Today’s News May 8, 2015

• Russia Offers Help To Greece In German War Reparations Investigation

  Just a day after German President Joachim Gauck shocked his government by remarking in an interview that Germany should at least “consider” demands by Prime Minister Alexis Tsipras that the nation pay billions of euros in reparations for the Nazi occupation of Greece, ekathimerini reports that none other than ‘helpful’ Russians are willing to provide assistance in the World War II claims investigation.

   

   

  Following recent comments by German President Joachim Gauck that,

  “We are not only people who are living in this day and age but we’re also the descendants of those who left behind a trail of destruction in Europe during World War Two — in Greece, among other places, where we shamefully knew little about it for so long,” Gauck said in an interview with German newspaper Sueddeutsche Zeitung.

   

  “It’s the right thing to do for a history-conscious country like ours to consider what possibilities there might be for reparations.”

   

  While he only went as far as to suggest “consideration” of the demand, this is further than the direct rejections other high-ranking German officials have issued. As Reuters recalls, the last time a German official mentioned the reparations demand, it was economic minister Sigmar Gabriel, who proclaimed them “stupid.”

  And now, as ekathimerini reports, it appears the Greeks are getting some assistance…

  Moscow is helping Greece in its investigation into possible Second World War reparations from Germany by providing access to previously unused archives.

   

  Following a request by Alternate Defense Minister Costas Isichos, the Russian Embassy in Athens has provided Greek authorities with a list of the relevant archives, including documents, photographs and documentary footage.

   

  Moscow’s move comes as the National Council for WWII Reparations from Germany has stepped up efforts to inform Greeks about its work. The group has put on display videos and posters explaining its work at 100 locations in Athens metro stations.

  *  *  *
  Perhaps  Putin is working on commission? 20% finders fee of the €278.7 billion that Greece believes it is owed for helping to gather the money from the Germans?

  

  

  
  
  

  

• In A Cop Culture, The Bill Of Rights Doesn't Amount To Much

  Submitted by John Whitehead via The Rutherford Institute,

  Police officers are more likely to be struck by lightning than be held financially accountable for their actions.—Law professor Joanna C. Schwartz (paraphrased)

  “In a democratic society,” observed Oakland police chief Sean Whent, “people have a say in how they are policed.”

  Unfortunately, if you can be kicked, punched, tasered, shot, intimidated, harassed, stripped, searched, brutalized, terrorized, wrongfully arrested, and even killed by a police officer, and that officer is never held accountable for violating your rights and his oath of office to serve and protect, never forced to make amends, never told that what he did was wrong, and never made to change his modus operandi, then you don’t live in a constitutional republic.

  You live in a police state.

  It doesn’t even matter that “crime is at historic lows and most cities are safer than they have been in generations, for residents and officers alike,” as the New York Times reports.

  What matters is whether you’re going to make it through a police confrontation alive and with your health and freedoms intact. For a growing number of Americans, those confrontations do not end well.

  As David O. Brown, the Dallas chief of police, noted: “Sometimes it seems like our young officers want to get into an athletic event with people they want to arrest. They have a ‘don’t retreat’ mentality. They feel like they’re warriors and they can’t back down when someone is running from them, no matter how minor the underlying crime is.”

  Making matters worse, in the cop culture that is America today, the Bill of Rights doesn’t amount to much. Unless, that is, it’s the Law Enforcement Officers’ Bill of Rights (LEOBoR), which protects police officers from being subjected to the kinds of debilitating indignities heaped upon the average citizen.

  Most Americans, oblivious about their own rights, aren’t even aware that police officers have their own Bill of Rights. Yet at the same time that our own protections against government abuses have been reduced to little more than historic window dressing, 14 states have already adopted LEOBoRs—written by police unions and being considered by many more states and Congress—which provides police officers accused of a crime with special due process rights and privileges not afforded to the average citizen.

  In other words, the LEOBoR protects police officers from being treated as we are treated during criminal investigations: questioned unmercifully for hours on end, harassed, harangued, browbeaten, denied food, water and bathroom breaks, subjected to hostile interrogations, and left in the dark about our accusers and any charges and evidence against us.

  Not only are officers given a 10-day “cooling-off period” during which they cannot be forced to make any statements about the incident, but when they are questioned, it must be “for a reasonable length of time, at a reasonable hour, by only one or two investigators (who must be fellow policemen), and with plenty of breaks for food and water.”

  According to investigative journalist Eli Hager, the most common rights afforded police officers accused of wrongdoing are as follows:

  • If a department decides to pursue a complaint against an officer, the department must notify the officer and his union.
  • The officer must be informed of the complainants, and their testimony against him, before he is questioned.
  • During questioning, investigators may not harass, threaten, or promise rewards to the officer, as interrogators not infrequently do to civilian suspects.
  • Bathroom breaks are assured during questioning.
  • In Maryland, the officer may appeal his case to a “hearing board,” whose decision is binding, before a final decision has been made by his superiors about his discipline. The hearing board consists of three of the suspected offender’s fellow officers.
  • In some jurisdictions, the officer may not be disciplined if more than a certain number of days (often 100) have passed since his alleged misconduct, which limits the time for investigation.
  • Even if the officer is suspended, the department must continue to pay salary and benefits, as well as the cost of the officer’s attorney.

  It’s a pretty sweet deal if you can get it, I suppose: protection from the courts, immunity from wrongdoing, paid leave while you’re under investigation, and the assurance that you won’t have to spend a dime of your own money in your defense. And yet these LEOBoR epitomize everything that is wrong with America today.

  Once in a while, the system appears to work on the side of justice, and police officers engaged in wrongdoing are actually charged for abusing their authority and using excessive force against American citizens.

  Yet even in these instances, it’s still the American taxpayer who foots the bill.

  For example, Baltimore taxpayers have paid roughly $5.7 million since 2011 over lawsuits stemming from police abuses, with an additional $5.8 million going towards legal fees. If the six Baltimore police officers charged with the death of Freddie Gray are convicted, you can rest assured it will be the Baltimore taxpayers who feel the pinch.

  New York taxpayers have shelled out almost $1,130 per year per police officer (there are 34,500 officers in the NYPD) to address charges of misconduct. That translates to $38 million every year just to clean up after these so-called public servants.

  Over a 10-year-period, Oakland, Calif., taxpayers were made to cough up more than $57 million (curiously enough, the same amount as the city’s deficit back in 2011) in order to settle accounts with alleged victims of police abuse.

  Chicago taxpayers were asked to pay out nearly $33 million on one day alone to victims of police misconduct, with one person slated to receive $22.5 million, potentially the largest single amount settled on any one victim. The City has paid more than half a billion dollars to victims over the course of a decade. The Chicago City Council actually had to borrow $100 million just to pay off lawsuits arising over police misconduct in 2013. The city’s payout for 2014 was estimated to be in the same ballpark, especially with cases pending such as the one involving the man who was reportedly sodomized by a police officer’s gun in order to force him to “cooperate.”

  Over 78% of the funds paid out by Denver taxpayers over the course of a decade arose as a result of alleged abuse or excessive use of force by the Denver police and sheriff departments. Meanwhile, taxpayers in Ferguson, Missouri, are being asked to pay $40 million in compensation—more than the city’s entire budget—for police officers treating them “‘as if they were war combatants,’ using tactics like beating, rubber bullets, pepper spray, and stun grenades, while the plaintiffs were peacefully protesting, sitting in a McDonalds, and in one case walking down the street to visit relatives.”

  That’s just a small sampling of the most egregious payouts, but just about every community—large and small—feels the pinch when it comes to compensating victims who have been subjected to deadly or excessive force by police.

  The ones who rarely ever feel the pinch are the officers accused or convicted of wrongdoing, “even if they are disciplined or terminated by their department, criminally prosecuted, or even imprisoned.” Indeed, a study published in the NYU Law Review reveals that 99.8% of the monies paid in settlements and judgments in police misconduct cases never come out of the officers’ own pockets, even when state laws require them to be held liable. Moreover, these officers rarely ever have to pay for their own legal defense.

  For instance, law professor Joanna C. Schwartz references a case in which three Denver police officers chased and then beat a 16-year-old boy, stomping “on the boy’s back while using a fence for leverage, breaking his ribs and causing him to suffer kidney damage and a lacerated liver.” The cost to Denver taxpayers to settle the lawsuit: $885,000. The amount the officers contributed: 0.

  Kathryn Johnston, 92 years old, was shot and killed during a SWAT team raid that went awry. Attempting to cover their backs, the officers falsely claimed Johnston’s home was the site of a cocaine sale and went so far as to plant marijuana in the house to support their claim. The cost to Atlanta taxpayers to settle the lawsuit: $4.9 million. The amount the officers contributed: 0.

  Meanwhile, in Albuquerque, a police officer was convicted of raping a woman in his police car, in addition to sexually assaulting four other women and girls, physically abusing two additional women, and kidnapping or falsely imprisoning five men and boys. The cost to the Albuquerque taxpayers to settle the lawsuit: $1,000,000. The amount the officer contributed: 0.

  Human Rights Watch notes that taxpayers actually pay three times for officers who repeatedly commit abuses: “once to cover their salaries while they commit abuses; next to pay settlements or civil jury awards against officers; and a third time through payments into police ‘defense’ funds provided by the cities.”

  Still, the number of times a police officer is actually held accountable for wrongdoing while on the job is miniscule compared to the number of times cops are allowed to walk away with little more than a slap on the wrist.

  A large part of the problem can be chalked up to influential police unions and laws providing for qualified immunity, not to mention these Law Enforcement Officers’ Bill of Rights laws, which allow officers to walk away without paying a dime for their wrongdoing.

  Another part of the problem is rampant cronyism among government bureaucrats: those deciding whether a police officer should be immune from having to personally pay for misbehavior on the job all belong to the same system, all with a vested interest in protecting the police and their infamous code of silence: city and county attorneys, police commissioners, city councils and judges.

  Most of all, what we’re dealing with is systemic corruption that protects wrongdoing and recasts it in a noble light. However, there is nothing noble about government agents who kick, punch, shoot and kill defenseless individuals. There is nothing just about police officers rendered largely immune from prosecution for wrongdoing. There is nothing democratic about the word of a government agent being given greater weight in court than that of the average citizen. And no good can come about when the average citizen has no real means of defense against a system that is weighted in favor of government bureaucrats.

  So if you want a recipe for disaster, this is it: Take police cadets, train them in the ways of war, dress and equip them for battle, teach them to see the people they serve not as human beings but as suspects and enemies, and then indoctrinate them into believing that their main priority is to make it home alive at any cost. While you’re at it, spend more time drilling them on how to use a gun (58 hours) and employ defensive tactics (49 hours) than on how to calm a situation before resorting to force (8 hours).

  Then, once they’re hyped up on their own authority and the power of the badge and their gun, throw in a few court rulings suggesting that security takes precedence over individual rights, set it against a backdrop of endless wars and militarized law enforcement, and then add to the mix a populace distracted by entertainment, out of touch with the workings of their government, and more inclined to let a few sorry souls suffer injustice than challenge the status quo or appear unpatriotic.

  That’s not to discount the many honorable police officers working thankless jobs across the country in order to serve and protect their fellow citizens, but there can be no denying that, as journalist Michael Daly acknowledges, there is a troublesome “cop culture that tends to dehumanize or at least objectify suspected lawbreakers of whatever race. The instant you are deemed a candidate for arrest, you become not so much a person as a ‘perp.’”

  Older cops are equally troubled by this shift in how police are being trained to view Americans—as things, not people. Daly had a veteran police officer join him to review the video footage of 43-year-old Eric Garner crying out and struggling to breathe as cops held him in a chokehold. (In yet another example of how the legal system and the police protect their own, no police officers were charged for Garner’s death.) Daly describes the veteran officer’s reaction to the footage, which as Daly points out, “constitutes a moral indictment not so much of what the police did but of what the police did not do”:

  “I don’t see anyone in that video saying, ‘Look, we got to ease up,’” says the veteran officer. “Where’s the human side of you in that you’ve got a guy saying, ‘I can’t breathe?’” The veteran officer goes on, “Somebody needs to say, ‘Stop it!’ That’s what’s missing here was a voice of reason. The only voice we’re hearing is of Eric Garner.” The veteran officer believes Garner might have survived had anybody heeded his pleas. “He could have had a chance,” says the officer, who is black. “But you got to believe he’s a human being first. A human being saying, ‘I can’t breathe.’”

