Today’s News June 15, 2015

• Snowden, Putin, Greece: It’s All The Same Story

  Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

  Through the last decades, as we have been getting ever more occupied trying to be what society tells us is defined as successful, we all missed out on a lot of changes in our world. Or perhaps we should be gentle to ourselves and say we’re simply slow to catch up.

  Which is somewhat curious since we’ve also been getting bombarded with fast increasing amounts of what we’re told is information, so you’d think it might have become easier to keep up. It was not.

  While we were busy being busy we for instance were largely oblivious to the fact the US is no longer a beneficial force in the world, and that it doesn’t spread democracy or freedom. Now you may argue to what extent that has ever been true, and you should, but the perception was arguably much closer to the truth 70 years ago, at the end of WWII, then it is today.

  Another change we really can’t get our heads around is how the media have turned from a source of information to a source of – pre-fabricated – narratives. We’ll all say to some extent or another that we know our press feeds us propaganda, but, again arguably, few of us are capable of pinpointing to what extent that is true. Perhaps no big surprise given the overdose of what passes for information, but duly noted.

  So far so good, you’re not as smart as you think. Bummer. But still an easy one to deny in the private space of your own head. If you get undressed and stand in front of the mirror, though, maybe not as easy.

  What ails us is, I was going to say perfectly human, but let’s stick with just human, and leave perfection alone. What makes us human is that it feels good to be protected, safe, and prosperous. Protected from evil and from hard times, by a military force, by a monetary fund, by a monetary union. It feels so good in fact that we don’t notice when what’s supposed to keep us safe turns against us.

  But it is what happens, time and again, and, once again arguably, ever more so. What we think the world looks like is increasingly shaped by fiction. Perhaps that means we live in dreamtime. Or nightmare time. Whatever you call it, it’s not real. Pinching yourself is not going to help. Reading Orwell might.

  The Sunday Times ran a story today -which the entire world press parroted quasi verbatim- that claimed MI6 had felt compelled to call back some of its operatives from the ‘field’ because Russia and China had allegedly hacked into the encrypted files Edward Snowden allegedly carried with him to Russia (something Snowden denied on multiple occasions).

  Glenn Greenwald’s take down of the whole thing is – for good reasons- far better than I could provide, and it’s blistering, it leaves not a single shred of the article. Problem is, the die’s been cast, and many more people read the Times and all the media who’ve reprinted its fiction, than do read Greenwald:

  The Sunday Times’ Snowden Story Is Journalism At Its Worst

  Western journalists claim that the big lesson they learned from their key role in selling the Iraq War to the public is that it’s hideous, corrupt and often dangerous journalism to give anonymity to government officials to let them propagandize the public, then uncritically accept those anonymously voiced claims as Truth. But they’ve learned no such lesson. That tactic continues to be the staple of how major US and British media outlets “report,” especially in the national security area. And journalists who read such reports continue to treat self-serving decrees by unnamed, unseen officials – laundered through their media – as gospel, no matter how dubious are the claims or factually false is the reporting.

   

  We now have one of the purest examples of this dynamic. Last night, the Murdoch-owned Sunday Times published their lead front-page Sunday article, headlined “British Spies Betrayed to Russians and Chinese.” Just as the conventional media narrative was shifting to pro-Snowden sentiment in the wake of a key court ruling and a new surveillance law, the article claims in the first paragraph that these two adversaries “have cracked the top-secret cache of files stolen by the fugitive US whistleblower Edward Snowden, forcing MI6 to pull agents out of live operations in hostile countries, according to senior officials in Downing Street, the Home Office and the security services.”

  Please read Greenwald’s piece. It’s excellent. Turns out the Times made it all up. At the same time, it’s just one example of something much more expansive: the entire world view of the vast majority of Americans and Europeans, and that means you too, is weaved together from a smorgasbord of made-up stories, narratives concocted to make you see what someone else wants you to see.

  Last week, the Pew Research Center did a survey that was centered around the question what ‘we’ should do if a NATO ally were attacked by Russia. How Pew dare hold such a survey is for most people not even a valid question anymore, since the Putin as bogeyman tale, after a year and change, has taken root in 99% of western brains.

  And so the Pew question, devoid of reality as it may be, appears more legit than the question about why the question is asked in the first place. NATO didn’t really like the results of the survey, but enough to thump some more chests. Here’s from an otherwise wholly forgettable NY Times piece:

  Poles were most alarmed by Moscow’s muscle flexing, with 70% saying that Russia was a major military threat. Germany, a critical American ally in the effort to forge a Ukraine peace settlement, was at the other end of the spectrum. Only 38% of Germans said that Russia was a danger to neighboring countries aside from Ukraine, and only 29% blamed Russia for the violence in Ukraine. Consequently, 58% of Germans do not believe that their country should use force to defend another NATO ally. Just 19% of Germans say NATO weapons should be sent to the Ukrainian government to help it better contend with Russian and separatist attacks.

  Do we need to repeat that Russia didn’t attack Ukraine? That if after all this time there is still zero proof for that, perhaps it’s time to let go of that idea?

  Over the past week, there have been numerous reports of NATO ‘strengthening’ its presence in Eastern Europe and the Baltics. Supposedly to deter Russian aggression in the region. For which there is no evidence. But if you ask people if NATO should act if one of its allies were attacked, you put the idea in people’s heads that such an attack is a real risk. And that’s the whole idea.

  This crazy piece from the Guardian provides a very good example of how the mood is manipulated:

  US And Poland In Talks Over Weapons Deployment In Eastern Europe

  The US and Poland are discussing the deployment of American heavy weapons in eastern Europe in response to Russian expansionism and sabre-rattling in the region in what represents a radical break with post-cold war military planning. The Polish defence ministry said on Sunday that Washington and Warsaw were in negotiations about the permanent stationing of US battle tanks and other heavy weaponry in Poland and other countries in the region as part of NATO’s plans to develop rapid deployment “Spearhead” forces aimed at deterring Kremlin attempts to destabilise former Soviet bloc countries now entrenched inside NATO and the EU.

   

  Warsaw said that a decision whether to station heavy US equipment at warehouses in Poland would be taken soon. NATO’s former supreme commander in Europe, American admiral James Stavridis, said the decision marked “a very meaningful policy shift”, amid eastern European complaints that western Europe and the US were lukewarm about security guarantees for countries on the frontline with Russia following Vladimir Putin’s seizure of parts of Ukraine. “It provides a reasonable level of reassurance to jittery allies, although nothing is as good as troops stationed full time on the ground, of course,” the retired admiral told the New York Times.

   

  NATO has been accused of complacency in recent years. The Russian president’s surprise attacks on Ukraine have shocked western military planners into action. An alliance summit in Wales last year agreed quick deployments of NATO forces in Poland and the Baltic states. German mechanised infantry crossed into Poland at the weekend after thousands of NATO forces inaugurated exercises as part of the new buildup in the east. Wary of antagonising Moscow’s fears of western “encirclement” and feeding its well-oiled propaganda effort, which regularly asserts that NATO agreed at the end of the cold war not to station forces in the former Warsaw Pact countries, NATO has declined to establish permanent bases in the east.

  It’s downright borderline criminally tragic that NATO claims it’s building up its presence in the region as a response to Russian actions. What actions? Nothing was going on until ‘we’ supported a coup in Kiev, installed a puppet government and let them wage war on their own citizens. That war killed a lot of people. And if Kiev has any say in the matter, it ain’t over by a long shot. Poroshenko and Yats still want it all back. So does NATO.

  When signing a post-cold war strategic cooperation pact with Russia in 1997, Nato pledged not to station ground forces permanently in eastern Europe “in the current and foreseeable security environment”. But that environment has been transformed by Putin’s decision to invade and annex parts of Ukraine and the 1997 agreement is now seen as obsolete.

  Meanwhile, Russia re-took Crimea without a single shot being fired. But that is still what the western press calls aggression. Russia doesn’t even deem to respond to ‘our’ innuendo, they feel there’s nothing to be gained from that because ‘our’ stories have been pre-cooked and pre-chewed anyway. Something that we are going to greatly regret.

  There are all these alphabet soup organizations that were once set up with, one last time, arguably, good intentions, and that now invent narratives because A) they can and B) they need a reason to continue to exist. That is true for NATO, which should have been dismantled 25 years ago.

  It’s true for the IMF, which was always only a tool for US domination. It’s true for the CIA and FBI, which might keep you safe if that was their intent, but which really only function to keep themselves and their narrow group of paymasters safe.

  It’s also true for political unions, like the US and EU. Let’s leave the former alone for now, though much could be said and written about the gaping distance between what the Founding Fathers once envisioned for the nation and what it has since descended into.

  Still, that is a story for another day. When we can find our way through the web of narratives that holds it upright. Like the threat from Russia, the threat from China, the threat from all the factions in the Middle East the US itself (helped) set up.

  The EU is much younger, though its bureaucrats seem eager to catch up with America in fictitious web weaving. We humans stink at anything supra-national. We can have our societies cooperate, but as soon as we invent ‘greater’ units to incorporate that cooperation, things run off the rails, the wrong people grab power, and the weaker among us get sacrificed. And that is what’s happening once again, entirely predictably, in Greece.

  That Spain’s two largest cities, Barcelona and Madrid, have now sworn in far-left female mayors this week will only serve to make things harder for Athens. Brussels is under siege, and it will defend its territory as ‘best’ it can.

  What might influence matters, and not a little bit, is that Syriza’s Audit Commission is poised to make public its findings on June 18, and that they yesterday revealed they have in their possession a 2010 IMF document that allegedly proves that the Fund knew back then, before the first bail-out, that the Memorandum would result in an increase in Greek debt.

  That’s potentially incendiary information, because the Memorandum -and the bailout- were aimed specifically at decreasing the debt. That -again, allegedly- none of the EU nations have seen the document at the time -let’s see how the spin machine makes that look- doesn’t exactly make it any more acceptable.

  Nor of course does the fact that Greece’s debt could and should have been restructured, according to the IMF’s own people and ‘standards’, but wasn’t until 2012, when the main European banks had been bailed out with what was subsequently shoved onto the shoulders of the Greek population, and had withdrawn their ‘assets’ from the country, a move that made Greece’s position that much harder.

  The narrative being sold through the media in other eurozone nations is that Greece is to blame, that for instance German taxpayers are on the hook for Greek debts, while they’re really on the hook for German banks’ losing wagers (here’s looking at you, Deutsche!). And that is, no matter how you twist it, not the same story. It’s again just a narrative.

  Once more, and we’ve said it many times before, Brussels is toxic -and so is the IMF- and Greece should leave as soon as possible, as should Italy, Spain, Portugal. And we should all resist the spin-induced attempts to demonize Putin, Athens and China any further, and instead focus on the rotten apples in our own basket(s).

  In short, the propaganda we should be worried about is not Russia’s, it’s our own. And it comes from just about every news article we’re fed. We’re much less than six degrees removed from Orwell.

  

  

  
  
  

  

• Euro & Stocks Maintain Losses Before EU Open As China Market Cap Tops $10 Trillion For 1st Time Ever

  The total market capitalization of China’s stocks is now over 40% the size of the US stock market and topped $10 trillion for the first time in history. This represents at 8-fold increase in Chinese market cap since Lehman.

  

   

  But after that initial pop, Chinese stocks are weak too.

  

   

  Meanwhile in other markets the EUR is notably lower against the JPY and USD but appears to be protected from a plunge for now hovering at 138.40 and 1.1200 respectively after the Greek Deal failure news.

  

   

  US equity futures are tumbling, down 9 points but off the initial lows for now.

  

   

  Of course there is great incentive for some plunge protection tonight to SHOW the world that Grexit contagion is contained and nothing to worry about.

  Charts: Bloomberg

  

  

  
  
  

  

• How Obama's "Trade" Deals Are Designed To End Democracy

  Submitted by Eric Zeusse, author of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010 and of Feudalism, Fascism, Libertarianism and Economics,

  U.S. President Barack Obama has for years been negotiating with European and Asian nations — but excluding Russia and China, since he is aiming to defeat them in his war to extend the American empire (i.e, to extend the global control by America’s aristocracy) — three international ‘trade’ deals (TTP, TTIP, & TISA), each one of which contains a section (called ISDS) that would end important aspects of the sovereignty of each signatory nation, by setting up an international panel composed solely of corporate lawyers to serve as ‘arbitrators’ deciding cases brought before this panel to hear lawsuits by international corporations accusing a given signatory nation of violating that corporation’s ‘rights’ by its trying to legislate regulations that are prohibited under the ’trade’ agreement, such as by increasing the given nation’s penalties for fraud, or by lowering the amount of a given toxic substance that the nation allows in its foods, or by increasing the percentage of the nation’s energy that comes from renewable sources, or by penalizing corporations for hiring people to kill labor union organizers — i.e., by any regulatory change that benefits the public at the expense of the given corporations' profits. (No similar and countervailing power for nations to sue international corporations is included in this: the ‘rights’ of ‘investors’ — but really of only the top stockholders in international corporations — are placed higher than the rights of any signatory nation.)

  This provision, whose full name is “Investor State Dispute Resolution” grants a one-sided benefit to the controlling stockholders in international corporations, by enabling them to bring these lawsuits to this panel of lawyers, whose careers will consist of their serving international corporations, sometimes as ‘arbitrators’ in these panels, and sometimes as lawyers who more-overtly represent one or more of those corporations, but also serving these corporations in other capacities, such as via being appointed by them to head a tax-exempt foundation to which international corporations ‘donate’ and so to turn what would otherwise be PR expenses into corporate tax-deductions. In other words: to be an ‘arbitrator’ on these panels can produce an extremely lucrative career.

