- Don't Be Fooled By The Political Game: The Illusion Of Freedom In America
Submitted by John Whitehead via The Rutherford Institute,
“The shaping of the will of Congress and the choosing of the American president has become a privilege reserved to the country’s equestrian classes, a.k.a. the 20% of the population that holds 93% of the wealth, the happy few who run the corporations and the banks, own and operate the news and entertainment media, compose the laws and govern the universities, control the philanthropic foundations, the policy institutes, the casinos, and the sports arenas.”—Journalist Lewis Lapham
Being a citizen in the American corporate state is much like playing against a stacked deck: you’re always going to lose.
The game is rigged, and “we the people” keep getting dealt the same losing hand. Even so, most stay in the game, against all odds, trusting that their luck will change.
The problem, of course, is that luck will not save us. As I make clear in my book, Battlefield America: The War on the American People, the people dealing the cards—the politicians, the corporations, the judges, the prosecutors, the police, the bureaucrats, the military, the media, etc.—have only one prevailing concern, and that is to maintain their power and control over the citizenry, while milking us of our money and possessions.
It really doesn’t matter what you call them—Republicans, Democrats, the 1%, the elite, the controllers, the masterminds, the shadow government, the police state, the surveillance state, the military industrial complex—so long as you understand that while they are dealing the cards, the deck will always be stacked in their favor.
Incredibly, no matter how many times we see this played out, Americans continue to naively buy into the idea that politics matter, as if there really were a difference between the Republicans and Democrats (there’s not).
As if Barack Obama proved to be any different from George W. Bush (he has not). As if Hillary Clinton’s values are any different from Donald Trump’s (with both of them, money talks). As if when we elect a president, we’re getting someone who truly represents “we the people” rather than the corporate state (in fact, in the oligarchy that is the American police state, an elite group of wealthy donors is calling the shots).
Politics is a game, a joke, a hustle, a con, a distraction, a spectacle, a sport, and for many devout Americans, a religion.
In other words, it’s a sophisticated ruse aimed at keeping us divided and fighting over two parties whose priorities are exactly the same. It’s no secret that both parties support endless war, engage in out-of-control spending, ignore the citizenry’s basic rights, have no respect for the rule of law, are bought and paid for by Big Business, care most about their own power, and have a long record of expanding government and shrinking liberty.
Most of all, both parties enjoy an intimate, incestuous history with each other and with the moneyed elite that rule this country. Don’t be fooled by the smear campaigns and name-calling. They’re just useful tactics of the psychology of hate that has been proven to engage voters and increase voter turnout while keeping us at each other’s throats.
Despite the jabs the candidates volley at each other for the benefit of the cameras, they’re a relatively chummy bunch away from the spotlight, presenting each other with awards (remember when Jeb Bush presented Hillary Clinton with a Liberty Medal for her service to the country), attending each other’s weddings (Bill and Hillary had front-row seats for Trump’s 2005 wedding), and embracing with genuine affection.
Trump’s various donations to the Clintons (he donated to Hillary’s Senate campaigns, as well as the Clinton Foundation) are not unusual. Remember, FOX News mogul Rupert Murdoch actually hosted a fundraiser for Hillary’s Senate reelection campaign back in 2006 and contributed to her presidential campaign two years later. In fact, FOX News has reportedly been one of Hillary’s biggest donors for the better part of two decades.
Are you starting to get the picture? It doesn’t matter who wins the White House, because they all work for the same boss: Corporate America. In fact, many corporations actually hedge their bets on who will win the White House by splitting their donations between Democratic and Republican candidates.
We’re in trouble, folks, and picking a new president won’t save us.
We are living in a fantasy world carefully crafted to resemble a representative democracy. It used to be that the cogs, wheels and gear shifts in our government machinery worked to keep our republic running smoothly. However, without our fully realizing it, the mechanism has changed. Its purpose is no longer to keep our republic running smoothly. To the contrary, this particular contraption’s purpose is to keep the corporate police state in power. Its various parts are already a corrupt part of the whole.
Just consider how insidious, incestuous and beholden to the corporate elite the various “parts” of the mechanism have become.
Congress. Perhaps the most notorious offenders and most obvious culprits in the creation of the corporate-state, Congress has proven itself to be both inept and avaricious, oblivious champions of an authoritarian system that is systematically dismantling their constituents’ fundamental rights. Long before they’re elected, Congressmen are trained to dance to the tune of their wealthy benefactors, so much so that they spend two-thirds of their time in office raising money. As Reuters reports, “For many lawmakers, the daily routine in Washington involves fundraising as much as legislating. The culture of nonstop political campaigning shapes the rhythms of daily life in Congress, as well as the landscape around the Capitol. It also means that lawmakers often spend more time listening to the concerns of the wealthy than anyone else.”
The President. With the 2016 presidential election shaping up to be the most expensive one in our nation’s history, with estimates as high as $10 billion, “the way is open for an orgy of spending by well-heeled interest groups and super rich individuals on both political sides.” Yet even after the votes have been counted and favors tallied, the work of buying and selling access to the White House is far from over. President Obama spends significant amounts of time hosting and attending fundraisers, having held more than 400 fundraising events over the course of his two terms in office. Such access comes with a steep price tag. It used to be that $100,000 got you an overnight stay at the White House. Now it will cost you $500,000 for four meetings a year with President Obama. Yet as Harvard professor Lawrence Lessig asks, “[H]ow does a man, as a person, run the nation when he’s attending 228 fundraisers? And the answer is not very well. It's pretty terrible for your ability to do your job. It's pretty terrible for your ability to be responsive to the American people, because—let me tell you—the American people are not attending 228 fundraisers. Those people are different.”
The Supreme Court. The U.S. Supreme Court—once the last refuge of justice, the one governmental body really capable of rolling back the slowly emerging tyranny enveloping America—has instead become the champion of the American police state, absolving government and corporate officials of their crimes while relentlessly punishing the average American for exercising his or her rights. Like the rest of the government, the Court has routinely prioritized profit, security, and convenience over the basic rights of the citizenry. Indeed, law professor Erwin Chemerinsky makes a compelling case that the Supreme Court, whose “justices have overwhelmingly come from positions of privilege,” almost unerringly throughout its history, sides with the wealthy, the privileged, and the powerful. For example, contrast the Court’s affirmation of the “free speech” rights of corporations and wealthy donors in McCutcheon v. FEC, which does away with established limits on the number of candidates an entity can support with campaign contributions, and Citizens United v. FEC with its tendency to deny those same rights to average Americans when government interests abound, and you’ll find a noticeable disparity.
The Media. Of course, this triumvirate of total control would be completely ineffective without a propaganda machine provided by the world’s largest corporations. Besides shoving drivel down our throats at every possible moment, the so-called news agencies which are supposed to act as bulwarks against government propaganda have instead become the mouthpieces of the state. The pundits which pollute our airwaves are at best court jesters and at worst propagandists for the false reality created by the American government.
The American People. “We the people” now belong to a permanent underclass in America. It doesn’t matter what you call us—chattel, slaves, worker bees, drones, it’s all the same—what matters is that we are expected to march in lockstep with and submit to the will of the state in all matters, public and private. Through our complicity in matters large and small, we have allowed an out-of-control corporate-state apparatus to take over every element of American society.
Our failure to remain informed about what is taking place in our government, to know and exercise our rights, to vocally protest, to demand accountability on the part of our government representatives, and at a minimum to care about the plight of our fellow Americans has been our downfall.
Now we find ourselves once again caught up in the spectacle of another presidential election, and once again the majority of Americans are acting as if this election will make a difference and bring about change—as if the new boss will be different from the old boss.
When in doubt, just remember what comedian and astute commentator George Carlin had to say about the matter:
The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the state houses, the city halls. They got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying. Lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else, but I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well-informed, well-educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interests.
They want obedient workers. Obedient workers, people who are just smart enough to run the machines and do the paperwork…. It’s a big club and you ain't in it. You and I are not in the big club. …The table is tilted, folks. The game is rigged and nobody seems to notice…. Nobody seems to care. That’s what the owners count on…. It’s called the American Dream, 'cause you have to be asleep to believe it.
- Trainwreck? US Freight Carloads Collapse, Flash Recession Warning
Trainwreck? Rail traffic fell in July from a year ago as WSJ reports an increase in container volumes couldn’t offset a steep decline in oil and coal shipments according to the Association of American Railroads. Despite almost constant reassurance that plunging oil prices are 'unequivocally good" for America, AAR analysts warn "railroads are overexposed, relative to the economy in general, to the energy sector," adding that traffic data indiates "growth is slow and the recovery could be threatened by an interest-rate increase by the Fed."
We have seen this kind of slide before…
As The Wall Street Journal reports,
Rail traffic fell in July from a year ago as an increase in container volumes couldn’t offset a steep decline in oil and coal shipments, the Association of American Railroads said in its monthly report Friday.
