• If You Live In These States You'll Soon Need A Passport For Domestic Flights

  Submitted by John Vibes via TheAntiMedia.org,

  To comply with the 2005 Real ID Act, which the U.S. government has been slowly implementing for the past decade, citizens in a number of different U.S. states will now be forced to obtain a passport if they want to board an airplane – even for domestic flights.

  The Department of Homeland Security and representatives with the U.S. Customs and Border Protection have declined to comment on why certain states have been singled out, but starting in 2016, residents of New York, Wisconsin, Louisiana, Minnesota, New Hampshire, and American Samoa will need a passport to fly domestically. All other states will still be able to use their state-issued driver’s licenses and IDs — for now, at least.

  According to the Department of Homeland Security’s guidelines on enforcement of the Real ID Act,

  “The Department of Homeland Security (DHS) announced on December 20, 2013 a phased enforcement plan for the REAL ID Act (the Act), as passed by Congress, that will implement the Act in a measured, fair, and responsible way.

   

  Secure driver’s licenses and identification documents are a vital component of our national security framework. The REAL ID Act, passed by Congress in 2005, enacted the 9/11 Commission’s recommendation that the Federal Government ‘set standards for the issuance of sources of identification, such as driver’s licenses.’ The Act established minimum security standards for license issuance and production and prohibits Federal agencies from accepting for certain purposes driver’s licenses and identification cards from states not meeting the Act’s minimum standards.  The purposes covered by the Act are: accessing Federal facilities, entering nuclear power plants, and, no sooner than 2016, boarding federally regulated commercial aircraft.

   

  States and other jurisdictions have made significant progress in enhancing the security of their licenses over the last number of years. As a result, approximately 70-80% of all U.S. drivers hold licenses from jurisdictions: (1) determined to meet the Act’s standards; or (2) that have received extensions. Individuals holding driver’s licenses or identification cards from these jurisdiction may continue to use them as before.

   

  Individuals holding licenses from noncompliant jurisdictions will need to follow alternative access control procedures for purposes covered by the Act.  As described below, enforcement for boarding aircraft will occur no sooner than 2016.”

  According to the fine print, not all 50 states have driver’s licences that meet the Real ID requirements, which could possibly explain why the aforementioned regions will not qualify in 2016. However, there is no specific mention of what the requirements actually are.

  The Real ID act has been controversial since its initial proposal over ten years ago and is seen by many as a massive violation of privacy. One of the primary reasons it has taken the government so long to roll this program out is that the program is wildly unpopular and creates heavy backlash every time it appears in the news.

  The tightening of the Real ID restrictions are seemingly intended to push people towards attaining the newly issued “enhanced ID,” which adds more unnecessary paperwork and bureaucracy to the already tedious process involved in identification applications.

  

  

  

  

  

• "Nope" & Change

  It’s The Jobs, Stupid!!

  Nope!

  

   

  Change?

  

   

  Source: Bloomberg, Investors.com

  

  

  

  

• Putin: Friend Or Foe In Syria?

  Submitted by Patrick Buchanan via Buchanan.org,

  What Vladimir Putin is up to in Syria makes far more sense than what Barack Obama and John Kerry appear to be up to in Syria.

  The Russians are flying transports bringing tanks and troops to an air base near the coastal city of Latakia to create a supply chain to provide a steady flow of weapons and munitions to the Syrian army.

  Syrian President Bashar Assad, an ally of Russia, has lost half his country to ISIS and the Nusra Front, a branch of al-Qaida.

  Putin fears that if Assad falls, Russia’s toehold in Syria and the Mediterranean will be lost, ISIS and al-Qaida will be in Damascus, and Islamic terrorism will have achieved its greatest victory.

  Is he wrong?

  Winston Churchill famously said in 1939: “I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma; but perhaps there is a key. That key is Russian national interest.”

  Exactly. Putin is looking out for Russian national interests.

  And who do we Americans think will wind up in Damascus if Assad falls? A collapse of that regime, not out of the question, would result in a terrorist takeover, the massacre of thousands of Alawite Shiites and Syrian Christians, and the flight of millions more refugees into Jordan, Lebanon and Turkey — and thence on to Europe.

  Putin wants to prevent that. Don’t we?

  Why then are we spurning his offer to work with us?

  Are we still so miffed that when we helped to dump over the pro-Russian regime in Kiev, Putin countered by annexing Crimea?

  Get over it.

  Understandably, there is going to be friction between the two greatest military powers. Yet both of us have a vital interest in avoiding war with each other and a critical interest in seeing ISIS degraded and defeated.

  And if we consult those interests rather than respond to a reflexive Russophobia that passes for thought in the think tanks, we should be able to see our way clear to collaborate in Syria.

  Indeed, the problem in Syria is not so much with the Russians — or Iran, Hezbollah and Assad, all of whom see the Syrian civil war correctly as a fight to the finish against Sunni jihadis.

  Our problem has been that we have let our friends — the Turks, Israelis, Saudis and Gulf Arabs — convince us that no victory over ISIS can be achieved unless and until we bring down Assad.

  Once we get rid of Assad, they tell us, a grand U.S.-led coalition of Arabs and Turks can form up and march in to dispatch ISIS.

  This is neocon nonsense.

  Those giving us this advice are the same “cakewalk war” crowd who told us how Iraq would become a democratic model for the Middle East once Saddam Hussein was overthrown and how Moammar Gadhafi’s demise would mean the rise of a pro-Western Libya.

  When have these people ever been right?

  What is the brutal reality in this Syrian civil war, which has cost 250,000 lives and made refugees of half the population, with 4 million having fled the country?

  After four years of sectarian and ethnic slaughter, Syria will most likely never again be reconstituted along the century-old map lines of Sykes-Picot.

  Partition appears inevitable.

  And though Assad may survive for a time, his family’s days of ruling Syria are coming to a close.

  Yet it is in America’s interest not to have Assad fall — if his fall means the demoralization and collapse of his army, leaving no strong military force standing between ISIS and Damascus.

  Indeed, if Assad falls now, the beneficiary is not going to be those pro-American rebels who have defected or been routed every time they have seen combat and who are now virtually extinct.

  The victors will be ISIS and the Nusra Front, which control most of Syria between the Kurds in the northeast and the Assad regime in the southwest.

  Syria could swiftly become a strategic base camp and sanctuary of the Islamic State from which to pursue the battle for Baghdad, plot strikes against America and launch terror attacks across the region and around the world.

  Prediction: If Assad falls and ISIS rises in Damascus, a clamor will come — and not only from the Lindsey Grahams and John McCains — to send a U.S. army to invade and drive ISIS out, while the neocons go scrounging around to find a Syrian Ahmed Chalabi in northern Virginia.

  Then this nation will be convulsed in a great war debate over whether to send that U.S. army to invade Syria and destroy ISIS.

  And while our Middle Eastern and European allies sit on the sidelines and cheer on the American intervention, this country will face an anti-war movement the likes of which have not been seen since Col. Lindbergh spoke for America First.

