- FIFA Confirms Russia Will Be Stripped Of 2018 World Cup If "Evidence Of Bribery" Emerges
Ten days ago, when the FIFA scandal broke out, it took just a few hours to figure out what the US DOJ’s motive was. The answer was simple: stripping the 2018 (and 2022) World Cup hosts, i.e., Russia (and to a lesser extent Qatar), of their respective hosting venues, and long before the Blatter’s resigned we said:
What happens next? Sepp Blatter’s reelection this coming Friday, which until yesterday had been guaranteed, is now virtually assured to fail as Putin’s frontman at FIFA is shown the door.
What else likely happens? Following some dramatic procedural changes, Russia loses the hosting of the 2018 World Cup.
And moments after Blatter’s unexpected resignation we doubled down:
And now Russia is stripped of the 2018 World Cup
— zerohedge (@zerohedge) June 2, 2015
One day later, we learned that as the FIFA corruption scandal kept growing, the jaws surrounding Russia started to close following a report thatthe FBI had launched a probe into the Russia 2018 World Cup award.
There was just one thing missing: someone at FIFA admitting that the necessary and sufficient condition for Russia (if not so much Clinton Foundation donor Qatar) to be stripped of their hosting rights, would be evidence of bribery during the selection process. Which would be a low threshold indeed: if the past two weeks have confirmed it is that every single World Cup award stretching all the way back to France in 1998 and likely prior (such as the US in 1994) was as a result of illegal back-room dealings.
Today, the last missing piece finally fell into place, after Domenico Scala, the independent chairman of FIFA’s audit and compliance committee, told a Swiss newspaper that Russia and Qatar could be stripped of their World Cup hosting rights if evidence emerges of bribery in the bidding process. From Reuters:
“If evidence should emerge that the awards to Qatar and Russia only came about thanks to bought votes, then the awards could be invalidated,” Scala told SonntagsZeitung in an interview published on Sunday.
“This evidence has not yet been brought forth.”
It shortly will be, even as both countries – as expected – have denied wrongdoing in the conduct of their bids for the 2018 and 2022 tournaments, which were not the subject of charges announced by U.S. prosecutors last week against FIFA officials.
Ironically, British Foreign Secretary Philip Hammond said he supported Qatar hosting the 2022 tournament but said Britain would work with another country if FIFA re-opened the bidding process.
Perhaps the Clinton foundation will merely refund the Qatar “proceeds” if the Mid-east nation is stripped of its hosting rights. Or perhaps the US will simply make it up by “accidentally” blowing up Bashar al Assad’s home and ending once and for all the last hurdle to launching the Qatari natgas pipeline to Europe (in the process, the US also successfully isolating Gazprom as Europe’s sole outside energy provider).
For Russia, the fate of Assad and Syria is a booby-trapped bridge it will have not choice but to cross eventually. But as for the fate of the Russian 2018 World Cup, the irony is that by forcibly stripping Putin of hosting rights, it will do Russia not one favor but two as we explained on Thursday:
- first, Putin will save billions in funds for far better uses (the IRR on mass sport spectacles is terrible), and avoid the bottomless pit that is building if not bridges, then surely road, to nowhere and stadiums that will be used once only to become grazing grounds for sheep in the years to come.
- more importantly, for a country fanned by nationalistic fervor, Putin will be able to wave the patriotic flag and slam the evil USA for not only meddling in other people’s affairs, but taking away what was rightfully Russia’s, thereby boosting his nationalism-inspired popularity to even greater heights.
Or, to loosely paraphrase Hans Gruber, “You asked for miracles, Theo, I give you the DOJ.”
- A Professor Speaks Out: How Coddled, Hyper Sensitive Undergrads Are Ruining College Learning
Submitted by Michael Krieger of Liberty Blitzkrieg
A Professor Speaks Out: How Coddled, Hyper Sensitive Undergrads Are Ruining College Learning
Things have changed since I started teaching. The vibe is different. I wish there were a less blunt way to put this, but my students sometimes scare me — particularly the liberal ones.
I once saw an adjunct not get his contract renewed after students complained that he exposed them to “offensive” texts written by Edward Said and Mark Twain. His response, that the texts were meant to be a little upsetting, only fueled the students’ ire and sealed his fate. That was enough to get me to comb through my syllabi and cut out anything I could see upsetting a coddled undergrad, texts ranging from Upton Sinclair to Maureen Tkacik — and I wasn’t the only one who made adjustments, either.
The current student-teacher dynamic has been shaped by a large confluence of factors, and perhaps the most important of these is the manner in which cultural studies and social justice writers have comported themselves in popular media. I have a great deal of respect for both of these fields, but their manifestations online, their desire to democratize complex fields of study by making them as digestible as a TGIF sitcom, has led to adoption of a totalizing, simplistic, unworkable, and ultimately stifling conception of social justice. The simplicity and absolutism of this conception has combined with the precarity of academic jobs to create higher ed’s current climate of fear, a heavily policed discourse of semantic sensitivity in which safety and comfort have become the ends and the means of the college experience.
– From the Vox article: I’m a Liberal Professor, and My Liberal Students Terrify Me
The article at the center of today’s piece is truly excellent and demands much thought and introspection. One of the main themes here at Liberty Blitzkrieg since inception, has been the contention that the American population has turned into a nation of coddled, fearful serfs.
It’s not quite clear to me when this transformation actually happened, but the first undeniable evidence within my lifetime was the public’s reaction to the terror attacks of September 11, 2001. I’ve written about this before, most specifically in the post, How I Remember September 11, 2001. Here’s an excerpt:
In the days following the collapse, all I wanted was for the towers to be rebuilt just like before. I wanted the skyline back to what I had know since the day I came into this earth at a New York City hospital to be restored exactly as I had always known it. Career-wise, I felt I should leave Wall Street. I thought about going back to graduate school for political science, or maybe even join the newly created Department of Homeland Security (yes, the irony is not lost on me). I read a lengthy tome on Osama Bin Laden and al-Qaeda. I was an emotional and psychological mess, and it was when I was in this state of heightened distress that my own government and the military-industrial complex took advantage of me.
It wasn’t just me of course. It was an entire nation that was callously manipulated in the aftermath of that tragedy. The courage and generosity exhibited by so many New Yorkers and others throughout the country and indeed the world was rapidly transformed into terrifying fear. Fear that was intentionally injected repeatedly into our daily lives. Fear that translated into pointless wars and countless deaths. Fear that was used to justify the destruction of our precious civil rights. Fear that was used to initiate a gigantic power grab and the source of tremendous profits for the corporate-statists and crony-capitalsits. Unfortunately, that is the greatest legacy of 9/11.
It was the American public’s fearful and panicked emotional response to the attacks that allowed authoritarians and corrupt politicians to seamlessly and expeditiously steamroll over the civil rights of the citizenry. Unsurprisingly, this act of cowed submissiveness sent a signal to the less ethically inclined amongst us, and in the decade and a half since the attacks, the U.S. has rapidly deteriorated into something barely distinct from a Banana Republic.
This infestation of cowardice, anti-intellectualism and fear has permeated almost every nook and crany of American life, including academics. So much so, that a college professor has just penned an article titled: I’m a Liberal Professor, and My Liberal Students Terrify Me. Even more worrisome, he felt the need to write it under a pseudonym due to the fear of backlash.
This is not what makes a great nation. Here are some excerpts from Vox:
I’m a professor at a midsize state school. I have been teaching college classes for nine years now. I have won (minor) teaching awards, studied pedagogy extensively, and almost always score highly on my student evaluations. I am not a world-class teacher by any means, but I am conscientious; I attempt to put teaching ahead of research, and I take a healthy emotional stake in the well-being and growth of my students.
Things have changed since I started teaching. The vibe is different. I wish there were a less blunt way to put this, but my students sometimes scare me — particularly the liberal ones.
Not, like, in a person-by-person sense, but students in general. The student-teacher dynamic has been reenvisioned along a line that’s simultaneously consumerist and hyper-protective, giving each and every student the ability to claim Grievous Harm in nearly any circumstance, after any affront, and a teacher’s formal ability to respond to these claims is limited at best.
I once saw an adjunct not get his contract renewed after students complained that he exposed them to “offensive” texts written by Edward Said and Mark Twain. His response, that the texts were meant to be a little upsetting, only fueled the students’ ire and sealed his fate. That was enough to get me to comb through my syllabi and cut out anything I could see upsetting a coddled undergrad, texts ranging from Upton Sinclair to Maureen Tkacik — and I wasn’t the only one who made adjustments, either.
A bizarre form of censorship and anti-intellectualism, but a very dangerous one nonetheless.
I am frightened sometimes by the thought that a student would complain again like he did in 2009. Only this time it would be a student accusing me not of saying something too ideologically extreme — be it communism or racism or whatever — but of not being sensitive enough toward his feelings, of some simple act of indelicacy that’s considered tantamount to physical assault. As Northwestern University professor Laura Kipnis writes, “Emotional discomfort is [now] regarded as equivalent to material injury, and all injuries have to be remediated.” Hurting a student’s feelings, even in the course of instruction that is absolutely appropriate and respectful, can now get a teacher into serious trouble.
The academic job market is brutal. Teachers who are not tenured or tenure-track faculty members have no right to due process before being dismissed, and there’s a mile-long line of applicants eager to take their place. And as writer and academic Freddie DeBoer writes, they don’t even have to be formally fired — they can just not get rehired. In this type of environment, boat-rocking isn’t just dangerous, it’s suicidal, and so teachers limit their lessons to things they know won’t upset anybody.
This shift in student-teacher dynamic placed many of the traditional goals of higher education — such as having students challenge their beliefs — off limits. While I used to pride myself on getting students to question themselves and engage with difficult concepts and texts, I now hesitate. What if this hurts my evaluations and I don’t get tenure? How many complaints will it take before chairs and administrators begin to worry that I’m not giving our customers — er, students, pardon me — the positive experience they’re paying for? Ten? Half a dozen? Two or three?
The current student-teacher dynamic has been shaped by a large confluence of factors, and perhaps the most important of these is the manner in which cultural studies and social justice writers have comported themselves in popular media. I have a great deal of respect for both of these fields, but their manifestations online, their desire to democratize complex fields of study by making them as digestible as a TGIF sitcom, has led to adoption of a totalizing, simplistic, unworkable, and ultimately stifling conception of social justice. The simplicity and absolutism of this conception has combined with the precarity of academic jobs to create higher ed’s current climate of fear, a heavily policed discourse of semantic sensitivity in which safety and comfort have become the ends and the means of the college experience.
This new understanding of social justice politics resembles what University of Pennsylvania political science professor Adolph Reed Jr. calls a politics of personal testimony, in which the feelings of individuals are the primary or even exclusive means through which social issues are understood and discussed. Reed derides this sort of political approach as essentially being a non-politics, a discourse that “is focused much more on taxonomy than politics [which] emphasizes the names by which we should call some strains of inequality [ … ] over specifying the mechanisms that produce them or even the steps that can be taken to combat them.” Under such a conception, people become more concerned with signaling goodness, usually through semantics and empty gestures, than with actually working to effect change.
This is more or less how politics functions in the U.S. today. Fake and superficial narratives take position at center stage, while the really big existential issues are never addressed, or merely brushed under the rug.
The press for actionability, or even for comprehensive analyses that go beyond personal testimony, is hereby considered redundant, since all we need to do to fix the world’s problems is adjust the feelings attached to them and open up the floor for various identity groups to have their say. All the old, enlightened means of discussion and analysis —from due process to scientific method — are dismissed as being blind to emotional concerns and therefore unfairly skewed toward the interest of straight white males. All that matters is that people are allowed to speak, that their narratives are accepted without question, and that the bad feelings go away.
In a New York Magazine piece, Jonathan Chait described the chilling effect this type of discourse has upon classrooms. Chait’s piece generated seismic backlash, and while I disagree with much of his diagnosis, I have to admit he does a decent job of describing the symptoms. He cites an anonymous professor who says that “she and her fellow faculty members are terrified of facing accusations of triggering trauma.” Internet liberals pooh-poohed this comment, likening the professor to one of Tom Friedman’s imaginary cab drivers. But I’ve seen what’s being described here. I’ve lived it. It’s real, and it affects liberal, socially conscious teachers much more than conservative ones.
This is how civilizations die. Slowly, and by a thousand small cuts.
- The Central Banks Are Losing Control Of The Financial Markets
Submitted by Michael Snyder of The Economic Collapse blog
Every great con game eventually comes to an end.