  As I point out in my new book Battlefield America: The War on the American People, when all is said and done, the various problems we’re facing today—militarized police, police shootings of unarmed people, the electronic concentration camp being erected around us, SWAT team raids, etc.—can be attributed to the fact that our government and its agents have ceased to see us as humans first.

  Then again, perhaps we are just as much to blame for this sorry state of affairs. After all, if we want to be treated like human beings—with dignity and worth—then we need to start treating those around us in the same manner. As Martin Luther King Jr. warned in a speech given exactly one year to the day before he was killed: “We must rapidly begin the shift from a ‘thing-oriented’ society to a ‘person-oriented’ society. When machines and computers, profit motives and property rights are considered more important than people, the giant triplets of racism, materialism, and militarism are incapable of being conquered.”

  

  

  
  
  

  

• On This Day In 1945: Reporter Fired For Biggest Scoop In History

  In World War II's final moments in Europe, Associated Press correspondent Edward Kennedy gave his news agency perhaps the biggest scoop in its history.

  He reported, a full day ahead of the competition, that the Germans had surrendered unconditionally at a former schoolhouse in Reims, France.

  

   

  For this, he was publicly rebuked by the AP, and then quietly fired.

  As AP reports,

  The reason: The veteran reporter was accused of breaking a pledge that he and 16 other correspondents had made to keep the surrender secret for a time, as a condition of being allowed to witness it. This was done so Russian dictator Josef Stalin could formally announce the defeat in Berlin.

   

  Kennedy viewed the embargo as a political security issue, rather than a military one, and felt compelled to report the surrender, especially after learning that German radio had already broadcast the news.

   

  In 2012, almost 50 years after Kennedy's death, then-AP President and CEO Tom Curley apologized for the way the company had treated the journalist.

  Ed Kennedy, pictured below,  was one of 17 reporters taken to witness the ceremony.

  

  He and the others were hastily assembled by military commanders, then pledged to secrecy by a U.S. general while the group flew over France. As a condition of being allowed to see the surrender in person, the correspondents were barred from reporting what they had witnessed until authorized by Allied headquarters.

  Initially, the journalists were told the news would be held up for only a few hours. But after the surrender was complete, the embargo was extended for 36 hours—until 3 p.m. the following day.

   

  Kennedy was astounded.

   

  "The absurdity of attempting to bottle up news of such magnitude was too apparent," he would later write.

   

  Nevertheless, he initially stayed quiet. Then, at 2:03 p.m., the surrender was announced by German officials, via a radio broadcast from Flensburg, a city already in Allied hands. That meant, Kennedy knew, that the transmission had been authorized by the same military censors gagging the press.

   

  Furious, Kennedy went to see the chief American censor and told him there was no way he could continue to hold the story. Word was out. The military had broken its side of the pact by allowing the Germans to announce the surrender. And there were no military secrets at stake.

   

  The censor waved him off. Kennedy thought about it for 15 minutes, and then acted.

  Seventy years after the scoop, the AP is making Kennedy's original story and photographs available…

  Germany surrendered unconditionally to the Western allies and the Soviet Union at 2:41 a.m. French time today. (This was at 8:41 p.m. Eastern war time Sunday, May 6, 1945.)

   

  The surrender took place at a little red school house that is the headquarters of Gen. Dwight D. Eisenhower.

   

   

   

  The surrender was signed for the Supreme Allied Command by Lt. Gen. Walter Bedell Smith, chief of staff for Gen. Eisenhower.

   

  It was also signed by Gen. Ivan Susloparov of the Soviet Union and by Gen. Francois Sevez for France.

   

  

   

  Gen. Eisenhower was not present at the signing, but immediately afterward Gen. Alfred Jodl and his fellow delegate, Gen. Admiral Hans Georg von Friedeburg, were received by the supreme commander.

   

  

   

  They were asked sternly if they understood the surrender terms imposed upon Germany and if they would be carried out by Germany.

   

  They answered yes.

   

  Germany, which began the war with a ruthless attack upon Poland, followed by successive aggressions and brutality in concentration camps, surrendered with an appeal to the victors for mercy toward the German people and armed forces.

   

  After signing the full surrender, Gen. Jodl said he wanted to speak and received leave to do so.

   

  "With this signature," he said in soft-spoken German, "the German people and armed forces are for better or worse delivered into the victor's hands.

   

  "In this war, which has lasted more than five years, both have achieved and suffered more than perhaps any other people in the world."

  *  *  *

  After being fired by the AP, Kennedy took a job as managing editor of the Santa Barbara News-Press in California, and then went on to become publisher of the Monterey Peninsula Herald. He died at age 58 after being struck by an automobile.

  Kennedy's family had held on to the manuscript for decades before his daughter, Cochran, began looking for a publisher.

  She said that even though she was only 16 when her father died, she got the impression he still took great joy in his career, despite the episode.

  Curley said Kennedy's daughter approached him around the same time he had become interested in the matter while helping with work on the book "Breaking News: How The Associated Press Has Covered War, Peace, and Everything Else." The publication of Kennedy's memoir prompted the AP's apology, Curley said.

  He called Kennedy's dismissal "a great, great tragedy" and hailed him and the desk editors who put the surrender story on the wire for upholding the highest principles of journalism.

  

  
  
  

  

• In Most Countries, 40 Hours + Minimum Wage = Poverty

  Last week, we noted that Democratic lawmakers in the US are pushing for what they call “$12 by ’20” which, as the name implies, is an effort to raise the minimum wage to $12/hour over the course of the next five years. Republicans argue that if Democrats got their wish and the pay floor were increased by nearly 70%, it would do more harm than good for low-income Americans as the number of jobs that would be lost as a result of employers cutting back in the face of dramatically higher labor costs would offset the benefit that accrues to the workers who are lucky enough to keep their jobs. 

  Regardless of who is right or wrong when it comes to projecting what would happen to low-wage jobs in the face of a steep hike in the minimum wage, one thing is certain: many working families depend on government assistance to make ends meet, suggesting it’s tough to persist on minimum wage in today’s economy and indeed, a new study by the OECD shows that in 21 out of the 26 member countries that have a minimum wage, working 40 hours per week at the pay floor would not be sufficient to keep one’s family out of poverty.

  

  Here’s more from Bloomberg:

  A global ranking out Wednesday by the Paris-based Organization for Economic Cooperation and Development painted a grim picture of the situation in member countries straddling continents. The 34-member organization found that a legal minimum wage existed in 26 countries and crunched the numbers to see how they compared.

   

  Forget taking a siesta in Spain. There, you’d have to work more than 72 hours a week to escape the trappings of poverty. Turns out that is the norm, not the exception. In the 21 countries highlighted with blue bars in the chart below, a full 40-hour work week still won’t lift families out of relative poverty. This list includes France, home to the 35-hour work week, which almost met the threshold. Minimum wage workers there who are supporting a spouse and two children need to work 40.2 hours to get their families out of poverty.  (The poverty line is defined as 50 percent of the median wage in any nation.)

  

  

  
  
  

  

• US Approves Saudi Use Of Banned Cluster Bombs (But Only If They're Extra Careful)

  Following a report on Sunday, where Human Rights Watch said video and photographic evidence showed that Saudi Arabia used cluster bombs near villages in Yemen’s Saada Province at least two separate times, the US State Department said it is "looking into" the allegations but, as Foreign Policy reports, said the notoriously imprecise weapon — banned by much of the world — could still have an appropriate role to play in Riyadh’s U.S.-backed offensive (as long as it was used carefully).

  Human Rights Watch details credible evidence indicates that the Saudi-led coalition used banned cluster munitions supplied by the United States in airstrikes against Houthi forces in Yemen, Human Rights Watch said today.

  Cluster munitions pose long-term dangers to civilians and are prohibited by a 2008 treaty adopted by 116 countries, though not Saudi Arabia, Yemen, or the United States.

   

  

   

  Photographs, video, and other evidence have emerged since mid-April 2015 indicating that cluster munitions have been used during recent weeks in coalition airstrikes in Yemen’s northern Saada governorate, the traditional Houthi stronghold bordering Saudi Arabia.

   

   

  “Saudi-led cluster munition airstrikes have been hitting areas near villages, putting local people in danger,” said Steve Goose, arms director at Human Rights Watch. “These weapons should never be used under any circumstances. Saudi Arabia and other coalition members – and the supplier, the US – are flouting the global standard that rejects cluster munitions because of their long-term threat to civilians.”

  However, as Foreign Policy reports, the State Department said it is "looking into" the allegations…

  “We’re looking into those details carefully. I don’t have an outcome of that to report,”  State Department spokesman Jeff Rathke said in answer to questions about the HRW report. “We take all accounts of civilian deaths in the ongoing hostilities in Yemen very seriously.”

   

  …

   

  On Monday, Rathke noted that U.S. law and policy dictates that the United States may only export cluster munitions to foreign buyers if the weapon’s unexploded ordnance rate does not exceed one percent. The U.S. also requires that the governments buying U.S. cluster bombs “must commit that cluster munitions will only be used against clearly defined military targets and will not be used where civilians are known to be present or in areas normally inhabited by civilians,” said Rathke.

   

  When Foreign Policy asked if cluster bombs were “appropriate” to use in the U.S.-backed air campaign in Yemen, Rathke said they were so long as they’re used “against clearly defined military targets.”

   

  “That’s our policy on those,” he said.

   

  …

   

  On the humanitarian front, U.S. officials have privately noted concerns about civilian casualties and fears that Riyadh is failing to properly vet the local fighters it’s arming in Yemen. But publicly, the White House fully backs the operation.

   

  Rathke said “we share the concerns regarding unintended harm to civilians caused by the use of cluster munitions.”

   

  “The United States remains the single largest financial supporter of addressing the explosive remnants of war,” he added.

  *  *  *
  And single largest supplier of explosives and creator of the need for them…

  

  

  
  
  

  

• Guest Post: The Big Business Of Cancer – 100 Billion Dollars Was Spent On Cancer Drugs Last Year Alone

  Submitted by Michael Snyder via The End of The American Dream blog,

  If you are an American, there is a 1 in 3 chance that you will get cancer during your lifetime.  If you are a man, the odds are closer to 1 in 2.  And almost everyone in America either knows someone who currently has cancer or who has already died from cancer.  But it wasn’t always this way.  Back in the 1940s, only one out of every sixteen Americans would develop cancer.  Something has happened that has caused the cancer rate in this nation to absolutely explode, and it is being projected that cancer will soon surpass heart disease and become the leading cause of death in the United States.  Overall, the World Health Organization says that approximately 14 million new cases of cancer are diagnosed around the globe each year, and the number of new cases is expected to increase by about 70 percent over the next 2 decades.

  There are very few words in the English language that cause more fear than the word “cancer”, but despite billions spent on research and all of the technological progress we have made over the years this plague just continues to spiral wildly out of control.  Why is that?

  In America today, more money is spent to treat cancer than to treat any other disease by far.  In fact, according to NBC News, 100 BILLION dollars was spent on cancer drugs just last year alone…

  As drug prices continue to fall under ever-increasing scrutiny, spending on cancer medicines has hit a new milestone: $100 billion in 2014.

   

  That’s up more than 10 percent from 2013, and up from $75 billion five years earlier, according to a report published Tuesday from the IMS Institute for Healthcare Informatics.

  100 million dollars would be an astounding amount of money to spend on these drugs.  But 100 billion dollars is 1,000 times as much money as 100 million dollars.  And the IMS Institute for Healthcare Informatics is projecting that the amount of money spent on cancer drugs will continue to grow at a rate of 6 to 8 percent a year.

  Needless to say, there are a lot of people out there that are becoming exceedingly wealthy treating this disease.

