- Spot The Defense Minister
Trick question…
They all are! (from left to right): Sweden (Karin Enstrom), Norway (Ine Eriksen Søreide), Russia ( Sergei Shoigu), Netherlands (eanine Hennis-Plasschaert), Germany (Ursula von der Leyen)
- Bank Of Japan Disappoints The World – Leaves Monetary Policy Unchanged
The last time The BoJ increased QQE it was a close vote (just 5 to 4) as The Fed ended QE3 and with 16 of the 36 'qualified' economists forecasting additional easing tonight, uncertainty was high going in with USDJPY and NKY drifting lower (and JGB yields rising) as recent data suggests Japan will escape a technical recession (even as household spending slides ever lower) buying Kuroda time (before unleashing his own bazooka). Then, just 25 minutes late, Kuroda unleashed… nothing:
- *BOJ VOTES 8-1 TO KEEP MONETARY BASE TARGET UNCHANGED
- *BANK OF JAPAN LEAVES MONETARY POLICY UNCHANGED
- *BOJ RETAINS PLAN FOR 80T YEN ANNUAL RISE IN MONETARY BASE
It appears Kuroda-san has chosen to wait til December and 'react' to The Fed, even though his inaction may just be the catalyst for keeping The Fed on hold for longer once again. USDJPy tumbled and global stocks are following for now.
The Bank of Japan Statement:
1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided, by an 8-1 majority vote, to set the following guideline for money market operations for the intermeeting period: The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 80 trillion yen.
2. With regard to the asset purchases, the Bank decided, by an 8-1 majority vote, to continue with the following guidelines:
a) The Bank will purchase Japanese government bonds (JGBs) so that their amount outstanding will increase at an annual pace of about 80 trillion yen. With a view to encouraging a decline in interest rates across the entire yield curve, the Bank will conduct purchases in a flexible manner in accordance with financial market conditions. The average remaining maturity of the Bank's JGB purchases will be about 7-10 years.
b) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 3 trillion yen and about 90 billion yen respectively.
c) As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen respectively.
Japanese stocks and USDJPY were drifting lower in to the statement….and dumped on the NOTHING
US equity futures are giving back some of the after-hours gains…
And JGB yields were heading higher into the statement… and rose further after The BoJ did nothing…
- *JGB 10-YR FUTURES DOWN 0.22, SET FOR BIGGEST DROP SINCE AUG.
Next up the press conference… to explain how this is really dovish…
Bank will release updated inflation and GDP forecasts at 3:00 p.m. local time, and Governor Haruhiko Kuroda’s press conference will start at 3:30 p.m.
Charts: Bloomberg
- The Demobilization Of The American People & The Spectacle Of Election 2016
Submitted by Tom Engelhardt via TomDispatch.com,
You may not know it, but you’re living in a futuristic science fiction novel. And that’s a fact. If you were to read about our American world in such a novel, you would be amazed by its strangeness. Since you exist right smack in the middle of it, it seems like normal life (Donald Trump and Ben Carson aside). But make no bones about it, so far this has been a bizarre American century.
Let me start with one of the odder moments we’ve lived through and give it the attention it’s always deserved. If you follow my train of thought and the history it leads us into, I guarantee you that you’ll end up back exactly where we are — in the midst of the strangest presidential campaign in our history.
To get a full frontal sense of what that means, however, let’s return to late September 2001. I’m sure you remember that moment, just over two weeks after those World Trade Center towers came down and part of the Pentagon was destroyed, leaving a jangled secretary of defense instructing his aides, “Go massive. Sweep it all up. Things related and not.”
I couldn’t resist sticking in that classic Donald Rumsfeld line, but I leave it to others to deal with Saddam Hussein, those fictional weapons of mass destruction, the invasion of Iraq, and everything that’s happened since, including the establishment of a terror “caliphate” by a crew of Islamic extremists brought together in American military prison camps — all of which you wouldn’t believe if it were part of a sci-fi novel. The damn thing would make Planet of the Apeslook like outright realism.
Instead, try to recall the screaming headlines that labeled the 9/11 attacks “the Pearl Harbor of the twenty-first century” or “a new Day of Infamy,” and the attackers “the kamikazes of the twenty-first century.” Remember the moment when President George W. Bush, bullhorn in hand, stepped onto the rubble at "Ground Zero" in New York, draped his arm around a fireman, and swore payback in the name of the American people, as members of an impromptu crowd shouted out things like “Go get ‘em, George!”
“I can hear you! I can hear you!” he responded. “The rest of the world hears you! And the people — and the people who knocked these buildings down will hear all of us soon!”
“USA! USA! USA!” chanted the crowd.
Then, on September 20th, addressing Congress, Bush added, “Americans have known wars, but for the past 136 years they have been wars on foreign soil, except for one Sunday in 1941.” By then, he was already talking about "our war on terror."
Now, hop ahead to that long-forgotten moment when he would finally reveal just how a twenty-first-century American president should rally and mobilize the American people in the name of the ultimate in collective danger. As CNN put it at the time, “President Bush… urged Americans to travel, spend, and enjoy life.” His actual words were:
“And one of the great goals of this nation's war is to restore public confidence in the airline industry and to tell the traveling public, get on board, do your business around the country, fly and enjoy America's great destination spots. Go down to Disney World in Florida, take your families and enjoy life the way we want it to be enjoyed.”
So we went to war in Afghanistan and later Iraq to rebuild faith in flying. Though that got little attention at the time, tell me it isn’t a detail out of some sci-fi novel. Or put another way, as far as the Bush administration was then concerned, Rosie the Riveter was moldering in her grave and the model American for mobilizing a democratic nation in time of war was Rosie the Frequent Flyer. It turned out not to be winter in Valley Forge, but eternal summer in Orlando. From then on, as the Bush administration planned its version of revenge-cum-global-domination, the message it sent to the citizenry was: go about your business and leave the dirty work to us.
Disney World opened in 1971, but for a moment imagine that it had been in existence in 1863 and that, more than seven score years ago, facing a country in the midst of a terrible civil war, Abraham Lincoln at Gettysburg had said this:
“It is rather for us to be here dedicated to the great task remaining before us — that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion — that we here highly resolve that these dead shall not have died in vain — that this nation, under God, shall have a new birth of freedom at Disney World — and that government of the people, by the people, for the people, shall not perish for lack of vacations in Florida.”
Or imagine that, in response to that “day of infamy,” the Pearl Harbor of the twentieth century, Franklin Roosevelt had gone before Congress and, in an address to the nation, had said:
“Hostilities exist. There is no blinking at the fact that our people, our territory, and our interests are in grave danger. With confidence in our airlines, with the unbounding determination of our people to visit Disney World, we will gain the inevitable triumph — so help us God.”
If those are absurdities, then so is twenty-first-century America. By late September 2001, though no one would have put it that way, the demobilization of the American people had become a crucial aspect of Washington’s way of life. The thought that Americans might be called upon to sacrifice in any way in a time of peril had gone with the wind. Any newly minted version of the classic “don’t tread on me” flag of the revolutionary war era would have had to read: “don’t bother them.”
The Spectacle of War
The desire to take the American public out of the “of the people, by the people, for the people” business can minimally be traced back to the Vietnam War, to the moment when a citizen’s army began voting with its feet and antiwar sentiment grew to startling proportions not just on the home front, but inside a military in the field. It was then that the high command began to fear the actual disintegration of the U.S. Army.
Not surprisingly, there was a deep desire never to repeat such an experience. (No more Vietnams! No more antiwar movements!) As a result, on January 27, 1973, with a stroke of the pen, President Richard Nixon abolished the draft, and so the citizen’s army. With it went the sense that Americans had an obligation to serve their country in time of war (and peace).
From that moment on, the urge to demobilize the American people and send them to Disney World would only grow. First, they were to be removed from all imaginable aspects of war making. Later, the same principle would be applied to the processes of government and to democracy itself. In this context, for instance, you could write a history of the monstrous growth of secrecy and surveillance as twin deities of the American state: the urge to keep ever more information from the citizenry and to see ever more of what those citizens were doing in their own private time. Both should be considered demobilizing trends.
This twin process certainly has a long history in the U.S., as any biography of former FBI Director J. Edgar Hoover would indicate. Still, the expansion of secrecy and surveillance in this century has been a stunning development, as ever-larger parts of the national security state and the military (especially its 70,000-strong Special Operations forces) fell into the shadows. In these years, American “safety” and “security” were redefined in terms of a citizen’s need not to know. Only bathed in ignorance, were we safest from the danger that mattered most (Islamic terrorism — a threat of microscopic proportions in the continental United States).
As the American people were demobilized from war and left, in the post-9/11 era, with the single duty of eternally thanking and praising our "warriors” (or our "wounded warriors”), war itself was being transformed into a new kind of American entertainment spectacle. In the 1980s, in response to the Vietnam experience, the Pentagon began to take responsibility not just for making war but for producing it. Initially, in the invasions of Grenada and Panama, this largely meant sidelining the media, which many U.S. commanders still blamed for defeat in Vietnam.
By the First Gulf War of 1991, however, the Pentagon was prepared to produce a weeks-long televised extravaganza, which would enter the living rooms of increasingly demobilized Americans as a riveting show. It would have its own snazzy graphics, logos, background music, and special effects (including nose-cone shots of targets obliterated). In addition, retired military men were brought in to do Monday Night Football-style play-by-play and color commentary on the fighting in progress. In this new version of war, there were to be no rebellious troops, no body bags, no body counts, no rogue reporters, and above all no antiwar movement. In other words, the Gulf War was to be the anti-Vietnam. And it seemed to work… briefly.
Unfortunately for the first Bush administration, Saddam Hussein remained in power in Baghdad, the carefully staged post-war “victory” parades faded fast, the major networks lost ad money on the Pentagon’s show, and the ratings for war as entertainment sank. More than a decade later, the second Bush administration, again eager not to repeat Vietnam and intent on sidelining the American public while it invaded and occupied Iraq, did it all over again.
This time, the Pentagon sent reporters to “boot camp,” “embedded” them with advancing units, built a quarter-million-dollar movie-style set for planned briefings in Doha, Qatar, and launched its invasion with “decapitation strikes” over Baghdad that lit the televised skies of the Iraqi capital an eerie green on TVs across America. This spectacle of war, American-style, turned out to have a distinctly Disney-esque aura to it. (Typically, however, those strikes produced scores of dead Iraqis, but managed to “decapitate” not a single targeted Iraqi leader from Saddam Hussein on down.) That spectacle, replete with the usual music, logos, special effects, and those retired generals-cum-commentators — this time even more tightly organized by the Pentagon — turned out again to have a remarkably brief half-life.
The Spectacle of Democracy
War as the first demobilizing spectacle of our era is now largely forgotten because, as entertainment, it was reliant on ratings, and in the end, it lost the battle for viewers. As a result, America's wars became ever more an activity to be conducted in the shadows beyond the view of most Americans.
If war was the first experimental subject for the demobilizing spectacle, democracy and elections turned out to be remarkably ripe for the plucking as well. As a result, we now have the never-ending presidential campaign season. In the past, elections did not necessarily lack either drama or spectacle. In the nineteenth century, for instance, there were campaign torchlight parades, but those were always spectacles of mobilization. No longer. Our new 1% elections call for something different.
It’s no secret that our presidential campaigns have morphed into a “billionaire’s playground,” even as the right to vote has become more constrained. These days, it could be said that the only group of citizens that automatically mobilizes for such events is “the billionaire class” (as Bernie Sanders calls it). Increasingly, many of the rest of us catch the now year-round spectacle demobilized in our living rooms, watching journalists play… gasp!… journalists on TV and give American democracy that good old Gotcha!
In 2001, George W. Bush wanted to send us all to Disney World (on our own dollar, of course). In 2015, Disney World is increasingly coming directly to us.
After all, at the center of election 2016 is Donald Trump. For a historical equivalent, you would have to imagine P.T. Barnum, who could sell any “curiosity” to the American public, running for president. (In fact, he did serve two terms in the Connecticut legislature and was, improbably enough, the mayor of Bridgeport.) Meanwhile, the TV “debates” that Trump and the rest of the candidates are now taking part in months before the first primary have left the League of Women Voters and the Commission on Presidential Debates in the dust. These are the ratings-driven equivalent of food fights encased in ads, with the “questions” clearly based on what will glue eyeballs.
Here, for instance, was CNN host Jake Tapper’s first question of the second Republican debate: “Mrs. Fiorina, I want to start with you. Fellow Republican candidate, and Louisiana Governor Bobby Jindal, has suggested that your party’s frontrunner, Mr. Donald Trump, would be dangerous as president. He said he wouldn’t want, quote, ‘such a hot head with his finger on the nuclear codes.’ You, as well, have raised concerns about Mr. Trump’s temperament. You’ve dismissed him as an entertainer. Would you feel comfortable with Donald Trump’s finger on the nuclear codes?”
And the event only went downhill from there as responses ranged from non-answers to (no kidding!) a discussion of the looks of the candidates and yet the event proved such a ratings smash that its 23 million viewers were compared favorably to viewership of National Football League games.
In sum, a citizen’s duty, whether in time of war or elections, is now, at best, to watch the show, or at worst, to see nothing at all.
This reality has been highlighted by the whistleblowers of this generation, including Edward Snowden, Chelsea Manning, and John Kiriakou. Whenever they have revealed something of what our government is doing beyond our sight, they have been prosecuted with a fierceness unique in our history and for a simple enough reason. Those who watch us believe themselves exempt from being watched by us. That’s their definition of “democracy.” When “spies” appear in their midst, even if those whistleblowers are “spies” for us, they are horrified at a visceral level and promptly haul out the World War I-era Espionage Act. They now expect a demobilized response to whatever they do and when anything else is forthcoming, they strike back in outrage.
A Largely Demobilized Land
A report on a demobilized America shouldn’t end without some mention of at least one counter-impulse. All systems assumedly have their opposites lurking somewhere inside them, which brings us to Bernie Sanders. He’s the figure who doesn’t seem to compute in this story so far.
All you had to do was watch the first Democratic debate to sense what an anomaly he is, or you could have noted that, until almost the moment he went on stage that night, few involved in the election 2016 media spectacle had the time of day for him. And stranger yet, that lack of attention in the mainstream proved no impediment to the expansion of his campaign and his supporters, who, via social media and in person in the form of gigantic crowds, seem to exist in some parallel universe.
