- OBAMAS MaSSiVe FiGHT WiTH WaLL STReeT…
.
Our banks have admitted to crimes
And sentenced to pay a few dimes
While profits they see
Front-running QE
We’re living in interesting times
The Limerick King
- ECB's Willful Ignorance: Leaking Central Bank Says Austerity "Compliments" QE
Earlier this week, the ECB’s Benoit Coeure pulled a Janet Yellen and told a non-public audience of hedge funds that because markets are usually less liquid in the July-August “lull”, the central bank would be “slightly” front-loading PSPP purchases in May and June. This bit of very material, very non-public information promptly triggered a quick move lower in the EURUSD before things calmed down. Some ten hours later, the ECB was kind enough to share that information with the public which of course precipitated a 150 pip EURUSD plunge prompting us to ask just how many other mysterious market moves can be explained by “Chatham House rule” meetings heald by The ECB each day/week/month?
The ECB’s move to front-load asset purchases effectively means that QE will be expanded in months when net supply is positive and tapered when negative, which underscores a feature of PSPP that sets it apart from QE in the US and Japan: Mario Draghi is buying at a time when European governments have been cornered into an austerity fixation by the troika, meaning in many cases, monthly asset purchase targets will be difficult to hit owing lackluster supply.
This of course highlights something rather absurd about the ECB’s asset purchase program specifically, and about Brussels’ stance on fiscal discipline more generally. Namely, there’s something quite contradictory about telling governments to tighten their belts while promising to buy any and every piece of paper their treasury departments care to issue. In fact, it’s probably fair to say that a €1.1 trillion QE program simply cannot peacefully coexist with a strict, currency bloc-wide austerity policy.
This glaring contraction was on full display at the ECB’s April 14-15 policy meeting, minutes show.
Here’s more via the ECB:
Since the Governing Council’s previous monetary policy meeting on 4-5 March 2015, the implementation of the ECB’s expanded asset purchase programme (APP) had had a significant impact on euro area financial markets, contributing to further declines in government bond yields, while higher levels of excess liquidity had put downward pressure on euro money market rates. The euro had continued to depreciate against the US dollar, reaching a low of USD 1.05 per euro.
Since the start of purchases under the public sector purchase programme (PSPP) on 9 March, sovereign bond yields had declined further, reaching new historical lows in almost all euro area jurisdictions, the impact being strongest at the longer end of the yield curve. However, over the course of the month, yields in some jurisdictions had partly reversed the earlier declines that had immediately followed the start of the programme. Yield curves had remained lower and flatter than on 4 March, i.e. just before the announcement of the details on PSPP implementation. The downward shift was even more apparent when comparing prevailing yield curves with those observed immediately before the announcement of the APP on 22 January.
In other words, the ECB’s announcement in January has made it easier for EMU governments to borrow (the opposite of fiscal discipline), recent bond market turmoil notwithstanding. But the ECB is willfully ignorant (at least we hope it’s willful, although with central bankers, it’s hard to say what they might or might not understand) of the fact that its policies run counter to notions of fiscal restraint:
At the same time, a strong signal needed to be sent to euro area governments urging them to press ahead with structural reforms and to take measures to improve the business environment. Only with such complementary action could the full benefits of the monetary policy measures be reaped. Swift and effective implementation of appropriate reforms in the euro area would not only lead to higher sustainable growth in the medium to long term but also raise expectations of permanently higher incomes and encourage households to expand consumption and firms to increase investment already in the near term. In addition, fiscal policies should support the economic recovery while remaining in compliance with the Stability and Growth Pact.
It doesn’t get much more ridiculous than that. Coeure has just called fiscal reform “complementary” to a €1.1 trillion government bond buying program. But these two things aren’t complimentary at all, a fact which is on full display in Germany where the government does not need to borrow money, meaning that unless Bunds can be purchased in the secondary market, QE simply can’t be implemented in full under the capital key.
With these types on conflicting messages coming out of EMU officials, is it any wonder that “ascendant” socilaists are challenging austerity?
- George Soros Warns "No Exaggeration" That China-US On "Threshold Of World War 3"
While admitting that reaching agreement between the two countries will be difficult to achieve, George Soros – speaking at The World Bank’s Bretton Woods conference this week – warned that unless the U.S. makes ‘major concessions’ and allows China’s currency to join the IMF’s basket of currencies, “there is a real danger China will align itself with Russia politically and militarily, and then the threat of world war becomes real.”
Much in global geopolitics depends on the health and trajectory of the Chinese economy, was the undertone of George Soros’ comments as he spoke this week, but as MarketWatch reports,
Billionaire investor George Soros said flatly that he’s concerned about the possibility of another world war.
…
If China’s efforts to transition to a domestic-demand led economy from an export engine falter, there is a “likelihood” that China’s rulers would foster an external conflict to keep the country together and hold on to power.
…
To avoid this scenario, Soros called on the U.S. to make a “major concession” and allow China’s currency to join the International Monetary Fund’s basket of currencies. This would make the yuan a potential rival to the dollar as a global reserve currency.
In return, China would have to make similar major concessions to reform its economy, such as accepting the rule of law, Soros said.
Allowing China’s yuan to be a market currency would create “a binding connection” between the two systems.
An agreement along these lines will be difficult to achieve, Soros said, but the alternative is so unpleasant.
“Without it, there is a real danger that China will align itself with Russia politically and militarily, and then the threat of third world war becomes real, so it is worth trying.”
And while on the topic, Soros also spoke recently, as ValueWalk notes, on the situation in Europe…
“The European Union was a very inspiring idea to people like me,” he commented, reflecting back to when EU economies were more balanced. “It was the embodiment of the idea of an open society, like minded countries getting together and sacrificing part of their sovereignty for the common good. It was meant to be a voluntary association of equals.”