  And the cost of some these drugs is absolutely absurd.  According to NBC News, two of the latest cancer drugs to be developed “are priced at $12,500 a month“…

  Forty-five new drugs for cancer hit the market between 2010 and 2014, including 10 last year alone, IMS said. Two of those are so-called immunotherapies, a hot new class that harnesses the immune system to fight cancer. They are Opdivo from Bristol-Myers Squibb and Keytruda from Merck. Both are priced at $12,500 a month.

  Yes, I understand that drug companies are in business to make a profit.

  But how can anyone possibly justify charging cancer patients that much for their medicine?

  If you are diagnosed with cancer in America today and you choose to trust the medical system with your treatment, you can say goodbye to your financial future.  Even if you have health insurance, you will probably end up flat broke one way or the other.  Either you will survive and be flat broke, or you will die flat broke.

  And despite all of our ultra-expensive treatments, the survival rate for cancer is still not very good.  At this point, the five year survival rate for those diagnosed with cancer is just 65 percent.  That means that 35 percent of those diagnosed with cancer are going to end up dead within five years, and for certain forms of cancer that percentage is much, much higher.

  Sadly, as I mentioned at the top of this article, the percentage of the population getting cancer just continues to go up…

  We have lost the war on cancer. At the beginning of the last century, one person in twenty would get cancer. In the 1940s it was one out of every sixteen people. In the 1970s it was one person out of ten. Today one person out of three gets cancer in the course of their life.

  We live in a society that is highly toxic, and it is getting worse with each passing day.

  And once you do develop cancer, doctors are not allowed to prescribe any “alternative treatments” for you.  They are only permitted to offer you the treatments that the system tells them that they must offer.

  One of these is chemotherapy.  It is an absolutely nightmarish treatment that often kills the patient before it kills the cancer.  The following is how one woman described her experience with chemo…

  This highly toxic fluid was being injected into my veins. The nurse administering it was wearing protective gloves because it would burn her skin if just a tiny drip came into contact with it. I couldn’t help asking myself “If such precautions are needed to be taken on the outside, what is it doing to me on the inside?” From 7 pm that evening, I vomited solidly for two and a half days. During my treatment, I lost my hair by the handful, I lost my appetite, my skin colour, my zest for life. I was death on legs.

  Many patients go through round after hellish round, hoping that it will do something about their cancer.  Have you ever known someone who has gone through this ordeal?  It can be absolutely heartbreaking.

  But in the end, there is a tremendous amount of doubt regarding whether chemo does much good at all.  Just consider the words of Dr. Ralph Moss, the author of a book entitled “The Cancer Industry“…

  In the end, there is no proof that chemotherapy actually extends life in the vast majority of cases, and this is the great lie about chemotherapy, that somehow there is a correlation between shrinking a tumour and extending the life of a patient.

  So why do oncologists push chemo so hard?

  Well, it is because they make a tremendous amount of money doing it…

  According to the research of Steven Levitt and Stephen Dubner of Freakonomics fame, “Oncologists are some of the highest paid doctors, their average income is increasing faster than any other specialist  in the medical field, and more than half their income comes from selling and administering chemotherapy.”

   

  Yes you read that right.  Oncologists make a huge profit, as much as two-thirds of their income in some cases, from chemotherapy drugs.

   

  Their business model is very different from other doctors because you can’t buy chemotherapy drugs at your local pharmacy.

   

  Oncologists buy these drugs direct at wholesale prices, then they mark them up and bill the insurance companies. This legal profiting on drugs by doctors is unique to the cancer treatment world. They’re making money off the drugs that they insist you take to save your life. That’s a HUGE conflict of interest. They’re selling you the drugs, and charging you for the privilege of putting them in your body. No other doctor can do that.

  Our system is deeply corrupt and deeply broken.

  But nothing is going to change any time soon because hundreds of billions of dollars are being made.

  

  

  
  
  

  

• America’s Main Problem: Corruption

  Preface: Sadly, in the month since we last posted on this topic, many new examples of corruption have arisen.

  The Cop Is On the Take

  Government corruption has become rampant:

  • Senior SEC employees spent up to 8 hours a day surfing porn sites instead of cracking down on financial crimes

  • Nuclear Regulatory Commission workers watch porn instead of cracking down on unsafe conditions at nuclear plants

  • An EPA employee who downloaded 7,000 porn files, then spent 2-6 hours each workday watching porn. He's been doing it for years … but the EPA never fired him. Another EPA employee harassed 16 women co-workers … and then was promoted to a higher-paying job with more responsibility, where he harassed more women

  • NSA spies pass around homemade sexual videos and pictures they've collected from spying on the American people

  • NSA employees have also been caught using their mass surveillance powers to spy on love interests, such as girlfriends, obsessions or former wives … and to eavesdrop on American soldiers’ intimate conversations with their wives back home. And see this (“routinely shared salacious or tantalizing phone calls that had been intercepted” … “‘Hey, check this out … there’s good phone sex'”)

  • An employee of the Transportation Security Administration admitted that TSA agents share – and laugh at – nude scans of passengers.  Another TSA employee says that screeners make excuses so they can grope and fondle travelers that they're attracted to

  • Investigators from the Treasury’s Office of the Inspector General found that some of the regulator’s employees surfed erotic websites, hired prostitutes and accepted gifts from bank executives … instead of actually working to help the economy

  • The Minerals Management Service – the regulator charged with overseeing BP and other oil companies to ensure that oil spills don’t occur – was riddled with “a culture of substance abuse and promiscuity”, which included “sex with industry contacts”

  • Agents for the Drug Enforcement Agency had dozens of sex parties with prostitutes hired by the drug cartels they were supposed to stop (they also received money, gifts and weapons from drug cartel members)

  • Pentagon employees used government credit cards to pay for adult "escorts" (i.e. prostitutes) and to gamble

  • Federal agents with the Drug Enforcement Administration and Secret Service investigating Bitcoin money laundering extorted and stole over $1 million in Bitcoin

  • The IRS gave promotions to employees who were themselves tax cheats

  • The Commodity Futures Trading Commission has conspired with big banks to manipulate commodities prices for decades

  • The government-sponsored rating agencies committed massive fraud (and see this)

  • The Treasury department allowed banks to “cook their books”

  • Regulators knew of and allowed the use of debt-hiding accounting tricks by the big banks

  • The Secretary of Treasury (Tim Geithner) was complicit in Lehman’s accounting fraud, (and see this)

  • The former chief accountant for the SEC says that Bernanke and Paulson broke the law and should be prosecuted

  • The government knew about mortgage fraud a long time ago. For example, the FBI warned of an “epidemic” of mortgage fraud in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. See this and this. For example, the Federal Reserve turned its cheek and allowed massive fraud, and the SEC has repeatedly ignored accounting fraud. Indeed, Alan Greenspan took the position that fraud could never happen

  • Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not. The Treasury Secretary also falsely told Congress that the bailouts would be used to dispose of toxic assets … but then used the money for something else entirely

  • A high-level Federal Reserve official says quantitative easing is “the greatest backdoor Wall Street bailout of all time”

  • The SEC has been shredding Wall Street documents for decades to help the big banks cover up their fraud

  • The non-partisan Government Accountability Office calls the Fed corrupt and riddled with conflicts of interest. Nobel prize-winning economist Joe Stiglitz says the World Bank would view any country which had a banking structure like the Fed as being corrupt and untrustworthy. The former vice president at the Federal Reserve Bank of Dallas said said he worried that the failure of the government to provide more information about its rescue spending could signal corruption. “Nontransparency in government programs is always associated with corruption in other countries, so I don’t see why it wouldn’t be here,” he said

  • Arguably, both the Bush and Obama administrations broke the law by refusing to close insolvent banks

  • Congress may have covered up illegal tax breaks for the big banks

  • Police have been busted framing innocent people

  • Warmongerers in the U.S. government knowingly and intentionally lied us into a war of aggression in Iraq. The former head of the Joint Chiefs of Staff – the highest ranking military officer in the United States – said that the Iraq war was “based on a series of lies”. The same is true in Libya and other wars

  • $8.5 TRILLION dollars in taxpayer money doled out by Congress to the Pentagon since 1996 has NEVER been accounted for. The military wastes and "loses" trillions of dollars. And Congress pushes expensive boondoggles that our generals say are unnecessary and unhelpful … because it's pork for their district

  • The government lied when it said it doesn't conduct mass surveillance on Americans, and then lied again when it said that spying was aimed at protecting America against terrorists

  • The government also lied when it said American doesn't torture (and see this), and then lied once again when it said torture was aimed at protecting America against terrorists

  • The government made sure that false claims were made about the amount of oil spilled by BP in the Gulf

  • The government has framed whistleblowers with false evidence

  • The Pentagon falsely smeared USA Today reporters because they investigated illegal Pentagon propaganda

  • When one of the most respected radiologists in America – the former head of the radiology department at Yale University – attempted to blow the whistle on the fact that the FDA had approved a medical device manufactured by General Electric because it put out massive amounts of radiation, the FDA installed spyware to record his private emails and surfing activities (including installing cameras to snap pictures of his screen), and then used the information to smear him and other whistleblowers

  • In an effort to protect Bank of America from the threatened Wikileaks expose of wrongdoing – the Department of Justice told Bank of America to a hire a specific hardball-playing law firm to assemble a team to take down WikiLeaks (and see this)

  • The Bush White House worked hard to smear CIA officers, bloggers and anyone else who criticized the Iraq war

  • Corruption at the FBI lab led to the execution of scores of innocent people

  • The FBI smeared top scientists who pointed out the numerous holes in its anthrax case. Indeed, the head of the FBI's investigation agrees that corruption was rampant

  • Terror attacks such as 9/11, the Boston Marathon bombing and the Texas shooting all happened because of pervasive corruption in our intelligence agencies

  The biggest companies own the D.C. politicians. Indeed, the head of the economics department at George Mason University has pointed out that it is unfair to call politicians “prostitutes”. They are in fact pimps … selling out the American people for a price.

  Government regulators have become so corrupted and “captured” by those they regulate that Americans know that the cop is on the take. Institutional corruption is killing people’s trust in our government and our institutions.

  Indeed, America is no longer a democracy or republic … it's officially an oligarchy.

  The allowance of unlimited campaign spending allows the oligarchs to purchase politicians more directly than ever. Moreover, there are two systems of justice in America … one for the big banks and other fatcats, and one for everyone else.

  Big Corporations Are Also Thoroughly Corrupt

  But the private sector is no better … for example, the big banks have literally turned into criminal syndicates.

  Wall Street and giant corporations are literally manipulating every single market.

  And the big corporations are cutting corners to make an extra penny … wrecking havoc with their carelessness. For example:

  • Fracking companies dumped 3 billion gallons of highly-toxic waste into California's drinking water supply. Fracking is polluting water all over the country. A study published in the journal Ground Water predicts that the highly-toxic fluids used in fracking can migrate to aquifers within a few short years. In addition, it is now official that fracking can cause earthquakes.  Yet fracking companies are using military psychological operations techniques to discredit opponents (and see this)

  • U.S. military contractors have pocketed huge sums of money earmarked for humanitarian and reconstruction aid

  • Monsanto has claimed for decades that Roundup is safe, but the World Health Organization just said that it probably causes cancer.  Monsanto forbids independent scientists from testing its GMO crops for safety, attacks the computers of people who oppose GMO foods and sue small farmers when Monsanto GMO crops drift onto their fields

  • Big farmers are drenching their crops with Roundup right before harvest … to save a buck

  • Big food companies work hand-in-glove with the government to dish up unhealthy food

  • BP's criminal negligence led to the giant Gulf oil spill

  (Further examples here, here, here, here and here.)

  We've Forgotten the Lessons of History

  The real problem is that we need to learn a little history:

  • We’ve known for thousands of years that – when criminals are not punished – crime spreads

  • We’ve known for hundreds of years that the failure to punish financial fraud destroys economies, as it destroys all trust in the financial system

  • We’ve known for centuries that powerful people – unless held to account – will get together and steal from everyone else

  Beyond Partisan Politics

  Liberals and conservatives tend to blame our country's problems on different factors … but they are all connected.

  The real problem is the malignant, symbiotic relationship between big corporations and big government.

