Today’s News November 19, 2015

• Meet The Institution Most Intent On Destroying American Freedom (Hint: It's Not ISIS)

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  In time of actual war, great discretionary powers are constantly given to the Executive Magistrate. Constant apprehension of War, has the same tendency to render the head too large for the body. A standing military force, with an overgrown Executive will not long be safe companions to liberty. The means of defence against foreign danger, have been always the instruments of tyranny at home. Among the Romans it was a standing maxim to excite a war, whenever a revolt was apprehended. Throughout all Europe, the armies kept up under the pretext of defending, have enslaved the people.

   

  – James Madison, Founding Father and 4th President of these United States

  No outside force can end freedom in America. The only force that can end freedom in America, is the American government itself. This is the main lesson of the 15 years since 9/11.

  The notion that we must preemptively give up our freedoms to protect our freedoms is so remarkably infantile and irrational you’d think almost no one would fall for it. Yet fall for it they do.

  On the other hand if you are a serious person and want to examine where the real threat to American freedom and liberty resides, look no further than Washington D.C..

  From Foreign Policy:

  CIA Director John Brennan said Monday he suspects the Islamic State is currently working on more terrorist plots against the West following Friday’s attack in Paris that killed at least 129 people and injured hundreds more. He also criticized new privacy protections enacted after Edward Snowden’s disclosures about U.S. government surveillance practices.

   

  In his remarks, Brennan said the attacks should serve as a “wake-up call” for those misrepresenting what intelligence services do to protect innocent civilians. He cited “a number of unauthorized disclosures, and a lot of handwringing over the government’s role in the effort to try to uncover these terrorists.”

  Perhaps next time you shouldn’t unconstitutionally spy on everyone and lie about it.

  Brennan also said the United States had “strategic warning” about the terrorist attack in Paris, but did not provide details, other than to say it was “not a surprise.” He said he believed the attack was planned over “several months.”

  Sure, just give up a little more freedom and we’ll protect you next time. What an asshole.

  

  

  

  

  

• Texan Turmoil – Visualizing The Growing (& Shrinking) Local Economies Across America

  The Bureau of Economic Analysis (BEA) recently released its statistics on gross domestic product by metropolitan area for 2014. HowMuch.net built a map to provide a 3D visualization of the GDP growth by metropolitan area, seen below. The higher the cone rising out of the map, the greater the GDP growth in that area.

  (click image for huge legible version)

  

   

  Source: HowMuch.net

  Take a look to the top 5 metro areas with highest growth:

  • Midland, TX had the highest GDP growth for any metropolitan area in the country at 24.1%.
  • Another Texas metro area, San Angelo, came in second with 11.4% GDP growth. San Angelo had 1.85% growth in durable goods manufacturing and 1.09% growth in professional services.
  • Lake Charles, LA came in third with 10.3% GDP growth. Lake Charles saw growth of 3.76% in the construction industry.
  • Greeley, CO was fourth in GDP growth at 9.9% with 3.65% growth in natural resources and mining.
  • Wheeling, WV rounded out the top five with 9.5% growth. Wheeling saw 7.93% growth from natural resources and mining.

  Furthermore, the Dallas metropolitan area had the highest GDP growth at 8.5% out of the top 10 metro areas by GDP.

  Which is a problem, as opposed to what Dick Fisher said – that the collapse in oil prices was a net positive for Texas – it has not been, at all…

  

   

  Which means all those superlatives above from 2014's economic growth are now gone! And not coming back anytime soon.

  

  

  

  

• Indians Refuse To Give Their Gold To The Government: Only 30 Kilograms Take Part In "Gold Monetization Scheme"

  Two months ago we gave our most recent review of what we dubbed the soft launch of India’s gold confiscation program, when the government’s “voluntary”gold-to-paper backed bonds conversion went, well, gold: back then, Modi’s government approved the gold monetization plan and sale of sovereign bonds proposed several months ago by the Reserve Bank of India.

  The plans were first announced by Finance Minister Arun Jaitley in February as measures to woo Indians away from physical gold. As Jaitley explained the deposited gold would be auctioned, used to replenish the Reserve Bank of India’s reserves or be lent to jewelers. Subsequently, gold “depositors” can redeem in gold or cash depending on the tenure. Said otherwise, an attempt to “fractionally-reserve” gold, which would then be used a source of gold rehypothecation in the country that despite all the government’s efforts, remains starved for physical gold.

  Now, one week after the gold scheme’s official launch, we take a look at how has it has done so far. In one word, so far the “gold monetization” plan has been a disaster with a laughable 30 kilograms in gold tendered by the people from physical into “government-backed” form.

  The Times of India has the details, and reports that in the first-week “collection by the government’s sovereign gold bond scheme has been rather tepid with less than Rs 10 crore being reported to the Reserve Bank of India (RBI). The scheme, which closes on November 20, allows investors to purchase between 2 and 500 grams of gold-equivalent.

  The spin was immediate: “bankers say that in any issue, savvy investors – including high net worth individuals – usually hold off until the closing date before locking in their funds.” Or maybe they don’t lock in their funds at all since giving the government your physical gold in exchange for a interest payment – in other words, converting gold into a paper asset with the government’s blessing – is about as stupid as it gets. 

  TofI adds that “the money raised through the sale of these bonds will form a part of government borrowing. According to sources, the RBI, which manages government borrowings, is keeping track of the collections and it has got a number of below Rs 8 crore until last weekend. Of this, around Rs 6.5 crore has been reported by banks and another Rs 1.35 crore by the Post Office. The government has fixed the issue price at Rs 2,684 per gram, which means that the gold-equivalent of the bonds is less than 30kg.”

  The government has been aggressively marketing the scheme on three main points:

  • It is more remunerative than buying gold as the investor gets an interest of 2.75% in addition to getting returns equivalent to the value of gold on maturity. Incidentally this is far below the rate of inflation, so the nominal interest does not even cover rising prices). 
  • Second, there is no risk of theft since the gold is held in dematerialized form.
  • Thirdly, although the bond has an eight-year tenure, it offers liquidity as it is accepted as collateral and there is also a premature exit option at the end of five years.

  Alas, none of these appear to have had any impact on people’s willingness to part with bullion.

  

  Which brings us to our conclusion from two months ago, when we said that “the one thing to watch for is a shift in the posture of the Indian government: for now participation in the gold monetization scheme is voluntary, and largely geared to the general public with the 500 gram/year limit. But if and when the Modi cabinet starts “urging” the population, and certainly when threats of fines and/or prison time emerge, that is when we will finally have confirmation that the second coming of Executive Order 6102 has arrived.“

  If and when that happens, expect a full-blown global press to obliterate the price of gold as the gold confiscation wave is finally unleashed, first in India then everywhere else.

  

  

  

  

  

• The 1% Is Rolling Over

  Submitted by John Rubino via DollarCollapse.com,

  Today’s financial world is a tough place for the average person but paradise for rich guys. As easy money raises asset prices, the owners of those assets make effortless profits. Then they buy expensive toys and trophy properties. Hence the recent boom in fine art, high-end real estate, yachts and private jets.

  But like all financial trends, this one has a limit, and that limit is now in sight. The 1%, it seems, is rolling over:

  Sotheby’s Offers Employees Voluntary Buyouts to Cut Costs

  (Bloomberg) – Sotheby’s is offering employees voluntary buyouts to cut costs after a drop in third-quarter revenue grabbed more attention from the company’s investors than its largest ever semiannual auction season.

   

  The auction house told employees in an e-mail Friday that if not enough employees make use of the buyouts, it may have to resort to layoffs. Sotheby’s didn’t say how many jobs it plans to cut.

   

  Shares of Sotheby slumped as much as 16 percent this week after the firm reported a 9 percent decline in third-quarter revenue.

   

  “Sotheby’s costs of doing business – increased staff, more expensive catalogue production, huge marketing and promotional costs, etc. – have to be balanced against the declining revenue from commissions,” said David Nash, co-owner of Mitchell-Innes & Nash gallery in New York and former head of Impressionist and modern art at Sotheby’s.

   

  San Francisco in housing ‘correction’

  (CNBC) – San Francisco homes are still some of the priciest in the nation, but sales of those houses are showing significant weakness. September sales were down 19.5 percent in the city from a year ago, according to the California Association of Realtors.

   

  "We’re going through a kind of correction, as we have a lot of new developments being built right now. The supply is definitely on the rise,” said Justin Fichelson, an agent at Climb Real Estate Group in San Francisco. “The market is not going to continue going up like we’ve seen in the past two years, because prices are already high.”

   

  London Mansion Prices Fall 11.5% as Home `Bubble’ May Have Burst

  (Bloomberg) – Prices of homes valued at 5 million pounds ($7.6 million) or more fell 11.5 percent on a per square foot basis in the third quarter from a year earlier, according to Richard Barber, a director at broker W.A. Ellis LLP, a unit of Jones Lang LaSalle Inc. Sales volumes across all homes in the best parts of central London dropped 14 percent in the period, the realtor said on Thursday.

