Today’s News September 14, 2015

• Gold, Silver, and Horse Betting Report 13 Sep, 2015

  Consider the sport of betting on the sport of horse racing. It’s actually similar to the analysis of the gold and silver markets. How’s that?

  First, there is the manic-depressive crowd. Sometimes (as we are told—we don’t hang out at race tracks) the bettors sometimes get overly excited about a horse with slim chances to win, or get totally unexcited about a strong horse. The track responds by lowering or raising the payout for winning, respectively. The more betting on a horse, the lower the payout.

  The track does not care which horse is likely to win or not win. What it wants to do is take its rake from the total bets placed. It does this by making a spread between what it takes in on all the horses, and what it will have to pay out if any given horse wins. We don’t know the precise formula, but if horse X gets ¼ of the total bets then the payout if X wins had better be less than 4:1.

  In keeping with our theme of emphasizing spread rather than price, there is a spread that smart bettors should be paying attention to. A smart horse bettor should have a way of assessing the probability of X winning (and for every other horse in the race). He should bet when the payout is higher than the probability of winning. Suppose in the frenzy of betting on X, almost no one bets on Y. So Y pays 10:1. If a bettor assesses Y’s odds as 5:1, it’s a good bet. Yes, the horse is not probable to win. However, the payout is greater than the odds. Given enough bets with 5:1 odds and 10;1 payouts, a bettor will win in the long run.

  We admit to not knowing much about betting at racetracks. There may be lots of reasons why this scheme is not practical (not least of which is being accurate in assessing odds for each horse). That’s not the point, and we certainly don’t recommend anyone to start betting on horse racing.

  The point is that the “house” focuses on spread. Sophisticated operators focus on spread. You should focus on spread too.

  Mainstream analysis often dismiss gold as having no value, on grounds that they know not how to assess it. Gold bugs often like to divide some measure of the quantity of dollars by some measure of the quantity of gold to get an intrinsic value. This exercise in arithmetic usually shows that gold is massively underpriced.

  Both approaches are equally wrong.

  The fact is that virtually all of the gold mined over the millennia is still in human hands. The proportion for silver is lower, but still orders and orders of magnitude greater than that of any other commodity. This means that the people on this planet do value gold and silver, without much regard to quantity already held. The value they place on the metals can be measured at the margin. How?

  By studying spreads.

  We can theorize that people will value gold and silver more highly (i.e. value the dollar at a much lower level). But that is not a measurement of the current market reality. It is speculation. Perhaps smart speculation. It may even be based on sound economics. But it’s nothing to do with the current market and supply and demand conditions within it.

  …

  Monday was a holiday in the US (Labor Day), so it was a short week.

  The prices of the metals went down, with the gold move slightly larger than the silver. Yes, but what happened to the spreads of the metals this week? Read on…

  First, here is the graph of the metals’ prices.

         The Prices of Gold and Silver 

  We are interested in the changing equilibrium created when some market participants are accumulating hoards and others are dishoarding. Of course, what makes it exciting is that speculators can (temporarily) exaggerate or fight against the trend. The speculators are often acting on rumors, technical analysis, or partial data about flows into or out of one corner of the market. That kind of information can’t tell them whether the globe, on net, is hoarding or dishoarding.

  One could point out that gold does not, on net, go into or out of anything. Yes, that is true. But it can come out of hoards and into carry trades. That is what we study. The gold basis tells us about this dynamic.

  Conventional techniques for analyzing supply and demand are inapplicable to gold and silver, because the monetary metals have such high inventories. In normal commodities, inventories divided by annual production (stocks to flows) can be measured in months. The world just does not keep much inventory in wheat or oil.

  With gold and silver, stocks to flows is measured in decades. Every ounce of those massive stockpiles is potential supply. Everyone on the planet is potential demand. At the right price, and under the right conditions. Looking at incremental changes in mine output or electronic manufacturing is not helpful to predict the future prices of the metals. For an introduction and guide to our concepts and theory, click here.

  Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio moved down again this week. Is it bouncing off support, or just correcting before it goes higher? Read on… 

  The Ratio of the Gold Price to the Silver Price 

  For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

  Here is the gold graph.

         The Gold Basis and Cobasis and the Dollar Price
  
  

  The price of the dollar rose slightly, but the scarcity (i.e. cobasis) of gold backed off slightly. At least for the October contract.

  The fundamental price did not move much. It’s still over $1,270.

  Now let’s look at silver.

  The Silver Basis and Cobasis and the Dollar Price
  
  

  While the price of the dollar went up (i.e. the price of silver, measured in dollars went down) the scarcity rose.

  The silver fundamental price rose, and is now about a dollar over the market price.

  The fundamental ratio moved down slightly, but is still over 80.

   

  Monetary Metals may sponsor an event in London in early October, and another in Sydney in late October, to discuss economics and markets, with a focus on how to approach saving, investing, and speculating. Please let us know if you may be interested in attending either one here.

   

  © 2015 Monetary Metals

  

  

  

  

• A Refugee Crisis Made In America

  Submitted by Philip Giraldi via TheAmericanConservative.com,

  On April 29th, 2008 I had a Saul on the Road to Damascus moment. I had flipped open the Washington Post and there, on the front page, was a color photo of a two year old Iraqi boy named Ali Hussein being pulled from the rubble of a house that had been destroyed by American missiles. The little boy was wearing shorts and a t-shirt and had on his feet flip-flops. His head was hanging back at an angle that told the viewer immediately that he was dead.

  Four days later on May 3rd a letter by a Dunn Loring Virginia woman named Valerie Murphy was printed by the Post. Murphy complained that the Iraqi child victim photo should not have been run in the paper because it would “stir up opposition to the war and feed anti-US sentiment.” I suppose the newspaper thought it was being impartial in printing the woman’s letter, though I couldn’t help but remember that the neocon-dominated Post had generally been unwilling to cover anything antiwar, even ignoring a gathering of 300,000 protesters in Washington in 2005. Rereading the woman’s complaint and also a comment on a website suggesting that the photo of the dead little boy had been staged, I thought to myself, “What kind of monsters have we become.” And in truth we had become monsters. Bipartisan monsters wrapped in the American flag. Bill Clinton’s Secretary of State Madeleine Albright once said that killing 500,000 Iraqi children through sanctions was “worth it.” She is now a respected elder statesman close to the Hillary Clinton campaign.

  I had another epiphany last week when I saw the photo of the little Syrian boy Aylan Kurdi washed up on a Turkish beach like a bit of flotsam. He was wearing a red t-shirt and black sneakers. I thought to myself that many Americans will shake their heads when looking at the photo before moving on, more concerned about Stephen Colbert’s debut on the Late Show and the start of the NFL season.

  The little boy is one of hundreds of thousands of refugees trying to get to Europe. The world media is following the crisis by focusing primarily on the inability of unprepared local governments to deal with the numbers of migrants, asking why someone somewhere can’t just “do something.” This means that somehow, as a result, the vast human tragedy has been reduced to a statistic and, inevitably, a political football.

  Overwhelmed by thousands of would-be travelers, Hungary suspended train service heading towards Western Europe while countries like Serbia and Macedonia deployed their military and police along their borders in a failed attempt to completely block refugees. Italy and Greece have been overwhelmed by migrants arriving by sea. Germany, to its credit, is intending to process up to 800,000 refugee and asylum applications, mostly from Syria, while Austria and Sweden have also indicated their willingness to accept many more. Immediate neighbors of the zone of conflict, notably Turkey, Lebanon and Jordan are hosting more than three million of those who are displaced, but the wealthy Arab Gulf countries and Saudi Arabia have done little or nothing to help.

  Demands for a European unified strategy to deal with the problem are growing, to include sealing borders and declaring the seas off of preferred departure points in North Africa and Asia to be military zones where undocumented ships and travelers will be intercepted and turned back. One also has to suspect that the refugee crisis might be exploited by some European politicians to justify NATO “humanitarian” intervention of some sort in Syria, a move that would have to be supported by Washington. But while the bickering and maneuvering goes on, the death toll mounts. The recent discovery of 71 dead would-be migrants who suffocated in the back of a locked truck found in Austria, to include five children and a toddler, horrified the world. And that was before the dead three year old on the Turkish beach.

  Many of the would-be migrants are young men looking for work in Europe, a traditional enterprise, but most of the new arrivals are families escaping the horrors of war in Syria, Iraq, Afghanistan, and Yemen. Their plight has been described in the media in graphic terms, families arriving with nothing and expecting nothing, fleeing even worse conditions back at home.

  The United States has taken in only a small number of the refugees and a usually voluble White House has been uncharacteristically quiet about the problem, possibly realizing that allowing in a lot of displaced foreigners at a time when there is an increasingly heated debate over immigration policy in general just might not be a good move, politically speaking. But it should perhaps be paying some attention to what caused the problem in the first place, a bit of introspection that is largely lacking both from the mainstream media and from politicians.

  Indeed, I would assign to Washington most of the blame for what is happening right now. Since folks inside the beltway are particularly given to making judgements based on numerical data they might be interested in the toll exacted through America’s global war on terror. By one not unreasonable estimate, as many as four million Muslims have died or been killed as a result of the ongoing conflicts that Washington has either initiated or been party to since 2001.

  There are, in addition, millions of displaced persons who have lost their homes and livelihoods, many of whom are among the human wave currently engulfing Europe. There are currently an estimated 2,590,000 refugees who have fled their homes from Afghanistan, 370,000 from Iraq, 3,880,000 million from Syria, and 1,100,000 from Somalia. The United Nations Refugee Agency is expecting at least 130,000 refugees from Yemen as fighting in that country accelerates. Between 600,000 and one million Libyans are living precariously in neighboring Tunisia.

  The number of internally displaced within each country is roughly double the number of those who have actually fled and are seeking to resettle outside their homelands. Many of the latter have wound up in temporary camps run by the United Nations while others are paying criminals to transport them into Europe.

  Significantly, the countries that have generated most of the refugees are all places where the United States has invaded, overthrown governments, supported insurgencies, or intervened in a civil war. The invasion of Iraq created a power vacuum that has empowered terrorism in the Arab heartland. Supporting rebels in Syria has piled Pelion on Ossa. Afghanistan continues to bleed 14 years after the United States arrived and decided to create a democracy. Libya, which was relatively stable when the U.S. and its allies intervened, is now in chaos, with its disorder spilling over into sub-Saharan Africa.

  Everywhere people are fleeing the violence, which, among other benefits, has virtually obliterated the ancient Christian presence in the Middle East. Though I recognize that the refugee problem cannot be completely blamed on only one party, many of those millions would be alive and the refugees would for the most part be in their homes if it had not been for the catastrophic interventionist policies pursued by both Democratic and Republican administrations in the United States.

