’s report said in January 2014. It added that the “poorly constructed” building was also at increased “risk of structural collapse during an earthquake.”

  

  7. $36 million on a military facility that several generals didn’t want

  The so-called “64K” command-and-control facility at Afghanistan’s Camp Leatherneck cost $36 million and was “a total waste of U.S. taxpayer funds,” SIGAR’s report said in May 2015.

  8. $39.6 million that created an awkward conversation for the U.S. ambassador

  A now-defunct Pentagon task force spent almost $40 million on Afghanistan’s oil, mining and gas industry — but no one remembered to tell America’s diplomats in Kabul, according to SIGAR, citing a senior official at the U.S. embassy in the city.

  In fact, the first the U.S. ambassador knew about the multi-billion-dollar spend was when Afghan government officials thanked him for his country’s support, SIGAR said.

  

  9. $3 million for the purchase — and then mystery cancellation — of eight boats

  SIGAR said the U.S. military has been unable to provide records answering “the most basic questions” surrounding the mystery purchase and cancellation of eight patrol boats for landlocked Afghanistan.

  

  10. $7.8 billion fighting drugs — while Afghans grow more opium than ever

  Despite the U.S. plowing some $7.8 billion into stopping Afghanistan’s drug trade,” Afghan farmers are growing more opium than ever before,” SIGAR reported in December 2014.

  

  11. $7.8 million on a nearly-empty business park

  After the military withdrew in mid-2014, the investigators were told that at least four Afghan businesses had moved into the industrial park. However, SIGAR said that it could not complete a thorough inspection because USAID’s contract files were “missing important documentation.”

  12. $81.9 million on incinerators that either weren’t used or harmed troops

  The DOD spent nearly $82 million on nine incineration facilities in Afghanistan — yet four of them never fired their furnaces, SIGAR said in February 2015. These four dormant facilities had eight incinerators between them and the wastage cost $20.1 million.

  Read the full NBC report here

  *  *  *

  The good news is, now that Obama is set to keep all 9,800 troops that are currently in the country deployed through this year and 5,500 troops through 2017, they’ll be plenty more opportunities to waste money. 

  Maybe Kabul will mercifully pass the baton to the Russians who – if Syria is any indication – seem to have learned something from their experience fighting the Mujahideen in the 80s.

   

  

  

  

  

• Thanks To The Republican Civil War, Every Scenario Ends With Hillary Winning The Election

  Submitted by Michael Snyder via The Economic Collapse blog,

  What is the worst possible outcome for the presidential election of 2016?  Assuming that an election will actually take place, that is an easy question to answer – Hillary Rodham Clinton as the next president of the United States.  She is truly evil in every sense of the word, and the implications of what four (or eight) years of Hillary would mean for our nation are almost too terrible to imagine.  That is why it is so depressing watching what is happening to the Republican Party right now.  The civil war in the Republican Party is ripping it to shreds, and as a result of all this warfare every plausible scenario for what will happen the rest of the way ends with Hillary Clinton winning the 2016 election.

  According to the Associated Press, here is how the Republican delegate count stands as of right now…

  • Donald Trump: 384
  • Ted Cruz: 300
  • Marco Rubio: 151
  • John Kasich: 37

  Ted Cruz looks like he is within shooting distance of Trump, but that is an illusion.  The early part of the schedule was full of states where Cruz was expected to do well, but now the map is going to work very much against him.

  At this point, the only candidate that looks like he may be able to accumulate 1,237 delegates before the convention is Trump, and that is far from guaranteed.  So far, Trump has won approximately 44 percent of the delegates during the caucuses and primaries.  By the time it is all said and done, he will need to have slightly more than 60 percent of all the delegates awarded during the caucuses and primaries to guarantee himself the nomination before the Republican convention.  That is because there are hundreds of delegates that are not awarded during the caucuses and the primaries, and almost all of those delegates are members of the Republican establishment.