Soros continued to say: “Because of the Euro crisis, [the E.U.] has been transformed into something radically different.” He also emphasized that over time two different classes of countries have evolved: creditors and debtors. “The debtors had difficulty meeting their obligations and this put the creditors in charge. They (the creditors) set the rules and made it very difficult for the debtors to exit their inferior status. A voluntary association of equals turned into an involuntary association of un-equals.”
While avoiding making predictions, on Greece Soros noted: “Greece is a poisonous situation. All sides have made a lot of mistakes, and there is a lot of hostility, a lot of negative sentiments…Both sides are willing to hurt the other side even if it hurts them.”
* * *
The billionaire investor concluded by pointing out that military spending is currently on the rise in both Russia and China, warning ominously…
“If there is conflict between China and a military ally of the United States, like Japan, then it is not an exaggeration to say that we are on the threshold of a third world war.”
- Guest Post: This October The World Will Change – "China Is Preparing For Something Big"
Submitted by Mac Slavo via SHTFPlan.com,
“China… across the board… is preparing for something big in currency markets.”
(Video Via Future Money Trends)
This October may see the beginning of the end for the U.S. dollar as the world’s reserve currency. Twice every decade the International Monetary Fund meets to discuss their Special Drawing Rights (SDR) currency basket. Currently comprised of the dollar, Japanese Yen, British Pound and Euro, if China has their way a few months from now, we may well see the Chinese Yuan take its place among the world’s most trusted currencies.
U.S. Treasury Secretary Jack Lew says, “China isn’t ready for currency reserve status,” and would certainly like to see the Chinese blocked from entry, preserving the dollar’s status as the world’s go-to currency and primary mechanism of exchange for global international trade.
But while Lew and his predecessors have presided over the largest growth in national debt in world history, the Chinese have been strategically positioning, much like the United States did in the early 1900’s, to not just become the world’s largest economy, but to be the super power of the 21st century.
Forget for a moment what’s being touted by analysts, forecasters, politicians, and financial officials who say China is not ready. Focus instead on the actions being undertaken by China and you’ll understand why Chinese President Hu Jintao says that the dollar is a product of the past.
Excerpted From Future Money Trends:
Already we are seeing China and Russia hoard gold with Chinese demand skyrocketing in the past give year… China is both, the world’s largest gold producer and biggest importer… so not only are they accumulating gold by the truck load, but not one ounce produced is leaving their shore.
China… across the board… is preparing for something big in currency markets.
…
The world has an unease about the dollar system… President Hu of China said ‘the dollar is a product of the past.’
There was a time when the U.S. dollar was backed by gold. This backing helped to solidify it as a currency that could be trusted on the open market. Today, however, for all intents and purposes, the dollar is backed by absolutely nothing.
It is this weakness that the Chinese aim to exploit and that’s why they have been actively stockpiling thousands of tons of gold in recent years. But this is only part of the story.
In addition to their physical gold holdings, the Chinese have been using a secret gold accumulation strategy that no one is talking about :
The headlines for gold these past few years have only focused on physical gold accumulation by China, Russia and Eastern central banks. But what they have missed is a 7,000 year-old strategy that China is doubling down on.
According to data compiled by Bloomberg, in 2013 asset purchases by Hong Kong and [Chinese] mainland miners increased to a record $2.2 billion.
China is buying gold mines at a record… something completely missed by both, the mainstream investor and even the gold analysts who tend to only focus on the bullion sales, which haven’t been disclosed officially since 2009.
Although, according to Bloomberg, based on trade data the physical bullion stockpile has likely tripled since then.
China, who is aggressively buying gold, would spark an event if it disclosed how much gold it has stockpiled.
But imagine the true disclosure when you add up all their deposits… not just in China, but offshore. $2.2 billion is equivalent to 46 metric tons of physical gold… but when buying gold deposits in the ground this could be upwards of 5,000 metric tons.
And that is just one year of record mine buying from China.
It’s been rumored that China may disclose those gold holdings ahead of the IMF’s decision this October in an effort to prove to the world that their currency is not only worthy of admission into the SDR basket, but that it is more trustworthy than the U.S. dollar itself.
The winds of change are blowing and the Chinese will soon be taking the helm of the global economy. They know a major event is coming and they have been preparing for it by acquiring the one asset that has survived the test of time as a mechanism of exchange.
For those desperately trying to figure out where they should be putting their money before the next major market event takes shape, consider following their strategy.
- Welcome To The Oligarch Recovery: 82% Of US Construction Is Luxury Units
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
Here is good news for the plutocrat who wants to try out Manhattan’s ritziest neighborhoods before taking the multimillion-dollar plunge. The market for super-high-end rentals is booming, with plenty of enticing options for tenants of every taste.
In all, 82 apartments renting for at least $50,000 a month were listed on StreetEasy during the first three months of the year, more than triple the number listed in the first quarter of 2008. At lower thresholds, luxury listings are also on the rise. Apartments renting for more than $25,000 a month made up 0.95 percent of total inventory in the first quarter of 2015, up from 0.46 percent in the first quarter of 2008…
Of 370,000 multifamily rental units completed from 2012 to 2014 in 54 U.S. metropolitan areas, 82% were in the luxury category, according to CoStar Group Inc., a real-estate research firm. The firm defines luxury buildings as those that command rents in the top 20% of the market. In some places, including Denver, Tampa, Baltimore and Phoenix, virtually all new apartment construction has been targeted to high-end renters. In Atlanta, about 95% of new apartments have been in the luxury category.
– From Bloomberg and the Wall Street Journal
The oligarch recovery marches forward with reckless enthusiasm, despite extremely disturbing underlying trends which are all but guaranteed to result in significant societal unrest in the years ahead. The U.S. economy, and indeed the global economy, is much more similar to pre-1789 France than any other historical period I can think of.