The number of carloads carrying oil and petroleum products dropped 13.6% from a year ago to 67,909 last month, while coal volumes sank 12.5%. Container shipments rose 3.8% to 1.2 million. Traffic overall fell 1.8% to 2.7 million, the association said.
Oil-train shipments have tumbled this year, hurt by plunging prices for crude and concerns about the safety of transporting petroleum by rail. That, plus declining demand for coal from power plants and overseas buyers, has hit railroad operators’ earnings.
…
“Railroads are overexposed, relative to the economy in general, to the energy sector,” analysts with the AAR said in the traffic report.
The intermodal transport of containers and trailers was a bright spot for the railroads in July, reflecting an expanding economy. Still, the AAR report cautioned that growth is slow and the recovery could be threatened by an interest-rate increase by the Federal Reserve, which is widely expected this fall.
- China Enters Currency War – Devalues Yuan By Most On Record
Chinese stocks are holding on to modest losses in the pre-open as, just as we have been warning, the PBOC weakens the Yuan fix by the most on record.
As we first warned in March, and as became abundantly clear over the weekend when weaker than expected export data as well as the steepest decline in factory gate prices in six years underscored the extent to which the engine of global growth and trade has officially stalled, Beijing has no choice but to join the global currency wars, as the yuan’s dollar peg will ultimately prove to be too painful going forward. The renminbi has appreciated on a REER basis by double digits over the past 12 months, weighing heavily on already depressed exports. With multiple policy rate cuts having proven to be largely ineffective at resurrecting the flagging economy, the PBoC, despite the notion that this represents a “one-off”move, has been left with little choice. The bottom line: the danger posed by the country’s deepening economic slump now definitively outweighs the risk of accelerating capital outflows – especially after the latter moderated slightly in Q2.
As we noted over the weekend, “one can repeat that the PBOC will have to lower rates again until one is blue in the face (even as out of control soaring pork prices make it virtually impossible for the local authorities to ease any more), the realty is that Chinese QE is now inevitable. Why? Because while the government is already clearly buying stocks thereby validating the “other” transmission mechanism, the only thing the PBOC still hasn’t tried is to devalue the yuan. As global trade continues to disintegrate, and as a desperate China finally joins the global currency war, it will have no choice but to devalued next.”
Recall also what SocGen’s Albert Edwards said some five months ago:
We have long believed that China’s growth and deflation problems will necessitate a devaluation of the renminbi in a strong dollar environment. There is mounting evidence that this process may already be underway as the currency falls to a 28-month low against the dollar…
In the current deflationary environment the Chinese authorities simply can no longer tolerate the continued appreciation of their real exchange rate caused by the dollar link.
The 1.9% devaluation sends the Yuan to its weakest since April 2013. Gold is leaking lower as the offshore Renminbi collapses by the most since Oct 2011.
PBOC weakens Yuan fix by 1.9% – the most ever…
Offshore Renminbi is plunging..
Quite a shocking move, clearly aimed at regaining some competitiveness, one must wonder, given the lackluster response in stocks whether this will merely exacerbate capital outflows… though it does make one wonder who was buying yesterday ahead of the news…
Given The IMF’s delay decision, it seems that PBOC has decided maintaining a stable FX rate in the face of collapsing stock market is no longer in its best interest. Although the spin is already out…
- *PBOC SAYS YUAN EFFECTIVE FX RATE STRONGER THAN OTHER CURRENCIES
- *PBOC SAYS TODAY’S YUAN FIXING IS ONE-OFF ADJUSTMENT
- *CHINA TO KEEP YUAN STABLE AT REASONABLE, EQUILIBIRIUM LEVEL
- *PBOC SAYS YUAN EXCHANGE RATE DEVIATED FROM MARKET EXPECTATION
Officials say this is a one-off adjustment and we note that USDCNY has been trading 1t around 10 points cheap to the fix for 6 months.
- *PBOC PROPOSES TO EXTEND CNY TRADING HOURS
- *CHINA PBOC SAYS TO STRENGTHEN MARKET ROLE IN YUAN FIXING
- *PBOC TO PROMOTE CONVERGED ONSHORE, OFFSHORE YUAN EXCHANGE RATE
- *PBOC SAYS TO CONVERGE ONSHORE, OFFSHORE YUAN EXCHANGE RATES
And the reaction in gold:
* * *
1.Why choosing the current time to improve quotation of the central parity of RMB against US dollar?
Currently, the international economic and financial conditions are very complex. The U.S. economy is recovering and markets are expecting at least one interest rate hike by the FOMC this year. As such, the U.S. dollar is strengthening, while the Euro and Japanese Yen are weakening. Emerging market and commodities currencies are facing downward pressure, and we are seeing increasing volatilities in international capital flow. This complex situation is posing new challenges. As China is maintaining a relatively large trade surplus, RMB’s real effective exchange rate is relatively strong, which is not entirely consistent with market expectation. Therefore, it is a good time to improve quotation of the RMB central parity to make it more consistent with the needs of market development.
Since the reform of the foreign exchange rate formation mechanism in 2005, the RMB central parity, which serves as the benchmark of China’s exchange rate, has played an important role in market expectation and stabilizing RMB exchange rate. Recently, however, the central parity of RMB has deviated from the market rate to a large extent and with a larger duration, which, to some extent, has undermined the market benchmark status and the authority of the central parity. Currently, the foreign exchange market is developing in a sound manner, and market participants are increasingly strengthening their pricing and risk management capacities. The market expectation of RMB exchange rate is diverging, and the preconditions for improving quotation of the RMB central parity are becoming mature. Improving the market makers’ quotation will help enhance the market-orientation of RMB central parity, enlarging the operation room of market rate and enabling the exchange rate to play a key role in adjusting foreign exchange demand and supply.
2.Why did the central parity of RMB against US dollar of 11 August change by nearly 2% compared to that of 10 August?
We noticed that the central parity of RMB against US dollar of 11 August changed(in the depreciation direction) by nearly 2% compared to that of 10 August. The following two factors may be relevent. First, after the improvement of the quotation of the RMB central parity, the market makers may quote by reference to the closing rate of the previous day and, therefore, the accumulated gap between the central parity and the market rate received a one-time correction. Second, a series of macro economic and financial data released recently made the market expectation diverge. Market makers paid more attention to the changes of market demand and supply. Compared with the closing rate of 6.2097 Yuan per dollar in the previous day, today’s central parity depreciated by about 200 bps. The market still needs some time to adapt. The PBC will monitor the market condition closely, stabilizing the market expectation and ensuring the improvement of the formation mechanism of the RMB central parity in an orderly manner.
3.RMB exchange rate reform: what’s next?
Next, the reform of RMB exchange rate formation mechanism will continued to be pushed forward with a market orientation. Market will play a bigger role in exchange rate determination to facilitate the balancing of international payments. Foreign exchange market development will be accelerated and foreign exchange products will be enriched. In addition, the PBC will push forward the opening-up of the foreign exchange market, extending FX trading hours, introducing qualified foreign institutions and promoting the formation of a single exchange rate in both on-shore and off-shore markets. Based on the developing condition of foreign exchange market and the macroeconomic and financial, the PBC will enhance the flexibility of RMB exchange rate in both directions and keep the exchange rate basically stable at an adaptive and equilibrium level, enabling the market rate to play its role environment, retiring from the routine FX intervention, and improving the managed floating exchange rate regime based on market demand and supply.
Currently, under the complex international economic and financial condition, we are seeing increasingly large and volatile cross-border capital flow. As such, the PBC and SAFE will strengthen the examination of banks’ FX transactions according to relevant laws and regulations, adopt effective measures to fight money laundering, terrorist financing and tax evasion activities, and improve the monitoring of suspicious cross-border capital flow. The PBC and SAFE will severely punish illegal FX transactions, including underground banks, and maintain a compliant and orderly capital flow.
* * *
It is unclear what the potential losses for hedging/trading vehicles will be in the ‘most stable carry currency’ but as we noted in April 2014, TRF losses would be the 10s of billions…
The total size of the carry trade is hard to estimate although even just looking at some of the onshore CNY positions accumulated, DB Asia FX strategist Perry Kojodjojo estimates that corporate USD/CNY short positions are around $500bn. The size of the carry trade and the fact that China saw significant capital outflows during the last period of substantial Renminbi depreciation in the summer of 2012 has led to concerns over what this might mean for both the Chinese economy and financial markets as well as broader global financial implications.
