Today’s News 9th April 2016

• 1956: "America Peaked Back Then And We've Been In Decline Ever Since"

  As SHTFPlan.com's Mac Slavo noted,

  How far we have fallen! The American Dream used to be attainable to all who worked hard, and freedom was still a tangible thing that many experienced. People used common sense and wisdom from experience to make it through life.

   

  Today, most people are dumbed-down consumers who only know what they have been told through the television, who eat processed foods made by leading corporations with almost no nutritional value, they are in debt up to their eyeballs, and couldn’t think independently if they tried. Problem solving and common decency have disappeared, and the gap between the Americans of 60 years ago is so astonishing as to make movies like Idiocracy and books like The Time Machine appear absolutely correct.

  And so Michael Snyder (via The End of The American Dream blog) compares America 1956 vs. America 2016…

  Is America a better place today than it was back in 1956?  Of course many Americans living right now couldn’t even imagine a world without cell phones, Facebook or cable television, but was life really so bad back then?  60 years ago, families would actually spend time on their front porches and people would actually have dinner with their neighbors.  60 years ago, cars were still cars, football was still football and it still meant something to be an American. 

  In our country today, it is considered odd to greet someone as they are walking down the street, and if someone tries to be helpful it is usually because they want something from you.  But things were very different in the middle of the last century.  Men aspired to be gentlemen and women aspired to be ladies, and nobody had ever heard of  “bling”, “sexting” or “twerking”.  Of course life was far from perfect, but people actually had standards and they tried to live up to them.

  So how did it all go so wrong?

  Could it be possible that life in America peaked back then and we have been in decline ever since?

  Before you answer, I want to share with you a list of comparisons between life in America in 1956 and life in America in 2016…

  In 1956, John Wayne, Elvis Presley and Marilyn Monroe were some of the biggest stars in the entertainment world.

  In 2016, our young people look up to “stars” like Miley Cyrus, Justin Bieber and Lady Gaga.

  In 1956, Americans were watching I Love Lucy and The Ed Sullivan Show on television.

  In 2016, the major television networks are offering us trashy shows such as Mistresses and Lucifer.

  In 1956, you could buy a first-class stamp for just 3 cents.

  In 2016, a first-class stamp will cost you 49 cents.

  In 1956, gum chewing and talking in class were some of the major disciplinary problems in our schools.

  In 2016, many of our public schools have been equipped with metal detectors because violence has gotten so far out of control.

  In 1956, children went outside and played when they got home from school.

  In 2016, our parks and our playgrounds are virtually empty and we have the highest childhood obesity rate on the entire planet.

  In 1956, if a kid skinned his knee he was patched up and sent back outside to play.

  In 2016, if a kid skins his knee he is likely to be shipped off to the emergency room.

  In 1956, “introducing solids” to a baby’s diet may have meant shoving a piece of pizza down her throat.

  In 2016, we have “attachment parenting” which advocates treating children like babies almost until they reach puberty.

  In 1956, seat belts and bicycle helmets were considered to be optional pieces of equipment, and car safety seats were virtually unknown.

  In 2016, millions of us are afraid to leave our homes for fear that something might happen to us, and if something does happen we slap lawsuits on one another at the drop of a hat.

  In 1956, many Americans regularly left their cars and the front doors of their homes unlocked.

  In 2016, many Americans live with steel bars on their windows and gun sales are at all-time record highs.

  In 1956, about 5 percent of all babies in America were born to unmarried parents.

  In 2016, more than 40 percent of all babies in America will be born to unmarried parents.

  In 1956, one income could support an entire middle class family.

  In 2016, approximately one-third of all Americans don’t make enough money to even cover the basics even though both parents have entered the workforce in most households.

  In 1956, redistribution of wealth was considered to be something that “the communists” did.

  In 2016, the federal government systematically redistributes our wealth, and two communists are fighting for the Democratic nomination.

  In 1956, there were about 2 million people living in Detroit and it was one of the greatest cities on Earth.

  In 2016, there are only about 688,000 people living in Detroit and it has become a joke to the rest of the world.

  In 1956, millions of Americans dreamed of moving out to sunny California.

  In 2016, millions of Americans are moving out of California and never plan to go back.

  In 1956, television networks would not even show husbands and wives in bed together.

  In 2016, there is so much demand for pornography that there are more than 4 million adult websites on the Internet, and they get more traffic than Netflix, Amazon and Twitter combined.

  In 1956, the American people had a great love for the U.S. Constitution.

  In 2016, “constitutionalists” are considered to be potential terrorists by the U.S. government.

  In 1956, people from all over the world wanted to come to the United States to pursue “the American Dream”.

  In 2016, 48 percent of all U.S. adults under the age of 30 believe that “the American Dream is dead”.

  In 1956, the United States loaned more money to the rest of the world than anybody else.

  In 2016, the United States owes more money to the rest of the world than anybody else.

  *  *  *

  So now that you have seen what I have to share, what do you think?

  Has America changed for the better, or has it changed for the worse?

  

  

  

  

  

• The Salary Needed to Buy A Home in 27 Different U.S. Cities

  The popping of the Greenspan-era housing bubble took about six years in total to fully “deflate”.

  Most U.S. housing markets peaked sometime in 2006, and it wouldn’t be until just before the third-round of quantitative easing in 2012 that this fall would finally be cushioned. Since then, as VisualCapitalist's Jeff Desjardins details, the combination of QE and record-low interest rates have helped re-inflate the housing market. For better or worse, real estate in many U.S. cities are now approaching or passing their 2006 housing highs, but with a growing disparity between individual metropolitan areas.

  Today’s 3D map comes to us from HowMuch.net, and it shows the very different salaries needed to buy a median home in 27 different U.S. metropolitan areas. The salaries range between $31,134 to $147,996, which is a discrepancy of over $100,000.

   

  

  Courtesy of: Visual Capitalist

   

   

  At the low end of the spectrum, it takes a salary of between $30,000 to $40,000 to buy a home in most metropolitan areas in the Midwest. In St. Louis, for example, the salary needed to buy a home is $34,778. Pittsburgh was the least expensive city analyzed, where a salary of $31,135 could buy the median house in the city.

  At the high end is any metropolitan area in California, for which closer to six figures is now needed. San Francisco has the most expensive housing in the country, where residents must make $147,996 a year to be an average homeowner. However, Southern California is not far behind the Bay Area, where salaries of $95,040 and $103,165 are required to buy in Los Angeles and San Diego respectively.

  See the full data set, including mortgage rates, monthly payments, and median house prices here.

  West Coast Envy

  Which cities have rebounded the most since the popping of the housing bubble?

  According to The Economist’s interactive chart on U.S. housing price indices, the average U.S. market recovery between 2006 peak and 2012 trough has been about 63.9%.

  The Eastern half of the country has struggled to rebound to 2006 housing highs, with New York City, Baltimore, Philadelphia, Chicago, Tampa, Miami, and St. Louis all recovering below the above average mark.

  In contrast, prices in the West are soaring: San Francisco, Houston, Dallas, Denver, and Portland have all met or exceeded their 2006 highs. Meanwhile, Los Angeles, Seattle, and San Diego have recovered better than average.

  

  

  

  

  

• Was The Panama Papers "Leak" A Russian Intelligence Operation?

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  As I wrote on Monday, ever since I started reading about the Panama Papers “leak” something kept rubbing me the wrong way. From the absence of any well known, politically powerful Americans on the list, to the anonymous nature of “John Doe” as whistleblower and the clownish reporting from Soros and USAID affiliated organizations, the whole thing stunk from the start.

  The first plausible theory I came across attempting to explain the strangeness of it all was proposed by Craig Murray, and it basically went something like this. The leaker is a real whistleblower, but he placed the information in the wrong hands, therefore the organizations and journalists reporting on the story were not giving us the whole truth. Here’s some of that theory from the post, Are Corporate Gatekeepers Protecting Western Elites from the Leaked Panama Papers?

  Whoever leaked the Mossack Fonseca papers appears motivated by a genuine desire to expose the system that enables the ultra wealthy to hide their massive stashes, often corruptly obtained and all involved in tax avoidance. These Panamanian lawyers hide the wealth of a significant proportion of the 1%, and the massive leak of their documents ought to be a wonderful thing.

   

  The Suddeutsche Zeitung, which received the leak, gives a detailed explanation of the methodology the corporate media used to search the files. The main search they have done is for names associated with breaking UN sanctions regimes. The Guardian reports this too and helpfully lists those countries as Zimbabwe, North Korea, Russia and Syria. The filtering of this Mossack Fonseca information by the corporate media follows a direct western governmental agenda. There is no mention at all of use of Mossack Fonseca by massive western corporations or western billionaires – the main customers. And the Guardian is quick to reassure that “much of the leaked material will remain private.”

   

  The corporate media – the Guardian and BBC in the UK – have exclusive access to the database which you and I cannot see. They are protecting themselves from even seeing western corporations’ sensitive information by only looking at those documents which are brought up by specific searches such as UN sanctions busters. Never forget the Guardian smashed its copies of the Snowden files on the instruction of MI6. 

  Initially, this seemed to be a theory worth exploring, but in the following days I’ve come to a far different conclusion. The primary divergence between what I currently believe and what Mr. Murray proposed is that I do not think the leaker was a genuine whistleblower motived by the public interest. I think the leaker was working on behalf of a sophisticated intelligence agency.

