- Bitcoin Soars To 14-Month Highs As Major Exchange Eases Access For Chinese
Bitcoin, at $444, is now up over 100% since we suggested, in early September, it would become the conduit for Chinese capital outflows following China's crackdown on capital controls. This afternoon's sudden BIS-induced plunge, taking the virtual currency down $50, has been entirely retraced and more as BTCC (China's leading Bitcoin Exchange) announced it will now accept direct deposits (making it significantly easier for Chinese to rotate their Yuan deposits into the virtual currency and out of the potential clutches of capital controlling communists).
As BTCC details,
Recent bitcoin price increases have reignited enthusiasm in buying bitcoin. BTCC is confident this trend will continue. As such, we are pleased to announce that we now accept direct deposits.
Customers now need only log in, click on “Account,” then “Fund,” and then select the “Bank Deposit” option to fund their BTCC accounts through their bank accounts. All customers who have Chinese bank accounts will be able to make direct deposits through ATM transfers or online banking.
And adds, even more crucially…
BTCC will stop accepting customer deposits through agents on November 15.
Which appeared to provide further dip-buying impetus to the recovery off the day's earlier mysterious plunge…
Lifting BTC to $444 highs, more than double the September levels when we suggested it. Notice the rally is on rapidly increasingly volumes also (as word spreads and ease of access is enabled)…
As we noted previously, this is the validation that, just as predicted here two months ago, bitcoin has become the go-to asset class for millions of Chinese savers seeking to quietly and under the radar transfer funds from point A to point B, whatever that may be, in the process circumventing the recently expanded governmental capital controls:
While he didn’t provide any concrete numbers, he did comment last week on what was driving the adoption. “Some Chinese traders are expressing a view on the CNY exchange rate after the last devaluation and you have interest by mainland speculators to move to other assets after the stock market fallout,” he explained in an interview with Bitcoin Magazine.
Which again brings us back to our conclusion from two months ago:
… if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print.
As of this moment, the total value of bitcoin is up from the $3 billion two months ago to a little over $5 billion. That means the ratio of Chinese deposits (at around $22 trillion) to bitcoin, is down to a far more "conservative" 4,400x.
And now, again, imagine what could happen if these same Chinese depositors realize they have been lied about the non-performing loans "backing" their deposits and that instead of the official 1.5% bad debt ratio, the real number is really far greater, somewhere in the 20% ballpark as we will show shortly, suggesting major deposit impairments are no longer the stuff of Cypriot nightmares but just the thing hundreds of millions of Chinese depositors have to look forward to, and that they have just two possible choices to avoid said impairment: reallocating their savings into bitcoin or, of course, gold.
* * *
How will the Chinese regulators and government react to this? Especially as the volumes are start to become relevant.
- The Real Issues You Won't Hear From The 2016 Presidential Candidates This Election Year
Submitted by John Whitehead via The Rutherford Institute,
“Apparently, a democracy is a place where numerous elections are held at great cost without issues and with interchangeable candidates.”—Gore Vidal
The countdown has begun.
We now have less than one year until the 2016 presidential election, and you can expect to be treated to an earful of carefully crafted, expensive sound bites and political spin about climate change, education, immigration, taxes and war.
Despite the dire state of our nation, however, you can rest assured that none of the problems that continue to undermine our freedoms will be addressed in any credible, helpful way by any of the so-called viable presidential candidates and certainly not if doing so might jeopardize their standing with the unions, corporations or the moneyed elite bankrolling their campaigns.
The following are just a few of the issues that should be front and center in every presidential debate. That they are not is a reflection of our willingness as citizens to have our political elections reduced to little more than popularity contests that are, in the words of Shakespeare, “full of sound and fury, signifying nothing.”
The national debt. Why aren’t politicians talking about the whopping $18.1 trillion and rising that our government owes to foreign countries, private corporations and its retirement programs? Not only is the U.S. the largest debtor nation in the world, but according to Forbes, “the amount of interest on the national debt is estimated to be accumulating at a rate of over one million dollars per minute.” Shouldn’t the government being on the verge of bankruptcy be an issue worth talking about?
Black budget spending. It costs the American taxpayer $52.6 billion every year to be spied on by the sixteen or so intelligence agencies tasked with surveillance, data collection, counterintelligence and covert activities. The agencies operating with black budget (top secret) funds include the CIA, NSA and Justice Department. Clearly, our right to privacy seems to amount to nothing in the eyes of the government and those aspiring to office.
Government contractors. Despite all the talk about big and small government, what we have been saddled with is a government that is outsourcing much of its work to high-paid contractors at great expense to the taxpayer and with no competition, little transparency and dubious savings. According to the Washington Post, “By some estimates, there are twice as many people doing government work under contract than there are government workers.” These open-ended contracts, worth hundreds of millions of dollars, “now account for anywhere between one quarter and one half of all federal service contracting.” Moreover, any attempt to reform the system is “bitterly opposed by federal employee unions, who take it as their mission to prevent good employees from being rewarded and bad employees from being fired.”
Cost of war. Then there’s the detrimental impact the government’s endless wars (fueled by the profit-driven military industrial complex) is having on our communities, our budget and our police forces. In fact, the U.S. Department of Defense is the world’s largest employer, with more than 3.2 million employees. Since 9/11, we’ve spent more than $1.6 trillion to wage wars in Afghanistan and Iraq. When you add in our military efforts in Pakistan, as well as the lifetime price of health care for disabled veterans and interest on the national debt, that cost rises to $4.4 trillion.
Education. Despite the fact that the U.S. spends more on education than any other developed nation, our students continue to lag significantly behind other advanced industrial nations. Incredibly, teenagers in the U.S. ranked 36th in the world in math, reading and science.
Civics knowledge. Americans know little to nothing about their rights or how the government is supposed to operate. This includes educators and politicians. For example, 27 percent of elected officials cannot name even one right or freedom guaranteed by the First Amendment, while 54 percent do not know the Constitution gives Congress the power to declare war. As one law professor notes:
Only 36 percent of Americans can name the three branches of government. Fewer than half of 12th grade students can describe the meaning of federalism. Only 35% of teenagers can identify “We the People” as the first three words of the Constitution. Fifty-eight percent of Americans can’t identify a single department in the United States Cabinet. Only 5% of high school seniors can identify checks on presidential power, only 43% could name the two major political parties, only 11% knew the length of a Senator’s term, and only 23% could name the first President of the United States.
A citizenry that does not know its rights will certainly not rebel while they are being systematically indoctrinated into compliance.
Asset forfeiture. Under the guise of fighting the war on drugs, government agents (usually the police) have been given broad leeway to seize billions of dollars’ worth of private property (money, cars, TVs, etc.) they “suspect” may be connected to criminal activity. Then—and here’s the kicker—whether or not any crime is actually proven to have taken place, the government keeps the citizen’s property, often divvying it up with the local police who did the initial seizure. The police are actually being trained in seminars on how to seize the “goodies” that are on police departments’ wish lists. According to the New York Times, seized monies have been used by police to “pay for sports tickets, office parties, a home security system and a $90,000 sports car.”
Surveillance. Not only is the government spying on Americans’ phone calls and emails, but police are also being equipped with technology such as Stingray devices that can track your cell phone, as well as record the content of your calls and the phone numbers dialed. That doesn’t even touch on what the government’s various aerial surveillance devices are tracking, or the dangers posed to the privacy and safety of those on the ground. Just recently, a 243-foot, multi-billion dollar military surveillance blimp drifted off, leaving a path of wreckage and power outages in its wake, before finally crash landing.
Police misconduct. Americans have no protection against police abuse. It is no longer unusual to hear about incidents in which police shoot unarmed individuals first and ask questions later. What is increasingly common, however, is the news that the officers involved in these incidents get off with little more than a slap on the hands. Moreover, while increasing attention has been paid to excessive police force, sexual misconduct by police has been largely overlooked. A year-long investigation by the Associated Press “uncovered about 1,000 officers who lost their badges in a six-year period” for sexual misconduct. “Victims included unsuspecting motorists, schoolchildren ordered to raise their shirts in a supposed search for drugs, police interns taken advantage of, women with legal troubles who succumbed to performing sex acts for promised help, and prison inmates forced to have sex with guards.” Yet the numbers are largely underreported, covered up by police departments that “stay quiet about improprieties to limit liability, allowing bad officers to quietly resign, keep their certification and sometimes jump to other jobs.”