  Trump can still get there by racking up large delegate totals in winner-take-all states such as California, but it will be a challenge.  The entire Republican Party establishment, Fox News, Glenn Beck and a significant number of other prominent conservative voices have all declared war on Trump.  In fact, there are super PACs that are going to spend tens of millions of dollars doing nothing but trying to destroy Trump.

  If the Republican Party actually wanted to beat Hillary Clinton in November, they should be rallying around Trump and trying to help him, because he would definitely need a lot of help to win the general election.

  According to Real Clear Politics, the latest three polls all have Trump losing to Clinton by at least 5 points.  In key states such as Michigan, the numbers are quite a bit more dismal.  Over the next few months, those numbers are likely to get even worse as Trump is savagely assaulted by the Republican establishment and relentlessly bombarded by tens of millions of dollars of negative attack ads.  Meanwhile, Clinton is cruising along virtually unscathed.

  Of course in a just world Hillary Clinton would have already been arrested and put in prison.  There is no possible way that she should be running for president of the United States.  Unfortunately, we live in a deeply corrupt society, and this is the way that things work.

  If by some miracle he does survive to become the nominee, a significantly weakened Trump would then have to face the full power of the Clinton political machine.  It is estimated that a billion dollars could be spent on the Democratic side this time around, and Trump does not have the resources to match that.  Normally big Republican donors rally around the nominee, but in this case the big money is fighting like crazy to defeat Trump.  In a general election matchup, it really would be David vs. Goliath, and Trump would not be Goliath.

  If Donald Trump does not accumulate 1,237 delegates before the convention, then we would be headed for what is known as a “brokered convention“.  The rules are very complicated, but the key thing to remember is that the delegates are only bound for the first vote.  After that, they can vote for whoever they want.

  And it is very important to note that the campaigns don’t pick their delegates.  Becoming a delegate is a long and tedious process in most states, and most of them are party loyalists.

  In the end, a “brokered convention” would almost certainly result in an establishment candidate being chosen as the nominee.  Needless to say, the names “Trump” and “Cruz” would not be on that list.

  Have you noticed that Mitt Romney has started to put himself out there lately?  His verbal attacks on Trump have been absolutely scathing, and he told Fox News that he would not say no if he was “drafted” to become the nominee at the Republican convention…

  Romney, a former Massachusetts governor and the Republicans’ 2012 presidential nominee, repeated remarks from last week, telling “Fox News Sunday” that he wouldn’t launch an eleventh-hour campaign for president. But he declined to reject being “drafted” at the GOP convention in July to be the party’s general election candidate.

   

  “It would be absurd to say that if I were drafted I’d say no,” Romney said.

  Behind the scenes, much more is going on.  In fact, CNN is reporting that Romney’s team is actively working on a plan to steal the nomination from Trump at the convention…

  Mitt Romney has instructed his closest advisers to explore the possibility of stopping Donald Trump at the Republican National Convention, a source close to Romney’s inner circle says.

   

  The 2012 GOP nominee’s advisers are examining what a fight at the convention might look like and what rules might need revising.

   

  “It sounds like the plan is to lock the convention,” said the source.

  If Romney does emerge as the nominee, does anyone actually believe that he will defeat Clinton?

  Of course not.  Trump’s millions of supporters will be absolutely infuriated, and many of them would absolutely refuse to cast a vote for Romney in the general election.

  In the end, it would be the same result – a victory for Hillary Clinton.

  The next few weeks are going to be very interesting.  If Trump wins Florida and Ohio, there is going to be a lot of pressure on Marco Rubio and John Kasich to get out of the race, and the path to 1,237 delegates would appear to be clear.

  However, Mitt Romney could attempt to derail the Trump bandwagon by jumping in the race after March 15th.  Romney’s goal would be to capture enough delegates in winner-take-all states such as California to keep Trump from getting to the magic number of 1,237.  If Romney could do that, he knows that he would likely come out of a brokered convention as the nominee.