  These are in no way democratic legal proceedings; they’re the exact opposite, an international conquest of democracy, by international corporations. This “ISDS” sounds deceptively non-partisan, but it's really a grant to the controlling international investors giving them a 'right' against the taxpayers in each of the signatory nations, a ‘right’ to sue, essentially, those taxpayers; and ISDS includes no countervailing ‘right’ to those taxpayers, to sue those international corporations; it’s an entirely one-sided provision, and it even removes the authority of the democratically elected national government to adjudicate the matter. It even removes the appeals-court system: once a decision is reached by the ‘arbitrating’ panel, it is final, it cannot be appealed. And no nation may present a challenge to the constitutionality of the ‘arbitrators’ decision. These treaties, if signed, will override the signatory nation’s constitution, on those matters.

  This idea started after World War II and the defeat of the fascist nations on the military battlefields, and it moved this great fascist-v.-democratic war to a different type of battlefield. It’s round 2 of WW II.

  Unlike many wars, WW II was an ideological war. On the one side stood the Allies; on the other, the fascist powers. The first fascist leader, Italy's Benito Mussolini, said in November 1933 that his ideal was “corporatism” or “corporationism,” in which the state, or the national government, serves its corporations (see page 426 there):

  "The corporation plays on the economic terrain just as the Grand Council and the militia play on the political terrain. Corporationism is disciplined economy, and from that comes control, because one cannot imagine a discipline without a director.

   

  Corporationism is above socialism and above liberalism. A new synthesis is created. It is a symptomatic fact that the decadence of capitalism coincides with the decadence of socialism. All the Socialist parties of Europe are in fragments.

   

  Evidently the two phenomena—I will not say conditions—present a point of view which is strictly logical: there is between them a historical parallel. Corporative economy arises at the historic moment when both the militant phenomena, capitalism and socialism, have already given all that they could give. From one and from the other we inherit what they have of vitality. …

   

  There is no doubt that, given the general crisis of capitalism, corporative solutions can be applied anywhere."

  After World War II, the ‘former’ Nazi, Prince Bernhard, took up the fascist (lower-case f, indicating the ideology, instead of Mussolini’s Fascist political party; Bernhard had belonged instead to Hitler’s Nazi Party) cudgel, when he created in 1954 his then-secret (and still secretive today) Bilderberg group, which brings together the leaders, and the advisers to the leaders, of international corporations, meeting annually or bi-annually, near the places where major national leaders or potential future leaders have pre-scheduled to congregate, such as this year’s G-7 meeting in Bavaria, so that even heads-of-state (and/or their aides) can quietly slip away unofficially to join nearby the Bilderbergs and communicate privately with them, to coordinate their collective international fascist endeavor (and decide which presidential candidates to fund), to institute a fascist world government that will possess a legal control higher than what’s possessed by any merely national government. Just as the anti-Russian, anti-Chinese, G-7 conference ended on 8 June 2015, the Bilderberg conference opened 15 miles away three days later (after a few days of vacation in the Bavarian Alps), and Britain’s Telegraph (as it does every year with extraordinary boldness for the Western press) issued the list of attendees, which included top advisors to many heads-of-state, plus major investors in ‘defense’ stocks, plus top propagandists against Russia (such as Anne Applebaum).

  Bilderbergers have always been opposed to the old ideal of an emerging global federalism of democracies to constitute an ultimate world government; they instead favor a dictatorial world government, imposed by (the controlling owners of) international corporations. The major international corporations are controlled by perhaps fewer than a hundred people around the world; and, the other billions of people, the mere citizens, will, in this plan, as realized under Obama’s ‘trade’ deals, be fined if a three-person panel of servants (the ‘arbitrators’) to that perhaps fewer than 100 people, rule to say that the given nation has violated the ‘rights’ of those ‘investors,’ and assesses the ‘fine’ against those taxpayers.

  The first Bilderberg meeting was called together by Bernhard in a personal invitation which proposed that, “I think that a 'partnership for growth' is a fine idea. A good deal has been said but very little has been done about trade policy, and this would be a good place to start the partnership.” (Note the ‘Partnership’ in “Trans Pacific Partnership,” and in “Transatlantic Trade & Investment Partnership”; but TISA doesn’t use that term.)

  Among the leading Americans at the first (and perhaps each of the subsequent) Bilderberg meetings, were Wall Streeters David Rockefeller and George Ball, both of whom subsequently lobbied the U.S. Congress heavily to replace national standards with international standards, something that would be an improvement if done within a democratic framework (which would thus have electoral accountability to the public, and be appealable and amendable), but they didn’t even mention any proposed framework, and virtually everyone at that time was simply assuming that nobody in ’the West’ would have any dictatorial framework in mind; everybody assumed that, after the defeat of the fascist nations, any emerging world government could only be democratic. This isn’t what Bilderbergers actually had in mind, however.

  Matt Stoller, on 20 February 2014, bannered, “NAFTA Origins, Part Two: The Architects of Free Trade Really Did Want a World Government of Corporations,” and he reported, from his study of the Congressional Record, that:

  After the Kennedy round [international-trade talks] ended [in 1967], liberal internationalists, including people like Chase CEO David Rockefeller and former Undersecretary of State George Ball, began pressing for reductions in non-tariff barriers, which they perceived as the next set of trade impediments to pull down. Ball was an architect of 1960s U.S. trade policy — he helped write the Trade Act of 1962, which set the stage for what eventually became the World Trade Organization.

   

  But Ball’s idea behind getting rid of these barriers wasn’t about free trade, it was about reorganizing the world so that corporations could manage resources for “the benefit of mankind”. It was a weird utopian vision that you can hear today in the current United States Trade Representative Michael Froman’s speeches. …

   

  In the opening statement [by Ball to Congress in 1967], before a legion of impressive Senators and Congressmen, Ball attacks the very notion of sovereignty. He goes after the idea that “business decisions” could be “frustrated by a multiplicity of different restrictions by relatively small nation states that are based on parochial considerations,” and lauds the multinational corporation as the most perfect structure devised for the benefit of mankind.

  As for David Rockefeller, he wrote in the 1 February 1999 Newsweek an essay “Looking for New Leadership,” in which he stated (p. 41) the widely quoted (though the rest of the article is ignored): “In recent years, there's been a trend toward democracy and market economies. That has lessened the role of government, which is something business people tend to be in favor of. But the other side of the coin is that somebody has to take governments' place, and business seems to me to be a logical entity to do it.” He meant there that international corporations should have supreme sovereignty, above that of any nation. He always emphasized what he proudly called “internationalism.” To him, like to Ball, governments — that is, national governments —  were the problem, and democracy is not the solution. The solution is, to exact the contrary: provide supreme sovereignty to international corporations, as an international authority higher than any democracy, or that any nation.

  A two-minute video succinctly states the case for UK citizens against ISDS regarding Obama’s proposed TTIP or Transatlantic Trade & Investment Partnership with Europe, but the case equally applies for all citizens, regarding Obama’s TPP with Asia, and his TISA with all countries for “Services,” including financial services and the ‘rights' that international financial corporations such as banks have to transfer their billionaires’ gambling (‘investment’) losses onto the taxpayers (via megabank bailouts). Obama’s ‘trade’ deals will thus internationalize the system to bail out billionaires on their losses. Furthermore, (as that linked source on TISA explained): if TISA passes, then the United States, which is virtually the only industrialized country that hasn’t socialized the health-insurance function, would be prohibited from ever socializing it. (This, mind you, from the very same Barack Obama who, while he was running against Hillary Clinton in 2008 to win the Democratic Presidential nomination, told the AFL-CIO, “I happen to be a proponent of single-payer universal healthcare coverage.”

  He didn’t just lie: he’s now fighting to make socialization of health insurance absolutely impossible in the United States. No wonder why as President, Obama’s White House argued to the Supreme Court that no state may limit lying in political campaigns — that lying in politics is Constitutionally protected ‘Free Speech.’ Obama sets the record for phoniness.) 

  The world is already almost completely fascistic. As I previously reported, it really, truly, is the case that the “World’s Richest 80 People Own Same Amount as World’s Bottom 50%.” And, furthermore, the only rigorous scientific study that has ever been done of the extent to which a recognized ‘democratic’ country actually is a democracy found that that nation definitely is not. The nation was the United States. The U.S. was discovered to be, and long to have been, a dictatorship, in which the people who are not in the richest 10% have no impact whatsoever on the nation’s policies. A brief video accurately summarized that study (by Gillens and Page) and explained why its findings are that way.

  This 6-minute video is a crash course on political reality. That Gillens and Page study noted at the end, that, "Our findings also point toward the need to learn more about exactly which economic elites (the ‘merely affluent’? the top 1%? the top 0.01%?) have how much impact upon public policy.” However, the most detailed study of the flow of economic benefits and costs in the United States since 2000 has found that all of the economic benefits from ‘America’s economic recovery’ and ‘the end of the recession,’ etc., have gone only to the top 1%. (The ‘news’ media try to say it’s not ‘really’ so, but the finding is based on the most solid of all data, and that’s the most reliable way to calculate anything.) Another study, which I did, also based on the best available data, “The Top 1% of America’s Top 1%,” has shown that the reason for the immense power that’s within the top 10% is the soaring wealth-boost to only the top 0.01%, the very top end of the top end. Comparing the boost to incomes at America’s top 0.1% to that of the top 0.01%, one sees that most of the income of the top 0.1% is actually going to merely the top 0.01%, so that, as I summed it up, “the wealthiest of the billionaires are getting almost everything.” And, this is the situation even before the Bilderberg plan is fully in force. Obama’’s ‘trade’ deals wouldn’t just lock this in; they’d vastly increase the power, and also the wealth, of the perhaps 100 or fewer people who control the largest international corporations.

  The fact that these ‘trade’ deals are being pushed right now, means that the people who are in power have concluded that, already, ‘the free world’ is so dictatorial, that the chances that their plan can now be imposed globally are about as good as is likely ever to be the case again. The time is ripe for them to establish a global corporate dictatorship. The political money this year will be flowing like never before.

   

  

  

  
  
  

  

• Should Students Voluntarily Default On $1.3 Trillion In Debt?

  One week ago, we highlighted a NY Times op-ed by Lee Siegel, a writer who holds not one, not two, but three degrees from Columbia, including two graduate degrees. Long story short, Siegel accumulated quite a bit of student debt on the way to obtaining three degrees from one of the nation’s top schools, but apparently no one told him that writers (or at least the type of writer he planned on being) don’t generally make a lot of money, and so when Siegel found himself falling behind, he simply decided he would not be repaying his student loans.

  

  (Lee Siegel)

  You see for Siegel, student debt is part of a system that’s “legal but not moral.” It’s “absurd that one [can] amass crippling debt as a result, not of drug addiction or reckless borrowing and spending, but of going to college.”

  Of course, one might easily argue that taking out three large loans to fund three degrees from Columbia, none of which promise high-paying jobs, is the very definition of “reckless borrowing and spending.”

  Siegel also says it’s ridiculous that the education system “open[s] a new life beyond [people’s] modest origins [only to] call in its chits and prevent [these people] from pursuing that new life, simply because [they] had the misfortune of coming from modest origins.”

  But is it then immoral for auto lenders to expect to get their money back from low-income borrowers who take out car loans? After all, car loans also “open a new life” for people of “modest origins.” Before the loan they had to walk or take public transportation. After the loan they are able to go wherever they want, whenever they want in an expedient fashion. Is it then wrong for auto lenders to “call in their chits” by expecting borrowers to make their monthly payments? Obviously not. The argument is nonsensical.

  Siegel sums up the difficult decision he faced as follows:

  “Years later, I found myself confronted with a choice that too many people have had to and will have to face. I could give up what had become my vocation (in my case, being a writer) and take a job that I didn’t want in order to repay the huge debt I had accumulated in college and graduate school. Or I could take what I had been led to believe was both the morally and legally reprehensible step of defaulting on my student loans, which was the only way I could survive without wasting my life in a job that had nothing to do with my particular usefulness to society.”

  So according to Siegel, because the free market doesn’t value (in monetary terms) writers as much as it does say, petroleum engineers, that means writers shouldn’t have to repay their loans.

  But there’s no inherent injustice in the fact that writers are not, on average, paid as much as petroleum engineers. It is Siegel’s right to choose what he wants to study and thereby what vocation he wants to dedicate his life to. If that’s writing, so be it. That’s great.

  It is however, society’s right to determine how much Siegel’s writing is worth. If that determination leaves Siegel unable to service his debt, he does not have the right to punish society for how they valued his work by forcing taxpayers to take a loss on his student loans.

  We can of course argue over what it says about our society when writers and intellectuals can’t make enough to live a comfortable existence while white collar criminals on Wall Street rake in hundreds of millions every year, but that’s an entirely separate argument and probably shouldn’t have been included in Siegel’s op-ed because frankly, it has nothing to do with whether or not borrowers should be held accountable for their obligations to creditors.

  The better argument may be that the student debt bubble is just one more example of easy credit and moral hazard conspiring to create a massive social inefficiency wherein it’s impossible to compete for a job without having a $35,000 college degree, but depending on the major, these degrees don’t often prepare graduates for the job market. What’s left is a nation of waiters and bartenders laboring under tens, if not hundreds of thousands in student loans in an economy that still (BLS and BEA “adjustments” notwithstanding) hasn’t recovered from a crisis caused by the very same type of easy credit and moral hazard that has now spawned the student debt bubble.