Prison population. With more than 2 million Americans in prison, and close to 7 million adults in correctional care, the United States has the largest prison population in the world. Many of the nation’s privately run prisons—a $5 billion industry—require the state to keep the prisons at least 90 percent full at all times, “regardless of whether crime was rising or falling.” As Mother Jones reports, “private prison companies have supported and helped write ‘three-strike’ and ‘truth-in-sentencing’ laws that drive up prison populations. Their livelihoods depend on towns, cities, and states sending more people to prison and keeping them there.” Private prisons are also doling out harsher punishments for infractions by inmates in order to keep them locked up longer in order to “boost profits” at taxpayer expense. All the while, the prisoners are being forced to provide cheap labor for private corporations.
SWAT team raids. Over 80,000 SWAT team raids are conducted on American homes and businesses each year. Police agencies, already empowered to crash through your door if they suspect you’re up to no good, now have radars that allow them to “see” through the walls of your home.
Oligarchy. We are no longer a representative republic. The U.S. has become a corporate oligarchy. As a Princeton University survey indicates, our elected officials, especially those in the nation’s capital, represent the interests of the rich and powerful rather than the average citizen.
Young people. Nearly one out of every three American children live in poverty, ranking America among the worst countries in the developed world. Patrolled by police, our schools have become little more than quasi-prisons in which kids as young as age 4 are being handcuffed for “acting up,” subjected to body searches and lockdowns, and suspended for childish behavior.
Private property. Private property means little at a time when SWAT teams and other government agents can invade your home, break down your doors, kill your dog, wound or kill you, damage your furnishings and terrorize your family. Likewise, if government officials can fine and arrest you for growing vegetables in your front yard, praying with friends in your living room, installing solar panels on your roof, and raising chickens in your backyard, you’re no longer the owner of your property.
Strip searches. Court rulings undermining the Fourth Amendment and justifying invasive strip searches have left us powerless against police empowered to forcefully draw our blood, forcibly take our DNA, strip search us, and probe us intimately. Accounts are on the rise of individuals—men and women alike—being subjected to what is essentially government-sanctioned rape by police in the course of “routine” traffic stops.
Fiscal corruption. If there is any absolute maxim by which the federal government seems to operate, it is that the American taxpayer always gets ripped off. This is true, whether you’re talking about taxpayers being forced to fund high-priced weaponry that will be used against us, endless wars that do little for our safety or our freedoms, or bloated government agencies such as the National Security Agency with its secret budgets, covert agendas and clandestine activities. Rubbing salt in the wound, even monetary awards in lawsuits against government officials who are found guilty of wrongdoing are paid by the taxpayer.
Militarized police. Americans are powerless in the face of militarized police. In early America, government agents were not permitted to enter one’s home without permission or in a deceitful manner. And citizens could resist arrest when a police officer tried to restrain them without proper justification or a warrant. Daring to dispute a warrant with a police official today who is armed with high-tech military weapons would be nothing short of suicidal. Moreover, as police forces across the country continue to be transformed into extensions of the military, Americans are finding their once-peaceful communities transformed into military outposts, complete with tanks, weaponry, and other equipment designed for the battlefield.
These are not problems that can be glibly dismissed with a few well-chosen words, as most politicians are inclined to do. Nor will the 2016 elections do much to alter our present course towards a police state. Indeed, it is doubtful whether the popularity contest for the new occupant of the White House will significantly alter the day-to-day life of the average American greatly at all. Those life-changing decisions are made elsewhere, by nameless, unelected government officials who have turned bureaucracy into a full-time and profitable business.
As I point out in my book Battlefield America: The War on the American People, these problems will continue to plague our nation unless and until Americans wake up to the fact that we’re the only ones who can change things for the better and then do something about it.
This was a recurring theme for Martin Luther King Jr., who urged Americans to engage in militant nonviolent resistance in response to government corruption. In a speech delivered just a few months before his assassination, King called on Americans to march on Washington in order to take a stand against the growing problems facing the nation—problems that were being ignored by those in office because they were unpopular, not profitable or risky. “I don’t determine what is right and wrong by looking at the budget of the Southern Christian Leadership Conference. Nor do I determine what is right and wrong by taking a Gallup poll of the majority opinion,” remarked King. “Ultimately a genuine leader is not a searcher of consensus but a molder of consensus.”
Guided by Gallup polls, influenced by corporate lobbyists, and molded by party politics, the 2016 presidential candidates are playing for high stakes, but they are not looking out for the best interests of “we the people.” As King reminds us:
“Cowardice asks the question, ‘Is it safe?’ Expediency asks the question, ‘Is it politic?’ And Vanity comes along and asks the question, ‘Is it popular?’ But Conscience asks the question ‘Is it right?’ And there comes a time when one must take a position that is neither safe, nor politic, nor popular, but he must do it because Conscience tells him it is right.”
- US Ally Turkey Throws Journalists In Jail For "Attempting To Overthrow The Government"
Let’s just be clear: while it’s not precisely clear what combination of voter fraud, intimidation, and coercion ultimately led to Sunday’s sweeping ballot box victory for AKP in Turkey, there’s little question that the election results reflect the will of President Recep Tayyip Erdogan more than they reflect the will of the people.
Indeed, quite a few observers have voiced concerns over the election outcome including the US.
“We have both publicly and privately raised our concerns about freedom of the press, freedom of speech and freedom of assembly in Turkey,” White House Press Secretary Josh Earnest said on Monday.
For those unfamiliar with the backstory, Erdogan effectively started a civil war with the PKK in order to convince the public that only a dictator is capable of keeping the peace. Meanwhile, the PKK claims that Ankara has been using ISIS affiliates to stage what amount to false flag suicide bombings on Turkish citizens in order to frighten voters into relinquishing their support for the pro-Kurdish HDP.
The turmoil led directly to a plunging lira and crackdowns on anyone that even looked like they might be against the government. For example, here are some images from attacks on HDP offices in the lead up to the elections:
Indeed, just a week prior to the events depicted above, Ankara arrested three Vice News journalists (two British citizens and an Iraqi) for allegedly “engaging in terror activity” on behalf of ISIS. And as we said at the time, the media crackdown didn’t stop there. Turkish police also raided Koza-Ipek Media which, as AFP noted, owns the “Turkish dailies Bugun and Millet, the television channels stations Bugun TV and Kanalturk and the website BGNNews.com and is close to Erdogan’s political rival, the US-based Muslim cleric Fethullah Gulen.”
Now, in the wake of “elections” which virtually no impartial observer considers legitimate, Turkey has arrested the editors of a news magazine and charged them with attempting to orchestrate a “coup.” Here’s NBC:
Editors of a left-leaning Turkish news magazine were charged on Tuesday with attempting to topple the government over a cover suggesting Sunday’s election strengthening President Tayyip Erdogan could lead to a “civil war,” the journal said.
Nokta’s latest edition carried the cover headline “the beginning of civil war” after the ruling AK Party founded by Erdogan regained the parliamentary majority it had lost in a June poll.
“Senior editors Cevheri Guven and Murat Capan have been sent to jail pending trial over charges of ‘staging a coup attempt’ and ‘attempting to overthrow the government,'” Nokta said on its Twitter account.
Journalists accused of involvement in coup conspiracies against Erdogan have in the past been held in custody for months or even years awaiting trial.
Turkey, which aspires to membership of the European Union, ranks towards the bottom of global press freedom rankings. Erdogan’s opponents fear Sunday’s election result, which could pave the way for him to assume greater presidential powers, could encourage increasingly authoritarian rule.
Obviously, this is a complete farce. It’s Ankara that started the civil war and it began months ago. This is just another example of Erdogan persecuting dissent and frankly, it’s appalling that we’re talking about a NATO member and a country that’s considered one of the most important emerging markets in the world.
This is a backward state run by what amounts to a dictator and he’s managed to secure Washington’s tacit support for a brutal crackdown on his political foes by agreeing to let the US fly missions from Incirlik. This is, and always has been, an unholy alliance, and for those who contend that no matter what the political situation, we must still pay attention to Turkey due to its status as an up and coming economy, we encourage you to have a look at a six month chart of the lira prior to the post-election rally. That’s what happens when you’re a third world autocracy masquerading as a partially developed economy.
- The Market Is Not The Economy
After Q3’s magic…
Q4, we have a problem…
Just keep hoping.
h/t @Not_Jim_Cramer
- Dogfights Next? US Sends F-15 Jets To "Counter" Russian Air Force Over Syria
When the Obama administration announced it would soon put 50 (er… 100 we guess, since soldiers generally have two feet) boots on the ground in Syria, the US media immediately asked the wrong set of questions.
As we noted in “US Sends Troops To Syria: Here Are The Questions The Media Should Be Asking,” the Josh Earnest presser was nothing short of a joke, as the media peppered the Press Secretary with question after question about whether the President had gone back on his promise (made to the American people at least 16 times) to not put US ground troops into combat in Syria.