For years, global central banks have been manipulating the financial marketplace with their monetary voodoo. Somehow, they have convinced investors around the world to invest tens of trillions of dollars into bonds that provide a return that is way under the real rate of inflation. For quite a long time I have been insisting that this is highly irrational. Why would any rational investor want to put money into investments that will make them poorer on a purchasing power basis in the long run? And when any central bank initiates a policy of “quantitative easing”, any rational investor should immediately start demanding a higher rate of return on the bonds of that nation. Creating money out of thin air and pumping into the financial system devalues all existing money and creates inflation. Therefore, rational investors should respond by driving interest rates up. Instead, central banks told everyone that interest rates would be forced down, and that is precisely what happened. But now things have shifted. Investors are starting to behave more rationally and the central banks are starting to lose control of the financial markets, and that is a very bad sign for the rest of 2015.
And of course it isn’t just bond yields that are out of control. No matter how hard they try, financial authorities in Europe can’t seem to fix the problems in Greece, and the problems in Italy, Spain, Portugal and France just continue to escalate as well. This week, Greece became the very first nation to miss a payment to the IMF since the 1980s. We’ll discuss that some more in a moment.
Over in Asia, stocks are fluctuating very wildly. The Shanghai Composite Index plunged by 5.4 percent on Thursday before regaining all of those losses and actually closing with a gain of 0.8 percent. When we see this kind of extreme volatility, it is a very bad sign. It is during times of extreme volatility that markets crash.
Remember, stocks generally tend to go up during calm markets, and they generally tend to go down during choppy markets. So most investors do not want to see lots of volatility. Unfortunately, that is precisely what we are witnessing all over the world right now. The following comes from the Wall Street Journal…
“Volatility over the last days has been breathtaking, especially in bond markets,” said Wouter Sturkenboom, senior investment strategist at Russell Investments. He said that it rippled through equity and currency markets, which overreacted.
The yield on the benchmark German 10-year bond touched 0.99%, its highest level since September, before erasing the day’s rise and falling back to 0.84%. The 10-year U.S. Treasury yield, which hit a fresh 2015 high of 2.42% earlier Thursday, recently fell back to 2.33%. Yields rise as prices fall.
Sometimes when bond yields go up, it is because investors are taking money out of bonds and putting it into stocks because they are feeling really good about where the stock market is heading. This is not one of those times. As Peter Tchir has noted, the huge moves in the bond market that we are now seeing are the result of “sheer panic in the market”…
In a morning note before the open, Brean Capital’s Peter Tchir wrote: “It is time to reduce US equity holdings for the near term and look for a 3% to 5% move lower. The Treasury weakness is NOT a ‘risk on’ trade it is a ‘risk off’ trade, where low yields are viewed as a risk asset and not a safe haven.” And Tom di Galoma, head of fixed-income rates and credit at ED&F Man Capital Markets, told Bloomberg, “This is sheer panic in the market from the standpoint of what’s been happening in Europe … Most of Wall Street is guarded here as far as taking on new positions.”
But this wasn’t supposed to happen.
After watching the Federal Reserve be able to successfully use quantitative easing to drive down interest rates, the European Central Bank decided to try the same thing. Unfortunately for them, investors are starting to behave more rationally. The central banks are starting to lose control of the financial markets, and bond yields are soaring. I think that Peter Boockvar summarized where we are currently at very well when he stated the following…
I’ve said this before but I’m sorry, I need to say it again. What we are witnessing in global markets is the inherent contradiction writ large that is modern day monetary policy where dangerously ZIRP, NIRP and QE are considered conventional policies. The contradiction is simply this: the desire for higher inflation if fulfilled will result in higher interest rates that central banks are trying so hard and desperately to suppress.
Outside of the short end of the curve, markets will always win for better or worse and that is clearly evident now. The ECB is getting their first taste of the market talking back and in quite the violent way. In the US, the bond market is watching the Fed drag its feet (its never-ending) with wanting to raise interest rates and finally said enough is enough. The US Treasury market is tightening for them. Since mid April, the 5 yr note yield is higher by 40 bps, the 10 yr is up by 55 bps and the 30 yr yield is up by 65 bps.
And if global investors continue to move in a rational direction, this is just the beginning. Bond yields all over the planet should be much, much higher than they are right now. What that means is that bond prices potentially have a tremendous amount of room to go down.
One thing that could accelerate the global bond crash is the crisis in Greece. Negotiations between the Greeks and their creditors have been dragging on for four months, and no agreement has been reached. Now, Greece has missed the loan payment that was due to the IMF on June 5th, and it is asking the IMF to bundle all of the payments that are due this month into one giant payment at the end of June…
Greece has asked to bundle its four debt payments to the International Monetary Fund that fall due in June so that it can pay them in one batch at the end of the month, Greek newspaper Kathimerini reported on Thursday.
The request is expected to be approved by the IMF, the newspaper said. That would mean Greece does not have to pay the first tranche of 300 million euros that falls due on Friday.
Greece faces a total bill of 1.5 billion euros owed to the IMF over four installments this month.
Of course that payment will not be made either if a deal does not happen by then. And with each passing day, a deal seems less and less likely. At this point, the package of “economic reforms” that the creditors are demanding from Greece is completely unacceptable to Syriza. The following comes from an article in the Guardian…
Fresh from talks in Brussels, Tsipras faced outrage on Thursday from highly skeptical members of his own Syriza party. A five-page ultimatum from creditors, presented by the European commission president, Jean-Claude Juncker, was variously described as shocking, provocative, disgraceful and dishonourable.
“It will never pass,” said Greece’s deputy social security minister, Dimitris Stratoulis. “If they don’t back down, the country won’t be lost … there are alternatives that would cost less than our signing a disgraceful and dishonourable agreement.”
Ultimately, I don’t believe that we are going to see an agreement.
Why?
Well, I tend to agree with this bit of analysis from Andrew Lilico…
The Eurozone does not want to make any compromise with the current Greek government because (a) they don’t believe they need to because Greek threats to leave the euro are empty both because internal polling suggests Greeks don’t want to leave and because if they did leave that doesn’t really constitute any threat to the euro; (b) because they (particularly perhaps Angela Merkel) believe that under enough pressure the Greek government might collapse and be replaced by a more cooperative government, as has happened repeatedly before in the Eurozone crisis including in Italy and Greece itself; and (c) because any deal with Greece that is seen to involve or be presentable as any victory for the Greek government would threaten the political positions of governments in several Eurozone states including Spain, Portugal, Italy, Finland and perhaps even the Netherlands and Germany.
Furthermore, it’s not clear to me that the Eurozone creditors at this stage would have much interest in any deal based upon promises, regardless of how much the Greek had verbally surrendered. Things have gone too far now for mere words to work. They would need to see the Greeks deliver actions — tangible economic reforms and tangible, credible primary surplus targets and a sustainable change in the long-term political mood within Greece that meant other Eurozone states might eventually get their money back. That is almost certainly not doable at all with the current Greek government. The only deal possible would be with some replacement Greek government that had come in precisely on the basis that it did want to do a deal and did want to pay the creditors back.
On the Syriza side, I see no more appetite for a deal. They believe that austerity has been ruinous for the lives of Greeks and that decades more austerity would mean decades more Greek economic misery. From their point of view, default or even exit from the euro, even if economically painful in the short term, would be better than continuing with austerity now.
You can read the rest of his excellent article right here.
Without a deal, the value of the euro is going to absolutely plummet and bond yields over in Europe will go through the roof. I am fully convinced that this is the beginning of the end for the eurozone as it is currently constituted, and that we stand on the verge of a great European financial crisis.
And of course the financial crisis that is coming won’t just be in Europe. The global financial system is more interconnected than ever, and there are tens of trillions of dollars in derivatives that are tied to foreign exchange rates and 505 trillion dollars in derivatives that are tied to interest rates. When this giant house of cards collapses, the central banks won’t be able to stop it.
In the end, could we eventually see the entire central banking system itself totally collapse?
That is what Phoenix Capital Research believes is about to happen…
Last year (2014) will likely go down in history as the “beginning of the end” for the current global Central Banking system.
What will follow will be a gradual unfolding of the next crisis and very likely the collapse of the Central Banking system as we know it.
However, this process will not be fast by any means.
Central Banks and the political elite will fight tooth and nail to maintain the status quo, even if this means breaking the law (freezing bank accounts or funds to stop withdrawals) or closing down the markets (the Dow was closed for four and a half months during World War 1).
There will be Crashes and sharp drops in asset prices (20%-30%) here and there. However, history has shown us that when a financial system goes down, the overall process takes take several years, if not longer.
We stand at the precipice of the greatest economic transition that any of us have ever seen.
Even though things may seem very “normal” to most people right now, the truth is that the global financial system is fundamentally flawed, and cracks in the system are starting to appear all over the place.
When this system does collapse, it will take most people entirely by surprise.
But it shouldn’t.
All con games eventually fall apart in the end, and we are about to learn that lesson the hard way.
- "Go East, Young Firm": Chinese Companies Drop New York Listings, Return Home
China’s equity market bubble has become the stuff of legend recently, as millions of newly-minted day traders, record margin debt, liberalized cross-border flows, and the inclusion of China A shares in two transitional EM FTSE Russell benchmark indices have created a veritable frenzy on the SHCOMP and, more spectacularly, on the Shenzhen exchange.
Valuations have soared, as has turnover and the bubble chorus is growing appreciably louder by the day. The following excerpt from a recent BNP note captures the situation nicely.
Momentum buying reinforced by market-capitalisation benchmark weightings could further inflate the bubble. In particular, imminent decisions on the inclusion of A-shares in global equity indices might see strong institutional buying buttress the retail mania for a time. Still, the exponential trends in turnover, margin debt and increasingly valuations imply that a climax is now unlikely to be too far away. The Shenzhen Composite’s P/E ratio is now over 66x (with a median P/E of 108x), compared with the 75.8x P/E at the 2008 bubble peak.
Of course not everyone thinks the historic run is likely to end anytime soon and indeed, the momentum serves as a siren song to many Chinese companies which have listed on the NYSE. Reuters has more:
Chinese tech firms have fallen out of love with America, and it shows – a growing number of them are looking to drop their listings in New York and head back home.
Many Chinese tech executives are betting on higher share valuations in China where stock markets have recently caught fire. They also hope to evade any legal mess when Beijing formally outlaws foreign shareholder control of firms in protected tech sectors.
The numbers are hard to resist. China’s tech-driven ChiNext composite index has gained nearly 180 percent this year, eclipsing the 30 percent rise in the Nasdaq OMX China Technology Index that tracks offshore listed mainland firms .
Firms listed on the Nasdaq index get an average share price equal to 11 times their earnings. On ChiNext, they get 133 times. There’s a debate over which ratio is more accurate, but Chinese executives blame U.S. ignorance of China.
“American investors don’t understand the business model of Chinese gaming companies,” said a senior executive of one such firm planning to eject from New York and move back to a Chinese listing, speaking on condition of anonymity.
Perhaps. Or maybe American investors don’t understand the valuations. 133X is a lofty multiple even for America’s generally clueless BTFDers and indeed, the mainstream financial media is now awash with reports about China’s stock bubble.
Whatever the case, China is relaxing restrictions on tech listings in an apparent effort to encourage more startups to repatriate as Shanghai transitions to a more prominent role in the financial world.
Chinese investors’ enthusiasm for startup listings is relatively recent, whereas U.S. investors have been rewarding internet startups with high share prices for decades.
But more important was the fact that Chinese regulators wouldn’t let such firms list in the first place. The China Securities Regulatory Commission (CSRC) has required any company to be profitable for several years before listing – a rule which ruled out most Chinese internet companies.
“The obstacle to coming back has been removed,” said China Renaissance in an email to Reuters.
Companies have also devised workarounds for China’s profitability restrictions, including convenient (if nonsensical) coporate tie-ups:
Profitability requirements are being eased, and there’s also a shortcut: a merger with a Chinese company with a listed shell.
Chinese display advertising giant Focus Media, which bailed out of New York in 2013, said this week it will relist in China via a $7 billion reverse merger with rubber manufacturer Jiangsu Hongda in what analysts say is a model for returnees to follow.
Finally, China may look to close a legal loophole that allows companies in restricted sectors to take in money from foreign investors, a move which could further discourage tech companies from pursuing US listings:
Chinese law bans foreign investment in domestic internet firms. Investors get around the restrictions by buying into variable interest entities (VIEs) set up by the internet companies, including Alibaba. U.S. courts recognise that as equivalent to ownership of the companies.
But now Chinese regulators are revising the foreign investment law. A draft version of the document published by China’s cabinet explicitly forbids “effective control” by foreigners of a Chinese company in a prohibited sector.
For Wall Street this means no more hundred million dollar paydays from underwriting highly anticipated Chinese offerings.