In this election cycle, Sanders alone uses the words “mobilize” and “mobilization” regularly, while calling for a “political revolution.” (“We need to mobilize tens of millions of people to begin to stand up and fight back and to reclaim the government, which is now owned by big money.”) And there is no question that he has indeed mobilized significant numbers of young people, many of whom are undoubtedly unplugged from the TV set, even if glued to other screens, and so may hardly be noticing the mainstream spectacle at all.
Whether the Sanders phenomenon represents our past or our future, his age or the age of his followers, is impossible to know. We do, of course, have one recent example of a mobilization in an election season. In the 2008 election, the charismatic Barack Obama created a youthful, grassroots movement, a kind of cult of personality that helped sweep him to victory, only to demobilize it as soon as he entered the Oval Office. Sanders himself puts little emphasis on personality or a cult of the same and undoubtedly represents something different, though what exactly remains open to question.
In the meantime, the national security state’s power is largely uncontested; the airlines still fly; Disney World continues to be a destination of choice; and the United States remains a largely demobilized land.
- The US Spends $35 Billion In Global Economic Aid (But Where Does All This Money Really Go?)
The United States provided approximately $35 billion in economic aid to over 140 countries in fiscal year 2014.
In the HowMuch.net-created map below, the relative size of each country is proportionate to the aid received from the United States and the color of each country indicates GDP per capita.
Clearly, not all aid is distributed equally. The question is: Who received the largest slice of the pie from the U.S.? From the map above, the answer is clear: Israel.
Of the $35 billion of total economic aid distributed, almost a quarter of funds went to five countries. Below are the top 5 recipients of economic aid in 2014.
- Israel: $3.1 billion
- Egypt: $1.5 billion
- Afghanistan: $1.1 billion
- Jordan: $1.0 billion
- Pakistan: $933 million
At first glance, one may wonder why Israel would receive roughly 9% of U.S. economic aid. It is important to note that foreign aid has a variety of uses depending on the current political, economic, and social climate.
According to the U.S. State Government 2013-2015 Foreign Assistance report, all $3.1 billion of Israel’s funding was used for military financing. In Egypt, $1.3 billion of $1.5 billion received was used for military-related activities as well. On the other hand, the majority of funds received by Afghanistan, Jordan, and Pakistan were used for economic development purposes.
Of the $35 billion referenced in the report, $8.4 billion (24%) was used towards global health programs, $5.9 billion (17%) was used for foreign military financing, $4.6 billion (13%) was used for economic support, and $2.5 billion (7%) was used for development assistance.
Below is a breakout of aid received by geographic region in fiscal year 2014.
- Africa: 20%
- East Asia and Pacific: 2%
- Europe and Eurasia: 2%
- Near East: 20%
- South and Central Asia: 7%
- Western Hemisphere: 4%
- General Aid: 45%
With 142 countries receiving aid out of the 188 countries listed with the International Monetary Fund (IMF) in 2014, approximately 76% of the world received some form of economic assistance from the U.S., the majority located within Africa and the Near East.
Depending on future geopolitical events, this allocation is subject to change; however, according to the federal government’s 2015 estimates, the approximate $33 billion requests in aid follow a similar geographic allocation. Nonetheless, in the past three years, the economic support from the U.S. will have impacted a large majority of the world’s population, totaling $103 billion in economic support across various programs.
- The Ghost Cities Finally Died: For China's Steel Industry "The Outlook Is The Worst Ever Amid Unprecedented Losses"
It’s almost difficult to believe, but just 8 years ago, in 2007 and right before the world was swept in the worst financial crisis in history, China had only $7.4 trillion in debt, or 158% in consolidated debt/GDP. Since then this debt has risen to over $30 trillion (specifically $28.2 trillion as of Q2, 2014) representing a staggering 300% debt/GDP.
Here is the summary breakdown from McKinsey.
This means that China was responsible for more than a third of all the $57 trillion debt created since 2007, making a mockery of the QE unleashed by all the DM central banks – something we first noted about two years before the famous McKinsey report went to print.
However, it was precisely this credit expansion that not only allowed China to completely ignore the global depression of 2008/2009 but to build lots and lots of ghost cities such as these.
To be sure, many noticed but everyone kept quiet: after all, to build these cities China not only had to create trillions in debt, it had to import a hundreds of billions worth of commodities form places such as Brazil and Australia.
Then, in the late summer and fall of 2014 something happened: for whatever reason, as we noticed one year ago, the most unregulated aspect of China’s financial system, its shadow banks, not only stopped lending money but actually went into reverse, thus putting a lid on China’s Total Social Financing expansion, which had been the world’s “under the radar” growth dynamo for so many years.
At that moment not only did China’s ghost cities officially die, but it meant an imminent collapse for China’s feeder commodity economies such as the abovementioned China and Brazil.
In the US this phenomenon was given a very simpler name by the brilliant economists: “snow.”
And since China’s domestic demand, not only from “ghost cities” but all other fixed investment was a function of pervasive credit, suddenly China’s commodity industry in general, and steel industry in particular, entered a state of shocked stasis.
To get a sense of how bad it is, look no further than China’s steel industry. It is here that, as Bloomberg reports, “demand is collapsing along with prices,” and “banks are tightening lending and losses are stacking up, the deputy head of the China Iron & Steel Association said on Wednesday.“
“Production cuts are slower than the contraction in demand, therefore oversupply is worsening,” said Zhu at a quarterly briefing in Beijing by the main producers’ group. “Although China has cut interest rates many times recently, steel mills said their funding costs have actually gone up.”
Meet the deflationary commodity cycle in all its glory:
China’s mills — which produce about half of worldwide output — are battling against oversupply and sinking prices as local consumption shrinks for the first time in a generation amid a property-led slowdown. The fallout from the steelmakers’ struggles is hurting iron ore prices and boosting trade tensions as mills seek to sell their surplus overseas. Shanghai Baosteel Group Corp. forecast last week that China’s steel production may eventually shrink 20 percent, matching the experience seen in the U.S. and elsewhere.
“China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu said. “As demand quickly contracted, steel mills are lowering prices in competition to get contracts.”
Actually no, it has nothing to do with China’s fabricated economic growth and it was everything to do with the unbridled credit expansion that amounted to over $3 trillion per year. That credit expansion, which has not yet been halted, is no longer making its way to the sectors in the economy, such as the abovementioned steel mills, that need it most.
As we reported a month ago, at current commodity prices, over half the debtors in China’s commodity space are generating so little cash, they can’t even cover their interest payment. They are, therefore, utterly insolvent, and the broader Chinese bond market is well aware of this – this is the reason why suddenly credit funding has collapsed.
But wait, it gets worse: because if the PBOC had made interest rates not artificially low (yesterday China’s 10 Year bond was yielding just about 3%), eventually demand would appear, however nobody wants to lend these companies at rates approaching those suggested by the market.
“Financing remains an acute problem as banks strictly restricted lending to the steel sector,” Zhu Jimin said. “Many mills found their loans difficult to extend or were asked to pay higher interest.”
And yet in an environment of plunging interest, nobody wants to be seen as paying a huge premium above market: such an admission of defeat would be quickly perceived as a signal of an imminent default.
And this is how China’s steel (and commodity in general) sector has suddenly found itself paralyzed without access to funding, and with collapsing end demand. As a result its only option is to do more of what got it there in the first place: produce ever more in hopes of offsetting tumbling prices with surging volume, thus accelerating the deflationary spiral that much more until ultimatly steel may be literally handed away for free.
For now, however, China’s steel mills are praying this inevitably outcome can be somehow avoided.
Medium- and large-sized mills incurred losses of 28.1 billion yuan ($4.4 billion) in the first nine months of this year, according to a statement from CISA. Steel demand in China shrank 8.7 percent in September on-year, it said.
Signs of corporate difficulties are mounting. Producer Angang Steel Co. warned this month it expects to swing to a loss in the third quarter on lower product prices and foreign-exchange losses. The company’s Hong Kong stock has lost more than half its value this year. Last week, Sinosteel Co., a state-owned steel trader, failed to pay interest due on bonds maturing in 2017.
Crude steel output in the country fell 2.1 percent to 608.9 million tons in the first nine months of this year, while exports jumped 27 percent to 83.1 million tons, official data show. Steel rebar futures in Shanghai sank to a record on Wednesday as local iron ore prices fell to a three-month low.
The conclusion, even though from Bloomberg, is quite terrifying: “China’s mills face some of their worst conditions ever and the vast majority are losing money, Citigroup Inc. said in September. The outlook is the worst ever amid unprecedented losses, Macquarie Group Ltd. said this month.”
China’s steel production may contract by a fifth should the country’s path follow the Europe, the U.S. and Japan, Shanghai Baosteel Group Chairman Xu Lejiang told reporters in Shanghai last week. The company is China’s second-largest mill by output.”
Considering China’s version of Glencore “Sinosteel” effectively went insolvent one week ago (followed by what may or may not have been a government bailout), the fallout is just starting.
The cherry on top is that China itself is now trapped: it simply can’t afford to let anyone default, as one bankruptcy would cascade across the entire bond market and wipe out countless corporations leaving millions of angry Chinese workers unemployed, and is therefore forced to keep bailing out insolvent companies over and over. By doing so, it is adding even more deflationary capacity and even more production into the market, which leads to even lower prices, and even greater bailouts!
In short: this is a deflationary toxic spiral, because while that $30 trillion in inflationary debt led to easy growth and much wealth and prosperity on the way up when prices were soaring and monetary transmission mechanisms were not clogged up, now that China has hit hit a 300% debt/GDP and the direction of the arrow is in reverse, all the growth and all the expansion of the past 7 years will be promptly unwound as mean reversion demands payment.
But perhaps most importantly, as we first reported last week citing BofA’s David Cui, we now have an ETA when this whole Chinese debt house of cards, some $30 trillion of it, bursts with consequences that will be so devastating not only China but the entire world, as the one catalyst that pulled the Developed Markets out of depression will be, poetically enough, the same one that pushed it right back in.
On the current trajectory, we doubt the market can stay stable beyond a few quarters, especially if some SOE and/or LGFV bonds indeed default.
Finally for those who would rather frontrun this runaway train when it slides off the tracks, here – again – is a list of the Chinese bonds that will almost surely default first.
- AsiaPac Calm Before BoJ Storm, Japanese Household Spending 'Unexpectedly' Drops As China Releveraging Continues
As all eyes, ears, and noses anxiously await the scantest of dovishness from Kuroda and The BoJ tonight (despite numerous hints that they will not unleash moar for now), the data that was just delivered may have helped the bad-news-is-good-news case. Most notably Japanese household spending dropped 0.4% YoY (with tax hike issues out of the way) missing expectations by a mile as the 'deflationary' mindset remains mired in Japanese heads. AsiaPac stocks are hovering at the week's lows unable to mount any bid as China fixed the Yuan notably stronger and instigated a new central pricing plan for pork prices (which suggests concerns about inflation domestically). Once again Chinese margin debt reaches a new 8-week high as 'stability' has prompted releveraging among the farmers and grandmas.
Japanese household spending dropped.. again… way more than expected…
Well done…
So, while expectations have been set that traders should not expect too much excitement tonight, Bloomberg lays out some of Kuroda's options…
The governor said earlier this year there were “many options" available for more stimulus and that the central bank may need to get creative in the case of any further expansion.
The easy road would be more government bond purchases, though more radical ideas such as buying stocks or debt from local governments have been suggested by economists.
Japanese Government Bonds
Purchases of Japanese government bonds are already the mainstay of Kuroda’sstimulus program. The BOJ is snapping them up so that its holdings increase at an annual pace of 80 trillion yen ($664 billion) to expand the size of the monetary base and encourage a decline in real interest rates. Boosting JGBs is something it turned to in October 2014. Eleven economists in the latest Bloomberg survey point to another increase in JGB purchases.
While Kuroda has indicated there’s still plenty of room to buy more JGBs, traders in the bond market complain that liquidity is drying up. BNP Paribas SA has estimated the central bank will hold 43 percent of outstanding government bonds at the end of 2016, up from 28.5 percent through the end of June. Another possibility is changing the average maturity of bonds bought from the current 7-10 years to options including 9-12 years.
Commercial Paper and Corporate Bonds
Kuroda’s target is to hold CP and corporate bond purchases at 2.2 trillion yen and 3.2 trillion yen a year, respectively. Unlike other parts of the current stimulus program, this was left unchanged during the surprise boost in October last year. The BOJ moved into this market after the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. in 2008. Stepping up purchases again could raise the question of fairness in choosing which companies’ bonds and CP to buy.
Exchange-Traded Funds and J-REITs
The BOJ is purchasing ETFs at an annual rate of 3 trillion yen, and Japanese real estate investment trusts at a pace of 90 billion yen a year. Economists at Nomura Securities have suggested the BOJ could load up on ETFs — boosting purchases to 6 trillion yen a year — and then pare its bond buying. This could propel the Japanese stock market from a slump in August and extend a recent rally to set new highs.
Purchases of J-REITs have buoyed this key market, helping breathe life back into the property industry. But the BOJ’s strict investment criteria could see it run out of securities to buy over the next year as it tripled the pace of purchases in October 2014. A boost here may require the central bank to dive into securities rated lower than AA.
Local Government Debt
This would be one of the more creative solutions to boosting stimulus. Several economists have suggested this idea as a fresh way to help adjust the composition of asset purchases. DBS Research said the BOJ could consider increasing the amount of “risky assets” to be purchased, including ETFs and J-REITs and incorporating new choices like local government bonds. This option has the advantage of helping revitalize regional economies but risks debates over favoritism if some areas benefit more than others.
Buying Shares
While this unconventional idea would raise issues of fairness, Credit Agricole has floated it as a possibility. Purchasing a composite of stocks based on a gauge like the JPX Nikkei Index 400 amounting to as much as 10 trillion yen a year could be used to raise the annual pace of monetary base expansion to 90 trillion yen, according to Credit Agricole’s Kazuhiko Ogata.
Cutting Interest Rates
Economists at Mizuho Research and Mitsubishi UFJ Securities predict the BOJ will cut the interest rate it pays private banks on excess reserves that they hold at the central bank when it next boosts stimulus.
The BOJ wasn’t considering lowering the rate from the current 0.1 percent, though the option hadn’t been taken permanently off the table either, people familiar with discussions at the bank said in May. Kuroda said more recently that the BOJ wasn’t considering a reserve rate cut for the time being.
Some economists say the BOJ could even implement a negative-interest rate policy, as has been seen in Europe.