  But no matter what happens on the Republican side from this point forward, it is going to take a miracle of epic proportions to keep Hillary Clinton from winning the presidency.  Every plausible scenario ends with her in the White House, and that is a truly horrible thing to imagine.

  

  

  

  

  

• Iran Billionaire Who Pioneered "PetroGold" Sentenced To Death

  Two months back, in a series of lengthy exposes (see here and here), we profiled the ins and outs of the “petrogold” trade that allowed Iran to skirt international sanctions that froze Tehran out of the banking system by way of conduits and shady go-betweens in Turkey and Dubai.

  The tale is long and winding and should probably be adapted for the silver screen, but really, the mechanics were pretty simple. Couriers simply carried briefcases full of bullion through Istanbul’s Ataturk Airport and flew to Dubai where the gold was then carted off to Iran.

  The Dubai intermediary became necessary because gold exports to then-pariah state Iran were becoming too suspicious. Here’s a bit from Reuters ca. 2012 that details the switch: “Turkey exported a total $2.3 billion worth of gold in August, of which $2.1 billion was gold bullion. Just over $1.9 billion, about 36 metric tons, was sent to the UAE, latest available data from Turkey’s Statistics Office shows. In July Turkey exported only $7 million of gold to the UAE. At the same time Turkey’s direct gold exports to Iran, which had been fluctuating between $1.2 billion and about $1.8 billion each month since April, slumped to just $180 million in August.”

  Eventually the world came to know who the people on the Turkish side of the deal were and unsurprisingly the connections went all the way to the top including Turkey’s then-economy minister, Zafer Caglayan and Erdogan himself (wouldn’t you know it). Finally, in July of 2013, the U.S. added precious metals to the list of items that couldn’t be sold to Iran as part of an effort to curtail the country’s nuclear enrichment program.

  Party over.

  We went on to identify the Dubai middleman involved in the trade and looked into his company Gold AE where, ultimately, all of the gold held on behalf of clients simply disappeared. You’re encouraged to read the entire series linked above, but what’s notable today is that the Iranian side of the business, billionaire Babak Zanjani was just sentenced to death in Iran.

  You may remember Mr. Zanjani from 2013, when he was arrested for corruption.

  In better times:

  

  Now:

  

  As PressTV reported at the time, “after sanctions were imposed against the National Iranian Oil Company, Iran had to export oil and they gave Babak Zanjani the task of exporting some of this oil worth around USD 3.0003 billion. The problem is that they were supposed to get collateral from him by law and this was not done.”

  We asked: “So, Zanjani was tasked to circumvent oil sanctions which he did for over a year, but now, for some inexplicable reason, he is arrested for not ‘getting collateral’?

  We suggested at the time that perhaps the US put pressure on Iran to arrest Zanjani in exchange for some manner of sanctions relief and we’ll probably (scratch that, “definitely”) never know the whole story, but the official line now is that he embezzled $2.7 billion from the state-run National Iranian Oil Co. 

  “The court found enough evidence to convict Zanjani and two other people, who were also sentenced to death,” Bloomberg reports, adding that “Zanjani, who has denied all wrongdoing, was accused of embezzling $2.7 billion from the state-run National Iranian Oil Co. during transactions intended to circumvent international sanctions on crude exports.”

  

  (Zanjani arrives for court in November)

  As you can imagine, being tasked with helping a country evade international sanctions might tempt one to skim a little off the top which is exactly what Zanjani is accused of doing via the Tajikistan branch of his own bank, First Islamic Investment Bank.

  But here’s the (politically) interesting part: “The embezzlement occurred under the presidency of Mahmoud Ahmadinejad [but Zanjani] was arrested in December 2013 after the election of President Hassan Rouhani.“

  Bloomberg continues: “Zanjani was known to have good contacts with Iran’s Revolutionary Guards, and the decision marks a political and economic “confrontation” within Iran’s political establishment between the legacy of Ahmadinejad and the new era of Rouhani.”