  In other words, it’s not that Siegel is wrong to criticize the student debt bubble, it’s just that the issue isn’t whether or not student borrowers somehow deserve to be treated differently by creditors simply because their debt went towards an education while someone else’s debt went towards a Honda Civic. 

  

   

  Moving on, you’ll recall that Siegel also has some concrete recommendations for graduates struggling under a mountain of student debt. As a reminder, here they are:

  You might want to follow these steps: Get as many credit cards as you can before your credit is ruined. Find a stable housing situation. Pay your rent on time so that you have a good record in that area when you do have to move. Live with or marry someone with good credit (preferably someone who shares your desperate nihilism).

  The NY Times has more on why some of these suggestions might turn out to be bad ideas:

  Over the last couple of decades, we have been engaged in an enormous national experiment, taking impressionable and often ignorant teenagers and young adults and seeing just how much student loan debt they can handle.

   

  Colleges and graduate schools flaunt their fancy amenities while making the case for their brand of degrees, loan papers in hand. Parents stand idly by and often co-sign for the debt. As a result, more than $1 trillion in student loans are outstanding, and people of all ages are struggling to repay them.

   

  Whatever you may think of these results and the costs that produced them, there is also a practical question at hand for people who feel as if they are in over their heads: Is it ever a good idea to try to beat the system by openly defying it and refusing to repay the debt that you willingly took on?

   

  The ramifications of defaulting and remaining in debt deliberately are usually real and lasting. After all, the federal government spends over $1 billion annually on collection agencies to get its money back on behalf of the taxpayers who pay for the loan programs.

   

  Mr. Siegel suggested that others might want to consider his example and listed three steps that could help them cope..

   

  First, he tells people to get as many credit cards as they can before they stop repaying their student loans. This way, presumably, you will have plenty of credit available once your credit report is ruined and you can’t get new cards. But card issuers are constantly checking the credit of existing cardholders to look for distress signals. If they see any, they may lower your limits or close your accounts.

   

  You could use debit cards instead, as long as you don’t bounce checks or regularly overdraw. Once your credit is a mess, however, it becomes that much easier to justify all sorts of bad financial behavior. After all, your student loan default has already rendered you off limits for lending, so what’s a few more late payments or stiffed creditors?

   

  The second piece of advice Mr. Siegel has for aspiring defaulters is to establish a good history of paying rent. This can work, as long as you rent from a landlord who never checks your credit or a new one who relies on your old landlord’s good word.

   

  But many landlords do check and won’t be sympathetic, especially in tight markets. Besides, plenty of people don’t want to be tenants forever, given how hard it can be to find rentals in some good school districts. Others want to plant roots and build home equity.

   

  Will those defaulters be able to qualify for a mortgage? A judgment resulting from a default may stay on your credit report for up to 10 years. But we’re talking about the credit reporting agencies here. Mistakes happen, black marks may linger, and they aren’t always easy to fix quickly when your home purchase hangs in the balance..

   

  Which brings us to Mr. Siegel’s third piece of advice: Marry well, or at least have a creditworthy partner. Then, that person can be the sole mortgage applicant. Mr. Siegel’s wife bought the home where they live, according to public records.

   

  There are a number of problems with this approach. Some lenders may not allow it, since certain low down-payment loans in community property states require both spouses to apply, according to Wells Fargo. Of course, you’ll need to talk someone into coupling up with you in the first place, after explaining that you’re not so big on financial obligations but that you really, truly intend to honor marital ones.

  In the final analysis, the entire debate may well end up being irrelevant because the larger the student debt bubble grows, the louder the “forgive all student debt” calls become and because, in Bill Ackman’s words, “there’s no way students are going to pay it back,” it may not be long before the Lee Siegels of the world have their debt cancelled before they have a chance to make a publicity stunt out of their defaults.

  

  

  
  
  

  

• The Futility Of Our Global Monetary Experiment

  Submitted by David Stockman via The Mises Institute,

  Jeff Deist: The Fed recently announced just this past week that it would not use specific dates for targeting higher Fed funds rate this year and you almost get the sense that poor Janet Yellen is at the end of this Greenspan-Bernanke experiment and there’s not much left for her to do. I mean, what’s our sense of Yellen and her position?

  David Stockman: Yeah, I agree with that. I think in some ways they’re petrified as to where they ended up or they should be. After all, we’re in an experiment of monumental proportions.

  Let’s just assess where we are. If they don’t raise the interest rate in June — and I think all the signals now are pretty clear they’re going to find another reason to delay — that will mean seventy-eight straight months of zero rates in the money market. As I always say, the money-market price, that is the Federal Funds Rate or Overnight Money or a short term treasury bill, is the most important price in all of capitalism because that determines the cost of carry, the cost of speculation and gambling.

  When you conduct a monetary policy that says to the speculators, to the gamblers, “come and get it,” you are guaranteed free money to carry your positions, whether you’re buying German Bonds or you’re buying the S&P 500 Stock Index or the whole array of yielding or price gaining assets that are available in the financial market. This monetary policy also sends the message that you can leverage and carry those positions for free and roll it day after day without worry because the central bank has pegged your cost and production, and in a sense has pledged on its solemn honor that it will not change without many months of warning. And that’s what this whole thing is about — changing the language and so forth. I think you have created a massive distortion in the very heart of capitalism in the financial system.

  Second, I think even though they stopped actually adding to their balance sheet in October — when QE supposedly ended in a technical sense — the Fed has put $3.5 trillion worth of basic financial fraud into the world financial system and economy. After all, when they bought all of that treasury debt and all of those GSE securities, what did they use to pay for it with? It was digital money conjured out of thin air and they certainly haven’t destroyed or repealed the law of supply and demand.

  So, if you put three-and-a-half trillion of demand into the fixed income market at points along the yield curve all the way from two years to thirty years, that is an enormous fat sum on the scale. That is an enormous distortion of pricing because you can’t have that much demand without affecting the price. Now, with the ECB at full throttle, and with Japan being almost a lunatic in its mimicking of QE, you are creating the greatest distortion of fixed income pricing or bond market pricing in the history of the world, and the bond market is the monster of the midway.

  The distortion is tens of trillions of dollars big, and meanwhile, the central banks are in some kind of quasi-coordinated unison in levitating the prices enormously. They’ve brought the yields right down almost to the zero line — to the zero bound, as they call it, and therefore have set up the world’s financial system for a huge day of reckoning somewhere down the road and perhaps not that far away.

  After all, only two weeks ago I believe, they had the German ten-year Bund yielding five basis points. That is crazy in any kind of world that makes economic sense or that’s sustainable. Already, some of the more aggressive bond traders in the world are jumping on that, calling it the short of a generation. We’ll see about that, but the point is, five basis points of yield even on the mighty German Bund for ten year money is just a major measure of the lunacy that has been injected into the financial system.

  Jeff Deist: David, when you talk about the injections, when you talk about the thumb on the scale, as you discussed in Contra Corner recently, it’s not working, right? The commerce department just announced anemic first quarter GDP growth. I mean is there any honest growth in the US economy at this point?

  David Stockman: No, and this is one of the things that I’ve been harping on. Sometimes we get so caught up in the monthly so-called incoming data and the short-term releases — that are seasonally maladjusted anyway and get revised four times over — that we really lose track of where we are. So, the other day I said let’s just look at two extended periods of time that occurred in different economic and policy environments and do an assessment of where we are.

  I took 1953 to 1971, that representing the end of the Korean War and the beginning of the Great Prosperity in the middle century, ending in the August 1971 fatal mistake that Nixon made when he closed down Bretton Woods and the rest. I call that the Golden Era of Prosperity. During that period, the economy grew and I use real final sales to measure the growth because that takes out the inventory fluctuations and distortions that are in the GDP number per se. But, if you take real final sales for that eighteen-year period, it was 3.6 percent a year compounded during a time in which the Fed was run by William McChesney Martin, a survivor — or veteran, you might say — of the 1929 crash and the trauma of the 1930s. He was a man who wasn’t necessarily, in the classic sense, a hard-money gold-standard advocate, but he certainly was a wise financial hedge who understood the dangers of speculation in the financial markets and of too much heavy-handed intervention in the financial system.

  During that eighteen-year period from 1953 to 1971, the balance sheet of the Federal Reserve expanded by only $42 billion over eighteen years. (Now during QE, that was about two weeks worth of expansion at the peak.) More importantly, if you look at it in real terms — in inflation-adjusted terms — the balance sheet of the Fed in that period grew about 3 percent a year, and the economy grew at nearly 4 percent. Therefore, the Fed was engaged in a very modest light-touch policy allowing the mechanism of capitalism, including the financial markets at the heart of it, to function. The balance sheet of the Fed grew by 0.8 percent of the growth in the GDP.

  Now, let’s take the last fourteen years, we’re in a totally different world. Greenspan has changed the whole notion of the role of the central bank, followed by Bernanke and Yellen. During that period, GDP growth of the economy has down shifted sharply to 1.8 percent a year over the last fourteen years, half of what occurred during the golden era. By contrast, the balance sheet of the Fed grew from $500 billion to four and a half trillion. But look at it in the same annual terms: 17 percent a year growth in the balance sheet, and 15 percent after adjusting for inflation.

  That means that the Fed’s balance sheet grew eight times more rapidly than the economy during the last fourteen years. That’s just the inverse of the relationship that occurred back in the Golden Era.

  So, I think if you need any proof at all of this massive intrusion into the financial system isn’t working; the huge amount of money printing and balance sheet expansion; the unremitting financial repression and pegging of interest rates; look at the fundamental comparison that I just made. It’s not working in the real economy. That is, it’s not generating expansion and giving standard gains on Main Street.

  The only thing it’s really doing is simply inflating the serial bubble that ultimately reach unsustainable peaks and collapse. We’ve had two of them this century already from that policy and we’re now overwhelmingly — if you really look at the evidence — in a third great bubble that is in some ways more fantastic than the earlier two. It’s only a matter of time before it bursts and implodes and we’ll then be back to square one.

  Hopefully on the third strike, the people who gave us these bubbles will be out. I think that might be a fair metaphor or proposition to make. Hopefully, when this next big bust comes — and surely it will when you look at the degree of speculation of the stock market in the high yield market or many other sectors that we can talk about — there will be a great day of reckoning in the country in terms of demanding a fundamental change in monetary policy and we’ll see the resignation of all the people who are sitting on the Fed today that have led us right into this gargantuan financial trap.

  

  

  
  
  

  

• Writing's On The Wall: Texas Pulls $1 Billion In Gold From NY Fed, Makes It "Non-Confiscatable"

  The lack of faith in central bank trustworthiness is spreading. First Germany, then Holland, and Austria, and now – as we noted was possible previously – Texas has enacted a Bill to repatriate $1 billion of gold from The NY Fed's vaults to a newly established state gold bullion depository…"People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold," and the Bill includes a section to prevent forced seizure from the Federal Government.

  From 2011:

  "The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board."

   

  The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.

   

  “Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

  And now, after we noted the possibility previously, as The Epoch Times reports, Texas Governor Greg Abbott signed a bill into law on Friday, June 12, that will allow Texas to build a gold and silver bullion depository. In addition, Texas will repatriate $1 billion worth of bullion from the Federal Reserve in New York to the new facility once completed.

  On the surface the bill looks rather innocent, but its implications are far reaching. HB 483, “relating to the establishment and administration of a state bullion depository” to store gold and silver coins, was introduced by state Rep. Giovanni Capriglione.

   

  Capriglione told the Star-Telegram:

   

  “We are not talking Fort Knox. But when I first announced this, I got so many emails and phone calls from people literally all over the world who said they want to store their gold … in a Texas depository. People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold.”

   

  But isn’t New York, where most of the world’s gold is stored, also big and powerful? Why does the state of Texas want to go through the trouble of building its own storage facility?

  There are precisely two important reasons. One involves distrust in the current storage system. The second threatens the paper money system as a whole.

  “In a lot of cases with gold you may not have clear title to the metal. You may have a counterparty relationship that makes you a creditor. If the counterparty has a problem unrelated to gold, they can default and then you become an unsecured creditor in bankruptcy,” said Keith Weiner, president of the Gold Standard Institute.

   

  This means you get whatever is left after liquidation, often just a fraction of the initial value of your holdings.

   

  “This exact scenario happened with futures broker MF Global. I knew people who had warehouse receipts to gold bars with a specific serial number. But that gold had an encumbered title and they became unsecured creditors in bankruptcy,” said Weiner.

   

  In Texas, two big public pension funds from the University of Texas (UoT) and the Teacher Retirement System (TRS) own gold worth more than $1 billion.

   

  Being uncomfortable with holding purely financial gold in the form of futures and Exchange-traded Funds, University of Texas actually took delivery of the gold bars in 2011 and warehoused it with HSBC Bank in New York.

   

  At the time pension fund board member and hedge fund manager Kyle Bass explained: “As a fiduciary, which I am in that position to the extent you own gold and you are going for a long time, and it’s not a trade. … We looked at the COMEX at the time and they had about $80 billion of open interest between futures and futures options. And in the warehouse they had $2.7 billion of deliverables. We are going to own it a long time. You are on the board, you are a fiduciary, so that’s an easy one, you go get it.”

   

  Bass is implying that there is much more financial gold out there than physical, and that it is prudent to actually hold the physical.