Morgan Stanley believes that one such carry-trade structured product that will be the “pressure point” for this – should the Yuan continue to depreciate – is the Target Redemption Forward (TRF) which has a payoff that looks as follows…
While this is just an example of a product payoff matrix to the holder, the broader point is that the USD/CNH market has a particular level (or range of potential levels) at which three factors can create non-linear price action. These are:
1. Losses on TRF products will (on average) crystallize if USD/CNH goes above a certain level. This has implications for holders of TRF products, who are mostly corporates;
2. The hedging needs of writers of TRF products (banks) mean that there is a point of maximum vega for banks in USD/CNH. Below this level banks need to sell USD/CNH vol; above this level banks need to buy USD/CNH vol;
3. The delta-hedging needs of banks are complex. As we approach the average strike (the 6.15 in the theoretical point of Exhibit 1), banks need to buy spot USD/CNH. Above this point but below the European Knock-in (EKI) (i.e., between 6.15 and 6.20 in Exhibit 1), banks need to sell spot. Then above the EKI, banks don’t need to do anything in spot.
From internal Morgan Stanley data, we estimate that the point of maximum vega is somewhere in the range of 6.15-6.20, and that the 6.15-6.20 in Exhibit 1 is reasonably indicative of the average strikes and EKIs in the market.
In other words, so long as the TRF products remain in place (i.e., are not closed out) and we remain below the maximum vega point (somewhere between 6.15 and 6.20), there is natural selling pressure by banks in USD/CNH vol. When we get above that level, there is natural vol buying pressure.
Of course, in the scenario that USD/CNH keeps trading higher and goes above the average EKI level, the removal of spot selling flow by banks and the need to buy vol means the topside move may accelerate.
Simply put, if the CNY keeps going (whether by PBOC hand or a break of the virtuous cycle above), then things get ugly fast…
How Much Is at Stake?
In their previous note, MS estimated that US$350 billion of TRF have been sold since the beginning of 2013. When we dig deeper, we think it is reasonable to assume that most of what was sold in 2013 has been knocked out (at the lower knock-outs), given the price action seen in 2013.Given that, and given what business we’ve done in 2014 calendar year to date, we think a reasonable estimate is that US$150 billion of product remains.
Taking that as a base case, we can then estimate the size of potential losses to holders of these products if USD/CNH keeps trading higher.
In round numbers, we estimate that for every 0.1 move in USD/CNH above the average EKI (which we have assumed here is 6.20), corporates will lose US$200 million a month. The real pain comes if USD/CNH stays above this level, as these losses will accrue every month until the contract expires. Given contracts are 24 months in tenor, this implies around US$4.8 billion in total losses for every 0.1 above the average EKI.
Deutsche Bank concludes…
Looking forward it’s possible that the PBOC is not attempting to actively engineer a sustained depreciation of the Renminbi but rather is attempting to increase the level of two-way volatility in the market to discourage the carry trade and also excessive capital inflows. In terms of the broad risk going forward the sheer scale of the challenge the PBOC has set out to tackle likely means they will have to move with restraint. This is certainly a story to watch…
As Morgan Stanley warns however, this has much broader implications for China…
The potential for US$4.8 billion in losses for every 0.1 above the average EKI could have significant implications for corporate China in its own right, as could the need to post collateral on positions even if the EKI level is not breached.
However, the real concern for corporate China is linked to broader credit issues. On that, it’s worth reiterating that the corporate sector in China is the most leveraged in the world. Further loss due to structured products would add further stress to corporates and potentially some of those might get funding from the shadow banking sector. Investment loss would weaken their balance sheets further and increase repayment risk of their debt.
In this regard, it would potentially cause investors to become more concerned about trust products if any of these corporates get involved in borrowing through trust products. In this regard, this would raise concerns among investors, given that there is already significant risk of credit defaults to happen in 2014.
Remember, as we noted previously, these potential losses are pure levered derivative losses… not some “well we are losing so let’s greatly rotate this bet to US equities” which means it has a real tightening impact on both collateral and liquidity around the world… yet again, as we noted previously, it appears the PBOC is trying to break the world’s most profitable and easy carry trade – which has created a massive real estate bubble in their nation (and that will have consequences).
* * *
As we noted then, and seems just as applicable now, The Bottom Line is the question of whether the PBOC’s engineering this CNY weakness is merely a strategy to increase volatility and thus deter carry-trade malevolence (in line with reform policies to tamp down bubbles) OR is it a more aggressive entry into the currency wars as China focuses on its trade (exports) and keeping the dream alive? (Or, one more thing, the former morphs into the latter as a vicious unwind ensues OR the market tests the PBOC’s willingness to break their momentum spirit).
Finally, putting aside speculative trader P&L losses, many of which are said to be of Japanese origin and thus will hardly enjoy much or any PBOC sympathies, here is CLSA’s Russel Napier on what the long-term fate of the Renminbi will be:
“Mercantilist alchemy transmutes China’s external surpluses into foreign exchange reserves and renminbi. But with capital outflows from China at record highs, those surpluses are only maintained due to its citizens’ foreign-currency borrowing. Bank-reserve and M2 growth are already near historical lows and are driving tighter monetary policy. This will lead to severe credit-quality issues and force the authorities to accept a credit crunch or opt for a major devaluation of the renminbi. They will do the latter; and despite five years of QE, the world will get deflation anyway.”
One now wonders how the Bank of Japan and The Bank of Korea will respond.. especially as protectionism rears it ugly head also…
- RTRS – CHINA TO RESUME 13 PCT VALUE ADDED TAX RATE ON FERTILISER IMPORTS AND SALES FROM SEPT 1 – GOVT
Charts: Bloomberg
- This Wasn't Supposed To Happen: Household Spending Expectations Crash
One of the biggest drivers of the so-called recovery (in addition to the Fed’s $4.5 trillion balance sheet levitating te S&P500 and the offshore bank accounts of 1% of the US population) has been the US consumer: that tireless spending horse who through thick, thin, recession and depression is expected to take his entire paycheck, and then some tacking on a few extra dollars of debt, and spend it on worthless trinkets.
Sure enough, for the past 8 years, said consumer has done just that and with the help of the endless hopium and Kool-Aid dispensed by the administration (who can forget Tim Geithner’s August 2010 op-ed “Welcome to the Recovery“), and by the political and financial propaganda media, spent, spent and then spent some more hoping that “this time it will be different.”
This all came to a screeching halt earlier today when courtesy of the latest New York Fed Survey of Consumer Expectations, we learned that the US consumer has finally tapped out. Households reported that they expected to increase their spending by just 3.5% in the next year, a major drop from the 4.3% the month before. This was the lowest reading in series history.
Worse, when adjusting for household inflation expectations, which have been relatively flat if modestly declining around 3%, real spending intentions, when adjusted for inflation, just crashed to a barely positive 0.5%, down over 60% from the prior month. This too was the lowest print in series history.
Think America’s poor have finally revolted, and refuse to spend any more? Think again: the biggest culprit in the collapse in spending intentions was the middle class (those making between $50 and $100K) but mostly the wealthy, those with incomes over $100K. It was the latter whose spending expectations dropped to, you guessed it, the lowest in series history.
Needless to say, this was not supposed to happen.
Worse, in an economy where 70% of the GDP is in the hands of consumer spending, a collapse in spending intentions to multi-year low levels means just one thing: recession.
The only silver lining is that since the source of this data is the Fed itself, then Yellen will surely be aware of the dramatic shift taking place within the biggest drive of US economic growth. Which is why for all those wondering just what caused today’s market surge which was driven not by China’s collapsing economy, but by the realization that the Fed will not only not hike in September, but probably won’t hike in December, or ever, just look at the first chart above.
Source: NY Fed
- Escaping Serfdom
Submitted by Jeff Thomas via InternationallMan.com,
The concept of government is that the people grant to a small group of individuals the ability to establish and maintain controls over them. The inherent flaw in such a concept is that any government will invariably and continually expand upon its controls, resulting in the ever-diminishing freedom of those who granted them the power.
When I was a schoolboy, I was taught that the feudal system of the Middle Ages consisted of serfs tilling small plots of land that belonged to a king or lord. The serfs lived a meagre life of bare subsistence and were subject to the tyranny of the king or lord whose men would ride into their village periodically and take most of the few coins the serfs had earned by their toil.
The lesson I was meant to learn from this was that I should be grateful that, in the modern world, I live in a state of freedom from tyranny, and as an adult, I would pay only that level of tax that could be described as “fair”.
Later in life, I was to learn that, in the actual feudal system, some land was owned by noblemen, some by common men. The commoners typically farmed their own land, whilst the noblemen parcelled out their land to farmers, in trade for a portion of the product of their labours.
As a part of that bargain, the nobleman would pay for an army of professional soldiers to protect both the farms and the farmers. Significantly, unlike today, no farmer was required to defend the land himself, as it was not his.
There was no exact standard as to what the noblemen would charge a farmer under this agreement, but the general standard was “one day’s labour in ten”.
This was not an amount imposed or regulated by any government. The nobleman could charge as much as he wished; however, if he raised his rate significantly, he would find that the farmers would leave and move to another nobleman's farm. The 10% was, in essence, a rate that evolved over time through a free market.
Modern Serfdom
Today, of course, if most countries levied an income tax of a mere 10%, there would be dancing in the streets. And the days of one simple straightforward tax are long gone.