  So it would appear that we may have been right three years ago. Is it possible that Rouhani made a deal with the US as part of the sanctions relief to rid the world of this petrogold peddler on the excuse he embezzled money from his own country? 

  In other words, was Zanjani simply a casualty of the Nuclear Accord and was he summarily abandoned by the Ayatollah and the IRGC for reasons of geopolitical expediency? 

  We’ll leave it to readers to decide.

  

  

  

  

  

• Egypt: The Pound Plunges

  Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

  The Egyptian pound is plummeting, again, losing 6.1% of its value against the greenback over the past week.  As shown in the accompanying chart, the black market premium has soared to 25.2%.

  

  The plunging pound has dramatically pushed up Egypt’s implied annual inflation rate.  It now stands at 28.9%.  The Egyptian pound might just be General Sisi’s Achilles’ heel.

  

  

  

  

  

• Chinese Hackers Break Into NY Fed, Steal $100 Million From Bangladesh Central Bank

  Reports indicate that some of the stolen funds were traced to the Philippines, but given what we know about the “Cyber Axis of Evil,” we can only suspect it was Iranians, Chinese, or the criminal/military mastermind Kim Jong-Un who was behind the scam, but whatever the case, someone, somewhere, hacked into Bangladesh’s central bank on February 5.

  According to Reuters, “some of the funds” have been recovered, but the bank didn’t initially say how much or how much was initially stolen. We suppose that theoretically it could have been a rather large sum, as the country has around $26 billion in FX reserves on hand:

  

  But just moments ago we learned from the AFP that the amount lost was around $100 million. “Some of the money was then illegally transferred online to the Philippines and Sri Lanka, a central bank official told AFP on condition of anonymity.” 

  “The bank reported that the USD 100 million was leaked into the Philippine banking system, sold to a black market foreign exchange broker and then transferred to at least three local casinos,” AFP continues, adding that “the amount was later sold back to the money broker and moved out to overseas accounts within days.”

  And here’s the punchline: According to AFP, Chinese hackers have been blamed and the money was stolen from accounts held at the New York Fed…

  

  (“They stole about this much, I’d say”)

  This afternoon, the Fed was out with the official denial, saying only this to Reuters: “To date, there is no evidence of any attempt to penetrate Federal Reserve systems in connection with the payments in question, and there is no evidence that any Fed systems were compromised.”

  Was Dudley penetrated then, or not? We’ll have to wait on the official investigation.

  

  

  

  

  

• Mike Bloomberg Won't Run For President: "I Won't Risk Helping Trump"

  Authored by Michael Bloomberg, originally posted at BloombergView.com,

  Americans today face a profound challenge to preserve our common values and national promise.

  Wage stagnation at home and our declining influence abroad have left Americans angry and frustrated. And yet Washington, D.C., offers nothing but gridlock and partisan finger-pointing.

  Worse, the current presidential candidates are offering scapegoats instead of solutions, and they are promising results that they can’t possibly deliver. Rather than explaining how they will break the fever of partisanship that is crippling Washington, they are doubling down on dysfunction.

  Over the course of American history, both parties have tended to nominate presidential candidates who stay close to and build from the center. But that tradition may be breaking down. Extremism is on the march, and unless we stop it, our problems at home and abroad will grow worse.

  Many Americans are understandably dismayed by this, and I share their concerns. The leading Democratic candidates have attacked policies that spurred growth and opportunity under President Bill Clinton — support for trade, charter schools, deficit reduction and the financial sector. Meanwhile, the leading Republican candidates have attacked policies that spurred growth and opportunity under President Ronald Reagan, including immigration reform, compromise on taxes and entitlement reform, and support for bipartisan budgets. Both presidents were problem-solvers, not ideological purists. And both moved the country forward in important ways.