  

  
  
  

  

• Introducing Hotel ISIS: Have Fun, But Don't 'Lose Your Head'

  Over the past year, the world has learned quite a bit about ISIS, the once obscure band of CIA-trained, Qatar-funded, marauding Muslim militants whose Cinderella story saw the group transform themselves from Syrian proxy war puppets to barbarous pseudo-state conquerors in the space of nine short months. We’ve learned, for instance, that the group are avid Twitter users, which is why they felt especially betrayed when the social network began suspending members’ accounts, prompting the group to warn co-founder Jack Dorsey that ISIS “lions” would be arriving in short order to “take his breath.” We’ve also learned that despite proving themselves extraordinarily capable when it comes to producing near Hollywood-quality videos, the group struggles when it comes to creating a social network from scratch. Finally, we’ve come to understand that despite the group’s tough guy posturing, most members have a soft spot for kittens and enjoy a spoonful of Nutella now and again. 

  And so, as the CIA prepares to train the next group of “moderate” Syrian rebels who may or may not become the successor to ISIS much as ISIS did to al-Qaeda, and as Texans ponder “lone wolves” and false flags, we present ISIS first-ever venture into the hospitality industry. Behold! Hotel ISIS…

  This was once the 262-room, five-star Ninawa International Hotel in Mosul, Iraq:

  

  It is now being reopened under new ownership… 

  

  

  

  …who are working diligently to give the hotel a fresh new look…

  

  …while tending to the grounds…

  

  …trimming the hedges…

  

  …and waxing the floors…

  

  As you can see, the group expended quite a bit of effort to get the building ready for opening night which was reportedly on May 1. All Muslims were told they could attend the event free of charge and as The Independent reports, ISIS even put on a fireworks show at the end of the night:

  Pictures circulated by Isis-affiliated social media accounts show members tending to a well-maintained garden, polishing floors and cleaning windows, expansive swimming pools and two black Isis flags flying at the front of the multi-storey building.

   

  The hotel is believed to be the Ninawa International Hotel, which received a number of positive reviews on TripAdvisor before being overtaken by militants and stripped of its branding. It has 262 rooms, two restaurants, two ballrooms and a gymnasium, among other facilities.

   

  Images from the event show dozens gathered around pools during the day, followed by a firework display in the evening.

  So while there’s plenty of fun to be had at this former five-star establishment, you’d be wise not to go overboard or otherwise ‘lose your head’ because well… you might lose your head. Here’s SputnikNews:

  Alas, the jihadists have prohibited their guests from dancing, smoking, gambling and other “sins”; women, visiting the hotel, should be dressed in accordance with strict Sharia laws – head-to-toe in black.

   

  Those who violate the Islamic rules are at risk of being decapitated, while ISIL’s infamous female police al-Khansaa will keep an eye on guests to ensure observance of Islamic values and practices.

  For those interested in making the trip to Mosul, we have not yet been apprised of the best way to make reservations, but we’ll be sure to keep an eye on Expedia for the best deals.

  

  
  
  

  

• Why We Have An Oversupply Of Almost Everything

  Submitted by Gail Tverberg via Our Finite World blog,

  The Wall Street Journal recently ran an article called, Glut of Capital and Labor Challenge Policy Makers: Global oversupply extends beyond commodities, elevating deflation risk. To me, this is a very serious issue, quite likely signaling that we are reaching what has been called Limits to Growth, a situation modeled in 1972 in a book by that name.

  What happens is that economic growth eventually runs into limits. Many people have assumed that these limits would be marked by high prices and excessive demand for goods. In my view, the issue is precisely the opposite one: Limits to growth are instead marked by low prices and inadequate demand. Common workers can no longer afford to buy the goods and services that the economy produces, because of inadequate wage growth. The price of all commodities drops, because of lower demand by workers. Furthermore, investors can no longer find investments that provide an adequate return on capital, because prices for finished goods are pulled down by the low demand of workers with inadequate wages.

  Evidence Regarding the Connection Between Energy Consumption and GDP Growth

  We can see the close connection between world energy consumption and world GDP using historical data.

  

  Figure 1. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

  This chart gives a clue regarding what is wrong with the economy. The slope of the line implies that adding one percentage point of growth in energy usage tends to add less and less GDP growth over time, as I have shown in Figure 2. This means that if we want to have, for example, a constant 4% growth in world GDP for the period 1969 to 2013, we would need to gradually increase the rate of growth in energy consumption from about 1.8% = (4.0% – 2.2%) growth in energy consumption in 1969 to 2.8% = (4.0% – 1.2%) growth in energy consumption in 2013. This need for more and more growth in energy use to produce the same amount of economic growth is taking place despite all of our efforts toward efficiency, and despite all of our efforts toward becoming more of a “service” economy, using less energy products!

  

  Figure 2. Expected change in GDP growth corresponding to 1% growth in total energy, based on Figure 1 fitted line.

  To make matters worse, growth in world energy supply is generally trending downward as well. (This is not just oil supply whose growth is trending downward; this is oil plus everything else, including “renewables”.)

  

  Figure 3. Three-year average percent change in world energy consumption, based on BP Statistical Review of World Energy 2014 data.

  There would be no problem, if economic growth were something that we could simply walk away from with no harmful consequences. Unfortunately, we live in a world where there are only two options–win or lose. We can win in our contest against other species (especially microbes), or we can lose. Winning looks like economic growth; losing looks like financial collapse with huge loss of human population, perhaps to epidemics, because we cannot maintain our current economic system.

  The symptoms of losing the game are the symptoms we are seeing today–low commodity prices (temporarily higher, but nowhere nearly high enough to maintain production), not enough good paying jobs for common workers, and lack of investment opportunities, because workers cannot afford the high prices of goods that would be required to provide adequate return on investment.

   

  How We Have Won in Our Contest with Other Species–Early Efforts 

  The “secret formula” humans have had for winning in our competition against other species has been the use of supplemental energy, adding to the energy we get from food. There is a physics reason why this approach works: total population by all species is limited by available energy supply. Providing our own external energy supply was (and still is) a great work-around for this limitation. Even in the days of hunter-gatherers, humans used three times as much energy as could be obtained through food alone (Figure 1).

  

  Figure 4

  Earliest supplementation of food energy came by burning sticks and other biomass, starting one million years ago. Using this approach, humans were able to gain an advantage over other species in several ways:

  1. We were able to cook some of our food. This made a wider range of plants and animals suitable for food and made the nutrients from these foods more easily available to our bodies.
  2. Because less energy was needed for chewing and digesting, our bodies could put energy into growing a larger brain, thus giving us an advantage over other animals.
  3. The use of cooked food freed up time for such activities as hunting and making clothes, because less time was needed for chewing.
  4. Heat from burning plant material could be used to keep warm in cold areas, thereby extending our range and increasing total human population that could be supported.
  5. Fire could be used to chase off predatory animals and hunt prey animals.

  Our bodies are now adapted to the need for supplemental energy. Our teeth our smaller, and our jaws and digestive apparatus have shrunk in size, as our brain has grown. The large population of humans that are alive today could not survive without supplemental energy for many purposes, such as cooking food, heating homes, and fighting illnesses that spread when humans are in as close proximity as they are today.

  Our Modern Formula For Winning the Battle Against Other Species

  In my view, the formula that has allowed humans to keep winning the battle against other species is the following:

  1. Use increasing amounts of inexpensive supplemental energy to leverage human energy so that finished goods and services produced per worker rises each year.
  2. Pay for this system with debt, because (if supplemental energy costs are cheap enough), it is possible to repay the debt, plus the interest on the debt, with the additional goods and services made possible by the cheap additional energy.
  3. This system gradually becomes more complex to deal with problems that come with rising population and growing use of resources. However, if the output of goods per worker is growing rapidly enough, it should be possible to pay for the costs associated with this increased complexity, in addition to interest costs.
  4. The whole system “works” as long as the total quantity of finished goods and services rises rapidly enough that it can fund all of the following: (a) a rising standard of living for common workers so that they can afford increasing amounts of debt to buy more goods, (b) debt repayment, and interest on the debt of the system, and (c) and an increasing amount of “overhead” in the form of government services, medical care, educational services, and salaries of high paid officials (in business as well as government). This overhead is needed to deal with the increasing complexity that comes with growth.

  The formula for a growing economy is now failing. The rate of economic growth is falling, partly because energy supply is slowing (Figure 3), and partly because we need more and more growth of energy supply to produce a given amount of economic growth (Figure 2). With this lowered world economic growth, the amount of goods and services being produced is not rising fast enough to support all of the functions that it needs to cover: interest payments, growing wages of common workers, and growing “overhead” of a more complex society.

  *  *  *

  Some Reasons the Economic Growth Cycle is Now Failing

  Let’s look at a few areas where we are reaching obstacles to this continued growth in final goods and services. An overarching problem is diminishing returns, which is reflected in increasingly higher prices of production.

  1. Energy supplies are becoming more expensive to extract.

  We extract the easiest to extract energy supplies first, and as these deplete, need to use the more expensive to extract energy supplies. We hear much about “growing efficiency” but, in fact, we are becoming less efficient in the production of energy supplies.

  In the US, EIA data shows that we are becoming less efficient at coal production, in terms of coal production per worker hour (Figure 5).

  

  Figure 5. US coal production per worker, on a Btu basis based on EIA data.

  With oil, growing inefficiency is shown by the steeply rising cost of oil exploration and production since 1999 (Figure 6).

  

  Figure 6. Figure by Steve Kopits of Douglas-Westwood showing trends in world oil exploration and production costs per barrel.

  Thus, it is for a fairly recent period, namely the period since about 2000, that we have been encountering rising costs both for US coal and for worldwide oil extraction.

  The extra workers and extra costs required for producing the same amount of energy  counteract the tendency toward growth in the rest of the economy. This occurs because the rest of the economy must produce finished products with fewer workers and less resources as a result of the extra demands on these resources by the energy sector.

  2. Other materials, besides energy products, are experiencing diminishing returns. 

  Other resources, such as metals and other minerals and fresh water, are also becoming increasingly expensive to extract. The issue with mineral ores is similar to that with fossil fuels. We start with a fixed amount of ores in good locations and with high mineral percentages. As we move to less desirable ores, both human labor and more energy products are required, making the extraction process less efficient.

  With fresh water, the issue is likely to be a need for desalination or long distance transport, to satisfy the needs of a growing population. Workarounds again involve more human labor and more resource use, making the production of fresh water less efficient.

  In both of these cases, growing inefficiency leaves the rest of the economy with less human energy and less energy products to produce the finished goods and services that the economy needs.

  3. Growing pollution is taking its toll.

  Instead of just producing end products, we are increasingly finding ourselves fighting pollution. While this is a benefit to society, it really is only offsetting what would otherwise be a negative. Thus, it acts like overhead, rather than producing economic growth.

  From the point of view of workers having to pay for higher cost energy in order to fight pollution (say, substitution of a higher cost energy source, or paying for more pollution controls), the additional cost acts like a tax. Workers need to cut back on other expenditures to afford the pollution control workarounds. The effect is thus recessionary.

  4. The amount of “overhead” to the world economy has been growing rapidly in recent years, for a number of reasons: 

  • The amount of overhead is growing because we are reaching natural barriers. For example, population per acre of arable land is growing, so we need more intensity of development to produce food for a rising population.
  • With greater population density and increased bacterial antibiotic resistance, disease transmission becomes a more of a problem.
  • Increasing education is being encouraged, whether or not there are jobs available that will make use of that education. Education that cannot be used in a productive way to produce more goods and services can be considered overhead for the economy. Educational expenses are frequently financed by debt. Repayment of this debt leads to a decrease in demand for other goods, such as new homes and vehicles.
  • We have more elderly to whom we have promised benefits, because with the benefit of better nutrition and medical care, more people are living longer.

  5. We are reaching debt limits.

  As economic growth has slowed, we have been adding more and more debt, to try to mitigate the problem. This additional debt becomes a problem in many ways: (a) without cheap energy to leverage human labor, there are not many productive investments that can be made; (b) the addition of more debt leads to a need for more interest payments; and (c) at some point debt ratios become overwhelmingly high.