  The fact that we seem to know nothing about “John Doe” concerns me. Say what you will about Edward Snowden, but he came out publicly shortly after his whistleblowing and offered himself up for the world to judge. His life, career and personality have been put on full display, and each and every one of us has had the opportunity to decide for ourselves whether his motivations were noble and pure or not.

  With the Panama Papers’ “John Doe” we are given no such opportunity, and in fact, the whole thing reads very much like a script concocted by some big budget intelligence agency. Once I started coming around to this conclusion, the obvious choice was U.S. intelligence; given the lack of implications to powerful Americans, the clownishly desperate attempts to smear Putin, and the appearance of Soros, USAID, Ford Foundation, etc, linked organizations to the reporting.

  So for someone who already thinks the whole Panama Papers story stinks to high heaven, a CIA link to the release seems obvious; but is it too obvious? Perhaps.

  Earlier this morning, I read an absolutely fascinating theory put forth by Clifford G. Gaddy at the Brookings Institution. Here’s what he wrote in the piece, Are the Russians actually behind the Panama Papers?

  The “Panama Papers”—does this strike anyone else as a very fishy story? It’s like something out of a cheap spy movie.

  Yes, yes it does.

  In early 2015, “John Doe” sends (out of the blue) an email to the German newspaper Süddeutsche Zeitung (SZ), offering 11.5 million documents from a Panamanian law firm relating to offshore shell companies. SZ accepts. Under the International Consortium of Investigative Journalists (ICIJ), some 400 journalists from 80 countries spend a year sifting through the documents. Then, in a coordinated launch, they present their first findings: With nearly identical language in all media (down to the local TV station in Washington that I happened to watch this week), they talk about the grand new revelations of corruption, money laundering, and financial secrecy by over 140 world leaders.

   

  Most reports, no matter where, feature Russian President Vladimir Putin as the headliner. But that might obscure a much bigger and more twisted story.

  The dog that didn’t bark

  Despite the headlines, there is no evidence of Putin’s direct involvement—not in any company involved in the leak, much less in criminal activity, theft, tax evasion, or money laundering. There are documents showing that some of his “friends” have moved “up to two billion dollars” through these Panama-based shell companies.

   

  But nothing in the Panama Papers reveals anything new about Putin. It is in fact far less of a story than has been alleged for a long time. For over 10 years, there have been suspicions that Putin has a vast personal fortune, claimed at first to be $20 billion, then $40, $70, even $100… And now all they find is “maybe” a couple of billion belonging to a friend?

  This is the dog that didn’t bark.

  I completely agree with this conclusion. Putin probably does have a huge fortune stashed away somewhere, but this “leak” doesn’t reveal anything about it. In fact, the Panama Papers will have absolutely zero impact on Putin’s political power at home, while making Western efforts to trash him look manufactured and clownish. Net-net Putin wins from the release of the Panama Papers.

  As Mr. Gaddy explains.

  Some (geo)political context is important here. In recent years, the media has become a key battleground in which Russia and the West have attempted to discredit each other. Early last year, circles in the West sought to use the media to respond to what they described as Russia’s “hybrid warfare,” especially information war, in the wake of the Russian annexation of Crimea and related activities. They identified corruption as an issue where Putin was quite vulnerable. It’s worth looking at the Panama Papers in that context: Journalists are targeting Putin far out of proportion to the evidence they present.

   

  As soon as one delves below the headlines, it’s a non-story. A “friend of Putin” is linked to companies that channel a couple of billion dollars through the offshore companies. Why? To evade Russian taxes? Really? To conceal ownership? From whom? You don’t need an offshore registration to do that. To evade sanctions? That’s a credible reason, but it makes sense only if the companies were registered after mid-2014. Were they?

   

  This information will not harm Putin at all—instead, it gives Putin cover, so he can shrug and say: “Look, everybody does it.” A more serious possibility is that the leaked data will lead to scandals throughout the West, where corruption does matter—a point I’ll discuss. On net, the Russians win.

   

  The cui bono principle connects profits with motives, asking who stands to gain from a certain action. If it’s the Russians who win, isn’t it possible that they are somehow behind at least part of this story? 

  Who is “John Doe”? 

  The ICIJ is the self-described elite of investigative journalists—but what have they discovered about the source of all these documents? The only information we have about John Doe is from SZ, which begins its story: “Over a year ago, an anonymous source contacted the Süddeutsche Zeitung (SZ) and submitted encrypted internal documents from the law firm Mossack Fonseca.” When the staff at SZ asked John Doe about his motive, he reportedly replied in an email: “I want to make these crimes public.”

   

  But how can the journalists—and the public—be sure he’s trustworthy, and that the documents are real, complete, and unmanipulated? It’s not clear that John Doe is a single individual, for one, nor why he would have been confident that he could reveal the documents without revealing himself. He’d also have access to a pretty impressive documents cache, which suggests that an intelligence agency could have been involved. 

  The above seems clear to me as well, which is why I feel pretty strongly that this was some sort intelligence operation.

  Moreover, the revelation brings collateral damage upon legal business and innocent individuals—was that not a worry? In my view, no responsible person with a real concern for rule of law would advocate this sort of sweeping document release. There might be many unintended consequences; it could topple regimes, with unforeseen consequences. It’s pure and naïve anarchism, if the thinking was (as it seems from the outside) to create maximum chaos and hope it will all purge the system of its evils. In any event, the potential for using such a leak for political purposes is immense.

   

  If “we” (in the United States or the West) released these documents, the motive would apparently be to embarrass Putin. This is part of the fantasy that we can defeat Putin in an information war. If that was the motive, the result is pathetic: No real damage is being done to Putin, but there is collateral damage to U.S. allies.

   

  If the Russians did it, a good motive might be to deflect the West’s campaign against Putin’s corruption. But as I’ve explained, any actual reputational damage to Putin or Russia caused by the Panama Papers is in fact pretty trivial. For that cheap price, the Russians would have 1) exposed corrupt politicians everywhere, including in “model” Western democracies, and 2) fomented genuine destabilization in some Western countries. What I wonder, then: Is it a set-up? The Russians threw out the bait, and the United States gobbled it down. The Panama Paper stories run off Putin like water off a duck’s back. But they have a negative impact on Western stability.

  Personally, I’m not convinced they will have any impact on Western stability whatsoever. Rather, here’s what they do achieve: 1) they make the Western press look ridiculous in its obsession with Putin 2) the absence of any notable Americans makes it look like a CIA operation.

  So let’s say that the “who” is the Russians, and the “why” is to deflect attention and show that “everybody does it.” But how? Given Russia’s vaunted hacking capabilities, a special cyber unit in the Kremlin may have been able to obtain the documents. (Monssack Fonseca is maintaining that the leak was not an inside job.) But it is most likely that such an operation would be run out of an agency called the Russian Financial Monitoring Service (RFM). RFM is Putin’s personal financial intelligence unit—he created it and it answers only to him. It is completely legitimate and is widely recognized as the most powerful such agency in the world, with a monopoly on information about money laundering, offshore centers, and related issues involving Russia or Russian nationals.

   

  An operation like the Panama Papers, which is only about financial intelligence, would have to be run out of RFM. Not the FSB, not some ad hoc gang in the Kremlin. While it might not (legally) have access to secrets kept by a firm like Mossack Fonseca, it’s privy to lots of international financial information through the international body of which it is a leading member, the Financial Action Task Force. In short, Russians are better equipped than anyone—more capable and less constrained—to hack into secret files.

   

  As for how to leak the documents, it would actually be pretty ingenious to “incriminate” Russia in a seemingly serious (and headline-grabbing) way without actually revealing incriminating information. That’s exactly what we have. The Panama Papers revealed no Russian secrets. They added nothing to the rumors already circulating about Putin’s alleged private fortune. And the story-that-isn’t-a-story was advanced by none other than the ICIJ. So, done right, the last thing anyone would suspect is that the Panama Papers are a Russian operation.

  A more serious Russian motive?

  Granted, this would be a complicated operation just to defuse the West’s campaign to point to “Putin the kleptocrat.” But maybe there’s another motive.

   

  As many have already pointed out, it’s curious that the Panama Papers mention no Americans. But it’s possible that they do and that the ICIJ hasn’t revealed that information. Perhaps, since the ICIJ is funded by Americans, they’re not going to bite the hand that feeds them. But suppose the ICIJ actually doesn’t have information on Americans—that calls into question the original data, which if actually real and uncensored would most probably include something on Americans. There are undoubtedly many American individuals and companies that have done business with the Mossack Fonseco crew, and it wouldn’t make sense for a collection of 11.5 million documents involving offshore finances to omit Americans entirely. Perhaps, then, someone purged those references before the documents were handed over to the German newspaper. The “someone” would, following my hypothesis, be the Russians—and the absence of incriminating information about Americans is an important hint of what I think to be the real purpose of this leak. 

  Some have argued that the reason no powerful Americans are named is because Americans use other jurisdictions for such behavior. Considering the size of this data leak and the fact that it supposedly contains information going back to the 1970s, I find this explanation unconvincing.

  Now back to Brookings.

  The Panama Papers contain secret corporate financial information, some of which—by far not all—reveals criminal activity. In the hands of law enforcement, such information can be used to prosecute companies and individuals; in the hands of a third party, it is a weapon for blackmail. For information to be effective as a blackmail weapon, it must be kept secret. Once revealed, as in the Panama Papers case, it is useless for blackmail. Its value is destroyed.