  It is perhaps past time for Washington to begin to become accountable for what it does. The millions of people living rough or in tents, if they are lucky, need help and it is not satisfactory for the White House to continue with its silence, a posture that suggests that the refugees are somehow somebody else’s problem. They are, in fact, our problem. A modicum of honesty from President Barack Obama would be appreciated, perhaps an admission that things have not exactly worked out as planned by his administration and that of his predecessor. And money is needed. Washington throws billions of dollars to fight wars it doesn’t have to fight and to prop up feckless allies worldwide. For a change it might be refreshing to see tax money doing some good, working with the most affected states in the Middle East and Europe to resettle the homeless and making an honest effort to come to negotiated settlements to end the fighting in Syria and Yemen, both of which can only have unspeakably bad outcomes if they continue on their current trajectories.

  Ironically, American hawks are exploiting the photo of the dead Syrian boy to blame the Europeans for the humanitarian crisis while also demanding an all-out effort to depose Bashar al-Assad. Last Friday’s Washington Post had a lead editorial headlined “Europe’s Abdication,” and also featured a Michael Gerson op-ed urging immediate regime change in Syria, blaming the crisis solely on Damascus. The editorial railed against European “racists” regarding the refugee plight. And it is not clear how Gerson, an evangelical neoconservative former speech writer for George W. Bush, can possibly believe that permitting Syria to fall to ISIS would benefit anyone.

  We Americans are in something approaching complete denial about how truly horrible our nation’s recent impact on the rest of the world has been. We are universally hated, even by those who have their hands out to receive their Danegeld, and the world is undoubtedly shaking its head as it listens to the bile coming out of the mouths of our presidential candidates. Shakespeare observed that the “evil that men do lives after them,” but he had no experience of the United States. We choose to dissimulate regarding the bad choices we make followed up with lies to justify and mitigate our crimes. And still later the evil we do disappears down the memory hole. Literally.

  In writing this piece I looked up Ali Hussein, the little Iraqi boy who was killed by the American bomb. He has been “disappeared” from Google, as well has the photo, presumably because his death did not meet community standards. He has likewise been eliminated from the Washington Post archive. The experience of Winston Smith in George Orwell’s 1984 immediately came to mind.

  

  

  

  

  

• US Futures Jump Unaware Gartman Short Has Been Stopped Out, China Hugs Flatline

  Following a string of weak economic news out of both Japan and the US, it was China’s turn to disappoint which it did over the weekend with the worst fixed-asset investment data – the primary driver of China’s GDP – since 2000, as well as yet another miss in Chinese industrial output, just the latest two indications that China’s economy is grinding to a halt if not slamming into reverse.

  

   

  The result: just like with Japan’s latest dramatic economic deterioration, China’s data was merely taken as yet another indication the PBOC will be forced to ease more in the coming days. As Reuters reported, “the data add to expectations that Beijing will respond with more measures to prop up the economy. “The numbers fit with our view that China will have to roll out more monetary easing,” said Fumio Nakakubo, Japan CIO at UBS’s wealth management division.”

  Because if it hasn’t worked so far, it is only because not enough has been applied right?

  That, however, may not work for Japan where there has been a resurgence in calls for more easing out of the BOJ although as we first noted last year, and as the IMF confirmed last week, the BOJ no longer can boost QE simply because there is nothing incremental it can buy. It also explains why Reuters reported earlier that “Bank of Japan policymakers are in no mood to expand monetary stimulus this week, sources familiar with their thinking say, even as poor data challenges their presumption that economic recovery will boost inflation to its 2 percent target next year.”

  There is still hope for an October rate hike, but just like September, the closer we get to the date, the more unlikely such a hike will “suddenly” become as even the BOJ is now officially out of QQE boosting ammo, and the best it can hope for is to last until 2017 without prematurely tapering.

  And while the Shanghai Composite opened green only to turn red moments ago as doubt starts to creep in that someone, anyone will ease more…

  

   

  … we don’t expect much of a move from China. As the following chart shows, ever since the Chinese government killed trading in Chinese index futures last week, the “market” is anything but – and has literally flatlined as virtually nobody trades anymore. In other words, China has successfully CYNKed its entire stock market.

  

   

  Earlier, the PBOC modestly raised the Yuan, pushing it higher by 0.02% to 6.3709, up from 6.3750, although even that move seems rather unremarkable by recent standards – as if even China is now waiting for the Fed.

  

   

  For now, US equity futures are higher on the day, rising by 9 point after being 14 points higher ealier, driven mostly by USDJPY correlation algos, and perhaps by Goldman’s conviction that the Fed will not hike in September and may delay hiking until 2016 altogether.

  

   

  However, we expect this initial euphoria higher to fade momentarily, once the vacuum tubes realize that the catalyst of Friday’s surge higher, namely Gartman’s latest flipflopping is no longer on the table. As a reminder, this is how we paraphrased Dennis in “A Warning For The Bears: Gartman Goes Short S&P Futures, “Very Worried In Catholic Terms“

  NEW RECOMMENDATION: we wish to sell the S&P futures short this morning, fearing that a major top hss developed and that the recent consolidation in the stock market is precisely that: a consolidation before the next leg downward.

   

  We’ll sell the S&P future short and will buy the December T-note at the same time, with the S&P trading 1933.00 as we write and with the Dec T-note future trading 127 ¼. We’ll risk no more than 1.5% on either position and we look for the consolidation in the S&P to resolve itself sharply lower as discussed at length above.

  Well, as of tonight, just 1 trading day after his latest reco, Gartman has been stopped out as his 1.5% limit was hit when futures rose above 1962 this evening.

  So with Gartman no longer a 100% assured fade, the algos are now flying blind and anything is possible.

  That said, for the real action we will just have to wait until Thursday when the Fed either proceeds with the first rate hike in 9 years or, far more likely, postponed once again… due to “risk management” considerations of course.

  

  

  

  

  

• An Angry China May Cancel Xi Trip To Washington Over US Cyber Sanctions

  A little over a week ago, FT suggested that the US was set to slap China with sanctions in retaliation for what the US claims are a series of cyber attacks. The news came a month after the NSA leaked a “secret” map to the press which purported to show the locations of hundreds of cyber intrusions which NBC said were used “to steal corporate and military secrets and data about America’s critical infrastructure, particularly the electrical power and telecommunications and internet backbone.”

  Furthermore, the report continued, “the prizes that China pilfered during its ‘intrusions’ included everything from specifications for hybrid cars to formulas for pharmaceutical products to details about U.S. military and civilian air traffic control systems.” NBC cited “intelligence officials.”

  The release of the map and subsequent indication that the Obama administration felt it needed to send a message in the wake of the OPM hack described as “the largest theft of US government data ever,” marked the culmination of a long cyber propaganda campaign which began with accusations that North Korea had attempted to sabotage the release of a Seth Rogen film and reached peak absurdity when Bloomberg reported that Chinese hacker spies had taken control of the Penn State engineering department. 

  Ultimately, all of this prompted the administration to “prepare a raft of sanctions to respond to [the] mounting commercial espionage,” FT reported. The problem with applying the sanctions now however, is that Xi Jinping is preparing to visit Washington and as anyone who knows anything about Xi is fully aware, he is not a man who enjoys being embarrassed, a fact that’s led some officials to voice concerns about the wisdom of leveling the sanctions now as opposed to after Xi and Obama have met and the Chinese President is back home in Beijing. The thinking is essentially this: “why risk making things awkward when the US could just wait and apply the sanctions later, allowing Xi to save face?” 

  Well sure enough, it now looks like the very idea that Washington is set to move ahead with the sanctions may be enough to prompt Xi to cancel the trip altogether. The Hill has more:

  Sanctions punishing China for hacking U.S. companies could drive Beijing to cancel President Xi Jinping’s upcoming U.S. visit, according to experts and former administration officials.

   

  The Asian power is increasingly anxious about the potential of economic penalties ahead of what’s seen as an important summit for the future of the U.S.-China relationship.

   

  “The Chinese right now are getting very concerned because they understand this will create embarrassing optics around the visit for them,” said Samm Sacks, China analyst at the Eurasia Group, a political risk consulting firm, who has advised government agencies on Chinese tech policy.

   

  While some experts and former White House cybersecurity officials are wary the administration will aggravate Beijing just days before Xi lands in Washington, current officials have privately indicated sanctions may be imminent.

  Then again, The White House is also concerned that its reputation (or whatever is left of it as it relates to relations with China) will be damaged if the US allows a diplomatic visit to dictate America’s response to what’s been billed as aggressive cyber warfare: 

  “If they don’t announce the sanctions soon,” Sacks said, “it makes the Obama administration look weak.”

   

  But when those penalties hit is a major question.

   

  Many see little upside to timing the sanctions this close to the meetings. After months of anticipation, such a move would eliminate any chance of a worthwhile dialogue on cybersecurity at the summit and compound the inevitable blowback, policy specialists agreed.

   

  “You’re not going to get any better chance to talk to them than right now,” said Jason Healey, a former director of cyber infrastructure protection at the White House. “If I were Obama, I would want some running room.” 

   

  Healey and others believe the rumors are meant simply as a message to the Chinese delegation as it prepares to make the trip stateside.

   

  “My sense was that the leaks were happening to try and create some kind of pressure on the Chinese as they come into the summit, to get some type of traction with them,” said Chinese cyber policy expert Adam Segal, a senior fellow at the Council on Foreign Relations.

   

  Others have heard the leaks were not intentional, and came from hard-liners within the administration who want to press forward with sanctions.

   

  Either way, the U.S. is in a rare position to apply cybersecurity pressure on China. Many believe the White House has less to lose than its counterpart during the upcoming summit.

   

  Within the Obama administration, “there’s a tolerance of having a bad visit,” Sacks said.

  Beijing officials are more concerned about the international community’s perception of the meetings, foreign policy experts agreed.

   

  “They want to send the signal about [Xi’s] arrival on the international stage,” Segal explained.

  In the end, this is just further evidence of worsening relations between the US and China. If the situation is so tenuous that sanctions related to hacking have the potential to derail a meeting between the leaders of the two countries which now preside over a world that’s returned to bipolarity for the first time since the fall of the USSR, then constructive dialogue around issues like China’s military buildup in the Spratlys or, more recently, the presence of the Chinese navy off the coast of Alaska may be all but impossible going forward and as Russian foreign minister Sergei Lavrov reminded the US last week, when dialogue isn’t possible, “unintended incidents” are more likely to occur.