  Over the last several months, many Americans have urged me to run for president as an independent, and some who don’t like the current candidates have said it is my patriotic duty to do so. I appreciate their appeals, and I have given the question serious consideration. The deadline to answer it is now, because of ballot access requirements.

  My parents taught me about the importance of giving back, and public service has been an important part of my life. After 12 years as mayor of New York City, I know the personal sacrifices that campaigns and elected office require, and I would gladly make them again in order to help the country I love.

  I’ve always been drawn to impossible challenges, and none today is greater or more important than ending the partisan war in Washington and making government work for the American people — not lobbyists and campaign donors. Bringing about this change will require electing leaders who are more focused on getting results than winning re-election, who have experience building small businesses and creating jobs, who know how to balance budgets and manage large organizations, who aren’t beholden to special interests — and who are honest with the public at every turn. I’m flattered that some think I could provide this kind of leadership.

  But when I look at the data, it’s clear to me that if I entered the race, I could not win. I believe I could win a number of diverse states — but not enough to win the 270 Electoral College votes necessary to win the presidency.

  In a three-way race, it’s unlikely any candidate would win a majority of electoral votes, and then the power to choose the president would be taken out of the hands of the American people and thrown to Congress. The fact is, even if I were to receive the most popular votes and the most electoral votes, victory would be highly unlikely, because most members of Congress would vote for their party’s nominee. Party loyalists in Congress — not the American people or the Electoral College — would determine the next president.

  As the race stands now, with Republicans in charge of both Houses, there is a good chance that my candidacy could lead to the election of Donald Trump or Senator Ted Cruz. That is not a risk I can take in good conscience.

  I have known Mr. Trump casually for many years, and we have always been on friendly terms. I even agreed to appear on “The Apprentice” — twice. But he has run the most divisive and demagogic presidential campaign I can remember, preying on people’s prejudices and fears. Abraham Lincoln, the father of the Republican Party, appealed to our “better angels.” Trump appeals to our worst impulses.

  Threatening to bar foreign Muslims from entering the country is a direct assault on two of the core values that gave rise to our nation: religious tolerance and the separation of church and state. Attacking and promising to deport millions of Mexicans, feigning ignorance of white supremacists, and threatening China and Japan with a trade war are all dangerously wrong, too. These moves would divide us at home and compromise our moral leadership around the world. The end result would be to embolden our enemies, threaten the security of our allies, and put our own men and women in uniform at greater risk.

  Senator Cruz’s pandering on immigration may lack Trump’s rhetorical excess, but it is no less extreme. His refusal to oppose banning foreigners based on their religion may be less bombastic than Trump’s position, but it is no less divisive.

  We cannot “make America great again” by turning our backs on the values that made us the world’s greatest nation in the first place. I love our country too much to play a role in electing a candidate who would weaken our unity and darken our future — and so I will not enter the race for president of the United States.

  However, nor will I stay silent about the threat that partisan extremism poses to our nation. I am not ready to endorse any candidate, but I will continue urging all voters to reject divisive appeals and demanding that candidates offer intelligent, specific and realistic ideas for bridging divides, solving problems, and giving us the honest and capable government we deserve.

  For most Americans, citizenship requires little more than paying taxes. But many have given their lives to defend our nation — and all of us have an obligation as voters to stand up on behalf of ideas and principles that, as Lincoln said, represent “the last best hope of Earth.” I hope and pray I’m doing that.

  *  *  *

  Or maybe he saw the polls… and the odds…

  

   

  And as if Bill Ackman's stock market forecasts were not bad enough, he said this in October:

  "I’m not supporting any other candidate. I’m all in for Mike Bloomberg."
   