   

  Taking the gold to Texas would then also solve the counterparty risk. “In this case it’s going to be a depository, the gold is going to be there, they are not going to be able to lend it out and it won’t serve as collateral for other transactions of the bank.” said Victor Sperandeo of trading firm EAM Partners. “Because if the bank closes, you are screwed.”

   

  “I think that somebody was looking at that, we better have this under our complete control,” said constitutional lawyer and gold expert Edwin Vieira, of the Texas bill. “They don’t want to have the gold in some bank somewhere and in two to five years it turns out not to be there.”

  So far most of the attention has focused on the part of the depository and the big institutions. However, the bill also includes a provision to prevent seizure, which is important for private parties who want to avoid another 1933 style confiscation of their bullion by Federal authorities.

  Section A2116.023 of the bill states: “A purported confiscation, requisition, seizure, or other attempt to control the ownership … is void ab initio and of no force or effect.” Effectively, the state of Texas will protect any gold stored in the depository from the federal government.

   

  And free from the threat of confiscation, private citizens can use gold and silver as money, completely bypassing the paper money system.

   

  “People can legally do that with gold contracts. The difficulty is the implementation. Now Texas has set up a mechanism with the depository. We have accounts in that institution and can easily transfer back and forth certain amounts. So we can run our money system a gold or silver basis if we were so inclined,” said Vieira.

   

  This would not be possible if the gold is stored in a bank because of the risks of bank holidays and bankruptcies. It would also not be possible if the federal government could confiscate gold.

   

  According to Vieira, this anti-seizure provision rests on Article 1, section 10 of the Constitution of the United States, which obliges the States to not make anything tender in payment of debts apart from gold and silver coin. 

   

  “If someone from the Department of Justice comes along you are going to see legal and political fireworks. The state is going to say ‘we need to have a mechanism to make gold and silver money. This is pursuant to the constitutional provision we have. You can’t touch this. Our state power on the constitutional level is more powerful than any statute you may pass,'” said Vieira.

   

  Because one of the litigant parties is a state, the case would go directly to the Supreme Court.

   

  “We are talking about something completely new in terms of the legal playing field. This is no longer a fringe concept,” he adds, but cautions about a possible fight with the federal government: “We will have to see how committed the governor and the attorney general are.”

   

  Official Statement from Governor Abbott:

  Governor Greg Abbott today signed House Bill 483 (Capriglione, R-Southlake; Kolkhorst, R-Brenham) to establish a state gold bullion depository administered by the Office of the Comptroller. The law will repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas. The bullion depository will serve as the custodian, guardian and administrator of bullion that may be transferred to or otherwise acquired by the State of Texas. Governor Abbott issued the following statement:

   

  “Today I signed HB 483 to provide a secure facility for the State of Texas, state agencies and Texas citizens to store gold bullion and other precious metals. With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state."

  *  *  *

  Is this the first step down a road to secession? Notably, they'll need that gold to establish their own country once they win the potentially imminent war with the US military which starts on Monday (Jade Helm).

  *  *  *

  This implicit subordination of The Fed's gold sends a more ominous signal of rising fears of confiscation and leaves us wondering just how long before every state (and or country) decides to follow Texas' lead?

  

  

  
  
  

  

• The Doomsday Bunker For Billionaires

  Two months ago we went inside the Fed’s “doomsday” bunker: a 135,000 square foot facility built in 1969, and nestled inside Mount Pony, east of Culpeper, Virginia that housed some $4 billion in hard currency as well as the central hub of FedWire, the computer network which allows the nation’s banks to communicate and transfer funds.

  It was meant to ensure that the US banking system could still function in the event there were still any banks left in the post-apocalyptic world, Culpeper Switch (officially the Federal Reserve System’s Communications and Records Center) was equipped with everything a Fed official would need to survive in the wake of a nuclear holocaust.

  And yet, it was in a word, “spartan” even by 1970s standards. After all who wants to greet the post-nuclear holocaust world surrounded by sterile plastic, a Fed spreadsheet (which caused the nuclear holocaust in the first place) and all the cash in the world, especially since the only currency accepted is silver, gold and of course, lead (not to mention a bunker-full of voodoo economists).

  

  

  

   

  Then along came Vivos, a company which specializes in creating the ultimate in luxurious Doomsday bunkers which, however, are not only for the world’s richest, but also for those who Vivos founder, California entrepreneuer Robert Vicino, deems worthy: anyone can apply for a spot in the post-apocalypse world but only a select few will be admitted.

  Until recently, the company’s only community shelter product was Vivos Indiana, a shelter “strategically located in midwestern America”, which the company describes as “one of the most fortified, nuclear hardened shelters within our network, located within a one-day drive from anywhere in the Midwest and the Eastern seaboard of America.  Built during the Cold War to withstand a 20 megaton blast, within just a few miles, this impervious underground complex accommodates up to 80 people, for a minimum of one year of fully autonomous survival, without needing to return to the surface.“

  Like a very comfortable 4-Star hotel, this massive shelter is tastefully and comfortably furnished and decorated, completely outfitted, fully stocked with food, toiletries, linens, medical supplies, a one year supply of fuel, a deep water well, NBC filtration systems, geothermal heating and cooling, bedroom suites, full size showers and bathrooms, a theater area, dining area, lounge area, exercise equipment, kennels, a garden area for fresh vegetables, laundry area, abundant storage areas, ATV’s, bicycles, tools, a workshop, security devices; and, just about everything else that may be needed to ride out virtually any catastrophic event.  You only need to bring your personal clothing and medications.  We’ve thought of everything else! 

   

  Far from any known nuclear targets, this shelter is also strategically located a safe distance away from the New Madrid fault line, the Mississippi River, and all oceans that might cause submersion as a result of a tsunami-type event.  The site is also surrounded by excellent farming, fishing, hunting and water resources.

  As the images and video below show, the Vivos Indiana complex indeed has thought of not only every contingency but presents it in utmost luxury.

  Below is the video Vivos has created to showcase its Genesis tour:

  The company’s marketing is solid, if somewhat morbid:

  The Vivos network of underground shelters is very real. Watch this video tour of one of the massive shelters built to withstand a 20 megaton blast from just 2 miles. This is one of the smallest Vivos shelters, with accommodations for just 80 people for up to one year of autonomous underground survival. The largest provides shelter for over 2,000 people. At complete build out Vivos will save about 6,000 people – 1 in every 1 million people on Earth in these impervious shelters.

   

  Something is coming. Vivos is prepared for all of the predicted risks, whenever they may occur. Vivos is the only co-ownership community shelter network on the planet. Limited space is still available for those that qualify. Members are now boarding. Don’t be left on the other side of the door!

  Some more snapshots of the Indiana facility:

  

  

  

  

  

   

  Of course, greeing the post-doomsday sun in a 5-star hotel is not cheap. Here is the price list from the company’s website.

  

   

  Still, when it comes to billionaires, $35,000 is a joke. They would much rather spend a whole lot more just to stand out among their equally showy peers.

  It is for them, as well as for Europe’s billionaires, where should a Grexit indeed take place and things quickly escalate, culminating in a way that nobody can anticipate, that Vivos has just opened its second major ultra-luxury bunker: Vivos Europa One, dubbed “The Elite Shelter for the Privileged Few“, which in addition to everything else even has what Vivos calls the “only private human DNA vault on Earth“, which offers donors the opportunity to collocate their DNA not in just one place but two: in both the United States and Europe. “Both deep underground shelters offer virtually impervious protection in their hermetically sealed vaults.” 

  Whether stored for years, decades or more than a century, the Vivos Global Genome Vault pool will be a perpetual depository, preserving life on Earth as we know it.

  Or rather, the DNA stored will be of those billionaires who are not only rich but megalomaniacal enough to believe they are worthy to be the template material of all future humans. Which means all of them.

  And speaking of everything else, there is a lot. As the Mail reports, the Vivos Europa One shelter is located in Rothenstein, Germany and is one of the most fortified and massive underground survival shelters on Earth. Its 6000 inhabitants can live up to a year without leaving the luxury premises.

  

   

  According to Forbes, the bunker was “originally built by the Soviets during the Cold War, this shelter was a fortress for military equipment and munitions. After the DDR was merged with Germany, the German government inherited this relic and intended to use it for the same purpose of weapons storage. However, due to a law prohibiting the storage of ammunition near a major highway, the German Government soon realized they could not continue with their plans and decided to auction this 76 acre complex. A wealthy investor purchased the entire property, along with all of its improvements, both above and below ground.”

  That investor was Vivos’ founder Robert Vicino whose “billionaire bunkers” are now on both continents, and who says “We are proud to bring this epic project forward in these increasingly dangerous times.”

  

  The bunkers consists of a planned survival complex that is comparable to billionaire’s mega-yacht or mansion – “but much bigger.”

  It boasts swimming pools, theaters, gyms, restaurants, custom apartments, outdoor space and helicopter service. And as one would expect, the bunker can withstand a nuclear blast, chemical agents, earthquakes, tsunamis, or another disaster. Unlike the Indiana complex where the cost is a relatively cheap $35,000 one time charge for adults, the Europea price list is still secret, although with the property valued at $1.1 billion, it is likely that the final price will be much higher. Underground shelter is currently in ‘turnkey operational condition.’

  Most importantly, in addition to paying a lot of money for the privilege of reserving a key for the luxurious doomsday bunker, residents will be accepted based on their ‘skills’ and ‘talents.’ It is unclear just which billionaire skills Vicinio deems critical for perpetuating humanity: being a legendary insider trader who pays off the government with Picasso painting, being the world’s greatest crony capitalist, creating a criminal bank enterprise while scolding people for not being “rich enough”, and so forth.

  Some more details: the complex includes over 21,108 square meters (227,904 square feet) of secured, blast proof living areas and, an additional 4,079 square meters (43,906 square feet) of above-ground office and warehouse buildings, including a train servicing depot.

  The typical chamber area is 5 meters wide (16.40 feet), by 6 meters tall (19.68 feet) and 85 meters (278.87 feet) long. Collectively there are over 5 kilometers (3.1 miles) of continuous tunnel chambers (equivalent to 71 Boeing 747’s fuselages stretched end to end). All shelter areas are located behind 3 separate nuclear blast and radiation proof vehicle entrances, and a number of other passages for access by people only. Each of the three main tunnel entrances includes an outer security door system, followed by a 40 ton hydraulic truck access door with hardened steel rods which expand into the surrounding encasement, and a second set of massive steel doors providing an airtight seal shut, protecting against chemical, biological and gas intrusion.

  The underground main traffic corridors are large enough to allow mechanical transportation of heavy equipment to almost any point within the complex.

  Each family in the complex will be provided with a private 2,500-square-foot apartment, which they can design and build to their own specifications. They may decide to add a pool, a theater or a deluxe bathroom. They will also have access to a hospital area, several restaurants and a bakery.

  Other common area amenities will include roadways, a wine cellar, prayer rooms, classrooms, a television station and a detention center.

  Once each member’s private accommodations are completed, furnished and fully outfitted, their respective quarters will be locked and secured, limiting access to their families and staff prior to lockdown; while Vivos will operate and maintain all common areas (under and above-ground) pending a catastrophic event.

  Members will arrive at their own discretion, prior to lockdown, landing their private planes at nearby airports. Vivos helicopters will then be deployed to rendezvous with each member group, and safely fly them back to the shelter compound, behind the sealed gates from the general public. Members will then enter the shelter and access their private quarters. Each family will pay a base amount for their respective living quarter’s area, along with their fair share of the ongoing stand-by costs for operational management, staffing, taxes, insurance, maintenance, utilities, and restocking as needed.

  In short: a complete turnkey operation that every zombie in the post-apocalypse world will desperately try to penetrate and feast on the inhabitants.

  And now, without further ado, here is how the world’s richest will live in the real world version of the Walking Dead:

   

  

  With its rolling heels and stunning woodland, the village of Rothenstein looks like an unlikely location for the bunker

   

  

  The survival bunker can apparently withstand a nuclear blast, chemical agents, earthquakes, tsunamis – and virtually any other disaster. Above, this photo shows a drive-thru blast-proof door at the complex, which will likely be available only to the super-rich.

   

  

  The Rothenstein facility also boasts 43,906 square feet of above-ground space. Above, an outdoor power station

  

  Vivos Europa One shelter also features its own railway and helicopter service, which picks up residents from nearby airports

   

  

  Each family in the complex will be provided with a private 2,500-square-foot apartment. Above, a personnel entry door

   

  

  The luxury shelter was originally built by the Soviets in the Cold War as a fortress for military equipment. Above, its engine room.