   

  “The bubble may already have burst” for the most expensive homes, Barber said. Now, “36 percent of all properties currently on the market across prime central London are being marketed at a lower price than they were originally listed at, with the average reduction in price being 8.5 percent.”

   

  Luxury-Jet Market Value Seen Slipping for First Time Since 2009

  (Bloomberg) – Global long-term spending on private jets is starting to slow for the first time since 2009 as slumping commodity prices sap demand in emerging markets, according to an industry forecast.

   

  Deliveries for the 11 years ending in 2025 will be valued at $270 billion, Honeywell International Inc. said Sunday in its annual survey of the luxury-aircraft market. That’s down 3.6 percent from last year’s comparable projection, and snapped a streak of gains since the last U.S. recession ended.

   

  The decline reflects weakness in Brazil, Russia, India and China, the group known as the BRIC countries, and the impact of political conflicts in the Middle East and Africa, according to Brian Sill, chief of Honeywell’s business and general aviation unit. Delays in some new plane models are also pushing back demand, he said.

   

  Jet shipments will drop 2.6 percent to 9,200 planes, according to Honeywell, whose forecast had predicted fluctuations in deliveries but no drop in the planes’ list value in the post-recession years. Large planes that had spearheaded the recovery are now seeing slower growth.

   

  “We’re just slogging along,” said Janine Iannarelli, president of Par Avion Ltd., a Houston based plane brokerage. “There is a shortage of buyers, there’s limited activity and prices keep correcting.”

  So the rich are becoming less rich? To an extent, yes. Recent declines in commodity prices and emerging market debt have no doubt taken a bite out of some big portfolios. Meanwhile hedge funds, the preferred investment management vehicle of the uber-wealthy, have done badly for the past couple of years, with some high-profile implosions generating headlines.

  These disappointments have lowered the net worth of some big players and made others more cautious. Hence the lessened demand for the most pretentious assets.

  The impact on the global economy? Almost certainly bad, since the 1% are the marginal buyers of so many reference assets like blue-chip stocks and government bonds. To the extent that they grow cautious, the bid for a lot of things will be lower, cutting corporate profits, equity valuations and high-end asset prices.

  Put another way, when the only healthy part of an already-impaired system turns negative, everyone will feel the resulting pain.

  

  

  

  

  

• BOHICA 2015

  

  

  

  

  

• Brazil GDP In "Free Fall Mode", Get Ready For "Terrible" Q3 Print, Analysts Warn

  On Sunday in “Depression Tracker: Brazil Braces For Big Week Of Bad Data,” we warned that this was likely to be a rather harrowing week for anyone hoping to see a light at the end of the tunnel for the trainwreck that is Brazil’s collapsing economy. 

  Specifically, we previewed three data points, i) the IBC-Br monthly real GDP indicator, ii) IPCA-15 inflation, and iii) the IBGE October labor market report. The latter two prints are due tomorrow. We got the GDP tracker today. It was not pretty. 

  The the central bank’s output proxy showed real activity falling 0.5% m/m, the fourth straight month of declines. Here’s Goldman’s full breakdown:

  In annual terms, the monthly indicator of activity declined by a large 6.1% yoy in September and on a 12-month cumulative sum basis, real GDP contracted 2.8% yoy, close to the lows reached in 3Q2009.

   

  According to the IBC-Br, the statistical carry-over for growth in 2015 dipped to -3.6% (i.e., if the economy remains flat throughout 2015 at the September level real GDP will record a 3.6% contraction on average during the year).

   

  According to the central monthly real GDP indicator, which has been an imperfect indicator of the National Accounts quarterly GDP, real GDP declined 1.4% QoQ sa during 3Q2015 (adding to the-2.1% qoq sa variation recorded during 2Q2015). Hence,real GDP has now declined by four consecutive quarters. Finally, the carry-over for 4Q real GDP is at -0.6%, that is, were GDP to remain flat during Oct-Dec at the September level, real GDP would decline 0.6% qoq sa during 4Q2015.

   

  

   

  Barclays simply called it “free fall mode”, noting that “today’s result is due to the strong contraction in industrial production (-1.3% m/m sa) and retail sales (-1.5% m/m sa).” 

  

  Finally, here’s FT, quoting Capital Economics:

  Economic activity fell by 6.2 per cent in September from the same period a year earlier.

   

  That’s the biggest year-on-year drop on record, according to Capital Economics, and points to a third quarter contraction of nearly 5 per cent.

   

  Edward Glossop at Capital Economics said he expects Brazil’s third quarter GDP numbers “to be terrible”. He added:

   

  “Conditions are unlikely to have improved much at the start of Q4. October’s PMI data suggest that the slump in industry deepened, while the further deterioration in labour market conditions over the past couple of months suggests that consumption remained under pressure.”

  Q3 data is due on December 1.

  Bear in mind that this comes against a backdrop of worsening inflation. As we noted on Sunday, Goldman sees IPCA-15 inflation coming in at 0.87%. The implication: inflation would print somewhere in the neighborhood of 10.3% y/y (the worst in more than 10 years) and you when you put that together with everything noted above you get a stagflationary nightmare. 

  Truthfully, this is an unmitigated disaster of epic proportions and it just keeps getting worse. Until now, Goldman’s Alberto Ramos has been the undisputed king when it comes to producing lists of the country’s economic problems that are so long they induce riotous laughter. Well watch out Alberto, BofAML’s David Beker may be coming for your spot: 

  Leading activity indicators are persistently posting negative prints throughout the year, despite already being at record low levels, corroborating our call for a 3.3% yoy contraction in 2015. Tightened credit markets, high household indebtedness level, rising inflation and the ongoing labor market loosening should continue to drive purchasing power and confidence levels down, preventing a rebound in the near term. Accordingly, industrial production declined 10.9% yoy in September, posting the 19th consecutive negative print and returning to production levels from a decade ago. At the same time, retail sales contracted for the sixth time in a row in year-over-year terms, reaching a negative 6.2% yoy print. All in, these results indicate that activity indicators should continue to decline next year, reflecting a deeper and longer economic recession, with economic activity only starting to recover in late 2016.

  
  

  

  

  

  

  

• Dead Unicorn Walking: Square IPOs At $9, 42% Below Latest Private Financing Valuation

  If having to slash valuations by 30% from the latest private financing round was not bad enough, Square's IPO just priced notably below the expected (already lowered) range of $11-13 (and even further below the $15.46 at which it raised private money last year):

  • *SQUARE SAID TO PRICE 27M IPO SHARES AT $9 EACH, REUTERS REPORTS

  So from a private valuation around $6 billion to this, and along with Fidelity marking down its SnapChat valuation, it appears that without another massacre in a major city, risk appetite for these paper-behemoths may have gone the way of the mythical unicorn itself.

  Square most recently raised $180 million in private funding at $15.46 per share, in a multi-stage Series E round stretching from September 2014 through just last month.

  

  As Fortune reports,

  Square’s IPO comes at a time when it appears the company’s losses are growing and revenue growth is slowing. In its original S-1 filing with the SEC, Square reported a $77.6 million loss for the first six months of this year compared to a $79 million loss during the same period in 2014. Meanwhile, revenues rose to $560.5 million from $372 million during the same six months.

   

  In a more recent third quarter filing, Square posted a loss of $53.9 million on $332.2 million in revenue, indicating slower revenue growth and widening losses than before.

  As The Wall Street Journal reports,

  Skeptical investors forced Square Inc. to sell shares in its initial public offering for less than the mobile payments startup had hoped, dealing another setback to the battered market for new technology-company stock.

   

  The six-year-old company, founded and run by  Twitter Inc.  Chief Executive  Jack Dorsey, priced its shares at $9 late Wednesday. That is beneath the projected offering range of $11 to $13 and even farther below the $15.46 at which Square raised money last year from private investors.

   

  …

   

  “This deal is representative of companies that are falling out of favor with investors,” said Jeremy Abelson, portfolio manager at Irving Investors. “These are companies that are spending a lot to grow their top line but still have a tough path to profitability.”

  *  *  *

  A bigger question, as we noted previously, is whether it will be a controlled demolition as unicorns everywhere are demoted to what we first dubbed "zerocorn" status in the coming days. To be sure, the VCs are desperate for a controlled demolition, and hoping the broader market ignores the euphoria that took place in Silicon Valley over the past 3 years, is now over, and that giddy investors overshot by at least 25-35% to the upside in the past several private funding rounds as everyone was rushing to pass the valuation hot potate to ever greater, and richer, fools.

  It remains to be seen how successful they will be, and just what the source of capital for hundreds of "$1+ billion"-valued, cash burning companies will be in lieu of generous VCs, and just how viable the second tech bubble will be if these hundreds of companies suddenly are forced to generate cash flow to fund themselves.

  One thing we know: there sure are many of them, as this infographic from the WSJ proves:

  

   

  *  *  *

  Which raises one interesting question…

  When is $TWTR buying Square? @Jack

  — 3:30 Ramp Capital™ (@RampCapitalLLC) November 19, 2015

  

  

  

  

  

• Do you believe in terrorists?