For American exchanges, it means that as long as China’s self-feeding equity mania persists, US listings make little economic sense. Especially if China makes a concerted effort to bring more companies home.
- Obama Sidelines Kerry On Ukraine Policy
Submitted by investigative historian Eric Zuesse
Obama Sidelines Kerry On Ukraine Policy
On May 21st, I headlined “Secretary of State John Kerry v. His Subordinate Victoria Nuland, Regarding Ukraine,” and quoted John Kerry’s May 12th warning to Ukrainian President Petro Poroshenko to cease his repeated threats to invade Crimea and re-invade Donbass, two former regions of Ukraine, which had refused to accept the legitimacy of the new regime that was imposed on Ukraine in violent clashes during February 2014. (These were regions that had voted overwhelmingly for the Ukrainian President who had just been overthrown. They didn’t like him being violently tossed out and replaced by his enemies.)
Kerry said then that, regarding Poroshenko, “we would strongly urge him to think twice not to engage in that kind of activity, that that would put Minsk in serious jeopardy. And we would be very, very concerned about what the consequences of that kind of action at this time may be.” Also quoted there was Kerry’s subordinate, Victoria Nuland, three days later, saying the exact opposite, that we “reiterate our deep commitment to a single Ukrainian nation, including Crimea, and all the other regions of Ukraine.” I noted, then that, “The only person with the power to fire Nuland is actually U.S. President Barack Obama.” However, Obama instead has sided with Nuland on this.
Radio Free Europe, Radio Liberty, bannered, on June 5th, “Poroshenko: Ukraine Will ‘Do Everything’ To Retake Crimea‘,” and reported that, “President Petro Poroshenko has vowed to seek Crimea’s return to Ukrainian rule. … Speaking at a news conference on June 5, … Poroshenko said that ‘every day and every moment, we will do everything to return Crimea to Ukraine.’” Poroshenko was also quoted there as saying, “It is important not to give Russia a chance to break the world’s pro-Ukrainian coalition,” which indirectly insulted Kerry for his having criticized Poroshenko’s warnings that he intended to invade Crimea and Donbass.
Right now, the Minsk II ceasefire has broken down and there are accusations on both sides that the other is to blame. What cannot be denied is that at least three times, on April 30th, then on May 11th, and then on June 5th, Poroshenko has repeatedly promised to invade Crimea, which wasn’t even mentioned in the Minsk II agreement; and that he was also promising to re-invade Donbass, something that is explicitly prohibited in this agreement. Furthermore, America’s President, Barack Obama, did not fire Kerry’s subordinate, Nuland, for her contradicting her boss on this important matter.
How will that be taken in European capitals? Kerry was reaffirming the position of Merkel and Hollande, the key shapers of the Minsk II agreement; and Nuland was nullifying them. Obama now has sided with Nuland on this; it’s a slap in the face to the EU: Poroshenko can continue ignoring Kerry and can blatantly ignore the Minsk II agreement; and Obama tacitly sides with Poroshenko and Nuland, against Kerry.
The personalities here are important: On 4 February 2014, in the very same phone-conversation with Geoffrey Pyatt, America’s Ambassador in Ukraine, in which Nuland had instructed Pyatt to get “Yats” Yatsenyuk appointed to lead Ukraine after the coup (which then occured 18 days later), she also famously said “F—k the EU!” Obama is now seconding that statement of hers.
In effect, Obama is telling the EU that they can get anything they want signed, but that he would still move forward with his own policy, regardless of whether or not they like it.
Kerry, for his part, now faces the decision as to whether to quit — which would force the EU’s hand regarding whether to continue with U.S. policy there — or else for Kerry to stay in office and be disrespected in all capitals for his staying on after having been so blatantly contradicted by his subordinate on a key issue of U.S. foreign policy. If he stays on while Nuland also does, then, in effect, Kerry is being cut out of policymaking on Europe and Asia (Nuland’s territory), altogether, and the EU needs to communicate directly with Obama on everything, or else to communicate with Nuland as if she and not Kerry were the actual U.S. Secretary of State. But if Kerry instead quits, then the pressure would be placed on EU officials: whether to continue with the U.S., or to reject U.S. anti-Russia policy, and to move forward by leaving NATO, and all that that entails?
If they then decide to stay with the U.S., after that “F—k the EU!” and then this; then, the European countries are clearly just U.S. colonies. This would be far more embarrassing to those leaders than John Kerry would be embarrassed by his simply resigning from the U.S. State Department. It might even turn the tide and force the Ukrainian Government to follow through with all of its commitments under the Minsk II accords.
It would be the most effective thing for Kerry to do at this stage. But, it would lose him his position as a (now merely nominal) member of Obama’s Cabinet.
The way this turns out will show a lot, about John Kerry. The nations of Europe already know everything they need to know about Barack Obama. If Kerry quits, he’ll have respect around the world. If he stays, he’ll be just another Colin Powell.
The ball is in Kerry’s court, and everyone will see how he plays it — and what type of man he is (and isn’t).
———-
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity, and of Feudalism, Fascism, Libertarianism and Economics.
- "Literally, Your ATM Won’t Work…"
By Bill Bonner Of Bonner And Partners
Literally, Your ATM Won’t Work…
While we were thinking about what was really going on with today’s strange new money system, a startling thought occurred to us.
Our financial system could take a surprising and catastrophic twist that almost nobody imagines, let alone anticipates.
Do you remember when a lethal tsunami hit the beaches of Southeast Asia, killing thousands of people and causing billions of dollars of damage?
Well, just before the 80-foot wall of water slammed into the coast an odd thing happened: The water disappeared.
The tide went out farther than anyone had ever seen before. Local fishermen headed for high ground immediately. They knew what it meant. But the tourists went out onto the beach looking for shells!
The same thing could happen to the money supply…
There’s Not Enough Physical Money
Here’s how… and why:
It’s almost seems impossible. Hard to imagine. Difficult to understand. But if you look at M2 money supply – which measures coins and notes in circulation as well as bank deposits and money market accounts – America’s money stock amounted to $11.7 trillion as of last month.
But there was just $1.3 trillion of physical currency in circulation – about only half of which is in the US. (Nobody knows for sure.)
What we use as money today is mostly credit. It exists as zeros and ones in electronic bank accounts. We never see it. Touch it. Feel it. Count it out. Or lose it behind seat cushions.
Banks profit – handsomely – by creating this credit. And as long as banks have sufficient capital, they are happy to create as much credit as we are willing to pay for.
After all, it costs the banks almost nothing to create new credit. That’s why we have so much of it.
A monetary system like this has never before existed. And this one has existed only during a time when credit was undergoing an epic expansion.
So our monetary system has never been thoroughly tested. How will it hold up in a deep or prolonged credit contraction? Can it survive an extended bear market in bonds or stocks? What would happen if consumer prices were out of control?
Less Than Zero
Our current money system began in 1971.
It survived consumer price inflation of almost 14% a year in 1980. But Paul Volcker was already on the job, raising interest rates to bring inflation under control.
And it survived the “credit crunch” of 2008-09. Ben Bernanke dropped the price of credit to almost zero, by slashing short-term interest rates and buying trillions of dollars of government bonds.
But the next crisis could be very different…
Short-term interest rates are already close to zero in the U.S. (and less than zero in Switzerland, Denmark, and Sweden). And according to a recent study by McKinsey, the world’s total debt (at least as officially recorded) now stands at $200 trillion – up $57 trillion since 2007. That’s 286% of global GDP… and far in excess of what the real economy can support.
At some point, a debt correction is inevitable. Debt expansions are always – always – followed by debt contractions. There is no other way. Debt cannot increase forever.
And when it happens, ZIRP and QE will not be enough to reverse the process, because they are already running at open throttle.
What then?
The value of debt drops sharply and fast. Creditors look to their borrowers… traders look at their counterparties… bankers look at each other…
…and suddenly, no one wants to part with a penny, for fear he may never see it again. Credit stops.
It’s not just that no one wants to lend; no one wants to borrow either – except for desperate people with no choice, usually those who have no hope of paying their debts.
Just as we saw after the 2008 crisis, we can expect a quick response from the feds.
The Fed will announce unlimited new borrowing facilities. But it won’t matter….
House prices will be crashing. (Who will lend against the value of a house?) Stock prices will be crashing. (Who will be able to borrow against his stocks?) Art, collectibles, and resources – all we be in free fall.
The NEXT Crisis
In the last crisis, every major bank and investment firm on Wall Street would have gone broke had the feds not intervened. Next time it may not be so easy to save them.
The next crisis is likely to be across ALL asset classes. And with $57 trillion more in global debt than in 2007, it is likely to be much harder to stop.
Are you with us so far?
Because here is where it gets interesting…
In a gold-backed monetary system prices fall. But the money is still there. Money becomes more valuable. It doesn’t disappear. It is more valuable because you can use it to buy more stuff.
Naturally, people hold on to it. Of course, the velocity of money – the frequency at which each unit of currency is used to buy something – falls. And this makes it appear that the supply of money is falling too.
But imagine what happens to credit money. The money doesn’t just stop circulating. It vanishes. As collateral goes bad, credit is destroyed.
A bank that had an “asset” (in the form of a loan to a customer) of $100,000 in June may have zilch by July. A corporation that splurged on share buybacks one week could find those shares cut in half two weeks later. A person with a $100,000 stock market portfolio one day could find his portfolio has no value at all a few days later.
All of this is standard fare for a credit crisis. The new wrinkle – a devastating one – is that people now do what they always do, but they are forced to do it in a radically different way.
They stop spending. They hoard cash. But what cash do you hoard when most transactions are done on credit? Do you hoard a line of credit? Do you put your credit card in your vault?
No. People will hoard the kind of cash they understand… something they can put their hands on… something that is gaining value – rapidly. They’ll want dollar bills.
Also, following a well-known pattern, these paper dollars will quickly disappear. People drain cash machines. They drain credit facilities. They ask for “cash back” when they use their credit cards. They want real money – old-fashioned money that they can put in their pockets and their home safes…
Dollar Panic
Let us stop here and remind readers that we’re talking about a short time frame – days… maybe weeks… a couple of months at most. That’s all. It’s the period after the credit crisis has sucked the cash out of the system… and before the government’s inflation tsunami has hit.
As Ben Bernanke put it, “a determined central bank can always create positive consumer price inflation.” But it takes time!
And during that interval, panic will set in. A dollar panic – with people desperate to put their hands on dollars… to pay for food… for fuel…and for everything else they need.
Credit may still be available. But it will be useless. No one will want it. ATMs and banks will run out of cash. Credit facilities will be drained of real cash. Banks will put up signs, first: “Cash withdrawals limited to $500.” And then: “No Cash Withdrawals.”
You will have a credit card with a $10,000 line of credit. You have $5,000 in your debit account. But all financial institutions are staggering. And in the news you will read that your bank has defaulted and been placed in receivership. What would you rather have? Your $10,000 line of credit or a stack of $50 bills?
You will go to buy gasoline. You will take out your credit card to pay.
“Cash Only,” the sign will say. Because the machinery of the credit economy will be breaking down. The gas station… its suppliers… and its financiers do not want to get stuck with a “credit” from your bankrupt lender!
Whose credit cards are still good? Whose lines of credit are still valuable? Whose bank is ready to fail? Who can pay his mortgage? Who will honor his credit card debt? In a crisis, those questions will be as common as “Who will win an Oscar?” today.
But no one will know the answers. Quickly, they will stop guessing… and turn to cash.
Our advice: Keep some on hand. You may need it.
- Citi Clients "Complain How Difficult It Is To Make Money", "Everyone Is Worried About Liquidity Shocks"
Back in early/mid 2007, just as the subprime bubble was bursting but Wall Street was desperate for the party to go on, when VIX was flirting with single digits (killing the swaption market due to lack of vol), when record, multi-billion LBOs were a daily thing, and when corporate bond spreads barely registered any risk on the horizon, there was one dominant trade for those credit traders who saw the writing on the wall (as they usually do 3-6 months ahead of their equity trading peers): going long cheap index puts while funding the cost of carry by selling a steep long end and pocketing the roll down.
That trade is back.
According to Citigroup’s Credit Index group led by Anindya Basu, “nearly every single investor conversation we have had recently has been about how difficult it is to make money in the current environment.”
There are good reasons for investors to be concerned – the two big elephants in the room are showing no signs of leaving. The Greece saga continues to drag on with headlines driving markets, and mixed economic data out of the US is causing considerable uncertainty around the timing and pace of Fed rate hikes
Citi adds that,”investors need to put money to work, but almost all investors lack conviction, bemoan the lack of opportunities given how tight spreads are, and continue to worry about market liquidity.”