  At least part of the slowdown in economic growth that we are seeing today is coming from a slowdown in the growth of debt. Without debt growth, it is hard to keep commodity prices high enough. Investment in new manufacturing plants is also affected by low growth in debt.

  *   *   *

  Reasons for Confusion in Understanding Our Current Predicament

  1. Not understanding that all of the symptoms we are seeing today are manifestations of the same underlying “illness”. 

  Most analysts think that the economy has stubbed its toe and has a headache, rather than recognizing that it has a serious underlying illness.

  2. Academia is focused way too narrowly, and tied too closely to what has been written before. 

  Academics, because of their need to write papers, focus on what previous papers have said. Unfortunately, previous papers have not understood the nature of our problem. Academics have developed models based on our situation when we were away from limits. The issues we are facing cover such diverse subjects as physics, geology, and finance. It is hard for academics to become knowledgeable in many areas at once.

  3. Models that seemed to work before are no longer appropriate.

  We take models like the familiar supply and demand model of economists and assume that they represent everlasting truths.

  

  Figure 7. (Source Wikipedia). The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

  Unfortunately, as we get close to limits, things change. Both wage levels and debt levels have an impact on demand; the quantity goods available is also affected by diminishing returns. The model that worked in the past may be totally inappropriate now.

  Even a complex model like the climate change model being used by the IPCC is likely to be affected by financial limits. If near-term financial limits are to be expected, IPCC’s estimate of future carbon from fuels is likely to be too high. At a minimum, the findings of the IPCC need to be framed differently: climate change may be one of a number of problems facing those people who manage to survive a financial crash.

  4. Too much wishful thinking.

  Everyone would like to present a positive result, especially when grants are being given for academic research will support some favorable finding.

  A favorite form of wishful thinking is believing that higher costs of energy products will not be a problem. Higher cost energy products, whether they are renewable or not, are a problem for many reasons:

  • They represent growing inefficiency in the economy. With growing inefficiency, we produce fewer finished goods and services per worker, not more.
  • Countries using more of the higher cost types of energy become less competitive in the world market, and because of this, may develop financial problems. The countries most affected by the Great Recession were countries using a high percentage of oil in their energy mix.
  • The amount workers have available to spend is limited. If a worker has $100 to spend on energy supply, he can buy 100 times as much in energy supplies priced at $1 as he can energy supplies priced at $100. This same principle works even if the cost difference is much lower–say $3.50 gallon vs. $3.00 gallon.

  5. Too much faith in, “We pay each other’s wages.”

  There is a common belief that growing inefficiency is OK; the wages we pay for unneeded education will work its way through the system as more wages for other workers.

  Unfortunately, the real secret to economic growth is not paying each other’s wages; it is growing output of finished products per worker through increased use of cheap energy (and perhaps technology, to make this cheap energy useful).

  Increased overhead for the system is not helpful.

  6.  An “upside down” peak oil story.

  Most people in the peak oil community believe what economists say about supply and demand–namely, that oil prices will rise if there is a supply problem. They have not realized that in a networked economy, wages and prices are tightly linked. The way limits apply is not necessarily the way we expect. Limits may come through a lack of good paying jobs, and because of this lack of jobs, inability to purchase products containing oil.

  The connection between energy and jobs is clear. Good jobs require the use of energy, such as electricity and oil; lack of good-paying jobs is likely to be a manifestation of an inadequate supply of cheap energy. Also, high paying jobs are what allow rising buying power, and thus keep demand high. Thus, oil limits may appear as a demand problem, with low oil prices, rather than as a high oil price problem.

  In my opinion, what we are seeing now is a manifestation of peak oil. It is just happening in an upside down way relative to what most were expecting.

  *  *  *

  Conclusion

  One way of viewing our problem today is as a crisis of affordability. Young people cannot afford to start families or buy new homes because of a combination of the high cost of higher education (leading to debt), the high cost of fuel-efficient new cars (again leading to debt), the high cost of resale homes, and the relatively low wages paid to young workers. Even older workers often have an affordability problem. Many have found their wages stagnating or falling at the same time that the cost of healthcare, cars, electricity, and (until recently) oil rises. A recent Gallop Survey showed an increasing share of workers categorize themselves as “working class” rather than “middle class.”

  It is this affordability crisis that is bringing the system down. Without adequate wages, the amount of debt that can be added to the system lags as well. It becomes impossible to keep prices of commodities up at a high enough level to encourage production of these commodities. Return on investment tends to be low for the same reason. Most researchers have not recognized these problems, because they are narrowly focused and assume that models that worked in the past will continue to work today.

  

  

  
  
  

  

• Slavery In America

  Presented with no comment…

   

  

   

  Source: Investors.com

  

  

  
  
  

  

• What The US Government Spends Its Money On, Besides Hookers And Gambling

  While there are those who, oblivious of the fastest collapse in US economic data on record, have pointed out that government tax receipts are rising with the implication being that the US consumer is doing quite fine thank you (and they are absolutely correct if by “consumer” they mean about 1% of the US population), what is rarely if ever discussed is that government expenditures are rising just as fast.

  In fact as the following chart from the latest Treasury refunding presentation shows, the cumulative deficit through December in 2015 is just a fraction greater than last year, when government tax revenues were substantially lower.

  

  So to understand where Uncle Sam spent all that extra cash it collected through various rising tax increases on the rich here is the full breakdown of the largest outlay categories for the US government in the first fiscal quarter of 2015 and 2014.

  

   

  It will hardly come as a surprise that after being neck and neck a year ago with Social Security outlays, the spending on Medicare and Medicaid (HHS) has jumped substantially, and at over $250 billion in the quarter, is now the most cash demanding category courtesy of a demographically deteriorating America that is just a little bit older and whole lot fatter.

  The bulk of the other spending categories were largely in line with the prior year, and the one outlier was interest on the debt (Treasury), which jumped to just around $125 billion for the quarter an increase of about 25% from a year ago, which is somewhat unexpected considering the average cost of debt continues to decline even if the total notional amount of US Federal Debt is now in the mid-$18 trillion range.

  The one most interesting category was defense spending: a category despised by progressives even though at this rate spending on interest for the progressives’ beloved government debt will soon eclipse defense. It is here that outlays actually dropped from a year ago, declining to just over $150 billion for the quarter. Which is surprising, because as Politico wrote overnight, among the items funded by general taxpayer revenue were such discretionary expenses as hookers and blackjack, after a defense department audit founds that Pentagon employees used their government credit cards to gamble and pay for “adult entertainment.”

  From Politico:

  The audit of “Government Travel Charge Transactions” by the Department of Defense Office of Inspector General, which is to be made public in coming weeks, found that both civilian and military employees used the credit cards at casinos and for escort services and other adult activities — in Las Vegas and Atlantic City.

  The audit forgot to add that the employees were either ridiculously brave or dumb as a bag of hammers to assume that charging a hooker on your taxpayer credit card would pass unnoticed.

  Actually make that dumb as a bag of hammers, because the expenditures did not just involve swiping you card (in the prostitute’s magnetic card reader), but actually submitting the expense for reimbursement. And for the supervisors to figure out that the funds were spent on hookers, it means that the Pentagon lackeys wrote down just that.

  A Pentagon official briefed on some of the findings stressed that the federal government did not necessarily pay the charges; holders of the cards pay their own bills and then submit receipts to be reimbursed for expenses related to their government business.

  Actually make that really, really dumb, because “the official said that the employees may have used the government cards for gambling and escort services in order to shield the charges from spouses.” In other words, if you got caught not only would you get fired, but you would lose half your assets following a very messy divorce.

  Those taxpaying Americans wondering if this was a one-off event, will be delighted to know that their taxes are abused pretty much on a constant basis by the government’s employees: “the Department of Labor’s Inspector General recently found that Job Corps employees charged nearly $100,000 to the government for hair cuts, clothing, and personal cell phone service. The Department of Homeland Security found that Coast Guard employees charged more than $12,000 at a one California coffee shop alone. Three employees were fired and two resigned last year at the Bureau of Land Management after they charged $800,000 worth of gift cards on their government credit cards.”

  On the other hand, the Keynesians among us will protest that this is perfectly normal and even legitimate theft: after all, how is the economy expected to grow if corrupt criminals don’t spend, spend, spend. Especially if the money isn’t theirs to begin with. Those same Keynesians will demand that instead of collecting taxes, the government should merely issue a quadrillion dollars in debt which will be promptly monetized by the Fed, with the proceeds used by every government criminal to hire hookers, do blow, gamble 24/7 and otherwise “boost” the economy.

  In fact, that may well describe the Keynesian nirvana: surely it would explain why the real US economy is fast approaching a state of terminal collapse. Which is why expect the trend in declining defense spending not to persist.

  As for that last question, whether anyone will be fired, here is the simple answer: of course not,

  Because the review was an audit of the credit card system and not an investigation of particular individuals, the official said the likely result will be that the agencies and military branches most affected will be compelled to remind employees that the practice violates policy — and possibly the law. [T]he findings are expected to lead department officials to issue stern new warnings.

  Because if criminal banks get away with a wrist slap and a harsh warning by their “regulators”, why not criminal government workers?

  

  

  
  
  

  

• New Russian High-Tech Tank Suffers BSOD Moment During Army Parade

  Russia unveiled its new main battle tank as part of practices for Saturday’s Victory Day parade (commemorating the end of WWII). According to RT, the Armata “is a cutting-edge vehicle with an unmanned turret armed with a brand new 125 mm smoothbore cannon, which is the most powerful gun of its kind to date in terms of muzzle energy.” You decide…

  Of course, the painful 40 seconds could be seen as an anology for The Fed’s effort to revive The US Economy.

  
  

  

  

  
  
  

  

• Global Trade To Remain Subdued Until At Least 2020, Goldman Says

  In early March, Maersk chief executive Søren Skou delivered a stinging blow to those who claim the epic decline in the Baltic Dry Index is representative not of sagging worldwide demand, but rather of severe oversupply, and is thus no longer a reliable indicator when it comes to assessing the state of the global economy. Skou told FT he sees container demand “towards the low end” of the 3-5% growth range the company forecasts for 2015. If Skou is correct, it would mark a Y/Y decline in growth for the company, which handles around 15% of all seaborne freight. Skou also flagged the generally sluggish pace of global economic growth, noting that “the economies in Europe are still very sluggish. Brazil, Russia and China: those three economies used to drive a lot of growth, and right now we are not really seeing that to the same extent. The only real bright spot is the US, and even the US is good but not great.” This led us to remark that “yes supply isn’t helping, but it is the lack of global demand that is pushing equilibrium levels lower, aka global deflation.” Later in the month, we flagged further declines in shipping rates as evidence that global trade was grinding to a crawl. 

  Meanwhile, we’ve exhaustively documented the laundry list of signs that point to dramtically decelerating economic growth in China, including falling metals demand, collapsing rail freight volume, slumping exports, a war on pollution that may cost the country 40% in industrial production terms, and, most recently, a demographic shift that’s set to trigger a wholesale reversal of the factors which contributed to the country’s meteoric rise. All of this means that the world’s once-reliable engine of demand is set to stall in the years ahead. 

  Finally, we’ve been keen to note that CB policy has had the effect of allowing otherwise insolvent companies to stay solvent by tapping investors at record low borrowing costs contributing to a supply glut and, ultimately, to deflation.

  Consider the above and then consider the following, from Goldman, who now predicts the intersection between soft commodity markets and the Chinese transition from investment to consumption will weigh on dry bulk trade — and by extension, on shipping rates — until at least 2020. 

  Via Goldman:

  The transition from investment to consumption in the Chinese economy, together with a shift towards cleaner energy sources, has caused a sharp deceleration in dry bulk trade. After expanding at an average annual rate of 7% over the period 2005-14, seaborne demand in iron ore, thermal and metallurgical coal is set to increase by only 2% in 2015 to 2.5 billion tonnes as these trends persist. In the steel sector, domestic consumption growth ground to a halt in 2014 and the prospect of peak iron ore demand is nigh. In the power sector, demand for coal-fired generation is suffering from a combination of weaker economic growth, rising energy efficiency and a diversification in the fuel mix towards renewable energy, natural gas and nuclear. There are no other markets large and/or dynamic enough to offset a slowdown in China in the foreseeable future, and we forecast trade volumes to stabilize in the period to 2018.