  Westerners have a deep history of a culture of myths (see Joseph Campbell).  We love to believe in Santa Claus, “The American Dream,” the Tooth Fairy, housing market always goes up, and countless others.  So it’s easy for us to be ‘terrorized’ by a myth; that hiding behind every corner are evil ‘terrorists’ waiting to blow themselves up because ‘they hate our freedoms.’ 

  Already, evidence surfaces that doesn’t match our traditional image for what a terrorist act should look like, as pointed out by George Washington’s article on ZH:

  What do you think? False flag? Light-skinned, clean-shaven ISIS jihadis who went undercover to carry out the terrorist attack? Or local Europeans who were radicalized into jihad?

  Postscript:  The Mirror also notes that the terrorists looked like professional soldiers:

  “I would describe him as tall, with dark hair and also quite muscular.

   

  “They looked like soldiers or mercenaries and carried the whole thing out like a military operation.

  Military operation or not, let’s take a step back how we got here, for those who can read and don’t have a TV.

  World War 2 and it’s climax defined the modern age and the century.  It is the most significant event, historically speaking for the last 500 – 1000 years.  How this event shaped the markets and modern capitalism; specifically – global trade, Forex, emerging markets, the concept model of the nation-state, and in one word – a complete paradigm shift.  

  Before WW2, nation-states waged war – these wars were all different but had several distinct characteristics.  There was always a winner, the winner basically wrote the terms of the agreement to end the war (taking various resources or land for themselves); it was usually financed through taxes or Rothschild type loans, and both sides were well defined.  Even when mercenaries participated, it was clear whose side was who.  Also it was clear, what the war was about – there was no ‘false flag’ events.  People mostly participated in war for survival, because they were forced to, or needed money and enlisted, or because their king told them to and they obey.  There was no TV, internet, or cameras attached to missiles.

  After WW2, only one single country remained intact, with infinite industrial capacity that easily switched to the consumer economy.  The United States of America had lost millions of lives in WW2, but the US was never invaded, factories remained, cities were not burned and bombed, a baby boom quickly expanded the population.  Resources were plentiful, and for 20 years the US was basically the only industrial superpower in the world.  This eventually led to the US Dollar based global Forex & payments system as we have today.  Breton Woods certainly would not have been in New Hampshire had it not been for this post WW2 dominance.  For all its benefits, this circumstantial gift left with it a seed of destruction; the military industrial complex.  

  Because now for the first time in history – war became a business.  Corporate America knew how to profit from war, in all manners.  Wall St. cozied up to Washington to form what would become the most powerful alliance of business & government in history (that ironically was a lot stronger form of Facism that these same forces destroyed in Europe a generation prior).  

  The peace after WW2 presented a problem for the military industrial complex – if there was no war, how could they profit from the war machine?  Enter Vietnam and George Morrison (father of Doors singer Jim Morrison):

  Daniel Ellsberg, who was on duty in the Pentagon the night of August 4, receiving messages from the ship, reported that the ship was on a secret electronic warfare support measuresmission (codenamed “DESOTO“) near Northern Vietnamese territorial waters.^[12] On July 31, 1964, USS Maddox had begun its intelligence collection mission in the Gulf of Tonkin. Captain George Stephen Morrison (father ofDoors singer Jim Morrison) was in command of local American forces from his flagship USS Bon Homme Richard. Maddox was under orders not to approach closer than eight miles (13 km) from the North’s coast and four miles (6 km) from Hon Nieu island.^[13] When the SOG commando raid was being carried out against Hon Nieu, the ship was 120 miles (190 km) away from the attacked area.^[13]

  So now we had a nice little war, where we could sell bell helicopters, and created the modern model for making ‘war business.’  After Vietnam it was easy to create an enemy.  Fast forward several conflicts and enter the ultimate enemy: Terrorists.  Terrorists are the dream of Neocons, warmongers, and anyone profiting from the war machine – because they are not connected to any ‘country’ – are always changing, nearly impossible to identify, have motives no one clearly understands, and can easily be bribed and manipulated to carry out the whims of Washington (in the case of Washington supported ISIS, to disrupt the Assad regime who has been on the black list since Libya.)  Who are Terrorists?  They can be anyone, operate anywhere, and always can be blamed on any mistakes made.  Plane crash, false flag – must be Terrorists!  They are the perfect enemy for the ‘war machine’.  And the middle east – a perfect playground.  “Washington” now can be replaced with some proper term for ‘global alliance’ enter recently to this game Russia, just learning how profitable war can be.

  Because practically, war is outdated.  A conventional war between any 2 nuclear powers would only create utter devastation, calculating which side would be more devastated is pointless, as the fallout would spread around the globe.  Also, countries such as Russia, the US, Germany, UK, have no real state enemies because of this, so keeping and maintaining a standing army of any kind – completely wasteful (except to keep the domestic population controlled by fear and opression, and the occasional cleansing of the genetic herd via in theater operations).  Hence the need for terrorists.

  In other words, false flag or not – Terrorists are the last frontier for the war machine created (and thus the modern Forex system).  It’s impossible to kill them, as they are an idea.  To end ‘terrorism’, we must end the war machine – dismantling this is very tricky!  Who are the real terrorists, suicide bombers, or news anchors constantly ‘terrorizing’ the population by making them afraid and worried around every corner a bomb will explode.  If we can overcome this huge mental challenge, we can really create a global panacea, a world without war, without currencies, without fraud.

  Just like with any system, the war machine needs our support.  To stop it – we need to stop being afraid, stop believing in it! Stop participating in it!  (But that’s not practical, because we like it.  It’s entertainment!)  So the philosophical question of the day is:  Do you believe in Terrorists?  At least have some decency if you do – don’t tell this fairy tale to your children.  Maybe they’ll grow up in a better world.

  Or to quote George Carlin, let’s accept it as a form of entertainment:

  The odds of your being killed by a terrorist are practically zero. So I say, relax and enjoy the show.

  You have to be realistic about terrorism. Ya gotta be a realist: Certain groups of people – Muslim fundamentalists, Christian fundamentalists, Jewish fundamentalists, and just plain guys from Montana – are going to continue to make life in this country very interesting for a long, long time. That’s the reality. Angry men in combat fatigue talking to God on a two-way radio and muttering incoherent slogans about freedom are eventually going to provide us with a great deal of entertainment.

  Especially after your stupid fuckin economy collapses all around you, and the terrorists come out of the woodwork. And you’ll have anthrax in the water supply and sarin-gas in the air conditioners; there’ll be chemical and biological suitcase bombs in every city, and I say, “Enjoy it, relax! Enjoy the show! Take a fuckin chance. Put a little fun in your life.”

   

  To me, terrorism is exciting. It’s exciting! I think the very idea that someone might set off a bomb in Macy’s and kill several hundred people is exciting and stimulating, and I see it as a form of entertainment! Entertainment that’s all it is. Yeah! But – but I also know most Americans are soft, frightened, unimaginative they don’t realize there’s such a thing as dangerous fun. And they certainly don’t recognize good entertainment when they see it. I have always been willing to put myself at great personal risk for the sake of entertainment. And I’ve always been willing to put you at great personal risk for the same reason.

  As far as I’m concerned, all of this airport security, all the searches, the screening, the cameras, the question it’s just one more way of reducing your liberty and reminding you that they can fuck with you any time they want, as long as you put up with it. As long as you put up with it. Which means, of course, any time they want. Because that’s what Americans do now. They’re always willing to trade away a little of their freedom for the feeling, the illusion–of security.   -GEORGE CARLIN

  If state-sponsored armies left the middle east permanently (Now speaking of the US, UK, ‘coalition of the willing’ and now Russia), including the US support of Israel, ‘terrorism’ as we know it at least, would cease to exist.  We’ve been sold a load of snake oil, that somewhere lurking in the shadows of these elephant oil fields, are crazed muslims who believe in killing infidels.  Nothing could be farther from the truth!   

  When a company is discovered for wrongdoing – often a boycott can succeed in getting their attention (the other alternative, being lawsuits & litigation).  It is not different with the war machine.  It feeds off our energy, our fears, which determines our need to finance and support the military through taxes and other means (and supports our local TV companies through advertisements).  The point is that there is no winning ‘the war on Terrorism’ – it’s a paradox.  It’s a genius invention by the war machine akin to “Terminator” films – now for every $1 we put into the military the profit can be $2 or $3 – because the more wars we launch in the middle east, the more terrorists are created, thus a need for even more security & war spending.  If even a small % of our tax dollars was funneled through various CIA shells to finance ISIS (even if the purpose was to overthrow Assad or other Terrorists) – technically speaking it is financed by the American taxpayer (at least in part).  Again, technically speaking – that would put the US Government on the OFAC list (which they publish) – and would be severe AML violations.  All these paradoxes are the ultimate ‘fog of war’ to enable the war machine to go on, now a self-replicating artificial intelligence of its own.  The ultimate paradox – this situation has made it impossible to stand up against the defense industry (literally) – ensuring it’s nearly infinite survival.  