   

  Therefore, I suggest that the purpose of the Panama Papers operation may be this: It is a message directed at the Americans and other Western political leaders who could be mentioned but are not. The message is: “We have information on your financial misdeeds, too. You know we do. We can keep them secret if you work with us.” In other words, the individuals mentioned in the documents are not the targets. The ones who are not mentioned are the targets.

  Kontrol, the special Russian variety of control

  In sum, my thinking is that this could have been a Russian intelligence operation, which orchestrated a high-profile leak and established total credibility by “implicating” (not really implicating) Russia and keeping the source hidden. Some documents would be used for anti-corruption campaigns in a few countries—topple some minor regimes, destroy a few careers and fortunes. By then blackmailing the real targets in the United States and elsewhere (individuals not in the current leak), the Russian puppet masters get “kontrol” and influence.

   

  If the Russians are behind the Panama Papers, we know two things and both come back to Putin personally: First, it is an operation run by RFM, which means it’s run by Putin; second, it’s ultimately about blackmail. That means the real story lies in the information being concealed, not revealed. You reveal secrets in order to destroy; conceal in order to control. Putin is not a destroyer. He’s a controller.

  At this point, I want to make something perfectly clear. I do not profess to know the “real story” behind the Panama Papers. The truth is, nobody knows, except for John Doe and the people he was working for (or with). The only thing I feel fairly confident about is that the story we are being fed is not the real story. The more I read and reflect upon the very minor consequences of the leak thus far, the more I become convinced this was a geopolitical play by a powerful intelligence agency. At first, I assumed it was U.S. intelligence, but Mr. Gaddy puts forth a compelling theory. If this was the work of the CIA, it was an extremely sloppy and obvious hit job. On the other hand, if this was the work of Putin for the purposes of blackmail, it’s one of the most ingenious chess moves I’ve ever seen played on the global stage.

  I want to conclude with a very important observation. If Clifford Gaddy’s theory is correct, it’s the worse case scenario for American citizens. It means that Putin essentially has the goods on the U.S. elite and he can now blackmail them for his purposes. Indeed, perhaps Iceland was put forward as an example of what can happen if truly damaging information makes it to the public.

  So if Putin is behind this, and does have the goods on the U.S. elite, not only do we not get rid of the these corrupt oligarchs, we now have to live with them in an even more compromised state than they were before. For all of our sakes, I hope Mr. Gaddy is wrong.

  

  

  

  

  

• Taxpayer Money Well Spent? US Among World's Top Executioners In 2015

  Submitted by Michaela Whitton via TheAntiMedia.org,

  The number of people put to death across the globe in 2015 reached a 25-year high. The alarming surge in executions saw at least 1,634 people sentenced to death in 25 countries, according to a new report by Amnesty International. The figures exclude China, whose numbers remain a state secret despite the country’s title as the world’s top executioner.

  Concluding that 2015 saw highest number of executions recorded by Amnesty International since 1989, the harrowing investigation also revealed a dramatic 54% increase since last year. Some of the methods used to carry out the death sentences included hanging, shooting, lethal injection, and beheading. In most countries where people were sentenced to death or executed, the penalty was imposed using guidelines that did not meet international standards for a fair trial.

  Almost 90% of the executions took place in three countries: Iran, Pakistan, and Saudi Arabia. However, before Westerners become too smug — and in spite of a drop in numbers — the U.S. still ranked as one of the top five executioners globally.

  

  For the seventh consecutive year, the U.S. remains the only country to use capital punishment in the Americas, carrying out 28 executions in six states. Amnesty claims the reason for the lowest recorded use of the death penalty in the U.S. since 1991 is due to legal and logistical challenges concerning the use of lethal injections. In addition, the number of death sentences imposed in the United States was the lowest since 1977 (clearly, the number of executions recorded doesn’t include the victims of drone strikes abroad, unarmed citizens killed by police, or those who died in custody).

  Despite a dramatic rise in the number of people being put to death around the world, there was some good news; Fiji, Madagascar, the Republic of Congo, and Suriname completely abolished the death penalty for all crimes. In addition, Mongolia passed a new criminal code abolishing the death penalty, which will take effect later in 2016.

  The report observed:

  “Whatever the short-term setbacks, the long-term trend is still clear: the world is moving away from the death penalty. Those countries that still execute need to realize that they are on the wrong side of history and abolish the ultimate cruel and inhuman form of punishment.”

  You can read Amnesty International’s full analysis here.

  

  

  

  

  

• WTF Chart Of The Weekend: Down Is The New Up

  Does anyone really believe this is sustainable?

   

  

  Chart: Bloomberg

  The longer the ‘visible’ hand of stabilization maintains the mirage, the bigger the inevitable collapse. Simply put, anything that can end, will! And in this case, badly…

  

  

  

  

  

• "The Greater Depression Has Started" – Comparing 1930s & Today

  Submitted by Doug Casey via InternationalMan.com,

  You've heard the axiom "History repeats itself." It does, but never in exactly the same way. To apply the lessons of the past, we must understand the differences of the present.

  During the American Revolution, the British came prepared to fight a successful war—but against a European army. Their formations, which gave them devastating firepower, and their red coats, which emphasized their numbers, proved the exact opposite of the tactics needed to fight a guerrilla war.

  Before World War I, generals still saw the cavalry as the flower of their armies. Of course, the horse soldiers proved worse than useless in the trenches.

  Before World War II, in anticipation of a German attack, the French built the "impenetrable" Maginot Line. History repeated itself and the attack came, but not in the way they expected. Their preparations were useless because the Germans didn't attempt to penetrate it; they simply went around it, and France was defeated.

  The generals don't prepare for the last war out of perversity or stupidity, but rather because past experience is all they have to go by. Most of them simply don't know how to interpret that experience. They are correct in preparing for another war but wrong in relying upon what worked in the last one.

  Investors, unfortunately, seem to make the same mistakes in marshaling their resources as do the generals. If the last 30 years have been prosperous, they base their actions on more prosperity. Talk of a depression isn't real to them because things are, in fact, so different from the 1930s. To most people, a depression means '30s-style conditions, and since they don't see that, they can't imagine a depression. That's because they know what the last depression was like, but they don't know what one is. It's hard to visualize something you don't understand.

  Some of them who are a bit more clever might see an end to prosperity and the start of a depression but—al­though they're going to be a lot better off than most—they're probably looking for this depression to be like the last one.

  Although nobody can predict with absolute certainty what this depression will be like, you can be fairly well-assured it won't be an instant replay of the last one. But just because things will be different doesn't mean you have to be taken by surprise.

  To define the likely differences between this depres­sion and the last one, it's helpful to compare the situa­tion today to that in the early 1930s. The results aren't very reassuring.

  CORPORATE BANKRUPTCY

  1930s

  Banks, insurance companies, and big corporations went under on a major scale. Institutions suffered the consequences of past mistakes, and there was no financial safety net to catch them as they fell. Mistakes were liquidated and only the prepared and efficient survived.

  Today

  The world’s financial institutions are in even worse shape than the last time, but now business ethics have changed and everyone expects the government to "step in." Laws are already in place that not only allow but require government inter­vention in many instances. This time, mistakes will be compounded, and the strong, productive, and ef­ficient will be forced to subsidize the weak, unproductive, and inefficient. It's ironic that businesses were bankrupted in the last depression because the prices of their products fell too low; this time, it'll be because they went too high.

  UNEMPLOYMENT

  1930s

  If a man lost his job, he had to find another one as quickly as possible simply to keep from going hungry. A lot of other men in the same position competed desperately for what work was available, and an employer could hire those same men for much lower wages and expect them to work harder than what was the case before the depression. As a result, the men could get jobs and the employer could stay in business.

  Today

  The average man first has months of unemployment insurance; after that, he can go on welfare if he can't find "suitable work." Instead of taking whatever work is available, especially if it means that a white collar worker has to get his hands dirty, many will go on welfare. This will decrease the production of new wealth and delay the recovery. The worker no longer has to worry about some entrepreneur exploiting (i.e., employing) him at what he considers an unfair wage because the minimum wage laws, among others, precludes that possibility today. As a result, men stay unemployed and employers will go out of business.

  WELFARE

  1930s

  If hard times really put a man down and out, he had little recourse but to rely on his family, friends, or local social and church group. There was quite a bit of opprobrium attached to that, and it was only a last resort. The breadlines set up by various government bodies were largely cosmetic measures to soothe the more terror-prone among the voting populace. People made do because they had to, and that meant radically reducing their standards of living and taking any job available at any wage. There were very, very few people on welfare during the last depression.

  Today

  It's hard to say how those who are still working are going to support those who aren't in this depression. Even in the U.S., 50% of the country is already on some form of welfare. But food stamps, aid to fami­lies with dependent children, Social Security, and local programs are already collapsing in prosperous times. And when the tidal wave hits, they'll be totally overwhelmed. There aren't going to be any breadlines because people who would be standing in them are going to be shopping in local supermarkets just like people who earned their money. Perhaps the most dangerous aspect of it is that people in general have come to think that these programs can just magically make wealth appear, and they expect them to be there, while a whole class of people have grown up never learning to survive without them. It's ironic, yet predictable, that the programs that were supposed to help those who "need" them will serve to devastate those very people.