   

  

  Underground, the bunker features countless tunnel chambers, each with their own security system and blast-proof doors

   

  

  The personnel entry corridor inside the shelter contains an array of white hard hats, with steel pipes running across the ceiling

   

  

  Water treatment plant: It also has its own self-contained water and power generation system, as well as climate and ventilation systems

   

  

  This photo depicts ‘typical living quarters’ in the shelter. It remains unclear how much each family will have to pay

   

  

  This photos shows a bedroom in the Vivos Europa One shelter, which is being dubbed the world’s ‘ultimate doomsday escape’

   

  

  A dining room in the underground bunker

   

  

  Residents can design and build their apartments to their own specifications.They may decide to add a theater (pictured) 

   

  

  Other common area amenities will include roadways, a wine cellar and prayer rooms. Above, a theater 

   

  

  The complex features all modern furnishings

   

  

  Above, another living quarters

   

  

  Alongside its catastrophe-proof features, the bunker will include a collection of zoological species and an artifact archive

   

  

  Most importantly, the bunker in Rothenstein boasts 227,904 square feet of blast-proof living areas, including this planned pub

  

  
  
  

  

• What Comes Next, Part 1: A Useful History Of The 20th Century

  Submitted by Jeffrey Snider via Alhambra Investment Partners,

  Value as a foundation seems almost too literal to be an economic or financial concept, but it is perhaps the bedrock association that makes the economic system. We are used to aspects like profits and money, even inflation, but those are all symptoms of the ever-changing world surrounding value. Karl Marx understood very well how deeply embedded value was even by the 1850’s, unleashed in just a few centuries’ time as Adam Smith’s wonderful summation recounted how mercantile capitalism was more than just some “invisible hand.” For Marx, he knew that the very rise of modern economic orientation would spoil all his plans and conceits for instituting equality as he saw it; that is why his revolution had to be worldwide and comprehensive, to totally and completely destroy all notions of value in order to start over.

  I wrote quite exhaustively (as I typically do) about the socialist strands in our economic history here, but it is, I think, useful to emphasize the role of value in theory that animates if not all of the historical progression of the elements that define our systemic operation than at least a majority portion. As early as the 1830’s, “reformers” of all kinds were beginning to examine how value might be “exploitable” as means to achieve desired results.

  In the 1830’s, Robert Owen, a Welsh “reformer”, had tried repeatedly to convert currency to labor function. Time-based currency was an idea where you were “paid” in time for labor (notes actually denominated in hours), exchangeable for products “valued” under the same terms. The idea was simple, namely that all labor should be equal so that inequality of class would be abolished. Time currency, then, meant that there was no value to labor, only to goods, which presented inordinate problems in valuing goods as they were also intermediate to labor.

  Owen, therefore, had very little luck in actually creating a workable system outside of that theory. He had close experience with a similar system, though wholly opposite his egalitarian intentions, in the “truck system” of early 19th century Britain. Owen was a part-owner of a mill and it was typical practice to pay mill workers in tokens (either in part or even in full) that were only exchangeable at the mill owner’s “truck shop.” Since the owner would often supply the worst kinds of inferior goods and charge the highest prices for them, Owen realized the relative exchange equation here was to devalue labor; he intended to accomplish the opposite thinking it would not only be more equitable to labor but far more efficient for everyone (instead of benefiting the mill owner almost exclusively, a far more fair labor “value” might benefit all of social society).

  Socialists independent of Marx, including Owen who had influenced Marx with his time currency, shared many of his ideals if not his fervor for destroying everything in a clean and devastating break. For many, money could be the agent of change, whether in the course of redistribution (including government taxation and “spending”) or outright redefinition. If they would not go so far as to destroy value from the root, then they thought it, as Owen, potentially effective to manipulate money as a substitute or proxy for value. And a great deal of socialist contribution had little to do with equality other than utopian ideals of creating “optimal” outcomes. The shared methodology was simply to reduce individuals to cogs in order to more cohesively control the macro mess of them.

  The development of economics as both a study and a political expression is certainly non-linear, but in the 20th century there is a clear progression; we started in gold and ended under much less certain terms, a process that seems chaotic, and often was, but with its own guiding if largely invisible hand. The battles in the various marginal directions seemed to take shape over money and currency, but in reality it is and has always been about value. The intent at times has been to separate money from value, but the grand mistake seems to have been where theorists simply assumed that all money and currency are eventually perfect substitutes. That may be true in at least one monetary function, payment terms, but has proven far more stubborn in practice across the whole spectrum of monetary discipline.

  At the start of the 20th century, value was relatively easy to describe and its role was just as straightforward. The decade of the 1890’s proved that inordinately (as it was known up until the 1930’s as the Great Depression) where value was imposed on financial society through the act of convertibility. Numbers and quantitative descriptions did not apply, which is why so often the ire of “experts” is invoked against this type of expression, but it comes down to a simple and collective judgment (not aggregated) of the people to disassociate their property from financial components; the latter being judged un-valuable with respect to the former.

  The result was banking panics and depression, negative outcomes which opened the door to anyone promising relief including through the growing collectivization of monetary affairs. Nobody likes a panic, and certainly not a depression, but to claim that they hold no role in systemic health is to ignore reality, to ignore value. But that is exactly what occurred at the start of the 20th century, given great vigor after the Panic of 1907 even though it produced only a minor (in historical terms) economic dislocation. The institutional intention toward “elasticity” in currency was not just a means to end bank panics (it worked out poorly anyway) but to disrupt the balance of power in the economic arrangements toward the socialist expression of the whole rather than individuals.

  For some, that meant egalitarian ends, for others just the quest for economic utopia largely of mathematical origin in those optimal outcomes. In any case, the balance of the last century and the first parts of this one all trace in governing dynamics to that introduction. What we can piece together, quite seamlessly, is different tones of aspiration and methods in trying to attain these largely socialist ideals.

  The American changes after the Panic of 1907 were just in many ways catching up to Europe, but at the start of World War I the gold standard would end and never truly return. All the theories, policies and programs put together thereafter were simply means to exercise greater control out of that momentous, cardinal shift – with gold gone, the opportunity to refashion was there. The problem was always value, in that it survives the deeper defenestrations of money and currency, even if only to interrupt, often terribly, these “best laid” plans for achieving either equality or optimal outcomes.

  

  The first age, out of necessity of the Great War, was monetary in character; the first international experimentation with fiat currency. As with most things, it started out as just a means to a specific end but overgrew and lasted far longer. The 1920’s were not simply a Golden Age particularly of American economic prowess and remarkably consistent monetary programs (how could it be, with what came immediately thereafter?), but were marked by serious incursions of monetary experimentation. The gold standard that was reworked after the war was by no means a traditional gold standard, featuring more than enough clearance for central banks to begin exercising “flexibility” outside of the more rigid historical arrangements. The results were predictably disastrous and monetary in nature.

  There is no mystery as to why the first socialist age ended in bubbles and depression (and then total war) and why they revisited again only so far in the third – those were both overriding of monetary character. The second was not, taking the form of fiscal dominance. The Federal Reserve today takes credit for the post-war period as if it were an island of perfect competence, but it was far from it as the Great Inflation (which marked the turn from the second age into the third) showed all too well.

  In that respect, the British experience in the second age is quite emblematic of these marginal shifts. Churchill was a hero, a great man of all history, on May 8, 1945 (V-E Day) and out of office six weeks later; and not just barely, but in one of the most lopsided electoral shifts in democratic history. The Great Depression had shown the dangers of monetary overdrive, but not the relevant lessons taken from central command in instilling that impulse. Instead, economic thought roundly viewed the Great Depression as a systemic flaw of capitalism (socialists taking advantage of the opportunity), and if money wasn’t the answer then government and their treasuries was.

  After 1945, Britain nationalized a huge proportion of their industrial base – there were 16 or so car manufacturers in the 1940’s but only one was left by the 1960’s. And so it was that the welfare statement and the ubiquitous if ephemeral drive for “full employment” became the objects of economic policy, not through central banking, but through government Keynesianism. It was mismatched from the start because value imposed restrictions, especially where the pound was supposed to act as a co-reserve to the dollar. The British government wanted heavy fiscal socialism as a means to full employment, but the pound meant that the people outside of that still had influence which they exercised intermittently to keep the utopian ideals restricted to at least less risible budget plans. This transition to fiscal dominance was thus highly irregular and often harrowing.

  By the late 1960’s and especially the 1970’s, it was almost all over. The rise of Thatcherism meant the end of nationalizations, the return of private industry and the private economy if not a total repudiation of the welfare state. The fiscal turn in the second age had proved far too unwieldy, and by the end of the 1960’s was once again expecting far more monetary contributions. That was true even in the United States, with vestiges of the New Deal remaining in place but augmented by fiscal experimenting in the 1950’s and especially the 1960’s. The Great Society and the War on Poverty were perfectly consistent with the fiscal focus of the second age, and only by the end was it “necessary” to employ heavy monetarism again – not in restoring value and sense, but in a last ditch to save it all before it became once more unworkable. Value was the great upheaval in the Great Inflation, but instead of listening and seeing that money was never going to be a perfect substitute, at least enough, to allow overcoming the value constraint, theorists simply went still further just as they had in transitioning from the first age to the second.

  Part 2 coming soon…

  

  
  
  

  

• Sepp Blatter "Smells Fresh Air" At FIFA, Plans To Unresign

  Despite ‘generously‘ offering his resignation just hours after being re-elected FIFA President following the massively wide-spread scandal; Swiss newspaper Schweiz am Sonntag is reporting, thanks to “generous messages of support from Asia and African colleagues,” Sepp Blatter is considering remaining in charge of the fraudulent festering football fiefdom.

  Blatter is not ready to relinquish his crown just yet…

  

   

  Via Schweiz am Sonntag (via Google Translate)

  Thanks to “messages of support from Asian and African nations”, Blatter may in fact continue his duties…

   

  PR consultant Klaus J. Stöhlker who was Blatter’s personal advisor from January to the end of May and supported him in the re-election, says: “It’s hard to find someone who is an equal. Blatter has built the organization into a global, highly successful company – and he’s a top diplomat “

   

  That is clear for Stöhlker:” Blatter has a fair chance.. It now it depends how it behaves in the coming months “

  *  *  *

  Welcome once again to the world of no consequences (if you have enough money).

  

  

  
  
  

  

• We Should All Strive to Be "Grave Dancers"

  By Chris at www.CapitalistExploits.at

  In the investment world he’s known as the Grave Dancer. Like many successful and outspoken men, he is loathed by some and loved by others. Whatever you may think of him, it’s valuable to keep an open mind to both success and failure in order to seek the former and avoid the latter. He is undoubtedly one of the smartest investors of all time.

  I’ve never met Sam Zell, though friends of mine have. They tell me he’s as intense as one would expect from a guy who entered the real estate world with all the finesse of a wrecking ball and today is widely considered to be the grandfather of institutional real estate.

  Sam is probably best known for identifying early on the market cycle and peak of the US housing boom in the 80s. Before the market fell apart, Zell combined forces with Wall Street and created a war chest of capital – a $400 million fund, which at the time was a lot of money.

  During the 90s, Zell was then putting that war chest to work accumulating high quality commercial and residential properties at significant discounts where he was often the only bidder. This process of buying deeply undervalued assets at times of distress garnered him the name “the Grave Dancer”.

  One of my favourite quotes from Sam sums up his philosophy well:

  Between ‘73 and ‘77, I acquired $3 billion worth of real estate. The banks had a problem carrying a large amount of distressed real estate with so many proper-ties in foreclosure. They weren‘t looking to make money. They were just trying to mitigate the losses their real estate loan portfolios were expected to generate.

   

  In those days, institutions didn‘t have to mark-to-market, so I tried to figure out ways to preserve the principal of the asset for the seller and still make the deal work. It basically amounted to lowering interest rates on the debt to the point where you could almost carry it or you had a defined carry. We realized that if we could accumulate assets – particularly in an inflationary time – with cheap fixed rate debt, it was hard not to make a fortune.

   

  When people looked at our performance during the ‘70s, they always asked, ?How did you pick all those ripe projects? But the truth of the matter was that I created $3 billion worth of 5% fixed rate debt in an inflationary environment of 10, 12 or 13%. In this situation, it was hard for it not to work. And yet, like many others in my career, most people thought I was crazy. I‘ve spent my whole life listening to people explain to me that I just don‘t under-stand, but it didn‘t change my view. Many times, how-ever, having a totally independent view of conventional wisdom is a very lonely game.

  It’s a classic tale of buying low and creating massive value in the process.

  What brings me to thinking about “the Grave Dancer” is his interest in Colombian real estate. Sam may well be correct. He believes that Colombia is one of the best places to be investing right now. Our research indicates this to be the case.

  Before you get high on the idea of walking in and buying an inexpensive apartment to hang out in Medellin’s lovely climate and culture, let me be clear: this is not our intention.

  

  Buying an apartment to live in is not an investment in my mind. It’s just a place to live and I don’t think it makes sense confusing the two. Sure, you can do that and have a nice little vacation home if that’s your thing. You will probably make some money out of it upon sale, too.

  Investments you liquidate when it makes sense and have nothing to do with where you may be hanging out for lifestyle or even business. A home you live in and use. The two are very different! People get emotional about any place they live in and getting emotional about investments is not a good strategy.

  Though one of our team members loves Medellin so much he’s looking to relocate there on a more permanent basis, we’re more interested in placing capital in a long term strategy and are after profit, pure and simple. I’ll let others go buying retirement homes there.

  I was recently asked what macro aspects to look for when considering buying real estate. Here are some for Medellin, though you’ll notice that this is not applicable solely for real estate.

  • GDP growth: Colombian economy is expected to grow at around 4% over the next 5 years;
  • Middle class growth: According to the World Bank, the percentage of the Colombian population in the middle class has risen to 28% from 15% over the past 10 years.
  • Young population: While Colombia is not comparable with some African or Southeast Asian countries, it is still relatively young.
  • Medellin is becoming an innovation hub: This ranges from a vibrant start-up ecosystem to multinationals, such as HP, setting up their headquarters there. To an extent, this falls into the GDP growth and rising middle class aspects, but is actually unique. Not all cities experiencing a rising middle class become innovation hubs!
  • Infrastructure development: For instance, EPM, a municipal utility company, is investing roughly US$2.9 billion in infrastructure projects during the 2015 – 2018 period. These investments are being made in energy and water infrastructure including investment into “new spaces for recreation, culture, and celebration of life in Medellin”.