  Or – here’s an investing idea – if you think this is all a bunch of left wing nonsense – time to go long Defense stocks!  And at least you won’t have to worry about any class action lawsuits or other problems with an angry and disgruntled public (they can be disapeared by outsourced foreign sub-contractors).

  Think about this next time you’re listening to ‘riders on the storm’.

  “Riders On The Storm”

  Riders on the storm

  Into this house we’re born

  Into this world we’re thrown

  Like a dog without a bone

  An actor out on loan

  Riders on the storm

   

  There’s a killer on the road

  His brain is squirmin’ like a toad

  Take a long holiday

  Let your children play

  If you give this man a ride

  Sweet family will die

  Killer on the road, yeah

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• The World's First Cashless Society Is Here – A Totalitarian's Dream Come True

  Submitted by Nick Giambruno via InternationalMan.com,

  Central planners around the world are waging a War on Cash. In just the last few years:

  • Italy made cash transactions over €1,000 illegal;
  • Switzerland proposed banning cash payments in excess of 100,000 francs;
  • Russia banned cash transactions over $10,000;
  • Spain banned cash transactions over €2,500;
  • Mexico made cash payments of more than 200,000 pesos illegal;
  • Uruguay banned cash transactions over $5,000; and
  • France made cash transactions over €1,000 illegal, down from the previous limit of €3,000.

  The War on Cash is a favorite pet project of the economic central planners. They want to eliminate hand-to-hand currency so that governments can document, control, and tax everything.

  This is why they’re lowering the threshold for mandatory reporting of cash transactions and, in some instances, simply making it illegal to pay cash.

  In the U.S., central planners ratchet up the War on Cash every time the government declares a made-up war on something else…a war on crime, a war on drugs, a war on poverty, a war on terror…

  They all end with more government intrusion into your financial affairs.

  Thanks to these made-up wars, the U.S. government is imposing an increasing number of regulations on cash transactions. Try withdrawing more than $10,000 in cash from your bank. They’ll treat you like a criminal or terrorist.

  The Federal Reserve is at the center of the War on Cash. Its weapons are inflation and control over the currency denominations.

  Take the $100 note, for example. It’s the largest bill in circulation today. This was not always the case. At one point, the U.S. had $500, $1,000, $5,000, and even $10,000 notes. But the government eliminated these large notes in 1969 under the pretext of fighting the War on Some Drugs.

  Since then, the $100 note has been the largest. But it has far less purchasing power than it did in 1969. Decades of rampant money printing have inflated the dollar. Today, a $100 note buys less than a $20 note did in 1969.

  Even though the Federal Reserve has devalued the dollar over 80% since 1969, it still refuses to issue notes larger than $100. This makes it inconvenient to use cash for large transactions, which forces people to use electronic payment methods.

  This, of course, is what the U.S. government wants.

  It’s exactly like Ron Paul said: “The cashless society is the IRS’s dream: total knowledge of, and control over, the finances of every single American.”

  Policymakers or Central Planners?

  On stories related to the War on Cash, you may have noticed that the mainstream media often uses the word “policymakers,” as in “policymakers have decided to keep interest rates at record low levels.”

  When the media uses “policymakers,” they are often referring to central bank officials. It’s a curious word choice. As far as I can tell, there is no difference between a policymaker and central planner.

  Most people who want to live in a free society agree that central planning is not a good idea. So the media uses a different word to put a more neutral spin on things.

  To help you think more clearly, I suggest substituting “central planners” every time you see “policymakers.”

  The World’s First Cashless Society

  In 1661, Sweden became the first country in Europe to issue paper money. Now it’s probably going to be the first in the world to eliminate it.

  Sweden has already phased out most cash transactions. According to Credit Suisse, 80% of all purchases in Sweden are electronic and don’t involve cash. And that figure is rising.

  If the trend continues – and there is nothing to suggest it won’t – Sweden could soon be the world’s first cashless society.

  Sweden’s supply of physical currency has dropped over 50% in the last six years. A couple of major Swedish banks no longer carry cash. Virtually all Swedes pay for candy bars and coffee electronically. Even homeless street vendors use mobile card readers.

  Plus, an increasing number of government restrictions are encouraging Swedes to dump cash. The pretexts are familiar…fighting terrorism, money laundering, etc. In effect, these restrictions make it inconvenient to use cash, so people don’t.

  So far, Swedes have passively accepted the government and banks’ drive to eliminate cash. The push to destroy their financial privacy doesn’t seem to bother them. This is likely because the average Swede places an unreasonable amount of trust in government and financial institutions.

  Their trust is certainly misplaced. On top of the obvious privacy concerns, eliminating cash enables the central planners’ latest gimmick to goose the economy: Negative interest rates.

  Making The Negative Interest Rate Scam Possible

  Sweden, Denmark, and Switzerland all have negative interest rates.

  Negative interest rates mean the lender literally pays the borrower for the privilege of lending him money. It’s a bizarre, upside down concept.

  But negative rates are not some European anomaly. The Federal Reserve discussed the possibility of using negative interest rates in the U.S. at its last meeting.

  Negative rates could not exist in a free market. They destroy the impetus to save and build capital, which is the basis of prosperity.

  When you deposit money in a bank, you are lending money to the bank. However, with negative rates you don’t earn interest. Instead, you pay the bank.

  If you don’t like that plan, you can certainly stash your cash under the mattress. As a practical matter, this limits how far governments and central banks can go with negative interest rates. The more it costs to store money at the bank, the less inclined people are to do it.

  Of course, central planners don’t want you to withdraw money from the bank. This is a big reason why they want to eliminate cash…so you can’t. As long as your money stays in the bank, it’s vulnerable to the sting of negative interest rates and also helps to prop up the unsound fractional reserve banking system.

  If you can’t withdraw your money as cash, you have two choices: You can deal with negative interest rates…or you can spend your money. Ultimately, that’s what our Keynesian central planners want. They are using negative interest rates and the War on Cash to force you to spend and “stimulate” the economy.

  If you ask me, these radical and insane measures are a sign of desperation.

  The War on Cash and negative interest rates are huge threats to your financial security. Central planners are playing with fire and inviting a currency catastrophe.

  Most people have no idea what really happens when a currency collapses, let alone how to prepare…

  How will you protect your savings in the event of a currency crisis? This just-released video will show you exactly how. Click here to watch it now.

  

  

  

  

  

• If We Want To Stop Terrorism, We Should Stop SUPPORTING Terrorists

  In the wake of the barbaric Paris terror attacks, everyone is arguing over what we should do to stop further terrorism.

  Some say we need more war against Islamic countries … or more spying … or more crackdowns on our liberties.

  In reality – despite what the talking heads may say – the methods for stopping future attacks are well known …

  I. Stop Overthrowing the Moderates and Arming the Crazies

  We know it’s a difficult concept to grasp, but if we want to stop terrorism we should – wait for it – stop supporting terrorists.

  Specifically, we’re arming the most violent radicals in the Middle East, as part of a really stupid geopolitical strategy to overthrow leaders we don’t like (more details below). And see this, this, this, this and this. And – strangely – we’re overthrowing the moderate Arabs who stabilized the region and denied jihadis a foothold.

  Indeed, the U.S. and its allies are directly responsible for creating and supplying ISIS.  As an internal Defense Intelligence Agency (DIA) document produced recently shows, the U.S. knew that the actions of “the West, Gulf countries and Turkey” in Syria might create a terrorist group like ISIS and an Islamic CALIPHATE.

  Indeed, the former head of the DIA explained:

  It was a willful decision [by America] to … support an insurgency that had salafists, Al Qaeda and the Muslim Brotherhood ….

  If we want to stop terrorism, we need to stop supporting the terrorists.

  II. Stop Supporting the Dictators Who Fund Terrorists

  Saudi Arabia is the world’s largest sponsor of radical Islamic terrorists.  The Saudis have backed ISIS and many other brutal terrorist groups. And the most pro-ISIS tweets  allegedly come from Saudi Arabia.

  According to sworn declarations from a 9/11 Commissioner and the Co-Chair of the Congressional Inquiry Into 9/11, the Saudi government backed the 9/11 hijackers (see section VII for details).

  Saudi Arabia is the hotbed of the most radical Muslim terrorists in the world: the Salafis (both ISIS and Al Qaeda are Salafis).

  And the Saudis – with U.S. support – back the radical “madrassas” in which Islamic radicalism was spread.

  And yet the U.S. has been supporting the Saudis militarily, with NSA intelligence and in every other way possible for 70 years.

  In addition, top American terrorism experts say that U.S. support for brutal and tyrannical countries in the Middle east – like Saudi Arabia – is one of the top motivators for Arab terrorists.