Today, the average person may expect to pay property tax (even if he is a renter), sales tax, capital gains tax, value added tax, inheritance tax, and so on. The laundry list of taxes is so long and complex that it is no longer possible to compute what the total tax level actually is for anyone.
And to this, we add the hidden tax of inflation. In the US, for example, the Federal Reserve has, over the last hundred years, devalued the dollar by 98%, a hefty tax indeed. And the US is not alone in this.
Only 50 years ago, the average man might work a 40-hour week to support a wife who remained at home raising the children. He often had a mortgage on his home but might have it paid off in ten years. He paid cash for nearly everything else that he and his family owned or consumed.
Today, both husband and wife generally must be employed full time. In spite of this, they can’t afford as many children as their parents could, and they generally remain in debt their entire lives, even after retirement. This is significant inflation by any measure.
In contrast, in the Middle Ages, the cost of goods might remain the same throughout the entire lifetime of an individual.
In light of the above, the 10% that was paid by the serfs is beginning to look very good indeed.
However, the great majority of people in the First World are likely to say, “What can you do; it’s the same all over the world. You might as well get used to it.”
Well, no, actually, it’s not. There are many governmental and economic systems out there and many are quite a bit more “serf friendly” than those in the major countries.
No Serfdom
Countries such as the British Virgin Islands, the Cayman Islands, Bermuda and the Bahamas have no income tax. Further, some have no property tax, sales tax, capital gains tax, value added tax, inheritance tax, and so on.
So how is this possible?
The OECD countries state that it is largely accomplished through money laundering, but this is not the case. In fact, low-tax jurisdictions are known to have some of the most stringent banking laws in the world.
The success of these jurisdictions is actually quite simple. Most of them are small. They have small populations and therefore need only a small government. Yet each jurisdiction can accommodate large numbers of investors from overseas. This results in a very high level of income per capita.
But unlike large countries, the money that is deposited or invested there is overseas money, so it is not captive. Investors can transfer it out overnight if need be.
So, even if the politicians are no better than those in larger countries (generally, they are of the same ilk), they’re aware that, like the noblemen of old, if they attempt to impose taxation, the business will dry up quickly.
In fact, such a free market dictates that the jurisdictions keep on their toes and keep trying to outdo their competitors by being more investment friendly.
Therefore, the politicians in these countries, who might be only too happy to promise entitlements to their constituents, then tax them to the hilt in order to pay for the entitlements, are kept restrained by their own system.
Are there downsides to living in a low-tax jurisdiction? Yes.
As most of them are small but require a very high standard of living in order to attract investors, they must import virtually all goods needed by residents. This means a higher cost of all goods, as compared to the cost in a country that produces such goods. However, the wage level is also higher, which tends to balance out the equation.
But there are also upsides.
Those who move to such a jurisdiction find that after the first year there (when the basics such as cars, televisions, etc., have been paid for), all further income that has been saved from taxation is beginning to get deposited in the bank.
At some point, the deposit level becomes great enough that investment becomes advisable. And as low-tax jurisdictions tend to be naturally prosperous, there is generally no limit to the opportunities for investment within the jurisdiction.
There is a further benefit to living in a low-tax jurisdiction that tends to become apparent over time. Any government that depends on major investments from overseas parties must, of necessity, be non-intrusive and non-invasive. Such a government stays out of people’s business, eschews electronic monitoring and most certainly is not given to SWAT teams crashing down doors for imagined wrongdoing.
Benjamin Franklin famously said, “Nothing can be said to be certain, except death and taxes.”
He was correct, but the level of tax can vary greatly from one country to the next. And just as important, the level of government intervention into the affairs of its citizenry varies considerably. In a country where the level of tax is low, the quality of life is generally correspondingly high.
A thousand years ago, noblemen, from time to time, became overly confident in their ability to keep the serfs on the farmland and demanded taxes beyond the customary “one day’s labour in ten”. When they did, the serfs of old often voted with their feet and simply moved. Today, this is still possible.
If the reader presently contributes more than one day’s labour in ten to his government, he may wish to consider voting with his feet.
You can find out more about our favorite jurisdictions in our free documentary video. Click here to watch it now.
- If You Are A Chinese TV Host, Do NOT Call Mao Zedong An "Old Son Of A Bitch"
When China’s equity bubble burst and the SHCOMP tumbled unceremoniously back to earth on the back of a harrowing unwind in the half dozen or so backdoor margin lending channels that had served to pump CNY1 trillion into an already inflated stock market, Beijing went looking for scapegoats. The ensuing crackdown on “malicious” sellers and “hostile foreigners” as well as a directive to reporters to avoid using certain phrases such as “rescue the market” served as poignant reminders to the world that although China is indeed making small steps towards liberalizing its markets, outcomes deemed undesirable by the Politburo will be “corrected” – and right quick.
Similarly, when a viral documentary about the country’s pollution problem began making the rounds back in March, the government moved quickly to suppress discussion as FT reported that “propaganda authorities directed news outlets not to publish stories about Under the Dome, the emotional first-person documentary by a former state television anchor.”
Given the above, and given everything we know about China’s propensity for censorship in all its forms, you can imagine that one thing you would not want to do in China if you were, say, “one of the most recognizable faces” on a state-run television station, is call Mao Zedong “an old son of a bitch,” but that’s exactly what Bi Fujian did back in April, and now Beijing’s media watchdog has “recommended” that Bi be “severely punished.” Here’s more from The Guardian:
One of China’s best known television presenters is to face “severe punishment” after being caught on camera referring to his country’s Great Helmsman, Mao Zedong, as an “old son of a bitch”.
As the host of “Star Boulevard” – a Britain’s Got Talent style variety show – Bi Fujian was one of the most recognisable faces on state broadcaster CCTV.
The 56-year-old had worked for the channel since 1989.
However, Bi’s future at the channel was cast into doubt in April after he was filmed at a private dinner mocking Chairman Mao, who founded the People’s Republic of China in 1949 and ran it until his death in 1976.
The video – which has been viewed more than 480,000 times on Youtube – shows Bi entertaining fellow diners with a rendition of a song from a Cultural Revolution era opera called Taking Tiger Mountain by Strategy.
The television host peppers his table-side performance with a series of sarcastic asides about Mao, including: “Don’t mention that old son of a bitch – he tormented us!”
While Bi and his dinner guests may have gotten a good laugh out of what looks to be a generally good natured joke, it’s “that old son of a bitch” that will likely have the posthumous last laugh, because the State Administration of Press, Publication, Radio, Film and Television has deemed Bi’s behavior “a serious violation of political discipline” for which there is “zero tolerance.” Here’s The Guardian again:
News of Bi’s punishment was splashed onto the front pages of many Chinese websites on Sunday with readers weighing in on the episode with thousands of comments.
“It is really pathetic and disgusting that after all these decades Mao is still a taboo,” wrote one. Another commented: “Bi should be seriously punished and expelled from the party for insulting Chairman Mao.”
And even though Bi has already said he feels “extremely pained” about his behavior, we suspect, based on the State Administration’s comments on Monday, that the “pain” may just begun.
- A Message From Generation Z: Thanks For Nothing
Submitted by Lance Roberts via STA Wealth Management,
This past weekend, I was reminded by my 9-year old son of the following passage in the Bible:
"Out of the mouth of babies and infants, you have established strength because of your foes, to still the enemy and the avenger." – Psalm 8:2
That verse has been shortened over time to become a colloquialism used when children have said something humorous in front of adults – "Out of the mouths of babes."
It was on our drive to Bible study that my son asked for my phone to play a new song he liked. (Note: This is also the reason traditional "terrestrial" radio stations are dying a slow painful death. If it ain't "on demand" – it's dead.) After a moment of scrolling on a music download app, the following words begin to stream through the cabin:
"We are the ones, the ones you left behind.
Don't tell us how, tell us how to live our lives.
Ten million strong we're breaking all the rules.
Thank you for nothing, 'cause there's nothing left to lose."I was immediately struck by the lyrics and paused the song to ask my son if he understood the meaning of the lyrics. He replied simply – "no…but I like the song."
The song opened up the ability for my son and I to have an important dialog about the future of "Generation Z" (those born after 1995) and the challenges that they will have to face. More importantly, the reasons why "Generation Z'ers," those "10 million strong," feel like they have been "left behind" by the generations before them.
What is interesting is that this was not a new song at all. In fact, the song debuted very quietly in 2013 by a band called MKTO (Misfit Kids and Total Outcasts) which was founded by two real life friends Tony Oller (21) and Malcolm Kelly (20). According to an interview with with Celebuzz the duo stated:
"We wanted to have a song that described our views of our generation, and to describe how we feel about being in the circumstances we are in, thanks to previous generations making mistakes."
However, it is not surprising that two twenty-somethings may be feeling the way they do. Let's take a look at some of the issues that they are growing up with.
Job Growth
As I have discussed often, the structural shift in employment, has had a negative impact on both total employment and particularly that of Generation Z. Currently, the number of individual working full time, between the ages of 16 and 24, has only seen a modest recovery since the end of the financial crisis.