Raising the Inflation Target
Consumer prices as measured by the BOJ’s main gauge stood at -0.1 percent in August, and no economists in the Bloomberg survey expect it to reach its 2 percent goal in the six months through September 2016, Kuroda’s latest time frame.
To reignite inflation expectations, the governor and his colleagues could aim to overshoot the target and establish a longer time frame. One option, says JPMorgan Chase & Co. economist Masaaki Kanno, is to target 3 percent inflation and push out the horizon to 2018.
Long-Term Bond Yield Target
Ryutaro Kono, an economist at BNP Paribas Securities in Tokyo, has said it’s possible that the BOJ will set a target for long-term bond yields, aiming to drive rates lower. Since the BOJ began unprecedented asset purchases in April 2013, the benchmark 10-year JGB yield has swung between 1 percent and 0.195 percent. It was at 0.3 percent on Tuesday in Tokyo.
Perhaps the most interesting (and terrifyingly tyrannical) suggestion now is that Kuroda is going to start accumulating a controlling stake in individual companies and then once he has that, demanding wage hikes and capex. As Bloomberg puts it, "if the macro didn’t work, maybe you do it on a super micro level."
In other words, they're going to make Abenomics a success by decree.
* * *
For now, 121.00 seems like the tractor beam and NKYis not having any of USDJPY's US session excitement…
AsiaPac stocks have been limping lower all week and early gains tonight are fading…
Then China stepped in with a significant Yuan strengthening:
- *CHINA RAISES YUAN FIXING BY 0.16% TO 6.3495/USD
And more importantly, is inflation creeping in?
- *CHINA REVISES LIVE PIG PRICE CONTROL PLAN
- *CHINA TO PREVENT OVERLY RISE, FALL IN LIVE PIG PRICES
- *CHINA NDRC REVISES LIVE PIG PRICES CONTROL MEASURES
And margin debt keep screeping back up…
- *SHANGHAI MARGIN DEBT BALANCE RISES TO EIGHT-WEEK HIGH
But…
- *CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 0.2% TO 3,380.28
- *CHINA'S CSI 300 INDEX SET TO OPEN DOWN 0.1% TO 3,530.22
So now we wait… Get back to work Mr Kuroda.
Charts: Bloomberg
- World Health Organization: Prolonged Exposure to Even LOW Level Radiation Increases the Risk of Cancer
Over 300,000 Nuclear Workers from France, the UK and US Studied for Radiation-Cancer Link
A major new study coordinated by World Health Organization’s cancer division – the International Agency for Research on Cancer (IARC) – finds that even low-level radiation increases the risk of cancer, if exposure occurs over time.
The IARC announced last week:
New results from a study coordinated by the International Agency for Research on Cancer (IARC), the cancer agency of the World Health Organization, show that protracted exposure to low doses of ionizing radiation increases the risk of death from solid cancers. The results, published today in The BMJ [the prestigious British Medical Journal], are based on the most powerful study to date and provide direct evidence about cancer risks after protracted exposures to low-dose ionizing radiation.
“The present study demonstrates a significant association between increasing radiation dose and risk of all solid cancers,” says IARC researcher Dr Ausrele Kesminiene, a study co-author. “No matter whether people are exposed to protracted low doses or to high and acute doses, the observed association between dose and solid cancer risk is similar per unit of radiation dose.”
***
A collaboration among international partners, evaluated the exposures of more than 300 000 nuclear workers in France, the United Kingdom, and the USA over a period of time between 1943 and 2005.
The scientists involved in the study come from government agencies such as the U.S. National Institute for Occupational Safety and Health, Public Health England Centre for Radiation, Chemical and Environmental Hazards and the International Agency for Research on Cancer, as well as universities including the University of North Carolina, Chapel Hill and Drexel University.
The study confirms – once again – what we’ve been saying for years.
For example, a major 2012 scientific study proves that low-level radiation can cause huge health problems. Science Daily reports:
Even the very lowest levels of radiation are harmful to life, scientists have concluded in the Cambridge Philosophical Society’s journal Biological Reviews. Reporting the results of a wide-ranging analysis of 46 peer-reviewed studies published over the past 40 years, researchers from the University of South Carolina and the University of Paris-Sud found that variation in low-level, natural background radiation was found to have small, but highly statistically significant, negative effects on DNA as well as several measures of health.
The review is a meta-analysis of studies of locations around the globe …. “Pooling across multiple studies, in multiple areas, and in a rigorous statistical manner provides a tool to really get at these questions about low-level radiation.”
Mousseau and co-author Anders Møller of the University of Paris-Sud combed the scientific literature, examining more than 5,000 papers involving natural background radiation that were narrowed to 46 for quantitative comparison. The selected studies all examined both a control group and a more highly irradiated population and quantified the size of the radiation levels for each. Each paper also reported test statistics that allowed direct comparison between the studies.
The organisms studied included plants and animals, but had a large preponderance of human subjects. Each study examined one or more possible effects of radiation, such as DNA damage measured in the lab, prevalence of a disease such as Down’s Syndrome, or the sex ratio produced in offspring. For each effect, a statistical algorithm was used to generate a single value, the effect size, which could be compared across all the studies.
The scientists reported significant negative effects in a range of categories, including immunology, physiology, mutation and disease occurrence. The frequency of negative effects was beyond that of random chance.
***
“When you do the meta-analysis, you do see significant negative effects.”
“It also provides evidence that there is no threshold below which there are no effects of radiation,” he added. “A theory that has been batted around a lot over the last couple of decades is the idea that is there a threshold of exposure below which there are no negative consequences. These data provide fairly strong evidence that there is no threshold — radiation effects are measurable as far down as you can go, given the statistical power you have at hand.”
Mousseau hopes their results, which are consistent with the “linear-no-threshold” model for radiation effects, will better inform the debate about exposure risks. “With the levels of contamination that we have seen as a result of nuclear power plants, especially in the past, and even as a result of Chernobyl and Fukushima and related accidents, there’s an attempt in the industry to downplay the doses that the populations are getting, because maybe it’s only one or two times beyond what is thought to be the natural background level,” he said. “But they’re assuming the natural background levels are fine.”
“And the truth is, if we see effects at these low levels, then we have to be thinking differently about how we develop regulations for exposures, and especially intentional exposures to populations, like the emissions from nuclear power plants, medical procedures, and even some x-ray machines at airports.”
And see this.
Physicians for Social Responsibility notes:
According to the National Academy of Sciences, there are no safe doses of radiation. Decades of research show clearly that any dose of radiation increases an individual’s risk for the development of cancer.
“There is no safe level of radionuclide exposure, whether from food, water or other sources. Period,” said Jeff Patterson, DO, immediate past president of Physicians for Social Responsibility. “Exposure to radionuclides, such as iodine-131 and cesium-137, increases the incidence of cancer. For this reason, every effort must be taken to minimize the radionuclide content in food and water.”
“Consuming food containing radionuclides is particularly dangerous. If an individual ingests or inhales a radioactive particle, it continues to irradiate the body as long as it remains radioactive and stays in the body,”said Alan H. Lockwood, MD, a member of the Board of Physicians for Social Responsibility.
***
Radiation can be concentrated many times in the food chain and any consumption adds to the cumulative risk of cancer and other diseases.
John LaForge writes:
The National Council on Radiation Protection says, “… every increment of radiation exposure produces an incremental increase in the risk of cancer.” The Environmental Protection Agency says, “… any exposure to radiation poses some risk, i.e. there is no level below which we can say an exposure poses no risk.” The Department of Energy says about “low levels of radiation” that “… the major effect is a very slight increase in cancer risk.” The Nuclear Regulatory Commission says, “any amount of radiation may pose some risk for causing cancer … any increase in dose, no matter how small, results in an incremental increase in risk.” The National Academy of Sciences, in its “Biological Effects of Ionizing Radiation VII,” says, “… it is unlikely that a threshold exists for the induction of cancers ….”
Japan Times reports:
Protracted exposure to low-level radiation is associated with a significant increase in the risk of leukemia, according to a long-term study published Thursday in a U.S. research journal.
The study released in the monthly Environmental Health Perspectives was based on a 20-year survey of around 110,000 workers who engaged in cleanup work related to the Chernobyl nuclear plant disaster in 1986.
Scientists from the University of California, San Francisco, the U.S. National Cancer Institute and the National Research Center for Radiation Medicine in Ukraine were among those who participated in the research.
Indeed, the overwhelming consensus among radiation experts is that repeated exposure to low doses of radiation can cause cancer, genetic mutations, heart disease, stroke and other serious illness (and see this.) If a government agency says anything else, it’s likely for political reasons.
The top U.S. government radiation experts – like Karl Morgan, John Goffman and Arthur Tamplin – and scientific luminaries such as Ernest Sternglass and Alice Stewart, concluded that low level radiation can cause serious health effects.
A military briefing written by the U.S. Army for commanders in Iraq states:
Hazards from low level radiation are long-term, not acute effects… Every exposure increases risk of cancer.
(Military briefings for commanders often contain less propaganda than literature aimed at civilians, as the commanders have to know the basic facts to be able to assess risk to their soldiers.)
The briefing states that doses are cumulative, citing the following military studies and reports:
- ACE Directive 80-63, ACE Policy for Defensive Measures against Low Level Radiological Hazards during Military Operations, 2 AUG 96
- AR 11-9, The Army Radiation Program, 28 MAY 99
- FM 4-02.283, Treatment of Nuclear and Radiological Casualties, 20 DEC 01
- JP 3-11, Joint Doctrine for Operations in NBC Environments, 11 JUL 00
- NATO STANAG 2473, Command Guidance on Low Level Radiation Exposure in Military Operations, 3 MAY 00
- USACHPPM TG 244, The NBC Battle Book, AUG 02
Many studies have shown that repeated exposures to low levels of ionizing radiation from CT scans and x-rays can cause cancer. See this, this, this. this, this, this, this, this, this and this.
Research from the University of Iowa concluded:
Cumulative radon exposure is a significant risk factor for lung cancer in women.
And see these studies on the health effects cumulative doses of radioactive cesium.
The European Committee on Radiation Risk notes:
Cumulative impacts of chronic irradiation in low doses are … important for the comprehension, assessment and prognosis of the late effects of irradiation on human beings ….
And see this.
The New York Times’ Matthew Wald reported in 2012:
The Bulletin of the Atomic Scientists[’] May-June issue carries seven articles and an editorial on the subject of low-dose radiation, a problem that has thus far defied scientific consensus but has assumed renewed importance since the meltdown of the Fukushima Daiichi reactors in Japan in March 2011.
***
This month a guest editor, Jan Beyea [who received a PhD in nuclear physics from Columbia and has served on a number of committees at the National Research Council of the National Academies of Science] and worked on epidemiological studies at Three Mile Island, takes a hard look at the power industry.
The bulletin’s Web site is generally subscription-only, but this issue can be read at no charge.
Dr. Beyea challenges a concept adopted by American safety regulators about small doses of radiation. The prevailing theory is that the relationship between dose and effect is linear – that is, that if a big dose is bad for you, half that dose is half that bad, and a quarter of that dose is one-quarter as bad, and a millionth of that dose is one-millionth as bad, with no level being harmless.
The idea is known as the “linear no-threshold hypothesis,’’ and while most scientists say there is no way to measure its validity at the lower end, applying it constitutes a conservative approach to public safety.
Some radiation professionals disagree, arguing that there is no reason to protect against supposed effects that cannot be measured. But Dr. Beyea contends that small doses could actually be disproportionately worse.
Radiation experts have formed a consensus that if a given dose of radiation delivered over a short period poses a given hazard, that hazard will be smaller if the dose is spread out. To use an imprecise analogy, if swallowing an entire bottle of aspirin at one sitting could kill you, consuming it over a few days might merely make you sick.
In radiation studies, this is called a dose rate effectiveness factor. Generally, a spread-out dose is judged to be half as harmful as a dose given all at once.
***
Dr. Beyea, however, proposes that doses spread out over time might be more dangerous than doses given all at once. [Background] He suggests two reasons: first, some effects may result from genetic damage that manifests itself only after several generations of cells have been exposed, and, second, a “bystander effect,” in which a cell absorbs radiation and seems unhurt but communicates damage to a neighboring cell, which can lead to cancer.
One problem in the radiation field is that little of the data on hand addresses the problem of protracted exposure. Most of the health data used to estimate the health effects of radiation exposure comes from survivors of the Hiroshima and Nagasaki bombings of 1945. That was mostly a one-time exposure.
Scientists who say that this data leads to the underestimation of radiation risks cite another problem: it does not include some people who died from radiation exposure immediately after the bombings. The notion here is that the people studied in ensuing decades to learn about the dose effect may have been stronger and healthier, which could have played a role in their survival.
Still, the idea that the bomb survivor data is biased, or that stretched-out doses are more dangerous than instant ones, is a minority position among radiation scientists.
Dr. Beyea writes:
Three recent epidemiologic studies suggest that the risk from protracted exposure is no lower, and in fact may be higher, than from single exposures.
***
Conventional wisdom was upset in 2005, when an international study, which focused on a large population of exposed nuclear workers, presented results that shocked the radiation protection community—and foreshadowed a sequence of research results over the following years.
***
It all started when epidemiologist Elaine Cardis and 46 colleagues surveyed some 400,000 nuclear workers from 15 countries in North America, Europe, and Asia—workers who had experienced chronic exposures, with doses measured on radiation badges (Cardis et al., 2005).
***
This study revealed a higher incidence for protracted exposure than found in the atomic-bomb data, representing a dramatic contradiction to expectations based on expert opinion.
***
A second major occupational study appeared a few years later, delivering another blow to the theory that protracted doses were not so bad. This 2009 report looked at 175,000 radiation workers in the United Kingdom ….
After the UK update was published, scientists combined results from 12 post-2002 occupational studies, including the two mentioned above, concluding that protracted radiation was 20 percent more effective in increasing cancer rates than acute exposures (Jacob et al., 2009). The study’s authors saw this result as a challenge to the cancer-risk values currently assumed for occupational radiation exposures. That is, they wrote that the radiation risk values used for workers should be increased over the atomic-bomb-derived values, not lowered by a factor of two or more.
***
In 2007, one study—the first of its size—looked at low-dose radiation risk in a large, chronically exposed civilian population; among the epidemiological community, this data set is known as the “Techa River cohort.” From 1949 to 1956 in the Soviet Union, while the Mayak weapons complex dumped some 76 million cubic meters of radioactive waste water into the river, approximately 30,000 of the off-site population—from some 40 villages along the river—were exposed to chronic releases of radiation; residual contamination on riverbanks still produced doses for years after 1956.