You have a handful of super wealthy people, completely disconnected from any sense of reality, running around telling governments what to do. All the same characters who created the global financial crisis remain in charge of the world’s most powerful institutions, and continue to benefit handsomely from its aftermath. While claiming to have “saved the global economy,” the only things they really saved were their own positions of power and wealth. The only thing that was saved, was the very thing that should have been completely discarded, the global status quo.
The results of the global bailouts and backstops are now clear for everyone to witness. The entire global economy is one gigantic ongoing crime scene. It’s an economy in which fraud is rewarded and never punished. An economy where the rich, powerful and connected concoct unimaginably lucrative crony deals knowing the law doesn’t apply to them. To hedge their corruption, they feed scraps to the poor, not out of altruism, but so that the growing underclasses have just enough not to rebel.
Today, I want to highlight two related articles to clearly demonstrate just how completely screwed up the U.S. economy really is. The first one is courtesy of Bloomberg, and focuses on my hometown of NYC. The best decision I ever made in my life was leaving that place, and it’s gotten much, much more narcissistic and financialized since I left (for the story of why I left, see: The Biggest Trade of My Life). The second article is from the Wall Street Journal, and it highlights the extremely troubling statistic that 82% of multifamily rental units completed from 2012 to 2014 in 54 U.S. metropolitan areas were luxury units.
First, from Bloomberg:
Here is good news for the plutocrat who wants to try out Manhattan’s ritziest neighborhoods before taking the multimillion-dollar plunge. The market for super-high-end rentals is booming, with plenty of enticing options for tenants of every taste.
In all, 82 apartments renting for at least $50,000 a month were listed on StreetEasy during the first three months of the year, more than triple the number listed in the first quarter of 2008. At lower thresholds, luxury listings are also on the rise. Apartments renting for more than $25,000 a month made up 0.95 percent of total inventory in the first quarter of 2015, up from 0.46 percent in the first quarter of 2008. Real estate agents and wealth managers say the increase in expensive rentals is partly an outgrowth of the luxury building boom sweeping through New York City and partly due to the shifting whims of a global elite that wants luxury digs without the hassle of a long-term commitment.
The hot market for super-luxury apartments has spurred new high-end projects. Spending on residential construction increased 73 percent in 2014 from the year before, according to the New York Building Congress, but the number of new units increased by only 11 percent. That means fewer resources for more-affordable housing. “The existence of a greater share of pricey buildings implies that the lower end isn’t growing as quickly,” said Alan Lightfeldt, data scientist at StreetEasy.
In some cases, it’s the very demand for luxury real estate that’s providing supply to the rental market. As the global elite hit on Manhattan condos as a store of wealth, buyers are more likely to become landlords. Last year, condo buyers were twice as likely to rent their apartments out within 60 days of buying them as they were in 2010, according to a Bloomberg story in February.
“The question might not be how rich do you have to be—it might be how foolish,” says Michael Goodman, chief executive of Wealthstream Advisors. “It’s like, why do you buy a $250,000 car? Not because it gets good gas mileage, but because you want to, and you can.”
While the above article points out that most of the construction in NYC targets the very wealthy, what about trends across the U.S. as a whole? For that, we turn to the WSJ:
Of 370,000 multifamily rental units completed from 2012 to 2014 in 54 U.S. metropolitan areas, 82% were in the luxury category, according to CoStar Group Inc., a real-estate research firm. The firm defines luxury buildings as those that command rents in the top 20% of the market. In some places, including Denver, Tampa, Baltimore and Phoenix, virtually all new apartment construction has been targeted to high-end renters. In Atlanta, about 95% of new apartments have been in the luxury category.
“I don’t believe there ever has been a time where we have produced so much luxury rental housing,” said Susan Wachter, professor of real estate at The Wharton School of the University of Pennsylvania. While these new buildings are priced for the affluent, many middle-class and young workers are straining to rent the units, in part because they have few others choices.
What’s more, rents in new apartment buildings are commanding a far bigger premium over older buildings than during past construction booms. According to MPF Research, a division of RealPage Inc., apartments completed a decade ago on average commanded rents that were 9% higher than older buildings. But new apartments delivered since 2010 have fetched a 21% premium over existing rental stock. In the Atlanta area, the premium for a new apartment is 39% compared with 2% a decade ago.
While some developers worry that the current construction boom could eventually result in overbuilding at the high-end—which could put downward pressure on rents for all types of apartments—there is considerable angst among city officials and housing advocates worried that the middle class is getting squeezed.
What’s the middle class? But don’t worry, there’s hope…
Some cities, such as New York, are moving to require that new developments in some areas include more units for middle- and low-income families.
I suppose after deliberately handing out subsidies to oligarchs, the serfs could use a few scraps. Let’s not forget: Tax Breaks for Oligarchs – The $100 Million Manhattan Apartment with a Property Tax Rate of 0.017%
Mr. Randall, owner of privately-held South City Partners, said when he started 30 years ago “almost 100%” of what he built was low-rise, suburban buildings with rents of about $1,000 a month in today’s dollars. Now, even as his business has shifted almost entirely to urban projects like Inman Quarter, he fears the supply of new high-end building could be overdone.
As a hedge, he’s in the process of purchasing two sites in suburbs of Atlanta where he hopes to return to building apartments for about $1,200 a month on average. He said the challenges are steep because suburban communities often oppose multifamily projects and banks aren’t anxious to finance middle-market projects.
Ah the banks. The taxpayers bailed them out so that they could turn around and steal billions by criminally rigging the financial markets, yet they can’t be bothered to finance projects for the middle class.