However, the story is substantially worse as the majority of those jobs were taken by immigrant workers. As recently discussed by the Center For Immigration Studies:
"It's frustratingly common: The mainstream media discusses a social problem obviously impacted by immigration — overcrowding, low wages, increasing poverty, etc. — but assiduously avoids any mention of immigration."
The importance of youth employment is extremely critical to that generation. As the CIS explains:
"The decline in youth employment is a serious problem that deserves a serious examination. After all, a number of studies have found that the lack of early labor market experience can have a significant negative impact on employment and wages later in life."
Student Debt
The next problem is the mountain of personal debt weighing on both the Millennial and Z generations. As shown in the chart below, over the last 6-years student debt has skyrocketed.
The problem, as discussed previously, is not all student loans went to higher educations. Student loans are sources of cheap and easy capital to support spending requirements. The WSJ confirmed the same:
"The Education Department's inspector general warned last month that the rise of online education has led more students to borrow excessively for personal expenses.
The report also found the schools disbursed an average of $5,285 in loans each to more than 42,000 students who didn't log any credits at the time."
The problem, of course, is that only about 1/3 of those that enroll in college actually graduate. This leaves a large number of individuals heavily debt burdened without the college degree needed to obtain a higher wage level to support the debt. Its a vicious cycle that now weighs on a large group of the younger generation and negatively impacts future consumption trends in the economy.
Government Debt
Of course, it isn't just consumers that have over borrowed to the point that it now negatively impacts economic growth. Since 2009, the government itself has went on an unprecedented spending binge that has doubled the amount of Federal Debt outstanding.
The problem, as shown, is that increases in the debt/GDP ratio has a long-term negative consequence to economic growth. Rising debt levels detract revenue obtained through taxation into the service of debt rather than reinvestment back into the economy via infrastructure development and other revenue positive projects. Such investments create jobs and increase production that supports stronger levels of consumption which comprises more than 2/3rds of economic growth.
Unfortunately, with debt currently capped at the debt-ceiling limit, the prospects of stronger GDP growth in the next decade is likely to remain just as elusive as it has been over the last.
Wage Growth
Of course, the problem for both Millenials and Generation Z is that lower rates of economic growth are directly correlated to lower rates of wage growth. As shown below the correlation between the two is extremely high.
Given the structural shift in employment, the impact of immigration and the continued burden of excessive debt on the individual, the trends of both economic and wage growth are unlikely to change anytime soon.
Economic Growth
The problem for Generation Z is not a transient one. As shown in the final chart below, the generations following the "baby boomers" have very little to be excited about. With the lowest average economic growth cycle currently in progress, there is little ability to "grow" out of the current debt problem.
While Central Banks globally intervened to offset the impact of the financial crisis, they also impeded the "reset" process from occurring to clear the excesses built up in the financial and economic system. Furthermore, the inflation of asset prices simply created a burgeoning "wealth gap" which has largely bypassed the 90% of Americans that have little or no invested assets.
The up and coming generations have plenty to blame on the "baby boomer" generation and the scores of bad fiscal and monetary policy decisions that has robbed them of their future. The job of each generation is to leave the world in a better place than they found it. It is clear, we failed.
"Thank you for feeding us years of lies.
Thank you for the wars you left us to fight.
Thank you for the world you ruined overnight.
But we'll be fine, yeah we'll be fine."However, for now, let the music play.
- New Study Exposes The "Dark Side" Of ETFs
Ever since we heard that some of the largest ETF issuers were lining up emergency liquidity lines to tap in the event all the retail money that’s piled into things like HY debt suddenly decides to head for the exits, we’ve gone out of our way to explain just why it is that the likes of Vanguard would consider paying out redemptions with borrowed money as opposed to selling the underlying assets.
The problem is that in the context of the post-crisis regulatory regime, banks are no longer willing to hold large inventories of securities and so, when a bond fund manager facing large outflows tries to transact in size, he or she will likely be confronted with an extremely thin secondary market. Rather than risk dumping a large amount of assets into a market with few buyers and thus facilitating a fire sale atmosphere, fund managers are considering paying out investors who sell with borrowed cash and selling off the underlying assets slowly as the market permits.
ETFs and other portfolio products mask this problem as long as flows are diversifiable. That is, if fund manager A is experiencing outflows, that’s ok as long as portfolio manager B is seeing inflows. However, once flows become unidirectional (i.e. everyone is selling), then managers will need to go and sell the underlying assets and that, in today’s market, is a big problem. Thus, ETFs give the illusion of liquidity – that is, investors assume there’s no problem because they can trade in and out easily, but should the flows suddenly all head in the same direction everyone will quickly discover that, as Howard Marks put it, an ETF “can’t be more liquid than the underlying.”
Amusingly, a new academic study from researchers at Stanford, UCLA, and the Arison School of Business in Israel suggests that ETFs themselves are contributing to a lack of liquidity for the stocks they hold. Essentially, the argument is that increased ETF ownership leads to wider bid-asks, less analyst coverage, and higher correlations with broad market moves.
Specifically, the hypotheses the researchers tested were: “1) An increase in ETF ownership is associated with higher trading costs for the underlying component securities, and 2) An increase in ETF ownership is associated with a deterioration in the pricing efficiency of the underlying securities.”
On the first hypothesis, the authors looked at “the relation between ETF ownership and two proxies of liquidity that capture trading costs: (1) bid-ask spreads, and (2) price impact of trades.” On the second, they looked at “the extent to which stock prices reflect firm-specific information.”
The results:
We first demonstrate that an increase in ETF ownership is associated with an increase in firms’ trading costs. This is consistent with the idea of uninformed traders exiting the market of the underlying security in favor of the ETF. As uninformed traders exit and trading costs rise, we posit that pricing efficiency will decline. Consistent with this prediction, we find that higher levels of ETF ownership are associated with an increase in stock return synchronicity and a reduction in future earnings response coefficients. We also observe a negative association between ETF ownership and the number of analysts covering the firm. Collectively, the evidence presented in this paper suggests increased ETF ownership can lead to weaker information environments for the underlying firms.
And here’s WSJ summarizing:
ETFs divert many individual and institutional investors from trading directly in certain stocks. And that means fewer opportunities for professional traders to profit from trading those stocks. Ownership of U.S. stocks by ETFs has grown from 0.1% of shares outstanding in 2000 to 7% in 2014, according to the paper.
The diminished profit potential leads to less competition for shares among traders, and that, in turn drives up the cost of trading the shares for everyone, as measured by the so-called bid-ask spread, the authors say. This spread is the difference between the price a stock can be sold at on the market and the (higher) price it can be bought for at any given moment.
The bid-ask spread is 6% wider on average when a big chunk of a company’s shares—more than 3% of the shares outstanding—is held by ETFs, compared with the spread when a stock has lower or no ownership by ETFs, the study found.
Wider bid-ask spreads not only increase the costs of trading, they also further reduce profit potential for traders. That gives traders less incentive to bid for stocks in anticipation of future earnings increases at the issuing companies. So stocks become less responsive to projected earnings, the report says.
There also is less financial incentive for analysts to provide company-specific analysis for stocks with less profit potential. The study found that the number of analysts covering a stock falls as ETF ownership of the company increases.
Finally, less company-specific analysis also means that a greater proportion of a stock’s price moves are likely to be driven by industrywide or general market movements.
Obviously, some of this is self-evident, but the important thing to note is that this looks to be still more evidence of a wholesale shift away from trading underlying asset classes in favor of trading derivatives.
And while we might be able to distinguish between those who are intentionally avoiding the underlying markets due to perceived illiquidty (i.e. fund managers trading portfolio products to meet redemptions and satisfy inflows and traders resorting to futures to avoid illiquid cash Treasury markets) and those who are simply not trading the underlying because trading the alternative is easier (i.e. retail investors opting for ETFs over invdividual stocks because they don’t feel they have the “sophistication” to trade the individual names) the effect is the same: the market for the underlying assets becomes ever more illiquid.
- The Assault On Donald Trump Shows That The "2 Party System" Is Really A "1 Party System"
Submitted by Michael Snyder via The End of The American Dream blog,
Were you sickened by the Republican debate the other night? The hype leading up to the debate was unbelievable. Never before had there been so much interest in a debate this early in an election season, and it turned out to be the most watched program on Fox News ever. A record-shattering 24 million Americans tuned in, and what they witnessed was an expertly orchestrated assault on Donald Trump. From the very first moments, every question that was launched at Trump was an “attack question”. And then the laughable “focus group” that followed was specifically designed to show that “ordinary people” were “changing their minds” about Trump. By the end of the evening, it was abundantly clear that Fox News had purposely intended to try to destroy Trump’s candidacy.
And of course Fox News is far from alone. Every mainstream news outlet in the entire country is running anti-Trump news stories every single day. Virtually every other presidential candidate in both parties is attacking him, and virtually every “political expert” from across the political spectrum is trashing his chances of success.