  Of course something tells us Xi wasn’t really looking forward to the trip in the first place so we doubt he’ll be losing sleep…

  

  

  

  

  

  

• Monsanto Stunned – California Confirms 'Roundup' Will Be Labeled "Cancer Causing"

  Submitted by Claire Bernish via TheAntiMedia.org,

  California just dealt Monsanto a blow as the state’s Environmental Protection Agency will now list glyphosate – the toxic main ingredient in the U.S.’ best-selling weedkiller, Roundup – as known to cause cancer.

  Under the Safe Drinking Water and Toxic Enforcement Act of 1986 — usually referred to as Proposition 65, its original name — chemicals that cause cancer, birth defects, or other reproductive harm are required to be listed and published by the state. Chemicals also end up on the list if found to be carcinogenic by the International Agency for Research on Cancer (IARC) — a branch of the World Health Organization.

   

  In March, the IARC released a report that found glyphosate to be a “probable carcinogen.”

  Besides the “convincing evidence” the herbicide can cause cancer in lab animals, the report also found:

  “Case-control studies of occupational exposure in the U.S.A., Canada, and Sweden reported increased risk for non-Hodgkin lymphoma that persisted after adjustments to other pesticides.”

  California’s decision to place glyphosate on the toxic chemicals list is the first of its kind. As Dr. Nathan Donley of the Center for Biological Diversity said in an email to Ecowatch, “As far as I’m aware, this is the first regulatory agency within the U.S. to determine that glyphosate is a carcinogen. So this is a very big deal.”

  Now that California EPA’s Office of Environmental Health Hazard Assessment (OEHHA) has filed its “notice of intent to list” glyphosate as a known cancer agent, the public will have until October 5th to comment. There are no restrictions on sale or use associated with the listing.

  Monsanto was seemingly baffled by the decision to place cancer-causing glyphosate on the state’s list of nearly 800 toxic chemicals. Spokesperson for the massive company, Charla Lord, told Agri-Pulse that

  "Glyphosate is an effective and valuable tool for farmers and other users, including many in the state of California. During the upcoming comment period, we will provide detailed scientific information to OEHHA about the safety of glyphosate and work to ensure that any potential listing will not affect glyphosate use or sales in California.”

  Roundup is sprayed on crops around the world, particularly with Monsanto’s Roundup-Ready varieties — genetically engineered to tolerate large doses of the herbicide to facilitate blanket application without harming crops. Controversy has surrounded this practice for years — especially since it was found farmers increased use of Roundup, rather than lessened it, as Monsanto had claimed.

  Less than a week after the WHO issued its report naming glyphosate carcinogenic, Monsanto called for a retraction — and still maintains that Roundup is safe when used as directed.

  On Thursday, an appeals court in Lyon, France, upheld a 2012 ruling in favor of farmer Paul Francois, who claimed he had been chemically poisoned and suffered neurological damage after inhaling Monsanto’s weedkiller, Lasso. Not surprisingly, the agrichemical giant plans to take its appeal to the highest court in France.

  It’s still too early to tell whether other states will follow California’s lead.

  

  

  

  

  

• Lord Of The Flies: Dystopia Is Arriving

  Submitted by Dave Kranzler via Investment Research Dynamics,

  Paper money eventually returns to its intrinsic value – zero  – Voltaire

  I was driving around Denver yesterday doing my “boots on the ground” due diligence scouting of the local housing market.  I continue to see some “sold” and “under contract” signs but I’m seeing a pile-up forming in new “for sale,” “price reduced,” and “for rent” signs.   The traffic update on the sports radio reported a back-up at an intersection in Denver caused by a fist-fight that had broken out between two drivers.  This country is sliding back into neanderthal times.

  The U.S. economic system is slipping into dystopia and the Government/Fed is doing everything it can to try and prevent the process.  The two most obvious signs of this are the perpetual market interventions by the PPT to prevent a stock market dump and the relentless propaganda flowing through the mainstream media which originates from the policy-implementing elitists (business and political).  Both efforts are insidious attempts to force control over our system

  Overnight this week, the S&P 500 e-mini futures were halted twice.   The SPX mini is the Fed’s choice intervention tool because it can direct the market with minimal capital requirements.  The e-mini is hyper-sensitive to big orders and tends to lead the big SPX directionally because of this.   The emini trading was halted after a sudden plunge in the futures at 5:51 a.m. EST, after which a massive buy order (the PPT) hit the tape and spiked the eminis straight up. The market was halted again after the spike up stalled and the emini was about to plunge again.   You can see the action here:   E-mini Market Halt

  The graphic linked above was provided by Nanex’s Eric Hunsader.  Prior to the market’s first market halt, Hunsader tweeted:  “emini getting tossed around like a rag doll:”

  

  I found Hunsader’s allusion to “Lord of the Flies” to be quite haunting. For me it encapsulates the societal, political and economic direction in which the United States is headed. Rule of Law has been completely eroded by corrupt Presidents and citizen nonchalance. Many beside me have alluded to the fact that the U.S. political system now resembles that of a Central American Banana Republic. That’s no secret to anyone who cares to peek at reality.

  But where this whole process starts to get scary is when that needle heads toward “Lord of the Flies.” That is the point at which we will see and experience the truly dark side of humanity. Too me the outbreak of fistfights at traffic intersections and the herds of panhandlers standing on busy urban and suburban corners reflects the movement of that needle past Banana Republic to the left…

  I’m not an e-wave theory advocate but there’s merit to some of the analysis.  Robert McHugh is probably the most skilled practitioner of it these days and he’s run 5 different “wave” scenarios – all of them suggest a high probability of serious market crash coming soon – he specifically references the August sell-off as “gentle” in comparison.

  If this stock market does what we all know it will do eventually, which is seek a level that reflects its true underlying intrinsic value, all hell will break loose in this country and we’ll start hearing reports of much worse occurrences than fist-fights at traffic intersections.

  What is the “intrinsic value” of the S&P 500?  Based studying the earnings of enough S&P 500 companies using the GAAP accounting standards that were in place 20-30 years ago – vs. non-GAAP, adjusted-GAAP, and new GAAP accounting applications used today – I would suggest that S&P 500 has “fair value” around the 500-600 level.  A large portion of reported net income/EPS is income that is non-cash and is manufactured by new accounting gimmicks.

  The S&P 500 hit 666.79, which is in my “fair value” range, intra-day on March 6, 2009 (no, I don’t read any significance into “666”).  We saw how the Fed and the Treasury responded: they began dumping trillions of printed dollars into the banking system and drastically altered some of the GAAP accounting rules – i.e. they changed the rules of the game.  This was in response to the S&P 500 seeking fair value.

  What is frightening to contemplate, in the context of Eric Hunsader’s haunting Tweet, is what the Government’s response will look like this time around when the PPT loses control – which I believe is occurring now – and the S&P plummets again in an attempt to seek it’s proper level.  Remember:  just like water, the stock market eventually always finds its own level.

  

  

  

  

  

• What Happens When Central Banks Hike Rates In The "New Normal"

  Ten days ago, using Bank of America data, we summarized what it means to live in the New Normal: “In the 110 months [since the last Fed hike] global central banks have cut interest rates 697 times, central banks have bought $15 trillion of financial assets, zero [or negative] interest rates policies have been adopted in the US, Europe & Japan. And, following the Great Financial Crisis of 2008, both stocks and corporate bonds have soared to all-time highs thanks in great part to this extraordinary monetary regime.”

  Indeed, what has happened in the past 7 years is nothing short of the greatest attempt ro reflate asset prices (if not so much the economy – that will come when the helicopters start paradropping bags of cash) the world has ever seen, driven entirely by the central banks and China. In fact, it is now so obvious even JPM finally figured it out.

  

  However, while the desperate attempt to monetize a quarter of global GDP in tradable assets just to boost the confidence (and wealth) of the “1%” is no longer lost on anyone, the reality is that some banks did try to tighten monetary conditions and hike rates.

  This is how they fared. According to the WSJ: “In the seven years since the world’s central banks responded to the financial crisis by slashing interest rates, more than a dozen banks in the advanced world have tried to raise them again. All have been forced to retreat.”

  

  So the question then becomes: if the Fed does hike on Thursday as two-thirds of economists predict (we doubt it: Goldman said no rate hike until December, and more likely, not until 2015… in fact Goldman said “the Fed should think about easing” and what Goldman wants Goldman gets), will it be the first bank that avoids having to promptly “unhike”, which is unlikely or far more realistically – how long until the Fed is forced to admit “policy defeat” and go right back to ZIRP, or perhaps even NIRP, ultimately sliding right into QE4.

  Alas, by now the script of hiking just to have an alibi to ease has become so trite even Deutsche Bank last weekend had the temerity to ask “Is The Fed Preparing For A “Controlled Demolition” Of The Market“?

  We’ll know in 4 days.

  

  

  

  

  

• Peter Hambro: "It's Virtually Impossible To Get Physical Gold In London"

  Submitted by Koos Jansen via BullionStar.com,

  Just after my colleague Ronan Manly wrote a very extensive article on how much gold is left in London (not much), Petropavlovsk Chairman and Co-Founder Peter Hambro discusses gold at Bloomberg Television. He, like Manly, concludes there is very little physical gold left in London. From Mr Hambro:

  My baseline is they [the Chinese] have been buying and the Indian have been buying in enormous quantities. It’s virtually impossible to get physical gold in London to ship to those countries. We get permanent requests from Russia, would we please sell our physical gold to India and China. Because there is no physical, only endless promises. And I really worry that the market, that paper market, could be stamped on and people will say “sorry we’ll have a financial close out”, and it’s all over.

  Perhaps this quote explains why UK gold export directly to China in June was not a net outflow from the UK – because there is little gold left in London (Manly, Hambro) and thus the UK had to ramp up import from the US in June to send forward to China.

  BPlayer(null, {“id”:”sZ~Uri4MRJunO9fg5JSKjA”,”htmlChildId”:”bbg-video-player-sZ~Uri4MRJunO9fg5JSKjA”,”serverUrl”:”http://www.bloomberg.com/api/embed”,”idType”:”BMMR”,”autoplay”:false,”log_debug”:false,”ui_controls_popout”:false,”wmode”:”opaque”,”share_metadata”:{“canonical_url”:”http://bloom.bg/1JUhpRp”},”use_share_overlay”:true,”video_autoplay_on_page”:false,”use_js_ads”:true,”ad_code_prefix”:””,”ad_tag_gpt_preroll”:true,”ad_tag_gpt_midroll”:true,”ad_tag_sz_preroll”:”1×7″,”ad_tag_sz_midroll”:”1×7″,”ad_tag_sz_overlay”:”1×7″,”ad_network_id_preroll”:”5262″,”ad_network_id_midroll”:”5262″,”ad_network_id_overlay”:”5262″,”ads_vast_timeout”:10000,”ads_playback_timeout”:10000,”use_comscore”:true,”comscore_ns_site”:”bloomberg”,”comscore_page_level_tags”:{“bb_brand”:”bbiz”,”bss_cont_play”:0,”bb_region”:”US”},”use_chartbeat”:true,”chartbeat_uid”:”15087″,”chartbeat_domain”:”bloomberg.com”,”vertical”:”business”,”ad_tag_overlay”:”business/videooverlay”,”use_parsely”:true,”source”:”BBIZweb”,”module_conviva_insights”:”enabled”,”conviva_account”:”c3.Bloomberg”,”zone”:”video”,”ad_tag_cust_params_preroll”:””,”width”:640,”height”:360,”ad_tag”:””,”ad_tag_midroll”:””,”offsite_embed”:true});

   

  The Financial Times reported on similar gold shortages in London. From the FT (2 September):

  The cost of borrowing physical gold in London has risen sharply in recent weeks. That has been driven by dealers needing gold to deliver to refineries in Switzerland before it is melted down and sent to places such as India, according to market participants.