The reason everything is being built for the wealthy, is because all the gains from the oligarch recovery have gone to the wealthy. This is no accident. It’s how the bailouts were designed, and how the status quo operates. Our socio-economic system since 2008 can be best described as serfdom, and nothing is going to change until people admit this, rather than hanging on to false hopes that they one day too will become an oligarch. It’s not gonna happen.
- US Retaliates At China Escalation, Warns Sea "Sandcastles" May "Lead To Conflict"
On Wednesday we showed what happens when US spy planes carrying CNN reporters get too close to China’s land reclamation project in the South China Sea. In short, the Chinese Navy not-so-politely advises them to “Go now!”
China is working diligently to construct man-made islands atop reefs in the Spratly archipelago where Beijing shares disputed waters with the Philippines, Vietnam, Malaysia, Brunei and Taiwan. For its part, Washington is none too pleased with the effort and in a fantastic example of ironic rhetoric and American hypocrisy, The White House is shouting about violations of territorial sovereignty and Chinese “bullying”.
The Pentagon meanwhile has said the US may consider confronting China in the region with surveillance aircraft (and CNN crews apparently) and war ships, a move China has gently advised against, telling Washington that it might be in everyone’s best interest if the US “refrains from risky and provocative actions,” and now, China looks to have conducted a practice bombing raid on Wednesday.
Via The South China Morning Post:
China’s air force sent a group of strategic bombers through the Miyako Strait south of Okinawa in a long-range drill for the first time yesterday as part of military exercises in the western Pacific.
The manoeuvre came as US-based CNN reported that the Chinese navy repeatedly warned a US surveillance plane to leave airspace over artificial islands that Beijing is building in the disputed South China Sea.
CNN reported that on Wednesday a Chinese navy dispatcher demanded eight times that a US Air Force P8-A Poseidon surveillance aircraft leave the area as it flew over Fiery Cross Reef, where China has conducted extensive reclamation work. The exercise and the warnings underscore growing tensions between the armed forces of China and the United States, and China’s neighbours.
PLA Air Force spokesman Colonel Shen Jinke said in a statement on The PLA Daily’s website that the bombers flew over the strait in a routine drill that was part of a blue-water training exercise.
Shen said the drill was not aimed at any country, region or target, and similar exercises could be conducted in future.
Now that the Chinese Navy has explicitly told at least one US surveillance aircraft to “leave immediately” (and implicitly threatened to shoot it down, CNN camera crew and all), it’s the US’s turn to ratchet up the war rhetoric. This time it’s John Kerry’s deputy Secretary of State Antony Blinken’s turn to denounce China’s series of sea sandcastles. Reuters has more:
China’s land reclamation around reefs in the disputed South China Sea is undermining freedom and stability, and risks provoking tension that could even lead to conflict, U.S. Deputy Secretary of State Antony Blinken told a conference in Jakarta.
China claims 90 percent of the South China Sea, which is believed to be rich in oil and gas, its claims overlapping with those of Brunei, Malaysia, the Philippines, Vietnam and Taiwan.
Recent satellite images suggest China has made rapid progress in filling in land in contested territory in the Spratly islands and in building an airstrip suitable for military use and that it may be planning another.
“As China seeks to make sovereign land out of sandcastles and redraw maritime boundaries, it is eroding regional trust and undermining investor confidence,” Blinken said on Wednesday.
“Its behavior threatens to set a new precedent whereby larger countries are free to intimidate smaller ones, and that provokes tensions, instability and can even lead to conflict.”
As for China … well, let’s just say that the resolve to implement territorial expansion via fake island construction is pretty strong:
China said its determination to protect its interests was “as hard as a rock”.
Asked about Blinken’s remarks, China’s Foreign Ministry demanded on Thursday that the United States abide by the principle of not taking sides on the South China Sea, and said his comments damaged trust in the region.
“The U.S. assumptions are groundless,” ministry spokesman Hong Lei told a regular briefing.
“Groundless” though these assumptions may be, one thing that is now certainly not “groundless” is Fiery Cross Reef.
* * *
Satellite photography has identified three cement plants operating on the island.
China has already constructed in excess of 60 semi-permanent or permanent buildings.
At least 20 structures are visible on the southern side of the island (ZH: including a helipad).
China is building an airstrip on the island. The airstrip is likely large enough to land nearly any Chinese aircraft.
Images taken on April 11 show the runway more than one-third complete.
Full interactive report available here from the AMTI
- How The Media Deceive The Public About "Fast Track" And The "Trade Bills"
Submitted by Eric Zeusse,
The way that “Fast Track” is described to the American public is as an alternative method for the Senate to handle “Trade Bills” (TPP & TTIP) that the President presents to the Senate for their approval; and this alternative method is said to be one in which “no amendments are permitted, and there will be a straight up-or-down vote on the bill."
But, in fact, the “Fast Track” method is actually to require only 50 Senators to vote “Yea” in order for the measure to be approved by the Senate, whereas the method that is described and required in (Section 2 of) the U.S. Constitution is that the President “shall have the Power, by and with the Advice and Consent of the Senate, to make treaties, provided two thirds of the Senators present concur.” That’s not 50 Senators; it’s 67 Senators, that the Constitution requires.
In other words: “Fast Track Trade Promotion Authority” (which was invented by the imperial President Richard Nixon in 1974, in order to advance his goal of a dictatorial Executive, that the Presidency would become a dictatorship) lowers the Constitutionally required approval from 67 Senators down to only 50 Senators.
This two-thirds rule is set forth in the Constitution in order to make especially difficult the passing-into-law of any treaty that the United States will have with any foreign country. The same two-thirds requirement is set forth for amending the Constitution, except that that’s a two-thirds requirement in both the House and the Senate: it can be done “by either: two-thirds (supermajority) of both the Senate and the House of Representatives …; or by a national convention assembled at the request of the legislatures of at least two-thirds (at present 34) of the states.”