***
Here was a study of citizens exposed to radiation much like that which would be experienced following a reactor accident. About 17,000 members of the cohort have been studied in an international effort (Krestinina et al., 2007), largely funded by the US Energy Department; and to many in the department, this study was meant to definitively prove that protracted exposures were low in risk. The results were unexpected. The slope of the LNT fit turned out to be higher than predicted by the atomic-bomb data, providing additional evidence that protracted exposure does not reduce risk.
***
In a 2012 study on atomic-bomb survivor mortality data (Ozasa et al., 2012), low-dose analysis revealed unexpectedly strong evidence for the applicability of the supralinear theory. From 1950 to 2003, more than 80,000 people studied revealed high risks per unit dose in the low-dose range, from 0.01 to 0.1 Sv.
A major 2012 study of atomic bomb data by the official joint U.S.-Japanese government study of the Hiroshima and Nagasaki survivors found that low dose radiation causes cancer and genetic damage:
Dr. Peter Karamoskos notes:
The most comprehensive study of nuclear workers by the IARC, involving 600,000 workers exposed to an average cumulative dose of 19mSv, showed a cancer risk consistent with that of the A-bomb survivors.
Children are much more vulnerable to radiation than adults. American physician Brian Moench writes:
The idea that a threshold exists or there is a safe level of radiation for human exposure began unraveling in the 1950s when research showed one pelvic x-ray in a pregnant woman could double the rate of childhood leukemia in an exposed baby. Furthermore, the risk was ten times higher if it occurred in the first three months of pregnancy than near the end. This became the stepping-stone to the understanding that the timing of exposure was even more critical than the dose. The earlier in embryonic development it occurred, the greater the risk.
A new medical concept has emerged, increasingly supported by the latest research, called “fetal origins of disease,” that centers on the evidence that a multitude of chronic diseases, including cancer, often have their origins in the first few weeks after conception by environmental insults disturbing normal embryonic development. It is now established medical advice that pregnant women should avoid any exposure to x-rays, medicines or chemicals when not absolutely necessary, no matter how small the dose, especially in the first three months.
“Epigenetics” is a term integral to fetal origins of disease, referring to chemical attachments to genes that turn them on or off inappropriately and have impacts functionally similar to broken genetic bonds. Epigenetic changes can be caused by unimaginably small doses – parts per trillion – be it chemicals, air pollution, cigarette smoke or radiation. Furthermore, these epigenetic changes can occur within minutes after exposure and may be passed on to subsequent generations.
The Endocrine Society, 14,000 researchers and medical specialists in more than 100 countries, warned that “even infinitesimally low levels of exposure to endocrine-disrupting chemicals, indeed, any level of exposure at all, may cause endocrine or reproductive abnormalities, particularly if exposure occurs during a critical developmental window. Surprisingly, low doses may even exert more potent effects than higher doses.” If hormone-mimicking chemicals at any level are not safe for a fetus, then the concept is likely to be equally true of the even more intensely toxic radioactive elements drifting over from Japan, some of which may also act as endocrine disruptors.
Many epidemiologic studies show that extremely low doses of radiation increase the incidence of childhood cancers, low birth-weight babies, premature births, infant mortality, birth defects and even diminished intelligence. Just two abdominal x-rays delivered to a male can slightly increase the chance of his future children developing leukemia. By damaging proteins anywhere in a living cell, radiation can accelerate the aging process and diminish the function of any organ. Cells can repair themselves, but the rapidly growing cells in a fetus may divide before repair can occur, negating the body’s defense mechanism and replicating the damage.
Comforting statements about the safety of low radiation are not even accurate for adults. Small increases in risk per individual have immense consequences in the aggregate. When low risk is accepted for billions of people, there will still be millions of victims. New research on risks of x-rays illustrate the point.
Radiation from CT coronary scans is considered low, but, statistically, it causes cancer in one of every 270 40-year-old women who receive the scan. Twenty year olds will have double that rate. Annually, 29,000 cancers are caused by the 70 million CT scans done in the US. Common, low-dose dental x-rays more than double the rate of thyroid cancer. Those exposed to repeated dental x-rays have an even higher risk of thyroid cancer.
It’s not just humans: scientists have found that animals receiving low doses of radiation from Chernobyl are sick as well.
Most “Background Radiation” Didn’t Exist Before Nuclear Weapons Testing and Nuclear Reactors
Uninformed commenters (and some industry flacks) claim that we get a higher exposure from background radiation (when we fly, for example) or x-rays then we get from nuclear accidents.
In fact, there was exactly zero background radioactive cesium or iodine before above-ground nuclear testing and nuclear accidents started.
Wikipedia provides some details on the distribution of cesium-137 due to human activities:
Small amounts of caesium-134 and caesium-137 were released into the environment during nearly all nuclear weapon tests and some nuclear accidents, most notably the Chernobyl disaster.
***
Caesium-137 is unique in that it is totally anthropogenic. Unlike most other radioisotopes, caesium-137 is not produced from its non-radioactive isotope, but from uranium. It did not occur in nature before nuclear weapons testing began. By observing the characteristic gamma rays emitted by this isotope, it is possible to determine whether the contents of a given sealed container were made before or after the advent of atomic bomb explosions. This procedure has been used by researchers to check the authenticity of certain rare wines, most notably the purported “Jefferson bottles”.
The EPA notes:
Cesium-133 is the only naturally occurring isotope and is non-radioactive; all other isotopes, including cesium-137, are produced by human activity.
Similarly, iodine-131 is not a naturally occurring isotope. As the Encyclopedia Britannica notes:
The only naturally occurring isotope of iodine is stable iodine-127. An exceptionally useful radioactive isotope is iodine-131…
(Fukushima has spewed much more radioactive cesium and iodine than Chernobyl. The amount of radioactive cesium released by Fukushima was some 20-30 times higher than initially admitted. Japanese experts say that Fukushima is currently releasing up to 93 billion becquerels of radioactive cesium into the ocean each day. And the cesium levels hitting the west coast of North America will keep increasing for several years … rising to some 80% as much Fukushima radiation as Japan by 2016. Fukushima is spewing more and more radiation into the environment, and the amount of radioactive fuel at Fukushima dwarfs Chernobyl.)
As such, the concept of “background radiation” is largely a misnomer. Most of the radiation we encounter today – especially the most dangerous types – did not even exist in nature before we built nuclear weapons and reactors.
Nuclear Apologists Are Going Bananas
Nuclear apologists pretend that people are exposed to more radiation from bananas than from Fukushima.But unlike low-levels of radioactive potassium found in bananas – which our bodies have adapted to over many years – cesium-137 and iodine 131 are brand new, extremely dangerous substances.
The EPA explains:
The human body is born with potassium-40 [the type of radiation found in bananas] in its tissues and it is the most common radionuclide in human tissues and in food. We evolved in the presence of potassium-40 and our bodies have well–developed repair mechanisms to respond to its effects. The concentration of potassium-40 in the human body is constant and not affected by concentrations in the environment.
Wikipedia notes:
The amount of potassium (and therefore of 40K) in the human body is fairly constant because of homeostatsis, so that any excess absorbed from food is quickly compensated by the elimination of an equal amount.
It follows that the additional radiation exposure due to eating a banana lasts only for a few hours after ingestion, namely the time it takes for the normal potassium contents of the body to be restored by the kidneys.
BoingBoing reports:
A lot of things you might not suspect of being radioactive are, including Brazil nuts, and your own body. And this fact is sometimes used to downplay the impact of exposure to radiation via medical treatments or accidental intake.
***
I contacted Geoff Meggitt—a retired health physicist, and former editor of the Journal of Radiological Protection—to find out more.
Meggitt worked for the United Kingdom Atomic Energy Authority and its later commercial offshoots for 25 years. He says there’s an enormous variation in the risks associated with swallowing the same amount of different radioactive materials—and even some difference between the same dose, of the same material, but in different chemical forms.
It all depends on two factors:
1) The physical characteristics of the radioactivity—i.e, What’s its half-life? Is the radiation emitted alpha, beta or gamma?
2) The way the the radioactivity travels around and is taken up by the body—i.e., How much is absorbed by the blood stream? What tissues does this specific isotope tend to accumulate in?
The Potassium-40 in bananas is a particularly poor model isotope to use, Meggitt says, because the potassium content of our bodies seems to be under homeostatic control. When you eat a banana, your body’s level of Potassium-40 doesn’t increase. You just get rid of some excess Potassium-40. The net dose of a banana is zero.
And that’s the difference between a useful educational tool and propaganda. (And I say this as somebody who is emphatically not against nuclear energy.) Bananas aren’t really going to give anyone “a more realistic assessment of actual risk”, they’re just going to further distort the picture.
Mixing Apples (External) and Oranges (Internal)
Moreover, radioactive particles which end up inside of our lungs or gastrointestinal track, as opposed to radiation which comes to us from outside of our skin are much more dangerous than general exposures to radiation.
The National Research Council’s Committee to Assess the Scientific Information for the Radiation Exposure Screening and Education Program explains:
Radioactivity generates radiation by emitting particles. Radioactive materials outside the the body are called external emitters, and radioactive materials located within the body are called internal emitters.
Internal emitters are much more dangerous than external emitters. Specifically, one is only exposed to radiation as long as he or she is near the external emitter.
For example, when you get an x-ray, an external emitter is turned on for an instant, and then switched back off.
But internal emitters steadily and continuously emit radiation for as long as the particle remains radioactive, or until the person dies – whichever occurs first. As such, they are much more dangerous.
As the head of a Tokyo-area medical clinic – Dr. Junro Fuse, Internist and head of Kosugi Medical Clinic – said:
Risk from internal exposure is 200-600 times greater than risk from external exposure.
See this, this, this and this.
By way of analogy, external emitters are like dodgeballs being thrown at you. If you get hit, it might hurt. But it’s unlikely you’ll get hit again in the same spot.
Internal emitters – on the other hand – are like a black belt martial artist moving in really close and hammering you again and again and again in the exact same spot. That can do real damage.
There are few natural high-dose internal emitters. Bananas, brazil nuts and some other foods contain radioactive potassium-40, but in extremely low doses. But – as explained above – our bodies have adapted to handle this type of radiation.
True, some parts of the country are at higher risk of exposure to naturally-occurring radium than others.
But the cesium which was scattered all over the place by above-ground nuclear tests and the Chernobyl and Fukushima accidents has a much longer half life, and can easily contaminate food and water supplies. As the New York Times notes:
Over the long term, the big threat to human health is cesium-137, which has a half-life of 30 years.
At that rate of disintegration, John Emsley wrote in “Nature’s Building Blocks” (Oxford, 2001), “it takes over 200 years to reduce it to 1 percent of its former level.”
It is cesium-137 that still contaminates much of the land in Ukraine around the Chernobyl reactor.
***
Cesium-137 mixes easily with water and is chemically similar to potassium. It thus mimics how potassium gets metabolized in the body and can enter through many foods, including milk.
As the EPA notes in a discussion entitled ” What can I do to protect myself and my family from cesium-137?”:
Cesium-137 that is dispersed in the environment, like that from atmospheric testing, is impossible to avoid.
Radioactive iodine can also become a potent internal emitter. As the Times notes:
Iodine-131 has a half-life of eight days and is quite dangerous to human health. If absorbed through contaminated food, especially milk and milk products, it will accumulate in the thyroid and cause cancer.
The bottom line is that there is some naturally-occurring background radiation, which can – at times – pose a health hazard (especially in parts of the country with high levels of radioactive radon or radium).
But cesium-137 and radioactive iodine – the two main radioactive substances being spewed by the leaking Japanese nuclear plants – are not naturally-occurring substances, and can become powerful internal emitters which can cause tremendous damage to the health of people who are unfortunate enough to breathe in even a particle of the substances, or ingest them in food or water.
Unlike low-levels of radioactive potassium found in bananas – which our bodies have adapted to over many years – cesium-137 and iodine 131 are brand new, extremely dangerous substances.
And unlike naturally-occurring internal emitters like radon and radium – whose distribution is largely concentrated in certain areas of the country – radioactive cesium and iodine, as well as strontium and other dangerous radionuclides, are being distributed globally through weapons testing and nuclear accidents.
Cumulative and Synergistic Damage
As noted above, a military briefing written by the U.S. Army for commanders in Iraq points out:
Hazards from low level radiation are long-term, not acute effects… Every exposure increases risk of cancer.
In other words, doses are cumulative: the more times someone is exposed, the greater the potential damage.
In addition, exposure to different radioactive particles may increase the damage. Specifically, the International Commission on Radiological Protection notes:
It has been shown that in some cases a synergistic effect results when several organs of the body are irradiated simultaneously.
(“Synergistic” means that the whole is greater than the sum of the parts.)
Because different radionuclides accumulate in different parts of the body – e.g. cesium in the muscles, kidneys, heart and liver, iodine in the thyroid, and strontium in the bones – the exposure to many types of radiation may be more dangerous than exposure just to one or two types.
As such, adding new radioactive compounds like cesium and iodine into the environment may cause synergistic damage to our health.
- The Oligarch Recovery: US Military Veterans Are Selling Their Pensions In Order To Pay The Bills
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
Moore soon found himself two months behind on rent and at least 10 days from payday. In bed that night, he saw a TV ad for Future Income Payments, a company based in Irvine, Calif., that buys pensions in exchange for a lump sum. The company said it had worked with military personnel and government workers. Ten minutes later, he got up and made the call.
The next day, a company representative called Moore back and explained that he would receive a $5,000 cash advance for selling part of his pension. In exchange, Moore would have to pay the company $510 a month for five years — a total of $30,600.
If it were a typical loan, that would amount to $25,600 in interest — a rate of 512 percent.
Most of the companies advertise nationally on news sites and in military magazines, consumer advocates say. One ad highlighted in the recent congressional hearing on pension advances featured two smiling people in uniform below the words “This is our America.”
The effective interest rates charged by pension advance companies can be abusive, Cartwright said. But it is particularly “egregious” that the companies go after military retirees, targeting income streams that are backed by the federal government, he added.
– From the Washington Post article: Some Retirees are Making a Terrible Mistake with their Pensions
Welcome to the oligarch recovery. An economic rebound so robust that an ever increasing number of Americans are being forced to borrow money at usurious rates just to pay the bills. Today, I want to introduce you to the latest scheme to profit from poverty: Pension Advance Companies.