   

  “[The rise] does indicate there is physical tightness in the market for gold for immediate delivery,” said Jon Butler, analyst at Mitsubishi.

  I’ve also asked BullionStar CEO Torgny Persson in Singapore what he’s currently seeing in the precious metals markets. He replied there are shortages in both the gold and silver market. From Mr Persson:

  I just got off the phone with A-Mark which is one of the world’s largest wholesalers. They are reporting that they have no gold and silver at all live available, that they have stopped taking orders for Silver Maples and Silver Philharmonics altogether and that Silver Eagles are available first in the end of November. For Pamp, there is similarly long delivery times for all minted gold bars.

   

  We still have most products in stock because we stocked up as massively as we could in the last weeks but for many products, we are unable to replenish as of now when we run out.

   

  Big squeeze with shortages starting now both on the wholesale/retail level and at the bulk level… Unless the paper price is reverting up, it may not subside this time around and then the paper fiat mess (including paper prices of gold and silver) is in trouble. If it goes to the point of shortages at the bulk level like 1kg gold bars and 1000 oz silver bars, the emperor will stand without clothes.

  To be continued…

  

  

  

  

  

• 1 In 3 Americans Would Support A Military Coup… In America

  One topic that seems to be of great concern to a relatively large swath of the US public is the militarization of American cities.

  Indeed, with each passing “confrontation” between protesters and police, “protecting and serving” seems to look more and more like “subduing and controlling.” 

  The fear of military and police overreach came to a head this year in the lead up to the US Spec Ops Command’s multi-state “training exercise” dubbed Jade Helm 15. Thanks to a few viral internet campaigns and some badly-timed Wal-Mart closures, some US citizens came to believe that the federal government had devised a plan to institute martial law in Texas. 

  Be that as it may, if there’s anything Americans fear more than overt oppression enacted by force it’s covert oppression enacted by a nefarious combination of crony capitalism and corrupt (not to mention largely incompetent) politicians, which we suppose explains why nearly a third of Americans say they would support a military coup in the US. Here’s more from YouGov:

  The United States military has long embraced the idea of civilian control of national affairs, and apart from certain rare moments the American officer corps has faithfully followed the orders of their civilian superiors.

   

  YouGov’s latest research shows, however, that officers in the military are held in much greater esteem than their civilian superiors, and that they are widely viewed as having the best interests of the country in mind instead of their own selfish concerns. 70% of Americans believe that military officers generally want what is best for the country. When it comes to Congressmen, however, 71% of Americans believe that they want what is best for themselves, along with 59% for local politicians. 

   

  

   

  29% of Americans could imagine a situation in which they would support the military seizing control of the federal government, while 41% could not imagine such a situation. 

   

  Republicans (43%) are more than twice as likely as Democrats (20%) to say that they could conceive of a situation in which they would support a military coup in the United States. Independents tend to say that they could not (38%) rather than could (29%) imagine supporting a coup.

   

  

   

  We present that with no further comment other than to note that Abraham Wyner, director of the undergrad program in statistics at Wharton, suggests you remember that selection bias makes online polling “worse than just about any other way you can put together a poll.”

  

  

  

  

  

• Civil Asset Forfeiture Has Enabled Police To Become The New "Highwaymen"

  Submitted by Jeff Thomas via InternationalMan.com,

  The Highwayman has a romantic image as a bold, 18th-century scallywag who would ride up to a coachload of aristocrats on his horse, shouting, “Stand and deliver!” Having relieved the aristocrats of their purses, he would gallop off.

  Today, the Highwayman is being revived in a big way in the US. But, far from being a scofflaw, he is, in fact, the law. He wears a badge and the law protects him in his roadside robberies.

  The revival is the result, in part, of both the defunding of police departments (creating a demand for law enforcement departments to seek money from other sources) and the encouragement of the federal government for an overall expansion of the police state.

  The legal justification for such highway robbery is the police practice of civil forfeiture, which has been on the books for decades. Civil forfeiture allows law enforcement to seize property (including cash, cars, and even homes) without having to prove the owners are guilty of a crime.

  In many cases, drivers are not charged with any crime at all, not even a traffic citation. In fact, one Florida sheriff has noted that the best targets are those who are obeying the speed law. He knows whereof he speaks, having seized over $6.5 million on the highways of Florida. (Quite an advance on the size of the purses seized by the 18^th-century highwayman.)

  Typically, police stop a car and make the usual request to see license and registration. If the driver asks why he was stopped, a vague explanation may be offered by the officer, or he may simply ignore the question, then demand a search of the car or the driver’s person. The officer then seizes cash and other valuables as potential “evidence” of a crime (suspected drug dealing is a common accusation).

  In some cases, police threaten drivers that, if they are not cooperative, their children may be taken by Child Protective Services.

  The burden of proof is on the driver. In order to regain his possessions, he must prove his innocence in a court. However, in most cases, no charges are made, so there is no court case to try. Whether charges are made or not, law enforcement agencies are entitled to keep 100% of the forfeiture proceeds. Although they are required to keep records on forfeiture, in many cases, police departments avoid or even refuse to provide such information when requested.

  Although police may prey on people anywhere, including in small towns, the most prevalent location is on highways, the further from civilisation the better. In this way, the driver knows that he’s in the middle of nowhere facing a man with both a badge and a gun. He might consider himself lucky to be left with just his car, so that he can drive away from the robbery and not be left on the pavement with no car and no money. For many, this is enough incentive to allow police to take what they want…and not file any complaint.

  Of course, these stops and seizures violate the Fourth Amendment right to freedom from unreasonable search and seizure and at least one state judge in California has described the practice as “an institutional corruption.” Conceptually, a driver can refuse to have his car or his person inspected and can attempt to prosecute the officer, but again, the burden of proof is on the driver. As a result, prosecutions are rare and successful prosecutions rarer still.

  So, the Highwayman has returned, but he now wears a badge. What does this mean for the future? As social and economic conditions deteriorate in the US, will the country’s highways come to resemble a Mad Max scenario, but one in which many of the raiders are people in authority?

  As with so many trends in the US, EU, and similar jurisdictions, this is one of many symptoms of overall social/moral/economic/governmental deterioration, a bellwether of continued decay. Whenever a country is so far along in its decline that its “peacekeepers” make a regular habit of robbing the people they’re paid to protect, and get away with it, we may conclude that further decline is to come and it may be time to exit this particular highway.

  Unfortunately, when such crime exists from coast to coast, as it does with today’s institutionalised highwaymen, the solution is to seek out a better way of life in another country entirely. Fortunately, there are many countries where conditions are considerably better.

  *  *  *

  Editor’s Note: Because of the risk of civil forfeiture, we’ve published a groundbreaking, step-by-step manual on the three ESSENTIAL steps all Americans should take right now to protect themselves and their family.

  These steps are easy and straightforward to implement. New York Times best-selling author Doug Casey and his team describe how you can do it all from home, with very little effort. Normally, this book retails for $99. But we believe this book is so important, especially right now, that I’ve arranged a way for US residents to get a free copy. Click here to secure your copy.

  

  

  

  

  

• Is The Fed Making A Huge "Policy Mistake"? This Market Reaction Will Give The Answer

  As discussed here on Saturday and as should be abundantly clear from the sheer confusion that reigns across markets ahead of this coming week’s all important FOMC meeting where the absurd (and frankly terrifying) fact that the fate of the financial universe hinges on 25bps will be on display for all to see, the Fed is at risk of committing a policy error of epic proportions. 

  To reiterate, the use of the term “epic” here has nothing to do with the magnitude of the hike which, if it occurs at all, will be more symbolic than anything else, and everything to do with the fact that in today’s centrally planned world, which for seven years has been coasting along on an magic carpet made of printing press money even as the entire system becomes ever more unstable, the smallest policy error will reverberate exponentially. 

  To be sure, whether or not Yellen has made a mistake will become all too clear over time. All one need do is observe whether EMs careen further into chaos and/or whether the PBoC becomes even more schizophrenic, but as far as what to watch in the immediate aftermath of the FOMC announcement, we return to what we noted after September’s NFP print when we quoted BofAML. To wit: “If they do hike, watch the long-end.” 

  Why? Because if there’s a flight to safety and the long bond rallies, the Fed will know it has officially erred, or, to quote Deutsche Bank: 

  The market still looks cheap for a September policy error. We see scope for Treasuries to rally significantly from here given the likely risk-off market response to a policy error – we think 10s could rally to 1.75% given the confluence of poor market liquidity and monetary tightening from the Fed and emerging market reserve loss. 

  In this extremely untenable situation, even doing nothing could end up producing the same result if that “nothing” is communicated poorly:

  Even a hawkish hold is likely to keep downward pressure on the slope of the curve and risk asset valuations.

  And as BofA suggests, the places to be in such a scenario will be “cash, volatility, and gold.” At that point, any and all “pet rock” jokes will cease being funny and the only thing humorous will be the sudden disappearance of the transient bid for USTs once everyone who piled in simultaneously realizes that their own actions in the wake of liftoff definitively signal the loss of any credibility the Fed, and by extension, the fiat money regime itself, had left.

  

  

  

  

  

• The End Of Britain? Martin Armstrong On Jeremy Corbyn's Resurrection Of Marx

  Submitted by Martin Armstrong via ArmstrngEconomics.com,

  

  Jeremy Corbyn, the infamous Karl Marx admirer, has been elected UK opposition Labour leader. 

  Here is The Anti Media with a little color on the landslide victory…

   

  People’s favourite Jeremy Corbyn became the new leader of Britain’s Labour Party on Saturday after racing to victory with 59.5% of the vote.

   

  The election results, announced on Saturday morning from the Queen Elizabeth II Conference Centre in London, declared that 422,664 votes were cast and saw Tom Watson elected as deputy leader of the Labour Party.