Of course that completely misses the point. And here’s why:
There have been boots on the ground in Syria and Iraq for years and indeed, the public seems to have forgotten that just five months ago, US commandos executed a raid in Syria that purportedly killed Islamic State’s “gas minister” (and yes, that’s just as absurd as it sounds).
Additionally, Washington has made no secret of the now defunct “train and equip” program for Syrian rebels – clearly, the American public hadn’t thought very hard about who was doing the on-the-ground “training.”
Finally, there’s no telling how many CIA operatives and black ops have been running around in Syria assisisting Saudi Arabia and Qatar’s proxy armies from the very beginning.
Given that, there are two questions everyone should be asking: 1) how does Washington plan to explain to Ankara that the Pentagon is set to embed US ground troops with the YPG in Syria and fly sorties from Incirlik in support of those ground troops when Turkey is literally flying from the exact same airbase on the way to bombing the exact same YPG forces with whom the US is set to embed?, and 2) how does the US intend to make sure that Russia doesn’t end up “accidentally” bombing US positions?
Well, one way to answer both of those questions is to send US dogfighters to Syria. The Daily Beast reports:
The U.S. Air Force is deploying to Turkey up to a dozen jet fighters specializing in air-to-air combat—apparently to help protect other U.S. and allied jets from Russia’s own warplanes flying over Syria.
Officially, the deployment of F-15C Eagle twin-engine fighters to Incirlik, Turkey—which the Pentagon announced late last week—is meant to “ensure the safety” of America’s NATO allies, Laura Seal, a Defense Department spokesperson, told The Daily Beast.
That could mean that the single-seat F-15s and the eight air-to-air missiles they routinely carry will help the Turkish air force patrol Turkey’s border with Syria, intercepting Syrian planes and helicopters that periodically stray into Turkish territory.
But more likely, the F-15s will be escorting attack planes and bombers as they strike ISIS militants in close proximity to Syrian regime forces and the Russian warplanes that, since early October, have bombed ISIS and U.S.-backed rebels fighting the Syrian troops.
Well, kind of. We could always be wrong, but it seems unlikely that The Pentagon is going to send F-15s into battle against Russian fighter pilots in western Syria. What’s pretty clearly going on here is that Washington is sending just enough air support to ensure that once the Russians and Iranians secure Syria’s major cities in the west, the US has the capability to shoot down Russian jets should they threaten whatever the hell Washington’s spec ops are trying to accomplish near Raqqa in conjunction with the YPG. Anyway, back to The Daily Beast:
Seal declined to discuss the deployment in detail, but hinted at its true purpose. “I didn’t say it wasn’t about Russia,” she said.
Russia’s air wing in western Syria is notable for including several Su-30 fighters that are primarily air-to-air fighters. The Su-30s’ arrival in Syria raised eyebrows, as Moscow insists its forces are only fighting ISIS, but ISIS has no aircraft of its own for the Su-30s to engage.
The F-15s the U.S. Air Force is sending to Turkey will be the first American warplanes in the region that are strictly aerial fighters. The other fighters, attack planes and bombers the Pentagon has deployed—including F-22s, F-16s, A-10s and B-1s—carry bombs and air-to-ground missiles and have focused on striking militants on the ground.
In stark contrast, the F-15s only carry air-to-air weaponry, and their pilots train exclusively for shooting down enemy warplanes. It’s worth noting that F-15Cs have never deployed to Afghanistan, nor did they participate in the U.S.-led occupation of Iraq. The war in Syria is different.
And while that is indeed interesting, the following is nonsense:
Incirlik and its growing contingent of warplanes is the key to a new northern strategy in the U.S. campaign against ISIS, an unnamed Pentagon official said on Oct. 30. “One of the principal things we will do to put pressure in the border area and into Syria is, quote, ‘thicken’ air operations in northern Syria.”
“That means we want a greater density of planes striking. We need a greater density of intelligence assets developing targets. You—the White House announced A-10s, which are already on the ground at Incirlik, and F-15s forthcoming on—in Incirlik, to help in the counter-ISIL campaign,” the official added, using another acronym for ISIS.
As we’ve said on too many occasions to count, if Washington and Ankara (both of which are flying from Incirlik) were that concerned about ISIS in the “border area”, then they wouldn’t have explicitly forbidden the YPG from advancing on ISIS west of the Euphrates.
In the final analysis, Washington has absolutely no idea what’s going to happen now that i) the PKK has suffered a bitter electoral defeat at the hands of Erdogan in Turkey, and ii) it’s just a matter of time before Hezbollah advances on Raqqa supported by Russian warplanes and so, the Pentagon is sending in the dogfighters to make sure that in case something goes horribly wrong, the US can shoot down whoever happens to be in the sky before the “50” spec ops get bombed.
- America's Endangered Species: Uneducated, Middle-Aged, White
Submitted by Eric Zuesse, author of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.young ones, and not of old ones, and
A Scientific Study Shows that in U.S., Uneducated Whites Are Now Dying Younger
An article published in the latest issue of the Proceedings of the National Academy of Sciences (PNAS), documents that, ever since 1998 in the U.S, Whites who are of non-Hispanic origin have been dying younger and younger, and that this is especially true for those Whites who are low-educated (non-BA’ed) and middle-aged (45- to 54-year-old). But it’s true also for the other age-categories of non-Hispanic Whites.
This study, by Anne Case and Angus Deaton, “Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century,” published now in PNAS, finds that, for the low-educated, group, “The change in all-cause mortality for white non-Hispanics 45–54 is largely accounted for by an increasing death rate from external causes, mostly increases in drug and alcohol poisonings and in suicide.” It “was driven primarily by increasing death rates for those with a high school degree or less. … Those with college education less than a BA saw little change in all-cause mortality over this period; those with a BA or more education saw death rates fall.”
Whereas in 1998, only 2 persons per 100,000 in the White non-BA’ed group died from “poisonings” (drug and alcohol), that figure has steadily soared since then and is now above 30, a 15-fold increase.
The suicide-rate rose from 16 to 25; and the rate from chronic liver disease rose from 16 to 21.
Poisonings are thus now the leading cause of deaths within the low-educated White middle-aged group; lung cancer is #2; suicide is #3; chronic liver disease is #4; and diabetes is #5. The only one among the five major causes that has gone down among Whites since 1998 is lung cancer (perhaps a result of reduced smoking). However, the increase from diabetes has been only very slight, from 11 to 12.
Table 2 in the article shows that for all White non-Hispanics aged 45-54, there were enormous increases (doubling in some, going to tenfold in others) in such categories as “days physical health was not good”; “days mental health was not good”; and difficulty with or related to “walking,” climbing stairs,” “standing,” “sitting,” “activities limited by physical or mental health,” “unable to work,” and “heavy drinking.”
The article doesn’t speculate as to the causes of this mortality-rise among Whites.
The question here is: what was done in or around 1998 that might have, to a greater degree than with other groups, adversely affected Whites, and especially low-educated ones, so as to have markedly and very disproportionately increased the stresses that can lead to deaths from poisonings (especially “drug and alcohol poisonings”), and from suicides?
Blacks and Hispanics have always been highly stressed in the U.S.; so, their decline in death-rates was actually continuing during this time; we’re looking here only for a differential indicator, one which can explain the rapid plunge in the welfare of Whites, and especially of middle-aged ones, and especially of low-educated middle-aged ones — not of young or old ones. However, actually, the entire category of American (non-Hispanic) Whites has been dying younger than before, and this fact also needs to be part of the same explanation.
American Whites, in their middle years, used to expect to outperform their parents; they used to expect to become better-educated and higher-income than their parents. Perhaps they no longer do.
One cannot say that the white majority has suffered more than minorities have suffered during the economic stagnation that this nation has experienced since, actually, around 1980. For example, here, from the Economic Policy Institute, is a table showing America’s economic stagnation across groups:
Furthermore, here is the Conclusion from the 2010 study, “Foreclosures by Race and Ethnicity,” that Responsible Lending did, of the extent to which the George W. Bush economic crash and home-foreclosures, affected Whites, Blacks, and Latinos:
“We have estimated that two million families have lost their primary homes and that AfricanAmerican and Latino borrowers have borne and will continue to disproportionately bear the burden of foreclosures.”
Blacks and Hispanics were hit harder by the 2005-2008 foreclosure-crisis than Whites were. And yet, ever since 1998, for some reason, Whites (especially low-educated ones) have lost hope at a far greater percentage than have Hispanics or Blacks.
Do Hispanics and Blacks have stronger psychological, and perhaps also physical, constitutions than Blacks and Hispanics do? They’ve always had lower suicide-rates than Whites. So: maybe they do.