  U.S. and NATO-supported Turkey is also massively supporting ISIS, provided chemical weapons used in the jihadi’s massacre of civilians, and has been bombing ISIS’ main on-the-ground enemy – Kurdish soldiers – using its air force.  And some of the Turkish people also seem to be unsympathetic to the victims of terrorism.

  The U.S.-backed dictatorships in Qatar and Bahrain also massively fund ISIS.

  So if we stop supporting the tyrannies in Saudi Arabia, Turkey, Qatar and Bahrain, we’ll get a two-fold reduction in terror:

  (1) We’ll undermine the main terrorism supporters

   

  And …

   

  (2) We’ll take away one of the main motivations driving terrorists: our support for the most repressive, brutal Arab dictatorships

  What a concept!

  III. Stop Bombing and Invading When a Negotiated Settlement Is Offered

  The U.S. rejected offers by Afghanistan, Iraq and Syria to surrender … and instead proceeded to wage war.

  Security experts – including both conservatives and liberals – agree that waging war in the Middle East weakens national security and increases terrorism. See this, this, this, this, this, this, this and this.

  For example, James K. Feldman – former professor of decision analysis and economics at the Air Force Institute of Technology and the School of Advanced Airpower Studies – and other experts say that foreign occupation is the main cause of terrorism. University of Chicago professor Robert A. Pape – who specializes in international security affairs – agrees.

  So negotiating peaceful deals will drain the swamp of terrorists created by war and invasion.

  IV. Stop Imperial Conquests for Arab Oil

  The U.S. has undertaken regime change against Arab leaders we don’t like for six decades. We overthrew the leader of Syria in 1949, Iran in 1953, Iraq twice, Afghanistan twice, Turkey, Libya … and other oil-rich countries.

  Neoconservatives planned regime change throughout the Middle East and North Africa yet again in 1991.

  Top American politicians admit that the Iraq war was about oil, not stopping terrorism (documents from Britain show the same thing). Much of the war on terror is really a fight for natural gas. Or to force the last few hold-outs into dollars and private central banking.

  And the U.S. military described terror attacks on the U.S. as a “small price to pay for being a superpower“:

  A senior officer on the Joint Staff told State Department counter-terrorism director Sheehan he had heard terrorist strikes characterized more than once by colleagues as a “small price to pay for being a superpower”.

  We’ve fought the longest and most expensive wars in American history … but we’re less secure than before, and there are more terror attacks than ever (update).

  Remember, Al Qaeda wasn’t even in Iraq until the U.S. invaded that country. And the West’s Iraq war directly led to the creation of ISIS.

  If we want to stop terrorism, we have to stop overthrowing Arab leaders and invading Arab countries to grab their oil.

  V. Stop Drone Assassinations of Innocent Civilians

  Top CIA officers say that drone strikes increase terrorism (and see this).

  The CIA – the agency in charge of drone strikes – even told Obama that drone kills can increase terrorism.

  If we want to stop creating new terrorists, we have to stop the drone strikes.

  VI. Stop Torture

  Top terrorism and interrogation experts agree that torture creates more terrorists.

  Indeed, the leaders of ISIS were motivated by U.S. torture.

  Once again, we have a very current example: Charlie Hebdo-murdering Frenchterrorist Cherif Kouchi told a court in 2005 that he wasn’t radical until he learned about U.S. torture at Abu Ghraib prison in Iraq.

  If we want to stop creating new terrorists, we have to stop torturing … permanently.

  VII. Stop Mass Surveillance

  Top security experts agree that mass surveillance makes us MORE vulnerable to terrorists.

  Indeed, even the NSA admits that it's collecting too MUCH information to stop terror attacks.

  Stop it.

  VIII. Stop Covering Up 9/11

  Government officials agree that 9/11 was state-sponsored terrorism … they just disagree on which state was responsible.

  Because 9/11 was the largest terror attack on the U.S. in history – and all of our national security strategies are based on 9/11 – we can’t stop terror until we get to the bottom of what really happened, and which state was behind it.

  Many high-level American officials – including military leaders, intelligence officials and 9/11 commissioners – are dissatisfied with the 9/11 investigations to date.

  The Co-Chair of the congressional investigation into 9/11 – Bob Graham – and 9/11 Commissioner and former Senator Bob Kerrey are calling for either a “permanent 9/11 commission” or a new 9/11 investigation to get to the bottom of it.

  The Co-Chair of the Congressional Inquiry into 9/11 and former Head of the Senate Intelligence Committee (Bob Graham) said that the Paris terror attack, ISIS, and other terrorist developments are a result of failing to stand up to Saudi Arabia and declassify the 9/11 investigation’s report about Saudi involvement in 9/11:

  The 9/11 chairs, Ron Paul, and numerous other American politicians have called for declassification, as well.

  Again, others have different ideas about who was behind 9/11. But until we get to the bottom of it, terror attacks will continue.

  IX.  Stop Doing It Ourselves

  The director of the National Security Agency under Ronald Reagan – Lt. General William Odom said:

  By any measure the US has long used terrorism. In ‘78-79 the Senate was trying to pass a law against international terrorism – in every version they produced, the lawyers said the US would be in violation.

  (audio here).

  The Washington Post reported in 2010:

  The United States has long been an exporter of terrorism, according to a secret CIA analysis released Wednesday by the Web site WikiLeaks.

  Wikipedia notes:

  Chomsky and Herman observed that terror was concentrated in the U.S. sphere of influence in the Third World, and documented terror carried out by U.S. client states in Latin America. They observed that of ten Latin American countries that had death squads, all were U.S. client states.

   

  ***

   

  They concluded that the global rise in state terror was a result of U.S. foreign policy.

   

  ***

  In 1991, a book edited by Alexander L. George [the Graham H. Stuart Professor of Political Science Emeritus at Stanford University] also argued that other Western powers sponsored terror in Third World countries. It concluded that the U.S. and its allies were the main supporters of terrorism throughout the world.

  Indeed, the U.S. has created death squads in Latin America, Iraq and Syria.

  Some in the American military have intentionally tried to “out-terrorize the terrorists”. As Truthout notes:

  Both [specialists Ethan McCord and Josh Stieber] say they saw their mission as a plan to “out-terrorize the terrorists,” in order to make the general populace more afraid of the Americans than they were of insurgent groups. In the interview with [Scott] Horton, Horton pressed Stieber:

  “… a fellow veteran of yours from the same battalion has said that you guys had a standard operating procedure, SOP, that said – and I guess this is a reaction to some EFP attacks on y’all’s Humvees and stuff that killed some guys – that from now on if a roadside bomb goes off, IED goes off, everyone who survives the attack get out and fire in all directions at anybody who happens to be nearby … that this was actually an order from above. Is that correct? Can you, you know, verify that?

  Stieber answered:

  “Yeah, it was an order that came from Kauzlarich himself, and it had the philosophy that, you know, as Finkel does describe in the book, that we were under pretty constant threat, and what he leaves out is the response to that threat. But the philosophy was that if each time one of these roadside bombs went off where you don’t know who set it … the way we were told to respond was to open fire on anyone in the area, with the philosophy that that would intimidate them, to be proactive in stopping people from making these bombs …”

  Terrorism is defined as:

  The use of violence and threats to intimidate or coerce, especially for political purposes.

  So McCord and Stieber are correct: this constitutes terrorism by American forces in Iraq.  And American officials have admitted that the U.S. has engaged in numerous false flag attacks.

  Indeed, many top experts – including government officials – say that America is the largest sponsor of terror in the world … largely through the work of the CIA. And see this.

  Stop Throwing Bodies In the River

  Defenders of current government policy say: “we have to do something to stop terrorists!”

  Yes, we do …

  But we must also stop doing the 9 things above which increase terrorism. We have to stop “throwing new bodies in the river.”

  But the powers-that-be don’t want to change course … they gain tremendous power and influence through our current war on terror strategies.

  For example, the military-complex grows rich through war … so endless war is a feature – not a bug – of our foreign policy.

  Torture was about building a false justification for war.

  Mass surveillance is about economic and diplomatic advantage and crushing dissent.

  Supporting the most radical Muslim leaders is about oil and power … “a small price to pay” to try to dominate the world.

  A leading advisor to the U.S. military – the Rand Corporation – released a study in 2008 called “How Terrorist Groups End: Lessons for Countering al Qa’ida“. The report confirms what experts have been saying for years: the war on terror is actually weakening national security (see this, this and this).

  As a press release about the study states:

  “Terrorists should be perceived and described as criminals, not holy warriors, and our analysis suggests that there is no battlefield solution to terrorism.”

  We, the People, have to stand up and demand that our power-hungry leaders stop doing the things which give them more power … but are guaranteed to increase terrorism against us, the civilian population.

  Postscript:  It’s not yet clear whether any of the terrorists were “refugees”, and some say that ISIS WANTS to stop all refugees from leaving Syria and Iraq. However, we also take the risk of infiltration of refugee groups by terrorists very seriously.

  The bottom line is that we have to stop throwing new bodies in the river, so that we drastically reduce the amount of terrorists in the first place.