  In making ISIS, not Assad, public enemy No. 1, Putin has it right.

  It is we Americans who are the mystery inside an enigma now.

  

  

  

  

  

• HeY JaMie…

  

  

  

  

  

• How The China-Led Bank That's Reshaping The Global Economic Order Almost Never Was

  One of the most amusing things about China’s Asian Infrastructure Investment Bank membership drive (which concluded at the end of March) was that it was so successful Beijing had to essentially apologize in order to ensure that all of the US allies that signed up stayed comfortable. 

  To recap, in early March Britain decided – much to Washington’s chagrin – to throw its support behind China’s effort to establish a new development bank. The venture, designed to help fill gaps left by The World Bank and the ADB, was viewed by the US as an attempt to challenge the supremacy of the multilateral institutions that have dominated the global economic order in the post-war world and also as an effort to create a powerful instrument of foreign policy that could be deployed on the way to establishing what amounts to a kind of Sino-Monroe Doctrine.

  Of course the Obama administration couldn’t come out and say that, so the excuse for Washington’s largely behind-the-scenes effort to subvert the AIIB was that the new lender would have inadequate controls and flimsy underwriting standards. There was also some nonsense about a lack of regard for environmental concerns. As silly and transparent as that was, Washington’s allies were willing to buy it right up until Britain broke ranks and at that point, the floodgates opened as virtually everyone except the US and Japan jumped on board. 

  That was great for China, until talk of a new world order characterized by yuan hegemony started to make Beijing uncomfortable. As we put it earlier this month, “despite the Politburo’s best efforts to toe the line between acknowledging the bank’s early success and unnerving Western members who, although happy to participate, are still acutely aware that a dying hegemon is still a hegemon and therefore would prefer it if Beijing didn’t rub the whole thing in Washington’s face, it was abundantly clear to everyone involved that the AIIB represented no less than a changing of the guard and a revolution against the US-dominated multilateral institutions that many emerging countries believe have failed to respond to seismic shifts in the global economy.”

  And so, China did its best to ensure everyone involved that it did not plan to use the bank as a foreign policy tool and had no plans to use the new lender as a kind of backdoor way to promote yuan hegemony. As we put it earlier this year, China simply couldn’t believe how successful the bank was before it was even launched. 

  Now, as the AIIB gets set to officially commence operations, Reuters is out with an interesting look back at the story behind the institution that’s set to bring about a dramatic change in how the world thinks about development lending. Here’s more:

  Plans for China’s new development bank, one of Beijing’s biggest global policy successes, were almost shelved two years ago due to doubts among senior Chinese policymakers.

   

  From worries it wouldn’t raise enough funds to concerns other nations wouldn’t back it, Beijing was plagued by self-doubt when it first considered setting up the Asian Infrastructure Investment Bank (AIIB) in early 2013, two sources with knowledge of internal discussions said.

   

  But promises by some Middle East governments to stump up cash and the support of key European nations – to Beijing’s surprise and despite U.S. opposition – became a turning point in China’s plans to alter the global financial architecture.

   

  The overseas affirmation, combined with the endorsement of stalwart supporters, including a former Chinese vice premier and incoming AIIB President Jin Liqun, a former head of sovereign wealth fund China Investment Corp, enabled China to bring the bank from an idea to its imminent inception.

   

  The bank’s successful establishment is likely to bolster Beijing’s confidence that it can play a leading role in supranational financial institutions, despite the economic headwinds it is facing at home.

   

  “At the start, China wasn’t very confident,” one of the sources said in reference to Beijing’s AIIB plans. “The worry was that there was no money for this.”

   

  
  

   

  A Finance Ministry delegation that called on Southeast Asian nations to gauge interest in the AIIB was not encouraging, the source said. Governments backed the idea, but were too poor to contribute heavily to the bank’s funding.

   

  But subsequent visits to the Middle East helped to win the day as regional governments informed China they needed new infrastructure and, crucially, were able to pay for it, a source said.

   

  “They are all oil-producing countries, they have foreign currencies, they were very enthusiastic, and they could shell out the cash,” he said.

   

  “That was when we thought ‘Ah, this can be done.'”

   

  While some officials, including Jin, AIIB’s incoming president, have over the years pitched for Beijing to start a new international development bank, the idea did not gain traction under previous Chinese governments, sources said.

   

  But that changed when President Xi Jinping took office in spring 2013 and threw his weight behind China’s bold “One Belt, One Road” infrastructure and export strategy.

   

  “No one imagined (the AIIB) would be so successful, that so many people would respond to it,” one of the sources said.

  

  

  

  

  

• Mark Spitznagel Warns: If Investors Thought August Was Scary, "They Ain't Seen Nothin' Yet"

  The man who made a billion dollars on Black Monday sums up his strategy perfectly in this excellent FOX Business clip with the money-honey, "I'm a hedge fund manager that actually hedges for his clients. This is something of an old fashioned idea in this day of just gambling on the next Fed bailout." Spitznagel, who is wholly unapologetic in his criticism of The Fed (and any central planner), unleashes eight minutes of awful truthiness on what is going on under the surface of the so-called 'market', concluding ominously, "if August was scary for people, they ain't seen nothin’ yet."

   

  Grab a beer and relax…

  Watch the latest video at video.foxbusiness.com

   

  Some key excerpts:

  On Universa's tail-risk strategy..

  "We tend to lose or draw—most of the time—these small battles or skirmished. But, ultimately, we win the wars."

  On the Great Myth of centrally planned economies..

  "Great myths die hard. And I think what we're witnessing today is the slow death of one of the great myths of human history: this idea that centrally planned command economies work, that they're even feasible, and that they can be successful.

   

  It's one of these enigmatic mythologies of the last hundred years in particular that we've been grappling with, and here we are today yet again thinking about this. Let's remember that in the last hundred years a lot of blood has been shed over this mythology. And here we are today, how did we get here again?

  On today's "all alpha is beta" hedge fund community…

  There was this notion not long ago of the Bernanke put, the Greenspan put. It was sort of a dirty thing to admit that it was part of our investment strategy. But today, it's everyone’s investment strategy."

  On "it's different this time"…

  "I think that another generation will look back and say 'how could you have made that mistake all over again? How could you have failed to understand Hayek's notion of the fatal conceit, that central planners can't do better than the dispersed knowledge and signals of free market processes?'"

  On the crazy world in which we live…

  "There's something self-fulfilling about this mythology, only in the short run.

   

  But in the long run we know that it is ultimately self-defeating. When bureaucrats mandate low interest rates it doesn't spawn long term productive investment. What it spawns is this short term gambling, punting on momentum-driven moves, on levered buybacks. This is the world we're in today."