Here’s some of the Washington Post’s article on the subject from today:
Keith Moore, a 40-year-old military veteran recovering from post-traumatic stress disorder in Oklahoma, remembers the day last year when he sold off a chunk of his pension.
He had left the military after 21 years of service, because his disabilities — PTSD, arthritis and other injuries — made it difficult to work. But the transition to civilian life came with a different struggle: the need to provide for his family and pay the same bills with only half the paycheck.
Moore soon found himself two months behind on rent and at least 10 days from payday. In bed that night, he saw a TV ad for Future Income Payments, a company based in Irvine, Calif., that buys pensions in exchange for a lump sum. The company said it had worked with military personnel and government workers. Ten minutes later, he got up and made the call.
The next day, a company representative called Moore back and explained that he would receive a $5,000 cash advance for selling part of his pension. In exchange, Moore would have to pay the company $510 a month for five years — a total of $30,600.
If it were a typical loan, that would amount to $25,600 in interest — a rate of 512 percent.
Pension advances are complex products that offer retirees a lump-sum cash advance in exchange for all, or part, of their future pension payments. Consumer groups say they are pitched disproportionately to retired military members and federal retirees.
Future Income Payments is just one of the companies that offer such products. In a 2014 report, the Government Accountability Office identified 38 companies that had recently offered pension advances. At least 30 of the 38 companies were affiliated with one another in some way, sharing a parent company, a broker or another business relationship.
Future Income Payments did not return calls seeking comment.
Would you return a phone call when your business model consists of peddling 500% interest rate loans to broke U.S. military veterans?
Most of the companies advertise nationally on news sites and in military magazines, consumer advocates say. One ad highlighted in the recent congressional hearing on pension advances featured two smiling people in uniform below the words “This is our America.”
Because pension advance companies can describe their products as pension sales and not loans, they often avoid some of the stricter oversight required of lenders. That includes laws that protect consumers from high interest rates and regulations that require lenders to clearly disclose the interest rates consumers will face.
The effective interest rates charged by pension advance companies can be abusive, Cartwright said. But it is particularly “egregious” that the companies go after military retirees, targeting income streams that are backed by the federal government, he added.
Moore said that in hindsight he should have read the paperwork more closely. But at the time, he was worried about providing for his family.
His pension payments weren’t large enough to cover rent and electricity and other expenses for his wife and two children. Things piled on in the spring of 2014 when his car broke down.
Of course, this is just the latest example of average Americans being preyed upon as they descend further into inescapable poverty. Recall:
The Oligarch Recovery – 30 Million Americans Have Tapped Retirement Savings Early in Last 12 Months
Another Tale from the Oligarch Recovery – How a $1,500 Sofa Costs $4,150 When You’re Poor
Thanks for playing suckers:
- 100 US CEO Have Greater Retirement Assets That 116 Million Americans
With another year of QE almost in the history books, we were looking for some great examples of how wealth disparity in the US between the pinnacle of the “wealth pyramid”, shown below and everyone else.
We got it thanks to a study by the Center for Effective Government and Institute for Policy Studies called “A Tale of Two Retirements“, which found that company-sponsored retirement assets of just 100 CEOs are equal to those of more than 40 percent of American families, roughly 50 million families or 116 million people.
Here are the findings which indicate a wealth divide so wide it could make Marie Antoinette blush:
- The 100 largest CEO retirement funds are worth a combined $4.9 billion. That’s equal to the entire retirement account savings of 41 percent of American families – more than 50 million families and more than 116 million people.
- On average, the CEOs’ nest eggs are worth more than $49.3 million, enough to generate a $277,686 monthly retirement check for the rest of their lives.
- David Novak of YUM Brands had the largest retirement nest egg in the Fortune 500 in 2014, with $234 million, while hundreds of thousands of his Taco Bell, Pizza Hut, and KFC employees have no company retirement assets whatsoever. Novak transitioned from CEO to Executive Chairman in 2015.
The rich are not only richer, they are also legally allowed to pay far less taxes than most mere mortals: Fortune 500 CEOs have $3.2 billion in special tax-deferred compensation accounts that are exempt from the annual contribution limits imposed on ordinary 401(k)s.
- Fortune 500 CEOs saved $78 million on their 2014 tax bills by putting $197 million more in these tax-deferred accounts than they could have if they were subject to the same rules as other workers. These special accounts grow tax-free until the executives retire and begin to withdraw the funds.
- The Fortune 500 CEOs had more in their company-sponsored deferred compensation accounts than 53.8 percent of American families had in their deferred compensation accounts.
- Glenn Renwick, CEO of The Progressive Corporation, transferred $26.2 million of his pay into his deferred compensation account last year, the most of any Fortune 500 CEO. That reduced his income tax bill by more than $10 million in 2014.
Remember that not only their year-end comp, but much of their retirement funds, are linked to stock performance thresholds, so the CEOs are explicitly motivated to boost their stock price. This means engaging in countless stock buybacks. However, when the debt spigot is put on hiatus and cash in must equal cash out, it means firing thousands workers. And if not firing, then merely reducing defined benefit plans should suffice.
- Last year 18 percent of private sector workers were covered by a defined benefit pension, which guarantees monthly payments, down from 35 percent in the early 1990s. In contrast, 52 percent of Fortune 500 CEOs are covered by a company-sponsored pension.
- Nearly half of all working age Americans have no access to any retirement plan at work. The median balance in a 401(k) plan at the end of 2013 was $18,433, enough to generate a monthly retirement check of $104.
- Of workers aged 50-64, 29 percent have no defined benefit pension or retirement savings in a 401(k) or IRA. These workers will be wholly dependent on Social Security, which pays an average benefit of $1,223 per month.
It gets worse, and more tragic at the same time, because according to BlackRock, Americans and especially Millenials just have too much cash. No really, this is what Blackrock said:
While Americans said that they ideally should have 33% of their net worth in cash instruments, they admit to holding 65%–far too high an allocation to achieve their retirement goals, given low interest rates and the diminishing purchasing power of their cash related to the pressures of inflation. The current asset allocation of American portfolios according to the survey includes 65% in cash, 18% in equities, 6% in bonds, 4% in property, 2% in alternatives, 5% listed as “other.”
Well, perhaps Americans are simply not looking forward to buying what Wall Street and central banks have to sell just ahead of the ritual rug pulling that wipes out 50% of the market every few years. And then there is the question of just how much cash said Millennials have.
Here it the problem according to the Two Retirements report:
Younger Americans face a particularly difficult time saving for retirement. More than half of millennials have not yet begun to save for retirement, as they lack access to good jobs, and have staggering amounts of student loan debt. Americans under 40 today have saved 7 percent less for retirement than people in that age group were able to save in 1983.
So sorry Blackrock, but your feeble mind games will not work on us, even though we realize you would love for everyone to buy your flash-crashy ETFs. The reality is that Americans simply do not have any leftover funds, period, which to fund a retirement, be it invested in cash or BlackRock triple inverse ETFs.
CEOs, however, have nothing to worry about. Not only do they have Congress in their back pocket, they also get preferred treatment by the IRS.
On top of their massive annual compensation, CEOs of most large U.S. corporations have amassed gilded retirement fortunes. We analyzed SEC filings of publicly held Fortune 500 firms and found that the 100 largest CEO nest eggs were worth a combined $4.9 billion at the end of 2014. That sum is equal to the entire retirement account savings of 41 percent of American families (50 million families in total).
While the guaranteed monthly retirement check until death is a thing of the past for the vast majority of Americans, more than half of Fortune 500 CEOs receive company-sponsored pension plans. Their firms are allowed to deduct the cost of these often exorbitant plans from their taxes, even if they have cut worker pensions or never offered them at all.
Nearly three-quarters (73 percent) of Fortune 500 firms also have set up special tax-deferred compensation accounts for their executives. These are similar to the 401(k) plans that some Americans receive through their employers. But ordinary workers face strict limits on how much pre-tax income they can invest each year in these plans, while top executives do not. These privileged few are free to shelter unlimited amounts of compensation in these special pots, where their money can grow, tax-free, until they retire and start spending it.
The CEO-worker retirement divide turns our country’s already extreme income divide into an even wider economic chasm. New analysis by the Government Accountability Office shows that 29 percent of workers approaching retirement (aged 50-65) have neither a pension nor retirement savings in a 401(k) or Individual Retirement Account (IRA). According to a study by the Schwartz Center for Economic Policy Research at the New School, 55 percent of those aged 50-64 will be forced to rely almost solely on Social Security (which averages $1,233 a month).
And so on.
And because we know that readers are mostly interessted in names, here is a selection.
First, the 10 Largest CEO Retirement Funds
Second, the 10 Largest CEO Deferred Compensation Accounts.
A quick primer on these:
In 2014, 198 Fortune 500 CEOs invested a combined $197 million more of their pre-tax income in these plans than they would have been able to invest if they’d been subject to the maximum $24,000 cap that applies to ordinary workers. If they had been subject to this limit, they would’ve owed the U.S. Treasury $78 million more in income taxes last year.
The funds in these special tax-deferred accounts grow tax-free for the rest of the executives’ lives or until they are withdrawn. At that point, the executives make a one-time tax payment at an ordinary income rate. The Joint Committee on Taxation has produced a useful analysis of the financial benefits of tax deferral from the compounding of investment returns.
Executives can also choose where they live when they receive this compensation, including in a low-tax state. For example, CEOs who move after they retire from relatively high-tax New York to Florida, which has no state income tax, would pay substantially lower state taxes on this deferred compensation. These accounts can even be passed on to the executive’s heirs, allowing our country’s extreme wealth concentration to be passed on to future generations. These rules are contributing to the perpetuation of a new aristocracy.
And third, a quick look at the pension funding status at the corporations with the largest CEO retirement accounts:
Finally, here is the full breakdown of Fortune 500 CEOs’ retirement assets.
- Australia Proposes Eliminating Passports. There's Just One Problem…
Submitted by Simon Black via SovereignMan.com,
It wasn’t that long ago that you could travel from one corner of the world to another with nothing but your good looks.
There are people still alive today, in fact, who were born into a world where passports were not widely used for international travel.
The passport itself is a relatively recent invention, an unfortunate consequence of World War I. And they didn’t really become ubiquitous until the late 20th century.
Now, in many respects you can’t leave your own country without one, especially if you hail from the Land of the Free.
Americans are so ‘free’, in fact, that they can’t even go to Canada without forking over $165 to the government of the United States just to ‘apply’ for a little booklet that gives you the right to leave the country.
Passports are nothing more than a form of control— a way to obtain oodles of personal information and to restrict one of the most basic freedoms of humanity— the freedom to move.
Edward Snowden has been waylaid in Russia for more than two years because the US government rescinded his passport, effectively terminating his ability to travel anywhere.
I remember being in Africa a couple of years ago watching a herd of elephants in the wild continually cross the border in and out of Zambia and Zimbabwe near Victoria Falls.
While the elephants roam freely, we humans obstruct ourselves with imaginary barriers and demands for a bunch of silly paperwork, passports, and visas. Not exactly the pinnacle of civilization.
So you can imagine how excited I was when I read about Australia’s government announcing a program to eliminate passports. Incredible.
Then I saw the punch line— the idea is to eliminate physical passports. So instead of giving everyone these little colored booklets, they want to move passports ‘into the cloud.’
Hey, it worked for Microsoft.
The ‘cloud’, of course, is the technological Neverland where unicorns play, tech titans rake in record profits, and millions of gigabytes of data are stored.
The cloud is what makes it possible for you to store files on remote servers and access them across multiple devices (phone, tablet, laptop) over the Internet.
You might use Dropbox or iCloud, for example, both of which are popular cloud-based storage platforms. (Though I’d suggest switching to a more secure platform like SpiderOak or Tresorit.)
So now Australia’s government proposes moving citizens’ personal information into the cloud, with a pilot program to test travel between Australia and New Zealand with cloud-based passports.
It remains to be seen how it would even work once you arrive. Do you give a secret handshake? PIN code? Or do you get to bypass the immigration line altogether?
Probably not. Cloud-based passports would likely be loaded with all sorts of biometric data, facial recognition, etc.
And all of this data would be placed online in government databases. I mean, they might as well paint a bulls-eye on the server farm and hang a sign on it that says “Please Hack Me.”
In the black market, that kind of data is worth billions. And governments don’t exactly have a sterling track record of tip-top network security.
The Australian Government’s Cyber Security Centre released a report just a few months ago stating that government networks are attacked every day, and that cyber security incidents are up over 300% from 2011 to 2014.
Over the summer the US government embarrassingly admitted to a data breach that exposed over 20 million Americans, up from an initial estimate of 4 million.
If the thought of submitting to the indignity of biometric data and RFID chips on physical passports weren’t bad enough, the prospect of pushing all of that data online to be ‘safeguarded’ by government bureaucrats is simply agonizing.
Who knows if there’s any nefarious intent behind this. My guess is that a bunch of politicians are desperate to look smart and innovative, so they spout off some poorly thought-out idea that is even more poorly executed.
Small businesses that consistently fail with such bad ideas eventually go bankrupt.
Governments, on the other hand, get to paper over the consequences of their incompetence by printing money and indebting future generations.
They make egregious mistakes with people’s lives and livelihoods, in this case putting the private (even biometric) information of millions of citizens at risk.
And they’re never held accountable. Ever. Leaving them free to move on to the next bad idea.
Perhaps next time it will be implantable chips.
- Europe's Next Refugee Crisis: Thousands Of Migrants Freezing To Death
“It cannot be that in the Europe of 2015 people are left to fend for themselves, sleeping in fields.”
That’s a quote from European Commission President Jean-Claude Juncker and he’s referring to the EU’s effort to create makeshift “holding camps” along the Balkan route to Germany designed to house some 100,000 asylum seekers as they make their way north. Eastern Europe is struggling with the influx of refugees from the Mid-East and while Hungary has simply decided to close its borders, other states in the region are attempting to strike some sort of middle ground between relenting and allowing migrants to turn the countryside into a superhighway to Germany and implementing a Viktor Orban-style crackdown that lacks any semblance of humanity (say what you will about a country’s right to protect its borders and cultural heritage, but using tear gas and water cannons in conjunction with an attempt to ignite an ultra-nationalist, religious fervor amongst the populace is dangerous at best and outright irresponsible at worst).