  

  

  

  

• RBS Lays Out 10 Key Points For 2016, Warns "Political Risk" Will "Break" QE-Infinity Equilibrium

  As the global economy limps into 2016, the prospects for a sustained pickup in worldwide trade and/or a return to robust growth are decidedly grim. 

  Global trade growth has lagged the already tepid pace of global output expansion for three years running, averaging just 3% per year. That’s half of the rate witnessed from 1983 to 2008. 

  Meanwhile, inflation expectations in developed economies have not rebounded, despite the best efforts of DM central bankers. And yet housing costs have soared in tandem with round after round of policy rate cuts and the global proliferation of QE, reflecting two things, i) central banks have learned nothing from the US housing bubble (that is, when you artificially suppress borrowing costs, housing prices soar), and ii) when you intentionally inflate bubbles in the assets most likely to be concentrated in the hands of the wealthy (i.e. financial assets), those bubbles spill over into other asset classes like real estate and high end art. 

  What should be apparent from the above is that all the Mario Draghis and Haruhiko Kurodas of the world are doing at this point is blowing bubbles on the way to creating more inequality and embedding ever greater amounts of risk into capital markets not only by driving up prices, but by sucking out liquidity.

  As for Main Street, there’s no “wealth effect” (where “wealth effect” refers to a kind of neo-trickle down economics catalyzed by QE). There’s only persistently slow growth, a jobs market that churns out more waiters and bartenders than it does breadwinner jobs, and a noticeably wider gap between the rich and the poor as exemplified by the fact that the billionaires of the world are paying $170 million for Modiglianis. 

  But the game is almost up. Central banks have monetized everything that isn’t tied down. Hell, Kuroda owns half of the entire Japanese ETF market. Rates are below zero and there’s only so much more NIRP banks are going to be able to stand before negative rates get passed on to depositors. Put simply: we’re approaching the Keynesian endgame and there’s still no growth, and no inflation (well, unless you count housing) and trade is collapsing. 

  Against this backdrop, RBS is out with 10 key points for 2016 and as you’ll see below, the overarching message is that the entire world is about to discover that the emperor(s) have no clothes.

  Note the last point (#10) as it, i) goes along with a previous note from Alberto Gallo in which RBS takes a close look at support for “radical” political parties in Europe (more on this here), and ii) makes a connection between recent economic outcomes in Europe, the ECB’s evolving experience with ZIRP, NIRP, and QE, and Japan’s lost decade.

  *  *  *

  From RBS

  These are our key views for 2016:

  1. There are limits to monetary policy. Central bankers will be tested in 2016. The economic equilibrium based on monetary stimulus, but lack of other measures is circular and fragile. Central bank balance sheets cannot grow indefinitely and forward guidance cannot target asset prices, without damaging credibility. Investors are growing increasingly wary of central bankers’ credibility, and worried about the effectiveness of further stimulus (ECB, BoJ) and their ability to reverse policy (Fed, BoE). 

  2. Fiscal stimulus, reforms and investment remain scarce. The result is more QE in Europe and Japan, and a very shallow reversal of policy in the US and UK. We expect the ECB to deploy more QE in December, extending the length of the programme and the list of eligible assets. We think the BoJ will continue expanding its balance sheet as well. Conversely, exiting QE will be difficult even in the regions where it is deemed most successful – the US and UK – given lack of balance sheet  deleveraging, or re-leveraging. Our economists expect the Fed to start hiking in December and to end at 1.5% at the end of 2016, with risks skewed to the dovish side, and the Bank of England to start hiking in August 2016. We think the impact of ECB QE2 will be temporary, as for QE1, due to persistent structural issues in the Eurozone economy. Despite convergence in periphery-core financial spreads, investment and loan volumes continue to decline, according to ECB data. The opportunity for US and European governments to build on the recovery is infrastructure investment and reforms, respectively. But what we are seeing is still too little, too late. 

  3. More QE means central banks will own an increasing share of assets markets. The ECB has already bought much of the free-float in European covered bonds, and the BoJ owns half of some stock ETFs in Japan. Without sovereign bond issuance, ECB QE demand will outpace bond supply by 2:1. This means the ECB will have to look for more assets (regional bonds, corporates), or that investors will be squeezed with lower yields or into other assets. However, given investment regulation, not every investor can move from asset to asset: some will have to learn to live with lower yields. 

  4. Market liquidity will decline further, also due to central bank buying of assets. This reduces both the free-float available, and the number of factors driving prices. Regulation will also continue to reduce dealers’ ability to make markets. 

  5. China’s top priority is reform, not stimulus: the slowdown will continue. A largescale stimulus is unlikely – instead, a long-series of reforms aimed at restructuring local governments, the financial sector, state-owned firms and at reducing corruption is what we are likely to see. If needed, Chinese policymakers have dry powder to smooth the landing, with cuts to the policy rate, bank reserve requirements or by using reserves. But the dry powder is not as much as it looks, compared to the length of the multi-year readjustment period for the Chinese economy. 

  6. China-dependent economies will get hurt: Brazil and Australia in particular. Brazil is the most vulnerable EM, on a combination of China exposure, dependence on $ debt, and political risk. Australia, still trading as a safe haven, is instead sitting on a very levered housing market and an export sector completely geared to China. 

  7. Banks will need to live with low interest rates. More disruption and consolidation is coming. This will challenge investment bank focused business models, and generally low-profitable banks. We see some opportunities from consolidation, e.g. in the Italian popolari. We are long, but avoid investment banks and EM-exposed banks. 

  8. Asset managers: liquidity optimisation and bye bye to passive investing. We see disruption in the asset management industry also. Passive strategies, IG in particular, will be replaced by ETFs. Active strategies will be increasingly detached from benchmarks. We look at liquidity optimisation as a way to build more efficient portfolios. 

  9. Deeper capital markets are part of the solution, but the solution is far away. A more flexible financial system, where debt restructuring is quicker and more efficient, could help economies to get out more quickly from a balance sheet recession. Despite the United Nations’ call for a common framework for sovereign restructuring, Greek restructuring will continue to be a purely political decision and to be procrastinated. 

  10. The equilibrium, for now, is QE infinity – but political risk could be the breaking point. Political risk could be the breaking point for the QE infinity equilibrium. Europe, unlike Japan, will not be able to go through a “lost decade” intact, given its political dynamics, elevated youth unemployment and rising radical parties. 

  

  

  

  

  

• Why The Status Quo Is Doomed: Income Stagnates, Costs Rise

  Submitted by Charles Hugh-Smith of OfTwoMinds blog,

  Why are costs rising inexorably? The answer in most cases is simple: cartels.

  Even if nothing else doomed the status quo, the widening gap between household incomes and costs will push the corrupt contraption over the cliff by itself. The status quo (whatever you wish to call it) requires "growth" to sustain itself–growth in consumption, spending, sales, debt, asset valuations, profits and of course taxes, and ultimately all of those "growths" depend on household incomes.

  Incomes even for the most highly educated workers are stagnating:

  

  Adjusted for inflation, median household income is down significantly in the 'recovery":

  

  Some observers quibble that since this doesn't include food stamps and other transfer payments, it isn't accurate: in other words, it's not so bad if we include social welfare.

  If the status quo now depends on government payments to households to sustain "growth," then the system is nearing the cliff edge.

  Another trend that pushes the contraption closer to oblivion is income disparity: virtually all the non-welfare gains in income have gone to the top 5%, with most of those gains concentrated in the top 1%:

  

  We all know what's happened to major household expenses such as higher education, healthcare, rent/housing: they're soaring to the moon. Here's higher education:

  

  The status quo views additional healthcare spending as an unalloyed good thing, but as this chart (courtesy of B.C.) shows, rising healthcare costs correlate to recessions: it turns out paying $500 for a medication that cost $10 a few years ago isn't the kind of "growth" that the system needs to survive:

  

  Here's urban area rents:

  

  Why are costs rising inexorably? The answer in most cases is simple: cartels. Cartels and quasi-monopolies create artificial scarcities by limiting competition (usually via regulatory collusion with the government). This artificial scarcity enables the cartels to raise prices because consumers have no choice: the "competition" (i.e. the other members of the cartel) have the same prices for the same services.

  Take college as an example. The artificial scarcity is accreditation: if the institution isn't accredited, the diplomas it issues are worthless.

  Suppose (as I propose in my book The Nearly Free University and the Emerging Economy) that college diplomas were awarded on the basis of standardized exams and essay questions: the only thing that matters is what the student learned, not what bureaucratic hoops the cartel has erected to protect itself from real competition.

  As for healthcare, the cartel hides behind opaque pricing and complex billing that is paid by insurers or the government; the consumer has no choice and no access to the real costs.

  Many cartels are obscured by complex ownership arrangements. The majority of the mainstream media is famously owned by six corporations; this concentration of ownership (and thus of political influence) dominates the cartel-state-dominated American economy.

  Cartels will fight to the death to retain their privileges and profits. The status quo works just fine for them, and they will never let reform reduce their privileges, power or profits.