  

  

  

  

  

• Central Banks Have Shot Their Wad & The Market Deck Has Been Reshuffled

  Submitted by Doug Noland via Credit Bubble Bulletin,

  Most just scoff at the notion that there has been a historic global Bubble, let alone that this Bubble has over recent months begun to burst. Talk of an EM and global crisis is viewed as wackoism. Except that the Federal Reserve clearly sees something pernicious in the world that requires shelving, after seven years, even the cutest little baby step move in the direction of policy normalization.

  The Fed and global central banks responded to the 2008 crisis with unprecedented measures. When the reflationary effects of these policies began to wane, the unfolding 2012 global crisis spurred desperate concerted do “whatever it takes” monetary stimulus. This phase has now largely run its course, and there is at this point little clarity as to what global central bankers might try next.

  Clearly, great pressure will remain to hold rates tight at zero. I fully expect policymakers at some point to see no alternative than to implement additional QE. But under what circumstances? Will it be orchestrated independently or through concerted action? What about timing? How much and how quickly? Might global central banks actually consider adopting negative rates? Well, there’s enough here to really have the markets fretting the uncertainty, especially with global central bankers not having thought things through.

  There is today extraordinary confusion and misunderstanding throughout the markets. Policymakers are confounded. Years of zero rates, Trillions of new “money” and egregious market intervention/manipulation have left global markets more vulnerable than ever. Now What? I’m the first to admit that global Credit, market and economic analyses are these days extraordinarily complex – and remain so now on a daily basis. We must test our analytical framework and thesis constantly.

  I am confident in my analytical framework and believe it provides a valuable prism for understanding today’s complex world. The current global government finance Bubble is indeed the grand finale of serial Bubbles spanning about 30 years. Importantly, each Boom and Bust Bubble Cycle – going back to the mid-eighties (“decade of greed”) – spurred reflationary policy measures that worked to spur a bigger Bubble. Inevitably, each bursting Bubble would ensure only more aggressive inflationary policy measures.

  It is fundamental to Credit Bubble Theory (heavily influenced by “Austrian” analysis) that the scope of each new Bubble must be bigger than the last. Credit growth must be greater, speculation must be greater and asset inflation must be greater. This Financial Sphere inflation is essential to sufficiently reflate the Real Economy Sphere – i.e. incomes, spending, corporate earnings/cash flows, investment, etc. Reflation is necessary to validate an ever-expanding debt and financial structure, including elevated asset prices. Ongoing rapid Credit growth is fundamental to this entire process, much to the eventual detriment of financial and economic stability.

  There are a few key points that drive current analysis (completely disregarded by conventional analysts).

  First, the government finance Bubble saw historic Credit growth unfold in China and EM – Credit expansion sufficient to reflate a new Bubble after the bursting of the mortgage finance Bubble. Central to my thesis: when the current Bubble bursts – especially with regard to China – it will be near impossible to spur sufficient global Credit growth to inflate a bigger ensuing Bubble.

   

  Second, with the global government finance Bubble emanating from the very foundation of contemporary “money” and Credit, it will be impossible for governments and central banks to extricate themselves from monetary stimulus (any tightening would risk bursting Bubbles).

   

  Third, extreme measures – monetary inflation coupled with market manipulation – spurred enormous “Terminal Phase” growth in the global pool of speculative finance. It’s been a case of too much “money” ruining the game.

  “Moneyness of Risk Assets” has played prominently throughout the government finance Bubble period. Unlimited Chinese stimulus seemed to ensure robust commodities markets and EM economies generally. Limitless sovereign debt and central bank Credit appeared to guarantee ongoing liquid and continuous global financial markets – “developed” and “developing.” And with governments backstopping global growth and central bankers backstopping liquid markets, the perception took hold that global stocks and bonds offered enticing returns with minimal risk. Global savers shifted Trillions into perceived “money-like” (liquid stores of nominal value) ETFs and stock and bond funds. Government policy measures furthermore incentivized leveraged speculation.

  And why not leverage with global fiscal and monetary policies promoting such a predictable backdrop? Indeed, speculative finance has over recent years played an unappreciated but integral role in global reflation. This process has created acute fragility to market risk aversion and a reversal of “hot money” flows.

  Central to the bursting global Bubble thesis is that Chinese and EM Bubbles have succumbed – with policymakers rather abruptly having lost control of reflationary processes. Measures that elicited predictable responses when Bubbles were inflating might now spur altogether different behavior. A year ago, Chinese stimulus incited speculation – and associated inflation – in domestic financial markets, while bolstering China’s economy and EM more generally. Today, in a faltering Bubble backdrop, aggressive Chinese measures weigh on general confidence and stoke concerns of destabilizing capital flight and currency market instability.

  In the past, a dovish Fed would predictably bolster “risk-on” throughout U.S. and global markets. Times have changed. As we saw this week, an Ultra-Dovish Fed actually exacerbates market uncertainty. The global leveraged speculating community is these days Crowded in long dollar trades. Federal Reserve dovishness – and resulting pressure on the dollar – thus risks reinforcing “risk off” de-risking/de-leveraging. In particular, the yen popped on the Fed announcement, immediately adding pressure on already vulnerable yen “carry trades” (short/borrow in yen to finance higher-yielding trades in other currencies). While EM currencies generally enjoyed small bounces (likely short covering) this week, for the most part EM equities traded poorly post-Fed. European equities were hit hard, while the region’s bonds benefited from the prospect of more aggressive ECB QE.

  The bullish contingent has clung to the view that EM weakness has been a function of an imminent Fed tightening cycle. In the market’s mixed reaction to Thursday’s announcement, I instead see support for my view that the bursting EM Bubble essentially has little to do with current Federal Reserve policy.

  The bursting China/EM Bubble is the global system’s weak link. Surely the activist Fed would prefer to do something. They must believe that hiking rates – even if only 25 bps – would support the dollar at the risk of further straining commodities and EM currencies. Moreover, the FOMC likely sees any “tightening” measures as exacerbating general market nervousness and risk aversion. Moreover, the Fed must believe that dovish surprises will be effective in countering a tightening of financial conditions in the markets, as they were in the past.

  Major Bubbles are so powerful. It was amazing how long the markets were willing to disregard shortcomings and risks in China and EM (financial, economic and political). Similarly, it’s been crazy what the markets have been so willing to embrace in terms of Federal Reserve and global central bank doctrine and policy measures. With their Bubble having recently burst, Chinese inflationary measures are now significantly hamstrung by an abrupt deterioration in confidence in policymaker judgment and the course of policymaking. I believe Thursday’s Fed announcement marks an important inflection point with respect to market confidence in the Fed and central banking.

  Japan’s Nikkei dropped 2% Friday, and Germany’s DAX sank 3.1%. Both have been global leveraged speculating community darlings. Crude was hammered 4.2% Friday, with commodities indices down about 2%. Notably, the Brazilian real was trading at 3.83 (to the dollar) prior to the Fed announcement, before sinking 3% to a multi-year low by Friday’s close. Reminiscent of recent market troubles, financial stocks led U.S. equities lower on Friday. Financials badly underperformed for the week, with Banks down 2.7% and the Securities Broker/Dealers sinking 2.6%.