Getting two-thirds of either house of Congress to vote for a bill is rare and difficult, but it has happened 27 times, because the entire process was public, and because there was widespread support of each Amendment.
By contrast: Obama’s proposed trade treaties are still secret.
The difference between 50 Senators versus 67 Senators is, essentially, the difference between a treaty that is publicly discussed and widely acceptable to the American public (the people, after all, who voted for those members of Congress); versus a secret treaty that will be widely unacceptable to the American public when the America public will become informed of its contents, which won’t be until years after the treaty has already gone into effect.
This is the reason why only a tiny fraction of authentic “trade bills” even need “Fast Track Trade Promotion Authority” in order to pass; most trade bills are passed in the normal way. A President doesn’t ask for “Fast Track Trade Promotion Authority” unless he is going to be presenting to the Congress a treaty that is so horrible for the American people that only few members of either the House or the Senate would vote for it — the bill needs “Fast Track” in order for it to be able to pass.
What types of “Trade Bills” are these?
They are treaties in which only a tiny fraction of the treaty actually has to do with “Trade,” or with tariffs and other legal favoritisms toward one nation as opposed to another. In other words: They’re legislation to cede our national sovereignty to international corporations. Issues of tariffs and other “trade” disputes between nations are tacked onto these multinational treaties in order to be able to fool the public into thinking that all that’s at issue is “trade.”
Now, it’s true that “Fast Track” does also eliminate the ability of members of the Senate to propose an amendment to the treaty that the President is presenting for their approval. But that’s a relatively minor feature of “Fast Track,” which was included in the concept in order for “Fast Track” to be able to be described by politicians and by the ‘news’ media as being a minor matter — no “big deal,” no ceding of sovereignty to international corporations.
It’s not a minor matter; it’s the biggest matter in President Obama’s entire Presidency: it’s about scandalously bad international treaties with many nations at once, in which international corporations (that is, the hundred or so individuals who own the controlling interests in them) will be handed our national and democratic soverieignty over labor rights, consumer rights, environmental rights, and investors’ rights — it’s every way that those billionaires can think of to pass off onto the public the harms that they do while keeping for themselves all the benefits of the heads-I-win-tails-you-lose game they’re playing with the U.S. public and that of every other signatory nation. It’s international fascism, not merely fascism of the local type.
And that’s what we’ve now got.
* * *
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.
- The Government's Message For Heavily Indebted Students: Don't Pay Us Back
Over the course of several years, we’ve chronicled virtually all aspects of America’s $1.3 trillion student loan bubble.
We’ve discussed, for instance, the Treasury’s projections of a $3.3 trillion student debt nightmare by 2025. We’ve also outlined why the official data on delinquencies almost assuredly understates the case. The numbers you see, have been adjusted twice. Instead of taking the number of delinquent borrowers over the number of borrowers in repayment, the official figures instead report the number of delinquent borrowers over total borrowers, even those in deferment and forbearance, which ensures the delinquency ratio will be far lower than it would otherwise be. But that’s not all. Borrowers making no monthly payments due to their enrollment in the government’s Income Based Repayment program are not counted as delinquent because in a society built on debt, a “payment” of $0 counts as a “qualified payment” towards the 300 monthly installments needed for the government to “forgive” the balance of the loan. The delinquency data has effectively been “Liesman’d”.
Moody’s (when they aren’t busy sparking bank runs) has warned that the proliferation of $0 Income Based Repayment plans threatens to plunge billions in student loan-backed ABS into default and based on the following official Department of Education letter that’s sent to students coming off of the 6-month post-graduation grace period, we can see why the ratings agency is concerned because as you can see, the government can’t wait to tell students how they can avoid repaying their debt.
Dear XXX,
Your loan servicer, Great Lakes Educational Loan Services, Inc., has contacted you or will be contacting you soon about your repayment options for your federal student loan. As you consider these options, the U.S. Department of Education wants to remind you that you may qualify for a repayment plan that calculates your monthly payment based on your income.
You will likely qualify for an income-driven repayment plan if your total federal student loan debt exceeds your annual income. Under an income-driven plan, your initial payment could be as low as $0 per month.
When you make payments based on your income, your loans are paid off over a longer period of time than the standard 10-year plan. While this reduces your monthly payment amount, it also increases the total amount you pay over time. But if you work for the government or a not-for-profit employer, you may qualify to have your remaining loan balance forgiven after 10 years of payments under the Public Service Loan Forgiveness Program.
We encourage you to use our repayment estimator to estimate your monthly payments under our income-driven plans and see if you might qualify. Your loan servicer can also help you better understand your repayment options.
Thank you,
U.S. Department of Education
We’ll leave you with the open letter we penned to the Class of 2015 earlier this month:
Dear Class of 2015,
Because we recognize your plight, allow us to provide you with a bit of friendly advice as it realtes to your student loans. Once you are uncerimoniously thrown from your dorm into the less-than robust US jobs market, you will likely discover that contrary to what you were told in your economics courses, the US economy is but a shadow of its former self. Because you probably didn’t study to become a petroleum engineer, you will likely find your student debt burden to be quite onerous. The key to having it discharged is to make just enough money to stay clear of bankruptcy, but not enough to really survive above the poverty line. This is because it’s hard to have student debt discharged in the event you go completely broke. However, if your discretionary income is so small as to render you incapable of making payments, the government will start you on a program whereby a monthly payment of zero dollars counts towards the 300 “payments” you need to make to have your debt forgiven. Toe this line carefully (i.e. don’t slip up and start making too much discretionary income) and the entirety of your student debt will be forgiven in 25 short years without your ever having to pay a dime.