  
  

  Meanwhile, shipyards churning out large dry bulk carriers in expectation of a sustained period of strong demand for commodities now find themselves adding unwanted capacity into an oversupplied freight market. The two largest dry bulk vessel types, panamax (c.75,000 DWT2) and capesize (c.180,000 DWT), benefited the most from the bull market in iron ore and coal. The size of the fleet doubled between 2008 and 2015, and current order books will ensure that shipping capacity continues to grow until 2017, when vessel retirements will finally outweigh new deliveries.

  
  

  

   

  The divergence between demand for freight and the capacity of the vessel fleet reflects the time lag between the mining and shipping sectors. In both industries, supply responds to price: rising commodity prices in a tight market leads to investment in new mining capacity in the same way that rising freight rates encourages greater activity in shipyards. On that basis, the mining sector moves first by ramping up export volumes and the shipping sector moves next, responding to rising trade volumes by investing in new vessels. Conversely, mining companies will be the first to respond in a bear market by curtailing investment, while the delayed response from ship builders will result in overinvestment and excess capacity. 

  

  The daily charter rate for a capesize vessel has declined from a peak in excess of US$100,000 in 2008 down to its current level below US$10,000. Faced with the risk of leaving vessels idle over long periods, we believe that ship owners will charge charter rates that are range bound between the cash cost of operating the vessel and the accounting break-even rate. This compounds the impact of lower fuel prices, resulting in a period of cheap freight that should last until older vessels have been scrapped in sufficient numbers to balance the market, most likely beyond 2020.

   

  In other words: not bullish for global trade/demand. So as we anxiously wait to hear from those who claim it’s all about oversupply and nothing to do with the fact that between a decelerating China and the utter failure of central bank policies to stimulate demand to soak up a global supply glut which QE has to a large extent facilitated, we’ll leave you with a fresh look at the Baltic Dry Index which, all things equal, signifies a global depression of epic proportions.

  

  

  

  
  
  

  

• Presenting The Best (And Worst) College Majors

  A long time ago someone started a rumor that says college graduates will make around $1,000,000 more over their lifetime than those who only earn a high school degree.

  Ok, maybe it’s not entirely fair to call it a “rumor” because we’re sure there are some statistics behind it, but as Jamie Dimon recently reminded us, statistics can’t be trusted, and even if in this case they could, the fact that the average college graduate enters the job market saddled with nearly $30,000 in student loan debt and the fact that — as Moody’s recently noted on the way to putting some $3 billion in student loan-backed ABS on review for downgrade — unemployment rates are high among recent graduates, have led some observers to question whether a college degree is still as valuable as it once was. Throw in relentlessly rising tuitions rates (meaning degrees will become ever more expensive over time), and you have the beginnings of what may be a compelling case against the utility of higher education in America.

  Fortunately, there are still some majors out there which promise to reward students with high paying, full-time work upon graduation. Here, courtesy of a study from Georgetown, are the best and worst areas to major in if you hope to survive once the student loan checks stop showing up in the mail.

  (Note: the dots in the middle of the bars represent the median salaries for a given major)

  If it’s money you’re after, you don’t want to be a social worker and probably not a psychologist either…

  

  … and you definitely do not want to major in any of the liberal arts…

  

  …or any other kind of arts for that matter…

  

  …but you might want to consider being a doctor…

  

  …or a finance executive…

  

  …but if you really want to make some serious cash right out of college, you’ll help find oil…

  

  …and if you really want to struggle, you’ll teach children…

  

  Here’s a bit of color from the report:

  STEM (science, technology, engineering, and mathematics), health, and business majors are the highest paying, leading to average annual wages of $37,000 or more at the entry level and an average of $65,000 or more annually over the course of a recipient’s career.

   

  The 10 majors with the lowest median earnings are: early childhood education ($39,000); human services and community organization ($41,000); studio arts, social work, teacher education, and visual and performing arts ($42,000); theology and religious vocations, and elementary education ($43,000); drama and theater arts and family and community service ($45,000).

  And a bit more from Bloomberg:

  Georgetown University’s Center on Education and the Workforce analyzed Census Bureau data to determine the average wages for 137 college majors and found that students who focused on architecture and engineering come out on top, with a $50,000 starting salary.

   

  Within that group, those who studied the skills needed for oil jobs got paid best. People who majored in petroleum engineering made an average of $135,754 a year by their mid to late 20s—more than any other major. 

   

  Then there are the jobs people do more for love than cash: Early childhood education majors pulled in the least, making an average of $39,097 a year. While that’s still a significant bump over high school graduates, who typically pull in $22,000 a year, it’s a drastic cut of what STEM and business majors reported making a couple years out of college.

   

  “A college major isn’t destiny,” said Anthony Carnevale, director of the Center and the report’s lead author. But it does appear to be a more significant factor than some college counselors and brochures might suggest. “For today’s high school graduates, and an increasing share of middle-aged adults who are pursuing a bachelor’s degree, the decision about what to major in will have critical economic consequences for the rest of their lives,” Carnevale said.

  To summarize: drilling for oil is important, educating America’s youth … not so much.

  WIW2-FullReport

  

  

  
  
  

  

• The Nazi Economic Mirage

  Submitted by Erico Matias Tavares via Sinclar & Co.,

  Many believe that Adolf Hitler’s centrally-planned economic policies produced an economic miracle in the 1930s, with Germany finally regaining its tempo and getting out of a terrible depression.

  Conventional economic indicators confirm this view. However, they can also be misleading as to the true condition of the German economy and the sustainability of its finances. Moreover, the heavy burden placed on society, where millions of people suffered tragic losses and virtually everyone lost their freedoms, cannot be just regarded as a footnote. And these policies, or more precisely their failure, put Germany on a collision course with the rest of the world.

  In 1930 Germany had a functioning democracy, world class scientists and engineers and impressive industrial capabilities. Still, prosperity levels were well below those of its US and UK counterparts, as the country never fully recovered from the socioeconomic turmoil that resulted from its defeat in World War I.

  The global depression that soon followed only worsened the economic conditions of Germans, with unemployment reaching a staggering 30% of the population by 1933. In their desperation, they turned to a man with a grand vision and a plan, promising he would fulfill the great Germanic promise and usher in a new era of prosperity: Adolf Hitler. His siren song and radical policies set in motion a chain of events which eventually lead to a diametrically opposed outcome for his country.

  From Failure to Savior

  Hitler had been pretty much a failure most of his early life. While he valiantly served as a Private during World War I, often volunteering for the most dangerous jobs and even receiving two Iron Crosses as a result, he was never promoted because he could not interact well with his comrades, nor – if you can believe it – did he have the charisma to lead them into action.

  In 1918 he was blinded by a gas attack and put of commission for weeks. When he recovered his entire world had changed: his country lost the war and everything he had fought for collapsed.

  Hitler was quick to blame his misfortunes on others, particularly wild conspiracy theories about the undue influence of the Jews in world events, as he would later articulate in his book “Mein Kampf”. Disillusioned with the outcome of the war and prospects for the future, he settled in Munich and joined a radical workers party, along with other former soldiers. In charge of propaganda, he became a prolific public speaker, so much so that people began to think that the National Socialist German Workers’ Party – abbreviated to Nazi – was in fact his own party.

  After being imposed hefty war reparations by the Allies, Germany’s woes got progressively worse, leading to a humiliating foreign occupation of the Ruhr in 1923, along with a devastating bout of hyperinflation. This was too much to bear and the Nazis decided to take violent political action, seeking to expand their influence in society.

  After this strategy failed to deliver any tangible results, and most importantly put him in jail for a while, Hitler realized that he would have to resort to legal means to achieve power. He then split the party and headed the new faction, with the financial backing of several Bavarian industrialists and landlords.

  Although progress was very slow at first, the Nazi party grew steadily. In May 1928 they had won less than 3% of the vote in the elections to the Reichstag, Germany’s parliament. They fared even worse in the presidential elections almost a year later, with their candidate getting barely 1% of the vote. But as Germany’s socioeconomic crisis deepened, all of the sudden their influence exploded. In the parliamentary election of July 1930, the Nazis scored 18% of the vote, doubling it within two years and becoming the largest party in the Reichstag. Hitler became Germany’s chancellor in January 1933 – at 39 years old, and absolute dictator by August 1934, marking the end of the Weimar Republic.

  The Nazis had finally reached their goal—the establishment of the Third Reich, an authoritarian state in Germany under the control of the Fuhrer, Adolf Hitler.

  An Economic Revival – Of Sorts

  Having tightened their grip on politics, the Nazis promptly implemented their plan to reshape society and the economy with the following goals:

  • Solve the unemployment problem – a key promise of Hitler
  • Drag the German economy out of the recession and make the country self-sufficient (“autarky”)
  • Promote the population growth of “true” Germans
  • Get rid of Jewish socioeconomic influence
  • Realign the economy with the Nazi’s expansionist objectives

  Hitler launched several government programs and policies to reduce unemployment, with much fanfare to boot.

  Massive public work schemes were announced. Over 2,500 miles of autobahn (highways) were built, linking major cities. Hospitals, houses, canals and so forth were also built across the country. All this work was done manually, shovel in hand, so that more workers were needed.

  Trade unions were banned and all workers were forced to join the Nazi Labor Front. Working hours were thus increased and wages frozen. Workers were strongly encouraged to go along with this, as any dissenters were immediately accused of economic sabotage and sent to forced labor camps.

  To counter any resentment for the loss of worker rights, the “Strength through Joy Movement” (KdF) was established specifically to make workers “happy”, providing them with a range of leisure opportunities. This of course included a healthy dosage of Nazi ideological indoctrination and thanking the Fuhrer for their good fortune. The KdF also introduced a plan that enabled workers to buy a car. The Volkswagen (the People's Car) was conceptualized so that most people could afford it. The Beetle, designed by Ferdinand Porsche, cost the equivalent of 35 weeks wages for the average worker, and he could pay for it on a weekly basis.

  Women’s rights – which had flourished under the Weimar Republic, were significantly curtailed. Since they were no longer allowed to work, men took over their jobs and were the only ones allowed to make decisions in society. The Nazis had another role in mind for women, since they had always been particularly concerned with the decline in “true” German population numbers. Accordingly, there was a great deal of propaganda celebrating the image of the mother and the family unit. Prizes were given to women who would bear a large number of children.

  Industry was also reorganized – around a very pressing Nazi concern: rearmament. Hitler had devolved great many powers to large private industrial interests, which were now headed by Nazi sympathizers and who stood to gain a great deal from weapons production. Entire factories were uprooted to parts of the country less exposed to French aggression. New railways were built in record time (but with dubious efficiency). The whole productive scheme was now rethought and planned in the context of war.

  Of course the Treaty of Versailles had prohibited all of this, but Hitler went ahead regardless. From 1935 onwards, every man aged between 18 and 25 had to spend two years in the armed forces. While in 1933 there were 100,000 members in the armed forces, by 1939 this number would balloon to 1.4 million.

  Rearmament created jobs of course, but also a lot of disturbances in established industrial practices and logistics. All the while, the Nazis attempted to reconcile these efforts with making Germany more self-reliant – which was clearly contradictory given the massive increase in demand for raw materials to support the construction new ships, tanks and airplanes. At first they searched for artificial ingredients to replace oil, rubber, textiles and coffee, to no avail. Then they struck a deal with the Soviets, exchanging raw materials for arms in the lead up to the war. By 1939 Germany was still importing 33% of its raw materials. Autarky turned out to be another grandiose Nazi policy ill-adjusted to the needs of the economy.

  Unfortunately, not only factories were uprooted. The Jewish community, which had played a prominent role in German society for centuries, was promptly segregated and then progressively eliminated. Other minorities followed, with all their jobs and possessions reallocated.

  Hitler’s vision for the German nation was finally becoming a reality. But he was far from done.

  The Crucial Role of the Farming Sector

  Many of the traditional Germanic themes were associated with the land. As such, this became a centerpiece of the Nazis’ ideology, further accentuated by the historical support of many landlords to their cause.