   

  Corbyn now faces the resignation of up to a dozen shadow cabinet members who claim they will refuse to serve under the MP and cannot publicly support his policies. According to The Telegraph, a group of centrist MPs nicknamed “The Resistance” intends to hold a series of public policy debates about Labour’s future — in open defiance of their new leader.

   

  During the last month, the Labour leadership campaign has seen trade unions double their number of signed-up supporters and 120,000 people pay £3 to register as supporters to be able to vote. The party’s website crashed as surges of people attempted to sign up at the last minute and Labour struggled to cope with almost 400,000 new members and supporters.

   

  Corbyn’s anti-war stance and fierce criticism of regimes that others are falling over themselves to support has resulted in an unprecedented smear campaign against him, painting him as weak on terror. His biggest and best endorsement to date has to be vilification by Tony Blair, who warned the Labour Party would face annihilation if Corbyn were crowned  leader.

   

  In addition to establishment hysteria at anticipation of Saturday’s result, The Times reported that David Cameron plans to claim the new leader poses a clear threat to Britain’s security since he questioned the latest drone strikes in Syria.

  Corbyn is really communist who professes an admiration for Karl Marx. He is the new face of Britain’s opposition Labour party which will help to make a British EU exit more likely. The Marxist sophistry is rob anyone who has more.

  They never understand that we all provide our piece of the economy that creates the whole. Many are starting to realize that this could be the downturn for Britain.

  

  This is actually right on schedule for the other side of 2015.75 will be the battle of all time – Freedom v Authoritarianism.

  People like Corbyn will inspire violent and the overthrow of capitalism for what they think will be the betterment of man. They are idiots and dangerous ones at that for you cannot eradicate human nature. Yet they will try.

  I am routinely asked why to I resistance so persistently?

  What I do, I do for my family and their future. If it were just me alone, I am ready to depart this world for I do not wish to live in the world Corbyn and others like him want to create. They cannot see that they seek to enslave me for their benefit. I am free and that is the true meaning of what Patrick Henry said so eloquently – “Give me freedom, or give me Death!”

  Death to me is preferable to living in their world of subjugation. You do not appreciate what those word so profoundly mean until you are confronted with the true evil of Marxists.

   

  

  

  

  

  

• 10,000 Syrians Are Headed For The Following 180 US "Refugee Processing Centers"

  For the past several weeks it seemed as if Germany had truly become the promised land for Mideast asylum seekers, primarily those seeking to escape the Syrian civil (and global proxy) war, but according to various media reports, also a material number of “ISIS-linked terrorists.” Then it all came crashing down earlier today when Germany’s beloved by all refugees “Mutti” said genug, and with one decision shut down the border with Austria in the process unraveling decades of customs-union progress (following promptly by the Czech Republic doing the same, with Italy expected to follow suit in the hours ahead).

  Ironically, just as Europe is shutting its doors to Syrian refugees, the US is opening its own.

  On Friday, Obama said that the United States will admit 10,000 Syrian refugees for resettlement over the next 12 months, following criticism that America is not doing enough with Europe’s migrant crisis.

  How will this take place logistically? As AFP notes, “this would represent a huge increase in the number of families arriving on US soil. In the more that four years since fighting erupted barely 1,800 Syrians have been welcomed here.” Which is why the French wire service did a brief summary of the various steps involved in admitting a record number of Syrians on US soil.

  Here are the key points:

  • How will Obama’s promise be delivered and what hurdles are keeping the refugees from arriving sooner

  More than four million people have fled the fighting in Syria since 2011 and most are living in camps in Jordan, Turkey, Lebanon, Egypt and Iraq, where the UN High Commissioner for Refugees registers them. Some 18,000 of these people — chosen because they are the most vulnerable whether through family circumstances, injury or disability – have been referred to the United States for resettlement. Officers from the Department of Homeland Security fly from Washington to the camps and conduct interviews with candidates, seeking to weed out what a US official called “liars, criminals and terrorists.” Each case file is reviewed by the National Counterterrorism Center, the FBI’s terrorist screening center, the DHS, the Department of Defense and “other agencies” – US intelligence.

  “Refugees are subject to the highest level of security checks of any category of traveler to the United States,” another State Department official told reporters.Meanwhile they receive medical tests and those with communicable diseases, most commonly tuberculosis, are given treatment before they can travel to the United States, often delaying the process.

  Currently the procedure takes between 18 and 24 months from the time UNHCR recommends a refugee for resettlement and that person’s flight to America.

  It is not clear how much the screening process for Syrians costs, but the US government spent $1.1 billion last year resettling 70,000 people from around the world, or almost $16,000 per head.

  • Can the process be sped up?

  Critics note that if the United States takes two years to screen each of the 10,000 refugees Obama has promised to welcome none will have arrived before he leaves office.

  But, according to a US official, thousands of cases are already in the pipeline and will hopefully now be processed faster.

  “We have been resettling Syrian refugees in small numbers since 2011 and it was only in June of 2014 that UNHCR started submitting large numbers of referrals, between 500 and 1,000 per month,” she said.

  “Those referrals have come pretty steadily since last June to the point where we now have a critical mass. We at the State Department have already prepared the cases for more than 10,000 people.”

  * * *

  But the most important question on the minds of most Americans is the following:

  • Where will the “lucky” 10,000 Syrian refugees go?

  Well, once refugees are approved, the State Department pays the International Organization for Migration (IOM) to fly them to the United States.  Refugees sign a promissory note to repay their airfare once they are established, and they are met at the airport by members of one of nine non-government resettlement agencies contracted by the State Department.

  There are around 180 resettlement centers dispersed across the United States, where NGO workers help the new arrivals settle in and find work and accommodation in their first 30 to 90 days.

  Those who have relatives in the United States will sometimes be assigned to live near them, and most go to cities like Atlanta, San Diego or Dallas where rents are more affordable than in New York or San Francisco.

  Others end up in smaller cities like Boise, Idaho or Erie, Pennsylvania, but regardless of where they are taken they are free to move once they find their footing. After 90 days new arrivals are no longer eligible for the State Department-funded support through the resettlement agencies, but some join support programs run by the Department of Health and Human Services.

  * * *

  So where are these 180 resettlement center? They are shown on the map below:

  

   

  The full list can be found in the 35-page document sourced from the Refugee Processing Center.

   

  * * *

  All this, we again remind readers, just so a Qatari gas pipeline can cross Syria and enter Europe, ending Gazprom’s monopoly over European gas demand.

  

  

  

  

  

• Apple's Bruised Presentation: A Warning Sign Rarefied Air Is Becoming Exhaust Fumes

  Via Mark St.Cyr,

  On Wednesday of this past week Apple™ held its much-anticipated annual roll-out of new products and features to the Apple lineup. However, this latest presentation caused more head scratching as well as out right consternation than any in recent memory. There was one other, but I’ll get to that later when there’s more context as to compare.

  Whether it be within the confines of media reviews or tech blogs, it seems almost to a person the reaction to this latest event was anything but celebratory. Rather, the overarching theme revolved around the questioning of: Did they just witness the initial confirmation that many have pondered now these last few years. i.e., Has Apple lost, or, is rapidly losing their soul/spirit of innovation? Or, just the outright feeling of confirmation: without Jobs – Apple is an also ran.

  Like many I too was flummoxed when watching the event. However, unlike some I saw things a little differently. What I saw; and the way I saw it, I’ll illustrate, as well as counter how I believe many of the obvious missteps, as well as outright blunders were made should have been handled and addressed differently.

  Although I’m going to address my assertions through my business eye (for that’s what I do professionally) as if I were called into the board of Apple in a hypothetical sense and asked my opinion. I want to make sure it’s known for the record I could be what one considers an Apple “fan boy.” I use their products near exclusively and have great respect for the company. Yet, much like if I saw a family member doing the obvious wrong things; being openly harsh, critical, or straight forward in that criticism doesn’t mean any lack of respect. Quite the contrary.

  So first things first: For the first time since the inception of these stylized “Event” roll-outs one thing was clear to almost everyone that viewed it. The “presentation” along with its cinematic star quality infused theatrics more often than not didn’t help nor bolster the products or presenters. Again, for the first time that I can remember – it actually seemed to take it away.

  A few things were obvious. One of these is the incessant use of the glorious styled verbiage made famous by Apple when trying to invoke awe inspired anticipation. The problem this time were the products they were introducing. There were obvious trip wires that needed to be addressed that one could see for miles. Yet, it seemed as if Apple was going to pay no attention to them and roll them out because “They’re Apple therefore you’re going love it.”

  The Apple Watch™ fits into this category probably more than any other. The problem? It seems the push is to present the watch as a fully formed device which it clearly is not. Yes there is the nod that more and more applications are forthcoming. However, it is quite obvious the main focus is all too centered on fit and finish. The push about what band one can now choose and the on, and, on aspect of the details of these bands subliminally pushes one to assume – I guess that’s all they have to show right now.

  I believe the watch will be a great product in the future. And it’s easy to understand it’s a work in progress that needs to be out in the public a little before prime time as to see just where the market wants to take it. And there’s nothing wrong with that. That said, the more that Apple makes this almost sycophantic push towards fit and finish currently? It doesn’t hide or subvert its obvious current limitations – it pushes them more into the fore front.

  If you wanted more proof of the “We’re Apple therefore you’re going to love it” attitude that I believe allowed for the lack of self-awareness to see obvious issues or miscues. All one had to do was watch the introduction of the Apple Pencil®. It went something like this…

  Ladies and gentlemen. May I draw you’re attention to the big screen behind me and behold. Never before in the history of mankind has such a device ever been thought of by mere mortal man. Ladies and gentlemen I introduce to you – the pencil!

  And there on the screen stood what at first blush was a representation of the one thing Jobs railed against: a stylus. You could hear either a collective chuckle or, YAYYYYyyyyy….wait a what? The set up for this product buzz-killed its own introduction.

  Another was when the new IPad Pro® was revealed to show it with its newly designed specific keyboard. What seemed at first like thunderous applause drifted quickly to be silenced by the obvious knee-jerked gasp when the big screen showed what everyone instinctively recognized as a product resembling what no one seems to use or want – a Microsoft Surface®.

  These weren’t the only missteps – just the most obvious. A few others? Well, there was the “let’s show you just what you can do on this fantastic, great, super, stupendous, mind altering, supercalafragilous new product. We’ll start by bringing on our next guest speakers from – Microsoft. Even the crowd within the center went speechless. It was a clear awkward moment. Again, all self-inflicted.