  But once the average household depends on government handouts just to remain nominally solvent, the slide over the cliff has already started.

  

  

  

  

  

• Did Goldman Sachs Just Find The Smoking Gun In Today's FOMC Minutes?

  The market’s reaction to today’s FOMC Minutes was, to some, a little odd given the “December is on” hawkish narrative being sold to the public. Stocks rallied, longer-dated bonds rallied, gold managed gains, and the US Dollar sold off… not exactly the reaction one would expect from a ‘hawkish’ Fed statement. But there is one thing that would explain those moves… and it appears Goldman Sachs found it buried deep inside the 12 pages of Minutes…

   

  First, we know that macro and micro data had deteriorated notably from the September meeting to the October meeting…

   

  

   

  Second, the reaction across asset classes was ‘odd’ – Bonds and Stocks bid, Dollar down and gold up (and crude up)…

   

  

   

  So, what would create that kind of market response? We’ll let Goldman Sachs explain…

  Minutes from the October 27-28 FOMC meeting indicated that most FOMC participants thought that the conditions for liftoff “could well be met by the time of the next meeting.” The minutes also noted staff estimates that the short-run equilibrium real interest rate is currently around zero and the long-run equilibrium rate would likely remain lower than was the case in previous decades.

   

  1. Minutes from the October 27-28 FOMC meeting indicated that most Fed officials thought that the conditions for liftoff “could well be met by the time of the next meeting.” However, in part due to worries about “weaker-than-expected readings on measures of labor market conditions,” FOMC members agreed to wait for further information before raising policy rates. We expect that the stronger-than-expected October employment report will have assuaged many of these concerns, and that the committee now has a strong baseline to raise rates next month.

   

  2. The minutes noted that “a number of participants” pointed to various other reasons for avoiding a further delay in raising the funds rate. The reasons included signaling confidence in the economic outlook, reducing uncertainty in financial markets, reducing the risk of a buildup of financial imbalances caused by low interest rates, and avoiding a loss of credibility.

   

  3. The minutes included a discussion of staff presentations on the concept of “equilibrium” real interest rates (also known as the neutral/natural rate or r*). Consistent with earlier public comments from Fed officials, including Chair Yellen, the staff presentations estimated that the short-run equilibrium real rate was currently around zero. FOMC participants expected the short-run equilibrium real rate to rise over time, “but probably only gradually.” The minutes also suggested that participants’ views on longer-run equilibrium rates may be evolving: “it was noted that the longer-run downward trend in real interest rates suggested that short-run r* would likely remain below levels that were normal during previous business cycle expansions, and that the longer-run normal level to which the nominal federal funds rate might be expected to converge in the absence of further shocks to the economy … would likely be lower than was the case in previous decades.” The staff attributed the lower long-run equilibrium rate to a slower rate of potential growth, a consequence of slower population growth and weak productivity growth. These comments might foreshadow another reduction in the median “longer-run” funds rate projection in the Summary of Economic Projections (SEP) in December.

   

  4. Participants also noted that the lower long-run equilibrium rate implies that the near-zero effective lower bound could become binding more frequently. As a result, “several” participants indicated that it would be “prudent” to consider “options for providing additional monetary policy accommodation” should the economic recovery falter.

  In other words – as the bolded sections highlight –

  The Fed is admitting that the neutral rate (to which they will theoretically raise rates before re-easing) will remain lower for longer…

  …and therefore will reach ZIRP more frequently going forward…

  …which means, as they state, using “additional monetary policy accomodation.”

  Which means, unless The Fed wants to implement NIRP (which it appears it does not), they will have to do more QE, more frequently going forward…

  …basically admitting that the rate manipulation transmission channel is defunct for all intent and purpose.

  *  *  *

  So what Goldman discovered was the ‘smoking gun’ admission that this is no normal recovery and what was once entirely extreme and experimental monetary policy will be the new normal… and that may be why stocks and bonds rallied and why the dollar dropped and gold and crude gained.

  Incidentally, all of this talk about the long-run equilibrium rate reminds us quite a bit of something Narayana Kocherlakota said back in July (that is, before he was replaced by Goldman alum and bailout architect Neel Kashkari). Recall this from Bloomberg:

  Increasing the supply of assets available to investors “would push downward on debt prices, and so upward on the long-run neutral real interest rate,” Kocherlakota said Thursday in Frankfurt in remarks prepared for delivery at a conference hosted by Germany’s Bundesbank.

  Lifting the so-called neutral rate, which prevails when Fed policy is neither stimulating nor restraining growth, would in turn benefit Fed policy makers by creating more space between the benchmark federal funds rate and zero, he said.

   

  “I want to be clear at the outset that I am not saying that it is appropriate for fiscal policymakers to increase the long-run level of public debt. I am simply pointing to one benefit associated with such an increase: It allows the central bank to be more effective in mitigating the impact of adverse shocks to aggregate demand.”

  So when the Fed talks about considering “options” in light of a lower long-term neutral rate, will one of those “options” be to encourage the Treasury to issue more debt? If so, we know a new regional Fed President that’s in good with the folks at Treasury…

  

  

  

  

  

  

• "What Happens In Syria, Doesn't Stay In Syria"

  Obama drops that ‘C’ word again…

   

  

   

  Source: Investors.com

  

  

  

  

  

• European Union Challenged From Right And Left, "Maybe Too Much To Endure"

  Submitted by John Browne via Euro Pacific Capital,

  The heinous ISIS attack in Paris is a game changer in Europe. In addition to the horrific amount of individual casualties, the attack has also threatened severe damage to the long term survivability of the European Union as a political entity. Based on the unpopularity and unfeasibility of immigration controls under the EU's Schengen Plan, the events have opened up the Union to renewed attacks from the right, just as its support from the left is crumbling as a result of opposition to EU-mandated fiscal austerity. This two-front onslaught may be too much for the Union to endure.

   

  Over the decades, Western Europeans had come to rely on the power of the United States to shield them from the chaos of the East. But it has become abundantly clear that America, particularly under President Obama, is not up to the task. Obama's now infamous claim that ISIS was merely a "JV Team" combined with his enduring lassitude in dealing head on with the growing threat of a radical Islamist proto-state in the heart of the Middle East has forced Europeans to consider taking the reins of their own defense.

   

  Unlike the lone wolf attacks in Boston and underwear bombers on planes in the United States, the Paris attack last week (as well as the Charlie Hebdo attack earlier this year) was highly sophisticated. (The explosives used in the attack, while simple to produce, are extremely difficult to handle once they are in their final form. The fact that its use was coordinated in simultaneous attacks while evading detection by anti-terrorist signals monitoring demonstrates an alarmingly high level of planning and control.) Initial evidence suggests the strategy was conceived in Syria, planned in Belgium and executed in France, reinforcing the idea that a high degree of transnational reach was available to the terrorists.

   

  In this environment, EU border control has become an issue of vital security. But the border control regulations that are part of the fiber of the European experiment are simply inadequate to stop the free flow of terrorists, both into the EU from abroad, and within the EU. Germany's stated goal of accepting 800,000 refugees from Syria this year, a policy that throws the door wide open for the immigration of potential terrorists, cannot coexist with the Continent's growing concern about Islamist terror attacks.

   

  In France, President Francois Hollande appears to have wrested from a hesitant President Obama the leadership of a frustrated West. France has now taken the lead in airstrikes against ISIS positions and has shown a greater willingness to work with Russia to do so. However, with regional elections in three weeks, Hollande faces a renewed challenge from Marine Le Pen, leader of the right wing National Front (NF) party. Despite facing charges for an anti-Islamic remark, Le Pen stands to make large electoral gains based on her Eurosceptic anti-immigration stance. The FN has been gaining traction for years, and last week's attacks could provide them with the fuel to become the most powerful party in France.

   

  In particular, it is surprising how the NF has also taken up some of the anti-EU sentiment usually reserved to the left wing. Le Pen has called for greater government welfare spending, austerity reductions, and increased trade protectionism, causes that have been championed by the left, especially in Southern Europe.

   

  Last week, Portugal's center-right minority government led by Prime Minister Pedro Passos Coelho was forced out of office after just two weeks. The prospect of continued EU-mandated austerity forced Coelho's Socialist partners to leave the coalition to join forces with the Communist and Green parties.

   

  Germany, Europe's economic engine long-admired for efficiency, high productivity and sound monetary views, recently has experienced a major internal political shock. Chancellor Angela Merkel emerged last year as the most powerful woman in the world and the undisputed leader of the 503 million people of the European Union, the world's third largest population after China and India. However, Merkel appears to have miscalculated massively with her pledge to accept so many refugees from the war-ravaged Middle East. In response to horrified public opinion, her center-right coalition has appeared to break political ranks, giving the impression even of chaos within Merkel's administration.