Those investors must have read what Citi’s Matt King said two weeks ago, namely that the market as we know it no longer exists courtesy of central banks (something Zero Hedge has said since 2009).
So what is the best way to position/trade in the current environment? Citi’s answer is putting the 2007 trade back on again: “Under these circumstances, we believe that option hedges funded by the substantial roll down of mezzanine tranches can be very attractive.”
This is how those who just have to invest other people’s money are advised to do so via Citi:
… the markets are awash in liquidity – recent fund flow data indicates continued inflows into corporate IG funds, and even HY funds have seen a reversal of some of the outflows (see Figure 1) – in fact, YTD, both IG and HY funds have experienced net positive inflows. So investors are now faced with the difficult choice of finding opportunities to generate alpha in markets that appear overpriced, while contending with the possibility of liquidity shocks when a sell off happens.
Now, no one seems to disagree that put (payer) options could potentially provide the best hedges for such situations, if we could only find a way to pay for them. The problem is that in a tight spread environment such as now, investors have to be conscious about how much they can allocate to their hedging budget. One way to make this work is to move the put option strikes significantly out of the money, but that can often make the hedge less effective, especially if we need protection from the daily mark-to-market volatility.
We believe that the steepness of current credit curves offers a way out (see Figure 2 (left)) – the carry from rolling down such steep curves, combined with some form of cheap leverage could potentially be enough to fund closer to ATM puts. From that perspective, we favor selling protection (going long) in index tranches which have steeper curves than the underlying indices (see Figure 2 (right)) – for example, IG 3-7% 3s5s are 63% of the 5y spread, compared to IG index 3s5s at 42% of the 5y. Similarly, HY 15-25% 3s5s are 55% of the 5y spread compared to HY index at 29% of the 5y.
At the present time, it is our view that the mezzanine index tranches provide the most attractive vehicle for funding close-to-ATM option shorts. In addition to benefitting from the inherent (non-recourse) structural leverage, these tranches can also shield investors from actual default risks, which can be an important factor in an environment where idiosyncratic or sector specific (e.g. energy) risks are dominant.
Combining the tranche and the option legs is advantageous in the following way. As spreads tighten, the trade benefits from the long tranche leg, while the option leg expires worthless. As spreads widen, the trade gains from the option leg and while mark-to-market losses on the tranche legs are partially compensated by the roll down. This can provide positive convexity.
How to structure the trade:
The details of our proposed trade are shown in Figure 3. We recommend buying December expiry 60 strike IG payers funded by selling protection in the 5y IG23 3- 7% tranche. We show the performance of the trade under different spread scenarios upon expiry in Figure 3 (red line). The trade is efficient in the sense it demonstrates positive convexity – upon option expiry, the P&L remains positive regardless of the direction of spread moves over a wide range of spreads. We chose a slightly in-the-money strike at 60bp since this exhibits better projected performance relative to strikes that are closer to the ATM 65bp strike.
In effect, this trade can be thought of as a “payer spread” – selling protection on the IG23 3-7% tranche can be considered as selling an OTM payer option on defaults. In other words, we are long an ATM (technically in-the-money for this trade) payer option on IG in the conventional manner, but we are selling an OTM “default payer” option to fund this. The roll down characteristics of this “payer option” makes it anattractive way to fund the payer spread, rather than using a standard payer option.
Whether Citi is merely looking for “clients” to take the opposite side of its own trade, or is legitimately pitching a funded, and deeply convex “fat tail” trade is unclear, but the fact that the very same trades that the entire hedge funds community (at least those who made money into the crash before both legs of the trade blew up) are starting to show up again is likely a cause for concern for those who are convinced the artificial, centrally-planned status quo of the past 7 years will continue indefinitely.
As for Citi’s convictionless clients who “suffer” under the repressive, low vol regime: be happy you still have a job. Because just like Bill Gross, you may have identified both the trade and the timing of the “short (or long) of the century”, but if you execute it incorrectly and find yourself in a liquidity vacuum, your suffering will be the result of no longer having a job, artificial market conditions nowithstanding.
- Turkish Lira Plunges As Landmark Election Portends Political Uncertainty
In an election that was, essentially, a litmus test for Recep Tayyip Erdogan’s plans to expand his powers, voters dealt the Turkish President and his Justice and Development Party (A.K.P.) a stinging blow at the ballot box on Sunday.
With 99% of the vote tallied, A.K.P appeared to have lost its parliamentary majority, winning only around 40% of the vote, a steep decline from 2011.
The results likely mean the party will have around 260 seats in parliament, down from 327. A difficult coalition building effort will now ensue and Erdogan can call for new elections if a government isn’t formed within 45 days.
What this means for political and social instability remains to be seen.
More color from The New York Times:
Almost immediately, the results raised questions about the political future of Prime Minister Ahmet Davutoglu, who moved to that position from that of foreign minister last year and was seen as a loyal subordinate of Mr. Erdogan. Mr. Davutoglu, who during the campaign vowed to resign if the A.K.P. did not win a majority, told reporters on Sunday evening in brief comments, “whatever the people decide is for the best.” Mr. Davutoglu was due to speak later in the evening in Ankara.
Mr. Erdogan, who as president was not on the ballot Sunday, will probably remain Turkey’s dominant political figure even if his powers have been rolled back, given his outsized personality and his still-deep well of support among Turkey’s religious conservatives, who form the backbone of his constituency. But even among those supporters, including ones in Kasimpasa, the Istanbul neighborhood where Mr. Erdogan spent part of his youth, there are signs that his popularity is flagging, partly because of his push for more powers over the judiciary and his crackdown on any form of criticism, including prosecutions of those who insult him on social media.
“A lot of people in Kasimpasa have become disheartened by Erdogan’s aggressive approach in recent weeks,” said Aydin, 77, who gave only his first name because some of his family members are close to Mr. Erdogan. “I voted for the A.K.P. because it has become habit, but I think Erdogan lost votes this week.”
And here’s Barclays on the implications going forward:
So far, a single party government in Turkey has generally been perceived as a source of stability by the market and reaction to election results confirming such continuity has generally been positive. However, this perception seems to have somewhat evolved recently. Particularly, foreign investors sound less uncomfortable with a coalition government scenario on the basis of improvement in checks and balances, whereas local investor perception is more negative.
In our view, local markets could trade poorly for an extended period should the election confirm a coalition government. First, it is still uncertain whether AKP would be able to attract support from MHP or HDP relatively swiftly and smoothly. While MHP stands as a natural coalition partner on the face of it, given the overlap in broader ideologies, the party’s disagreement with President Erdogan on many fronts and its reservations about the Kurdish peace process will likely make coalition process less straightforward. Indeed, MHP vice president Zuhal Topcu yesterday ruled out a coalition with AKP, accusing the party of making concessions to “terrorists” in an interview with Bloomberg. On the HDP front, external support for an AKP government seemed more likely than a coalition, given the sensitivities of both parties’ voter base.
However, HDP officials recently ruled out external support to an AKP government.
We think coalition negotiations could add another layer of uncertainty to the structure and focus of economic management, with which foreign investors already have concerns.
Underscoring Barclays commentary, the lira just hit a record low against the dollar:
- TURKISH LIRA PLUNGES 3.3% TO RECORD LOW 2.7523 AGAINST DOLLAR
- Another Bubble Alert: Home Down Payments Hit Three-Year Low
Fannie Mae and Freddie Mac — the perpetually insolvent, bailed-out GSEs that a whole host of BTFDers and a few disgruntled billionaires swear can become cash cows again if they are just allowed to escape the evil clutches of government — are now allowed to back home loans with down payments as low as 3%. The decision to lower the minimum from 5% to 3% came from the GSEs’ regulator FHFA and its Director, Melvin Watt. Rather than retrace the entire story of how this came about, we’ll give you the Cliff’s Notes version as it appeared in Bloomberg last October:
Fannie Mae, Freddie Mac and their regulator are nearing agreement with mortgage issuers on efforts to boost lending and ease banks’ concerns that they will get stuck with bad loans when borrowers default.
Melvin L. Watt, the director of the Federal Housing Finance Agency, will clarify in a Oct. 20 speech at the Mortgage Bankers Association conference in Las Vegas how some loans can be permanently exempted from the threat of buybacks, said the people, who asked not to be identified because the plans aren’t public. Watt will also discuss an effort that would allow borrowers to put down as little as three percent of the purchase price on loans backed by Fannie Mae and Freddie Mac, enabling borrowers with lower incomes to access the mortgage market, the people said. The two companies currently require a five percent down payment on most loans (ZH: this led FHA — which offers a 3.5% down payment product — to lower premiums in order to avoid losing market share.)
Needless to say, some GOP lawmakers were not pleased with this initiative, noting (correctly) that this simply encourages banks to return to pre-crisis underwriting standards and once again imperils taxpayers by putting Fannie and Freddie on the hook for loans made to borrowers who cannot afford their homes. Of course this kind of argument falls on deaf ears in a society where the answer to debt is still more debt and in a world where even the IMF now recommends “living with” debt rather than repaying it.
Given the above we weren’t surprised to learn that during Q1, the average down payment on single family homes, condos, and townhomes fell to just 14.8% — the lowest level since Q1 2012. RealtyTrac has more:
The Q1 2015 U.S. Home Purchase Down Payment Report shows the average down payment for single family homes, condos and townhomes purchased in the first quarter was 14.8 percent of the purchase price, down from 15.2 percent in the previous quarter and down from 15.5 percent a year ago to the lowest level since Q1 2012..
The report also shows that the average down payment for FHA purchase loans originated in the first quarter was 2.9 percent of the purchase price while the average down payment for conventional loans was 18.4 percent of the purchase price..
FHA loans as a share of loan originations increased throughout the quarter, from 21 percent in January to 22 percent in February to 25 percent in March.
“Down payment trends in the first quarter indicate that first time homebuyers are finally starting to come out of the woodwork, albeit it gradually,” said Daren Blomquist, vice president at RealtyTrac. “New low down payment loan programs recently introduced by Fannie Mae and Freddie Mac, along with the lower insurance premiums for FHA loans that took effect at the end of January are helping, given that first time homebuyers typically aren’t able to pony up large down payments..
The share of low down payment loans — defined in the report as purchase loans with a loan-to-value ratio of 97 percent or higher, which would mean a down payment of 3 percent or lower — was 27 percent of all purchase loans in the first quarter, up from 26 percent in the fourth quarter and also 26 percent a year ago to the highest share since Q2 2013. Low down payment loans accounted for 83 percent of FHA purchase loans originated in the first quarter, while 11 percent of conventional loans were low down payment loans.
“I see the rise in low down payments as a positive for our market. In Seattle, it’s primarily a function of the price growth in our region combined with buyers looking to take advantage of the new Fannie/Freddie 97 loan to value programs,” said OB Jacobi, president of Windermere Real Estate.
And why not?
After all, the average term on new car loans now sits at a record high 64 months, you can now refinance your credit cards with an online P2P loan from someone you’ve never met, and the government is actively promoting a ‘repayment’ plan for heavily-indebted college students that allows borrowers to make ‘payments’ of $0 on their way to complete loan forgiveness in just 300 short months.
In other words, it’s no longer about credit risk. The only thing that matters is coming up with ways to re-leverage the economy. Someone else can deal with the fallout when the entire house of cards collapses on itself again down the road.
- The European "Template" For Dealing With Crises: Freezing Accounts, Bank Holidays, and Capital Controls…
More and more analysts are beginning to take note of the “War on Cash.” However, they’re missing the fact that the actual template for what’s coming to the US first appeared in Europe back in 2012.
Back in March of 2012, when the EU Crisis first began to spin out of control, then Prime Minister of France Nicolas Sarkozy openly called for the renegotiation of the Schengen Treaty: the treaty that established the 26-nation EU as a “borderless” entity in which individuals could move from one country to another with little difficulty and which also made trade among EU members easier.
France was not alone either. A few months later, both France and Germany proposed imposing border controls in June of that same year.
A Vote of No Confidence in Europe
Germany and France's joint proposal to allow Schengen-zone countries to temporarily reintroduce border controls as a means of last resort might sound harmless. But doing so would damage one of the strongest symbols of European unity and perhaps even contribute to the EU's demise.
Germany and France are serious this time. During next week's meeting of European Union interior ministers, the two countries plan to start a discussion about reintroducing national border controls within the Schengen zone. According to the German daily Süddeutsche Zeitung, German Interior Minister Hans-Peter Friedrich and his French counterpart, Claude Guéant, have formulated a letter to their colleagues in which they call for governments to once again be allowed to control their borders as "an ultima ratio" — that is, measure of last resort — "and for a limited period of time." They reportedly go on to recommend 30-days for the period.