  The market deck has been reshuffled for next week. A lot of market hedging took place during the past month of market instability. And a decent amount of this protection expired (worthless) with Friday’s quarterly “triple witch” options expiration. This means that if the market resumes its downward trajectory next week many players will be scampering again to buy market “insurance.” This creates market vulnerability to another “flash crash” panic “risk off” episode.

  I am not predicting the market comes unglued next week. But I am saying that an unsound marketplace is again vulnerable to selling begetting selling – and another liquidity-disappearing act. Bullish sentiment rebounded quickly following the August market scare. The bear market will be well on its way if August lows are broken. I’m sticking with the view that uncertainties are so great – especially in the currencies – the leveraged players need to pare back risk. And the harsh reality is that central bank policymaking is the root cause of today’s extraordinary uncertainties and market instability.

  In closing, I’m compelled to counter the conventional view that the Fed should stick longer at zero because there is essentially no cost in waiting. I believe there are huge costs associated with thwarting the market adjustment process. Measures that contravene more gradual risk market declines only raise the likelihood of eventual market dislocation and panic. This was one of many lessons that should have been heeded from the 2007/2008 experience.

  

  

  

  

  

• Don't Show This Chart To Your Hedge Fund Manager

  Make no mistake, the 2 and 20 crowd are having a rough go of it lately. 

  As we reminded readers in the wake of Nassim Taleb’s massive $1.1 billion payday on August 24, hedge funds are supposed to “hedge” – i.e. guard against all manner of black swans, tail risks, six sigma events, and other things that statistically speaking aren’t supposed to happen but in today’s broken markets occur with alarming frequency – but instead they merely “ride the beta train with the most leverage possible, hoping that the Fed will prevent any events that actually need hedging, and blow up in a fiery crash any time the market tumbles.” 

  For those who need a refresher, here’s how some of the more prominent funds had performed through August 21:

  

   

  Indeed, even the zen master himself, Ray Dalio, isn’t immune as the $80 billion “All Weather” fund recently found itself caught in the rain with no umbrella after an utter breakdown in the historical relationships between asset classes (volatilities and correlations) that are used to construct optimal “risk-parity” led to what Dalio called a “lousy” August that saw the fund down more than 4%. 

  The bottom line, as Goldman succinctly put it last month, is that “hedge funds are on pace to lag the market index for the seventh straight year in 2015,” suggesting that you’d be far better off paying 0 and 0 for SPY and calling it a day than you would paying 2 and 20 especially considering you’re relying on the Fed put either way.

  For anyone still not convinced, we present the following chart from Citi’s Matt King which sums up all of the above in just about the most straightforward, idiot proof manner imaginable by simply comparing hedge fund returns to a 50/50 mix of stocks and HY credit. Put simply, if you had bought SPY and JNK four years ago for a gross expense ratio of just 0.10% and 0.40%, respectively, not only would you would have saved yourself quite a bit of money, you’d have better performance as well.

  

  Summing up…

  

  

  

  

  

  

• With Wages Down 5% In 42 Years, Jamie Dimon Says Stop Complaining, At Least You Have An iPhone

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  

  Another day, another data point proving what anyone with two functioning braincells already knows.

   That for most citizens, the U.S. economy is a neo-feudal Banana Republic oligarch hellhole. The facts are indisputable at this point, and the trend goes back decades when it comes to the American male. All the way back to 1973, in fact, just two years after the U.S. defaulted on gold and the economy started its grotesque transformation into a Wall Street controlled, financialized gulag.

  Just yesterday, I highlighted some very depressing data from the Census in the post:

  Census Data Proves It – There Was No Economic Recovery Unless You Were Already Rich

  Now we learn the following, from the Wall Street Journal:

  The typical man with a full-time job–the one at the statistical middle of the middle–earned  $50,383 last year, the Census Bureau reported this week.

   

  The typical man with a full-time job in 1973 earned $53,294, measured in 2014 dollars to adjust for inflation.

  You read that right: The median male worker who was employed year-round and full time earned less in 2014 than a similarly situated worker earned four decades ago. And those are the ones who had jobs.

   

  This one fact, tucked in Table A-4 of the Census Bureau’s annual report on income, is both a symptom of an economy that isn’t delivering for many ordinary Americans and at least one reason for the dissatisfaction, anger, and distrust that voters are displaying in the 2016 presidential campaign.

  Now here’s a chart of the middle class death spiral:

  

  On a related note, billionaire and CEO of “Too Big to Fail and Jail” JP Morgan, Jamie Dimon, decided to weigh in on income inequality earlier today. Here’s some of what he had to say courtesy of Yahoo.

  JPMorgan CEO Jamie Dimon says it’s OK that chief executives get paid way more than their average employees — and that cutting down on executive compensation wouldn’t help eliminate income inequality.

   

  “It is true that income inequality has kind of gotten worse,” Dimon said, but “you can take the compensation of every CEO in America and make it zero and it wouldn’t put a dent into it. What really matters is growth.”

  How enlightened. Considering the U.S. has seen massive GDP growth since 1973, yet median wages for males haven’t budged, I wonder how growth is supposed to suddenly reverse the trend. Does he even think before speaking?

  But he wasn’t done. Apparently, Mr. Dimon felt a need to double down on his remarkable disconnectedness with the following:

  As for the middle class, Dimon reportedly said Thursday: “It’s not right to say we’re worse off … If you go back 20 years ago, cars were worse, the air was worse. People didn’t have iPhones.”

  That’s what you get when you ask a billionaire executive from a taxpayer bailed out, unaccountable industry for his thoughts on income inequality.

  

  

  

  

  

• US Readies Battle Plans For Baltic War With Russia: Report

  One of the most interesting – or perhaps “worrisome” is the better word – things about Moscow’s move to increase its support for the Bashar al-Assad regime as it battles to wrest control of large swaths of territory in Syria from Islamic State and other anti-government forces, is that it comes as the conflict in Ukraine still simmers. 

  Even if, as Bloomberg suggested on Friday, The Kremlin is “leaning on the separatists to limit cease-fire violations and focus on turning their makeshift administration into a functioning government with the help of Moscow-trained bureaucrats,” the issue is far from resolved and if Transnistria is any guide, it may never be. 

  That of course means the tension between Russia and Europe isn’t likely to dissipate any time in the foreseeable future, a fact that makes Moscow’s overt military support of Assad in Syria seem like a rather risky maneuver. In short, it appears that no matter how one wishes to characterize Moscow’s actions (i.e. irrespective of who the “aggressor” is), the West’s Russophobia as it relates to Putin’s willingness to chance a direct military confrontation with NATO isn’t entirely unfounded and as we’ve been keen to point out over the last several days, what the Russians have done by reinforcing Assad at Latakia is effectively call America’s bluff. 