  I’m all for celebrating life and it’s easier to celebrate it with profits in your pocket.

  However, reading the above you may think its all rainbows and unicorns. It is not! Colombia is an emerging market and emerging markets always pose challenges.

  Poor banking infrastructure, corruption, a culture which often is happy to overcharge gringos wherever possible, etc. None of this is anything new for an emerging market. These same problems can be found with ease throughout Southeast Asia, Africa and in between.

  Inefficient markets exist everywhere but they’re typically more inefficient in emerging market economies. This isn’t good or bad. It just pays to understand what you’re working with and quantifying the risk/reward and only acting when rewards are outsized to the level of risk taken.

  In that spirit of capitalism, we’re hosting a get together in Medellin shortly, and we invite you to come and join us.

  – Chris

   

  “My own formula is very simple. It starts and ends with replacement cost because that is the ultimate game. In the late 1980s and early 1990s, I was the only buyer of real estate in America. People asked me, ‘How could you buy it?’ How could I project yields? Rents? For me, it came down to these issues: Is the building well built? Is it in a good location? How much less than the cost of replacement is its price? I bought stuff for 30 cents on the dollar and 40 cents on the dollar.” – Sam Zell

  

  
  
  

  

• "Last Chance" Greek Bailout Talks End Without Deal

  The writing was already on the wall after several EU officials expressed reservations about the feasibility of striking any sort of compromise with Greece’s negotiating team in Brussels on Sunday, and now it’s official. Talks have once again ended with no deal as the Greeks are standing their ground on pension cuts and VAT hikes.

  #BREAKING Greece bailout talks end with no deal, ‘significant gaps’ remain : EU

  — Agence France-Presse (@AFP) June 14, 2015

  More color from Bloomberg:

  Greek govt delegation in Brussels bearing proposals that can bridge gap between country, its creditors on fiscal, financing matters, Greek govt official says in e-mailed statement, asking not to be named in line with policy.

   

  Greek govt will not accept cuts to pensions, VAT increases on basic needs goods like electricity.

   

  IMF insisting on annual pension cuts of EU1.8b, or 1% of GDP; another EU1.8b of increased VAT revenue: govt official.

  What this means is that Greece came to Brussels and presented the same “not serious” proposals Tsipras submitted last week. That is, Athens is willing to deal on fiscal targets and is more than willing to accept free money from the EFSF and ESM (which would be used to pay the ECB on July 20) but is not yet desperate enough to concede to pension cuts or VAT hikes. That means there will be no deal for now and all eyes will turn to a scheduled meeting of EU finance ministers on Thursday.

  As we noted earlier today (and on countless occasions previously), ‘deadlines’ and ‘ultimatums’ are largely meaningless because even if Greece misses its June 30 bundled payment to the IMF, Christine Lagarde would need to send a formal failure to pay letter to the Executive Board. Only then would Greece actually be in default. It’s up to Lagarde to decide when to send that letter and she would have at least 30 days. The set up for EFSF loans is similar, and besides, it seems exceptionally unlikely that either EU creditors or the IMF would put Greece into formal default while a deal is working its way through the Greek parliament, meaning all Tsipras really needs to do is get something on paper that has a chance of flying with Syriza hardliners and get it to the floor before July 20, when a payment to the ECB comes due.

  In other words: expect more contradictory headlines and more ‘ultimatums’ next week as this charade continues into its sixth month. 

  A sampling of headlines:

  • EU: `THERE REMAINS A SIGNIFICANT GAP’ BETWEEN PARTIES
  • EU: GAP BETWEEN PARTIES `IN THE ORDER’ OF 0.5%-1% OF GDP
  • EU: GAP BETWEEN PARTIES IS ABOUT 2B EUROS ON ANNUAL BASIS
  • EU: GREECE PROPOSALS REMAIN `INCOMPLETE’
  • JUNCKER’S `LAST ATTEMPT’ TO SEEK ACCORD MADE `SOME PROGRESS’
  • EU: FURTHER GREECE DISCUSSION WILL NOW MOVE TO EUROGROUP
  • EUROPEAN COMMISSION GIVES DETAILS IN TEXT MESSAGE

  

  

  
  
  

  

• Low Energy Prices And Conflict Drive Shell Out Of Ukrainian Shale

  Submitted by Andy Tully via OilPrice.com,

  Royal Dutch Shell has been considering ending its partnership with a Ukrainian energy company in a shale gas exploration venture in eastern Ukraine because of the fighting in the region and prospect of little profit from the project.

  In fact, at least two news reports say Shell already has notified Ukraine that it’s leaving in a formal “notice of withdrawal.”

  The decision by the Anglo-Dutch oil major is more bad news for Ukraine, which had hoped that producing its own gas would make it less reliant on energy from its antagonistic neighbor, Russia, and potentially infuse the country’s distressed economy with much needed foreign investment.

  As for Shell itself, sources identified by the Financial Times only as “insiders” said the company had concluded that the project wasn’t worth the effort because of the armed conflict and the precipitous drop in energy prices over the past year, which have made the extraction of oil and gas less cost-effective given the expense needed to ensure efficient output from underground shale formations.

  The Kyiv Post quoted a Shell spokesman as saying in an e-mail that the fighting between Ukrainian government forces and separatists supported by Russia amounted to “circumstances beyond Shell’s control.” As a result, the spokesman said, the company has “been prevented from performing its commitments under [the] Yuzivska production sharing agreement,” or PSA.

  “Therefore,” the spokesman said, “we have begun discussions with the Ukrainian government and our partner Nadra Yuzivska LLC on the way forward with the PSA, pursuant to its terms.”

  Under the agreement, signed by Shell and the Kiev government in January 2013, the company was to have developed a large gas field in the eastern Ukrainian oblasts, or provinces, of Donetsk and Kharkiv, where the fighting has been ongoing for more than a year.

  The field, discovered in 2010, has proven reserves of approximately 70.8 trillion cubic feet of gas. Production was supposed to begin in 2017.

  A copy of the agreement, released by a Kharkiv city councilman soon after it was signed, would have been fairly lucrative for Ukraine. It required Shell to pay $25 million to the Ukrainian government for signing the agreement, another $50 million once gas production efforts began, $25 million more when the first gas was produced, and a payment of $100 million when the field reached peak production.

  Shell isn’t the first Western oil major to withdraw from gas projects in Ukraine. Late last year, Chevron ended its role in a $10 billion shale gas deal in the west of the country. One anonymous “insider” told the Financial Times that the country’s “much hoped-for shale gas boom has gone bust.”

  Despite these setbacks, this sources said Kiev will maintain its effort to attract other potential energy partners at a time of capital flight and dwindling foreign direct investment. The International Monetary Fund has set up a $17.5 billion loan program for the country, but also has lowered its forecast for Ukraine’s economy, saying it will contract by 9 percent in 2015 while inflation will continue to rise.

  

  

  
  
  

  

• TPP Explained (In Comic Book Cartoons)

  Via EconomixComix,

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  
  
  

  

• The Death Of Capex In 8 Charts

  Thanks to voracious demand from yield-starved fixed income investors and rock-bottom borrowing costs courtesy of the Fed, high grade corporate issuance hit a record $348 billion in Q1 of this year and junk bond supply came in close to $93 billion during the same period. Some companies — such as heavily-indebted shale producers — have used the proceeds from bond sales to stay in business, a dynamic that’s helped to create a global, deflationary supply glut. Better positioned companies in the US have taken the opportunity to fund massive buybacks with debt issuance and as regular readers are acutely aware, share repurchases by price insensitive corporate management teams are in large part responsible for underwriting the rally in US equities. 

  Of course, leveraging balance sheets to artificially inflate the bottom line and boost equity-linked compensation comes at a cost — even if the ill effects don’t show up for years to come. When companies spend the proceeds from debt sales on buybacks while ignoring capex, they jeopardize future growth and productivity in order to engineer phony EPS beats even as revenue growth stagnates, or even declines. Below are updated graphics which illustrate the extent to which capex as fallen completely out fashion relative to buybacks.

   

  

  

  From Credit Suisse:

  In the US, capex to sales and net business investment as a share of GDP are a little higher than in Europe, but still not especially high by historic standards. In our view, levels of capex are relatively subdued because buybacks as a style are still outperforming, and this is incentivising corporates to pay back cash, not to invest.  The economic recovery in developed markets has, if anything, been ‘capex light’.

  Here are the updated versions of some graphics from Citi which we’ve shown before. These demonstrate the extent of corporate re-leveraging and clearly show that debt sale proceeds are being channeled into buybacks and dividends at the expense of business investment.

  From Citi:

  We looked at leverage for a sample of about 150 IG industrial benchmarks, and found that it doesn’t look good.

   

  

  
  

  Of course, if leverage is going up today because it’s funding tomorrow’s growth that might not be a bad thing. Unfortunately, that’s not what’s going on.

   

  

   

  *  *  *

  The question is what happens when rates begin to rise and inflows into corporate credit turn to outflows. In other words, what happens when tapping heretofore insatiable demand for corporate issuance in order to perpetuate the equity rally and engineer EPS beats is no longer an attractive option? As we’ve seen, organic growth is hard to come by in a post-crisis world characterized by lackluster demand, and when the easy money dries up (making massive buybacks and blockbuster M&A more expensive), corporate America may wish it had invested a little less in chasing an equity rally and a little more in growth, efficiency, and productivity.

  

  
  
  

  

• Flag Day 2015: Visualizing 248 Years Of American Banners

  As America ‘celebrates’ Flag Day – commemorating the adoption of the of the flag of the United States, which happened on June 14th, 1777 by resolution of the Second Continental Congress – we thought the following chart surveying the 48 flags (no confederate flags included) of America since 1767 would be of interest: from the Sons of Liberty’s rebellious stripes in 1767 to the pattern we know today…

  click image for huge legible version

  

   

  Source: FastCoDesign

  

  

  
  
  

  

• As "Options Run Out", This Is What Greek Capital Controls Would Look Like

  In what is being billed as a “last ditch” effort to secure an agreement with creditors, Greece’s negotiating team is in Brussels this weekend, where the focus is on crafting some kind of mutually agreeable proposal that can be presented at a scheduled meeting of EU finance ministers next Thursday. 

  There were reports on Saturday that Greek PM Alexis Tsipras was attempting to trade concessions on Greece’s ‘sticking points’ (i.e. the “red lines”) for debt relief (i.e. writedowns), but by the end of the day that rumor, like all the others that emanate from Brussels these days, had faded. 

  On Sunday negotiations will continue with EU officials having seemingly moved from exasperation to ambivalence. Here’s FT:

  Talks between Athens and its international bailout creditors were expected to resume late on Sunday after Greek government officials were told to submit a final list of economic reforms in order to secure €7.2bn in desperately needed rescue aid.

   

  The request came in a meeting in Brussels on Saturday between Nikos Pappas, aide-de-camp to Alexis Tsipras, Greek prime minister, and Martin Selmayr, chief of staff to Jean-Claude Juncker, the European Commission president who has played a central role in trying to broker an 11th-hour deal..

   

  “Positions are still far apart,” said one EU diplomat. “It’s not certain there will be an outcome.”

   

  Another senior eurozone official said the Greek team returned to Brussels on Saturday without new proposals and that Sunday’s evening session would be a “last try.”

   

  “Greek movement [is] not discernible,” said the official. “I think they do not want a solution.”

   

  “A credible proposal needs to be tabled by the Greeks in the next 24 or so hours,” said Mujtaba Rahman, head of European analysis at the Eurasia Group risk consultancy. “Otherwise it’s looking like game over for Athens.”

  Whether or not it would truly be “game over” for Greece should Tsipras’ negotiating team fail to table something “credible” by Monday is certainly debatable. After all, EU officials said the exact same thing on Thursday and here we are on Sunday listening to the same tired rhetoric.

  The truth is that as long as Tsipras can get an agreement in principle sometime over the next three weeks (or maybe even in the next five weeks), Greece can probably avoid a default. If Greece were to miss a payment to the IMF, Christine Lagarde would need to send a formal failure to pay letter to the Executive Board. Only then would Greece actually be in default. It’s up to Lagarde to decide when to send that letter and she would have at least 30 days. The set up for EFSF loans is similar, and besides, it seems exceptionally unlikely that either EU creditors or the IMF would put Greece into formal default while a deal is working its way through the Greek parliament, meaning all Tsipras really needs to do is get something on paper that has a chance of flying with Syriza hardliners and get it to the floor before July 20, when a payment to the ECB comes due.

  As such, the real short-term risk likely isn’t cross acceleration rights in the event of a formal default to the IMF on June 30, but rather what happens to the Greek banking sector when depositors — who are already pulling hundreds of millions of euros each day from ATMs — find out that Athens has missed the €1.5 billion bundled payment without cementing a deal.

  

  Irrespective of the political wrangling going on behind the scenes both in Athens and in Brussels, a terminal bank run could plunge the country into a crisis faster than politicians can react, an eventuality which would have to be met with capital controls. In “This Is What Capital Controls Will Look Like In Greece,” we took an in-depth look at this eventuality and presented the following graphic which helps to illustrate several potential scenarios:

  

  FT has more:

  “We are four to six weeks away from the possible imposition of capital controls,” said Daniel Gros, director of the Centre for European Policy Studies think-tank in Brussels. “There is always some temporary solution [eurozone politicians] can pull out of thin air, but now we are getting really close.”