So why is this happening?
Normally, candidates that are not part of the “establishment” do not pose much of a threat. In order to win elections in this country, especially on a national level, you need name recognition and you need lots and lots of money.
Donald Trump has both, and no matter what you may think of him you have to admit that he has star power.
And he was never supposed to run for president. You see, the truth is that only members of “the club” are allowed to play. The elite very carefully groom their candidates, and they are usually able to maintain a very tight grip on both major political parties.
This two-headed abomination that we call a “two party system” is in reality just a one party system. Yes, many Democrats and many Republicans really do hate one another, but at the end of the day there is very little difference between the two parties. That is why nothing ever really seems to change no matter who gets elected. George W. Bush continued almost all of Bill Clinton’s policies, and Barack Obama has continued almost all of George W. Bush’s policies. When they are running for office, they tell us what they think we want to hear, but once they get to D.C. they do exactly what the establishment wants them to do.
Donald Trump, whether you love him or you hate him, is a threat to this system. He is not controlled by the elite, and he does and says all sorts of things that drive the elite absolutely nuts.
If he was polling below 5 percent that wouldn’t be a problem. At first, the mainstream media attempted to portray him as a joke that would never get any real support. But since then, Trump has proven that he is a serious candidate with some very serious ideas about how to fix this country. Now that he is receiving far, far more support than the establishment choice (Jeb Bush), he must be destroyed.
I can promise you right now that the Republican establishment will pull out every dirty trick in the book to keep Donald Trump from getting the Republican nomination.
And if Donald Trump runs as an independent, the elite will move heaven and earth to keep him out of the White House.
This isn’t even just about Trump. If Ben Carson starts getting too much support, he will be destroyed too. This is how presidential elections in America work.
What we witnessed during the Fox News debate the other night was not an accident. The goal was to make Jeb Bush look good and to make Donald Trump look bad. The following comes from Mike Adams…
But the one thing that really stood out was the total fraud of what Fox News pulled off. It was clear from the first five minutes that Fox News had pre-arranged softball questions for Jeb Bush to highlight his “heroic actions” and accomplishments. Meanwhile, the kinds of questions directed to Donald Trump were all thinly veiled accusations and insults, designed to attack Trump on issues that had nothing to do with running the country.
The typical questions went something like this: (paraphrased)
Fox News: “Jeb Bush, how did you get to be such an amazing leader?”
Fox News: “Donald Trump, why do you hate women?”
As if a debate with totally contrived questions wasn’t enough, Fox News also had a pre-arranged assembly of apparently “ordinary citizens” who were asked, after the debate, how many of them now hated Donald Trump.
And even when “the debate” was over, the assault continued. If you have not seen the disgraceful “focus group interview” which Frank Luntz orchestrated, you can check it out below…
I just about fell out of my chair when I saw that.
Virtually everyone in the “focus group” that Frank Luntz put together supposedly had a positive view of Donald Trump before the debate, and then almost every single one of them supposedly become Trump haters during the course of the two hour debate.
I am sure that they were hoping that everybody in the viewing public would “come to their senses” and become Jeb Bush supporters.
But of course post-debate polling shows that is not happening at all.
The Drudge Report conducted a flash poll immediately following the debate, and a whopping 44.67 percent of those that responded said that Trump won the debate.
Ted Cruz was in second place with 14.31 percent.
Jeb Bush got a measly 2.07 percent.
A Newsmax survey came up with similar results…
- Donald Trump: 38 percent
- Ted Cruz: 15.5 percent
- Neurosurgeon Dr. Ben Carson: 10.2 percent
- Florida Sen. Marco Rubio: 9.7 percent
- Kentucky Sen. Rand Paul: 9.3 percent
- Ohio Gov. John Kasich: 4.9 percent
- Wisconsin Gov. Scott Walker: 4.5 percent
- Former Arkansas Gov. Mike Huckabee: 3.5 percent
- Former Florida Gov. Jeb Bush: 2.5 percent
- New Jersey Gov. Chris Christie: 1.4 percent
And a survey conducted by Time Magazine also produced similar findings. Donald Trump got 47 percent, Ben Carson was in second place with 11 percent, and Jeb Bush got 4 percent.
But Donald Trump is not going to be the Republican nominee.
Unless something goes horribly, horribly wrong for the Republican establishment, Jeb Bush is going to be the nominee.
We have a system that is deeply, deeply broken and that does not reflect the will of the people.
This was illustrated by one of the questions that Trump was asked during the debate…
BAIER: Mr. Trump, it’s not just your past support for single-payer health care. You’ve also supported a host of other liberal policies….You’ve also donated to several Democratic candidates, Hillary Clinton included, and Nancy Pelosi. You explained away those donations saying you did that to get business-related favors. And you said recently, quote, “When you give, they do whatever the hell you want them to do.”
TRUMP: You’d better believe it.
BAIER: — they do?
TRUMP: If I ask them, if I need them, you know, most of the people on this stage I’ve given to, just so you understand, a lot of money.
TRUMP: I will tell you that our system is broken. I gave to many people, before this, before two months ago, I was a businessman. I give to everybody. When they call, I give. And do you know what? When I need something from them two years later, three years later, I call them, they are there for me. And that’s a broken system.
The really amazing thing is that nobody up on that stage disputed that what Trump was saying was true.
It is very well understood by our politicians that when they get big checks from the elite for their campaigns that certain things are expected from them in return.
Our government does not reflect the will of the people and it hasn’t for a very long time.
Instead, it reflects the will of the elite, and the American people are getting sick and tired of it.
Right now, surveys show that Donald Trump has far more support than any other Republican candidate.
But he is not going to be the Republican nominee. The Republican establishment will make sure of that.
There is still the possibility that Trump could run as an independent. That would be an extremely tough road, but on Sunday he sounded very open to the possibility…
The political hurricane that is Donald Trump didn’t recede over the weekend, even in the face of a rising tide of criticism from Republican rivals about his attack on Fox News anchor Megyn Kelly.
Instead, the celebrity billionaire insisted in a string of interviews on Sunday TV shows that he had done nothing wrong, that “only a deviant” would interpret his words in an offensive way, and that he is leaving open the possibility of running an independent campaign for the White House if the GOP doesn’t treat him “fairly.”
“I do have leverage and I like having leverage,” Trump declared on CBS’ Face the Nation on a morning that also included interviews with ABC’s This Week, CNN’s State of the Union and NBC’s Meet the Press.
This is a scenario that I discussed in my previous article entitled “Republican Operatives Plot To Sabotage Trump – But That Could Turn Him Into Their Worst Nightmare“. Personally, I believe that Donald Trump will decide to run as an independent when it becomes clear to him that the Republican establishment is going to prevent him from winning the nomination at all costs.
But I could be wrong.
- Why China Can't Unleash Major Stimulus (In 3 Simple Charts)
It appears – according to the narrative assigned by the mainstream media – that any weakness in asset prices should be bought because China will inevitably have to unleash pure QE (as opposed to the modestly watered down version currently underway) or some combination of RRR cuts. This is 'western' thinking as the go to policy of the rest of the world's central banks has been – put on pants, print money, paper over cracks, proclaim victory. However, in China there is one big problem with this… stoking inflation… and most crucially the social unrest concerns when suddenly a nation of newly minted equity losers can no longer afford their pork (which is facing record shortages)…
As SocGen notes, the infamous pork cycle is heating up again…
Pork prices in the CPI basket have risen 17.4% since May and were up 16.7% yoy in July, which accounted for half of the headline CPI reading of 1.6% yoy.
The current cycle is similar to the previous two disruptive cycles in terms of supply shortages… [ZH – but considerably worse!!!]
Pork prices will probably keep rising and push CPI above 2% yoy in the coming months, but the chance of CPI going much beyond 3% is limited in our view.
Nevertheless, this inflation outlook is still likely to restrain the central bank’s scope for policy rate cuts.
So, as SocGen concludes, judging from recent activity data, the economy is still under immense downward pressure. Furthermore, supply-driven inflation is by nature deflationary, as higher pork prices can squeeze other consumption in the absence of any acceleration in income growth.
Therefore, fiscal policy has to step up, and monetary policy is likely to play an assisting role by providing targeted liquidity. It seems that the focus at the moment is on the indirect channels of policy bank funding support to infrastructure investment.
* * *
In other words, do not expect some broad based liquidity infusion (RRR cuts or QE) – policy reaction, just as we have seen in the stock market manipulation, will be piecemeal and focused.
- The US Economy Continues Its Collapse
Submitted by Paul Craig Roberts,
Do you remember when real reporters existed? Those were the days before the Clinton regime concentrated the media into a few hands and turned the media into a Ministry of Propaganda, a tool of Big Brother. The false reality in which Americans live extends into economic life. Last Friday’s employment report was a continuation of a long string of bad news spun into good news. The media repeats two numbers as if they mean something—the monthly payroll jobs gains and the unemployment rate—and ignores the numbers that show the continuing multi-year decline in employment opportunities while the economy is allegedly recovering.