  Needless to say, NATO’s actions over the last six or so months have done nothing to de-escalate what amounts to the most intense staring contest between Russia and the West since the Cold War. War games and snap drills conducted along Russia’s border combined with the stationing of heavy weapons in Poland lend credence to the idea that at best, the US isn’t nearly as anxious to re-establish a constructive dialogue with Moscow as Washington would like the public to believe.

  It’s against this backdrop that we present the following excerpts from Foreign Policy who reports that “for the first time since the collapse of the Soviet Union, the U.S. Department of Defense is reviewing and updating its contingency plans for armed conflict with Russia.” Notably, when the Army ran a series of war games to test NATO’s preparedness, the results were nothing short of a disaster. 

  *  *  *

  Via Foreign Policy

  The Pentagon generates contingency plans continuously, planning for every possible scenario — anything from armed confrontation with North Korea to zombie attacks. But those plans are also ranked and worked on according to priority and probability. After 1991, military plans to deal with Russian aggression fell off the Pentagon’s radar. They sat on the shelf, gathering dust as Russia became increasingly integrated into the West and came to be seen as a potential partner on a range of issues. Now, according to several current and former officials in the State and Defense departments, the Pentagon is dusting off those plans and re-evaluating them, updating them to reflect a new, post-Crimea-annexation geopolitical reality in which Russia is no longer a potential partner, but a potential threat.

  “Russia’s invasion of eastern Ukraine made the U.S. dust off its contingency plans,” says Michèle Flournoy, a former undersecretary of defense for policy and co-founder of the Center for a New American Security. “They were pretty out of date.”

  The new plans, according to the senior defense official, have two tracks. One focuses on what the United States can do as part of NATO if Russia attacks one of NATO’s member states; the other variant considers American action outside the NATO umbrella. Both versions of the updated contingency plans focus on Russian incursions into the Baltics, a scenario seen as the most likely front.

  After Russia’s 2008 war with neighboring Georgia, NATO slightly modified its plans vis-à-vis Russia, according to Julie Smith, who until recently served as the vice president’s deputy national security advisor, but the Pentagon did not. In preparing the 2010 Quadrennial Defense Review, the Pentagon’s office for force planning — that is, long-term resource allocation based on the United States’ defense priorities — proposed to then-Secretary of Defense Robert Gates to include a scenario that would counter an aggressive Russia. Gates ruled it out. “Everyone’s judgment at the time was that Russia is pursuing objectives aligned with ours,” says David Ochmanek, who, as deputy assistant secretary of defense for force development, ran that office at the time. “Russia’s future looked to be increasingly integrated with the West.” Smith, who worked on European and NATO policy at the Pentagon at the time, told me, “If you asked the military five years ago, ‘Give us a flavor of what you’re thinking about,’ they would’ve said, ‘Terrorism, terrorism, terrorism — and China.’”

  In June 2014, a month after he had left his force-planning job at the Pentagon, the Air Force asked Ochmanek for advice on Russia’s neighborhood ahead of Obama’s September visit to Tallinn, Estonia. At the same time, the Army had approached another of Ochmanek’s colleagues at Rand, and the two teamed up to run a thought exercise called a “table top,” a sort of war game between two teams: the red team (Russia) and the blue team (NATO). The scenario was similar to the one that played out in Crimea and eastern Ukraine: increasing Russian political pressure on Estonia and Latvia (two NATO countries that share borders with Russia and have sizable Russian-speaking minorities), followed by the appearance of provocateurs, demonstrations, and the seizure of government buildings. “Our question was: Would NATO be able to defend those countries?” Ochmanek recalls.

  The results were dispiriting. Given the recent reductions in the defense budgets of NATO member countries and American pullback from the region, Ochmanek says the blue team was outnumbered 2-to-1 in terms of manpower, even if all the U.S. and NATO troops stationed in Europe were dispatched to the Baltics — including the 82nd Airborne, which is supposed to be ready to go on 24 hours’ notice and is based at Fort Bragg, North Carolina.

  “We just don’t have those forces in Europe,” Ochmanek explains. Then there’s the fact that the Russians have the world’s best surface-to-air missiles and are not afraid to use heavy artillery.

  After eight hours of gaming out various scenarios, the blue team went home depressed. “The conclusion,” Ochmanek says, “was that we are unable to defend the Baltics.”

  Ochmanek has run the two-day table-top exercise eight times now, including at the Pentagon and at Ramstein Air Base, in Germany, with active-duty military officers. “We played it 16 different times with eight different teams,” Ochmanek says, “always with the same conclusion.”

  Full article here

  

  

  

  

  

• The Fed's First "Policy Error" Was Not Yellen's "Dovish Hold" But Bernanke's Tapering Of QE3

  Two days before the Fed confused everyone when it delivered neither a dovish hike nor a hawkish hold, but the most dovish possible outcome, we warned readers that the September FOMC announcement could be a carbon copy replica of what happened precisely two years ago, when everyone was expecting Bernanke to announce the Fed’s taper – a sign the US economy was solidly improving and QE was a success and thus can start being unwound – only to get precisely the opposite when Bernanke said “no taper”, leading some to wonder if this had been the Fed’s first major policy, and communication, mistake.

  Sept. 18, 2013: Fed shocks market when it “unexpectedly” refrains from QE taper http://t.co/nmEbVeSDrl

  — zerohedge (@zerohedge) September 15, 2015

  Fast forward to Thursday’s Fed statement and subsequent market reaction which prompted many to ask if Yellen’s own error did not just cost the Fed a substantial dose of credibility, because this may well have been the first time when a dovish Fed led to such a major market selloff.

  And while there was no selloff in September 2013 when the Fed refrained from tapering, the market reaction in December 2013 when Bernanke did announce the tapering of QE3 was very clear: an initial drop followed by a massive surge.

  Ironically, according to Deutsche Bank, it was not the Fed’s Thursday announcement that was the Fed’s most notable mistake, but Bernanke’s 2013 Taper announcement, which the market perceived as an all clear signal for the economy, only to realize just how clueless the Fed truly has been all along.

  Here is DB’s Dominic Konstam explaining why for the Fed, the mistakes are starting to pile up, with the December 2013 tapering start being the first and foremost one.

  At a recent investor gathering a question was asked, prior to the FOMC meeting, in the spirit of why the Fed should raise rates, whether or not anyone could argue that tapering itself was a “mistake”. It is an interesting question but the answer is surely a resounding “yes”. While a counterfactual is hard to prove, the impact of tapering in rates space is self evident. From the moment it began we saw a relentless fall in long term rates and a return to where those rates more or less stood around the onset of (endless) QE3. The cost of tapering should therefore be viewed in terms of what we have lost in rate space. If we think of 5y5y OIS as a terminal Funds rates, we have lost the best part of 200 bps in terminal funds and still counting. The Fed has managed to recognize about 75 bps of this so far in terms of dropping their terminal funds rate projections.