   

  Were Greece to default on a €1.5bn payment to the International Monetary Fund due at the end of June, the situation could spiral out of control, forcing the hand of policy makers. Greece could then be forced to repeat the experience of Cyprus and Argentina, which chose to intervene to stop their banks bleeding deposits in order to avoid insolvency.

   

  But imposing capital controls would hardly be straightforward.

   

  Such measures are frowned on by the EU treaties, which sanctify the free movement of capital — together with labour, goods and services — as one of the union’s four pillars.

   

  It would be up to the government to enforce unpopular measures, such as limiting citizens’ cash withdrawals, exposing Athens to political blowback from angry citizens.

  And here’s Open Europe with more color on what capital controls will look like in Greece:

  How would Greek capital controls be implemented and what form might they take?

   

  It’s likely that such controls would need to be brought in over the course of a weekend, though I expect they may also need to be combined with some bank holidays anyway

  • Cash/ATM withdrawal limits: This would be a vital control in order to halt the huge outflow of deposits which has been taking place and which will pick up if a deal isn’t struck soon. In Cyprus the limit was set at €300 per person per day. However, I suspect ones in Greece may go even lower. This is because Greece is suffering from serious domestic withdrawals while the primary concern in Cyprus was foreign outflows.
  • Foreign transfer controls: The aim here would be to limit the amount that people can transfer abroad from Greece in one go and also over a set period. Obviously some transfers are needed for businesses to function so there would need to be a process by which businesses related (and other verified) transactions could still go through.
  • Time requirements or taxes: Other options or versions of the above include taxing certain withdrawals or foreign transactions heavily. This has the advantage of potentially creating a revenue stream for the government, though it may come at a very high cost. The government could also decree time limits on certain deposits or investments in an attempt to limit withdrawals indirectly.
  • Physical controls: Obviously with free movement within the EU it would be quite easy for people to move large amounts of cash or assets across borders. As such there will need to be checks and limits on the amount of cash people can take abroad with them. This may also have to extend to assets. For example, someone could purchase a car and then try and drive across a border and sell it on. This is tricky to police but some attempts may well be made.

  Harvard economist Kenneth Rogoff (who has an opinion or two about high debt and economic growth) echoes the above, telling NZZ am Sonntag that capial controls in Greece are the only alternative (via Bloomberg):

  “I see only one possibility: Greece should introduce capital controls for an extended period,” Harvard University economics professor Kenneth Rogoff tells NZZ am Sonntag in interview.

  We assume no spreadsheet errors were made on the way to that conclusion.

  *  *  *

  If Athens does decide to take the plunge and set about the ‘Cyprus’ing‘ of Greek depositors, the real problem may not be how to implement capital controls, but rather how to lift them, especially considering Greece is doomed to a life of debt servitude until at least 2057. On that note, we’ll close with the following warning from Reykjavik University economist Friðrik Már Baldursson: 

  “It is easier to impose the controls than to lift them. The government needs to convince depositors that they can bring their money back into the banks as controls will not be imposed again. But credibility can disappear very quickly and take a lot of time to be regained.”

  

  

  
  
  

  

• The Hillary Promise

  Following Hillary’s first official campaign speech yesterday, promising everything to everyone (apart from those dastardly Wall Street types that keep donating to her campaign and Foundation) so that “everybody will have a better time,” we thought it worth reminding ‘voters’ of another promise…

   

  

   

  Source: Townhall.com

  

  

  
  
  

  

• The First Canary To Fall In Unicorn Valley Won't Be The Last

  Submitted by Mark St.Cyr,

  An odd occurrence took place this past week in the “Land of Unicorns” aka Silicon Valley. The first of what was once described as the “future of social media” canary’s Twitter™, was suddenly struck by the “Where’s The Money” kingdom aka Wall Street. Suddenly, what was once the dulcet tones for acquiring investment capital “eyeballs to monetize” is now being answered by the investment crowd in a much more sobering tone of “Where’s the monetized money?!”

  This isn’t just some play on words. As I’ve stated over the years you’ll know that everything has changed when you see the first of these so-called “darlings of Wall St.” within the social media space called out on the carpet (i.e., investors will begin selling or dumping their shares) and their management teams will be pressured to either be; replaced, or the company sold, spun off, or any combination there of.

  It’s a little bit ironic that the first would be fitting the proverbial “canary in the coal mine” analogy. Yet, although it’s the first, it’s going to be far from the last. For if awareness, with a reinvigorated quest for generating real profits are not followed immediately by others within this space – the enveloping hazards now forming around, and within the Valley are going to catch a whole lot of them flat-footed with the possibility for disastrous results. For there’s real tragedy beholding for a great many of today’s Unicorns around every bend. (or Quarter)

  Many in Silicon Valley for the last 5 or 6 years have felt (as well as acted) with somewhat of a near invincibility not only for their enterprises, but also to the idea that their “social metrics” matter more than basic economics. i.e., Eyeballs trump actual net profits.

  This was the storyline that worked when “free money” flowed via The Fed’s QE open spigot. However, since that source has now been closed? The only story line investors want to here is an answer to “where’s the money?” It’s a far cry from what Silicon Valley has come used to these last few years. And this narrative as well as tone is going to get a whole lot harsher, as well as quicker for anyone who forgot, or never went through the last dot-com bubble.

  Many believe because they are the current, Chairman, CEO, Founder, Social Media personality/Superstar, ___________(fill in the blank) that’s been the focus of buzz or rage (past or present) across the media space as today’s Silicon Valley kings and queens, with front page spreads on magazine covers, or “in-depth” cover articles why they’re so “brilliant,” or learning how to speak other languages. Or, now they get to hang out with musicians, hob nob with today’s political figure of the moment, or throw lavishly themed parties, etc., etc. That somehow they are above the fray of fundamental business principles.

  In regards to all the calls of “brilliance” or “special.” All of it. And I do mean – all of it – means squat when they’ll be sitting in on future conference calls, and the only thing they can point to as “improvement” in their business is to try and spin why: A smaller than expected loss via Non-GAPP is great news! Rather, than being able to at the very least state; an actual net profit via GAAP that met expectations.

  This simple and subtle change will be earth-shattering for some, and for others it’ll usher in annihilation of past heralded performance spin. Regardless how many languages they now speak, clothes they wear, currently hangout with, or magazine covers they may grace.

  For years when it came to building businesses that need to produce real profits. Most in Silicon Valley felt this was beneath them, (i.e., they’re changing the world) and expressed it with a tone of: They breathe rarefied air from where they sit.

  Little did they realize what they believed was “rarefied air” was actually their own exhaust. And the onslaught of headaches that will result from all this time spent focusing on “eyeballs” rather than actual profits has only just begun.

  And about all those eyeballs…

  Another story that received little fanfare and in my opinion should send shivers down the backs (as well as potential monetization hopes) of every “unicorn” social-media enterprise, was the story in the WSJ™ on March 31, 2015 stating “Walmart ratchets up pressure on suppliers to cut prices”

  At first glance it’s another “Yeah, what else is new.” Yet, if you read into the article you notice one of the main line items arguing to be cut by both the retailer is: advertising. The implications for the bottom lines of many of today’s Silicon Valley unicorns have just monumentally been shifted from under their hooves. And I believe many don’t even realize it.

  So why is this such a big deal you might ask? Simple. In the world of advertising there are two types. One is the: Will pay X amount per 1000 viewers. Regardless of interaction. They fall into the “impression” group. The other is the: Pays per click type. i.e., There must not only be an interaction, (e.g., a click) but also a verifiable sale linked to it. There are others but for simplicity these are the easiest to understand.

  The former (the impression type) is the life blood of many in social media. This is where eyeballs matter to the calculus. But there’s also a catch. Most of the largest players in this ad spending realm are also the most price sensitive. i.e., Just like Walmart they’re in a race to the bottom to sell for the cheapest because to their customers – price, and only price matters.

  In today’s world of the internet, along with the relative fearless shopping on whatever the website. If all that matters is price: one doesn’t need to spend precious ad dollars by either Amazon™, Walmart™, or Who-Cares-Where.  Because price is searchable. e.g., Why pay for ads placed on social – when I can pay or maximize search?  Maybe with better odds for results. Hello Google™, or Bing™, or ?

  Again, if all that matters for the sale is the price. What good does advertising on social do for them? Easy: Nothing. And not only is that a fundamental change to the current ad spending structure or ecosystem. Rather, it changes the whole premise of paying for eyeballs under a totally new light. A light that Silicon Valley has precariously avoided these last few years at all costs – literally. Suddenly, what was thought of and used as “a selling point to sell investors” might have just turned overnight into a selling hurdle that many Unicorns may find impassable.

  With a company the size of Walmart openly stating that they’ve come to this same conclusion, (e.g., ads aren’t selling products price is) this shot across the bow should raise concerns for everyone in Silicon Valley. For the model that was touted as “the future” may now be long past its expiration date. And it’s not stopping there because Walmart will far from be alone. This new “meme” is just starting in my opinion. And it will grow is size and scope.

  Just to show how quickly things can change when no one expects it. There seems to be another “oh so subtle,” yet “oh so large white elephant” once again entering the room that all too many believed either couldn’t – or wouldn’t be an obstruction to their ad space formulations: Apple™.

  As much as a sea change the Walmart example can have and the possible implications going forward for many social media models. The same in-kind is now happening with Apple’s foray into streaming music. Here again, whether or not Apple is, or is not, better than others is inconsequential. What matters is Apple has a history of making real, verifiable, unquestionable net profits. Not only that, they have billions upon billions of those net profits sitting around the globe just looking for ways to be utilized.

  Theoretically, all Apple has to do is sit back and offer a similar service to anyone else’s and the investment dollars are going to roll out of today’s “haven’t been able to make a profit yet” and right into “if I’m going to sit and wait, I’m going to sit and wait with a proven money-maker.” Just a rolling from one into the other purely on the basis of “what the heck, can’t do no worse” can start a stampede of nervous bulls running from one pasture to another purely on where others in the herd are heading. Just a 10% shift in ad dollar allocations can have Richter Scale type connotations for this space alone.

  What does the above do to the memes of let’s say a Spotify™, or Pandora™, or ___________? And that’s just streaming. What happens further to the value of “eye balls to monetize” when Safari™, the web browser of the Apple ecosystem becomes the predominant ad-blocking portal? Which by the way happens to be installed on the worlds most dominant mobile device that social is trying to hang on to. Not to forget Apple is also partnered with Bing so its reach into search is already established. So possible growth there is certainly plausible needing only a small percentage of “making no money in social now. Why not just pull it from there, and try it here” argument entirely plausible. And it’s not just Apple; but now Mozilla™ is said to be doing the same. i.e., Dedicated ad-blocking web browsers.

  Who cares one might say,”Browsers are so 90’s. Everything today is done via an app.” And it’s a fair point. However, who controls the largest and most used app platform? This point shouldn’t be over looked. I’m not saying that Apple is the best, nor will rule in the end, However, what I am stating is what was the dominant meme just 1 year ago i.e., “Eyeballs or users rule first over net profits” is now reversed. i.e., “Net profits rule first over eyeballs or users.” And that is what felled the fate of the first canary in my opinion. And it’s will be far from the last.

  At the same time remember, this is only one scenario I’ve toyed with for this writing. I would bet dollars to doughnuts there are thousands of competitors that were previously shut out of ad dollars by the “everything-social-meme” chomping at the bit ready to re-engage with vigor for those precious ad dollars. The coming changes as well as the speed and voracity as to how they’ll be applied will shake the very foundations of what is today known as both Silicon Valley, and the budding unicorns that currently inhabit it.

  Add to all of the above many of today’s private valuations for “unicorn” status entities (e.g., BILLION dollar valuations) have been allowed to be touted as “real” and have gone unchallenged. Even though most informed or business inclined people know, and understand, the numbers have more in common with fantasy-land than anything else. For their formulations make Non-GAAP look real. Yet, one thing in business never changes: Sooner or later, whether it’s an Angel Investor, Wall Street, or your sister Sally. Everyone comes back around looking for their money. Everyone.

  And with the pool of “free money” tapped out and shut off at the spigot, it seems many of Wall St.’s former darlings are going to be asked one question and one question repeatedly at every future conference call: “Where’s the money?”

  If you’re a unicorn in Silicon Valley watching the current debacle at Twitter. And it doesn’t make you worried? You’re not paying close enough attention. Because in the mine – there’s only one canary to warn. After that, it may already be too late.

  

  

  
  
  

  

• "Cornering The Earth" – How The Rothschilds "Controlled At Least One Third Of Global Wealth" Over 100 Years Ago

  One week ago we presented the prophetic work of Alfred Owen Crozier who in 1912 penned “U.S. Money vs Corporation Currency” in which, together with 30 illustrations that captured Wall Street precisely as it would turn out some 103 later year, he explained why the the “Aldrich Plan” proposal, infamously crafted in secrecy by a small group of bankers and their bought politicians on Jekyll Island to establish a National Reserve Association, a money printing-predecessor to the Federal Reserve, would lead to untold pain, suffering ans war.

  The Aldrich Plan was defeated only to bring the Federal Reserve Act of 1913, and the most deadly 30-year period of warfare in human history.

  And while we urge everyone to read the Crozier’s book for its profound insight, and its painful reminder that even in the “New Normal” there is absolutely nothing new, as everything that has happened was foretold over a century ago, we wish to bring readers’ attention on one segment in the book.