  Think about it. Within the span of a few minutes a new product was introduced that for all intents and purposes can really be a game changer with applications for both personal as well as enterprise use never before available to Apple. And within the course of those minutes did nothing but leave the impression this great new product has a stylus, and a keyboard configuration that looks all to close to a Surface; and cemented that impression with introducing none other than a Microsoft representative to demonstrate how Microsoft Office™ will run on it. Again, think about that. And as bad as that progression was – it was enhanced. And not for the better in my view.

  The next guest or representative in the line up? Adobe™. You know that company which right before Jobs passed was still calling them out for shipping lousy software. One silently wondered if Pages® or Keynote® were going to still run on Apple products because other than what seemed as a hat tip to Garageband®; one was left feeling unclear. And remember, this is Apple’s premier event! The missteps as to the attention to detail of presentation flow was nothing less than stunning. I personally can not remember such outright blunders in previous roll-outs. And I was not alone, for what I heard from others who just wanted to see what was new reacted in ways I previously never encountered.

  Here was my first confirmation that it wasn’t just me. All the above overshadowed what has been the usual star of these events: The iPhone®. Nobody that I talked to could even remember what new innovation or updates were made to the newest version. All they seemed to remember was there’s now an “S” version, but other than that, it was all about “What is up with that new iPad?” Or, “A stylus?! Are you kidding me? A freaking stylus?!! WTF is up with that?!!!”

  And that seemed to be the cumulative summation I distilled from both my personal exchanges, as well as what I’ve seen in both tenor and tone reported almost everywhere.

  This is, and should be taken by Apple as a clear warning sign this bruised “Event” could be the one that spoils the “whole bunch” going forward. The event showed to my eyes in stunning clarity that Apple delivered this presentation via the viewpoint and execution of: We’re Apple – and you’re gonna love our new products and upgrades because – we’re Apple, and we’re saying so because – we’re Apple.

  Again, whether intentional or not. Too my eyes, it was a clear illustration of: Rarefied air has become breathing one’s exhaust fumes.

  Now here’s where I take a different tack from everyone else: Personally, I believe the upgrades as well as new products are noteworthy. It’s all about the delivery as well as introduction I take issue with. And this area of difficulty is a first for Apple. How they mange their way around as well as through this obvious debacle will be one of Apple’s greatest challenges post Steve Jobs in my view. For perception is just as big as product to no other company as it is to Apple.

  So that’s my descriptive view. Now let’s delve into the prescriptive.

  Right off the start let’s address the greatest of overhangs that is not, nor will not, go away unless Apple itself stops trying to push it themselves: Tim Cook is not, nor will he ever be seen in the same light as Jobs. Period, end of story. Not by anyone at Apple itself, nor the public at large. So stop trying. Again, period. It’s hurting Apple’s, as well as Mr. Cook’s image, more than it’s helping. So again – stop. Please for the love of humanity – just stop.

  Although I don’t know Mr. Cook personally I’m sure he’s a great guy, and we know he’s a competent executive for he has done some great things since Jobs passing in helping to lead and maintain Apple’s core structure. We also know Jobs had great admiration for his executive qualities. However, no one can replace Jobs. And the more one tries (or desperately hangs on to the idea) to replace rather than move forward is in effect moving backwards. This is why the more one tries – the worse the comparisons fester. And Apple seems to be trying far, far, too hard in this one area alone.

  Let me use an analogy based in music as opposed to strictly business: Van Halen didn’t “replace” David Lee Roth with Sammy Hagar. Sammy Hagar, nor the band, tried to be Van Halen with Sammy acting as a stand in replacement for Roth. Same can be said with AC/DC. Just like with first example, after Bon Scott there truly was no replacement. So they didn’t. They added Brian Johnson and the rest is history. Whether you liked or disliked the new band was exactly the point. Van Halen as well AC/DC were: a new band, and they weren’t afraid of the comparisons. They took them straight on and made no bones about it. This allowed the band to be its own force while still paying reverence to previous milestones without any regards to “What would David or Bon do?” Apple needs to apply the same or they’ll never get out from under “What would Jobs do?”

  I’ll use as proof for my assertions using a current screenshot I took from Apple’s own public webpage:

  

  (Photo Credit: Screenshot taken of Apple’s public home page)

  Why my criticism? First of all: It has nothing to do with Mr. Cook personally. The issue is: it shows or implies just how tone-deaf, blind, or nervous Apple is becoming. Apple seems to be bordering on desperate as to be trying to create a replacement figure, and it’s now far too striking as to evade the inserting for subliminal comparison (whether intended or not) of Cook as Jobs. And far too many have an instinctive gut reaction too it. And it’s not in the affirmative.

  Jobs was, and always will be, the comparison to these events as well as “the face” of Apple. Now and for the foreseeable future. If the solitary person in this type photo is not Jobs, it should only be the closest thing possible to him; and it’s not a person – it’s the product or the logo. Anything (or anyone) else stands right out as “trying too hard” in pushing a narrative. Since the passing of Jobs no person for the immediate future will meet the mark. The only “one” that can is – the product/products themselves. Anything less hurts the image as well as brand of everyone involved by my calculations.

  I believe unlike many (and I’ll wager it’s the Board itself that is the most confused on this subject) the more Mr. Cook removes himself as “the face” of Apple and puts forth the product as “the face” the more Jobs-like Apple remains in the public eye, as well as the lessening of many of the unfair comparisons Cook as well as Apple has to constantly dodge or defend against. This is where Apple is being its own worst enemy. They desperately need (as well as want) to move out from under the Jobs comparisons as time and products march on. Yet, it seems Apple itself is the one unwittingly making that trek all the more harder.

  Then there were the introductions of new or improved products. Here there were far more miscues as well as missteps than I can remember. So I’ll take just the one’s that are in my front-of-mind.

  First there were the transitions from introduction to video presentation. In a word, for someone who understands the importance of theater and seamless transitions: They were horrible. Apple once excelled at these – until recently. At this event? They were clumsy allowing for misconceptions to fester. No, not in the content and production value of the videos themselves. It was in the hand-off from presenter to video. They simply just didn’t flow.

  There was no better example of this than when the Apple Pencil® video was shown. Personally I cringed. The video’s introduction did not match the content. The content was great, but you were trying to get over the idea that this was not a stylus – first. And it felt that way. For anyone paying attention this was an obvious flaw. And it was obvious the one’s who should have been paying attention (i.e., Apple) were not or could not see it.

  The attention to details such as this was always prominent and seemed to never be lost on Jobs. However, at this event it was conspicuously not there.

  And while we’re on it let’s talk about the Pencil. Not only was the roll-out worse than bad. It actually may have set back the whole adoption cycle months if not years just based in ridicule. For nearly everyone remembers one of Jobs’ strongest arguments against anything was – the need for a stylus. And the way the introduction of the Pencil was presented did nothing to alleviate that memory. In fact, it brought it out front-and-center. It’s a shame because the Pencil truly is so much more, but again, the presentation did little to change that initial perception.

  It would not have been hard to take this issue head on and maybe have some fun with it. Make it their own post-Jobs product launch he would be proud of. It could have easily been done in my view if the obvious hurdles would have been addressed right from the get go, rather, than trying to act as if no one would remember the past. The diametric forces of awe-inspiring and ridicule enforcing left it up to the product itself to overcome them. A tough task when everything is running perfectly. Quite another when it’s happening within obvious missteps or miscues.

  An easy way to have overcome many of the obvious would have been to remind people of a few things like: When Steve was around one thing he was not afraid to do was to change his mind if one could prove that he should. (which he did many times, but you had to prove it first to convince him, not just express or think that he should) Steve would tell anyone who asked “As soon as you need a stylus you lose” and we still believe he is right. That’s why we don’t and won’t make one. So today I introduce to you a technological instrument so advanced we gave it the only name that could match it for context, simplicity, and ease of use. Ladies and gentlemen I introduce to you today – the Apple Pencil.

  It took me no longer to think of the above than to type it. It’s not perfect, but it’s far better from what was presented. i.e., act like no one’s first reaction will be: It’s a stylus! Again, this is a detail I believe would have never been allowed circa Jobs. It was far too obvious for initial reactionary ridicule. Yet, that’s exactly how it went off.

  Then there was the other obvious calamity. The gut reaction to the iPad Pro with its new smart cover keyboard. Again, here we saw Apple acting as if it there was no such thing as the Surface. It was breathtakingly tone-deaf for what would be the obvious reaction. You almost could feel the collective gasps worldwide through your monitors. Again, I personally was stunned on such a misstep.

  My argument is this all could have been so easily addressed and possibly as I’ve stated again, and again, been a turning point in the post Jobs era. And in a good way.

  If the new IPad had been presented differently showing its new size and features for general use as associated with the current versions only. They did some of this but it was far too little. What they should have done was introduce and infuse with a little more depth some of the new features and reasoning why a physical keyboard will be necessary for upcoming partnerships with new collaborative partners such as those announced with IBM™ and highlight it with more detail. People get that.

  Say things like: As game changing as the iPad was to the home and business we’ve discovered there more possibilities than ever, and these possibilities demand two new features unparalleled by any other brand today. First, with our larger screen size new enterprise functions and uses are now available that were not conducive to previous iPads. Although the bigger screen allows for a more natural feeling keyboard we know by listening to all of our customers they want an Apple designed and built dedicated IPad removable keyboard. I’m here to tell you, we heard you – and we listened. And so I introduce to you today, what at first may look like another brands however, I respectfully say: It is anything but – and here’s why…”

  Instead the keyboard attached version went up on the big screen and did nothing but put front-of-mind “what the heck is that? A Surface?! That’s the new thing?!!” The following dissertation felt like Apple believed customers had never seen a similar product. No matter how well crafted and design specific for IPad this new keyboard is. The timing and delivery for its introduction, like the Pencil, was a self inflicting buzz-kill for it. I say again, this all was so blatantly self-inflicted it was painful to watch from my view.

  One place that has yet to lose its luster, or fall into the lame, are the informative product videos showcasing Jony Ive. Here is where the Apple of yesterday still shows through today. Even though Ive is not shown there is gravitas in voice and reputation for we all instinctively understand many of these products are associated with his creative vision much like Jobs. However, these unlike the “Event” shake free of the post-Jobs gravitational pull. Why?

  The product is the feature – not a person. It’s not lost on anyone that Ive is still responsible for the products creative attributes. But it does one thing that Apple Inc. itself has not yet learned. It allows Ive and the product to stand on their own in a post-Jobs world of Apple. And I believe not only are these displaying a tenor and tone Jobs would approve of, I believe they are showing the way Apple itself needs to start addressing this issue far more head on than seemingly trying to either avoid it, or push a persona in the fear of they don’t know of any other way. That way is right under their own noses yet, they seem somehow patently blind to the obvious.