  Some 9 million people worked in German farms by the time Hitler came to power. In comparison, the US had 10 million people employed in the sector (curiously many from German descent, particularly in the Midwest) with seven times as much arable land. This was emblematic of Germany’s meager productivity and incomes in the farming sector.

  In 1933, Hitler implemented the State Hereditary Farm Law, where selected lands were declared hereditary, as an Erbhof, to pass from father to son, and could not be mortgaged or alienated. Any farm of 7 to 125 hectares, the size deemed to be adequate to maintain a family and act as a productive unit, could be declared Erbhof. All farms of over family size were also made secure in possession of their owner's family, with no possibility of alienation.

  While farmers benefited from the elimination of debt and some aid from the government – such as fixating prices and production to promote that elusive autarky, their ability to finance crop expansions and purchases of new equipment was also reduced. The sector saw a continuous outflow of workers, who were now being employed in all the other government sponsored projects and the military.

  As a result, agricultural productivity suffered and shortages of food developed across the country. In response, the Nazis implemented food rationing – which would remain in place until the end of the war. In 1937, annual consumption of wheat bread, meat, bacon, milk, eggs, fish, vegetables, sugar, fruit and beer had fallen to levels comparable to a decade earlier (only rye bread, cheese and potatoes had increased). Malnourishment was starting to become a real problem amongst German workers, in farms and factories across the country.

  In typical fashion, rather than blaming his own policies, Hitler believed that this situation resulted from a lack of “space to live” for his people. All major European powers had access to vast territories in Africa and elsewhere. The US had a huge continent at its disposal. But not Germany, who had lost out in WWI and was now confined to its diminished borders.

  If other countries could obtain large amounts of land by force, why couldn't Germany? After all, security was not the only reason to build a powerful army.

  The Miracle Begins to Unravel

  By the time the Olympic Games took place in Berlin in 1936, cracks were starting to appear in German society. This was not immediately obvious to large parts of the population (nor to foreign economists and commentators, for that matter), who for the most part were still seduced by the Fuhrer’s promises of a glorious pan-Germanic future.

  Any dissent was violently crushed through party terrorism (via the infamous SS and Gestapo). The persecution of Jews was intensified. The regular police were circumvented by the party’s police; the regular avenues of justice were bypassed by the party’s courts; the regular prisons were eclipsed by the party's concentration camps. In short, a rational bureaucracy was replaced by a virulent irrational one.

  Government controls and management of certain parts of the economy were creating huge distortions which in turn prompted even more intervention, invariably at the expense of some other society group. While the big industrial concerns were benefiting from these arrangements, small businesses and the middle classes were squeezed out of the market; as were most of the staples that ordinary people needed.

  With taxation revenues curtailed by design, Hitler’s expansionary policies had to be financed with debt. But these funds were neither unlimited nor free, and Nazi leaders were starting to become very aware of this. There was some debate as to which economic policies should be adopted as a result, with some prominent figures recommending a more liberalized approach to the economy.

  However, like any good central planner, Hitler decided to press ahead with his original policies with even more gusto. During a cabinet meeting in 1936, he and Hermann Göring, his aviation minister and trusted adviser, announced that the German rearmament program must be sped up. There was no turning back.

  As a result, Göring was put in charge of the four year economic plan, creating a new organization to administer it. He subordinated the ministries of labor and agriculture and bypassed the economics ministry in his policy-making decisions, which meant that he had de facto control of the economy. Expenditures on rearmament were increased, in spite of growing budget deficits. In 1937, the Reichswerke Hermann Göring was established under state ownership with the aim of boosting steel production beyond the level which private enterprise could economically provide. This was command-and-control policies on steroids.

  

  German Unemployed (in millions): Jan 33 – Jan 39

  Source: historylearningsite.co.uk

  As shown in the graph above, the reduction of unemployment was an unequivocal bright spot, but largely at the expense of women, Jews and other minorities, as well as over a million people serving in the military. The same formula was applied to other territories that were subsequently annexed, yielding similar results. For instance, unemployment also dropped in Austria after the Anschluss in 1938.

  But the Nazis had a strategy to fund their grand vision and release the German people from the shackles of want: territorial expansion and plain robbery. And so the hostilities began with the invasion of Poland in 1939.

  The War Years

  The early months of the war went fairly smoothly for the German army, which overran large territories as the Allies were still gearing up for battle. However, as the war intensified, so did the chronic shortages back home. Farms lacked equipment and people, which were now being absorbed in ever expanding numbers by factories supplying the military, or by the military itself.

  By early 1941, when the German army arguably had its strongest foothold across Europe, civilian consumption was already down 18% from 1938 levels. And it would continuing going down from there.

  The labor force kept on shrinking, although now irreversibly. Impressive military victories soon turned into stalemates and finally into catastrophic losses across all three war fronts: East, West and South. The Nazis were left with little choices on how to replenish those losses and continue fighting. Accordingly, farmers were next to be enlisted, which was then extended to everyone once Germany was on the brink of defeat. To get a sense of the catastrophe resulting from Hitler’s stubbornness, a third of all boys born between 1915 and 1924 was either dead or missing by the end of the war.

  But in addition to soldiers Germany needed to eat. As its farming population shrank, the Nazis came up with a devious plan to make up for it: enslave their neighbors and prisoners of war.

  Every season there used to be a flow of workers coming across from Poland to work in German farms, given that higher wages were on offer. But after the German invasion in 1939, the Nazis brought back hundreds of thousands of Polish workers and POWs against their will. Then came the invasion of France, which provided a labor pool of over a million POWs. But even that paled in comparison to the number of workers brought in after the invasion of the Soviet Union in 1941, almost three million in total. When the Italians changed sides in 1943, the German army captured as many of them as they could to work in the fields. None of this was enough to sustain production as all these people died quickly due to appalling working conditions.

  Such was the insanity of the Nazi war machine. By the end of the war nearly one in every four workers in Germany was a foreigner, in most cases unwillingly.

  The Nazi Economic Mirage

  Hitler’s policies are still viewed to this day as a great example of how unprecedented government intervention fixed a dire economic problem. In short, Hitler laid a golden egg and produced an economic miracle.

  As early as 1933, even before any miracle could be seen, the New York Times had nothing but praise for his ambitions, according to the following front page headline:

  “There is at least one official voice in Europe that expresses understanding of the methods and motives of President Roosevelt—the voice of Germany, as represented by Chancellor Adolf Hitler.”

  For sure, some of Hitler’s policies made a lot of sense. Building up the country’s infrastructure, which was so vital to a modern industrial economy, proved to be a winning bet. German workers could now afford cars to drive in the new roads, as well as other modern conveniences. Economic activity and incomes responded accordingly. That Weimar Republic feeling of uncertainty and malaise finally subsided. And the dramatic increase in fertility rates during the Nazi years also provided a boost (after all, babies can promote consumption). So in a sense there was no mirage here, the growth was real.

  Perhaps if the real economy had been allowed to flourish at that stage, Germany could have indeed produced a real economic miracle. If anything the most prosperous nations of the 20th century proved that the economic reigns and decision-making must eventually be decentralized in order for any gains to be sustained and expanded. Women also needed to play a role in the economy, much beyond just having babies.

  Unfortunately for the people living under the Third Reich, this was never allowed to happen. All of these efforts became increasingly subordinated to the logic of war. As a result, the economy was stifled by top-down industrial policies and readjustments, price controls, misallocation of resources and so forth. Personal and commercial freedoms had to be restricted so that the prevailing Nazi ideology could never be challenged.

  Rearmament thus became the most significant government expenditure. The resulting increase in GDP was significant. In fact Germany boasted the highest growth rates in Europe in the prewar years. But this can be misleading as any comparison could not be done on an apples-to-apples basis, since other major economies spent considerably more on consumption and productive activities. Just because Germans were producing more guns does not mean that they were better off.

  The government went ever deeper into debt as a result of this policy. Of course any leader, no matter how incompetent, can create growth if enough money is thrown at the economy; the problem is that those debts will need to be repaid at some point.

  During the war, Albert Speer, the minister of armaments and war production and a close friend to Hitler, also directed a miracle of his own: doubling Hitler’s production orders as Germany was under heavy Allied bombardments. No doubt his administrative genius played a role, but so did exploiting millions of slave laborers who were starved and worked to death in his factories. It was the same ideology at work all over again. And the war effort was significantly prolonged as a result.

  Speer was arrested in 1945 and interrogated by a committee of US representatives, who wanted to learn more about the inner workings of the Third Reich. John Kenneth Galbraith, the famous Harvard economist and adviser to several US presidents later in his career, was also in attendance.

  Here’s a transcript of the committee’s report after that meeting:

  “The German people, [Speer] said, had worked hard and faithfully and had suffered greatly. They had won victory after two years and had been denied the fruits of the victory they deserved by the inadequacy of their leaders. That inadequacy he felt obliged to expose.

   

  “The fall of the Third Reich Speer attributed to the moral decay of its rulers. This decay was well advanced before the outbreak of the war. Its most spectacular manifestation was soft, expensive living. In some instances it took the form of extreme corruption. Speer cites Göring as the most corrupt of his colleagues. Göring's acquisitive looting and hoarding was unmatched by the other party leaders. But nearly all of the party leaders, Berlin ministers and Gauleiters alike, showed a penchant for a rich, easy, well-nourished existence and variety in wine and women.”

  Göring of course was the prime architect of Germany’s war economy after 1936. All of the sudden the Nazi elite was not looking so brilliant after all. Here’s what Galbraith would later say about the whole bunch in his book “The Age of Uncertainty”:

  “Hermann Göring, Joachim von Ribbentrop, Albert Speer, Walther Frank, Julius Streicher and Robert Ley did pass under my inspection and interrogation in 1945 but they only proved that National Socialism was a gangster interlude at a rather low order of mental capacity and with a surprisingly high incidence of alcoholism.”

  Rather than being some central planning geniuses, Galbraith’s quote is a rather more accurate description of the Nazis. After over a decade under their leadership, Germany reversed its gains and prosperity all the way back to the late 19th century, with a large part of its population annihilated in the process. The country was then sectioned off to different Allied factions.

  The mirage was finally over.

  

  

  
  
  

  

• "Mystery" Buyer Of Stocks In The First Quarter Has Been Identified

  Three days ago, when looking at the unprecedented, record outflows from US equities (coupled with continued inflow into bond funds into what BofA’s Hans Mikkelsen would likely dub the Great Antirotation) we asked a simple question: “who is buying… no really“.

  

  

  
  

  Then yesterday, the spoofing algos were briefly spooked when Yellen, for the second time in under one year, issued a warning about valuations, only this time instead of bashing the biotech and social media sector, the non-Series 7, 63 certified financial advisor brought attention to the entire market saying “equity market valuations generally are quite high.”

  She was referring to a level in the S&P around 2100 (aka 21x forward GAAP P/E multiple) which is where the S&P has been trading for the past several months, a level which was as high as 2120 in the first quarter, on February 20, 2015.

  Yet, one entity that clearly disagrees with her assessment is none other than her peer institution in Switzerland, the Swiss Central Bank, which as we noted earlier, owned a record $1.1 billion in AAPL stock as of March 31.

  The Swiss National Bank is also the answer to the question we posed, rhetorically, a few days ago:

  “Who is buying”?

   We now know, because while everyone else, hedge funds included, were dumping stocks in droves, here is what the Swiss National Bank was doing:

  

   

  Together with companies engaging in record amounts of stock buybacks, the SNB was buying billions and billions worth of shares. So much so, in fact, that its US-listed equity portfolio rose by a record 40% to a record $37 billion.

  

   

  And now we know, even if we don’t know how many other central banks were active alongside the Swiss during its record stock-buying spree. And perhaps even more apropos: which central bank was selling to the SNB?

  Finally, those wondering if the Fed gave the SNB the money with which to buy stocks on its behalf, the answer based on the most recent NY Fed FX swap data, is no. At least not in the most recent week.