At this stage, one can only speculate as to the reasons behind the Case-Deaton findings.
- China Services PMI Rises (And Falls); Stocks Jump Led By Brokers, Exchanges On Shenzhen Trading Link Resumption
Following Caixin China Manufacturing's 'surprise' jump higher (in the face of the official PMI flat), Caixin Services PMI just beat expectations and bounced considerably to a 'healthy expanding' 52.0 (despite official Services PMI plunge), bringing the Composite PMI to 49.9 – thus proving that billions of dollars of liquidity injections, market interventions, debt transfers to SOEs, arrests, shootings, and general thuggery has fixed China. For now stocks are rallying on this news but offshore Yuan is continuing to leak back to Friday's lows. The biggest gainers are the Chinese brokerages and exchanges (HKEx is up 8%) after PBOC Governor Zhou said a trading link with Shenzhen will start this year.
Is China Fixed?
Who knows?
Chinese stocks are recovering on the 'good' news…
Led by brokerages and exchanges…Hong Kong Exchanges & Clearing Ltd. shares surged the most in four months
After the head of China’s central bank said a trading link with Shenzhen will start this year.
HKEx rallied 5.4 percent, heading for the biggest gain since July 9 and extending this year’s advance to 23 percent. China needs to accelerate the opening of its financial markets, People’s Bank of China Governor Zhou Xiaochuan wrote in an article published on the PBOC’s website Tuesday.
An expansion of Hong Kong’s exchange link to Shenzhen after a similar program with Shanghai started last November would come as a surprise to many investors who had anticipated a delay. Ten of the 13 respondents in a Bloomberg survey in September predicted the Shenzhen connect would start next year as authorities focus their efforts on stabilizing the mainland share prices in the wake of a $5 trillion selloff
ut it seems the Yuan continues to weaken…
Charts: Bloomberg
- Hugh Hendry Says "Don't Panic"; Here Is Paul Singer Explaining Why You May Want To
Earlier today, we presented the latest outlook by reformed bull Hugh Hendry, who had one message for his readers : “it is ironic that we are perhaps best known for advising “that you panic”. However, if you are anxious at the wrong time it can prove very painful. Today, we would advise that you don’t panic!” He said a bunch of other things too (you can read his full letter here).
So lest we be accused of being overly biased to the “rose-colored glasses” side, here is the counterpoint straight from Elliott management’s founder and prominent activist, Paul Singer who, contrary to Hendry, thinks panicking may not be a bad idea after all.
The Calm Before The Who Knows What
Businesspeople in today’s world are either concerned, actively sweating or oblivious to the rumblings and dangers around them. We recommend that both investors and businesspeople be highly alert to the implications of populism, the increasing concentration of power into the hands of unaccountable elites and the dissipation of the rule-of-law protections of liberty.
It is very odd and dangerous that governments, satisfied with policies which, by raising asset prices (stocks, bonds, real estate, high-end art), are seemingly designed to make the rich richer, nevertheless simultaneously excoriate inequality as the cause of slow growth and societal disquiet. It is also strange that policymakers are not concerned by the obvious failure of monetary extremism to achieve the predicted levels of growth, or by the risks that may exist either in the continuation of the monetary experiment or in its ultimate unwinding. Policymakers who are sticking with the failed policy mix have invented creative explanations for why growth has been so bad for such a long a period of time. The most prevalent (and tautological) of these explanations is “secular stagnation,” a theory that the developed world simply cannot grow faster due to ageing populations, growth-destructive technologies and competition from cheap labor around the world. We disagree with this theory, and assert that it can be examined for validity only after a full range of first-line “fiscal” policies (as we have defined them) has been put firmly and comprehensively in place. In contrast to the “secular stagnationistas,” we believe that there is a great deal of low-hanging fruit (that is, far higher rates of growth in incomes, jobs and national wealth) to be had from simple changes in leadership and policies.
The question of the day is: What will be the policy response of the developed world toward the currently deteriorating (at least in EMs and China) conditions, and the policy response if the deterioration spreads to Europe and the U.S.? If we know anything about the policy decision-making landscape in developed countries, it is that policymakers are all on super-keen-alert for signs of deflation (which they basically equate with credit collapse — a false and misleading connection, but that is a topic for another day). They will not remain passive in the face of a renewed global recession and/or financial crisis. So what will they do next, and how will it affect global markets? We can be reasonably certain that policymakers will not leap into action on the fiscal measures that we have described as the front-line policies needed to meaningfully quicken economic growth. Try to imagine more flexible and business-friendly tax, regulatory and labor policies being enacted by current political leadership in the U.S., Europe and Japan. Sorry, our imaginations — never inert — just can’t get there.
What policymakers will do, in all likelihood, is hope and pray, and when that fails, they will likely double down on monetary extremism. This landscape is essentially baked, unless you think that sometime in the near future the global economy will turn higher, either on its own or in anticipation of such policy measures in the future. To many policymakers today, jawboning seems like a magic button, since markets often create the desired result in anticipation of possible future actions. Consequently, governments may be able to get a particular outcome without requiring the central bankers to actually take any action.
But the real risk (not necessarily because it is the highest probability but because its consequences would be so damaging) is that somewhere in the action/counteraction matrix of markets, economic adversity, and monetary actions and failures, market actors lose confidence. Such a loss could take a number of shapes and disrupt a multitude of different asset classes and markets. We are aware that the “informed” opinion of the world’s investors at present is that the U.S. dollar will always remain strong and never lose its special reserve currency position, thereby permitting the Fed to promulgate (at no cost) any monetary policy it deems necessary to save the U.S. economy. It is, however, not possible to predict the effects on “investor psychology” of the next set of creative and extreme monetary and fiscal policies (in this use of “fiscal,” we mean raw government spending) that surely will follow the next financial crisis or global downturn. At the outer edges of the most damaging of possibilities, bond markets could collapse in a flight from paper money; stock markets could collapse from a combination of much higher interest rates and expected new rounds of populist punitive policies; commodities markets could drop further (in recession) then soar (with a flight from paper money); inflation could plunge, and then skyrocket; more governments could evolve in a Venezuelan/Argentinian model (autocratic, populist, cronyism, corrupt, irrational); and/or gold prices could spike.
Remember that we believe that doubling down on, or even expanding the scope and radicalism of, monetary policy is highly likely to be the policy response to a global downturn or financial crisis. And remember also episodes like the “taper tantrum,” where bond markets around the globe instantly tried to “discount” what they saw to be a future of continuously rising interest rates. Markets generally try to discount or front-run the future. Policymakers, currently smugly asserting that “inflationistas” are “wrong” because QE and ZIRP/NIRP have not caused generalized inflation after seven years, may be surprised indeed if the next round of (possibly expanded) monetary extremism causes markets to try to get “ahead” of monetary debasement. That could look like a self-reinforcing spiral of rejection of paper money.
These thoughts and paths are suggestive. Nobody knows what such a landscape would look like in shape or detail, although the picture we want to paint is not a blueprint for disaster, but rather a suggestion of the kinds of things that could go awry given trends in modem markets, governments, policy and politics. What is clear, however, about the current environment, in which global growth is slowing, is that the policy options which governments have chosen to pursue are wrong. What will suffer as a result is growth and freedom.
Other Observations About Current Policies And Their Implications
It appears that pumping up the wealth of the affluent is the principal goal of state policy throughout the developed world. It is not a collateral consequence, but the seriously pursued aim of policymakers who often spend their time railing against wealth and the wealthy. What is the policymakers’ desired result in this fetid mixture of policies and populism? If it is to restart their economies, it has failed. If it is to stir up resentment against the prosperous and enable the populists to get elected by giving benefits to those whose assets haven’t been levitated, or those who have no assets, then the policy mix is diabolical.
Another implication of the current policy landscape is the dissipation of the habit and imperative of saving. A whole generation of young people has little concept of building a nest egg. It is not just government benefits that discourage this practice. It is also the absence of a reasonable rate of return. Many older people who thought saving money for their retirement was a good idea are now sorely disappointed (and poor) because they can’t get a fair rate of interest on their savings. Pension funds can’t meet their liabilities with zero or negative short-term interest rates and I% or 2% rates on 30-year bonds. The “bailout culture” often coincides with sustained weak growth because, among other consequences, successful companies have to compete with companies who are alive only because of cheap credit. Overcapacity and inefficient production are engendered by such policies, causing price and profit declines. Failure is an essential element of capitalism, and if failure is politically denied, the most effective, efficient and innovative solutions cannot “win” over the “living dead” who clutter markets and consumer baskets. Given the obviously deflationary effects of ZIRP and bailouts on growth, we can’t imagine why American and European policymakers have effectively looked at Japanese history since 1989 and said, “We just love what they have done for 25 years of no growth! Let’s do the same.”