  Apple isn’t about Jobs anymore. He’s gone, and he’s not coming back. And the more Apple tries to fill that void, the deeper and wider the chasm becomes to fill by their own hand. Apple is no longer about a person – it’s about the product. And the product is the only thing capable of bridging that gap or hole left with the passing of Jobs. And the sooner Apple realizes it, and takes that to heart. The faster and better both Apple, their products, as well as the management and employees will be. Where they can all get back to doing what Jobs would be the most concerned with as well as probably proud of. i.e., Running a great company steered by smart people creating insanely great and revolutionary products second to none.

  And as for that only other “Event” I mentioned at the beginning? I could think of none other than the one that caused an even more visceral knee jerk reaction than the one hosted by Jobs himself. That event?

  One of the first where he introduced none other than Bill Gates on the big screen as a new partnership between the two rivals. Again, Jobs could have easily tried to hide the fact or, never speak about the collaboration he made with Gates at the time. There possibly was no worse time than then to even discuss such a possibility; never mind an already done deal. Yet Jobs did just that. Jobs instinctively knew – you can’t hide the 800 pound gorilla or act like it’s not there. You have to get past it one way or the other come hell or high-water. And they did just that.

  Again, the lesson for Apple today is right there in the Apple of yesterday. All they have to do is look. For the only thing in my opinion holding Apple back from moving forward and beyond – is Apple itself.

  

  h/t Goodbyeamericainaphoto

  

  

  

  

  

• Germans, Czechs Return To "Border Controls" With Austria, Riot Police Dispatched To Contain Refugee Crisis

  Two weeks ago, in what was the first official shot across the bow to Europe’s long-standing “Schengen” customs union, we reported that the Italian province of Bolzano across from the Austrian border announced it is willing to “temporarily suspend Schengen” and “restore border controls” following a request by the German state of Bavaria.

  Today, none other than Europe’s master state, Germany itself, is about to launch an ICBM at Schengen when, as BBC reports, “Germany is to reintroduce some form of controls on its border with Austria to cope with the influx of migrants, German and Austrian media report.” While the BBC said that it is not clear what measures would be introduced, it is likely that a full return to the pre-Schengen era, with extensive customs checks of every border crosser is imminent.

  BBBC further reports that”more than 13,000 migrants arrived into Munich alone on Saturday. Germany’s vice-chancellor said the country was “at the limit of its capabilities”. Germany’s Bild newspaper and Austria’s Kronen Zeitung said controls would be in place on the Bavaria-Austria border. Germany expects 800,000 migrants to arrive this year.”

  Also, according to Germany’s Spiegel, German Interior Minister, Thomas de Maiziere, would make an announcement in the coming hours. Since last month, Mr de Maiziere said the Schengen agreement, which allows free movement between a large number of European countries, could be suspended, it is quite likely that as of today, Europe’s customs union will officially be halted if only temporarily.

  Kronen Zeitung said that Bavarian police will begin to carry out checks “to determine immediately who is entitled to asylum”, but it is not clear how such checks would be made.

  Earlier on Sunday, Germany’s Vice-Chancellor Sigmar Gabriel, who is also economy minister, warned the country was being stretched to its limits by the new arrivals.

  “Europe’s inability to deal with the migrant crisis has brought even Germany to the limit of its capabilities,” he told Der Tagesspiegel newspaper. “It is not just a question of the number of migrants but also the speed at which they are arriving that makes the situation so difficult to handle.”

  Which is somewhat ironic considering the full-court media propaganda press eager to make Germany seem like the promised land for hundreds of thousands of Syrian refugees: just ealier today CBS had an article on “Angela Merkel: From debt villain to migrant heroine” in which it said “In the space of two months, German Chancellor Angela Merkel has gone from being portrayed as the heartless villain in Europe’s debt crisis to the heroine of those flooding in to find refuge on the continent.”

  Her insistence that Germany and its fellow members in the 28-nation European Union all have a duty to shelter people fleeing civil wars has cemented something similar among hopeful migrants. Some have held aloft pictures of Merkel, and she was greeted with applause and cheers at a Berlin refugee home Thursday.

  

  Oops, may want to rewrite that one quickly, especially following a report from Bild that the German government “will send 2,00 riot police to the Bavarian border, where they will “help the State to secure the border.”

  Not only that but Express reported that the “German Defence Minister has admitted that the country verges on “an emergency” after cracks have begun to emerge in the ‘German generosity’ and that some 4000 German troops have been put on standby.

  

  Germany has been viewed as a leader on Europe’s worst refugee crisis for 70 years, with Chancellor Angela Merkel’s expectation that the country will take in 800,000 this year alone.”

  However, the move appears to have backfired as German towns struggle to process the unprecedented number of arrivals.

   

  Defence Minister Ursula von der Leyen said: “For this weekend alone we have put 4,000 soldiers on standby.” 

   

  He added that the troops would be able “to pitch in in an emergency”.

  Putting Germany’s generosity, which just ended in perspective, “More migrants have arrived at Munich’s train station since the start of September than in the whole of 2014.”

  The good news for Germany is that at least the tens of thousands of Muslims migrants will have a place to pray: just as “generously” Saudi Arabia – in lieu of actually accepting any asylum seekers – offered to help Germany cope by building at least 200 mosques.  The Gulf state said it would build one mosque for every 100 Middle Eastern refugees who entered Germany. It will be busy building a lot of mosques.

  The bad news for Germany is that not only will the migrant situation not improve any time soon, but it is now in a lose-lose situation, with the facade of its former faux generosity crumbling, just as countless more migrants are set to lose their lives on their way to a promised land that no longer is.

  And confirming just that, moments ago Xinhua reported that 28 migrants were killed as a boat capsized off Greece.

  BREAKING: 28 #migrants killed in boat capsize off #Greece: report pic.twitter.com/apLOkms9Xu

  — China Xinhua News (@XHNews) September 13, 2015

  For now, however, one thing is certain: Europe may still have the Euro now that Greece is a permanent German debt colony, but the true heart of Europe, its customs union, is about to go on into indefinite V-fib as nation after nation follows in Germany’s footsteps and closes its doors to all those refugees it so generously welcomed until now.

  * * *

  Update: just minutes after we wrote the following, we got confirmation we may have been on to something. Oh, and goodbye Schengen, only for the “time being” of course. from Czech News:

  Prime Minister Bohuslav Sobotka (Social Democrats, CSSD) is going to make a public statement on the current situation, his spokesman Martin Ayrer told CTK.

   

  The Interior Ministry´s spokeswoman Petra Kucerova confirmed for CTK that the measure is linked to the launch of border checks on the German-Austrian border over the influx of refugees.

   

  Earlier today, German Interior Minister Thomas de Maiziere announced that Germany will temporarily introduce checks on its borders, the EU´s internal ones, beginning with its border with Austria. He said Germany consulted Austria before taking the step.

   

  The Czech police expected Germany to take this step, Foreigner Police spokeswoman Katerina Rendlova told CTK.

   

  “For the moment, we will react by taking our own measures, which is the reinforcement of the police on duty in the border areas. Our further steps will depend on the number of incoming migrants,” Rendlova said.

   

  She said the measures would concern the South Moravia and South Bohemia Regions, both of which border on Austria.  The police would release information about the reinforcement and further details only later.

  To the refugees (and/or masked ISIS terrorists of course) that successfully made it into Germany/Europe, congratulations. To the rest of them: better luck next time.
  

  

  

  

  

  

• Bringing "Once Great Nations" To Their Knees – Reagan Vs. Obama

  Presented with no comment…

   

  

   

  Source: Townhall.com

  

  

  

  

  

• Risk Of “Economic Totalitarianism” From “Cashless Society”

  Cash Withdrawal Limits and “Bank Holidays” Coming
  
  – Concerns that next crisis may be imminent

  – Bail-ins, withdrawal limits and negative interest rates may be imposed

  – FT proposes a ban on “barbarous relic” cash

  – Central banks and banks would have people “completely under their control”

  Collapsing commodities prices, erratic market turmoil and the bursting of Chinese bubbles are leading to a crisis in confidence in the economic system across the globe. The long-expected crisis to which the global financial and systemic crisis in 2008 may have been a mere prelude may be upon us.

  
  
  Governments have no appetite for further bailouts. The EU states have passed legislation which will make the banks or rather unfortunate and unsuspecting depositors liable for the bank’s lending and speculative profligacy.
  
  It is claimed that this is to “protect” the taxpayer. In reality it will likely lead to bail-ins – the confiscation of deposits. It is likely that that in a crisis within the banking system this bail-in mechanism would be imposed on an impromptu “bank holiday”  followed by limits on cash withdrawals as were applied in Cyprus and more recently to depositors in Greece.

  As has been pointed out by many other analysts, the unelected powers-that-be have used all their conventional weaponry to stave off the consequences of their irresponsible ultra loose monetary policies and massive buildup of debt globally – the largest ever seen in the history of the world.
  
  
  
  The typical response to a crisis has been to slash rates from somewhere around 6% – the historic post war norm in the west – to between 0% and 1%. This has stored up an even crisis in the future – the question is not if we have another crisis but when.

  With interest rates now near zero, rates cannot be slashed any further. Unless of course, further “unconventional” weaponry are deployed upon the citizens to encourage them to spend. Further QE and QE$ is likely. Another option is negative rates – where depositors are charged by banks to hold their money. Both constitute weapons of financial and monetary repression in the deepening “war on cash.”

  Bail-ins, withdrawal limits and negative interest rates would provoke a wave of withdrawals, further undermining the banking system – as was seen in Greece.

  Hence, the deep concern when the Financial Times recently proposed abolishing cash altogether.

  In a piece entitled “The Case for Retiring Another ‘Barbarous Relic” the FT laments the existence of cash. In the view of the editorial, cash limits the capacity of omniscient central banks to bully savers into parting with the fruits of their own labour to “stimulate” debt laden economies.

  “The worry is that people will change their deposits for cash if a central bank moves rates into negative territory.”

  
  Armstrong Economics
  
  Bill Bonner from Bonner and Partners has written an excellent piece on what the proposed ban on cash fully implies. He explains how such a move could have Orwellian consequences. The central bank, not to mention individual accounts, he writes, “will have you completely under their control”.

  “You will buy when and what they want you to buy. You will be forced to keep your money in a bank – a bank controlled, of course, by the feds. You will say that you have ‘cash in the bank,’ but it won’t be true. All you will have is a credit against the bank. (Bank deposits are nothing more than IOUs from your bank to you.)”

  He continues

  “You will be completely surrounded. If the feds want to force you to spend… or invest… your money, they will simply impose a ‘negative interest rate.’ They will do this by simply imposing a fee, or tax, on deposits greater than the interest rate you receive on your savings.”