You’re welcome,
Zero Hedge
- Zappos CEO Pushes "100% Weird" Boss-less Model After Employee Exodus
Last month, Zappos CEO Tony Hsieh made what he would likely call a calculated error: he forced his 1,500 employees to choose between a seemingly unpopular ultimatum and free money. Hundreds chose the money.
Hsieh is in the process of implementing a “holacratic” corporate culture at Zappos. As a reminder, here’s what that means:
Holacracy is, in Hsieh’s words, “a system that removes traditional managerial hierarchies allowing employees to self-organize to complete work in a way that increases productivity, fosters innovation and empowers anyone in the company with the ability to make decisions that push the company forward.” So essentially, it’s a boss-less structure aimed at driving productivity and innovation by allowing employees to take ownership of their respective goals and responsibilities.
That sounds good in theory, but for whatever reason — perhaps employees want structure and guidance, perhaps they perceived the new system as antithetical to career advancement, or maybe all of the managers just quit — 210 people chose “the offer” over Holocracy.
“The offer” is Zappos lingo for a pay-to-quit scheme wherein the company offers to compensate employees who choose to leave, the idea being to retain only those who are truly dedicated to Zappos. Typically, only around 1-3% accept — this time around, the number was 14%.
New details are now emerging both about the employee exodus and about how effective the “bossless” system has been in terms of achieving the outcomes envisioned by Hsieh.
WSJ has the story:
Brironni Alex was so good at answering telephone calls and emails from customers at Zappos.com Inc. that the company promoted her to customer-service manager.
But when the online retailer adopted a management philosophy called Holacracy, she lost her job title and
responsibility for performance reviews. Since the end of April, Zappos has zero managers to oversee employees, who are supposed to decide largely for themselves how to get their work done…
Employees say the new system has been confusing and time-consuming, especially at first, sometimes requiring five extra hours of meetings a week as workers unshackled from their former bosses organize themselves into “circles” and learn the vocabulary of Holacracy.
Created by a former software executive, the philosophy is spelled out in a 30-page “Constitution” where doing a job is called “energizing a role,” workplace concerns are “tensions” and updates are made at “tactical meetings”…
Boss-free companies are the extreme version of a recent push to flatten out management hierarchies that can create bottlenecks and slow productivity. W.L. Gore & Associates Inc., the maker of Gore-Tex fabric, says it has more than 10,000 employees and annual sales of more than $3 billion but no traditional organizational charts or chain of command…
Tweaks to how employees work at the company’s headquarters in the former Las Vegas city hall are common. Employees from every part of Zappos frequently mention its second core value: “Embrace and Drive Change.”
Zappos began testing Holacracy with a small group of employees in 2013. Mr. Hsieh then declared at a company wide meeting that Zappos would get rid of bosses and put employees in charge.
The management philosophy replaces work teams with circles. Employees start or join a circle based on the type of work they want to do, and each circle has a “lead link” who is similar to a project manager with limited authority.
Day-to-day routines were thrown into doubt, too. In many companies, managers announce new projects and direct employees to meet specified deadlines. The bosses usually track performance, make crucial decisions and swoop in if problems erupt.
Holacracy-driven employees establish their own priorities and raise problems with the rest of their “circle.” Meetings end with an opportunity for employees to say whatever is on their minds. Ms. Jimenez says she has heard employees say: “We got a lot done” and “I can’t wait to eat my leftover pizza for lunch.”
Note the rather amusing bolded passage above wherein employees attest that this space-age, zen-like management philosophy which Hsieh swears will “increase productivity” has in fact been “confusing”, “time-consuming”, and on bad weeks, creates five hours worth of extra meetings because no one can understand what anyone else is saying.
In a further testament to just how efficient this new system isn’t, Hsieh says implementation will take half a decade…
Mr. Hsieh says it could take Zappos two to five years to finish the transition.
…while those who stuck around think things have gone from ‘we’ve got a McDonald’s playplace in the office’ eccentric to ‘we may have inadvertently joined a cult’ weird:
“Create Fun and a Little Weirdness” is one of 10 “core values” [at Zappos] and a conference room features a Chuck E. Cheese’s-style pit filled with small plastic balls…
Marques Smith, 31, who drives the company’s courtesy shuttles, found Holacracy hard to understand and “weird 100%.”
Here’s a handy Holacracy graphic to which you can refer should any of the above sound as convoluted to you as it apparently did to 14% of Zappos’ workforce:
* * *
In the end, Hsieh isn’t discouraged by the employee exodus because after all, not everyone quit:
“Another way to look at it is that 86% of employees chose to … stay with the company.”
Right.
Kind of like how another way to look at a 20% decline in Greek bank deposits since December is that 80% of depositors didn’t stuff their money in the mattress.
- Where America's Airplanes Go To Die
Davis–Monthan Air Force Base is located in Tucson, Arizona. It occupies an area of over 10 square kilometers, equal to roughly 1,870 football fields. The base is the location of the Air Force Materiel Command’s 309th Aerospace Maintenance and Regeneration Group, or AMARG in short. It is also known as the “boneyard.”
With the area’s low humidity in the 10%-20% range, meager rainfall of 11″ annually, hard alkaline soil, and high altitude of 2,550 feet, it has the “just right” conditions to avoid corrosion and not to need paving when moving massive objects. It has emerged as the perfect venue for one thing: the largest aircraft boneyard in the world, with a typical inventory of more than 4,400 aircraft.
Allowing the aircraft to be naturally preserved for cannibalization or possible reuse, Davis-Monthan is the logical choice for a major storage facility. The geology of the desert allows aircraft to be moved around without having to pave the storage areas.
AMARG’s role in the storage of military aircraft began after World War II, and continues today.