  REGULATIONS

  1930s

  Most economies have been fairly heavily regulated since the early 1900s, and those regulations caused distortions that added to the severity of the last depression. Rather than allow the economy to liquidate, in the case of the U.S., the Roosevelt regime added many, many more regulations—fixing prices, wages, and the manner of doing business in a static form. It was largely because of these regulations that the depression lingered on until the end of World War II, which "saved" the economy only through its massive reinflation of the currency. Had the government abolished most controls then in existence, instead of creating new ones, the depression would have been less severe and much shorter.

  Today

  The scores of new agencies set up since the last depression have created far more severe distortions in the ways people relate than those of 80 years ago; the potential adjustment needed is proportionately greater. Unless government restrictions and controls on wages, working conditions, energy consumption, safety, and such are removed, a dramatic economic turnaround during the Greater Depression will be impossible.

  TAXES

  1930s

  The income tax was new to the U.S. in 1913, and by 1929, although it took a maximum 23.1% bite, that was only at the $1 million level. The average family’s income then was $2,335, and that put average families in the 1/10^th of 1 percent bracket. And there was still no Social Security tax, no state income tax, no sales tax, and no estate tax. Furthermore, most people in the country didn't even pay the income tax because they earned less than the legal minimum or they didn't bother filing. The government, therefore, had immense untapped sources of revenue to draw upon to fund its schemes to "cure" the depression. Roosevelt was able to raise the average income tax from 1.35% to 16.56% during his tenure—an increase of 1,100%.

  Today

  Everyone now pays an income tax in addition to all the other taxes. In most Western countries, the total of direct and indirect taxes is over 50%. For that reason, it seems unlikely that direct taxes will go much higher. But inflation is constantly driving everyone into higher brackets and will have the same effect. A person has had to increase his or her income faster than inflation to compensate for taxes. Whatever taxes a man does pay will reduce his standard of living by just that much, and it's reasonable to expect tax evasion and the underground economy to boom in response. That will cushion the severity of the depression somewhat while it serves to help change the philosophical orientation of society.

  PRICES

  1930s

  Prices dropped radically because billions of dollars of inflationary currency were wiped out through the stock market crash, bond defaults, and bank failures. The government, however, somehow equated the high prices of the inflationary '20s with prosperity and attempted to prevent a fall in prices by such things as slaughtering livestock, dumping milk in the gutter, and enacting price supports. Since the collapse wiped out money faster than it could be created, the government felt the destruction of real wealth was a more effective way to raise prices. In other words, if you can't increase the supply of money, decrease the supply of goods.

  Nonetheless, the 1930s depression was a deflationary collapse, a time when currency became worth more and prices dropped. This is probably the most confusing thing to most Americans since they assume—as a result of that experience—that "depression" means "de?ation." It's also perhaps the biggest single difference between this depression and the last one.

  Today

  Prices could drop, as they did the last time, but the amount of power the government now has over the economy is far greater than what was the case 80 years ago. Instead of letting the economy cleanse itself by allowing the ?nancial markets to collapse, governments will probably bail out insolvent banks, create mortgages wholesale to prop up real estate, and central banks will buy bonds to keep their prices from plummeting. All of these actions mean that the total money supply will grow enormously. Trillions will be created to avoid de?ation. If you ?nd men selling apples on street corners, it won't be for 5 cents apiece, but $5 apiece. But there won't be a lot of apple sellers because of welfare, nor will there be a lot of apples because of price controls.

  Consumer prices will probably skyrocket as a result, and the country will have an in?ationary depression. Unlike the 1930s, when people who held dollars were king, by the end of the Greater Depression, people with dollars will be wiped out.

  THE SOCIETY

  1930s

  The world was largely rural or small-town. Communications were slow, but people tended to trust the media. The government exercised considerable moral suasion, and people tended to support it. The business of the country was business, as Calvin Coolidge said, and men who created wealth were esteemed. All told, if you were going to have a depression, it was a rather stable environment for it; despite that, however, there were still plenty of riots, marches, and general disorder.

  Today

  The country is now urban and suburban, and although communications are rapid, there's little interpersonal contact. The media are suspect. The government is seen more as an adversary or an imperial ruler than an arbitrator accepted by a consensus of concerned citizens. Businessmen are viewed as unscrupulous predators who take advantage of anyone weak enough to be exploited.

  A major financial smashup in today's atmosphere could do a lot more than wipe out a few naives in the stock market and unemploy some workers, as occurred in the '30s; some sectors of society are now time bombs. It's hard to say, for instance, what third- and fourth-generation welfare recipients are going to do when the going gets really tough.

  THE WAY PEOPLE WORK

  1930s

  Relatively slow transportation and communication localized economic conditions. The U.S. itself was somewhat insulated from the rest of the world, and parts of the U.S. were fairly self-contained. Workers were mostly involved in basic agriculture and industry, creating widgets and other tangible items. There wasn't a great deal of specialization, and that made it easier for someone to move laterally from one occupation into the next, without extensive retraining, since people were more able to produce the basics of life on their own. Most women never joined the workforce, and the wife in a marriage acted as a "backup" system should the husband lose his job.

  Today

  The whole world is interdependent, and a war in the Middle East or a revolution in Africa can have a direct and immediate effect on a barber in Chicago or Krakow. Since the whole economy is centrally controlled from Washington, a mistake there can be a national disaster. People generally aren’t in a position to roll with the punches as more than half the people in the country belong to what is known as the "service economy." That means, in most cases, they're better equipped to shuffle papers than make widgets. Even "necessary" services are often terminated when times get hard. Specialization is part of what an advanced industrial economy is all about, but if the economic order changes radically, it can prove a liability.

  THE FINANCIAL MARKETS

  1930s

  The last depression is identified with the collapse of the stock market, which lost over 90% of its value from 1929 to 1933. A secure bond was the best possible investment as interest rates dropped radically. Commodities plummeted, reducing millions of farmers to near subsistence levels. Since most real estate was owned outright and taxes were low, a drop in price didn't make a lot of difference unless you had to sell. Land prices plummeted, but since people bought it to use, not unload to a greater fool, they didn't usually have to sell.

  Today

  This time, stocks—and especially commodities—are likely to explode on the upside as people panic into them to get out of depreciating dollars in general and bonds in particular. Real estate will be—next to bonds—the most devastated single area of the economy because no one will lend money long term. And real estate is built on the mortgage market, which will vanish.

  Everybody who invests in this depression thinking that it will turn out like the last one will be very unhappy with the results. Being aware of the differences between the last depression and this one makes it a lot easier to position yourself to minimize losses and maximize profits.

  *  *  *

  So much for the differences. The crucial, obvious, and most important similarity, however, is that most people's standard of living will fall dramatically.

  The Greater Depression has started. Most people don't know it because they can neither confront the thought nor understand the differences between this one and the last.

  As a climax approaches, many of the things that you've built your life around in the past are going to change and change radically. The ability to adjust to new conditions is the sign of a psychologically healthy person.

  Look for the opportunity side of the crisis. The Chinese symbol for "crisis" is a combination of two other symbols – one for danger and one for opportunity.

  The dangers that society will face in the years ahead are regrettable, but there's no point in allowing anxiety, frustration, or apathy to overcome you. Face the future with courage, curiosity, and optimism rather than fear. You can be a winner, and if you plan carefully, you will be. The great period of change will give you a chance to regain control of your destiny. And that in itself is the single most important thing in life. This depression can give you that opportunity; it's one of the many ways the Greater Depression can be a very good thing for both you as an individual and society as a whole.

  

  

  

  

  

• BofA Notices Something Troubling: China's Debt Bubble Has Burst

  It was just a few days ago when we covered most recently that China has created a subprime debt bubble of monstrous proportions. We explained that the exposure isn’t just within the conventional, state-backed banking system, but also within their “wild west” shadow banking system, which has introduced “investors” to a significant amount of risk. 

  We know that it’s not a question of if, but when will the bubble finally pop (and as we show below, it already has) and introduce a new subprime (and debt in general) financial crisis for the world to deal with.

  While it is sometimes difficult to get the data around just how significant a problem NPL defaults have become for China, and more specifically how the shadow banking lenders are faring, Bank of America has done some work to help give clarity around just that.

  As BofAML shows below, defaults in the shadow banking sector have accelerated sharply, growing in both size and volume since late 2011.

  

  And just like that, the relaxed credit policies in China, in their desperate desire to reinflate housing prices and stimulate the economy, have created a significant issue for the central planners to contend with , one which seems to be a recurring theme… Needless to say, the government is now scrambling to both suppress the number of defaults, and companies are even taking drastic measures to not have to report that they’re insolvent, but it may be too late.

  Because as the chart above clearly shows, China’s debt bubble has officially burst. It’s all downhill from here.

  BofA’s David Cui explains:

  We have noticed a sharp jump since mid-2015 in the total value of reported defaults of shadow banking products, defined here as non-bank-loan debt instruments that include bonds, trusts, and credit products offered by peer-to-peer (P2P) and various offline wealth management companies (WMCs). While the government and some involved parties are busily trying to suppress defaults, risk exists that at certain point the scale and scope of the task may overwhelm their efforts; which may trigger a credit crunch, in our view. Although the exact timing is difficult to forecast, as defaults pile up, the risk of the debt market reaching a psychological turning point should keep on rising by our assessment.

   

  Chart 1 (above) shows the trend of defaulted value in the shadow banking sector, based on data we gathered on noticeable default cases since late 2011 as reported by the media. As of June 2015, the accumulated amount was Rmb53bn; by now, it’s reached Rmb214bn.