Why border controls? Well in truth, it was all about the money… specifically, physical cash. As we’ve noted before… with the vast majority of the global financial system based on digital money… the minute a significant number of depositors try to move their money OUT of a bank and INTO physical cash, the whole system can collapse.
Again, Europe was ahead of the US in terms of proposing these terms. The below article dated from 2012 outlines the plan to limit cash withdrawals, shut down ATMs, and impose border controls to stop people from fleeing with their capital.
Exclusive: EU floats worst-case plans for Greek euro exit: sources
European finance officials have discussed as a worst-case scenario limiting the size of withdrawals from ATM machines, imposing border checks and introducing capital controls in at least Greece should Athens decide to leave the euro…
As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.
http://money.msn.com/business-news/article.aspx?feed=OBR&date=20120611&id=15208663
What are the key takeaways from this?
1) When the next crisis hits, the Powers That Be are only too happy to let the rule of law will go out the window.
2) The biggest problem they face is STOPPING people from moving their money into physical cash.
3) To stop #2, capital controls, border controls, and even a CARRY taxes (read here for more on this) will be imposed.
Moreover, and I want to stress this, Europe has also shown us the template for how this mess will play out. Indeed, the 2013 banking crisis in Cyprus showed us EXACTLY how it will be in terms of speed and timing.
The quick timeline for Cyprus is as follows:
· June 25, 2012: Cyprus formally requests a bailout from the EU.
· November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).
· February 25, 2013: Democratic Rally candidate Nicos Anastasiades wins Cypriot election defeating his opponent, an anti-austerity Communist.
· March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000… a bank holiday is announced.
· March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.
· March 18 2013: Bank holiday extended until March 21 2013.
· March 19 2013: Cyprus parliament rejects bail-in bill.
· March 20 2013: Bank holiday extended until March 26 2013.
· March 24 2013: Cash limits of €100 in withdrawals begin for largest banks in Cyprus.
· March 25 2013: Bail-in deal agreed upon. Those depositors with over €100,000 either lose 40% of their money (Bank of Cyprus) or lose 60% (Laiki).
The most important thing I want you to focus on is the speed of these events.
Cypriot banks formally requested a bailout back in June 2012. The bailout talks took months to perform. And then the entire system came unhinged in one weekend.
One weekend. The process was not gradual. It was sudden and it was total: once it began in earnest, the banks were closed and you couldn’t get your money out. ATMs were closed, capital controls were in place, full stop.
There were no warnings that this was coming because everyone at the top of the financial food chain are highly incentivized to keep quiet about this. Central Banks, Bank CEOs, politicians… all of these people are focused primarily on maintaining CONFIDENCE in the system.
How far will they go to maintain this trust?
The Bank of Cyprus, the bank that imploded in 2013 and STOLE clients’ funds was voted Best Bank for Private Banking in Cyprus by EUROMONEY magazine in 2012!!!
No joke…
Bank of Cyprus has been named as the Best Bank for Private Banking in Cyprus, by the internationally acclaimed magazine EUROMONEY
Bank of Cyprus Private Banking ranked first among Cypriot, Greek and other international financial institutions operating in Cyprus in the Private Banking sector…
This recognition by EUROMONEY is ever more important in today’s macroeconomic environment as it reaffirms the Bank’s ability to safely and successfully respond to its clients’ financial needs and emphasizes its clients’ loyalty and trust.
http://www.bankofcyprus.com.cy/en-GB/Cyprus/News-Archive/Best-Bank-for-Private-Banking/
From best bank to totally broke and freezing clients’ accounts in less than one year.
Europe has laid the template for what’s coming to the US.
This is just the beginning. We've uncovered a secret document outlining how the Fed plans to incinerate savings.
We detail this paper and outline three investment strategies you can implement
right now to protect your capital from the Fed's sinister plan in our Special Report
Survive the Fed's War on Cash.
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Best Regards
Phoenix Capital Research
- Overeducated Writer Explains Why He Defaulted On His Student Loans, Asks "If He Is A Deadbeat"
There are some valid points raised in Lee Siegel’s 1100 word rant against college loans (if not so much against college education). There are some bad ones. But two things are clear: the words “personal” and/or “responsibility” were used precisely zero times, and the op-ed writer, who described himself as “the author of five books who is writing a memoir about money“, is hardly a glowing advertisement for an education attained (funded with either debt or equity) at one of the Ivy League’s “best”, Columbia University.
That, or the return on money after spending nearly a decade in university and taking out tens of thousands in loans just to achieve a Master of Philosophy degree.
- Bachelor of Arts: Columbia University
- Master’s Degree: Columbia University
- Master of Philosophy: Columbia University
Why I Defaulted on My Student Loans, originally published as an opinion piece in the NYT Sunday Review
One late summer afternoon when I was 17, I went with my mother to the local bank, a long-defunct institution whose name I cannot remember, to apply for my first student loan. My mother co-signed. When we finished, the banker, a balding man in his late 50s, congratulated us, as if I had just won some kind of award rather than signed away my young life.
By the end of my sophomore year at a small private liberal arts college, my mother and I had taken out a second loan, my father had declared bankruptcy and my parents had divorced. My mother could no longer afford the tuition that the student loans weren’t covering. I transferred to a state college in New Jersey, closer to home.
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.
I chose life. That is to say, I defaulted on my student loans.
As difficult as it has been, I’ve never looked back. The millions of young people today, who collectively owe over $1 trillion in loans, may want to consider my example.
It struck me as absurd that one could amass crippling debt as a result, not of drug addiction or reckless borrowing and spending, but of going to college. Having opened a new life to me beyond my modest origins, the education system was now going to call in its chits and prevent me from pursuing that new life, simply because I had the misfortune of coming from modest origins.
Am I a deadbeat?
In the eyes of the law I am. Indifferent to the claim that repaying student loans is the road to character? Yes. Blind to the reality of countless numbers of people struggling to repay their debts, no matter their circumstances, many worse than mine? My heart goes out to them. To my mind, they have learned to live with a social arrangement that is legal, but not moral.
Maybe the problem was that I had reached beyond my lower-middle-class origins and taken out loans to attend a small private college to begin with. Maybe I should have stayed at a store called The Wild Pair, where I once had a nice stable job selling shoes after dropping out of the state college because I thought I deserved better, and naïvely tried to turn myself into a professional reader and writer on my own, without a college degree. I’d probably be district manager by now.
Or maybe, after going back to school, I should have gone into finance, or some other lucrative career. Self-disgust and lifelong unhappiness, destroying a precious young life — all this is a small price to pay for meeting your student loan obligations.
Some people will maintain that a bankrupt father, an impecunious background and impractical dreams are just the luck of the draw. Someone with character would have paid off those loans and let the chips fall where they may. But I have found, after some decades on this earth, that the road to character is often paved with family money and family connections, not to mention 14 percent effective tax rates on seven-figure incomes.
Moneyed stumbles never seem to have much consequence. Tax fraud, insider trading, almost criminal nepotism — these won’t knock you off the straight and narrow. But if you’re poor and miss a child-support payment, or if you’re middle class and default on your student loans, then God help you.
Forty years after I took out my first student loan, and 30 years after getting my last, the Department of Education is still pursuing the unpaid balance. My mother, who co-signed some of the loans, is dead. The banks that made them have all gone under. I doubt that anyone can even find the promissory notes. The accrued interest, combined with the collection agencies’ opulent fees, is now several times the principal.
Even the Internal Revenue Service understands the irrationality of pursuing someone with an unmanageable economic burden. It has a program called Offer in Compromise that allows struggling people who have fallen behind in their taxes to settle their tax debt.
The Department of Education makes it hard for you, and ugly. But it is possible to survive the life of default. 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).
When the fateful day comes, and your credit looks like a war zone, don’t be afraid. The reported consequences of having no credit are scare talk, to some extent. The reliably predatory nature of American life guarantees that there will always be somebody to help you, from credit card companies charging stratospheric interest rates to subprime loans for houses and cars. Our economic system ensures that so long as you are willing to sink deeper and deeper into debt, you will keep being enthusiastically invited to play the economic game.
I am sharply aware of the strongest objection to my lapse into default. If everyone acted as I did, chaos would result. The entire structure of American higher education would change.
The collection agencies retained by the Department of Education would be exposed as the greedy vultures that they are. The government would get out of the loan-making and the loan-enforcement business. Congress might even explore a special, universal education tax that would make higher education affordable.
There would be a national shaming of colleges and universities for charging soaring tuition rates that are reaching lunatic levels. The rapacity of American colleges and universities is turning social mobility, the keystone of American freedom, into a commodified farce.
If people groaning under the weight of student loans simply said, “Enough,” then all the pieties about debt that have become absorbed into all the pieties about higher education might be brought into alignment with reality. Instead of guaranteeing loans, the government would have to guarantee a college education. There are a lot of people who could learn to live with that, too.
- 103 Years Later, Wall Street Turned Out Just As One Man Predicted
In 1910, three years before the US Federal Reserve was founded, Senator Nelson Aldrich, Frank Vanderlip of National City (Citibank), Henry Davison of Morgan Bank, and Paul Warburg of the Kuhn, Loeb Investment House met secretly at Jekyll Island in Georgia to formulate a plan for a US central bank just years ahead of World War I.
The result of their work was the so-called Aldrich Plan which called for a system of fifteen regional central banks, i.e., National Reserve Associations, whose actions would be coordinated by a national board of commercial bankers. The Reserve Association would make emergency loans to member banks, and would create money to provide an elastic currency that could be exchanged equally for demand deposits, and would act as a fiscal agent for the federal government.
In other words, the Aldrich Plan proposed a “central bank” that would be openly and directly controlled by Wall Street commercial banks on whose behalf it would solely operate, instead of doing so indirectly, behind closed doors and the need for criminal probe of Yellen’s Fed seeking to find who leaked what to whom.
The Aldrich Plan was defeated in the House in 1912 but its outline became the model for the bill that eventually was adopted as the Federal Reserve Act of 1913 whose passage not only unleashed the Fed as we know it now, but the entire shape of modern finance.
In 1912, one person who warned against the passage of the Aldrich Plan, was Alfred Owen Crozier: a man who saw how it would all play out, and even wrote a book titled “U.S. Money vs Corporation Currency” (costing 25 cents) explaining and predicting everything that would ultimately happen, even adding some 30 illustrations for those readers who were visual learners.
The book, which is attached at the end of this post, is a must read, but even those pressed for time are urged to skim the following illustrations all of which were created in 1912, and all of which predicted just what the current financial system would look like.
Or, in the words of Overstock’s CEO Patrick Byrne, “that’s uncanny“
@zerohedge that’s uncanny.
— Patrick Byrne (@OverstockCEO) June 5, 2015
From “U.S. Money vs Corporation Currency” (which can and should be read for free on Google), here are the selected illustrations:
None of this was rocket science: should the power to create money fall into the hands of a private few, or an entity working purely on their behalf (and lest there is any confusion, a multi-trillion bailout of the US financial system and the ongoing ZIRP/QE regime has benefited almost entirely that handful of people who stood to lose trillions in paper wealth should US banking as we know it end), it would “inaugurate a financial and industrial reign of terror.” It was clear as day 103 years ago.
Fast forward 103 years when who should end up with that power? A group of central banking career academics, currently in the midst of a criminal probe what and how much information they leaked to a select group of private Wall Street interests and commercial bankers.
Why? Simple.
The country now knows: “Democracy” forgot.
* * *
Full book below (link for free ebook):
- Citi: Euro Bond Market Faces "Historic" Levels Of Risk
A little less than a month ago in “Two Years Later, The VaR Shock Is Back,” we outlined the similarities between the recent bout of bund selling and similar instances of safe haven havoc that have unfolded in the past.
More specifically, we discussed two self-fulfilling feedback loops that likely contributed to the sell-off. One of those self-feeding dynamics is known as a “VaR shock” and the concept is really quite simple. Here’s how we described it:
A VaR shock simply refers to what happens when a spike in volatility forces hedge funds, dealers, banks, and anyone who marks to market to quickly unwind positions as their value-at-risk exceeds pre-specified limits.
We went on the outline how QE sets the stage for episodic credit carnage:
Predictably, VaR shocks offer yet another example of QE’s unintended consequences. As central bank asset purchases depress volatility, VaR sensitive investors can take larger positions — that is, when it’s volatility times position size you’re concerned about, falling volatility means you can increase the size of your position. Of course the same central bank asset purchases that suppress volatility sow the seeds for sudden spikes by sucking liquidity from the market. This means that once someone sells, things can get very ugly, very quickly.