The so-called recovery is based on the U.3 measure of the unemployment rate. This measure does not include any unemployed person who has become discouraged from the inability to find a job and has not looked for a job in four weeks. The U.3 measure of unemployment only includes the still hopeful who think they will find a job.
The government has a second official measure of unemployment, U.6. This measure, seldom reported, includes among the unemployed those who have been discouraged for less than one year. This official measure is double the 5.3% U.3 measure. What does it mean that the unemployment rate is over 10% after six years of alleged economic recovery?
In 1994 the Clinton regime stopped counting long-term discouraged workers as unemployed. Clinton wanted his economy to look better than Reagan’s, so he ceased counting the long-term discouraged workers that were part of Reagan’s unemployment rate. John Williams (shadowstats.com) continues to measure the long-term discouraged with the official methodology of that time, and when these unemployed are included, the US rate of unemployment as of July 2015 is 23%, several times higher than during the recession with which Fed chairman Paul Volcker greeted the Reagan presidency.
An unemployment rate of 23% gives economic recovery a new meaning. It has been eighty-five years since the Great Depression, and the US economy is in economic recovery with an unemployment rate close to that of the Great Depression.
The labor force participation rate has declined over the “recovery” that allegedly began in June 2009 and continues today. This is highly unusual. Normally, as an economy recovers jobs rebound, and people flock into the labor force. Based on what he was told by his economic advisors, President Obama attributed the decline in the participation rate to baby boomers taking retirement. In actual fact, over the so-called recovery, job growth has been primarily among those 55 years of age and older. For example, all of the July payroll jobs gains were accounted for by those 55 and older. Those Americans of prime working age (25 to 54 years old) lost 131,000 jobs in July.
Over the previous year (July 2014 — July 2015), those in the age group 55 and older gained 1,554,000 jobs. Youth, 16-18 and 20-24, lost 887,000 and 489,000 jobs.
Today there are 4,000,000 fewer jobs for Americans aged 25 to 54 than in December 2007. From 2009 to 2013, Americans in this age group were down 6,000,000 jobs. Those years of alleged economic recovery apparently bypassed Americans of prime working age.
As of July 2015, the US has 27,265,000 people with part-time jobs, of whom 6,300,000 or 23% are working part-time because they cannot find full time jobs. There are 7,124,000 Americans who hold multiple part-time jobs in order to make ends meet, an increase of 337,000 from a year ago.
The young cannot form households on the basis of part-time jobs, but retirees take these jobs in order to provide the missing income on their savings from the Federal Reserve’s zero interest rate policy, which is keyed toward supporting the balance sheets of a handful of giant banks, whose executives control the US Treasury and Federal Reserve. With so many manufacturing and tradable professional skill jobs, such as software engineering, offshored to China and India, professional careers are disappearing in the US.
The most lucrative jobs in America involve running Wall Street scams, lobbying for private interest groups, for which former members of the House, Senate, and executive branch are preferred, and producing schemes for the enrichment of think-tank donors, which, masquerading as public policy, can become law.
The claimed payroll jobs for July are in the usual categories familiar to us month after month year after year. They are domestic service jobs—waitresses and bartenders, retail clerks, transportation, warehousing, finance and insurance, health care and social assistance. Nothing to export in order to pay for massive imports. With scant growth in real median family incomes, as savings are drawn down and credit used up, even the sales part of the economy will falter.
Clearly, this is not an economy that has a future.
But you would never know that from listening to the financial media or reading the New York Times business section or the Wall Street Journal.
When I was a Wall Street Journal editor, the deplorable condition of the US economy would have been front page news.
- Mapping The "Not Donald Trump"-ness Of GOP Candidates
Ever aware of the potential for change, GOP Presidential candidates face a tough balance currently. As The Washington Post explains, should Trump's 'burn-it-down' aggression ever cross one too many lines, around 20% of Republicans will be looking for someone else to support – someone who didn't think they were a total idiot for supporting Trump in the first place. Based on their responses and statements, WaPo has quantified the "Trumpness Factor" for each of the GOP candidates…
An important note on these rankings… expect them to change…
- Inside The Swiss Franc LIBOR Rate Rigging Chatroom: 6 Years Of Manipulation
One of the nice things about the multitude of lawsuits and settlements surrounding the concerted effort by Wall Street’s largest banks to manipulate the world’s most important benchmark rates is they’ve produced a litany of hilarious chat transcripts that include such gems as “mess this up and sleep with one eye open at night” and the always popular, “if you ain’t cheatin, you ain’t tryin.“
Now, courtesy of the appendix attached to the latest LIBOR-related suit brought against Wall Street (and one hedge fund), we bring you six years of Swiss franc LIBOR manipulation presented in chronological order. Highlights here include:
- “It is our natural right to reflect our interest in the libor fixing process”
- “Can’t you ask your fft to contribute 1m chf libor very low today? I have 10yr of fix, 8 of which against ubs and they’re getting on my nerves.”
- “yes, ok mate, I am heading out for a run, enjoy, talk tom, get those fixings down”
- “whoooooohooooooo 0.01%? that’d be awesome”
- All The S&P 500 Support And Resistance Levels That Matter
Given today’s extremely technical trading, we thought it appropriate to lay out exactly where the next stop hunts (up and down) will be…
Trade Accordingly…
Source: BofAML
- Google Renames Itself "Alphabet", Stock Soars
It’s long been difficult to catalogue everything that Google does, and apparently Google couldn’t keep up with anymore either because the company has unveiled a somewhat bizarre restructuring effort that will see “Google” become a wholly-owned subsidiary of a new holding company called “Alphabet.”
Google directors will become Alphabet directors, Larry Page will be the holding company’s CEO, and Page’s deputy Sundar Pichai will now be CEO of Google. Alphabet will replace Google as the publicly traded entity, Google shares will become Alphabet shares, but the tickers will remain as is – or something. Here’s Bloomberg trying to put it in perspective.
Google is adopting this structure in order to make clearer the difference between its main business and longer-term endeavors, as Page and Brin take on more strategic roles, while leaving operational management to trusted deputies.
Of course in today’s market, all news is good news even if it’s almost impossible to digest and evaluate, or maybe traders presume the move will be somehow “tax advantaged”, but whatever the case, the stock is soaring in AH trading.
Here’s the full statement from Google.. err.. Alphabet:
Google Announces Plans for New Operating Structure
August 10, 2015
G is for Google.
As Sergey and I wrote in the original founders letter 11 years ago, “Google is not a conventional company. We do not intend to become one.” As part of that, we also said that you could expect us to make “smaller bets in areas that might seem very speculative or even strange when compared to our current businesses.” From the start, we’ve always strived to do more, and to do important and meaningful things with the resources we have.
We did a lot of things that seemed crazy at the time. Many of those crazy things now have over a billion users, like Google Maps, YouTube, Chrome, and Android. And we haven’t stopped there. We are still trying to do things other people think are crazy but we are super excited about.
We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.
Our company is operating well today, but we think we can make it cleaner and more accountable. So we are creating a new company, called Alphabet. I am really excited to be running Alphabet as CEO with help from my capable partner, Sergey, as President.
What is Alphabet? Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main internet products contained in Alphabet instead. What do we mean by far afield? Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related.
Alphabet is about businesses prospering through strong leaders and independence. In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed. We will rigorously handle capital allocation and work to make sure each business is executing well. We’ll also make sure we have a great CEO for each business, and we’ll determine their compensation. In addition, with this new structure we plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole.
This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google. A key part of this is Sundar Pichai. Sundar has been saying the things I would have said (and sometimes better!) for quite some time now, and I’ve been tremendously enjoying our work together. He has really stepped up since October of last year, when he took on product and engineering responsibility for our internet businesses. Sergey and I have been super excited about his progress and dedication to the company. And it is clear to us and our board that it is time for Sundar to be CEO of Google. I feel very fortunate to have someone as talented as he is to run the slightly slimmed down Google and this frees up time for me to continue to scale our aspirations. I have been spending quite a bit of time with Sundar, helping him and the company in any way I can, and I will of course continue to do that. Google itself is also making all sorts of new products, and I know Sundar will always be focused on innovation—continuing to stretch boundaries. I know he deeply cares that we can continue to make big strides on our core mission to organize the world’s information. Recent launches like Google Photos and Google Now using machine learning are amazing progress. Google also has some services that are run with their own identity, like YouTube. Susan is doing a great job as CEO, running a strong brand and driving incredible growth.
Sergey and I are seriously in the business of starting new things. Alphabet will also include our X lab, which incubates new efforts like Wing, our drone delivery effort. We are also stoked about growing our investment arms, Ventures and Capital, as part of this new structure.