   

  The immigration situation is so bad that it has encouraged discussion of a possible early German election. The prospect has been raised that Finance Minister Wolfgang Schaeuble, a very tough moneyman keen on austerity, might re-challenge Merkel for the leadership of their Christian Democratic Union party. Replacement of the pro-EU Angela Merkel by Wolfgang Schaeuble likely would increase austerity pressures and ignite further strong left wing feelings against the EU. Austerity measures in Portugal and Greece are exposing already increasingly deep-seated Eurosceptic feelings.

   

  Further, the planned December EU summit meeting faces increasing opposition to the further integration of a single state. Increased German focus on internal politics will divert energy from forging a closer EU. Without German support, the Eurozone may quickly become a thing of the past.

   

  Rising Eurosceptic feelings and voting power are storm clouds for international investors. Increased doubts about EU solidarity could threaten even the perceived future of the euro, now the world's second currency. Signs of weakening EU cohesion could affect the value of many investments within the EU and around the world. In particular, absent their ECB subsidy, the prices of sovereign bonds of highly indebted periphery EU nations could come under intense pressure and thereby cause liquidity problems for EU banks.

   

  Even before the attacks in Paris, the world appeared to be entering a period of slow growth, with Japan, the Eurozone, and even the United States flirting with recession. Given the slowing trajectory economy, it is logical to suggest that the attacks in Paris could help pave the way for even greater activism from The Bank of Japan, The Federal Reserve, and the ECB. The monetary authorities would surely seek to help bolster economies that are being rocked by fiscal, political and strategic crises. In other words, the era of permanent global stimulus may continue for the foreseeable future.

   

  

  

  

  

  

• Russia Explains To Clueless US Public Why Obama Can't Defeat ISIS

  Earlier this week, CNN’s senior White House correspondent Jim Acosta asked President Obama the following question at a press briefing: 

  “A lot of Americans have this frustration that they see the United States has the greatest military in the world, it has the backing of nearly every other country in the world when it comes to taking on ISIS. I guess the question is, and if you’ll forgive the language, but why can’t we take out these bastards?”

  Well Jim, the answer is quite simple and indeed, if you – or any other member of the mainstream media for that matter – would bother to look at things like the declassified Pentagon report that Judicial Watch turned up earlier this year, you’d be less confused.

  Allow us, once again, to provide you with the answers you seek, straight from the Pentagon ca. 2012: 

  …there is the possibility of establishing a declared or undeclared Salafist Principality in eastern Syria (Hasaka and Der Zor), and this is exactly what the supporting powers to the opposition want, in order to isolate the Syrian regime, which is considered the strategic depth of the Shia expansion (Iraq and Iran).”

  Translation: if Sunni extremists were to establish a proto-state in eastern Syria that would be great because it would destabilize Assad and cut off Iran from Hezbollah thus endangering the preservation of Tehran’s Shiite crescent. 

  For those who need a still simpler formulation: ISIS started out no different than any of the other rebels the US supports in Syria. They likely received guns, money, and training if not directly from the US, then from Saudi Arabia and Qatar. Washington seems to have had some idea that they would seek to capture and hold territory and as far as the Pentagon was concerned, that was just fine. Whether or not the CIA anticipated what would come next is up for debate, but make no mistake, US intelligence knew good and well this was a possibility and let it happen because ousting Assad was (and still is) the top priority. 

  So when the Jim Costas of the world ask “why can’t we take out these bastards?”, the answer is that if if we did, one of the main forces destabilizing the Assad regime would be gone and not only that, the US would no longer have an excuse to be in Syria, which would leave the country’s political future entirely up to Russia and Iran and that is a decidedly unpalatable outcome not only for Washington, but for Riyadh and Doha as well.

  It’s Occam’s Razor Jim: look for the simplest possible explanation and go with that. 

  Of course that explanation is simply too bad to be true for most Americans and so the public and the mass media will continue to exists in a state of perpetual bewilderment as to why 13 months of aerial bombardment hasn’t done anything to degrade the group.

  In case any of the above isn’t clear enough, Sergei Lavrov has commentary which may help to drive the point home, presented below without further comment:

  “Despite announcing ambitious plans for its coalition against Islamic State (IS, formerly ISIS/ISIL), the analysis of those [US-led] airstrikes during over a year lead to conclusion that they were hitting selectively, I would say, sparingly and on most occasions didn’t touch those IS units, which were capable of seriously challenging the Syrian army.”

  
  

  “Apparently, it’s a kind of a ‘honey is sweet, but the bee stings’ situation: they want IS to weaken Assad as soon as possible to make him leave somehow, but at the same time they don’t want to overly strengthen IS, which may then seize power.”

   

  “The US stance seriously weakens the prospects of Syria to remain a secular state, where the rights of all ethnic and religious groups will be provided and guaranteed,” 

   

  “Russia’s assessment of the US-led anti-terror operation in Syria is based on observations of specific results and there are little results, not to say there are none – except the fact that during this period [since August 2014] the Islamic State has grown on the territories they control.”

  Clear enough?

  

  

  

  

  

• ISIS Posts Photo Of Bomb That Brought Down Russian Plane

  Moments ago, ISIS released the 12th issue of its magazine profiled here previously, which had a cover page with a clear enough title: “Just Terror“

  

   

  But while it has the usual content full of pro-Jihad propaganda, some 66 pages of it, as well as numerous images to commemorate the martyrs for the ISIS cause, what was most stunning about this edition was ISIS admission of how it brought down the Russian airplane above Egypt’s Sinai peninsula, which as even Russia admitted yesterday, was the result of an ISIS bomb.

  On page 3, we find the following two photos: one shows what Dabiq alleges are passports belonging to the “dead crusaders obtained by mujahidin”…

  

  … and more troubling, is the image of the IED used to bring down the Russian airliner: a bomb concealed in a can of Gold beer.

  

  This corroborates what Russia FSB chief Aleksandr Bortnikov said: “traces of a foreign-made explosive substance” have been found.  “During the flight, a homemade device with the power of 1.5 kilograms of TNT was detonated.”

  And something else which is perhaps just as surprising: in the foreword to its magazine, ISIS says it had originally planned to bring down a plane “belonging to a nation in the American-led alliance” but changed its mind to blow up the Russian plane instead.

  On “30 September 2015,” after years of supporting the Nusayr in the war against the Muslims of Sham, Russia decided to participate directly with its own air force in the war. It was a rash decision of arrogance from Russia, as if it held that its wars against the Muslims of al-Qawqz were not enough offence. And so after having discovered a way to compromise the security at the Sharm el-Sheikh International Airport and resolving to bring down a plane belonging to a nation in the American-led Western coalition against the Islamic State, the target was changed to a Russian plane. A bomb was smuggled onto the airplane, leading to the deaths of 219 Russians and 5 other crusaders only a month after Russia’s thoughtless decision.

  For those curious about the authenticity of the photo, or to learn more about ISIS’ propaganda, the complete latest edition of the magazine can be found here, and is reposted below.

  

  

  

  

  

• "We Should All Be Afraid" Of The 'Brutal' Commodity & Credit Volatility

  "The signals across asset classes are diverging incredibly," warns Macro Risk Advisors' Dean Curnutt, "and we should all be afraid." All of that volatility is rolling back into corporate credit and that, inevitably will dramatically impact equity markets (explicitly through higher funding costs weighing on earnings or implicitly through lower buybacks and higher risk premia), "the illiquidity and implied defaults that we are seeing in credit markets are not at all priced into a 2060 S&P."

   

   

  With commodities now glued at a 2-standard-deviation limit down trend (just as it was a limit-up trend into the last crash), volatility in this crucial asset class is literally exploding…

  

   

  and, if leveraged loans are any indication, crushing corporate credit markets…

  

   

  Curnutt is right that equities are massively mispriced.

   

  Charts: Bloomberg

  

  

  

  

  

• ISIS Goes Full "Jackass", Tries To Shoot Down Fighter Jet With Pickup Truck Machine Gun

  The thing about ISIS is that for every time they do something absolutely horrific like say, massacre 50 people in the streets of Paris before gunning down another 80 in a concert hall, or blowing up a passenger jet, or say, drowning “confessed spies” in a cage, they do something completely ridiculous.

  It’s a dichotomy that makes the whole thing feel kind of surreal at times. 

  Case in point, around the same time the group released a clip of a captured SAA soldier being run over by a tank, they also released a video of themselves making flying landmines out of condoms which they apparently thought could be used to create a kind of sky minefield that would deter Russian fighter jets. 

  Then, for those who watched the video the militants released earlier this week threatening to attack Washington, you might have noticed that in the scenes with the soldiers standing in front of the armored truck, the guy on the right falls asleep standing up at least four separate times as the man in the center delivers an impassioned speech. 

  

  Well, in the true spirit of ISIS buffoonery, we present the following classic video which appears to depict ISIS militants attempting to shoot down a Russian fighter jet using only a truck-mounted machine gun and a spotter who uses his thumbs to gauge the distance. 

  But perhaps the best part is the narrator. Or actually, the captions which frame the entire spectacle as though it were a terrorist episode of Jackass. 

  Enjoy.

  

  

  

  

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