QE, ZIRP and NIRP not only distort the prices of financial assets, but also effectively bully investors into making decisions that they didn’t want to make, raising their risk levels far beyond what would be considered “normal” for such instruments.
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And also making respectable, rational people capitulate and BTFD, unable to look at themselves in the mirror again…
- A Furious Trump Goes After Janet Yellen: "She Is Not Raising Rates Because Obama Told Her Not To"
Having gone after the entire GOP primary playing field, earlier today during a press conference held in his very own Trump Tower, Donald Trump decided to target his ire at a more worth adversary:US monetary policy in general, and Janet Yellen in particular.
This is what he said:
“The question is should the Fed raise rates? They are not raising them because Obama has asked them not to raise them. In my opinion, he wants to get out of office, because we’re in a bubble and when those rates are raised, a lot of bad things are going to happen. In my opinion Janet Yellen is highly political and she’s not raising rates for a very specific reason: because Obama told her not to because he wants to be out playing golf in a year from now and he wants to be doing other things and he doesn’t want to see a big bubble burst during his administration.
The clip:
Naturally, the White House promptly denied the allegations: “Of course not,” White House spokesman Josh Earnest said when asked about the remarks by Trump. “This administration goes to great lengths to ensure that the Federal Reserve” can make monetary policies that are in the best interests of the country and the economy, Earnest said.
This was to be expected.
Then again, considering today’s rally which at least on the surface appears to be on a shift in sentiment (even if it is merely a continuation of the relentless short squeeze seen for the past month), now that a rate hike is again perceived bullish (which clearly does not explain why stocks soared on bearish economic data in October and hopes of rate hike delays) because “what would the Fed know if it is hiking that the market does not”, Yellen just may surprise Trump and Obama with a rate hike in just over one month.
Which leads to the question: is Yellen as political as Trump claims, and if so, will Obama risk a market drop just in time for a presidential election that makes his golf game far less pleasant a year from now?
- 18 Bullets Showing That A Global Recession Is Already Here
Submitted by Michael Snyder via The End of The American Dream,
The stock market has been soaring, but all of the hard economic numbers are telling us that a major global recession is here. This is so reminiscent of what happened back in 2008. Back then, all of the fundamentals were screaming “recession” by the middle of that year, but the equity markets didn’t respond until later. It appears that a similar pattern is playing out right now.
The trade numbers, the manufacturing numbers, the inventory numbers and even the GDP numbers are all saying that a very significant economic slowdown is happening, but stock traders haven’t gotten the memo yet. In fact, stocks had an absolutely great month in October. Of course just like in 2008, stocks will eventually catch up with reality. It is just a matter of time. The following are 18 numbers that scream that a crippling global recession has arrived…
#1 According to the biggest bank in the western world, British banking giant HSBC, the world is already in a “dollar recession“. Global GDP expressed in U.S. dollars is down 3.4 percent so far in 2015, and total global trade has fallen 8.4 percent.
#2 In September, Chinese exports were down 3.7 percent compared to one year ago, and Chinese imports were down a whopping 20.4 percent compared to a year ago.
#3 Demand for Chinese steel is down 8.9 percent compared to a year ago.
#4 China’s rail freight volume is down 10.1 percent compared to last year.
#5 In October, South Korean exports were down 15.8 percent from a year ago.
#6 According to the Dutch government index, a year ago global trade in primary commodities was sitting at a reading of 150 but now it has fallen all the way down to 114. What this means is that less commodities are being traded around the world, and that is a very clear sign that global economic activity is really slowing down.
#7 U.S. exports are down 11 percent for the year so far. The only other times they have fallen this dramatically since the turn of the century were during the last two recessions.
#8 Since March, the amount of stuff being shipped by truck, rail and air inside the United States has been falling every single month on a year over year basis. If less stuff is being moved around the country, does that mean that economic activity is growing or declining? The answer, of course, is obvious.
#9 The ISM Manufacturing Index, which is the most important measurement of U.S. manufacturing activity, has fallen for four months in a row.
#10 The Dallas Fed’s Manufacturing Outlook has dropped for 10 months in a row.
#11 Wholesale sales in the U.S. have fallen to the lowest level since the last recession.
#12 The inventory to sales ratio has risen to the highest level since the last recession. This means that there is a whole lot of unsold inventory that is just sitting around out there and not selling.
#13 It looks like a new housing slump is emerging in the United States. Sales of previously owned homes fell by 2.3 percent in September.
#14 New home sales in the United States declined by a whopping 11.5 percent in September.
#15 Wal-Mart is projecting that its earnings may fall by as much as 12 percent during the next fiscal year.
#16 According to John Williams of shadowstats.com, if the government was actually using honest numbers the unemployment rate in the United States today would be 22.9 percent.
#17 According to Challenger Gray, layoffs at major firms have risen to the highest level that we have witnessed since 2009.
#18 The number of job openings in the United States declined by 5.3 percent during the month of August. That was a very large plunge for just one month.
None of the underlying issues that caused our problems back in 2008 and 2009 have been fixed. Instead, we just became even bigger and bolder with our mistakes. In the period between the last recession and today, we witnessed the greatest debt binge in the history of the planet. Now a lot of that debt is starting to go bad, and the Bank for International Settlements says that their “dashboard of risk is flashing red”. The following comes from a recent article in the Guardian entitled “Apocalypse now: has the next giant financial crash already begun?“…
This summer, the Bank for International Settlements (BIS) pointed out that certain major economies were seeing a sharp rise in debt-to-GDP ratios, which were well outside historic norms. In China, the rest of Asia and Brazil, private-sector borrowing has risen so quickly that BIS’s dashboard of risk is flashing red. In two thirds of all cases, red warnings such as this are followed by a major banking crisis within three years.
And that is exactly what we are heading for. Whether it happens next week or several months from now, the truth is that we are steamrolling toward another great banking crisis, and it will be worldwide in scope.
By the time that it is all said and done, I believe that the economic crisis that we are heading toward will be much worse than what we experienced back in 2008 and 2009. The U.S. economy has never even gotten close to the level it was operating at prior to the last recession, and now the next crisis is upon us.
But until stocks crash here in the United States, most people are going to ignore all of the numbers above and will just keep pretending that everything is going to be just fine.
Just like in 2008, the irrational optimists are going to keep chanting their happy mantras for as long as they possibly can.
- Housing Crisis: Australians Resort To Renting Tents As Cost Of Living Skyrockets
Last week we brought you “Million Dollar Shack,” a comedic yet sobering documentary that provides a first hand account of California’s housing bubble.
As we noted when we presented the clip, the short film embedded above has it all: absurd prices for rundown properties, soaring costs for rentals, even a tent in someone’s backyard that goes for $46 a night (you get an extension cord, one shower a day, and wi-fi).
Of course California isn’t the only place where the cost of living has gone through the roof.
Indeed, between America’s transformation from a nation of homeowners to a nation of renters, capital fleeing China for international real estate, and the proliferation of ZIRP and NIRP, housing costs have skyrocketed from New York, to Oslo, to Hong Kong. As we pointed out last Thursday, UBS is now out warning that London risks a “substantial price correction should the fundamentals for estate investment deteriorate.”
All of this comes as DM central banks across the globe swear there’s no inflation and not only that, the same central banks cite a deflationary impulse on the way to cutting rates to zero or below which of course only serves to exacerbate the housing bubbles that are pricing the lower- and middle-classes out of the market.
The situation is so bad in London that one apartment seeker was recently shown the following “room” which she was told could be hers for “just” £500 a month.
Well as it turns out, Silicon Valley and London aren’t the only places where tents and cots under the stairs are actually being marketed to renters. As Australian media reports, “tents outside” are now going for $90 a week. Here’s more:
Renters in Melbourne are offering tents on a balcony instead of a normal bedroom — and people are desperate enough to move in.
Those who want cheap rent in the city can find adverts on sites like Gumtree, promoting the low-cost housing solution.
One tent is being rented out at Southbank for $90 a week.
The seller, who already lives with two other people, had previously lived in the tent for six months.
It is described as comfortable and has electricity and a mattress.
The person who moves into the tent can share one of two toilets and can have access to the living room, kitchen and two new fridges.
Flatmates.com.au chief executive Thomas Clement gently suggests that before you resort to living in a tent on someone’s porch, you consider living outside the city and dealing with the commute:
“More and more people want to live closer to the city centre and I believe that’s where some of the issues come in A lot of people are having affordability issues but the easy solution is move out of the city a little bit. I think people’s desire to live centrally is outweighing the logic of taking something affordable.”