   

  

   

  One conclusion from the taper mistake is that if the Fed wants a sustainable normalization of rates it needs to be considerably behind the curve. It can never raise rates if the market discounts lower rates. Our confident prediction  is that the Fed will raise rates only when the market is begging for it and it should do it more slowly than the market discounts. That means the curve needs to be a lot steeper and the terminal rate priced a lot higher than currently. For the Fed to move otherwise, normalization is bound to fail i.e. be short-lived and partial. Recognizing this the Fed would do well to signal that by explicitly relinquishing any claim to higher rates through 2016. There might then be a chance that they could actually hike in 2016.

  Just in case anyone is still harboring any hope that the Fed may hike in October or December, or even any time in early 2016, allow us to disabuse you of such a fallacy, thanks to the recent devaluation chaos out of China. DB continues:

  For Yellen the uncertainty is that if the yuan is to fall further, it may not be now but perhaps year end or even later. There would need to be a clear shift positively in China’s fundamentals for that uncertainty to dissipate. Meanwhile any adjustment if and when it came would add to disinflation concerns at home and, presumably, at least initially adversely affect stocks, led by other Asian equities.

  Confused by what all of the above means? Simple: forget any rate hike now or for the foreseeable future. The Fed just got its first major wake up call by the market that it made a policy error, a mistake which it can and will trace to the QE4 unwind. Which means one thing: if Yellen decides to undo the Fed’s mistake, having not hiked on Thursday, she will next undo Bernanke’s last error: the naive hope that the US can operate without a regime of epic liquidity, i.e., either printing money once more in the form of QE4, 5, etc… or, as Kocherlakota hinted, the arrival of NIRP.

  One thing is certain: with the market tumbling, and with Bank of America admitting yesterday that a plunge in the S&P below 1870 to hint that QE4 is on the table, there is much more debasement of paper currencies on the horizon as the Fed grudgingly admits it is back to square one.

  

  

  

  

  

• 81% Of Syrians Believe US Is To Blame For ISIS

  Submitted by Cassius Methyl via TheAntiMedia.org,

  81 percent of Syrians believe the U.S. and its allies are behind the creation of the ISIS, according to a recent survey from research firm ORB International.

  “The advance of ISIL In Iraq has many seeking reasons for their presence in Iraq. 81% Syria/85% Iraq believe that ISIL is a foreign/American made group, while in Iraq with the larger split in sunni/shia population 75% also agree that it is a result of sectarian problems across the region.

   

  Previous Prime Minister al-Maliki is also blamed by 71% as a driving force in the creating of the terror group. A majority (51%) also believe that ‘getting rid of ISIL is not possible without solving the problems in Syria also,’”  the report explained.

  Further, the survey predictably found that many Syrians believe the country’s affairs are still headed in the wrong direction. As the report explains,

  “The poll also confirms a deteriorating environment.

   

  A majority in both countries say things are heading in the wrong direction (66% Iraq, 57% Syria), while in Iraq 67% that they preferred their life two years ago before the conflict started, increasing to 71% among those from ISIL majority controlled governorates of Anbar, Ninevah and Salah al-din.

   

  In Syria, just 21% prefer life now to what life was like under the full control of Bashar al Assad – 40% preferred life four years ago, 35% saying life is essentially the same.”

  The results shouldn’t come as a surprise, but they do offer another piece of anecdotal evidence that suggests the U.S. had a major role in creating ISIS — evidence that is becoming less anecdotal every day.

  

  

  

  

  

• "Irony"

  Who could have seen this coming? Well, he did!

   

  

   

  h/t @JeffInLondon

  

  

  

  

  

• Peter Schiff Explains The "External Threat" Justifying The Fed's Tyrannical Policies

  Submitted by Peter Schiff via Euro Pacific Capital,

  Every dictator knows that a continuous state of emergency is the best means to justify tyrannical policies. The trick is to keep the fictitious emergency from breeding so much paranoia that routine activities come to a halt. Many have discovered that its best to make the threat external, intangible and ultimately, unverifiable. In Orwell's 1984 the preferred mantra was "We've always been at war with Eurasia," even though everyone knew it wasn't true. In its rate decision this week the Federal Reserve, adopted a similar approach and conjured up an external threat to maintain a policy that is becoming increasingly absurd.  

  In blaming its continued inaction on "uncertainties abroad" (an excuse never before invoked by the Fed in the current period of zero interest rates), the Fed was able to maintain the pretense of a strong domestic economy, and its desire to lift rates at the earliest appropriate moment while continuing the economic life support of zero percent rates. Unbelievably, the media swallowed the propaganda hook, line, and sinker.  

   

  Over the summer it all seemed so certain. In mid-August the Wall Street Journal conducted a poll revealing that 95% of economists expected a rate hike by the end of 2015, with 82% expecting the first move to come in September. On July 29, Marketwatch reported that changes in Fed language were the "smoking gun" that made a September move a certainty. I was one of the few who publicly predicted that all the tough talk from the Fed was a bluff, and that there would be no hike in 2015. For taking that stance, I was largely ignored and ridiculed. In a July 16 interview on CNBC's Futures Now (I am no longer invited to be on their television broadcasts), pundit Scott Nations took me to task for making the "outlandish" suggestion that the Fed would not raise in 2015, saying (to paraphrase):

  "If price is truth and Fed funds futures are the collective wisdom of everybody in the world, and they are absolutely a lock for the Fed to raise rates by the end of the year, why is everybody else wrong and you are right?"

  But now, in mid-September, it has all changed, far fewer economists expect a hike this year. However, despite this dramatic reversal, few have downgraded their forecasts or weakened their belief that the Fed remains committed to tighten policy…eventually. In other words, the Fed has achieved a complete communications victory.

   

  Just like it has in prior statements, the Fed painted a picture of a stable and growing economy that was ready for a hike. In fact, in her press conference, Janet Yellen said that the Fed was "impressed" by the strength of the domestic economy. Although such statements began to resemble the film Groundhog Day, no one seems to tire of it.

   

  A cornucopia of metaphors should have come to mind: The Fed's bite had failed to live up to its bark; its "open mouth" operations wrote a check that its Open Market Committee was unable to cash; the Fed has become Lucy of the comic strip Peanuts, always promising to hold the football for Charlie Brown to kick, but always taking it away before he kicks it. Instead, the dominant theme of the coverage was that the Fed's understanding of the global economy was just better than the rest of us. It apparently understood that a 25 basis point increase in rates in the U.S. could ripple through to the world markets and could potentially push China's tottering stock market into the abyss. That was a risk it believed was not worth taking.

   

  To keep the story line going requires that the steady torrent of negative data be ignored (see manufacturing data in September Manufacturing Business Outlook Survey of Philly Fed). Similar weakness is evident in business investment, productivity, and consumer confidence numbers. Based on those data sets, conventional Keynesian “wisdom” suggests the Fed should be preparing a fresh round of stimulus, not readying its first economic sedative in nine years.