   

  * * *

   

  The government is clearly concerned about the risks in shadow banking. Just today, it’s reported that 1) NDRC had called upon issuers and underwriters of enterprise bonds to assess default risks; 2) the Shanghai municipal government had stopped registration of new WMCs, and will review certain existing ones; 3) the Asset Management Association of China (AMAC) will announce rules by the end of Apr to help investors identify illegal fund raising activities by privately raised funds; and 4) CSRC may require brokers to include their off-balance sheet businesses, including derivatives, in their risk assessment, including leverage. The question is whether the government is closing the stable door after the horse has bolted. We suspect that the answer is yes.

  One couldn’t make it any more convoluted, opaque and sadly, entertaining (for when it all unravels) if one tried.

  It sounds like an enormous storm is brewing, and once again it’s a direct result of central planners convinced they know best not only how to run an economy, but that they will be able to fix everything once what is China’s most historic debt bubble ever, burst. 

  Or maybe, what we are told by overeager 17 year old hedge funds is true, and this time it’s different.

  

  

  

  

  

• The Beginning Of The End For Obamacare: Largest US Health Insurer Exits Georgia, Arkanasas

  You can’t say UnitedHealth didn’t warn us.

  * * *

  Tracking the slow motion trainwreck of Obamacare has become one of our preferred hobbies: below is just a random sample of headlines covering just the most recent tribulations of the “we have to pass it to find out what’s in it” Unaffordable Care Act:

  • In Latest Obamacare Fiasco, Most Low-Income Workers Can’t Afford “Affordable Care Act”
  • The Stunning “Explanation” An Insurance Company Just Used To Boost Health Premiums By 60%
  • Your Health Insurance Premiums Are About To Go Through The Roof -The Stunning Reason Why
  • Obama Promised Healthcare Premiums Would Fall $2,500 Per Family; They Have Climbed $4,865
  • Largest Health Insurer On Colorado Exchange Abruptly Collapses
  • Co-Op Insurers Across America Are Collapsing, And Now There Is Fraud
  • “$19,000 Premiums, Up 4x Since Passage”: The ‘Crippling Effect’ Of Obamacare On The Middle Class
  • Meet The Family That Just Spent Half Its Annual Income Paying For Obamacare

  But the most surprising article we wrote was our explanation from last November explaining why “Your Health Insurance Premiums Are About To Go Through The Roof” showing that even insurance companies have been unable to earn a profit under Obamacare, as shown in the following chart:

  

   

  This was a stunning revelation because, after all, the Affordable Care Act was largely drafted by the insurance industry itself, and if for whatever reason, it itself was unable to capitalize on Obamacare, then it has truly been a disaster.

  It all came to a head in late November of last year when none other than the U.S.’s biggest health insurer, UnitedHealth, cut its 2015 earnings forecast with a warning that it was considering pulling out of Obamacare, just one month after saying it would expand its presence in the program. At the time UnitedHealth Group said it would scale back marketing efforts for plans it’s selling this year under the Affordable Care Act, and may quit the business entirely in 2017 because it has proven to be more costly than expected.

  In a statement, UnitedHealth said that “the company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017.”

  Needless to say, the implications for Obamacare – which had seen a surge in problems over the past year – were dire: As Bloomberg reported at the time, “a pull-back would deal a significant blow to President Barack Obama’s signature domestic policy achievement. While UnitedHealth has been slower than some of its rivals to sell Obamacare policies since new government-run marketplaces for the plans opened in late 2013, the announcement may indicate that other insurers are struggling.”

  “If one of the largest and presumably, by reputation and experience, the most sophisticated of the health plans out there can’t make money on the exchanges, then one has to question whether the exchange as an institution is a viable enterprise,” Sheryl Skolnick, an analyst at Mizuho Securities said at the time. UnitedHealth further said it suspended marketing its individual exchange plans and is cutting or eliminating commissions for brokers who sell the coverage.

  Fast forward to today, this largest U.S. health insurer, announced it has decided to pull the plug on two state Obamacare markets.

  Going forward, UnitedHealth said it will no longer sell plans for next year in Georgia and Arkansas, according to state insurance regulators. Tyler Mason, a UnitedHealth spokesman, confirmed the exits and declined to say whether the company would drop out of additional states, Bloomberg reported.

  As per our extensive coverage of the topic, the reason for the pull out is simple: many, if not most, insurers have found it difficult to turn a profit in the new markets created by the Affordable Care Act, “where individuals turned out to be more costly to care for than the companies expected. UnitedHealth and Aetna Inc. both posted losses from the policies last year, as did big Blue Cross and Blue Shield plans in states like North Carolina.“

  According to Bloomberg, UnitedHealth’s decision to stop offering ACA plans next year means that people who are currently enrolled with the insurer will have to choose a new health insurance provider next year. And while UnitedHealth is the biggest carrier in the United States, with about 42 million medical customers, it has a smaller role in the ACA’s markets. The company had about 650,000 in individual exchange-compliant policies as of Dec. 31.  Kenneth Ryan James, a spokesman for the Arkansas Insurance Department, told Bloomberg tgat UnitedHealth had a “small footprint” in the state, where Blue Cross and Blue Shield plans are dominant.

  However, now that the the precedent has been made, it will likely promptly spillover to other major insurers, including Blue Cross Blue Shield plans, which are dominant on many state exchanges, and have also complained about losses in the individual market, citing higher-than-expected medical claims. 

  In total, Georgia currently has nine – make it eight after the withdrawal of UnitedHealth – health insurers that currently offer ACA polices, according to Glenn Allen, a spokesman for the state’s insurance commissioner. Others include Aetna, Humana Inc. and Cigna Corp. No other company has yet told Georgia that it’s exiting, and companies have until May 11 to decide, he said.

  We are certain that many if not all will promptly follow in UnitedHealth’s footsteps as the beginning of the end for Obamacare finally plays out as so many skeptics of the “Affordable” Care Act had predicted.

  

  

  

  

  

• Black Activists Heckle, Turn On Clinton; Accuse Him Of "Destroying Their Communities"

  It is no secret that one of the core support groups behind Hillary’s presidential campaign are black voters. Which is why it came as a surprise when none other than Bill Clinton faced down protesters angry at the impact his 1994 crime reforms have had on black Americans and defended the record of his wife, Hillary Clinton, who is relying on the support of black voters in her quest for the presidency.

  As Reuters reports, the former president spent more than 10 minutes confronting the protesters at a campaign rally in Philadelphia for his wife over criticisms that the crime bill he approved while president led to a surge in the imprisonment of black people. Clinton’s speech devolved into confusion when several protesters heckled the former president mid-speech and held up signs, including one that read: “CLINTON Crime Bill Destroyed Our Communities.”

  Bill Clinton’s remarks on Thursday drew criticism online. Some saw him as dismissive of the Black Lives Matter movement, a national outgrowth of anger over a string of encounters in which police officers killed unarmed black people. Johnetta Elzie, a civil rights activist, wrote online that Clinton “can’t handle being confronted by his own record.”

  “This is like watching a robot malfunction,” she wrote. She was referring to Bill, not Hillary.

   

  Ahead of Clinton’s speech activists in the Black Lives Matter protest movement circulated video footage of Hillary Clinton defending Bill’s reforms in 1994. In the footage, she calls young people in gangs “super-predators” who need to “be brought to heel.” Hillary Clinton, 68, who also has faced protesters upset by her remarks, said in February she regretted her language.

  To be sure, Bill Clinton defended her 1994 remarks, which protesters say were racially insensitive, and suggested the protesters’ anger was misplaced.

  “I don’t know how you would characterize the gang leaders who got 13-year-old kids hopped on crack and sent them out on the street to murder other African-American children,” he said, shaking his finger at a heckler as Clinton supporters cheered, according to video of the event. “Maybe you thought they were good citizens. She (Hillary Clinton) didn’t.“

  The question whether they are good citizens aside, the bigger problem is that absolutely nothing has been done to even address a problem of gang violence which has resulted in a record surge in gun homicides in cities such as Obama’s own Chicago, as we reported last week.

  

   

  That said, Clinton was right: “You are defending the people who kill the lives you say matter,” he told a protester. “Tell the truth.” Many have criticized the Black Lives Matter activists for actively attacking white people, while openly ignoring the problems within their own society.

  One thing is clear, however: whether as a result of Clinton’s crime bill or not, the United States has more people in prison than any other country. According to the Bureau of Justice Statistics, 1.05 million prisoners were held in federal or state facilities in 1994. By 2014, it was 1.56 million. That year, 6 percent of all black men in their 30s were in prison, a rate six times higher than that of white men of the same age.

  On Thursday confusion ensued over whether or not Clinton defended his legislation: the former president said last year that he regretted signing the Violent Crime Control and Law Enforcement Act into law because it contributed to the high incarceration rate of black people for nonviolent crimes. On Thursday, he did not explicitly recant those regrets, but appeared to be angry at any suggestion the bill was wholly bad.

  The legislation imposed tougher sentences, put thousands more police on the streets and helped fund the building of extra prisons. It was known for its federal “three strikes” provision that sent violent offenders to prison for life. The bill was backed by congressional Republicans and hailed at the time as a success for Clinton.

  Hillary Clinton promised to end “mass incarceration” in the first major speech of her campaign last year. She has won the support of the majority of black voters in every state nominating contest so far, often by a landslide.