While the effort is admirable – we suppose – it may nonetheless backfire. That is, while it’s certainly not ideal to have hundreds of thousands of people sleeping in the middle of fields and building campfires out of flammable garbage, these ad hoc way stations will almost invariably become overcrowded, unsafe refugee internment camps and they’ll likely be easy targets for vociferous anti-migrant protests or worse.
That said, there really are no viable alternatives which is frightening considering we’re now headed into winter. Put simply, the “Schengen” concept is rapidly falling apart and unless Europe figures something out soon (and by “soon” we mean in the next couple of weeks) migrants could start to freeze to death. Here’s The Telegraph:
Migrants crossing the Balkans will begin freezing to death as winter approaches, the head of European Union has said, as leaders warned the continent was “falling apart” trying to deal with the biggest refugee crisis since the Second World War.
Jean-Claude Juncker, the president of the European Commission, said a solution was urgently needed or thousands of refugee families facing winter temperature on the hillsides and freezing river-banks of Eastern Europe, would die.
“Every day counts,” he said. “Otherwise we will soon see families in cold rivers in the Balkans perish miserably.”
Miro Cerar, the Slovenian prime minister, said the EU was days from collapse as his country buckled under an “unbearable” influx of migrants.
“If we do not deliver some immediate and concrete actions on the ground in the next few days and weeks I believe the EU and Europe as a whole will start falling apart,” he said.
Poorly dressed and under-fed, there are mounting fears they will fall victim to rougher seas and the Balkan winter that can reach minus 15C as they attempt to reach Germany and Sweden.
Aid agencies and human rights groups have also weighed in on the crisis. “As winter looms, the sight of thousands of refugees sleeping rough as they make their way through Europe represents a damning indictment of the EU’s failure to offer a coordinated response to the refugee crisis,” said John Dalhuisen of Amnesty International.
If you thought the firestorm surrounding the images of drowned toddler Aylan Kurdi was bad, just wait until the pictures of frozen migrant children start to surface on social media.
In many ways, Europe is damned if they do, damned if they don’t. If refugee families are left to freeze in the Balkans because a confederacy of supposedly advanced nations couldn’t figure out how to cope with the influx of asylum seekers from the war-torn Mid-East, the history books will be replete with references and images to migrant families freezing to death trying to get to Germany. Then again, if the whole of the EU adopts an open door policy and something goes wrong – or even if nothing goes wrong and the people flows simply serve to change the character of European society forever – the bloc will likely be blamed for not taking a more measured approach.
Meanwhile, note the bolded passage from The Telegraph article excerpted above: “…the Balkan winter that can reach minus 15C as they attempt to reach Germany and Sweden.” Well, if you though anti-migrant sentiment was on the rise in Germany (see the latest PEGIDA rally), just have a look at Sweden where as yet unidentified groups are literally torching refugee shelters. Here’s The Telegraph again:
Sweden’s migration authorities on Wednesday moved to hide the locations of buildings earmarked for housing refugees, after attackers set more a dozen prospective refugee centres on fire in a matter of months.
Mikael Ribbenvik, chief operative officer at the Swedish Migration Agency, made the decision after the thirteenth centre, a home for unaccompanied refugee children in the city of Lund, was set alight on Monday.
“We have decided today that where asylum centres are located will from now on be classified information,” Johanna Uhr, a spokeswoman for the agency, told The Telegraph. “We will no longer be sending out any lists of locations.”
The populist Sweden Democrat party has been harshly criticised for last week publishing a map listing the addresses of all asylum centres in and around the city of Lund.
“I find it hard to see that this is anything other than an incitement to commit hate crimes,” Veronica Palm, a Social Democrat MP, told Expressen newspaper.
And so sadly, the choice appears to be between bullets, bombs, and sword-wielding jihadists in Syria and freezing to death in the Balkans or else being burned alive in Sweden – and that’s assuming you don’t die at sea in transit.
The reports from Sweden underscore our point that Europe’s plan to establish makeshift “holding camps” is likely a bad idea. Anti-migrant sentiment is running high among Europeans predisposed to nationalistic ideals and while the facilities torched in Sweden were apparently empty, the migrant camps along the Balkan route won’t be. That said, the alternative is to force asylum seekers to sleep out in the cold and risk going down in history as a union of advanced economies that couldn’t even manage to cooperate enough to keep tens of thousands of people from freezing to death.
Of course the tragic irony is that whatever fate should befall the legions of refugees seeking asylum in Western Europe, it will all be blamed on brutal Mid-East dictators and while autocratic regimes should unquestionably be held to account for their role in creating disaffection among the citizenry, at some point the West needs to wake up and come to terms with the fact that playing Mid-East kingmaker everywhere and always has tragic consequences. Europe’s refugee crisis is just the latest example.
- The 'Bernwashing' Of America
Submitted by Chris Campbell via lfb.org,
#Feelthebern…
If you use any form of social media, and have any friends or followers at all, you’ve undoubtedly come across the hashtag.
And you also undoubtedly feel the ‘bern’ of yet another fellow American falling… yet again… for the socialist trap.
And here are some scary numbers to chew on this fine Monday afternoon…
According to social media analytics firm RiteTag, #Feelthebern is tweeted 625 times per hour.
With that, it’s getting 2.11 million views and being shared 883 times…
Yes… PER HOUR!
Also according to RiteTag, some of the latest pictures shared are…
Let’s face it. Bernie Sanders is ‘hot right now.’
And here’s the thing…
We don’t disagree with him on everything. In fact, here are just a few things we can say, from a 10,000 foot view, we agree with…
- Get big money out of politics.
- Create decent paying jobs.
- Care for our veterans.
- End the drug war.
- And on…
But how he plans to do it, of course, is what we absolutely, unequivocally, without a single shred of doubt… completely… disagree with.
He’s a one-trick pony. His only solution is to redistribute wealth. Which, if history is any guide, doesn’t work.
Alas, some are doomed to repeat humanity’s mistakes. And they think that it makes perfect sense. Especially the majority of the millennials, who, caught in a trap of student debt, wish someone would wave a magic wand and make it all go away.
I know many of these people. And have heard many of them, on many different occasions, tell me that they don’t plan to ever pay off their debt. Their plan is to just let it fester until it’s absolved.
Seriously.
Apparently, enough millennials rubbed the lamp and… miraculously… out popped Uncle Bernie, here to soothe all their ills with free stuff.
Oh, wait. There he is now, on his white unicorn…
How will you do it, Bernie?
Raise the taxes.
But just on the rich, right?
No.
Wait… what?
What most bernwashed Americans don’t get is it’s not the super rich who are going to #feelthebern… it’s them.
Everyone… we repeat… everyone is going to get taxed to death so that our government can waste more of our money on waging wars, spying on its citizens, militarizing our law enforcement, secretly running civil disobedience trainings on our soil, and making sure that this country falls to its knees and stays there.
In the meantime, all the services that Bern is offering for free might become free — but they will also continue to degrade. And they will quickly become completely irrelevant in our society. A big waste of resources and time.
We can already see it happening in regards to healthcare and education.
Many think Sanders is somehow ‘new,’ and ‘edgy,’ and he’s on the fringe.
When, in reality, he’s just spouting the same old [expletive deleted] that governments have always promised when a charismatic leader steps up in a time of crisis.
Bigger government. Bigger government. Bigger government.
If that mantra doesn’t keep you up at night, you need a little dose liberty in your life.
Or maybe a whole lot. But that’s up to you to figure out.
To help, we’ve invited Paul Kahn from Your Life Your Liberty…
Read on…
Hey, Bernie! Look Up!!!
By Paul Kahn
Bernie Sanders supporters seem to be everywhere. Many of his supporters are intelligent people who are sick of the corruption and greed they are seeing and know something needs to change.
Understandably, they like him because he is one of the few politicians that actually talks about it. And he is right. Well, HALF right.
One cannot lay the blame solely on the corporations or the people who run them. The government is the institution that actually EMPOWERS them. As government grows and continues to expand with more and more power over our lives, so grows the opportunity for large corporations to petition government, which only further expands the ultra-wealthy’s power, control, and influence.
There is a renewed interest in socialism in this country, as if putting the word “democratic” in front of it makes it somehow unique. No matter how it is wrapped, socialism is still the belief that we can raise people out of poverty by taking money out of the hands of those who have learned how to produce.
And it has never worked.
Yes many of the people in the Nordic countries say they are happier, but it’s not because of socialism.
- Denmark ranks higher than the US in business freedom, monetary freedom, investment freedom, financial freedom, property freedom and freedom from corruption.
- Finland ranks higher than the US in business freedom, monetary freedom, investment freedom, fiscal freedom, property freedom and freedom from corruption.
- Norway ranks higher than the US in trade freedom, property freedom and freedom from corruption.
- Sweden ranks higher than the US in business freedom, monetary freedom, investment freedom, financial freedom, property freedom and freedom from corruption.
Taking money away from people who have figured out a way to produce a viable good or service and then giving the money to people who will do nothing but spend it, does not and can never, create economic growth and prosperity.
Savings and investment drive production and production is what drives consumption. Real economic growth involves people taking on risk and actually creating something productive.
Taking money from one hand and putting it in the other does absolutely nothing to grow the economy — it is simply moving the same money around.
These ideas are completely flawed and unsound.
The idea that there is only a certain amount of money to go around and we need someone to re-distribute it so it is more evenly dispersed is totally misguided. If there is only one fixed amount of money to go around, then how did we go from about 3 million people since our country was founded in 1776, to 300 million?
True capitalism (what we have now is a far cry from it) produces real economic growth and the most amount of prosperity for the greatest number of people. It doesn’t come from some command and control bureaucracy that steals the money from society’s producers and then re-distributes the goodies to the rest.
Socialism always fails because at some point people realize they don’t have to work as hard to get the same amount of stuff. It takes all the incentive away to really succeed.
49% of Democrats now have a favorable view towards socialism. This is scary. And sad. All of the economic and productivity advancements we have seen are all the result of someone being willing to take risks. ‘Oh no,’ you say, ‘we only want to steal money from the “rich”. Really?
Take a look at how we live in this country compared to the rest of the world. To them, we are ALL rich! Is it ok for other, more impoverished countries to steal 90% of our wealth so we are forced to pay OUR “fair share”?
What does it really mean to say that some people should pay 90% tax? It means you believe that it is acceptable for the government to take 90% of everything you earn.
‘No, but we are only punishing the super rich — the people making millions every year!‘
Wrong again.
The super rich have dozens of tax attorneys and financial planners that make sure that their wealth is hidden. They don’t show their money through the income tax.
Most of the money they earn is a result of tax free municipal bonds and other investments as a way to shelter the money from taxation. Income taxes don’t reach the super rich because they don’t earn their money in income.
So who does it really hurt?
It hurts the people who are running small businesses who are trying to grow it, so they can employ more people. A successful small business owner may report $200,000 profit on his income taxes and he is considered “rich,” as he is in the top percentile. After all the risk he has taken on, all the debt, all the people he employs (including the contractors he paid to get to where he is) he finally starts to reap the rewards of his years of dedication, effort and hard work and now we should punish him for his success? When we take the majority of his income away, he now has less money to re-invest in his business.
That means his business doesn’t grow or takes much longer to grow, which means it takes that much longer for him to hire more people. He is less productive and we are making it harder for him to succeed. He makes good money, but it’s not enough to have a team of tax attorneys and multiple tax shelters like the big boys controlling the politicians. These policies are therefore actually protecting the super rich, as they make it more difficult for the small business owner to become really rich themselves — it prevents competition.
Those at the top also get the government to work for them by passing legislation to keep out competitors. They don’t just do this through lobbyists. They do it by getting top executives into government itself!
Case in point: Monsanto.
The former Monsanto vice president, Michael R. Taylor is now running the FDA. Taylor spent years lobbying for the GMO Foods giant. The commissioner position he now holds at the FDA, affords Taylor the ability to sign off of any cancer-causing, harmful agent produced by Monsanto. In this way, no more expensive lobbyists are needed and one doesn’t need money to influence the legislators, because they ARE now the legislator!
Whoever wins the next election is meaningless because Monsanto’s interests will be served.
Today, we live in an economic and political system controlled by corporations or corporate interests; a merger of state and corporate power if you will. The original point behind government providing a watchdog over industry — was to keep the playing fields equal — between players and owners.
Those days are long gone. Government is now part of most industries and those industries are part of government. As the federal government has progressively become larger over the decades, every significant introduction of government regulation, taxation, and spending has been to the benefit of some big business.
It used to be against the law for a corporation to contribute to a political party. Now these corporations spend more on lobbyists than they pay in taxes. We now live in a system where corporations can legally purchase politicians through unlimited, undisclosed campaign donations.
Giant corporations and the wealthy elite rule in a way to satisfy their own self-interest. It is in the interest of the ruling class to maintain the appearance that the people have a say, so more than one candidate is offered up. It’s in the interest of corporations and the wealthy elite that the winning candidate is beholden to them, so they financially support both Democrats and Republicans.
Look at the list of the top donors to both political campaigns and it’s virtually the same donors. It’s in the interest of corporations and the wealthy elite that there are only two viable parties—this cuts down on bribery costs.
And it’s in the interest of these two parties that they are the only parties with a chance of winning.
The corporations and the wealthy elite directly and indirectly finance candidates, who are then indebted to them. As in the case of the example with Monsanto, it is common for these indebted government officials to appoint to key decision-making roles those friendly to corporations, including executives from these corporations.
And it’s routine for high-level government officials to be rewarded with high-paying industry positions when they exit government. It’s common and routine for former government officials to be given high-paying lobbying jobs so as to use their relationships with current government officials to ensure that corporate interests will be taken care of.
The United States is not ruled by a single deranged dictator but by an impersonal corporatocracy.
Thus, there is no one tyrant that Americans can first hate and then finally overthrow so as to end senseless wars and economic injustices. Revolutions against Qaddafi-type tyrants require enormous physical courage. We all need to wake up and see that we Americans have neither a democracy nor a republic and are in fact ruled by a partnership of “too-big-to-fail” corporations, the extremely wealthy elite and corporate-collaborator government officials.
Americans must surgically remove the corporate cancer from government through direct action like voting out the statists and cultivating new leaders from within the movement.
If we want to solve the issues of corruption, we must start at the source by electing representatives who will reduce the size, scope and power of the functions of government.
- Housing Bubble 2.0: Flipping A Home In These 20 Cities Results In A 102% Average Return
When it comes to the US housing market, there are two clusters: an undisputed bubble among the luxury, bi-coastal or “flippable” markets, which serve a tiny portion of the population but a major portion of foreigners seeking to park illegal money in U.S. real estate, and a rapidly sinking market serving everyone else.