   

  The big news is the introduction of "international developments" as an ongoing input into the Fed's rate deliberation process. This addition allows the Fed nearly limitless latitude to perpetually kick the can down the road. After all, it is a great big world, and it will always be possible to find a problem somewhere. A Reuters article issued after the decision describes the new reality (9/18/15, Howard Schneider):

  "It is a situation that could leave the Fed stranded in its hunt for a rate liftoff until the entire global economy is growing in sync, and the horizon is clear of risks."

  So there you have it. The Fed is no longer just the central bank of the United States, but the central bank of the entire world. As such it will need to consider any possible negative impacts, anywhere, before it pulls the trigger. This isn't just moving the goalposts; it is dismantling them completely, putting them in crates, and losing them in a government warehouse…much like the Ark of the Covenant at the end of the first Indiana Jones movie. 

   

  The height of this week's absurdity came during Janet Yellen's press conference when Ann Saphir from Reuters asked her about the possibility that interest rates could stay at zero "forever." While characterizing that likelihood as "extreme," Yellen incredibly stated that she could not rule out the possibility. Of course the absurd suggestion that American civilization may never see rates above zero did not even raise eyebrows in the mainstream media. But the statement itself raises some interesting questions about Yellen's actual thinking. First, how can she really be contemplating at 2015 rate hike, if she cannot even rule out the possibility of rates remaining at zero forever? Second, is she really that naïve and arrogant to believe that currency markets would allow the Fed to hold interest rates at zero indefinitely, without creating a dollar crisis, even if the Fed wanted to hold them there?

   

  As I have maintained continuously, rate hike talk from the Fed is just a bluff to disguise its inability to tighten, as even small increases could be sufficient to prick the biggest bubble it has ever inflated. It is no coincidence that the stunning 170% increase in the Dow Jones, that occurred between March 2009 and the end of 2014, happened while the Fed was stimulating the economy almost continuously with QE, and that the rally came to an abrupt end when the QE stopped.

   

  The recent 10% correction on Wall Street confirms to me just how sensitive the markets remain to the prospect of any rates higher than zero. In reality, that sell-off was a much greater factor than China in keeping the Fed quiet. That steep correction occurred at a time when most forecasters believed that a September hike was in the cards. For years, they had known that a rate hike was coming, but they always thought it would arrive when the economy was healthy. But when the big day became a clear and present danger, and the economy was still less than optimal, markets began to panic. It was only when Fed officials came out with publicly dovish statements that the sell-off ended. Despite this obvious connection, the markets are still blaming China, despite the fact that big sell-offs in China had been occurring for much of 2015 without sparking follow on panics in the U.S. 

   

  As a result, it should be clear that ongoing Fed decision-making is not just "data dependent" (and now we are talking about international, not just domestic, data), but also "market dependent," meaning the Fed won't raise rates if markets sell off sharply on expectations that it will raise. Given these impossible conditions, perhaps a perpetual zero rates are not so outlandish. But the reality is Central banks can't really control interest rates across the spectrum, just the short end of the curve…when markets really panic, they won't be able to stop economically devastating interest rate spikes on the long end. 

   

  In the meantime, I can only hope that the foreign exchange and commodity markets are finally getting the picture that the Fed appears impotent. The tremendous rally in the dollar over the past 18 months was predicated on the belief that interest rates would be rising in the U.S. just as they were falling everywhere else. Now that that premise is in tatters, the dollar should be giving back its undeserved gains. Recent moves in the foreign exchange market reveal that this is the case.    

   

  When the year began, opinion was divided between those who thought the Fed would move in March, and those who thought it wouldn't happen until June. When June came and went, September became the odds-on favorite. Now those same experts are once again divided between December and sometime in 2016. When will these "experts" finally connect the real dots and discover that the monetary medicine that the Fed has doused over the economy since 2008 has only created a weak and utterly dependent economy. A rate hike is supposed to be a signal that the economy has a clean bill of health. But as the patient fails to recover, another dose of QE will be just what the doctor orders.

  

  

  

  

  

• Conspiracy "Fact" – VIX Manipulation Runs The Entire Market

  Ever since Simon Potter's 2012 arrival as head of The NYFed's trading desk, the manipulation of VIX (and thus its reflexive levered tail wagging the algo-driven dog of the indices) has been front-and-center day-after-day in the so-called US equity 'market'. Since the introduction of VIX ETFs there has been an almost inexhaustible supply of conspiracy theory coincidental evidence of a mysteriously well-capitalized market participant always willing to step on the neck of any volatility-spike, thus protecting poor market participants from any prospective plunge. While only fringe-blogs have noticed this in the past, now The FT admits that not only was recent volatility in markets exacerbated by VIX ETFs (thus confirming the tail-wagging-dog analogy), and further, the nature of the link between VIX ETFs and VIX Futures (rebalancing) enables frontrunning which serves to reinforce any trend into the close and thus manipulate the markets.

   

  Since Simon Potter's arrival at The NY Fed in 2012… the rather amusing correlation between the collapse in net VIX futures non-commercial spec interest (yes, the traded VIX, which courtesy of the New Normal's relentless synthetic reflexivity has a huge impact on the trillions in underlying assets: think massive leverage) as per the CFTC's weekly commitment of traders report, and the arrival of Brian Sack's replacement as head of the NY Fed's trading desk, Simon Potter, the same former UCLA Econ PhD who recently delivered a very ornate speech explaining central bank interactions with financial markets "through the prism of an economist." Now at least we know how said "interactions" look outside of "Market Manipulation for Econ PhD Dummies" and in practice.

  

   

  So-called VIX-terminations have bcome ubiquitous…

  VIXtermination: Vol Banged To Lowest Close Since June 2007

  VIXterminated – Fear Collapses By Most In 31 Months

  Mickey Mouse Market Pops-n-Drops As Crude Carnage Follows VIXtermination

  Volumeless VIXtermination Fuels Stock-Buying Frenzy To Record Highs

  Biggest Short Squeeze Since 2008 Bank Bailout And Epic VIX Rigging Sends Stocks Green For The Week

  Which all look – to some extent – like this…

  VIX ETFs were screwed with…

  

   

  To ensure S&P closed Green!!!

  

   

  And notice the noise in VIX from this week…

  

   

  But, this ability to exaggerate the upside of any momentum, has its downside. 

  As The FT reports, the upsurge in stock market turmoil during August was exacerbated by specialised exchange traded funds that track volatility and use leverage to magnify investor returns, according to some analysts.

   

  Some analysts argue that the magnitude of the move in the Vix was fuelled by certain types of ETFs, and similar exchange traded notes, that track the index but use futures contracts to multiply investor’s returns.

   

  There is rising concern over the bigger role played by passive or systematic trading strategies in equity markets — given the current uncertain global economic and financial backdrop — with some fund managers arguing that their techniques are aggravating market movements.