Last week, the bund battering was back. Here’s Goldman:
German long-dated government bonds (Bunds) have sold off aggressively this week. Returns on 10-year and 10-to-30- year bonds are negative to the tune of 6% and 16%, respectively, from the April 20 highs. Long-dated yield levels are back to roughly where they were in the last quarter of 2014, but their volatility is much higher. The 10-year benchmark rate has approached our end-2015 forecast.
Our correlation analysis indicates that the back-up in 10-year Bund yields has been affecting other markets and was pushing US Treasury yields higher. Exhibit 1 depicts the cumulative bullish or bearish signals generated by each of the four major bond markets, once contemporaneous and lagged inter-relations between rates are accounted for. As can be seen, Bunds are still in ‘in the driver’s seat’ in G4 rate markets, only this time they are moving ‘in reverse gear’. After contributing to a decline in global long-end rates since the Spring of 2014, they are now pushing them higher.
QE distortions: As we have discussed elsewhere, the way in which the ECB is conducting QE is leading to a ‘see-saw’ effect in the price action, particularly in markets with scarce supply. Consider that German 10-year yields were trading at around 35-40bp at the time of the March 5 press conference when President Draghi stated that the Eurosystem would not buy bonds yielding below the deposit rate, setting in motion a self-reinforcing price action largely unconnected to macro information. Seen in this light, around half of the sell-off from the 5bp lows on April 20 can be seen as the unwind of a ‘rational bubble’.
Picking up where Goldman leaves off, if half of the sell-off represents the unwind of a “rational bubble” (where we assume “rational bubble” means the rapid yield compression that occurred when investors “rationally” anticipated that the entire bund curve was destined, by the design of PSPP, to converge on the depo rate) then the other half may represent a forced unwind into an increasingly illiquid market after Mario Draghi essentially warned that hightened volatility is set to become a permanent fixture in EU credit markets.
For their part, Citi suggests that although the April/May bund rout may have forced hedge funds and banks to recalibrate, longer-term holders have not yet moved to adjust to the new reality and while the ECB seems ambivalent — content to bask in PSPP’s “success” — EGB bond risk has soared.
Via Citi:
Coming back to concept of bond market risk, we would expect high frequency investors (banks & HFs) to have reduced their risk-processing ability already in the sell-off four weeks ago. Other, less frequently trading investors (for example foreign central banks, insurance and pension funds, but also benchmarked mutual funds) might take some more time before adapting their limits to the new volatility environment. At the same time, the ECB – a large absorber of risk – is not altering its activity and even the front-loading is marginal (so far).
VaR-measures are a better measure than just volatility or dv01 in the current environment as the total market risk is a function of outstanding market value, duration and volatility (we’re simplifying a lot here). The question then is: Do investors want to own bonds at 1% or 1-2bp yield per bp of realized vol, if risk is exploding (Figure 14)? Standard theory tells us that investors want to be compensated for their portfolio risk. That is the link between risk, term premium and bond yields. Figure 15 shows that the EGB market is at historical highs in terms of total market risk!
With hoplessly illiquid core markets set become hoplessly illiquid-er during the summer “lull” (EGB net supply, QE inclusive, was set to be deeply negative in July and August and it isn’t clear to what extent font-loading will serve to mitigate supply constraints), investors should probably take Mario Draghi’s advice and prepare for severe turbulence.
- World’s 2nd Biggest Stock Breaks 28-Year Trendline
By Dana Lyons, partner at Lyons Fund Management and founder of 401kPro.com
On March 24, we posted a rare piece on an individual stock. As we do not invest in individual stocks, they are typically not our focus. Therefore, it takes extraordinary circumstances to inspire a post on a single stock. That was the case with the March 24 post which noted the fact that Exxon Mobil (XOM), the world’s 2nd biggest stock, was testing a trendline that began back in 1987.
The origin of the trendline, based on a logarithmic scale of XOM, is the low point of the October 1987 crash. It then precisely connects the 1994 and 2010 lows. Interestingly, the stock stopped on a dime in March once it hit the vicinity of the post-1987 trendline. I say interestingly because, at the time, the stock appeared to be in no-man’s land. There were no obvious support or resistance levels in the vicinity. And yet, the stock stopped right on the trendline. It then proceeded to “walk up” the trendline for the next 18 days.
To those who dismiss the influence of technical analysis and charting techniques on the behavior of stocks as completely random, I can hardly think of a better example of counter-evidence than this. What are the odds that a stock “respecting”, or adhering to, a nearly 3 decade-old trendline is completely random – for 18 days? Furthermore, after bouncing off this trendline into May, XOM returned to it over the past few weeks. It spent 6 straight days sitting squarely (again) on the trendline…before breaking below it yesterday.
This breakdown marks the first day that Exxon Mobil has ever closed below this trendline. Now, assuming the stock’s behavior around the trendline is not completely random, and considering its capacity as the 2nd biggest stock in the equity market, the effect of this breakdown may be profound. Absent an immediate reversal back above the trendline, this loss of 28-year support would appear to open the door to more downside in the stock.
- "Shawshank Redemption" Inspires Real World Prison Break
On Saturday, convicted murderers David Sweat and Richard Matt escaped from the maximum security wing of the Clinton Correctional Facility in upstate New York near the Canadian border.
Escaping from a maximum security prison is not — we imagine anyway — a particularly easy task, but even as improbable jailbreaks go, this particular effort was quite remarkable.
In a scene straight out of “The Shawshank Redemption”, Sweat and Matt apparently busted through a steel wall, maneuvered down catwalks, cut through a steel pipe, left a Post-it note with the message “Have A Nice Day”, and crawled their way to freedom, emerging from a manhole outside of prison walls. The New York Times has more:
Duping guards with dummies fashioned out of sweatshirts and using power tools to drill out of their cells, the men made their getaway late Friday or early Saturday, emerging on the other side of the prison’s 30-foot-tall walls, officials said..
The governor marveled at the particulars of escape, in which the two inmates had cut through a steel wall of their adjacent cells, shinnied down a series of internal catwalks, and burrowed their way more than a city block away before emerging from a manhole. Mr. Cuomo said that there had been a number of contractors working in the facility, and that the escapees’ work may have been safeguarded by the silence of other prisoners.
“I chatted with a couple of the inmates myself and said, ‘You must be a very heavy sleeper,’ ” the governor said. “They were heard, they had to be heard”..
“When you look at how the operation was done, it was extraordinary,” Mr. Cuomo said on Saturday after being given a tour of the escape route. This was the first time in the prison’s history that anyone escaped from the maximum-security section of the facility, he said.
The State Police said that Mr. Matt, 48, and Mr. Sweat, 34, were discovered missing during a 5:30 a.m. bed check.
The inmates left a parting message, according to a picture posted to Twitter by Gareth Rhodes, the governor’s deputy press secretary. It shows a yellow Post-it note next to a hole cut in a pipe. On the note, a caricature of a man wearing a conical hat appears above the words: “Have a nice day!”
A massive manhunt is now underway involving hundreds of law enforcement officers, K-9s, bloodhounds, and helicopters.
Despite their apparent sense of humor, Sweat and Matt are considered extremely dangerous and although authorities would appreciate any help they can get, Governor Cuomo had the folowing warning for New York residents:
“These are dangerous people, and they are nothing to be trifled with.”
- Should We Raise The Voting Age?
Submitted by Mark St. Cyr
Should We Raise The Voting Age?
I know at first blush the above headline reeks of “click bait.” However, that’s far from my intention. The reason why I used it, is exactly for the stopping power, as well as attention grabber I needed during a recent conversation. (If it could be called that)
During a discussion amongst people of varying ages the discourse became heated and focused more on “who was to blame” for the current economic malaise throughout the country. As well as “who the fingers should be pointed at” as to fix it. Neither side seemed willing to budge or relent any ground. Yet, the side that seemed the most adamant was the “younger” of the two sides (although younger was not by much).
They were also the most vocal in professing why “they were correct” as well as the one’s that were listening the least – and talking the most. Countering, or getting a word in edgewise without seeming to (or in reality) yell was near impossible. So I interjected with what I felt was a question that needed to be addressed if the “finger-pointing” argument if either side was to have any validity.
Although I’m not going to touch with a 10? pole the arguments of left vs right. Or, who vs who. Or who should pay more or less. What I am not afraid to state, as well as remind anyone of is this: When it comes to taxes – everybody pays them in one form or another – nothing is free. And just like death – taxes (regardless of age) will at sometime need to be settled with the “ferryman.” Pure and simple. And by taxes I mean all – everything. i.e., taxing in all its forms be it business, personal, wealth, education, speech, freedom, safety etc., etc.
You might want to debate they’re too high, or too low as to influence what one decides in the privacy of the voting booth. There’s nothing wrong with that and ideas should be expressed. However – knowing the implications; where they come from; the potential burdens on the young, old, neighbors, themselves, their families, the country and more is what has to be contemplated. Otherwise the arguments are nothing more than an assemblage of moot points only for the sake of verbal jousting.
It’s not my place to say one is right or wrong. Again, that’s not my gist here. Nevertheless, when the argument falls between two sides and one of those sides has no experience in the effects of their decisions; and can only speak as to why in reasoning’s of platitudes, sound bites, or less? (i.e., Just because they think so.) Someone has to be the adult in the room and stop the merry-go-round of nonsensical reasoning or accusations. Which is where I found myself, as the appointed “ring master.”
So when I interjected with the supposition “Maybe it’s time we need to raise the voting age?” Both sides stopped and took notice. Suddenly there was an argument on the table (which is what I’m known to do as to get to the real issue) neither contemplated. I believed it was a central (as well as clarifying) question that should be addressed by both sides if they were to continue further. For it opened the discussion more towards a tangible cause and effect both sides could, and did, have equal standing. Along with opening (hopefully) more reasoned arguments to answer for.
This question focused and demanded qualitative answers. There could be no “just because” type answers from either side without making it blatantly obvious that’s all one had. (i.e., No real defensible argument. For “just because” type answers are just that.)
I also elaborated the following in a true questioning manner. While at other times some bordered (and some were purely) the rhetorical. Whether or not any side agreed with the premise I stressed was not the case. However: knowing and understanding the intents and consequences contained within couldn’t go unanswered if: they wanted to continue on and try to reach an amicable conclusion. Whether it would be in half agreement, full agreement, or the willingness to agree they completely disagreed till more evidence or facts could be contemplated. But whatever the case: the talking (or half yelling) at each other had to cease. For as I’ve said many times “The best way to stop a headache is not with a stronger aspirin. It’s to first stop pounding your head against the wall.” And I could see the only thing everyone was contributing to was the severity of this “migraine.”
(I started with asking the following as a premise for further insight and discussion. I wasn’t taking one side or another. The premise was purely for pushing the discussion forward where thinking and true reasoning needed to stem from. Nothing more.)
I began with: Currently you can vote at 18. However, some of you are currently still in school (college), while some of you have recently just graduated. Others have since graduated and have yet to enter the work force. And, there are some that have since entered the work force yet, they are working in fields other than their chosen degree. And many combined still live at home. As a matter of fact, statics imply the number of college graduates that go back and live at home (i.e., parents or other family members) and remain there for years for whatever the reasons is quite high.
On average, it takes about 3 or 4 years after the day you leave high-school to obtain and get yourself adjusted to enter the labor force with an associate degree. Yes, it’s a two-year “in school” thing. However, when you total up all the incidental time you’ll spend i.e., the summers in between, then graduate and settle back home time, get your bearings and start applying to businesses. It runs around 3 to 4 years. For a graduate degree, it’s about 5 to 6 when all is said and done.
The average age after high school is about 18. So in essence, after an associates program you’re about 21. After a graduate somewhere around 23-24. And if a post-graduate about 25 or so give or take. The vast majority might not ever had, or may never hold a job of any type during this period.
Not only that, they will live in a sheltered environment where all the rules are known, visible, and the only competition they’ll face is to answer taught, and known variables that will be asked during testing assignments. Where a mediocre score, if not an outright 1 point above a fail allows one to be included, as well as on the same stage or platform, as one who receives above average scoring. (e.g., This can be shown in the old joke that really isn’t: “What do they call a med-student who graduates at the bottom, and is last in their class? Doctor!)
Add too this many of this same group have fought to be classified today as “children” until the age of 26 as to remain on their parents health insurance for the explicit reasoning that they “can’t and shouldn’t be made to afford it otherwise.” Also while remembering one isn’t considered legally as an “adult” to even drink alcohol till they’re 21.
Yet, at the same time many (and many is just that: a vast preponderance) have taken on suffocating amounts of student debt in the pursuit of degrees or studies that when looked through the prism of prudent financial analysis shows; repayment (if even possible) may cripple one’s ability to move forward in pursuit of the things so many take for granted. i.e., Qualifying for a house, raising kids of their own, and more in the not so distant future.