Interactive map of AMARG as seen in the most recent Google maps satellite overflight:
been commented on," Schleiger wrote. "This one took until after midnight."Which resulted in an internal probe ordered by Bernanke that inevitably found no wrongdoing.. and so Congress took up the matter.
And then, as The Wall Street Journal reports, The Fed has ignored that request…
The Federal Reserve has not replied to a lawmakers’ request that it identify the individuals who had contact with a private consulting firm that published a report on the central bank’s market-sensitive internal policy deliberations.
In October 2012, the day before the Fed released its minutes of its September 2012 policy meeting, Medley Global Advisors, sent a report to its clients with several sensitive details that subsequently appeared in the minutes. A central bank probe found a “few” Fed staffers had contact with Medley before the report, but did not identify them.
Rep. Jeb Hensarling (R., Texas), Chairman of the House Financial Services Committee, sent a letter to Fed Chairwoman Janet Yellen on April 15 asking the Fed to name them by 5 p.m. EDT April 22.
The deadline passed without any response by the Fed, a committee spokesman said Wednesday.
The Fed declined to comment. Medley did not respond to a request for comment.
* * *
Then Janet Yellen herself admitted meeting with Medley Global Advisors…
So she met with the analyst that leaked the statement… but didn't say anything?
And so then The Fed agrees to name the leaker (but only in secrecy)
As The Wall Street Journal reports,
The Federal Reserve is providing a congressional panel with the names of its staffers who had contact with a consulting firm that published details of market-sensitive policy deliberations in October 2012, “with the understanding that the names will be kept confidential,” Fed Chairwoman Janet Yellen said.
“As you are aware, the [Fed] Board’s Inspector General and the Department of Justice are in the midst of an investigation into this matter,” Ms. Yellen wrote in a letter dated Monday to Rep. Jeb Hensarling (R., Texas), chairman of the House Financial Services Committee, and Rep. Sean Duffy (R., Wis.), who chairs the panel’s oversight subcommittee.
“We are cooperating fully with them and look forward to the results of their investigation. To avoid compromising that investigation, these names are being provided with the expectation that they will be kept confidential.”
Mr. Hensarling did not respond immediately Monday to a request for comment.
So we'll happily tell you who leaked it… as long as you don't tell the public.
Audit The Fed!!!
* * *
And so now, Hensarling is subpoenaing them…
The subpoena is necessary because the Fed has failed to comply with a request for documents, Hensarling, a Texas Republican, said in a statment Thursday.
- Hewlett Packard Just Reported Its Worst Revenue Since 2007: This Is How It "Beat"
If you are the Hewlett-Packard CFO and you know you are about to miss badly on your revenue, which incidentally at $25.5 billion will not only be a 7% drop from the prior year’s topline and below the $25.7 billion expected, but will also be the worst revenue since July 2007 and on top of that, your Q2 GAAP EPS of $0.55 will will miss lower end of the previously provided range of $0.57 -$0.61, what do you do? Why you fudge your non-GAAP EPS as much as you possibly can.
So much so, that while missing your own GAAP outlook your non-GAAP EPS of $0.87 lands in the upper end of the $0.84-$0.88 range you provided!
How is it that the company’s GAAP EPS declined by a whopping 17%, from $0.66 to $0.55, and yet its non-GAAP EPS dropped by a tiny 1% from 0.88% to 0.87%?
This is how:
Non-GAAP diluted net EPS exclude after-tax costs of $585 million and $0.32 per diluted share, respectively, related to separation costs, restructuring charges, the amortization of intangible assets and acquisition-related charges.
In other words, because the business is doing progressively worse, it will get full credit for all these non-GAAP addbacks, which make it seem that neither revenue nor actual operations cratered!
But don’t worry, while Hewlett admits the organic contraction will continue and Q3 EPS will decline even more, this time to a range of $0.50-$0.54 or down 13% from the current quarter guidance (which the company will surely miss once more) its non-GAAP EPS will be virtually unchanged at $0.83-$0.87!
And that is non-GAAP data fabrication magic front and center right there.
Oh, and just in case someone asks about that all important metric which no amount of seasonal-adjustments or GAAP fabrication can adjust, actual cash flow, here it is: “HP generated $1.5 billion in cash flow from operations in the second quarter, down 51% from the prior-year period.”
Oops.
The collapse in cash flow generation however did not prevent the company from “utilized $659 million of cash during the quarter to repurchase approximately 19.0 million shares of common stock in the open market.”
In fact, as the following chart shows, in the LTM Period, HPQ has spent just about the same amount on stock buybacks as it has on capital expenditures.
Is there any wonder then why HPQ’s revenue is constantly crashing, and has now dropped to the lowest level in 8 years?!
- Top 10 Banks To Sell Your Soul
Janet Yellen at the Federal Reserve believes that the partying on Wall Street and in the financial institutions may “lead to trouble”. The world knows that the trouble that they start because they are too drunk celebrating the higher-than-high highs that they have created will lead the banksters and the tradesters to pass the baby onto the likes of Joe Blow and John Doe out there. That will be inevitable. The partying is now entering the early morning hours. You know, that time just when you’ve drunk too much and you think you are invincible and there’s really no point stopping downing another one, is there. One for the road?
But, why have the financial markets got to this stage of gorging on the stocks and eating up everything in sight to a position where a new high no longer makes the headlines just because it’s mundane and oh so boringly everyday’ish? They are in this position because the killings that can be made in the final few hours before a new crash happens are usually the greatest ones. But, the ones that will last the least. They are in this position because they have been lead to believe that they are priceless, unimaginable worth their weight in gold and that they are irreplaceable. The tradesters and the banksters have become the new child prodigies, the child king, the big baby syndrome where the party always has to be on.