Alphabet Inc. will replace Google Inc. as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights. Google will become a wholly-owned subsidiary of Alphabet. Our two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.
For Sergey and me this is a very exciting new chapter in the life of Google—the birth of Alphabet. We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha?bet (Alpha is investment return above benchmark), which we strive for! I should add that we are not intending for this to be a big consumer brand with related products—the whole point is that Alphabet companies should have independence and develop their own brands.
We are excited about…
- Getting more ambitious things done.
- Taking the long-term view.
- Empowering great entrepreneurs and companies to flourish.
- Investing at the scale of the opportunities and resources we see.
- Improving the transparency and oversight of what we’re doing.
- Making Google even better through greater focus.
- And hopefully… as a result of all this, improving the lives of as many people as we can.
- What could be better? No wonder we are excited to get to work with everyone in the Alphabet family. Don’t worry, we’re still getting used to the name too!
- Towards A State Of Near Chaos…
Submitted by James H. Kunstler via Kunstler.com,
Yes, there is such a thing as “the public,” a term that derives from the ancient Latin, populous (the people), via publicus (of the people), via old French, public — pertaining generally to the mass of adults dwelling in a polity, a society under (political) governance. In the USA, government is vested as a republic, also from the Latin, res publica, meaning the public thing, the vessel that contains the public.
I present these terms to clarify how our society is cracking up. The American public, we the people, lately swoon into a morass of multi-dimensional failure: failure to control their economic lives, to regulate their appetites and their bodies, to understand what is happening to them, to fend off the propaganda and distractions that disable them, and to properly express and direct their wrath at those elements of the polity who deserve it.
True, their awful, epic failures at this moment in history are largely engineered and aggravated by those who have captured the polity and turned it into a looting and racketeering engine. The net result, though, is a self-reinforcing circle of degradation that rots the collective ethos of the public while it destroys the vessel of the republic that contains it.
Societies that act as though they are hostage to these forces of degradation are able to pretend that they are helpless in the face of them; that the public bears no responsibility for its own choices or for the disintegration of the polity they live under. Hence, the current condition of the American public and its disgraceful government.
It’s not difficult to understand how Donald Trump becomes the instrument for the public’s wrath. Whatever his checkered career in land development amounts to, he is at least a freely-functioning and unfettered actor in the political arena. The public enjoys most of all his assertion of independence from the tremendous engine of grift that the republic has become. His arrant contempt for his rivals, and for the disgusting political process erected for the election contest, also thrills a big wad of the public. So far, his actual ideas for governing lack coherence, except for the rather general notion that uncontrolled immigration, and all the mendacious fakery associated with it, is a bad thing for the republic. Beyond that he offers only blustering claims that he is “very smart,” an “artist of deal-making,” a “patriot.”
Almost nothing so far can knock him down or take him out. Fox News tried in last week’s “debate” — which was not a debate at all, really, but a half-assed interrogation — by trying to set the female half of the public against him for his nasty remarks about women over the years. Of course, the dirty secret of both politics and the media is that the common backstage chatter among pols and TV news producers is every bit as vulgar and hateful as anything Trump said. In case you haven’t noticed, all of America has turned into a verbal sewer, especially the virtual public realm of television. I don’t remember anyone complaining about the comportment of the characters in Tony Soprano’s Badda-Bing Lounge. In fact, awards were heaped on the depiction of that behavior. That’s who we are now.
The rise and persistence of Trump raises a more pertinent question: why are all the other candidates such obvious shills for the implacable engine of grift that is destroying the Republic? Why has nobody with the possible exception of Bernie Sanders, called bullshit on the basic operations of the machine? Why have no other persons of real stature stepped forward to challenge the suicidal dynamic of the age?
There are many cycles in history, politics, and economics. One in particular afflicts the American public today: we’re at a cycle low for comprehending what is happening to us. Sometimes societies know very well what is going on and communicate it superbly. Such was the case in the late 1700s when American leaders filed divorce from Great Britain. Can you imagine any of the clowns onstage for the Fox News “debate” playing a role in writing the Federalist Papers? Obviously, the public and its putative representatives today don’t have a clue what is happening. And then, necessarily, they don’t have a clue what to do about it.
The foregoing assumes that they are honorable persons, though, which may not be the case. This is the chief gripe against Hillary Clinton, of course: that she is an unprincipled monster of ambition and little more. That would be my take on her, for instance. Among the Republicans (as in party) only Rand Paul stands out as not appearing to be some kind of puppet shilling for the grift machine. After all, the party is the very embodiment of that machine. And by trying to play nicely in its arena, Rand Paul may lack the fortitude to attack it.
I’m with those who think that the 2016 election campaign is going to be a wild spectacle beyond the current imaginings of news media. I’m serenely convinced that, among other things, the banking system is going to implode so hard and fast well before the nominating conventions that the nation will be in a state of near chaos. What’s out there now is just a tired dumb-show replaying the shopworn themes of an era that is about to slam to a close.
- Stocks Volumelessly Surge On Biggest Short Squeeze Of The Year
Today was very reminiscent of last Wednesday's NO REASON meltup… and that did not work out so well… So this seemed appropriate…
Today was the biggest short squeeze of 2015…
No volume – you hear that!!
Stocks did what stocks do – because as Bob Pisani said "a rally was overdue" – S&P 500 pushed back above its 50- and 100-DMA having bounced off the 200DMA on Friday…Nasdaq surges off 50DMA…
The S&P 500 retraced all of last week's losses today…
Because… AAPL…? Best day since January
Small Caps – Russell 2000 – made it back above its 200DMA at 1221…but then fell back…
Today's surge in The Dow managed to stave off the death cross and avoided the 8th day in a row of losses which would have stumped Pisani…NOTE: a close below 17850 tomorrow will trigger a death cross
VIX was managed down to close to a 11 handle once again…
Credit markets were not playing along fully…
With energy credit risk surging well above 1000bps…but energy stocks don't care today.!!
As the energy sector outperformed…
Treasury yields bled higher from the early morning… biggest yield spike in a month… very notable steepening today…
The dollar was monkey-hammered as Lockhart forgot to say "September" – biggest drop in 2 weeks… notice swissy weakness early which sponsored the equity rally in the US for a while…
And Goldman notes we posted a bearish key reversal on Friday…
Commodities surged with Copper and Crude jumping and gold and silver surging on hopes of China QE… or PBOC buying rumors… or algos gone manic…
Crude's chaos today…
Don't get too excited in Copper as Goldman warns this is abunce in a downtrend…
Silver had its best day in 3 months… Gold's best day in 2 months…
Charts: Bloomberg
- EPA Admits Spilling Millions Of Gallons Of Toxic Waste Into Colorado River – Stunning Aerial Footage
By John Vibes via TheAntiMedia.org,
The Environmental Protection Agency (EPA), the federal organization in charge of fining and arresting people and companies for damage done to the environment, spilled over a million gallons of toxic waste into the Animas river in Colorado this week. The waste came from an abandoned mining operation and turned the entire river a disgusting shade of bright orange.
The EPA admitted earlier this week that the spill occurred while workers from the agency were using heavy machinery to open the Gold King Mine, an operation that was shut down some time ago. While trying to enter the mine, the machines busted a shaft that was filled with wastewater, creating a leak into the river.
At first, the EPA attempted to downplay the spill and act like there was nothing wrong, but they were heavily criticized for those initial statements.
Dave Ostrander, the EPA’s regional director told reporters in a later statement that “It’s hard being on the other side of this.”
“We are very sorry for what happened. This is a huge tragedy. It’s hard being on the other side of this. Typically we respond to emergencies; we don’t cause them. … It’s something we sincerely regret,” he said.
However, some people are not willing to let the EPA off that easily, even some politicians have rightly pointed out that the EPA should be treated in the same way that any company or private individual would be treated if they poisoned the river.
U.S. Rep. Scott Tipton, who is from the area where the spill occurred said the EPA must pay for their mistake.
“If a mining operator or other private business caused the spill to occur, the EPA would be all over them. The EPA admits fault and, as such, must be accountable and held to the same standard,” Tipton said.
In a statement released this Thursday, Taylor McKinnon, of the Tucson-based Center for Biological Diversity, said that
“Endangered species downstream of this spill are already afflicted by same toxic compounds like mercury and selenium that may be in this waste. Taylor McKinnon, of the Tucson-based Center for Biological Diversity, said in a statement Thursday. “These species are hanging by a thread, and every new bit of toxic exposure makes a bad situation worse. EPA’s downplaying of potential impacts is troubling and raises deeper questions about the thoroughness of its mine-reclamation efforts.”
Aerial footage below:
The EPA actually has no concern for the environment, they just happen to use the environment as a cover story to create laws and gain an advantage for the companies that lobbied for exemptions to the agency’s regulations, and to collect money in fines. There are solutions outside the common government paradigm, and that is mainly the ability for individuals, not governments, to hold polluters personally and financially accountable.
- Artist's Impression Of The Next GOP Debate
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