  And while many attack Trump on flipflopping on many issues, this is becoming one particular topic that may have a lasting impact on Hillary’s core support group if left unresolved. During Hillary Clinton’s failed 2008 presidential bid, civil rights leaders and high-ranking Democrats in Congress criticized the former president for statements he made during a heated campaign against then-U.S. Senator Barack Obama.

  Bill Clinton said Obama’s campaign had “played the race card.” Obama became the first U.S. black president in November that year.

  

  

  

  

  

• Market ReCap 4-8-2016 (Video)

  By EconMatters

  

  Oil moved higher on short covering, equities faded in front of earnings, and most currencies appreciated against the U.S. Dollar.

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

  

  

  

  

• For Albert Edwards, This Is The "One Failsafe Indicator" Of An Inevitable Recession

  When trying to time the next US recession, most economists – as one would expect – look at economic data. The problem with such “data” as last year’s farcical double seasonal GDP adjustments have shown, is that if the government is intent on putting lipstick on the pig that is US GDP, it will do just that over and over, unleashing non-GAAP GDP if it must, to avoid revealing the truth until it is prepared to do so.

  To avoid such purposeful obfuscation SocGen’s Albert Edwards looks at places where it is more difficult to fabricate and goalseek data. Conveniently, he has discovered precisely that in what calls a “failsafe recession indicator,” one which has stopped flashing amber and has turned to red. He is referring to whole economy profits data, which in his own words “shows a gut wrenching slump.”

  What Edwards is referring to is not that different from what we posted about back in October when we said that on 5 of the past 6 times when corporate profits dropped 60%, the economy entered a recession. This time the drop is far worse, and it’s no longer just energy (the loophole used by many to explain away why in 1985 there was no recession). However, instead of looking at bottom up data, the SocGen strategist instead collapses corporate profits from the top down.

  

  Edwards lays out the reasons why he believes that “a recession now virtually inevitable”, and since this is Albert Edwards after all, he has a jovial follow up: not only will the US economy contract, it “will surely be swept away by a tidal wave of corporate default.”

  From his latest Global Strategy Weekly

  Despite risk assets enjoying a few weeks in the sun our failsafe recession indicator has stopped flashing amber and turned to red. Newly released US whole economy profits data show a gut wrenching slump. Whole economy profits never normally fall this deeply without a recession unfolding. And with the US corporate sector up to its eyes in debt, the one asset class to be avoided – even more so than the ridiculously overvalued equity market – is US corporate debt. The economy will surely be swept away by a tidal wave of corporate default.

   

  The temper tantrum risk assets threw at the start of the year was sufficient for the Fed to backpedal furiously on rate hikes. Like the Grand Old Duke of York, the Fed marched us up to the top of the hill and then down again – at the behest of the markets. And as more and more contorted excuses are wheeled out to justify its inaction we all surely know by now that the Fed’s articulated “data-dependent” rate hikes are primarily focused solely on the level of the S&P, i.e., when it slumps they will quickly back off rate hikes and use any excuse necessary  including dismissing surging core CPI inflation. How sad that Central Bank policy should have come to this.

   

  I suppose now the S&P has recovered we are about to go through another turn on the monetary/market merry-go-round. Ignore this noise. Recent whole economy profits data show that while the Fed plays its games, the economic cycle is withering and writhing from within. For historically, when whole economy profits fall this deeply, recession is virtually inevitable as business spending slumps. And if I had to pick one asset class to avoid it would be US corporate bonds, for which sky high default rates will shock investors.

   

  

   

   

  We have written extensively in the past as to why sell-side economists almost to a man and woman fail to predict recessions. One of the key reasons – aside from the obvious wish not to make an unpopular call that might prove wrong and likely fatal to their career – is that they do not place enough importance on the role of profits as a driver of the economic cycle.

  My own observation has led me to the conclusion that when whole economy profits begin to fall sharply, this is usually followed shortly after by the overall economy tipping over into recession, driven by the volatile business investment cycle. The national accounts, whole economy profits data give a wider and “cleaner” estimate of the underlying profits environment than the heavily doctored “pro-forma” quoted company profits data (the former also often leads the latter). As illustrated below, a longer term chart shows how whole economy profits tend to be a leading indicator of the business investment cycle. It also shows the current profits downturn is notably worse than the 1998 downturn – which is often cited as evidence that a profits recession does not necessarily lead to a full blown economic downturn.

   

  

  At this point Edwards observes that some fellow skeptics like Gerry Minack do not see a recession as imminent (he sees a stagflation). However, he remains adamant: “My own view is that Fed tightening may not be a necessary condition to catalyse a recession and that the deep profits downturn is sufficient in itself. Historically all recessions are effectively caused by slumps in business investment driven by a profits downturn: the chart below shows that whenever GDP growth (dotted line) is negative it is almost totally overlaid by the contribution of GDP growth in business investment (red line).“

  

  Will Edwards be right? Of course, but at that point the government – which needs to preserve confidence in growth at all costs – will simply change the definition on GDP first, and when that fails, of “recession” next. And all shall once again be well.

  

  

  

  

  

• Why Janet Yellen Can Never Normalize Interest Rates

  Submitted by Bill Bonner of Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

  No Return to Normal

  Overall, world stocks have held up well, despite cascading evidence of impending doom.

  U.S. corporate profits have been in decline since the second quarter of 2015. Globally, 36 corporate bond issues have defaulted so far this year – up from 25 during the same period of 2015. Economists at JPMorgan Chase put the U.S. economy growth rate for the first quarter at 0.7% – down by over one-third from earlier estimates.

   

  

  Annual rate of change in quarterly pre-tax profits: nothing to write home about. A  small “profits recession” incidentally preceded the last economic downturn as well – click to enlarge.

   

  And there is $1.7 trillion in junk bonds outstanding – a trillion more than in 2008. Some of these are sure to default in the months ahead. Speculators are already shorting the banks with the biggest piles of these grenades in their vaults.

  Over the last few days, we’ve been trying to coax out an insight. It concerns whether Fed chief Janet Yellen really does have investors’ backs. Not that we have any doubt about her intentions.

  Her career has been financed and nurtured by credit and the people who provide it. Crony capitalists, corrupt politicians, and Deep State hustlers paid good money for her; she’ll do all she can to avoid letting them down.

   

  

  Bank stocks vs. the S&P 500 Index: something isn’t right in financial land – click to enlarge.

   

  But something isn’t working. Not for her. Not for Bank of Japan governor Haruhiko Kuroda. Not for the president of the European Central Bank, Mario Draghi. Not for People’s Bank of China governor Zhou Xiaochuan. Their tricks no longer work.

  We’re on record with a bold prediction: The Fed will NEVER normalize interest rates. Readers may wonder how that jives with our deeper insight: Nobody knows anything. And of course, we don’t know whether the Fed will normalize or not. But let us further explain our reasoning; you make up your own mind as to where to place your bet.

   

  

  They’ve built a big house of cards…and they presumably realize it by now (how can they not?)

   

  The short version of our argument: For the last eight years, the Fed has tried to stimulate the economy with ultra-low interest rates. Business, consumers, and government now almost all depend on credit… and most need ultra-low rates to make ends meet.

  Consumers are in better shape, generally, than they were in 2008. But corporations and governments are in worse shape. Raise the cost of funding, and you will push many of them over the edge.

  Banks, pension funds, and insurance companies are especially vulnerable. They’re now stocked up with low-yield government bonds. Should interest rates rise, those bonds will go down in price. In other words, raising rates will provoke the very calamity the Fed was trying to avoid: the bankruptcy of the financial sector.

   

  The Triumph of Politics

  But wait…how did Bernanke, Yellen, Kuroda, Draghi et al. think they would ever get away with it? How could they believe – even for a minute – that a debt problem could be solved by adding more debt? And yet, they always got away with it before.

  After World War II, for example, the feds had a higher debt-to-GDP ratio than they have now. But after the war, the economy boomed, inflation rose… and soon the debt was no problem. Again, at the beginning of President’s Reagan’s first term, economists worried about large government deficits.

   

  

  The “there’s no coming back from this” chart: total US credit market debt (black line), federal government debt (green line), GDP (red line) and the federal funds rate (light-blue line) – click to enlarge.

   

  The job of colleague David Stockman – director of Reagan’s budget team – was to bring those deficits under control. He failed… a story well told in his book The Triumph of Politics: Why the Reagan Revolution Failed.

  Conservative economists thought the U.S. would sink into another slimy pool of deficits and debt. But once again, a spurt of growth (with low deficits) during the Clinton years reduced the debt to a more manageable level. So, why worry?

  Because this time, it’s not working. Growth is slowing. Productivity has stalled. As former Goldman boy Gavyn Davies put it in the Financial Times: “The slowdown in labor productivity accounts for most of the massive disappointment in global output growth since just before the 2008 crash.”

  Professor Robert Gordon at Northwestern University believes there is more to it than just a cyclical downturn. He maintains that the extraordinary growth of the Industrial Revolution had played itself out by the 1980s. And it can’t be repeated.

  We have another hypothesis: Either way, the debt can never, voluntarily, be brought under control. And the Fed can never “normalize” rates.