  

  Source: SEC

  

  

  
  
  

  

• "Market 1 – 0 Yellen/Gartman" Bonds & Stocks Bid As Crude Crumbles

  Only one clip seemed appropriate given the last two days…

  This seemed to sum things up nicely…

  S&P500 Futures; NO STOPS GO UNTOUCHED IN THE ELECTRONIC ARCADE – http://t.co/8DmaJqUWbe pic.twitter.com/Icwt87hliL

  — Mr TopStep (@MrTopStep) May 7, 2015

   But this morning's epic short squeeze provided the momentum for the rest of the move… 

  

   

   Gartman and Yellen were celebrating briefly (very briefly) this morning… then not so much

  

  As we said this morning, "Will Yellen Capital Management LP be right, or will Gartman's uncanny ability to be always wrong at just the right time, provide the bounce the market so desperately needs?" It appears so – for now.

   

  Cash indices managed briefly to get green *(Russell and Trannies only) for the week, but leaked lower into the close…

  

   

  It appears there was some protection-buying ahead of tomorrow's "digital" payrolls number (VIX notably underperformed)

  

   

  As did HY Credit…

  

   

  Then there's YELP…

  

   

  SHAK shook…

  

   

  Bonds were the big movers today with Bunds & Treasuries massively roundtripping… (Bunds -18bps from overnight highs… and USTs -15bps!!)

  

  This is the best day for 30Y TSYs since Jan 28th

  On the week, Treasuries remain higher in yields but major bull flattening today (as perhaps AAPL rate locks were lifted)…

  

   

  The Dollar rose notably, driven by buying during the US Session…

  

   

  Commodities all weakened as the dollar strengthened…

  

   

  As Crude crashed back to one-week lows…(despite tension rising in ME)

  

   

  And Shale Stocks were slammed…

  

   

  Charts: Bloomberg

  Bonus Chart: Bears still absent…

  shocker -bears still 13.9% pic.twitter.com/PR4mAEHjnb

  — Not Jim Cramer (@Not_Jim_Cramer) May 6, 2015

  

  
  
  

  

• Cable Surges After UK Exit Poll Shows Big Lead For Conservatives

  In what Goldman suggested was "the most market-friendly" outcome, UKPolls reports that the Conservative Party leads the UK election (based on exit polls) with LibDems taking enough seats to enable a majority coalition. UKIP managed a disappointing 2 seats. Cable is rallying on the back of this (though we note this is exit polls only).

  

   

  With 326 seats required for a majority:

  • *U.K. VOTES: TORIES SET TO WIN 316 SEATS: EXIT POLL
  • *U.K. VOTES: LABOUR SET TO WIN 239 SEATS: EXIT POLL
  • *U.K. VOTES: SNP SET TO WIN 58 SEATS IN SCOTLAND: EXIT POLL
  • *U.K. VOTES: LIBDEMS SET TO  WIN 10 SEATS: EXIT POLL
  • *UKIP 2 SEATS, "GREENS" 2 SEATS, OTHER 19

  A projected GB-only electoral map using @May2015NS's model, based on the exit poll #GE2015 http://t.co/8Fu11S4HJI pic.twitter.com/T3ILLLBggm

  — New Statesman (@NewStatesman) May 7, 2015

  Here are the possible outcomes (along with SocGen's probabilities)… It appears Box (6) is the most likely now…

  

   

  and here is Goldman, simplifying the decision process to three potential outcomes. While there is a whole range of potential outcomes to the May 7 election, each of the most likely governmental combinations falls into one of three broad groupings:

  1. A Conservative-led government (either on its own or in coalition with the LibDems). This is likely to be perceived as the most ‘market-friendly’ outcome, partly because it would come closest to maintaining the status quo and also because the Conservatives’ stated aim is to reduce the budget deficit through cutting current expenditure rather than by raising taxes. Set against this, the Conservatives’ commitment to hold a referendum on EU membership by 2017 and the increased risk of exit would likely be negative for investment spending and UK assets.

   

  2. A Labour-led government (either on its own, with the implicit support of the SNP, or in a formal coalition with the LibDems) would shift the balance of further fiscal adjustment away from spending cuts to tax increases. Labour’s proposals include: raising the top rate of income tax from 45% to 50%; raising the headline corporation tax rate from 20% to 21% (offset by measures designed to help small businesses); increasing the ‘Bank Levy’ on banks’ balance sheets, applying a second ‘one-off’ tax on bank bonuses, removing the non-domicile tax status and introducing a ‘Mansion Tax’ on residential properties worth more than £2 million. At the same time, a government of this complexion would be less likely to contemplate a referendum on Britain’s EU membership.

   

  Of the potential Labour-led government combinations, financial markets would likely respond more favourably to a Labour/LibDem coalition than to a minority Labour government supported by the SNP on a confidence and supply basis. (The Labour party has ruled out a formal coalition with the SNP.) In this scenario, concerns are likely to emerge that reliance on the SNP would pull the Labour government away from the centre to the left of the political spectrum, as well as raising the spectre of distributional policies favouring Scotland at the expense of the UK as a whole.

   

  3. It is also possible that there will be no clear outcome to the election. If no party (or coalition of parties) is able to form a stable government, a second election could be called shortly after the first or a minority government might attempt to struggle on. Again, the lack of clarity surrounding such an impasse would likely be damaging for UK growth and assets.

  *  *  *
  The Bottom Line is that at the macro level the implications of the election may be less pronounced than many anticipate. Monetary policy has been de-politicised through the Bank of England’s independence. Moreover, the formation of a coalition government is likely to involve convergence towards centrist positions, while a minority administration that pursues policies outside the mainstream would be unlikely to survive given its fragile parliamentary basis. In either case, the political system is unlikely to deliver radically different macroeconomic outcomes.

  *  *  *

  As Bloomberg reports,

  David Cameron is on course to remain prime minister at the head of a minority government after the U.K. general election, an exit poll showed. The pound jumped.

   

  The prime minister’s Conservatives were forecast to win 316 of Parliament’s 650 seats, with Ed Miliband’s Labour Party trailing on 239 seats, according to the survey of voters published shortly after polling stations closed Thursday.

   

  The forecast, based on interviews at voting centers in 140 districts across Britain, put the Scottish National Party in third place with 58 seats and Deputy Prime Minister Nick Clegg’s Liberal Democrats fourth with 10, almost wiping out the 57 seats they won in 2010.

   

  “We haven’t had an incumbent government increase its majority since 1983,” Conservative Chief Whip Michael Gove told the BBC. “If it is right, it means the Conservatives have clearly won this election and Labour has lost it.”

  It appears Scenario #1 is most likely now and cable is loving it

  

  

  
  
  

  

• The Great Disconnect – Central-Bank-Driven "Markets" Have Nothing To Do With Economics

  Submitted by David Stockman via Contra Corner blog,

  The German bund yield soared like a rocket earlier today. After touching on the truly lunatic rate of 5 bps only a few weeks back, it has just crossed the 60 bps marker. Needless to say, when a blue chip 10-year bond widely held on @95% repo leverage moves that far that fast – there is some heavy duty furniture breakage happening in fast money land.

  But don’t cry for the bond market gamblers. They already made a killing front-running the ECB.  During the 16 months between January 2014 and the April peak, speculators in German 10-year bunds would have made a 350% profit using essentially zero cost repo funding. So in the last few days they have given a tad of that back while making a bee line for the exit.
  

  BUNL data by YCharts

  Yet during the uninterrupted march of the bund into the monetary Valhalla depicted above, how many times did you hear that the market was merely “pricing in” a flight to quality among investors and the dreaded specter of “deflation”. That is, what amounted to sheer lunacy—– valuing any 10-year government bond at a deeply negative after-tax and after-inflation yield—-was attributed to rational economic factors. 

  No it wasn’t. The manic drive to 5 bps was pure speculative caprice, triggered by the ECB’s public pledge to corner the market in German government debt. What gambler in his right mind would not buy hand-over-fist any attempt to corner the market by a central bank with a printing press——especially one managed by a dim bulb apparatchik like Mario Draghi!

  Never has an agency of a state anywhere on the planet pleasured speculators with such stupendous windfalls. Yet any day now we will hear from the talking heads on CNBC that, no, massive bond buying by central banks does not repress or distort interest rates because once Europe’s QE started, rates actually backed up. And, furthermore, this is entirely logical because QE will enable the economy to escape its deflationary trap, meaning that investors are discounting an imminent resurgence of growth!

  Oh, com’on.  When investors—-if there are any such naïve waifs left—–start down the rabbit hole believing that markets and economics are still connected in a historically orthodox manner, they will eventually run smack into something a lot more ferocious than a rabbit.  Namely, the next bear market crash——the inexorable end game of a financial system in which price discovery has been totally extinguished.

  Thus, in today’s central bank dominated casinos, bad news is not priced in slowly as its scope and timing become more defined; it’s priced-in suddenly and violently when even the fast money gamblers conclude that the pricing has reached irrationally exuberant extremes that even the central banks cannot sustain.

  That’s what now happening to the bund, the Italian bond, the US treasury note and most all else in the $100 billion global bond market. The front-runners are cashing-out. The vast falsification of pricing fostered by the central banks is unraveling upon its own perilous extreme.

  Like in the case of the Fed’s QE phases, it was mostly all over except the shouting when the ECB’s bond-buying campaign actually commenced in early March. By then the front-runners had done their work of accumulating vast inventories of bonds to sell back to the respective national central banks at far higher prices than they had paid.

  So what’s left now is for the euro-market gamblers to unload their stashes to the sucker with the dumbest bid in the casino. Namely, the geniuses in Frankfurt who apparently believe that if you tax an economy to 50% of income and then bury its consumers, producers and taxpayers alike under endless heapings of debt, that you can make growth accelerate by injecting $1.3 trillion of fraudulent credit conjured from thin air into the casino.

  In fact, today’s bund and treasury dumpers are piling into other short-run speculations like oil futures and busted shale names. And soon the rabbit hole dwellers will pronounce that the oil bottom is in and all is awesome in the forward outlook for growth and profits.

  But here’s the problem—–that is, the very same and universal problem as that which afflicts the fixed income markets. To wit, any and all of the “incoming data” on the economy is badly distorted and deformed owing to the global falsification of financial prices by the central banks.

  For example, this week they stuck the proverbial fork in the GDP “escape velocity” myth not only owing to the 0.2% posting for Q1 GDP, but more especially due to the thundering March collapse in the non-oil trade deficit. The latter “unexpected” data shock will clearly drive Q1 into negative GDP growth, even as Q2 struggles with the massive overhang of excess inventories that have been building for more than a year.

  Yet the Wall Street economists and strategists did not see it coming because they view today’s tortured data through the false lens of 50 years worth of business cycle data patterns. In that vein, one prong of the recovery has been the strong growth of US exports during recent years. It now turns out, however, that the rising numbers were largely an artifact of the false global boom in industrial activity spurred by the central bank printing presses.

  Now that boom is cooling rapidly, as every new release from China and other EM economies like Brazil make clear. Consequently, it seems that the US economy had not regained its mojo as an industrial materials supplier, after all. There was just a temporary shortage of petrochemical feedstock and scrap metal, for example, that has now disappeared.

  As shown below, just in the last two quarters, US exports of industrial supplies and materials have dropped by nearly $100 billion or 20% at annualized rates.
  

  US Exports of Industrial Supplies and Materials data by YCharts

  And there is a lot more where that came from. The collapse of oil drilling rigs from 1600 as recently as October to hardly 700 in April is only a leading indicator of the impending collapse in CapEx, where the modest recovery since 2009 has been heavily dependent upon the energy sector.

  In short, the bond market is now cracking as the mother of all bubbles reaches its apex. Likewise, the risk asset markets generally are likely not far behind.

  None of this is “expected” by the Wall Street talking heads, of course. They are still in the rabbit hole combing through economic data archives that are utterly disconnected from the “markets” they claim to explain.

  What matters now is what the central banks do next. Yet having painted themselves into an impossible corner of junk Keynesian economics, they are now clueless about how to get out.

  So its time to recognize that there has been a monetary regime change. The Fed might well have been your friend since March 2009 or even for the last several decades. But stranded on the zero bound and smothered by a $22 trillion collective balance sheet, the central banks of the world are now fast becoming your fiend.

  

  

  
  
  

  

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