Maybe. Or maybe prices are just too damn high. That is, maybe it’s not the renters that are being illogical – maybe it’s a market that’s been distorted by a variety of factors including, but certainly not limited to, ZIRP. In any event, we took a quick spin around Gumtree.com and found another amusig listing which, despite a valiant effort on “Debbie’s” part to sell it in a way that isn’t demeaning, is for all intents and purposes being pitched to vagrants:
hi,everyone i know how backpacker can be to cramped in shareing rooms with no private or to put a tent up at a caravan park , i have a caravan i have parked in my drive way that i am gonna let out for short stay people who are travelling through.
caravan has all utilities as reverse air con, microwave,toaster, kettel , small gas cooker, linen, it has 2 single beds or the table folds down to a double bed , where you have your own space,inside house you tv with foxtel if you like to use and socialised in side the house , share bathroom, kitchen if you like to cook up a storm, pergola out back with bbq that you can use if you like,internet at an extra cost.
your close to shops , beach, and transport, i have dogs that are friendly love people for attention.
PRICE
$25 a night
$30 a night for 2 people
$5 a day for internet per person in house
$155 if you stay7days for one person or for 2 is $190
there is a security bond but depends on how long you stay.
please text me or call no emails please Debbie.
Yes, “no e-mails”, which shouldn’t be a problem because if you’re considering renting out Debbie’s driveway “caravan,” chances are you aren’t toting around a MacBook (unless you’re a jobless recent college graduate, in which case you probably left school with $35,000 in debt and five Apple products). Here’s more from Thomas Celement (cited above):
“We don’t believe it’s a reasonable way for people to live.”
“People think share accommodation is a student thing but it’s not. The majority of people who live in share housing are around 27 and in their first or second job.
“Living in a tent doesn’t connect with someone with a professional job.”
No argument there.
Of course at the end of the day, if living on someone’s porch in a tent or in someone’s driveway in a “caravan” isn’t your style, you can always just go home…
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- Why Most Investors Will Never Go Back To Stocks Again, In One Chart
The simple answer: the risk/return is simply not worth it.
Whether it is two recent yet “generational” crashes still fresh in most investors’ minds, or the countless micro flash crashes witnessed daily and countless market fragmentation events thanks to the ubiquitous penetration of HFT in every asset class which have led to partial or wholesale market closures and a risk to principal far beyond what is embedded in the “fundamentals”, not to mention the risk that faith in central planning simply runs out in any given moment, for many equities are simply, as SocGen puts it, “too scary.”
In short, for most return of capital is now far more important than return on capital.
We note this just in case Steve Liesman is confused “why”…
- Goldman Warns "VIX Seems Low", Significantly Underpricing Economic Uncertainty
"The options market seems to either be anticipating an inflection higher in the economic data, no rate hike, or an extreme lack of catalysts between now and year-end," according to Goldman Sachs' Krag Gregory. With VIX trading with a 13 handle, Gregroy warns, it is notably under-priced relative a 19 handle more in line with economic and policy uncertainty. The potential for volatility to swing higher seems more likely.
The VIX landed at 14.2 on November 2nd, back down to its average closing level during the low volatility years of 2013 and 2014.
That seems low to us given recent weakness in the U.S. economic data and a potential rate hike in December. The options market seems to either be anticipating an inflection higher in the economic data, no rate hike, or an extreme lack of catalysts between now and year-end.
Argument for higher volatility: Uncertainty surrounding a mediocre economy + FOMC reaction function; GDP of 1.5% and ISM @ 50 are more consistent with a 19 VIX
Our VIX model uses economic inputs to estimate trend VIX levels over time. With the ISM, consumer spending and unemployment data that we have in hand, our models would suggest baseline VIX levels of 19, not 14 and change. Reverse engineering our model we estimate that a 14 VIX is more consistent with an ISM new orders level above 60 (ISM high 50’s) given no change in consumer spending or the unemployment rate.
The U.S. options market may be expecting economic stabilization, or a lower likelihood of a December rate hike given an ISM at 50.1.
Volatility: Less room for error with ISM @ 50 and GDP is 1.5% rather than 3%
GDP is 1.5% and ISM at 50.1: In our 2015 Volatility Forecast (January 20, 2015), we showed that the FOMC has tended to hike rates when the economy is on solid footing. U.S. real GDP growth has been 3% or higher during the quarter of the initial hike and the ISM averaged 57.6 the month of the hike and a robust 57 one- to three-months after a hike over the last three rate cycles. While the VIX is already pricing in an ISM level in the high 50's and the FED has put a December hike back on the table, the economy is well below where we were at the beginning of past hikes. The advance number for real GDP was +1.5% in Q3 and the ISM stands at 50.1. That gives us a lot less cushion than in past cycles.
Implications: Modest U.S. and global growth may imply that U.S. market volatility (much like the FOMC) will be a lot more data dependent.
The economy and the FOMC reaction function will be the key into year-end. Our point is that the potential for volatility to swing higher seems more likely when we are (1) at low VIX levels, (2) the economy is mediocre, and (3) the market is navigating the ramifications of a potential December rate hike.
Bottom line: a VIX back at 2013-2014 levels seems low if a December rate hike really is in play. In terms of timing, it may be natural for volatility to take a breather after the intense market swings experienced in August-September, an earnings season, and three highly scrutinized central bank meetings (FOMC, ECB, BOJ). We would take advantage of lower option prices to implement direction views.
Source: Goldman Sachs
- Peter Schiff On QE's Creeping Communism: Washington Joins Tokyo On The Road To Leningrad
Submitted by Peter Schiff via Euro Pacific Capital,
Most economists and investors readily acknowledge that the current period of central bank activism, characterized by extended bouts of quantitative easing and zero percent interest rates, is a newly-blazed trail in economic history. And while these policies strike some as counterintuitive, open-ended, and unimaginably expensive, most express comfort that our extremely educated, data-dependent, central bankers have a pretty good idea as to where the trail is going and how to keep the wagons together during the journey.But as it turns out, there really isn't much need for guesswork. As the United States enters its eighth year of zero percent interest rates, we should all be looking at a conveniently available tour guide along the path of perpetual easing. Japan has been doing what we are doing now for at least 15 years longer. Unfortunately, no one seems to care, or be surprised, that they are just as incapable as we have been in finding a workable exit. When Virgil guided Dante through Hell, he at least knew how to get out. Japan doesn’t have a clue.Despite its much longer experience with monetary stimulus, Japan's economy remains listless and has continuously flirted with recession. In spite of this failure, Japanese leaders, especially Prime Minister Shinzo Abe (and his ally at the Bank of Japan (BoJ), Haruhiko Kuroda), have recently doubled down on all prior bets. This has meant that the Japanese stimulus is now taking on some ominous dimensions that have yet to be seen here in the U.S. In particular, the Bank of Japan is considering using its Quantitative Easing budget to buy large quantities of shares of publicly traded Japanese corporations.So for those who remain in doubt, Japan is telling us where this giant monetary experiment leads to: Debt, stagnation and nationalization of industry. This is not a destination that any of us, with the possible exception of Bernie Sanders, should be happy about.The gospel that unites central bankers around the world is that the cure for economic contraction is the creation of demand. Traditionally, they believed that this could be accomplished by simply lowering interest rates, which would then spur borrowing, spending and investment. But when that proved insufficient to pull Japan out of its recession in the early 1990s, the concept of Quantitative Easing (QE) was born. By actively entering the bond market through purchases of longer-dated securities, QE was able to lower interest rates across the entire duration spectrum, an outcome that conventional monetary policy could not do.But since that time, the QE in Japan has been virtually permanent. Unfortunately, Japan's economy has been unable to recover anything resembling its former economic health. The experiment has been going on so long that the BoJ already owns more than 30% of outstanding government debt securities. It has also increased its monthly QE expenditures to the point where it now exceeds the Japanese government's new issuance of debt. (Like most artificial stimulants, QE programs need to get continually larger in order to produce any desirable effects). This has left the BoJ in dire need of something else to buy. Inevitably, it cast its eyes on the Japanese stock market.In 2010 the BoJ began buying positions in Japanese equity Exchange Traded Funds (ETFs). These securities, which track the underlying performance of the broader Japanese stock market, are one step removed from ownership of companies themselves. After five years of the policy, the BoJ now owns more than half the entire nation's ETF market. But that hasn't stopped it from expanding the program. In 2014, it tripled its ETF purchases to $3 trillion yen per year ($25 billion), and the program may be tripled again in the near term. In just another example of how QE is a boon to the financial services industry, Japanese investment firms are currently issuing new ETFs just to give the BoJ something to buy.However, these purchases have not proven to be particularly effective in doing much of anything, except possibly pushing up ETF