Does it seem this side should have equitable standing at the ballot box when their decisions will have the weight of enforcement by both law, and force under penalties of imprisonment or monetary damage when they may have never experienced a day in the real world outside of school?
Think hard about how you address these points. For they are not only valid arguments – they are also very real. And although one may not feel the ramifications of these decisions today. Rest assured, they will – once they too enter what is known as real life.
From the point of one side vs the other answer this question to yourself: Who is in the midst of what I just outlined? And should they be granted the right without any true understanding of the consequences of their actions? i.e., To vote for candidates, and laws to be passed where the ramifications will be borne by others? Or, those consequences may in fact backfire resulting to be far more devastating to they themselves in the future for they willy-nilly, or haphazardly voted them in – never contemplating the true ramifications.
Again: Should a person or group that has never experienced what is known by all as “real life” while simultaneously being seen by many legal standards as not having the full credentials to be recognized as an “adult” have the ability to vote directly for, or vote for candidates responsible in the setting of the nations wage laws, tax laws, business law, national debt, business tax structures, business mandates, international trade policies, monetary policy, or most importantly – whether to send their brethren off to war where people die for real – not in some video game or movie? All the while they’ve never been responsible for anything more than “school” and in many cases not subject to feel the direct consequences of their votes until some 8 years or even longer after the age of 18?
Not withstanding showing an inadequate fiduciary responsibility to themselves, never mind others, to pursue degrees that may in fact have no value in society for gainful employment? All the while taking on ever more burdensome debt that may never be paid back in their lifetimes without needing their own form of bailouts or debt forgiveness in the future? All this as they rail about “Wall St.” bailouts. Again, both sides should take a real hard look at not only these questions, but also the mirror.
At the end both sides were a little taken back and knocked of their own self-appointed pedestals (which is what I hoped for). For as I stated earlier, The “younger” side wasn’t all that younger than the other. Many fit into the above from both sides. And you could see the wheels turning in their heads as they contemplated what I had just proposed.
So now, with all that said, do I think we should raise the voting age? No. Of course not. Again: That’s not what I’m trying to argue.
What I am trying to bring to light is: Far too many today are acting like children when in fact they are older (I’ll contend much older) than the many that not all that long ago set out and made a life for both themselves, as well as others. If I may be so bold I’ll use an example in which I played my own part.
At 18 not only had the majority left school, many left at 16 or 17 never finishing (which is where I fell) and were out working odd or whatever jobs they could find. And trust me they were scarce in the 70’s. Sometimes we worked as many as we could handle at once with little to no sleep in between because if you wanted to eat – that’s what it took. (Many times I slept in my car, in the parking-lot as to not miss or be late. For a miss could mean being fired.)
There was no “going back home” to live with your parents. Many at 18 were confronted by very loving parents and asked point-blank “So you’re 18 now. Have you thought about where your going to live?” Why? Because you were considered an adult in just about every aspect of life. And you had better of understood that or else life was going to get a whole lot tougher – sooner.
For many by the age of 19 to 21 they were married, and most had their first child. They had apartments they were responsible for paying rent, utilities, food, as well as upkeep in household chores. Whether they could barely afford it or not. Want to eat? You had better learn to cook and make a meal of whatever you had on hand. A lot of times what was “on hand” was more like a finger. But we all did just that. There was no complaining because – there was no alternative. And for every generation going back it was the same if not more harsh. Want an example? Compare today’s employment prospects for a 20 something today as compared to someone the same age in let’s say 1938?
By 25 most were in jobs that would turn out to be careers in one form or another. By 30 you were contemplating school districts for your kids, neighborhoods to raise them through high school and more. Today, there are more just shy of 30 (if not over) still living in their parents home with nothing more intense as to compare against a real word “family life” than a relationship that maybe lasted a year or so since college. The same may be for a job if that. All while under the guise of “Unless they can get a corner office with a title along with a smokin’ hot spouse – there’s no rush because – they aren’t settling.” As they remain in their parents home unemployed – and single.
Before: the case for voting at 18 could easily be argued. For at 18 you were directly at the receiving end of consequences for your votes. Today? At 18? Answer that honestly. Especially if you are one that fits into the above scenario that I outlined in the beginning.
Never mind what many deem as “the older generation.” If you are right now 25-ish. Do you want any 18-year-old today that you know voting into law something that can directly impact you for what ever the reason? Especially if they seem directly indifferent to anything you may hold as dear? And there would be nothing you can do about it (whether you like it or not) because it would be enforced by all the power that comes from being law. Are you starting to understand why knowing the consequences and truly weighing them against alternative scenarios is important? Important as in say…voting?
Again, don’t let this point be lost on you. It truly is the crux of my argument. Think about it because what one thinks today as unimaginable can turn into reality tomorrow. If you think I’m trying to fear monger, or use the ole “when I went to school it was uphill both ways” argument. Think this…
The most influential group coming up the ranks that may contemplate whether or not the voting age should, or should not be raised out of respect for future generations may very well be the next batch of newly minted 18 year old’s. Where they may decide to form a movement pursuing, pushing, and mobilizing their own grass-roots and numbers for its passage. Many think the argument only resides or will be borne from some organizing “old geezers” constituent. But history shows us surprises can come from where one least expects it.
It’s quite possible (and perfectly lawful) it may very well be borne by some active and vocal group of 18 year-old’s the nation has ever seen. Remember, no matter what one thinks, or how hard one tries to escape it. The newest crop of 18 year-old’s at any time may take the sanctity of voting and its repercussions on the future more to heart than any predecessor – and decide for themselves how and when the “ferryman” in both death or taxes will be paid. After all – they will have to live the longest in what ever world they’re in, and may look at today’s constituent of 20 or 30 somethings – in the same light they look at their elders. Changes the whole landscape of who has the moral authority argument when put that way does it not?
At the same time let’s not forget the reason why you or I can even sit here and contemplate these current arguments was made possible in no small part this weekend in history by a group of individuals younger than today’s most recent graduates. Those that stormed into the teeth of a relentless and unrelenting foe with thousands upon thousands of lives lost and even more wounded, so that we can contemplate (as well as vote on) the issues of the day going forward.
If you want to impress upon yourself why voting in this country is looked upon with such reverence. Remembering D-Day should help you in that quest. Don’t take it for granted. Young – or old. And if you want more proof the world at any time could belong to someone 18.
Alexander The Great conquered the known world at about age 18.
- Drivers in the Week Ahead
The most important driver of the dollar remains the de-synchronization of the monetary policy cycle. The early and more aggressive action by the US, and the institutional flexibility, leaves the Federal Reserve in a position to begin normalizing monetary policy several quarters at least ahead of the eurozone, the UK and Japan. Other countries, including China, Australia, New Zealand, Sweden, and Norway are also in the process or are anticipated to be, of easing policy as well.
Improvement in the US labor market is key. The strength of the May employment report strengthens conviction that the March weakness was a bit of a fluke, and in any event, not reflective of the underlying trends. The same can be said of the contraction in Q1 GDP. We recognize that the trend growth in the US economy has slowed on this side of the Great Financial Crisis. The two drivers of growth–labor force growth and productivity, have slowed. This means that even at 2% growth, the US economy can absorb the slack.
The IMF opined that the Federal Reserve should wait until next year to hike rates. The Federal Reserve is unlikely to be swayed by the IMF’s logic. Fed officials, or at least the leadership, accept some version of the Phillips Curve, which posits that a tighter labor market will boost inflation. The underlying view is that headline inflation gravitates toward core inflation, and labor costs drive core inflation. Labor, like other commodities, is seen driven by supply and demand though a bit stickier. Yellen has argued that she does not need to see core inflation rise much as long as the labor market slack is being absorbed to be reasonably confident that Fed’s 2% inflation target (core PCE deflator) will be reached in the medium term.
The most important US economic data in the coming days will be the May retail sales data. Recall that after the strongest report in a year in March (1.2%), US consumers rested in April and retail sales were flat. They returned in May. The headline rate will be flattered by the strong auto sales that have already been reported. The components used for GDP calculations are expected to rise 0.5%. The monthly average in Q1 was 0.02%.
Assuming the a consensus report in May, and a flat June, the monthly average in Q2 would be 0.16%. What this means is that consumption is likely to be a bigger contributor to Q2 GDP than Q1, and we have already learned that trade is exerting a smaller drag. The Atlanta Fed GDPNow model says the US economy is tracking 1.1% Q2 GDP, and this is likely be revised higher after the retail sales report.
Another driver for the US dollar has been the dramatic sell-off in European bonds that pushed yields sharply higher. As the long positions are unwound, the short euro hedge are bought back. There are two issues here: the direction of yields and pace of the move. German bunds appear to be at the heart of the matter. The rise in German yields had a knock-on effect throughout the capital markets. The 10-year yield approached zero in the middle of April, which culminated a multi-year decline in yields. The last leg down in yields was sparked by European inflation falling into deflation territory.
There were also supply and demand dynamics at work. The grand coalition in German had agreed to a balanced budget and paying down debt this year. This curbed supply at the same moment that demand was increasing. The increase in demand is partly a function of its safe haven status given the ongoing Greek drama. German bunds are also used as collateral, not just an investment. The launch of the ECB’s sovereign bond-buying program is another source of demand.
The decline in the interest rates, the euro and oil prices fueled an economic recovery in the euro zone. At the same time that the economy gained traction and credit growth expanded, oil prices began recovering. This reduced the deflationary pressures. April’s CPI was flat, and the preliminary May report was the first positive reading (0.3%) since last November.
If economic fundamentals explain the direction, what about the pace of the move? In mid-April, many had expected the 10-year German bund yield to go negative, but it stopped just below five bp. Three weeks later it was near 80 bp and a half week later (last week) it approached 100 bp. There appear to be several factors at work. First, as Draghi noted, the low yields themselves leave the market more subject to volatility. Second, the micro-structure of the market, with levered players using some variant of value-at-risk models, exacerbates movement.
As yields and vol fall, such participants take larger positions only to have to scramble out when vol increase. Thirdly, the a combination of technology, regulation, and central bank activity appears to have contributed to the fragmentation of the market which while often generating strong volumes, diminishes liquidity. Draghi’s failure to express much concern (instead he advised investors to get used to it) may have helps spur new selling.
The unresolved Greek crisis also keeps the market on edge. The official creditors made an offer to Greece, which was very much in line with the “pretend and extend” strategy. The Greek government summarily reject it. The Greek government gets little sympathy from the political elites and investor class. Nevertheless, its demand for debt relief is more realistic than pretending that its debt is sustainable. Even the IMF has called for debt relief though it wants to exclude itself from the process. It is willing to be more generous with EU money than with its own.
The Greek government has consistently maintained that it comes down to a political decision. It has been accused of trying to have an end run around the Eurogroup of finance minister. To the extent that the creditors finally offered its own proposal after Greece has submitted no less than three plans, it came about only with the intervention of officials at the highest level.
As European officials did in 2010-2011, they want to make an example of Greece. They want to send a message that there is no alternative to the diktat of austerity. But there is. It is called debt relief. This can take the orderly form of restructuring that EMU officials have permitted for private sector investors in Greece and Cyprus. It can take a less organized form of default. The more onerous the demand for austerity and refusal of the official creditors to devise a plan for debt restructuring, the more likely is a default. A default under current conditions would make the Argentinian crisis look like a tea party. Greece may very well have been dysfunctional before the crisis, but the cost to Europe of turning it into a failed state would be much higher than debt relief.
The dollar has rallied nearly 6% against the yen from the low seen on May 14 (~JPY118.90) to the high seen before the weekend (~JPY125.85). Absent among the drivers is jawboning by Japanese officials. If anything, government officials have been cautioning against sharp moves. Japanese companies, like Fuji Heavy, have indicated that an “overly weak yen is not welcome.” The macroeconomic considerations include the rise in US yields and the strong rise in Japanese stocks. Of the major G7 equity markets, the Nikkei is the only one to have rallied (~5.6%) over the past month.
In terms of flows, Japanese investors had stepped up their purchases of foreign bonds after early May. Before turning to small sellers in late May, Japanese investors had bought nearly JPY2.5 trillion of foreign bonds in the preceding three weeks. Japanese pension funds are diversifying away from the JGB market toward domestic equities and foreign bonds. The yen has reached levels, though that some asset managers are reevaluating whether they want to continue buying foreign bonds on an unhedged basis.
Speculators also have been exceptionally aggressive sellers of the yen over the past three weeks. We cite this figures from the speculative positioning in the futures market assuming that they are representative of that market segment of short-term leveraged momentum players.