  During a financial crisis following a ban on cash Bonner writes
  
  “You will be locked into a bank account with a bankrupt institution. And the feds and their bank cronies will tell you when and how you can have access to your own money.”

  Bonner also suggests that there may then be an attempt to prevent the sale of gold bullion coins and bars to the public in a desperate attempt at neutralising its qualities as a store of wealth and safe haven money.
  
  One cannot have a free market or a free society if citizens are banned from choosing which form of money and which form of payment they choose to use. Such economic totalitarianism is liable to further erode trust in the financial system and actually contribute to runs on banks. Exactly the opposite effect that the proponents of the cashless society claim to be trying to avoid.  
  
  Fostering dependence on irresponsible banks and a still very vulnerable banking sector will make the entire western financial and economic system even more vulnerable.
  
  Forcing entire nations to use electronic currency also seems imprudent at a time when electronic magnetic pulse warfare may be a key weapon of choice of terrorists and powerful state actors. Electric grids could be disabled for periods of time – rendering all commerce impossible in a cashless society.
  
  Without electricity and computer or internet access, one could not access your current and savings account or make electronic payments.
  
  Fostering absolute dependence and giving banks an even more entrenched and powerful monopoly over the issuance of credit and control of citizens savings and spending is a recipe for economic disaster. This is especially the case in an age of cyber warfare when banks have already been shown to be vulnerable to hacking.  
  
  The current drive towards a cashless society shows the importance of being diversified and not having all your savings and assets within the vulnerable financial and banking system.
  
  It underlines the importance of having direct ownership of some of your wealth – be that cash or gold bullion in a safe deposit box or bullion coins and bars in the safest vaults, in the safest jurisdictions in the world.
  
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• Dependence On Central Banks Is "Unrealistic And Dangerous", BIS Warns

  To be sure, there’s something terribly ironic about the central bank for central banks telling the world that the market is too dependent upon central banks, but then again, the Bank for International Settlements isn’t exactly shy about making scary-sounding declarations and criticizing its board members (listed below) in its “closely-watched” (if only by those who are aware of the institution’s shadowy existence and give any credence to what they say) quarterly reviews. As we put it back in June: 

  The BIS serves to encourage and perpetuate the power and prestige of the world’s central bankers and provides a top secret forum for the monetary policy cabal to meet and commiserate safe at all times from the prying eyes of those to whom the bankers should by all rights be accountable. 

   

  In this context it’s somewhat absurd that the bank’s reports — which, as a reminder, are required reading in treasury departments and monetary policy circles around the globe — contain scathing critiques of the very same policies which were no doubt devised, tweaked, and honed over dinner and fine wine in Basel. Nevertheless, the BIS’ latest tome is replete with criticism for the idea that the very people who make up the bank’s Board of Governors are indeed omnipotent. 

  

  Last year alone for instance, the bank warned of a “puzzling” disconnect between the economy and “euphoric” markets, excessive risk taking and depressed volatility fostered by ultra accommodative monetary policy, and the effect of a strong dollar on the solvency of EM corporates. Earlier this year, the BIS joined the cacophony of analysts, pundits, and commentators suddenly screaming about the absence of liquidity in corporate credit markets. 

  Well, the bank is at it again in their latest quarterly report and although most of what’s discussed in the 187-page document will be no surprise to regular readers, BIS Head of the Monetary & Economic Department, Claudio Borio’s prepared remarks are worth a review as they serve to underscore the fact that some very “serious” people in Basel are apparently quite concerned about the risks facing their board members.

  Borio begins by noting that the defining feature of Q2 was turbulence, first in Greece, and then in China, where a multi-hundred billion yuan unwind in a half dozen backdoor margin lending channels triggered a market meltdown:

  We often look at the world as a set of still frames, rather than as a movie, as we should.

   

  The still frame of the last quarter – the period under review in this issue – has one distinguishing feature: turbulence. Initially – think of it as the left side of the frame – it was Greece that grabbed all the attention and headlines. Market participants had hardly had the time to breathe a sigh of relief when Asia, in particular China, appeared in the centre of the frame. First, the origin of the shock was the Chinese stock market, which on 8 July saw its largest one-day drop ever; then, on 12 August, it was the authorities’, admittedly rather small, devaluation of the currency as they officially shifted towards a more market-oriented exchange rate regime.

   

  The shocks in July and August set off much bigger and far-reaching tremors. Stock markets around the world weakened. More importantly, commodity prices plummeted – accelerating their previous longer-term decline – and volatility spiked. The oil price gyrations were remarkable. The price sunk to a new trough below $40 on 24 August, undoing the whole of the partial recovery in the second quarter of the year, then soared some 30% in only one week before dropping back again.

  The story progresses logically to the predictable and well-documented effect the above has had on EMs, with Borio also noting that the market’s extreme reaction to developments in China may have something to do with the extent to which market participants are hanging on every last movement in the SHCOMP and, more importantly, the yuan:

  The exchange rates of emerging market economies (EMEs), especially commodity exporters, were hit hard, and their credit spreads widened. 

   

  Why such a big difference in the response to the initial sharp drop in Chinese equity prices in June and the subsequent shocks? In part, this may reflect market participants’ selective attention. More fundamentally, though, it mirrors their shifting perceptions of background economic conditions and of the power of policy. 

  And there’s the seemingly obligatory discussion of dollar-denominated EM corporate debt, which is of course a potential landmine in an environment where capital is flowing out of EMs and where the effect of a Fed hike is magnified by the fact that in a world where asset classes have become increasingly correlated, risk-parity funds may be forced into the dollar should everything else begin to sell-off at once:

  The data reveal a certain bifurcation in global liquidity, with credit to China, Russia and, to a lesser extent, Brazil being especially weak. Here, the role of credit denominated in US dollars plays a critical role. As highlighted in a number of BIS publications, the total amount of dollar credit to non-bank borrowers outside the United States had risen by over 50% since early 2009, to 9.6 trillion by end-March 2015, and almost doubled for EMEs, to over 3 trillion. Much of it has found its way to corporates, raising serious questions about the financial vulnerabilities involved and the implications for self-reinforcing movements in exchange rates and credit spreads.

  Finally, Borio warns that increasingly interdependent “policy arrangements” have proven ineffective when it comes to smoothing out the business cycle and have in fact served only to magnify the scale of booms and busts (and argument we and others have made tirelessy for years): 

  Taking an even longer-term perspective, as argued in detail in the latest BIS Annual Report, all this points to weaknesses in domestic and international policy arrangements – arrangements that have so far been unable to constrain sufficiently the build-up and unwinding of hugely damaging financial booms and busts across countries.

  But despite all the evidence (2000, 2008, etc.) which points to the fact that attempting to use monetary policy to micromanage economic outcomes very often ends in tears, the world has nevertheless become more dependent on central banks than ever before:

  Hence a world in which debt levels are too high, productivity growth too weak and financial risks too threatening. This is also a world in which interest rates have been extraordinarily low for exceptionally long and in which financial markets have worryingly come to depend on central banks’ every word and deed, in turn complicating the needed policy normalisation. It is unrealistic and dangerous to expect that monetary policy can cure all the global economy’s ills.

  The cryptic conclusion: “All this is reminiscent of the old joke about the stranded tourist who, having asked for directions, was told: ‘If I were you, I wouldn’t start from here.'”

  We agree – we think.

  

  

  

  

  

• Equity Markets, Credit Creation, & The Central Bank's Ultimate Priority

  Submitted by Alasdair Macleod via GoldMoney.com,

  There is one class of money that is constantly being created and destroyed, and that is bank credit.

  Bank credit is created when a bank lends money to a customer; it becomes money because the customer draws down this credit to deposit in other bank accounts and to pay creditors. It is not money that is created by a central bank; it is money that is created out of thin air by commercial banks to lend. Its contraction comes about when it is repaid, or if a customer defaults.

  The recent sharp fall in equity markets is leading to two levels of contraction of bank credit. Brokers' loans to speculating investors are being unwound from record levels, notably in China and also in the US where in July they hit an all-time record of $487bn. Then there is the secondary effect, likely to kick in if there are further falls in equity prices, when equities held as loan collateral are liquidated. This is when falling stock prices can be so destructive of bank credit, and as the US economist Irving Fisher warned in 1933, a wider cycle of collateral liquidation can ensue leading to economic depression.

  Fear of an escalating debt liquidation cycle is always a major concern for central bankers, so ensuring the secondary effect described above does not occur is their ultimate priority. Macroeconomic policy is centred on ensuring that bank credit grows continually, so since the Lehman crisis any tendency for bank credit to contract has been offset by central banks creating money. The bald fact that equity markets have now lost upside momentum and appear to be at risk of a self-feeding collapse will be viewed by central bankers with increasing alarm.

  For this reason many investors believe that a bear market will never be permitted, and the combined weight of central banks, exchange stabilisation funds and sovereign wealth funds will be investing to support the markets. There is some evidence that this is the direction of travel for state intervention anyway, so state-sponsored buying into equity markets is a logical next step.

  The risk to this line of reasoning is if the authorities are not yet prepared to intervene in this way. When the S&P 500 Index halved in the aftermath of the last financial crisis, the subsequent recovery appeared to occur without significant US government buying of equities. Instead the US government might continue to rely on more conventional monetary remedies: more quantitative easing, reversing current attempts to raise interest rates, and perhaps attempting to enforce negative interest rates as well. If, in the future, state jawboning accompanying these measures does not stop the bear market from running its course, the next round of quantitative easing will have to be far larger than anything seen so far.

  Alternatively, if states by buying equities attempt to kill the bear, it will have to be through massive market intervention, aiming helicopter-distributed money at investors as well as rigging the alternatives to make them relatively less attractive. Either way, the shake-out in equities we have seen so far is a wake-up call for mainstream economists and commentators who believe in the comfort of government statistics, which seem designed to convince us all that economic growth is perpetually on its way.

  Since the Lehman crisis, investors have bought into this bullish argument to the exclusion of any likely risk that a bear market will happen. Consequently, considerable amounts of speculative money are committed to the concept of a perpetual state-guaranteed bull market; so if the destructive forces of reality do intervene, the potential for a severe fall in equity prices will be much greater than before.

  Meanwhile global bank credit looks like it is already contracting in key markets, such as China, in which case global fundamentals are definitely deteriorating. This being the case, it will take increasing amounts of newly-issued money from the central banks to perpetuate the illusion that markets are rising, and that the economy is still growing, with or without state-directed buying of equities.

  This article coms one week before the Fed's September interest rate decision, which might result in a small interest rate rise, but it is time to put the Fed's interest rate dilemma aside and instead think beyond it about the wider economic consequences of the monetary inflation necessary to ensure a perpetual bull market.

  

  

  

  

  

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