share prices. But even that has been a mixed blessing. ETFs are supposed to be the cart that is pulled along by stocks (which function as horses). But trying to move the market by buying ETFs creates a whole other level of potential price distortions. It also tends to limit the impact to those holders of financial assets, rather than the broader economy. For this reason the BoJ is now contemplating the more direct action of buying shares in individual Japanese companies.Such purchases would allow the Japanese government to accumulate sizable voting interests in some of Japan's biggest companies. Equity ownership would then allow, according to an economist quoted in Bloomberg, the Abe administration to demand that Japanese corporations adhere to the government's priorities for wage increases and heightened corporate spending. The same economist suggested, this "micro" stimulus provided by government controlled corporations may be more effective in spurring the economy than "macro" purchases of government bonds.These possibilities should horrify anyone who still retains any faith in free markets. The more than four trillion dollars of government bonds purchased through the Federal Reserve’s QE program since 2008 now sit on account at the Fed. Although these purchases may have distorted the bond market, created false signals to the economy, and may loom as a danger for the future (when the bonds need to be sold), they are primarily a means of debt monetization, whereby the government sells debt to itself. But purchases of equities would involve a stealth nationalization of industry, and would represent a hard turn towards communism.Many American observers will take comfort in their belief that the United States has already concluded its QE experiment and that we are heading in the opposite direction, toward an era of monetary tightening. This greatly misjudges the current situation.The U.S. economy is slowing remarkably, and despite the continuous assertions by the Fed that rate hikes are likely in the very near future, I believe we are stuck just as firmly in the stimulus trap as Japan. The main difference between the U.S. and Japan is that Japan began this "experiment" from a much stronger economic position. Japan was a creditor nation, with ample domestic savings and large trade surpluses. In contrast, the U.S. started as the world's largest debtor nation, with minimal savings, and enormous trade deficits. So if Japan, with its superior economic position, could not extricate itself from this trap, what hope does the United States have?If the Fed is unable to raise rates from zero, it will also be have no ability to cut them to fight the next recession. So the next time an economic downturn occurs (one may already be underway), the Fed will have to immediately launch the next round of QE. When QE4 proves just as ineffective as the last three rounds to create real economic growth, the Fed may have to consider the radical ideas now being contemplated by the Bank of Japan.So this is the endgame of QE: Exploding debt, financial distortion, prolonged stagnation, recurring recession, and the eventual government takeover of industry and the economy. This appears to be the preferred alternative of politicians and bankers who simply refuse to let the free markets function the way they are supposed to.If interest rates were never manipulated by central banks and QE had never been invented, the markets could have purged themselves years ago of the speculative bubbles and mal-investments. Sure we could have had a deeper recession, but it also could have been much shorter, and it could have been followed by a far more robust and sustainable recovery.Instead Washington has joined Tokyo on the road to Leningrad.
- Greek Island Runs Out Of Burial Ground Amid Flood Of Dead Refugees
A surge in the number of bodies of refugees whose boats capsized as they desperately tried to reach Europe has filled the burial grounds of the Greek island of Lesbos to capacity, the island’s mayor said, adding that over 50 bodies remain unburied.
As RT reports, The island’s morgues, cemeteries and emergency services have been overwhelmed with a record number of bodies of migrants who died trying to cross the Mediterranean in October. According to the latest UN data, over 218,000 people arrived in the EU during the month, beating the total annual number for the whole of 2014.
Some 744,000 migrants and refugees have arrived in Europe in 2015 alone, of which at least 3,300 died while making the journey.
Mayor Spyros Gallons told the Greek media that, while five funerals were held this weekend, 55 bodies remain at the morgue and the island is having a hard time finding burial ground for them.
“Yesterday we held five funerals, but there are still 55 bodies at the morgue,” NBC News quoted Galinos as saying. “Who could have anticipated such a carnage in the Aegean?”
Lesbos, with a population of 86,000, lies in the Aegean Sea near Turkey’s cost. It has served as one of the main destinations for refugees and other migrants trying to escape violence and poverty in Syria and other conflict zones in the Middle East and Africa.
On Monday, the tragic situation was exacerbated, as 11 refugees, most of them children, drowned in the Aegean Sea while trying to reach Lesbos. Moreover, on Sunday another 15 people, including six children, died in the Aegean after their boat capsized off the Greek island of Samos.
Galinos told the media that authorities are working on fast-tracking procedures for creating new burial ground next to the main cemetery.
The situation on the island has also prompted ambulance workers to protest state budget cuts that have downsized the number of emergency vehicles to only three, despite the increasing number of refugees.
As DW.com adds, Lesbos currently has 90,000 residents and 200,000 refugees…
Mytilene is the largest city on the Greek island of Lesbos, in the northeast Aegean Sea not far from Turkey. It is an attractive place with massive docks. From there many large ferries run daily towards Piraeus and Kavala near the Macedonian border.
And that is why there are thousands of refugees here – they want to keep going.
The north coast of Lesbos is an orange streak. Thousands of lifejackets lie on the beach as far as the eye can see, having fulfilled their purpose for the refugees crossing from Turkey. So do the many rubber dinghies that the volunteers pierced right after their arrival so that they couldn't be pushed back onto the sea.
The helpers come from England, the Netherlands, Spain and Germany. A few Greeks as well hurry about the beaches. But they limit themselves to "recovering" the valuable scraps of metals from the boats. By sunrise, some are already carrying away the motors of the boats that came in overnight. These are worth a few thousand euro a piece.
The so-called "hotspot" in Moria, a barrack outside of Mytilene, has become a textbook example of the way processing is handled in Greece. By now the Greek police and officials from Frontex – the European Union border agency – have managed to register more than 5,000 refugees a day. However, the registration is not valid across the EU. It is usually full of loopholes; the information provided by refugees is not tested for its truth.
In the end, everyone here receives a registration form that entitles them to travel on from Lesbos. As a matter of fact, the refugees are not allowed to leave Greece, and many will still be ultimately deported. But the authorities on Lesbos cannot do that themselves. Nor do they want to. They just want to sustain a bit of peace and order. And therefore as many refugees as possible must be moved on from the island, as fast as possible.
- The Unhackable iPhone Has Been Compromised: "Intelligence Agencies Can Intercept Calls, Messages, & Access Data"
Submitted by Mac Slavo via SHTFPlan.com,
Iphone maker Apple, Inc. claimed last month that their latest iteration of the wildly popular handheld device was unhackable. According to HackRead, the company is so convinced of its security successes that they issued a statement saying that data stored on a phone secured with a front screen passcode was impossible to access – even by highly talented intelligence agencies:
The CIA and the FBI are always looking for backdoors in Apple devices, in fact, the agency spent years trying to hack iPhone and iPads according to documents released by NSA’s Edward Snowden.
Now, with the new upgraded operating systems, Apple has termed it “impossible” to access any data from Apple devices. Though, the company can still access data from older phones.
…
According to the Apple’s response to the court, 90 percent of the devices has ios 8 installed and with the type of encryption already there in the phone, it’s nearly impossible to access the data without the passcode, which is only known to the original owner. Even Apple itself cannot find the code.
But as we already know from recent hacks of Department of Defense computers, essential domestic grid infrastructure computers, and even NASA’s in-orbit spacecraft, in the digital age nothing is ever really secure.
Within hours of Apple releasing their latest iOS 9 update a cyber security firm known as Zerodium issued a challenge to the hacker community and offered up a $1 million bounty for any team that could bypass Apple’s latest security features. For weeks it appeared that Apple was right. Scores of hackers around the world burned the midnight oil trying to hack the iphone before Zerodium’s bounty expired.
But just few hours before the challenge came to end, one team submitted their exploits and vulnerabilities and Zerodium has confirmed that the Apple’s iOS 9 has been compromised.
The exploits, according to experts, would give snoopers the ability to not only access the data on your phone, but intercept calls, text messages and even live chat conversations.
Here’s the kicker: the exploit is remote, so it can be launched on your phone without you even knowing about it. Simply visiting a web site or receiving a certain kind of text message could initiate the jailbreak process on your phone and then install unwanted (and hidden) monitoring apps.
According to Motherboard, the unhackable has been hacked… again:
Bekrar explained that the winning team found a “number of vulnerabilities” in Chrome and iOS to bypass “almost all mitigations” and achieve “a remote and full browser-based (untethered) jailbreak.”
If true, this is a considerable feat. No one had found a way (at least that’s publicly known) to jailbreak an iPhone remotely for more than a year, since iOS 7.