  

  

  

  

  

• Average Wall Street Bonus Drops 9%; Lowest Since 2012

  When it comes to concerns about their professional future, few things faze Wall Streeters: mass layoffs – no big deal, someone else will hire; empty steakhouses – that’s ok, Hustler Club is packed (and expense accounts are accepted just fine). But lower compensation and all hell breaks loose. Which is why quite a few hearts must have been pounding today when New York state Comptroller Thomas DiNapoli released his annual Wall Street compensation report in which we revealed that average Wall Street bonuses for 2015 will drop by a quite substantial 9% to “only” $146,200, the second consecutive year of declines, and the lowest since 2012 when average bonuses were $142,860.

  According to DiNapoli, “Wall Street bonuses and profits fell in 2015, reflecting a challenging year in the financial markets. While the cost of legal settlements appears to be easing, ongoing weaknesses in the global economy and market volatility may dampen profits in 2016.” This is bad news for New York because “both the state and city budgets depend heavily on the securities industry and lower profits could mean fewer industry jobs and less tax revenue.

  The total bonus pool for securities industry employees declined by 6 percent to $25 billion in 2015 during the traditional December-March bonus season. The Comptroller’s estimate includes cash bonuses for the current year and bonuses deferred from prior years that have been cashed in.

  Curiously, DiNapoli said that while profits in the securities industry declined for the third straight year, reaching their lowest level since 2011, industrywide employment increased 2.7% in 2015, averaging 172,400 jobs for the year.  As a result, the average bonus declined by 9 percent in New York City to $146,200 in 2015 and the decline in the average bonus was larger than the decline in the total bonus pool because the pool was shared among a larger number of employees than last year.  As a result, the average bonus in 2015 was slightly larger than the average of the seven prior years (adjusted for inflation).

  However, anyone seeking a big pick up in wages will have to look elsewhere: ideally minimum wage waiters, bartenders and retail workers who now make up the bulk of Obama’s “recovery.”

  One also wonders how long before Wall Street switches from bonus cuts to even more wholesale terminations. Indeed, as DiNapoli notes, “it remains to be seen whether the recent job gains can be sustained in 2016 given the weakness in the global economy and financial markets, and increased provisions for bad loans related to the energy sector. A number of large financial firms have already announced plans to reduce costs to improve profitability, which could lead to fewer employees in New York City and smaller bonuses next year.”

  And that is what the recovery has to look forward to: not only fewer of the best paid employees in the US, but another year of smaller bonuses. At least the price of oil has soared enough to where that quarter of a million of laid off O&G workers will be promptly rehired, or else very soon the US will run out of waiters.

  Finally, don’t cry for Wall Street: like every other utility, increasingly more of the comp is paid in the form of base pay and less in the bonus: according to DiNapoli the average salary (including bonuses) for securities industry employees in New York City rose 14% in 2014 to $404,800, setting a new record (data are not yet available for 2015). This was nearly six times higher than salaries in the rest of the City’s private sector ($72,300).

  Some other observations from the report:

  • Although the securities industry is smaller, it is still one of New York City’s most powerful economic engines. The industry accounted for 22 percent of all private sector wages paid in New York City in 2014 even though it accounted for less than 5 percent of the City’s private sector jobs. An estimated 1 in 9 jobs in the city are either directly or indirectly associated with the securities industry;
  • Unlike in prior economic recoveries, the securities industry has not been a driving force in the current jobs recovery in New York City. So far, the industry has accounted for less than 1 percent of the private sector jobs added, compared with 10 percent during the two prior recoveries;
  • Securities-related activities are a large contributor to state and city tax revenues. DiNapoli estimates that securities-related activities accounted for 7.5 percent ($3.8 billion) of all city tax revenue in city fiscal year 2015 and 17.5 percent ($12.5 billion) of state tax collections in State Fiscal Year (SFY) 2014-15. The state also expects to receive more than $8.5 billion in settlement payments from financial firms during SFY 2014-15 and SFY 2015-16; and

  Finally, this is the history of average Wall Street bonuses over the years:

  

  

  

  

  

  

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