One needs to appreciate that dollar-yen was confined to a broad trading range since last December. During this period, the gross short yen speculative positions at in the futures market were cut from 153k contracts (each contract is for 12.5 mln yen) to about 52.3k contracts by late April. This was the smallest speculative short yen position since November 2012. In the past three CFTC reporting weeks, speculators have more than doubled their gross short yen position. As of June 5, it stood at 132.4k contracts. This three-week selling spree is the largest since in four years.
Indicative pricing in the options market is interesting. The upside breakout for the dollar has coincided with a decline in implied volatility. The three-month implied volatility has fallen from 10% in late-May to about 8.75% before the weekend.
At the same time, the premium for dollar calls (3-month 25 delta) have fallen from 0.9% to 0.3%. This suggests that instead of buying dollar calls while it is a rally, participants are selling dollar calls. These participants could be long dollars and using the options market to buy downside protection. It could also be Japanese exporters, whose exports to the US have been running more than a fifth above year ago levels, sell calls against their dollar receivables. Some Japanese investors in US bonds may also be hedging their currency risk.
Japan will offer a revision to its initial Q1 GDP estimate of 2.4% at an annualized pace. The market is divided about the outlook for the revision. The Bloomberg consensus anticipates an upward revision to 2.8%. This would be largely based on the strong upward Q1 caps. Instead of falling by 0.2% as anticipated, it jumped 7.3%. However, there is some risk that inventory accumulation that accounted for over half of Japan quarterly growth are revised down. Hence, it will be a surprise regardless of the outcome.
Europe will report industrial production data for April. After a weak March (-0.3%), industrial production in the eurozone is expected to have bounced back with the consensus around 0.4%. However, it is not non-eurozone industrial production reports that may be more interesting. Industrial output jumped 0.5% in the UK in March but is likely to have slowed in April. The consensus expects a 0.1% rise though the risks seem on the downside. Sterling has built a small shelf in the $1.5180-95 area (there is other technical support in the area, see here) and a disappointing report, which would play on ideas that the UK economy has peaked, would likely send sterling lower. The next target is the early May lows a cent lower.
Sweden reports industrial output and CPI figures. The consensus is for a 0.2% increase in industrial production, but we see risk on the upside. We look for the Swedish krona to be particularly data sensitive as the market is not convinced that the Riksbank QE is over. The CPI figures are expected to show that Sweden is still experiencing deflation, but it appears to be diminishing.
At the same time, poor Norwegian industrial output figures (-4.9% month-over-month in April and a 2.9% fall in manufacturing output) has heightened speculation of a Norges Bank rate cut at the June 18 meeting. Softness in this week’s CPI report will only fan such expectations. The Norwegian krona broke down last week against the Swedish krona. Although it looks over-extended, Nokkie is still vulnerable.
The Swiss National Bank meets the same day as Norges Bank. It will likely confront a strengthening of deflationary forces as the franc’s appreciation following the lifting of its cap continues to filter through the economy. With the risk of disruptive developments from the eurozone, the Swiss franc appears poised to strengthen against the euro. Although Swiss officials have indicated that they are near the lower limit of rates with a minus 75 bp 3-month LIBOR target, there may be scope for a lower target, within the existing -1.25% to -0.25% current range.
The Reserve Bank of New Zealand meets on June 10. The cash rate currently stands at 3.5%. The OIS market is discounting roughly a 50% chance of a cut. We had been leaning more in favor of a cut, but the 7.25% decline in New Zealand dollar against the US dollar since mid-May may have removed some urgency. It finished at new multi-year lows against the dollar. We are concerned that the RBNZ either disappoints those looking for a cut or that there is a sell-the-rumor, buy the fact” type of activity.
China reports its slew of monthly data. On balance, the real sector is expected to have stabilized. That includes industrial production, retail sales, and investment. China’s imports and exports likely remained soft (declining on a year-over-year basis), but this may result in a wider surplus. Yuan loans and aggregate financing likely remained robust. Perhaps the most important report is the CPI. Disinflationary, if not deflationary pressures are still evident. The pace of increase in consumer prices has been halved since the recent peak in October 2013 at 3.2%. Food prices are masking the decline in consumer prices. Non-food prices are increasing by less than 1%. A sharp slowing in the CPI (consensus is for 1.3% after 1.5% in April) may signal higher real interest rates, to which PBOC officials have been particularly sensitive.
The Mexican mid-term, and Turkey’s national elections are being held today. The results are not yet available. In Mexico, since the President cannot stand for re-election, the significance is about the legislative agenda for the next three years. The peso finished last week at record lows against the US dollar. In Turkey, the issue is whether the ruling AKP wins a super-majority that would give Erdogan a mandate to lead the country even further away from its secular and pro-European path. It does not appear that he will get such a mandate. If these results are borne out, the lira and Turkish assets may perform well at the start of the week.
- De-Dollarization Du Jour: Russia's Largest Bank Issues Yuan-Denominated Guarantees
The unipolar, dollar-dominated post-war world is shifting under Washington’s feet.
Leading the push towards multipolarity and de-dollarization are a resurgent Russia and China, the rising superpower. The demise of the Bretton Woods world order is perhaps nowhere more apparent than in the launch of the BRICS bank and the establishment of the AIIB. These new structures represent a move away from US-dominated multilateral institutions and their very existence suggests that a failure to adapt to economic realities and an inability or unwillingness to meet the needs of the modern world may soon drive institutions like the IMF into irrelevancy.
If the demise of the existing supranational economic order seems improbable, or if calls for its downfall appear at the very least to be premature, consider recent events.
While the US obstructs efforts to reform the IMF and give member countries representation that’s commensurate with their economic clout, and as the Fund itself bickers with the EU over aid to Greece, the BRICS bank (which hasn’t even officially launched) has offered Greece a spot at the table with some reports suggesting Athens may be able to contribute its paid in capital in installments while receiving aid in the interim.
China has pledged to invest some $50 billion in Pakistani infrastructure via Beijing’s Silk Road initiative and the AIIB. The money will fund power plants, roads, railways, and, perhaps most importantly, the Iran-Pakistan natural gas pipeline. The vast sum represents 53% more than the US has given Islamabad over the past 13 years combined. China is also set to invest an equally large sum in Brazil and is even considering the construction a railroad over the Andes, which would connect Brazil to China via the Pacific and ports in Peru. Meanwhile, lawmakers in Washington fight over whether infrastructure spending could have prevented an Amtrak derailment.
When considering the above, it’s important to understand that the BRICS bank isn’t simply a channel by which rising EM powers can ban together to project their growing influence in the face of the multilateral institutions which they feel have left them underrepresented. Similarly, the AIIB is more than a foreign policy tool that will allow Beijing to establish regional dominance.
Both institutions will serve to accelerate de-dollarization. Russia, for instance, has proposed the establishment of a BRICS alternative to SWIFT. China, meanwhile, is set to ensure that the yuan plays an outsized role in lending through the AIIB.
In yet another sign that Russia and China are set to work together to extricate themselves from a dependence on the dollar specifically and on Western financial institutions more generally, Russia’s largest bank has, for the first time, extended yuan-denominated letters of credit in concert with the Chinese Export-Import bank.
More, via Sberbank:
Sberbank issued its maiden letters of credit with financing from The Export-Import Bank of China for Baikal Bank’s client JSC Pharmasyntez.
JSC Pharmasyntez approached Sberbank about the possibility to finance letters of credit in yuan (CNY) for the import contract to supply pharmaceutical products worth more than 29 mln yuan.
The first LCs with financing from The Export-Import Bank of China have allowed the client to meet its current working capital needs while continuing to actively cooperate with Chinese suppliers.
The development of cooperation with The Export-Import Bank of China expands Sberbank’s possibilities to finance clients’ foreign trade with Chinese counterparties.
* * *
Recall that last October, Russia and China opened a $25 billion currency swap line, an effort which not only serves to bolster ties between Moscow and Beijing in terms of investment and trade, but which also helps to secure Russia against the financial strain imposed by Western sanctions.
- Tales From The Bizarro World
Submitted by Erico Matias Tavares
Tales from the Bizarro World
Back in the 1960s, DC Comics introduced a parallel Earth called Bizarro, where everything is inverted and everyone is insane. They even have their own wacky Superman, which ends up being a formidable foe of his sane counterpart in our world.
Or not in our world perhaps. Some events make us question in which of the two we might actually be living in: what if it was some version of Bizarro?
Over the last decades scientists have been researching certain quirks in our brain, or cognitive biases, that make us act in rather illogical and peculiar ways under certain circumstances. Since Amos Tversky and Daniel Kahneman first introduced this notion in 1972, a growing body of evidence suggests that we may not be as rational as we once thought. And this impacts many areas of our lives, including our beliefs, attitudes towards certain events, political affiliations and so forth.
A less scientific explanation for our illogical behaviors is that they may simply be the result of our imperfect human condition. That, or something in our environments could be poisoning our reasoning (we would argue, quite acutely in the case of Keynesian economists) similar to what happened to the Romans after they started using led in everyday life artifacts.
Whatever the reason, consider the examples presented below, drawn from the fields of economics, politics, health, society and even religion. Now, to be clear, we don’t mean to pick on any country or anyone in particular, much less on their beliefs (except for those Keynesians). Remember, in the Bizarro World everyone is mad so presumably we are all in this together.
Let’s proceed…
- If you want to market a new medicine, first you need to spend years in a very expensive approval process to make sure it is completely safe to the public. However, at the same time, any adult can buy a particular and ubiquitous consumer product where it is clearly written in the package that if you use it will eventually kill you and all those around you
- Keynesian economists tell us that in order to get richer we must save less and get deeper into debt
- Obesity is estimated to kill three times as many as malnutrition
- World governments spend trillions on weapons every year when we already have the capacity to blow up the planet many times over. But they always come up short when it comes to cleaning water supplies, providing healthcare, upgrading infrastructure, restoring nature and feeding people
- How does a desert-like region such as Southern California decide to become so dominant in food production? All the water exported in the form of fresh produce, dairy, fresh fruits, rice and so on will NEVER return to that ecosystem
- Hemp consumption can become a destructive addiction; but so can alcohol consumption. Why is only one of them illegal, or, depending on your views on the matter, why aren’t both legal in the same places?
- A google search of “Kim Kardashian” generates 197 MILLION results (we speculate, to figure out what she actually does), just a tad less than the current US President “Barack Obama”
- Some 30-40% of global food production is wasted
- Western leaders, once the biggest supporters of free markets, now spend trillions intervening in the economy. The US government has been the world’s biggest employer for many years. The (Keynesian-inspired) theme is “we had to destroy capitalism in order to save it”
- Everyone talks about the need to reduce debt levels, and yet since 2007 total debt around the world has increased by almost US$60 trillion
- Politicians in the US seem to have gotten into the habit of approving major legislation without reading it
- Pursuant to the Eurozone financial crisis in 2010, the Portuguese government was advised by international lenders to implement an aggressive austerity program. But public sector debt as a percentage of GDP ended up exploding as a result, reaching 166% last March from 108% in December 2009 – the exact opposite of the program’s goal. Nevertheless, the Portuguese government was recently praised by the architects of the program for delivering outstanding results (while being told, perhaps unsurprisingly, that more austerity is needed)
- A famous actor passionately demands in front of a UN assembly that world governments take drastic action to reduce carbon emissions and tackle global warming. Maybe they could start with him. Just a few months earlier he rented a mega yacht (complete with its own helipad) off Rio de Janeiro to watch the World Cup in style and supposedly flew his mother and himself multiple times on a private jet while shooting one movie in the US
- A country known as the “Land of the Free” has one of the largest prison populations on the planet; another with “Order and Progress” written on its flag has 19 of the world’s 50 most dangerous cities
- A UK scientist achieves worldwide fame through his widely publicized efforts to debunk the existence of God, while admitting at the same time that creation might in fact be the result of intelligent design
- In China, provincial governments have spent billions building new cities when most of their citizens can’t afford living there. Many remain empty
- The Japanese government is so desperate to create inflation that it is printing more trillions of new debt, when even a modest increase in nominal yields will explode its fiscal position
- The West’s financial system received trillions in financial support in 2008 to avoid an implosion of the global economy. However, it has since become even bigger and more concentrated, and as such the associated systemic risk might now be larger than ever. The people who designed this financial system are also doing better than ever
- Countries with the most abundant natural resources often have the poorest people
- Most parents unconditionally love their children and would do anything to secure their future. So why are we bequeathing a world with ballooning financial debts, less freedoms, lower education standards and increasingly broken ecosystems?
In his book “1984” George Orwell created his own version of an inverted world, where “war is peace, freedom is slavery, ignorance is strength”. That was quite a frightening vision.
If we indeed live in the Bizarro World, what does that look like to you?
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