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there’s no doubt that for some, this exploit is extremely valuable. Intelligence agencies such as the NSA and the CIA have run into problems when trying to hack into iPhones to spy on their targets, and the FBI has publicly complained about Apple’s encryption for months. This exploit would allow them to get around any security measures and get into the target’s iPhone to intercept calls, messages, and access data stored in the phone.
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A source, who used to work for the NSA, told Motherboard a few weeks ago that $1 million is actually a good price for such an exploit, because “if you sell it to the right people” you can fetch much more.
And who will Zerodium be selling this exploit to?
You probably already know the answer:
Bekrar and Zerodium, as well as its predecessor VUPEN, have a different business model. They offer higher rewards than what tech companies usually pay out, and keep the vulnerabilities secret, revealing them only to certain government customers, such as the NSA.
So just in case you thought your data and private activities were safe from spying eyes, think again.
The very people who we want to keep out of our private lives are the ones who will be the beneficiaries of the jailbreak.
Now the NSA, FBI and other interested intelligence partners will have total access to your phone.
- How Beijing & The West Work Together To Manipulate The Global Currency War
Submitted by Brendan Brown via The Mises Institute,
From reading the commentaries you might have imagined that the process of a currency winning international reserve status depends on getting the IMF seal of approval. At least that seems to be the story with China.
So, strange to tell, the great international monies of the past evolved either before the IMF was created or without its help. Think of the Deutsche mark and Swiss franc — the two upstarts of the 1970s and 1980s — or briefly the Japanese yen when it enjoyed great popularity. Their emergence was due to the path of monetary stability chosen by their issuing authorities together with complete freedom from restrictions.
So why is the world of currency diplomacy now playing along with the nonsense of the IMF examining whether the Chinese yuan has met the criterion to become a reserve currency?
Incidentally, the last time that Washington body bestowed “reserve currency status” it was with respect to the Australian dollar and Canadian dollar, on the eve of the bust for the respective commodity and carry trade bubbles which sent them to their respective skies.
Beijing and DC Pick the Winners and Losers
The question as to why the Western world is playing along with the official Chinese currency charade is part of a more general point. Why do Western governments pursue non-market trade diplomacy so enthusiastically with Beijing?
Think of the repeated times that Chinese communist party dictators traveled to a particular Western capital to hand out their list of chosen beneficiaries of Chinese corporate (mostly state) spending. These dictators were welcomed by fawning officials and bureaucrats who assured us that they also brought up, with muted whispers and inaudible comments, the problem of human rights to their guest.
And, by the same token, why are there high profile visits of Western leaders to China, presenting their own list of chosen industrialists selected to pick up the new business deals? This is not the way free markets, and global free trade, in particular, is meant to work.
If it smells like a rat it probably is a rat, and so it is with respect to these deals by collusion between China and Western governments, and their chosen corporate protégés, whether on currency or trade or investment matters. This is all an exercise in some combination of crony capitalism (with cronies on both sides!) and diplomacy by stealth. The gains and gainers are deliberately kept opaque. The losers are much less evident than the gainers, on whichever side of the fence, but principle and practice tells us that the total losses are much larger than the gains.
The Cronies’ Currency War
In particular, how much more prosperous would China be today under a regime of currency freedom and well-functioning markets, than under the cozy order of restrictions and preferred access (to capital and trade) put together by Beijing and foreign governments in cahoots? And how much are Western priority systems for getting Chinese capital and orders to favored domestic destinations distorting the signals which guide the invisible hands? And how far is the secret — or not so secret — G-20 currency diplomacy, related to China, abetting the most serious episode of currency warfare since the 1930s?
Think about the new currency offensive launched by Europe last month when ECB Chief Draghi’s calibrated remarks about further QE drove the euro down by 3–4 percent against the US dollar in 24 hours, which was double the extent of any Chinese currency maneuvers earlier in the summer. And in the bigger picture, China’s mini currency devaluation hardly smacks of currency warfare compared to moves ten or even twenty times greater by Europe and Japan in the past three years.
So why did Beijing agree to the mild censoring which occurred at the last G-20 meeting (in Lima) of its own mini-devaluation when it could have called on Europe and Japan to halt their currency warfare?
A plausible answer is that Beijing has no interest in facilitating the emergence of a free market in its currency together with full convertibility. If silence is required on currency warfare as the price of getting its coveted currency reserve status, then so be it.
Yes, a fully convertible Chinese currency might well find a substantially lower level than today’s official rate. Much would depend on what steps accompany the road to convertibility. Would there be broad-based liberalization in the Chinese economy and markets such as to make assets there more attractive to both domestic and international investors in the context of improved prospects of economic prosperity? Or would the road to convertibility simply facilitate a flight of capital out of the country with little foreign appetite to engage in the opposite direction?
There is little indication that the Chinese leadership would take the market reform route, which incidentally might seriously undermine the basis of the rents enjoyed by themselves and their connected state enterprises. In effect, there is an unholy alliance between the West and Beijing on only limited reforms and the currency status quo as blessed by the IMF. Meanwhile, currency wars remain a protected activity of the large powers outside China.
Official game plans do not always work out as hoped. It remains to be seen whether the continued and accelerated path of monetary easing by Beijing is consistent with only a mini-devaluation of the Chinese currency. There is anecdotal evidence of Chinese retail investors now engaging themselves in a new bout of yield-search frenzy in the local high-yield bond markets. That may not endure in the face of a rising tide of default. And the massive yuan carry trade which built up in the past few years could contract much more forcefully in coming months in the context of shrunken yield gaps and credit market cool-down.
- 162 Days Later, The Treasury Finally Updates The Total US Debt Number, And It Is…
On March 16 of 2015, the US Treasury officially hit what was then the US statutory debt limit of $18.113 trillion. At that moment the Treasury started using “emergency” measures to fund itself while the total reported debt remained unchanged and just dollars below the technical debt limit. This prompted much confusion among the punditry, leading to questions how is it that for many months the US has not updated its official debt number.
The reason is that until last Friday, the US had no official debt deal and as a result was unable to show legally the official current debt holdings.
As of Friday, this peculiar situation has been resolved following the latest deal by both parties to suspend the debt ceiling until March 2017 which also means that we finally got an updated total public debt number.
And so, after 162 work days without an update, the latest US debt number is $18,492,091,120,833.99 (yes, and 99 cents), an increase of $339.1 billion since the latest official pre-debt ceiling update. This is also 102.5% of GDP.
And what is the new debt ceiling? Funny you should ask, because as noted above as part of the debt deal, the debt ceiling was “suspended”, not revised which means that as of this moment the US officially no longer has a debt ceiling.
Why is the debt ceiling suspended? Simple: as we calculated two weeks ago, to provide enough room until March 2007, the total capacity on the US credit card would have to be $19.6 trillion. The problem is that while “selling” democrats the optics of a number that rounds up to $20 trillion would not be difficult at all (the only complaint would be why it is not $200 trillion), for many conservatives the realization that a GOP-controlled Congress just gave the US a blessing to issue another $1.1 trillion in debt would hardly be enjoyable.
So what did Congress, both democrats and republicans, do? They decided to do away with the debt ceiling entirely, “temporarily” of course, so as not to show what the next debt target for the US will be. And once March 15, 2017 arrives up what then? Why the temporarily suspended debt limit will be extended for another 2 years, “temporarily” again. Because while US representatives don’t have the courage to tell their electorate what the number is, they also don’t have the guts to do away with the debt ceiling entirely either.
And now: we look forward to the story about the next $43 million gas station somewhere in Afghanistan.
- The European Refugee "Invasion" In One Stunning Infographic
A week ago, we brought you drone footage which vividly demonstrates the scope of Europe’s worsening migrant crisis.
The people flows into Germany alone are expected to top 1 million this year as desperate asylum seekers flee the war-torn Middle East where the West and Russia are busy taking opposite sides of the Sunni-Shiite divide on the way to facilitating a regional conflict that looks set to spill across the Iraq-Syria border and possibly into Afghanistan.
Indeed, the influx of refugees threatens to destabilize the EU as Germany’s insistence on the bloc-wide adoption of an open door policy has infuriated the likes of Hungary’s Viktor Orban who insists that if Europe’s cultural heritage is to be protected and preserved, a mandatory settlement arrangement simply isn’t a viable option.
Meanwhile, Alexis Tsipras – who everyone promptly forgot about once China replaced Greece as the market’s focal point – has weighed in from the front lines, expressing shame that the West is at least partially responsible for the migrant crisis due to its role in intentionally destabilizing Mid-East governments.
Now, Helsinki-based Lucify is out with a fascinating, interactive infographic on the refugee flow into Europe which we present below and which should help to illustrate just how dramatic a demographic shift this truly is.
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