For the purpose of this post we are more interested in the first, “bubbly” segment, and specifically that unforgettable remnant of the old housing bubble which is alive and well right now: flipping.
According to RealtyTrac, in the third quarter there were a grand total of 43,197 single family homes and condos “flips” – units sold as part of an arms-length sale for the second time within a 12-month period – or 5.0% of all single family home and condo sales during the quarter. This was an increase of 18% from a 4.3% share in the third quarter of 2014.
As RealtyTrac further reports, the average gross flipping profit, the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping experts estimate typically run between 20 percent and 33 percent of the property’s after repair value), was $62,122 for completed home flips in the third quarter. That was down slightly from an average gross flipping profit of $62,521 in the second quarter but up slightly from an average gross flipping profit of $61,781 in the third quarter of 2014.
The average gross return on investment (ROI), the average gross profit as a percentage of the average original purchase price, was 33.8 percent for completed home flips in the third quarter, down from 34.4 percent in the previous quarter but up from 32.7 percent in the third quarter of 2014.
But we don’t care about the entire market. We only care about those markets where the Return On Flip (ROF) is highest.
Based on RealtyTrac data, among 101 markets with at least 75 single family and condo flips in the third quarter, those with the highest average gross flipping ROI were Pittsburgh (78.4 percent), New Orleans (73.1 percent), York, Pennsylvania (64.5 percent), Punta Gorda, Florida (61.3 percent), and Clarksville, Tennessee (59.6 percent).
Narrowing it down further, among zip codes with at least 10 completed flips in the third quarter with home price data available, those with the highest average gross flipping ROI were 21229 in Baltimore (136.0 percent) and 33063 in Tampa (130.2 percent), along with three Chicago-area zip codes: 60652 in the city of Chicago (120.4 percent), 60402 in the city of Berwyn (120.3 percent), and 60629 in the city of Chicago (115.2 percent).
The bottom line: the gross profit from a “flip” in any of these 20 markets will result in an average profit of just over 102% in as little under 7 months. Good luck.
Source: RealtyTrac
- The Housing Bubble Is Biggest In These Cities
Two convergent themes we’ve been keen on documenting this year are stagnant wage growth and the soaring cost of living.
Needless to say, when housing prices rise inexorably but incomes remain stuck in the mud, the strain on everyday people can become overwhelming as illustrated rather poignantly in “Million Dollar Shack”, a documentary which lays bare California’s housing bubble.
But Silicon Valley isn’t the only place where even the upper middle class are being priced out of the market.
Prices are soaring across the US with the cost per square foot in Manhattan hitting an all-time high in Q3. Similarly, ZIRP and NIRP have driven the housing market into the stratosphere in places like Denmark, Sweden, and Norway. Meanwhile, in China, the massive amount of capital flowing out of the country (courtesy of “Mr. Chen” and his Snickers bars) is still finding its way into already overpriced overseas real estate despite Xi’s best efforts to crack down on illicit transfers.
It’s against this backdrop that we bring you the following from Bloomberg and UBS who note that when it comes to housing bubbles, London and Hong Kong are right up there with the “best” of them. Here’s more:
London and Hong Kong are the cities most at risk of a housing bubble as real estate begins to look overvalued, according to UBS Group AG.
The U.K. capital is now the second-least affordable of the 15 urban centers studied by UBS, trailing only Hong Kong, the report said. Price-to-income and price-to-rent values have surged to all-time highs even as real earnings have fallen 7 percent in London since 2007, UBS said.
London risks a “substantial price correction should the fundamentals for estate investment deteriorate,” the report said. “We advise caution.”
Just as PE is minting new landlords in the US, the market in London is being driven by the allure of capitalizing on rising rents:
London house prices have surged 40 percent since the beginning of 2013 because of demand from overseas buyers, attractive rental yields and population growth, the Swiss bank’s global real estate bubble index shows. The Bank of England has asked for more powers to regulate lending to so-called buy-to-let investors, who are attracted by rental yields of more than 5 percent compared with 1.8 percent for benchmark U.K. government bonds.
Here’s a bit more color from The Guardian:
Price increases of 40% since the start of 2013 have more than offset losses during the financial crisis and mean that homes in London now cost more than ever before. On Wednesday, the Land Registry said the average price had almost hit the £500,000 mark, with the annual rate of inflation running at 9.6%.
Meanwhile, wage growth has been sluggish, and the price increases have made London one of the most expensive cities in the world based on price-to-income and price-to-rent ratios, the UBS report said.
“It takes a skilled service-sector worker approximately 14 years of average earnings to be able to buy a 60 sq m dwelling; the expense of buying a flat is comparable to renting it for 30 years,” it said.
And here’s unequivocal validation of everything we’ve been saying for years (from UBS’ Claudio Saputelli and Matthias Holzhey):
“House prices have decoupled most from local incomes in Hong Kong, London, Paris, Singapore, New York and Tokyo. Buying a 60-square-meter apartment exceeds the budget of most people who work even in the highly-skilled service sector. Loose monetary policy has prevented a normalization of housing markets and encouraged local bubble risks to grow”
In other words, far from promoting a beneficial trickle-down “wealth effect,” ZIRP has i) failed to lift household incomes, and ii) precipitated another housing bubble that is now so large and ubiquitous that even the well-off are priced out.
But don’t worry Londoners, you can still get a bed under the stairs for £500 a month…
* * *
While it is painfully obvious that London property prices (and now rents) are in an atmospheric bubble, it appears the policy-makers choose to ignore the reality for the average Brit in favor of ‘wealth’ creation for the few.
As @Alex_Lomax tweets… “I have literally just been shown a bed under the stairs for £500 a month… F You London!”
The ad was posted on site London2let and reads:
One single furnished room available.
We are looking for a friendly, open-minded and outgoing person to join our houseshare in a great period house in Clapham.
We’re a good bunch and like to chill out a lot together – not really looking for somebody that just wants to stay in their room. Room comes with a bed.
Bills to be shared – approx £60 per month each. Easy access to local tube stations.
As Alex explains, the room lacked any utilities, but did come with a carton of Daz on the floor and coats hanging from hooks.
I didn’t even stay long enough to check if there was a mattress, and the landlord seemed absolutely serious.
I asked him if he was joking and he seemed shocked I’d even asked.
I took the pics secretly when he was making himself a cup of coffee, the cupboard was right next to the kitchen.
I expected a normal single room, definitely not this. I left as quickly as I could.
- The Debate: GOP Candidates Elevated, CNBC Eviscerated
Let's get this straight. On Wednesday morning a new national poll revealed that 54% of Americans rate the economy as 'poor.' That's after nearly seven years of Barack Obama's big government solutions. Republicans, of course, are especially gloomy about the economy.
That was Wednesday morning, teeing things up for CNBC, the self-described 'world leader in business news.' Surely the moderators would flood the zone with substantive questions about the U.S. economy.
Instead, Becky Quick quizzed Marco Rubio about his 'lack of bookkeeping skills,' Carl Quintanilla posed questions about homosexuality and fantasy football, and the astonishingly incompetent John Harwood expressed doubt about Donald Trump's 'moral authority.'
To be fair, CNBC's triumvirate asked many questions about taxes and spending and deficits and Social Security, but way too many of those questions did not elicit solid answers. They seemed crafted to bring attention to the hosts, not the candidates.
But, as Contra Corner blog's David Stockman details, almost with out exception the GOP candidates conveyed a compelling message that the state is not our savior, while the CNBC moderators spent the night fumbling with fantasy football and inanities about which vitamin supplements Ben Carson has used or endorsed.
But this was about more than tone. The interaction between the candidates and the CNBC moderators revealed the yawning gap between the bubble world at the intersection of Washington and Wall Street and the hard scrabble reality of economic stagnation and political alienation on main street America.
Yes, the CNBC moderators engaged in a deplorable display of gotcha journalism punctuated by a snarky self-righteousness that was downright offensive. John Harwood is surely secretly on the payroll of the Democratic National Committee and it was more than obvious why Becky Quick excels at serving tea to blathering old fools like Warren Buffett.
So they deserved the Cruz missile that came flying at them mid-way through the debate.
At that point the Senator from Texas had had enough, especially from Carl Quintanilla. The latter has spend years on CNBC commentating about the “market”, but wouldn’t know honest capitalism is if slapped him upside the head, and has apparently never meet a Washington intervention that he didn’t cheer on as something to help the stock averages go higher:
Let me say something at the outset. The questions that have been asked so far in this debate illustrate why the American people don’t trust the media. This is not a cage match. And if you look at he questions—Donald Trump, are you a comic book villain? Ben Carson, can you do math?… Marco Rubio, why don’t you resign? Jeb Bush, why have your numbers fallen? How about talking about substantive issues?”
Nor did the Texas Senator let up:
“Carl, I’m not finished yet. The contrast with the Democratic debate, where every thought and question form the media was ‘Which of you is more handsome and wise”
As one pundit put it afterwards, “given the grievous injuries inflicted on Team CNBC” by Cruz and the rest of the candidates, the only thing left to do was to “shoot the wounded”.
Actually, there is rather more. Last night was billed as a debate on domestic issues and the economy, and CNBC is the communications medium of record about the daily comings and goings of the US economy and the financial markets at its center. Yet not one of the three moderators during the entire two hour period asked a question about the elephant in the room.
They had to bring in from the sidelines the intrepid Rick Santelli to even get the Federal Reserve on the table. Its almost as if the CNBC commentators work on the set of the Truman Show and have no clue that it’s all make believe.
In the alternative, call this condition Bubble Blindness. It’s a contagious ideological disease that afflicts the entire corridor from Wall Street to Washington, and CNBC is the infected host that propagates it.
The fact is, the monetary madness in the Eccles Building is destroying free market capitalism by systematically and massively falsifying the prices of financial assets, and fueling a relentless, debilitating accumulation of debt throughout the warp and woof of the American economy and the rest of the world; and it’s simultaneously extinguishing political democracy by deeply subsidizing our crushing $19 trillion national debt.
The GOP politicians appropriately sputtered last night about the bipartisan beltway scam rammed through the House yesterday by Johnny Lawnchair, but they were given no opportunity by their clueless moderators to explore exactly why this kind of taxpayer betrayal happens over and over.
Well, there is a simple answer. The Fed’s elephantine $4.5 trillion balance sheet represents the greatest fiscal fraud ever conceived. Last year it paid the Treasury approximately $100 billion in absolutely phony profits scalped from its massive trove of Treasury debt and quasi-government GSE paper.
That is, over time Uncle Sam has purchased $4.5 trillion worth of real economic resources——in the form of goods, services, salaries and transfer payments——from the US economy, which were paid for with IOUs.
Under an honest financial regime these obligations would be eventually redeemed in equivalent goods and services, thereby causing a transfer from private to public use and a reallocation of savings from productive investment to the balance sheet of the state.
But no more. The Fed’s massive purchases of the public debt are funded not with society’s real savings from current income and production, but from fiat credits it conjures out of thin air.
And then the monetary charlatans behind the curtain at the Fed add insult to injury. Every year they send back to the US treasury the coupons earned on these airballs, causing the politicians to think the national debt is no problem; and that they can buy aircraft carriers and GS-15 salaries indefinitely while booking a “profit” on their borrowings.
Folks, this is just plain madness. Back in 1989 when the real median household income first hit its current level of about $54,000, this entire monetization scam would have been considered beyond the pale by even the inhabitants of the Eccles Building, and most certainly by everyone else in Washington——from the US Treasury, to the Congressional budget committees, to the summer interns in the Rayburn Building.
But after 25 years of central bank induced financialization of the US economy, there has developed a cult of the stock market and a Wall Street regime of relentless financial gambling in the guise of “investment”. Consequently, the massive aritificial inflation of financial asset values is not even recognized by CNBC and its fellow travelers in the main stream financial press—to say nothing of the very prosperous punters who inhabit the casino.
But here’s the thing. How did the real median household income stagnate at $54,000 while the real value of the S&P 500 soared by nearly 4X during the era of Bubble Finance?
Likewise, how did the aggregate “market cap” of US debt and business equity soar from 200% to 540% of GDP when main street living standards were not rising at all? Could it be that something rotten and deformed has been injected into the very financial bloodstream of American capitalism—-something which the CNBC cheerleaders dare not acknowledge or even allow conservative politicians to explore in a public forum?
Worse still, this entire Fed-driven regime of Bubble Finance has inculcated in the casino and its media megaphones the insidious notion that the arms and agencies of government exist for one purpose above all others. Namely, to do “whatever it takes” to keep the bubble inflated and the stock market averages rising—–preferably every single day the market is open.
There was no more dramatic demonstration of that proposition than after the Wall Street meltdown in September 2008 when the as yet un-house broken GOP had had the courage to vote down TARP.
But when they were dragged back into the House chambers by Goldman Sachs and its plenipotentiaries in the US Treasury, the message was unmistakable. On one side of the CNBC screen was the House electronic voting board and on the other side was the second-by-second path of the S&P 500. And delivering the voice-over narrative were the same clowns who could not even mention the Fed last night. The US Congress dare not vote down TARP again, they fulminated.
It obviously didn’t. Yet right then and there the conservative opposition was broken, and the present statist regime of Bubble Finance was off to the races.
During the coming decade the nation will be battered and shattered by a monumental fiscal crisis and the bankruptcy of the bogus “trust funds” which now pay out upwards of $2 trillion per year to 70 million citizens. At length, the bearers of pitchforks and torches descending on Washington will surely ask how this all happened.
But they will not need to look much beyond last night’s debate for the answers. The nation’s fiscal process has been literally shutdown by the Fed and the Wall Street gamblers and media cheerleaders who insouciantly and relentlessly demand of Washington that it do “whatever it takes” to keep the bubble inflated.
As a result, we have had the absurdity of 82 months of ZIRP and a orgy of public debt monetization that has driven the weighted average cost of the Federal debt to a mere 1.75%. That’s close enough to free for government purposes—–so exactly which heroic politicians are going to fall on the sword to stop the debt machine when they can kick the can without visible consequences?
And when a few courageous remnants of fiscal sanity like Senators Cruz and Rand Paul have had the courage to resist still another increase in the public debt ceiling, they have been treated as pariahs by Wall Street and the kind of snarky financial media types on display last night.