  A segment dealing with the Rothschild family.

  Below are select excerpts of a text written precisely 103 years ago by Alfred Owen Crozier, in “U.S. Money vs Corporation Currency.”

  * * *

  [The Rothschild] descendants comprise the four great banking houses of that name in Europe—in London, Paris, Berlin and Vienna. In 1863 the wealth of this one family was conservatively estimated at $3,200,000,000, over three billions of dollars. This huge total compounded during the past fifty years and increased by incidental investments in mines, timber and many other things, may now amount to fifty or one hundred billions. No one outside knows the amount. With alliances controlled by this family it surely directly or indirectly controls a large portion of all government bonds and at least one-third of the world’s estimated total wealth of $377,000,000,000.

  But suppose the Rothschilds themselves only own $39,000,000,000, an amount equal to the bonded debt of all the governments of the world, with an annual income of $2,300,000.000 or two-thirds what their total wealth was in 1863. Any change either way in these figures will be a variation only in degree. In no way does it materially change the acknowledged potent fact that in all great national and international monetary and financial affairs the Rothschilds always play the ruling hand. They possess masterful genius and financial intellect. But it is the sheer weight of liquid or ready wealth held in such large quantity that all the nations of the world must go to the Rothschilds for financial assistance in time of peace, or before they can go to war whatever the provocation or emergency, that gives them supreme power in the world’s affairs. No war can be waged without money, and no large nation can get adequate money to finance a war from anyone but the Rothschilds. Therefore it is reasonable to assume that whenever any war is begun the Rothschilds have consented thereto. They may finance both sides, because it is immaterial whether the interest profits they crave come from one or both countries. In fact the war furnishes an excuse recognized as legitimate for charging both nations higher interest rates not only on the new debts but on old obligations maturing and being refunded. Increase to 4 per cent from 3 per cent is a 25 per cent increase in the total income and in the value of bonds, measured by their earning power.

  It is known, of course, that after the nations have fought for a while and murdered tens of thousands and wounded and permanently maimed hundreds of thousands of human beings on both sides, pressure exerted by other governments instigated by the financiers will force a quick compromise, leaving the nations both in approximately the same condition as before except that each has vastly increased its debt and the annual interest burden on its people while the financiers have gotten rid of accumulated capital in exchange for high interest gold bonds that can not be paid for perhaps thirty or fifty years. This surely is the result if not the deliberate plan.

  Then again, the debt of the principal European countries has been doubled or vastly increased during the long period of “armed peace.”

  Frequent rumors of war or warlike preparations each year have been ping-ponged back and forth between the countries in the public press. These have tended to excite popular fear, hate and patriotism and cause the people to consent and even to urge the governments to swell vastly the mortgage burden upon the peoples for funds to increase and equip still larger standing armies and to build greater and more expensive navies. By withdrawing millions of men. into armies and idleness it reduces production and the earning power of the people, increases the burden on those employed, and makes it more certain that existing bonds will not be paid but will be refunded and increased. Why not have bigger armies, navies, forts, guns, idleness of millions of soldiers, rumors of war or even occasional war, when such things are so fruitful, so necessary to cause the issuance of more bonds to provide profitable investment for the $5,000,000,000 of excess income derived yearly from interest paid on existing issues of gold bonds?

  These conditions explain at least a substantial portion of the bonded debt and yearly interest of these countries.

  Peaceful and quiet little Netherlands (the home of the dove of peace, the Hague) and Belgium together have a larger debt than the United States, although their aggregate wealth is but $13,000,000,000, as against $125,000,000,000 for this country. Belgium has 7,074,910 population and a debt of $93.77 per capita. Evidently they have been frightened into hopeless, permanent debt by the menacing actions of their neighbors towards each other. Poor exploited Congo, whose ignorant natives do not know a bond from a hole in the ground or interest and the gold standard from the milky way and the Aurora Borealis, has been given a hot dose of the “blessings of Christian civilization” by being saddled with a debt of $20,000,000 on which annually they must pay $1,260,306 interest profits to the exploiters. Unwelcome British rule has imposed upon India a yoke of mortgage debt 40 per cent larger than the total bonded debt of the United States.

  Portugal with $2,500,000,000 wealth has a government debt of $864,561,212, or 35 per cent. No wonder it tired of royalty and sought relief as a republic. The tombs of Pharaohs of Egypt now groan under a public debt half that of the United States. China may be the next debt victim.

  Is hopeless debt and perpetual interest slavery forever to be the price of Christian civilization and civil liberty?

  Large portions of most of these vast bond issues are in the strong boxes of the Rothschilds. No doubt they are satisfied with their clever work in Europe, their manipulation of Governmental policies, their control of state and private finances through great private central banks dominated by them in the principal countries, and their mastery, through the purse, over kings, czars and emperors. They have seen the average government debt of European nations grow until it has become about equal to one-tenth of the entire wealth of those countries.

  But they must be sorely disappointed and dissatisfied with the work and progress of their direct personal representatives in the United States. Here we have the richest and most substantial country, the best security, on the globe and the financiers have succeeded in keeping it in debt only about three-fourths of 1 per cent of its $125,000,000,000 of wealth. And worse than that, the Government has kept control of its monetary system and currency supply and so conducted its finances that most of the bonds bear only 2 per cent interest, or 40 to 60 per cent less interest annually than is paid by other governments that have turned monetary control over to the same private interests that buy and own the bonds issued by themselves for the Government to themselves for their individual profit.

  Then no doubt they have been worried over another serious problem. Their financial ascendency and control over governments and maintenance of relatively high interest rates is possible only so long as they own or at least control all large loanable funds seeking such investments; only while there is no important competition.

  The wonderful natural resources of the United States and the boundless energy of its people has greatly increased the liquid capital of the country. Hundreds of millions of American debts to European investors have been paid off or bought up by Americans. This has tended to increase the supply of idle capital in Europe. And now the United States has invaded Rothschild’s exclusive melon patch by bidding for large issues of the new or of refunding bonds of various governments. This is a serious situation. If this competition goes on it is certain to lower the rates of interest not only on new issues but ultimately on the entire 39 billion dollars of present bonds, to say nothing of state, county, city, district and corporation bonds. Genuine competition, such as the United States could furnish with the available investment capital it now commands or soon will have, might easily lower the average bond interest of other governments to the 2 per cent basis enjoyed by our Government. This would cut down by one-half the annual income of the owners of the fixed income or bond wealth of the world. They would lose thereby $2,500,000,000 annually. This in effect would be the equivalent of a direct shrinkage of so per cent in the value of the 39 billions of bonds, an immediate loss of nearly 20 billion dollars, for the value of bonds is measured by their rate of interest, the annual income they yield, their earning power.

  And we now see the stealthy hand of these foreign bond-holders in one of the most clever and far-reaching schemes ever devised by the mind of man, driving American sentiment and politics rapidly toward the adoption of a plan that will instantly remove the one menace to the supremacy and profits of the Rothschilds, viz.: competition for bonds.

  It is believed that the scheme now called “Aldrich plan” was originally conceived and worked out in Europe by the Rothschild interests, and that it was put out here or pushed by Jacob H. Schiff and Paul M. Warburg of the firm of Kuhn, Loeb & Co., said to represent here or do business with the Rothschilds of Europe. It is at least certain that Mr. Schiff of that firm was actively advocating a central bank as far back as 1906, when the New York Chamber of Commerce on October 4, 1906, officially adopted the plan after sending its representatives to Europe for several months to meet and personally discuss the matter with the big financiers of Europe.

  The official records of the Chamber, printed elsewhere in this volume, show these facts.

  Since then Mr. Warburg has been the most active of the Wall Street financiers in promoting the central bank or National Reserve Association plan by way of articles, speeches, conferences, and in persuading bankers and the American Bankers’ Association to join in promoting the scheme through Congress, and in thereafter participating in its benefits. He has been greatly aided from the outset by the Standard Oil interests, officials of the National Bank of Commerce and National City Bank of New York (Mr. Schiff being a director of both of these banks), and affiliated banks in that and other cities and by many of the powerful financiers of Wall Street. We show elsewhere conclusive documentary proof that the Aldrich plan is identical with what we could call the Rothschilds’ plan, but have named “New York Chamber of Commerce’s first plan,” adopted in 1906, except that the original plan at least made a pretense of Government control, while the Aldrich plan is strictly for a private corporation.

  At the currency conference of the National Civic Federation in New York on December 16, 1907, Mr. Spyer presided, and Mr. Seligman introduced the prepared resolutions. Both are Hebrew Wall Street international bankers said to do business for or with the great financiers of Europe. August Belmont, who then was president of the National Civic Federation, is said also to represent or do business with the Rothschilds.

  Jacob H. Schiff seems to have led the movement that has caused the abrogation of the commercial treaty with Russia. The action taken was right, for obedience to the provisions of all treaties must be enforced. But we wonder if the only object was to punish Russia for denying passports to a mere handful of American Jews?

  Was there back of it in Europe a Rothschild scheme to embroil the two nations so that each would increase its bonded debt, sell more bonds, to be prepared for possible complications if not actual hostilities? [ZH: all this is written 2 years before World War I erupted]

  Several attempts looking to a vast increase of the bonded debt of the United States have been made, other attempts will be made. But this Government should pay every dollar of its bonded debt and then stay out of debt. It would be a wholesome example to the world. It would show to all nations the advantages of self-government and human liberty.

  With the Standard Oil, the Morgan and the Kuhn, Loeb & Co. groups linked by ties of mutual interest and profit with the Rothschilds and their affiliations abroad, there would be complete harmony and co-operation and practically no competition between America and Europe for big government loans. All danger of lowering interest rates has been removed and an effective plan adopted that will enable substantial increases from time to time in the bond interest rate the world over. There will be no adequate market for such bonds except with this international money combine. Truly, the United States proposes to become a “financial world power” by this merger, but it will be controlled from the other side because Europe, the Rothschilds, will furnish 90 per cent of the cash. Wall Street seems to be willing to play second fiddle and permanently sell out the interests of the United States and the welfare of all the people for the mere hope that by thus getting near the money throne of the Rothschilds some crumbs from their table will fall within the reach of our high financiers.

  This Rothschild scheme if adopted will ultimately plunge the United States into the slavery of debt like the European nations. They do not want 2 per cent bonds. So it is proposed to increase the interest 30 to 50 per cent, make the rate 3 per cent, refund the present United States debt and make it payable in fifty years. That is the Aldrich plan, the provisions of the pending bill. Then it will be proposed to so change the tariff and increase expenditures that each year will show a deficit that can be converted into long time bonds. No doubt it is expected that in time the mort-gage debt of this country will be increased to $2,000,000,000, or even more, which with interest at 3 per cent instead of 2 per cent would- be the equivalent of a bonded debt of $3,000,000,000 so far as the yearly interest burden is concerned.

  The only way the human race can get the benefit, or its due because of the rapid increase of the world’s wealth, is to have free and unrestricted competition for loans maintained, so that as wealth increases the rate of interest will decrease.

  A billion of public currency now is to be taken away from the Government and given outright and free to a private corporation owned by the banks, and ultimately the National Reserve Association is to control the entire three billions of money heretofore issued by the United States Government. The association will gather up the United States money, hold it as a “reserve” and issue thereon two or three times its amount in corporation currency. Then by contraction and expansion of the money supply it will rule every bank and manipulate the supply of $20,000,000,000 of business credit and all prices and dominate everything in America for the profit of the world-wide money trust of which the National Reserve Association will be the American branch. This is the game, the program. If it succeeds the republic and all its people will find themselves permanently enslaved by the bondage of debt, chained helplessly to a system that takes everything and gives nothing, the victims of a soulless and sordid conspiracy that is moral if not legal treason against the welfare and perhaps the life of the nation.

  

  * * *

  A few notes:

  • As noted previously, this text was written in 1912.
  • The Aldrich Plan in its proposed form was rejected, only for the bankers behind it to refine it and present it as the Federal Reserve Act which subsequently passed in 1913, months before the start of World War I. The premise behind the Act was that the US nation, and not commercial banks, that decides the fate of US money. As the events of 2008 showed, this is completely false, and the US Federal Reserve is nothing more than the US Central Bank, working on behalf – and printing at the bidding – of a few major banks.
  • The Rothschild name is far less prominent these days; instead the family which has kept a very low profile since the two world wars, has remained active in determining policy through the control of financial interests in the prominent commercial banks of the day, either in Europe, the US or, most recently, Asia.
  • Contrary to 1912, US debt is no longer paltry, in fact quite the opposite. Depending on one’s definition of debt, total US debt is anywhere between 100% of GDP to many times that if one accounts for underfunded entitlements and public sector liabilities.
  • Unlike in 1912 when the rate of interest on debt is what mattered, under a ZIRP and then NIRP regime, the mere issuance of debt is what is critical now that virtually zero-cost debt is the functional equivalent of preferred (or even common) equity. Upon an event of default, the transfer of equity ownership falls in the hands of the debt holder which means the last decade has been nothing but a preparation for the biggest debt for equity exchange in the history of the human race, with the new equity holders of virtually all global assets set to be a select group of financial oligarchs.
  • The enslavement through debt bondage of the American people turned out just as the author had predicted.

  * * *

  “Let us control the money of a nation, and we care not who makes its laws”

  – the maxim of the house of Rothschild and is the foundation principle of European banks (source).

  

  

  
  
  

  

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