  

  

  

  

  

• Minimum Wage Jobs Are Safe: Robot Waiters Fired For Spilling Food And Drinks, Malfunctioning

  It has been a dangerous time for minimum wage waiters and bartenders. While on one hand, never in the history of the US has there been more “food and eating place” workers, and soaring with every month – if only in the BLS’ in house statistical models to compensate for the manufacturing recession the US finds itself in…

  

   

  … on the other hand, their corporate employers, alarmed by the recent spread of minimum wage hikes have been taking measures such as these:  

  the McCafe Coffee Kiosk (which is basically a self-serve coffee machine for the cheap price of $2.99)…

  

   

  … The McRobot

  

   

  … And the McLinecook.

  

   

  But the war of robot vs unskilled-worker-demanding-a-pay-raise, which the former had been expected to win by complete anihiliation of the latter hit a snag when actual robot waiters were employed, pardon, deployed in China leading to unintended consequences.

  Out of three Guangzhou restaurants that used robots to serve customers, two have closed and the third has fired its robot waiters, the Workers’ Daily has reported (We couldn’t find a Chinese Robot Daily yet).

  According to the Chinese media, customers flocked to the Heweilai Restaurant chain in the southern Chinese city when it introduced robots last year, but the chain has stopped using the machines for a number of reasons.

  A staff member said the robots couldn’t effectively handle soup dishes, often malfunctioned, and had to follow a fixed route that sometimes resulted in clashes. A customer also said the robots were unable to do tasks such as topping up water or placing a dish on the table.

  

   

  Another restaurant in Guangzhou’s Baiyun District said robots were used only because of a high turnover of waiters and waitresses.

  “The robots weren’t able to carry soup or other food steady and they would frequently break down. The boss has decided never to use them again,” said one employee.

  

   

  The limitations of the technology were clear, says another. They added: “They can’t take orders or pour hot water for customers.”

  

  However, the report said robots were mainly used to attract attention and don’t help reduce human resource costs.

  Zhang Yun, a vice president at the Guangdong University of Technology, said robots will be widely used within the manufacturing industry in the future, as many tasks are repetitive, but further development is needed before robots are able to work effectively in the service sector.

  For now, it appears, China’s minimum wage workers, and it has a few hundred million of those, will not be phased out just yet.

  In the US, however, it’s a different matter. Remember Boston Dynamics’ Atlas? The 5′ 9″ tall, 180 lbs robot is perfectly suited to replace any number of fast food employees. All it needs is the McDonalds retention letter and the next stage in the war of (minimum paid) man against robot may commence.

  

  

  

  

  

• Shocking Photo: Nearly 30 Oil Tankers in Traffic Jam Off Iraqi Coast

  Submitted by Charles Kennedy of OilPrice.com

  Shocking Photo: Nearly 30 Oil Tankers in Traffic Jam Off Iraqi Coast

  Oil tankers are caught in a traffic jam near the Iraqi port of Basra, causing delays in loading. According to Reuters, around 30 very large crude carriers (VLCCs) are sitting in the Persian Gulf, and the backlog could cost ship owners more than $75,000 per day. Some could be waiting for weeks to reach the port.

  Check out this shocking satellite photo of the tanker traffic jam just off the coast of Iraq.

  

  The culprit is high oil production in Iraq. The port at Basra is struggling to load up all the oil tankers fast enough, forcing some to sit and wait. Iraq exported about 3.26 million barrels per day (mb/d) in March from its southern coast, which is up from just 2.5 mb/d in 2010.

  And the line of tankers appears to be growing. The gridlock is forcing up the cost of renting an oil tanker. That, combined with the shrinking capacity of available storage in China is pushing up tanker rates in Asia as well. Shipping data shows that VLCC rates have doubled from $37,250 per day to $74,700 per day.

  As of now, Reuters calculates that there are 27 VLCCs sitting in the Gulf near Basra, holding about 43 million barrels of oil, double the typical backlog. Some have been waiting for weeks. The current waiting time is 18 to 19 days, which is two to three times the normal wait of 5 to 10 days.

  Reuters contacted a captain of one oil tanker, who said that he wasn’t sure when he would be able to load up at the port. “We’ve been given no details,” he said, declining to be identified.

  Meanwhile, onshore, Iraq is struggling with a bit of rising instability in the country’s south, which is far from the battlefields with ISIS and has been one of the few refuges of stability. However, militias have a growing presence there, raising concerns for the international oil companies operating in Basra.

  

  

  

  

  

• Weekend Reading: The Fourth Turning

  Submitted by Lance Roberts via RealInvestmentAdvice.com,

  Last week, I interviewed the author of “The Fourth Turning”, economist and demographer Neil Howe on “The Lance Roberts Show.” The discussion focused on the demographic shift that is currently occurring in the United States and the impact it will have on economics in the future. One of the most striking points of the discussion is how American’s are acting in many of the same ways they did during “The Great Depression.”  Also, he delves into the coming crisis in the next decade that will change the landscape of how American’s think and behave in the future.

  You can listen to the full interview by clicking here.

  I bring this up because just after I had the interview with Neil, it was Stanley Druckenmiller to point out many of the same issues.

  The disaster that Druckenmiller sees coming for the United States is all about changing demographics and entitlement spending. The same problem Neil Howe pointed out.

  In 1940, entitlement payments, which include everything from disability payments to Social Security to Medicare, amounted to just over 20% of annual government spending in the United States.  Today, entitlement spending has swelled to nearly 70% of the annual federal budget.

  With the 20-year baby boom that took place after World War II now beginning to result in a retiree boom, the demographic trend is going to create an entitlement spending catastrophe.

  Since 1980, the number of working-age people the country has had has outnumbered those age 65 and over by a count of 5-to 1. In other words, the country had enough workers to generate the tax revenue to support the number of retirees.  By 2030, that ratio is going to drop to 2.5-to-1.

  

  I think you will find the interview very interesting if you are a long-term investor.

  Looking to the markets, if you like volatility you had to love this week with the markets dropping 22 points on Tuesday, rising 21 points on Wednesday and dropping almost 25 points on Thursday. That kind of volatility should come with a dose of “Dramamine.”  The question now is whether all of the Federal Reserve “jaw boning” will continue to elevate stock prices higher as we head into what will most likely be a very rough earnings season.

  As John Hussman tweeted yesterday:

  Over the past year, "announcement effect" of global central bank easing on equity markets has typically been wiped out within 2-3 weeks.

  — John P. Hussman (@hussmanjp) April 7, 2016

   

  As I discussed last week, with the month of April winding up the seasonally strong time of the year, earnings season just ahead and economic growth weak, the risks to the downside far outweigh “hope” of higher prices.  Or, is “bad news” still the a bear market deterrent?

  ---

  CENTRAL BANKING

  • Yelling “Stay” In A Burning Theater by David Stockman via Contra Corner
  • Unconventional Monetary Policy On Stilts by Nouriel Roubini via Project Syndicate
  • Fed’s Mandate Outsourced to China by Macro Man
  • Central Banks: Enabling The Addiction by Buttonwood via The Economist
  • Fed “Is A God That Has Failed” by George Gilder via CNBC
  • Who’s Responsible For The Next Crisis by Narayana Kocherlakota via Bloomberg View
  • Janet Yellen Is Playing A Dangerous Game by Joe Calhoun via Alhambra Partners
  • What Would Be Necessary For More QE Or NIRP by Bob Janjuah via ZeroHedge
  • Heard At Every Major Peak: This Isn’t A Bubble via Reuters

  ---

  MARKETS & EARNINGS

  • Beat The Market, Trade Like A Cockroach by Greg Guenthner via Daily Reckoning
  • Traffic Jam Of A Market by Adam Koos via MarketWatch
  • Unintended Consequences & Market Outcomes by John Rekenthaler via Morningstar
  • Overbought Condition Tips Scales To Bears by Michael Gayed via Market Watch
  • A Brief Warning On Q1 Earnings via HedgeEye
  • US Braces For Worst Earnings Since 2009 by Blaise Robinson via Bloomberg
  • S&P Repeating A Rare Event by Harry Dent via Business Insider

  ---

  ECONOMY & OIL 

  • An Historic & Disappointing Jobs Recovery by Derek Thompson via The Atlantic
  • $85 Oil By Christmas by Nick Cunningham via OilPrice.com
  • Simple Math Shows America Headed For Disaster by Jody Chudley via The Daily Reckoning
  • Proof Oil Prices Won’t Recover Soon by Matt Badiali via Growth Stock Wire
  • Oil Likely To Fall Back Below $30 via Seeking Alpha
  • Time To Weed Out MLP’s by Christine Idzelis via Investment News
  • KKR’s Chilling Message About The End Of The Credit Cycle by Wolf Richter via WolfStreet
  • If The Economy Is Better Why Is It Worse Than 6-Months Ago by Tyler Durden via ZeroHedge

  ---

  OTHER GOOD READS

  • Albert Edwards: The Coming Recession  by Bob Bryan via Business Insider
  • Bond Yields Say “Mediocre Economy” Here To Stay by Mark Gilbert via Bloomberg View
  • Each Fed Intervention Deprives Investor Lessons by John Hussman via Hussman Funds
  • How Does A Market Get Cheap by Meb Faber via Faber Research
  • The Hidden Economics Of Porn by Joe Pinsker via The Atlantic
  • Think A Half Cycle Ahead by David Merkel via Aleph Blog
  • Dividends: US Economy In Contraction by IronMan via Political Calculations
  • White House Wants Your IRA by Staff via WSJ
  • Indicator Suggests Gold Bear Market Over by Jesse Felder via The Felder Report
  • High Beta Stocks Losing Leadership via Dana Lyons via Tumblr

  ---

  “The typical investor has usually gathered a good deal of half-truths, misconceptions, and just plain bunk about successful investing.” –Philip A. Fisher

  

  

  

  

  

• This Is How You Keep The S&P Green For The Year, Redux

  Just as we explained in this morning's wrap, today was all about keeping The S&P 500 in the green year-to-date…

  

   

  Because nothing says "efficient" markets like ten VIX-smash-based "rescues" of S&P 500 from the confidence-crushing perils of a red close year-to-date…

  

   

  And how was today's "save" achieved… the good old VIX smash…

  

   

  Just like we saw on Tuesday…
  

   

  Now the 10th time in a row…

  

  

  

  

  

  

• Banks Battered As Yen-magedddon Sends Stocks To Worst Week In 2 Months

  This seems to sum the week up…

   

  An ugly week for stocks despite the best ramping efforts…

  

   

  Financials were the week's biggest losers… worst week in 2 months

  

   

  Plenty more to come…

  

   

  Facebook had a tough time as FANG stocks suffered their worst week in 2 months (-2.2%)…breaking an 8-week winning streak

  

  TSLA ripped on 100% cancellabe pre-orders for a flying unicorn due sometime soon.