The fact is, the President has clear constitutional powers to prioritize spending in the absence of an increase in the debt ceiling. That is, he can pay the interest on the debt, keep the Veterans hospitals open, send out the social security checks and prioritize any other category of spending that he chooses from the current inflow of tax revenues, and for as long as it takes to legislate an honest fiscal retrenchment.
Needless to say, that would create howls of pain from the Federal vendors who wouldn’t get paid, the state and local governments which would have to wait for their grant payments and the Federal employees who would be put on furlough.
But that is not the reason that Mitch McConnell and Johnny Lawnchair have capitulated every time a debt ceiling crisis has reached the boiling point. That kind of action-forcing circumstance was managed by Washington innumerable times in the pre-Bubble Finance world, including on upwards of a dozen occasions during my time in the Reagan White House.
But back then no one thought that Wall Street would have a hissy fit if the government was shutdown for a few days or if the fiscal gravy train was temporarily put on hold; nor did politicians much care if it did.
My goodness. Paul Volcker had taught Wall Street a thing or two about the requisites of financial discipline in any event.
No, what is different now is that the establishment GOP politicians are petrified of a stock market collapse, and have been brow-beaten into the false belief that a government shutdown will create severe political costs.
Baloney. Even the totally botched affair in October 2013 created no lasting damage—-as attested to by the GOP sweep in the 2014 elections.
At the end of the day, all the hyperventilation about the political costs of a government shutdown or the forced prioritization of spending in the absence of a debt ceiling increase is pure Wall Street propaganda; and its an untruth amplified and repeated endlessly, loudly and often hysterically by its financial media handmaidens.
At least last night some GOP politicians gave it back to them good and hard.
So maybe there is some hope for release from the destructive pall of Bubble Finance, after all.
- Valeant Tumbles After Hours As More Bad News Emerges
Just when you (and Bill Ackman) thought the worst was over, an avalanche of insurers and pharmacies are dumping Valeant’s Philidor and raising more questions about its activities. VRX is now down 16% on the day, back below the key $100 level (after touching $127 intraday).
The carnage started when Dow Jones reported that two of five independent directors of Sequoia Fund, Valeant’s largest holder, resigned this past weekend:
- *TWO SEQUOIA FUND INDEPENDENT DIRECTORS RESIGN AMID VRX NEWS: DJ
- DJ says Vinod Ahooja and Sharon Osberg quit board this past weekend amid recent scrutiny of VRX
Then, just before the close, we reported that CVS Health, the second-biggest pharmacy-benefit manager in the U.S., had cut off Valeant’s specialty chain Philidor, saying that “where CVS goes, others will promptly follow, not only leading to a prompt termination of any and all overinvoicing benefits Philidor provided to Valeant, but also leading to a crack down on specialty pharma organizations everywhere, and likely finally inviting a federal inquiry into just what is going on, because for a pharmacy to admit that there was fire where until just now there was nothing but smoke, not even the Feds can ignore that.”
This is precisely what happened literally minutes later when as Bloomberg reported minutes ago Express Scripts also terminated Philidor from its pharmacy network:
- *EXPRESS SCRIPTS TERMINATING PHILIDOR PHARMACY FROM NETWORK
- ESRX says in e-mailed statement evaluating all similar captive pharmacy pacts in light of Valeant’s recent revelations of its relationship to Philador.
But the hits kept coming – add another:
*SOME BCBS INSURERS SAID TO REVIEW VALEANT SPECIALTY PHARMACIES
But the knockout punch was the following, which could make a Federal involvmenet here virtually inevitable:
- *PHILIDOR SAID TO MODIFY PRESCRIPTIONS TO BOOST VALEANT SALES
- *PHILIDOR WORKERS SAID TO BE INSTRUCTED ON CHANGING RX CODES
Bloomberg adds that Philidor had altered doctors’ orders to wring more reimbursements out of insurers, according to former employees and an internal document.
Workers at the mail-order pharmacy, Philidor RX Services LLC, were given written instructions to change codes on prescriptions in some cases so it would appear that physicians required or patients desired Valeant’s brand-name drugs — not less expensive generic versions — be dispensed, the former employees said. Typically, pharmacists will sell a generic version if not precisely told to do otherwise by a “dispense as written” indication on a script. The more “dispense as written” orders, the more sales for the brand-name drugmaker.
Ex-employees who worked at Philidor in the last two years, and who asked that their names not be used discussing their former employer, confirmed that prescriptions were altered as the document details. They said the intent was to fill more prescriptions with Valeant products instead of generics.
Which, incidentally, is a federal crime.
So apart from all that, Valeant is fine and this is all nothing more than a short-selling-research shop bear raid, right?
* * *
Ahead of Bill Ackman’s conference call tomorrow, we can only wish him luck.
- US Threatens UK With Trade Barriers If It Leaves The European Union
One of the most important decisions Brits have to make before the end of 2017 (most likely some time next year) is whether or not to remain in the European Union, and while recent polls have those willing to stay in as the majority, there has been a spike in support for leaving the bloc…
… which coupled with Europe’s refugee crisis has made a Brexit an all too possible outcome.
Which probably explains why the U.S., confident it sill has veto power over democracies anywhere in the world, has just made it quite clear to UK’s citizens which way they should vote.
According to the Guardian, the US trade representative, Michael Froman, in the first public comments from a senior US official on the matter, said that “the United States is not keen on pursuing a separate free trade deal with Britain if it leaves the European Union.”
Just like in the case of Scotland’s vote last year, trade is being used a key bargaining chip, or rather ultimatum: vote the way we want, or else. Guardian adds that Froman’s comments on Wednesday undermine a key economic argument deployed by proponents of exit, who say Britain would prosper on its own and be able to secure bilateral free trade agreements (FTAs) with trading partners.
The US is Britain’s biggest export market after the EU, buying more than $54bn (£35bn) in goods from the UK in 2014.
“I think it’s absolutely clear that Britain has a greater voice at the trade table being part of the EU, being part of a larger economic entity,” Froman told Reuters, adding that EU membership gives Britain more leverage in negotiations.
“We’re not particularly in the market for FTAs with individual countries. We’re building platforms … that other countries can join over time.”
Froman’s take it or leave it condition is that if Britain left the EU, Froman said, it would face the same tariffs and trade barriers as other countries outside the US free trade network. “We have no FTA with the UK so they would be subject to the same tariffs – and other trade-related measures – as China, or Brazil or India,” he said.
Of course, the US could craft a deal in hours if not minutes if it so wanted, and David Cameron knows this. However, it is far easier for the U.S. oversee a world which is globalizing rather than fragmenting, because if the U.K. were to leave the Union, the line of countries willing to be next would stretch around the block.
Some more details on UK’s trade statusin the EU:
The US is Britain’s second-largest export market for vehicles outside the EU.
If Britain is not part of the EU and therefore not part of TTIP, British cars exported to the US, such as those made by Jaguar Land Rover, would face a 2.5% tariff and could be at a disadvantage to German and Italian-made competitors.
British exports of fuel and chocolate could also be at a disadvantage if TTIP abolishes tariffs on those products.
Those are the benefits of the continued UK allegiance to Washington; however just ask any orginary Brit for the trade offs and you will be listening hours later, usually involving cheap labor migration from the continent.
But perhaps the most interesting consequence from this latest U.S. intervention in foreign affairs is how ordinary citizens will react when they realize just how aggressively the U.S. defends its strategic status quo interests. Which would then lead to a potentially fascinating pivot, one which would explain all the friendly relations between the U.K. and Beijing in recent months, including not only Xi Jinping’s recent visit, but also why China picked London as the city where to issue its first sovereign debt in Renminbi.
Meanwhile, the biggest loser from this latest power push may be none other than the U.S. which may soon learn, the very hard way, that those whom it considered close strategic allies can just as quickly find other partners in a world where the US is no longer the only superpower on the block.
- Today's War Against Deflation Will Make Us All Poorer
Submitted by Frank Shostak via The Mises Institute,
The yearly growth rate of the US consumer price index (CPI) fell to 0 percent in September 2015, from 0.2 percent in August and, 1.7 percent in September last year.
The yearly growth rate of the European Monetary Union CPI fell to minus 0.1 percent in September from 0.1 percent in the previous month and 0.3 percent in September last year.
Also, the growth momentum of the UK CPI fell into the negative in September with the yearly growth rate closing at minus 0.1 percent from 0 percent in August and 1.2 percent in September last year.
The growth momentum of China’s CPI eased in September with the yearly growth rate falling to 1.6 percent from 2 percent in August.
Deflation Fears Gain Steam
Consequently, many experts are expressing concern regarding the declining growth momentum of the CPI and are of the view that rather than tightening the monetary stance, central banks should loosen their stance further in order to counter the emergence of deflation, which is regarded as a major threat to economic well-being of individuals.
For most experts, deflation is bad news since it generates expectations of a decline in prices. As a result, they believe, consumers are likely to postpone their buying of goods at present since they expect to buy these goods at lower prices in the future.
This weakens the overall flow of spending and in turn weakens the economy. Hence, such commentators believe that policies that counter deflation will also counter the slump.
Will Reversing Deflation Prevent a Slump?
If deflation leads to an economic slump, then policies that reverse deflation should be good for the economy, so it is held.
Reversing deflation will simply involve introducing policies that support general increases in the prices of goods, i.e., price inflation. With this way of thinking inflation could actually be an agent of economic growth.
According to most experts, a little bit of inflation can actually be a good thing. Mainstream economists believe that inflation of 2 percent is not harmful to economic growth, but that inflation of 10 percent could be bad for the economy.
There’s good reason to believe, however, that at a rate of inflation of 10 percent, it is likely that consumers are going to form rising inflation expectations.
According to popular thinking, in response to a high rate of inflation, consumers will speed up their expenditures on goods at present, which should boost economic growth. So why then is a rate of inflation of 10 percent or higher regarded by experts as a bad thing?
Clearly there is a problem with the popular way of thinking.
Price Inflation vs. Money-Supply Inflation
Inflation is not about general increases in prices as such, but about the increase in the money supply. As a rule the increase in the money supply sets in motion general increases in prices. This, however, need not always be the case.
The price of a good is the amount of money asked per unit of it. For a constant amount of money and an expanding quantity of goods, prices will actually fall.
Prices will also fall when the rate of increase in the supply of goods exceeds the rate of increase in the money supply.
For instance, if the money supply increases by 5 percent and the quantity of goods increases by 10 percent, prices will fall by 5 percent.
A fall in prices cannot conceal the fact that we have inflation of 5 percent here on account of the increase in the money supply.
The Problem Is Really Wealth Formation, not Rising Prices
The reason why inflation is bad news is not because of increases in prices as such, but because of the damage inflation inflicts to the wealth-formation process. Here is why:
The chief role of money is the medium of exchange. Money enables us to exchange something we have for something we want.
Before an exchange can take place, an individual must have something useful that he can exchange for money. Once he secures the money, he can then exchange it for the good he wants.
But now consider a situation in which the money is created "out of thin air," increasing the money supply.
This new money is no different from counterfeit money. The counterfeiter exchanges the printed money for goods without producing anything useful.
He in fact exchanges nothing for something. He takes from the pool of real goods without making any contribution to the pool.
The economic effect of money that was created out of thin air is exactly the same as that of counterfeit money — it impoverishes wealth generators.
The money created out of thin air diverts real wealth toward the holders of new money. This weakens the wealth generators ability to generate wealth and this in turn leads to a weakening in economic growth.
Note that as a result of the increase in the money supply what we have here is more money per unit of goods, and thus, higher prices.
What matters however is not that price rises, but the increase in the money supply that sets in motion the exchange of nothing for something, or "the counterfeit effect."
The exchange of nothing for something, as we have seen, weakens the process of real wealth formation. Therefore, anything that promotes increases in the money supply can only make things much worse.
Why Falling Prices Are Good
Since changes in prices are just a symptom, as it were — and not the primary causative factor — obviously countering a falling growth momentum of the CPI by means of loose a monetary policy (i.e., by creating inflation) is bad news for the process of wealth generation, and hence for the economy.
In order to maintain their lives and well-being, individuals must buy goods and services in the present. So from this perspective a fall in prices cannot be bad for the economy.
Furthermore, if a fall in the growth momentum of prices emerges on the back of the collapse of bubble activities in response to a softer monetary growth then this should be seen as good news. The less non-productive bubble activities that are around the better it is for the wealth generators and hence for the overall pool of real wealth.
Likewise, if a fall in the growth momentum of the CPI emerges on account of the expansion in real wealth for a given stock of money, this is obviously great news since many more people could now benefit from the expanding pool of real wealth.
We can thus conclude that contrary to the popular view, a fall in the growth momentum of prices is always good news for the wealth generating process and hence for the economy.
- Yellen's Hawkish Hangover Leaves Bonds & Bullion Bruised & Stocks Steady
This won't end well…
* * *
First things first, The Fed managed to convince the market – despite the collapse of fundamentals – that it will hike in December…December odds the highest they have ever been…
Having dumped the post-FOMC gains early on, stocks bounced modestly… then acelerated in the last 20 minutes before last minute selling…
But in the day only Trannies ended green (as a late ramp failed)
All thanks to a VIX-crushing ramping S&P into the green…
Though a notable VIX decouple..
But bonds, gold, and crude are all red post-FOMC
And on the week…Small Caps unch, Trannies biggest losers…
Trannies outperformed (and did it again against crude)…pushing up to the 100DMA
Financials continue to bounce (but credit remains ominously weak)…
But Camera-on-a-stick crashed to record lows…
And Valeant had another tough day…
Credit markets decoupled from equities today…
With VXX trading in a very narrow range today…
But Treasury yields played catch up to stocks…
As the entire curve shot up today (with the long-end underperforming 2Y +2bps, 30Y +8bps)
The USDollar gave back some of its hawkish Fed gains…AUD continues to get slammed as EUR rallied back somewhat…
And The Dollar slipped back against Asian FX also (but remains notably stronger post FOMC)
Commodities were very mixed today…
With crude dump and pumping (run stops) and dumping…
And Nattie making new cycle lows…
Charts: Bloomberg
Bonus Chart: "Data-Dependent" Fed…
— Not Jim Cramer (@Not_Jim_Cramer) October 29, 2015
Bonus Bonus Chart: The Bulls Are Back In Town…
AAII Blog: Optimism among individual investors is above 40% for the first time 35 weeks. https://t.co/hIzEhrm4Mj pic.twitter.com/eMfv5Y75ED
— Charles Rotblut, CFA (@CharlesRAAII) October 29, 2015
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