These are the guys that push you out the way as you hail a taxi and jump in ahead of you. These are the guys that pull up and double park so they can pick up what they need from that little boutique. Who cares about the traffic and the police will recognize his bravado and brashness, a telling sign of the trading floor and the bank vaults. These are the guys that are paid the most. So, which bank should you be working for if you want to throw a two-year-old tantrum when the stock market crashes and you get your toys throw out of the pram? But, the saving grace is that in all societies in the world there are taboos were babies are concerned. They always have to be protected from danger. The banksters will be protected because they are earning the top salaries.
Top 10 Banks:
- Goldman Sachs
· Average base salary for Vice-Presidents stands at $169,896.
· Financial Analysts get $69,461.
- Capital One
· Vice-President’s average base salary is $165, 514.
· Financial Analysts earn $73, 462.
- American Express
· This bank pays an average of $163, 908 for a Vice-President.
· A Financial Analysts earns $66, 459.
- MetLife
· Average base salary of a Vice-President stands at $145, 583.
· A Financial Analyst gets $57, 115.
- Morgan Stanley
· A Vice-President earns $143, 489.
· A Financial Analyst’s salary is $63, 100.
- HSBC
· A Vice-President has a salary of $129, 686.
· A Financial Analyst gets $76, 413.
- Wells Fargo
· A Vice-President earns $128, 805.
· A Financial Analyst’s salary is $62, 195.
- Citigroup
· A Vice-President salary here stands at $119, 240.
· Financial Analysts get $66, 280.
- JPMorgan Chase
· This bank pays its Vice-Presidents $117, 058.
· A Financial Analysts earns $63, 229.
- Bank of America
· A Vice-President’s salary stands at $112, 501.
· A Financial Analyst earns $71, 435.
Bonuses ‘n all that?
There really is very little point in taking into account the ridiculously laughably low salaries that the poor bankers are earning, is there?
Of course, the vice-presidents and the presidents are earning a lot more in bonuses. This is just the shop window. It’s in the stock room and the back office that the real sound of fluttering greenbacks can be heard and the wads of Benjamins are doled out. Who said they never liked ‘cabbage’?
The average US salary for a president of a bank stands officially at $100, 566. But, this is the figure for the entire country in 2015. It doesn’t take into account the top banks only, which will push that figure much higher and it certainly doesn’t take into account the bonuses.
· The Bank of England has just announced to all banks in the UK that thy must re-write contracts of staff receiving bonuses to comply with EU legislation on bonus capping.
· EU legislation stipulates that bonuses cannot exceed 100% of the basic salary or 200% if shareholders give their approval.
· Banks got around the quandary by paying ‘allowances’ instead of bonuses. But, that has been deemed to tantamount to the same thing by the EU.
· The head of Barclays, Anthony Jenkins received £1m in allowances, as did Lloyd’s boss António Horta-Osório.
· Lloyds Banking Group saw its shareholders approve an £11.5m pay packet for the Chief Executive António Horta-Osório.
· The UK government share held in Lloyds Banking Group stood at 43% in 2008 after the financial crisis.
· Today it stands at 20% (May 2015).
· Only 3% of shareholders actually voted against the salary increase given.
· UK Financial Investments (responsible for managing the UK government stake in the bank) voted in favor of the increase and stated: “Following a process of thorough engagement with the Lloyds remuneration committee, UKFI believes the committee has exercised reasonable judgement in relation to their approach to directors’ remuneration, particularly in the context of performance over the year.”
· The head of HSBC, Stuart Gulliver had £1.7m in allowances.
· There are currently 39 banks in 6 countries in the EU that are using the allowance system to get around the bonus caps.
· It is supposed to be changed in 2015 and affect bonuses paid out in April 2016.
· Andrew Bailey, the deputy governor at the Bank of England, has stated categorically that outlawing bonuses will only push the salaries into a fixed area which will be possible to claw back if (or when) the banks suffer losses.
Steve Hilton, the former strategy adviser to Prime Minister David Cameron announced today that bankers should be paid no more than civil servants, since they were relying implicitly on the backing of the taxpayer.
In 2012, the top bank salaries already soared by 35% in the UK and they showed that nothing had been learnt. The pay-rises worked out in UK banks between 2011 and 2012 to 11% on average.
In the City of London there were more nearly 3, 000 bankers on more than a million dollars a year. There was a small lull, a reprieve for the rest of society as banks froze (is that possible?) their salaries. But, the meltdown didn’t last very long. In the UK more than 80% of the top salaries are in investment banking today.
Goldman Sachs announced in October 2013 that junior bankers would be ‘expected’ to take off time from work between Friday 9pm and Sunday 9pm. Although, they would be expected to consult their messages during that time. Does that mean the only thing the bank was doing was to save on electricity, getting the banker to work from home? JPMorgan Chase thought it was great and set up the ‘protected weekend’, whereby every banker would have to take off a weekend per month. Then, all banks followed suit. Apparently, today junior bankers only get bonuses in the region of $70, 000, whereas they were on six-figure sums before. The base salary stands at roughly $85, 000. Although there is a plan to have that increased by 20% this year. Haven’t the banks just redistributed the wealth, giving even more to the jobs at the very top? You know, those people that will deny they were aware of what you were doing when you were losing the money that the bank never had. Jérôme Kerviel is exactly that guy right now. Now the official investigator has finally admitted that the Société Générale must have known of the rogue antics and has accused the prosecutor of swallowing the bank’s story. Justice at last?
Instead of investing in the stock that is already high, the financial markets would be better off investing in the companies around the world that are growing quietly and secretly in their own little corner; the ones that attract the least amount of attention and the ones that will ride out the crash when Yellen starts a- yelling.
What stocks would you invest in that you think would survive that bubble bursting again?
Or, maybe we should just invest in the banks? They will never suffer, will they?
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