  As Digiday reported, some publishers saw their Facebook traffic nosedive last month, even as Facebook pushes initiatives designed to get users to stay in its app. A traffic analytics company, speaking anonymously to avoid getting on Facebook’s bad side, said Facebook traffic across clients, representing some of the biggest publishers, declined about 20 percent from January to March. The data showed the biggest drops came from publishers that have been heavily invested in Instant Articles, the fast-loading mobile initiative.

   

  Sine the "great" payrolls data, stocks are in the red.. and WTI Crude is epically bid…

  

   

  Treasury yields tumbled – making it a positive return week for bonds for the 3rd week of the last 4…

  

   

  The USD Index ended the week modestly lower (5th down week of the last 6) as AUD weakness offset JPY strength…

  

   

  USDJPY suffered its 2nd worst week in 3 years, erasing all the post-QE3, post-QQE2 gains (JPY devaluation)…

  

   

  Gold & Silver had their best week in a month as crude soared rather idiotically today to a yuuge win for the week (and copper remained mired in the reality of un-growthiness)…

  

   

  Oil algos jumped on every twitch of a headline and turn of a datapoint today no matter what it said – clearly their only goal was to close above the 100-day moving average…

  

   

  Oil and Stocks decoupled again… inverting last week's decoupling…

  

   

  So what happens next?

  

   

  Charts: Bloomberg

  

  

  

  

• Ron Paul Warns "The Conflict Between Government & Liberty Is At A Boiling Point"

  This is excerpted from the introduction of Ron Paul's Liberty Defined: 50 Essential Issues that Affect Our Freedom.

  Liberty means to exercise human rights in any manner a person chooses so long as it does not interfere with the exercise of the rights of others. This means, above all else, keeping government out of our lives. Only this path leads to the unleashing of human energies that build civilization, provide security, generate wealth, and protect the people from systematic rights violations. In this sense, only liberty can truly ward off tyranny, the great and eternal foe of mankind.

  The definition of liberty I use is the same one that was accepted by Thomas Jefferson and his generation. It is the understanding derived from the great freedom tradition, for Jefferson himself took his understanding from John Locke (1632–1704). I use the term “liberal” without irony or contempt, for the liberal tradition in the true sense, dating from the late Middle Ages until the early part of the twentieth century, was devoted to freeing society from the shackles of the state. This is an agenda I embrace, and one that I believe all should embrace.

  To believe in liberty is not to believe in any particular social and economic outcome. It is to trust in the spontaneous order that emerges when the state does not intervene in human volition and human cooperation. It permits people to work out their problems for themselves, build lives for themselves, take risks and accept responsibility for the results, and make their own decisions.

  Our standards of living are made possible by the blessed institution of liberty. When liberty is under attack, everything we hold dear is under attack. Governments, by their very nature, notoriously compete with liberty, even when the stated purpose for establishing a particular government is to protect liberty.

  Take the United States, for example. Our country was established with the greatest ideals and respect for individual freedom ever known. Yet look at where we are today: runaway spending and uncontrollable debt; a monstrous bureaucracy regulating our every move; total disregard for private property, free markets, sound money, and personal privacy; and a foreign policy of military expansionism. The restraints placed on our government in the Constitution by the Founders did not work. Powerful special interests rule, and there seems to be no way to fight against them. While the middle class is being destroyed, the poor suffer, the justly rich are being looted, and the unjustly rich are getting richer. The wealth of the country has fallen into the hands of a few at the expense of the many. Some say this is because of a lack of regulations on Wall Street, but that is not right. The root of this issue reaches far deeper than that.

  The threat to liberty is not limited to the United States. Dollar hegemony has globalized the crisis. Nothing like this has ever happened before. All economies are interrelated and dependent on the dollar’s maintaining its value, while at the same time the endless expansion of the dollar money supply is expected to bail out everyone.

  This dollar globalization is made more dangerous by nearly all governments acting irresponsibly by expanding their powers and living beyond their means. Worldwide debt is a problem that will continue to grow if we continue on this path. Yet all governments, and especially ours, do not hesitate to further expand their powers at the expense of liberty in a futile effort to force an outcome of their design on us. They simply expand and plummet further into debt.

  Understanding how governments always compete with liberty and destroy progress, creativity, and prosperity is crucial to our effort to reverse the course on which we find ourselves. The contest between abusive government power and individual freedom is an age-old problem. The concept of liberty, recognized as a natural right, has required thousands of years to be understood by the masses in reaction to the tyranny imposed by those whose only desire is to rule over others and live off their enslavement.

  This conflict was understood by the defenders of the Roman Republic, the Israelites of the Old Testament, the rebellious barons of 1215 who demanded the right of habeas corpus, and certainly by the Founders of America, who imagined the possibility of a society without kings and despots and thereby established a framework that has inspired liberation movements ever since. It is understood by growing numbers of people who are crying out for answers and demanding an end to Washington’s hegemony over the world.

  And yet even among the friends of liberty, many people are deceived into believing that government can make them safe from all harm, provide fairly distributed economic security, and improve individual moral behavior. If the government is granted a monopoly on the use of force to achieve these goals, history shows that that power is always abused. Every single time.

  Over the centuries, progress has been made in understanding the concept of individual liberty and the need to constantly remain vigilant in order to limit government’s abuse of its powers. Though steady progress has been made, periodic setbacks and stagnations have occurred. For the past one hundred years, the United States and most of the world have witnessed a setback for the cause of liberty. Despite all the advances in technology, despite a more refined understanding of the rights of minorities, despite all the economic advances, the individual has far less protection against the state than a century ago.

  Since the beginning of the last century, many seeds of destruction have been planted that are now maturing into a systematic assault on our freedoms. With a horrendous financial and currency crisis both upon us and looming into the future as far as the eye can see, it has become quite apparent that national debt is unsustainable, liberty is threatened, and the people’s anger and fears are growing. Most importantly, it is now clear that government promises and panaceas are worthless. Government has once again failed and the demand for change is growing louder by the day. Just witness the dramatic back-and-forth swings of the parties in power.

  The only thing that the promises of government did was to delude the people into a false sense of security. Complacency and mistrust generated a tremendous moral hazard, causing dangerous behavior by a large number of people. Self-reliance and individual responsibility were replaced by organized thugs who weaseled their way into achieving control over the process whereby the looted wealth of the country was distributed.

  The choice we now face: further steps toward authoritarianism or a renewed effort in promoting the cause of liberty. There is no third option. This course must incorporate a modern and more sophisticated understanding of the magnificence of the market economy, especially the moral and practical urgency of monetary reform. The abysmal shortcomings of a government power that undermines the creative genius of free minds and private property must be fully understood.

  This conflict between government and liberty, brought to a boiling point by the world’s biggest bankruptcy in history, has generated the angry protests that have spontaneously broken out around the country – and the world. The producers are rebelling and the recipients of largess are angry and restless.

  The crisis demands an intellectual revolution. Fortunately, this revolution is under way, and if one earnestly looks for it, it can be found. Participation in it is open to everyone. Not only have our ideas of liberty developed over centuries, they are currently being eagerly debated, and a modern, advanced understanding of the concept is on the horizon. The Revolution is alive and well.

  The goal is liberty. The results of liberty are all the things we love, none of which can be finally provided by government. We must have the opportunity to provide them for ourselves, as individuals, as families, as a society, and as a country.

  

  

  

  

  

• Something Just Snapped In Saudi Money Markets

  Away from the headlines about The Panama Papers, global financial markets turmoiled quietly this week with a surge in equity and FX volatility and banks suffering more death blows. However, something happened in Saudi Arabia’s banking system that was largely uncovered by anyone in the mainstream… overnight deposit rates exploded to their highest since the financial crisis in 2009…

   

  

   

  It is clear that that the stress in Saudi markets has spread from the forward derivatives markets to actual funding problems.

  

  This suggests one of the two main things: either Saudi banks are desperatly short of liquidity or Saudi banks do not trust one another and are charging considerably more to account for the suspected credit risk.

  Either way, not good. So what is going on behind the scenes in Saudi Arabia?

  

  

  

  

  

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