   

  Four products, two run by ProShares and two run by VelocityShares, totalling $2.8bn in assets, bought close to 35,000 Vix futures contracts on August 24, according to calculations from public data by Macro Risk Advisors, a broker dealer. Total trading volume in the futures contracts that day reached 569,000.

  Which explains the unprecedented record net longs in VIX Futures…

  Speculative traders have never – ever – been this net long VIX futures… and traders have not been this net short S&P futures since Summer 2012.

  

   

  It's all great when VIX is getting smashed lower – and implicitly stocks surged higher – but it appears the only "volatility" that gets any real attention is "downside" moves…

  “It exacerbated the move higher in the Vix, and has contributed to high volatility in the Vix itself,” said Pravit Chintawongvanich, a strategist at MRA. “Volatility of Vix at one point reached 2008 levels. The effect of levered ETFs is one reason that the Vix is less useful as a barometer of financial stress than in the past.”

   

  BlackRock, the largest mutual fund in the world, has previously warned about the risks of levered ETFs, and in a policy paper in July reiterated recommendations, “that these products not use the ETF label”.

  And the manipulation is simple and cost-effective…

  Futures contracts only require a small amount of money, or “margin”, to be paid up front to cover potential losses, rather than having to pay the full amount of the investment, allowing an ETF to buy a larger value of futures contracts than investors have paid into the fund.

   

  For example, investing $100 in an ETF offering twice the returns of the Vix futures index will mean the ETF provider buys $200 worth of futures. If the price goes up 10 per cent then the investor receives 20 per cent back, or $20. The investment is now worth $120 and the ETF is worth $220, so at the end of the day it has to go out and buy another $20 worth of futures contracts to maintain the same leverage for the next day.

  But here is the potential for froint-running and manipulation (especially from a deep-pocketed vol seller)…

  It requires ETF providers to buy as prices rise and sell as prices fall, which critics claim exacerbates market movements, filtering back into the closely-related options markets that the Vix is priced from.

  But providers of levered volatility products played down the relationship.

  “There is a layer of separation between the Vix and Vix futures, and the ability to uncover any effect is challenging,” said Scott Weiner, head of ETP quantitative strategy at Janus Capital, which own VelocityShares. “It’s a small impact, if at all.”

  The CBOE, which runs the Vix index, said that it allows investors, including ETFs, to agree trades during the day where the price is determined by the settlement price of a contract once the market closes, allowing ETFs to rebalance without having a significant impact on the price… and critics say this does not work…

  because the amount ETFs need to rebalance each day is publicly disclosed. “If people know someone has to buy in large size at the end of the day, then they will simply buy the contracts ahead of them,” said Mr Chintawongvanich. “It has the same effect.”

  So, whether by direct manipulation (sparking the most modest of momentum knowing that VIX ETF rebalancing into the close will extend any move), or learned rigging by the algos (following the same pattern), it appears yet another conspiracy theory become conspiracy fact.

  *  *  *

  But there is a silver lining to the recent smashing of fingers trapped trying to pick up pennies in front of steamroller…it appears The VIX Manipulation has begun to lose its mojo…

  A 1.5 vol crush in VIX managed a mere 6 point rise in the S&P 500 (20% of what would have been expected!!)

  

   

  

  

  

  

  

• Janet Yellen's "Fedspeak" Translated

  Submitted by Paul-Martin Foss via The Carl Menger Center,

  For those of you who don’t want to take the time reading through the ponderous 7000-word transcript of yesterday’s FOMC press conference, we bring you the shorter Janet Yellen, translated from Fedspeak into plain English. Enjoy!

  YELLEN: Good morning. I realize that everyone in this room has already read our monetary policy statement, but for the boobs out there in the general public who weren’t tipped off by us two hours in advance about what our decision was going to be, let me explain it to you even though you’re perfectly capable of reading it for yourself. In summary, we don’t have any clue what we’re doing or what’s going on in the economy. We’ll continue foolishly targeting a 2% increase in prices, and we’ll blame all sorts of external factors when that target can’t be met. Our projections about the economy are complete shots in the dark, but we’ll make a few minuscule changes to our projections from the June meeting just so that it looks like we know what we’re doing and are reacting to market conditions. So now let’s turn it over to questions.

  QUESTION: This idea of uncertainty in global markets, isn’t this going to play out over many months, so that the Fed isn’t ever going to hike rates?

  YELLEN: Well, global uncertainty definitely is worrisome, and some FOMC members have pushed their projections for rate hikes into next year. But in the end, we expect all of this to be transitory. I mean, it’s not like we’ve created a huge bubble in the US economy, or that China is going to see a huge correction in its markets. Who would actually believe that?

  QUESTION: Is the next meeting in play with regards to a rate hike? And what kind of data would you need to see in order to hike rates?

  YELLEN: As I’ve said before, a rate hike is possible at every meeting. And we haven’t told anybody before, but we’ve brought you guys in to prep you on how to react if we hike rates at a non-press conference FOMC meeting. After all, we don’t want any journalists to stray from the party line and ignore our propaganda.

  QUESTION: There have been some people protesting a Fed rate hike out of a concern that there still aren’t enough jobs. What impact has that had on you?

  YELLEN: Yes, I hate those annoying little s***s, but I have to pretend that every peon’s opinion is important. But let’s the cut BS: we make the decisions and we’re going to do it regardless of what anyone on the outside thinks, okay? And we still don’t think the labor market has quite reached the amorphous goal we’ve pretended to set for ourselves, so until we hit that ever-changing goal, we’re not going to hike rates.

  QUESTION: Do you think you’ve gotten closer to your inflation goals, and have you complied with the Congressional subpoena regarding the September 2012 leak?

  YELLEN: B****. How dare you ask me about the subpoena. Do you remember what happened to the last guy who asked a question like that? He hasn’t been seen or heard from since. So I’m going to give you the longest, wordiest answer of the afternoon, repeating myself three or four times and basically rehashing everything I’ve already said about our inflation targets. That should give the Federal Reserve police enough time to identify which car in the lot is yours and install the tracking device. And now that I’m winding up my answer, the folks upstairs should have also had enough time to permanently revoke your press pass. Next question. Oh, wait, you asked about a subpoena? Yes, we are fully complying with Congress’ request for information, just like we always have throughout our history.

  QUESTION: The projections you release basically show a low-inflation environment over the next three years, coupled with an unemployment rate that sits at your view of maximum unemployment. Doesn’t that seem a little unrealistic?

  YELLEN: Look, as I’ve said before, we really don’t have a clue what maximum employment looks like. And we can’t predict the future. But we have to keep up a facade of knowing what it looks like we’re doing. So we’re going to keep pulling numbers out of our a** for as long as we can and hope for the best.

  QUESTION: I want to piggyback on the last guy and point out that your old targets for the unemployment rate and the inflation rate were both higher. What has changed?

  YELLEN: Well, we decided that 2 sounded like a nice number. We don’t like decimals and fractions. So our target is 2%. 2, 2, 2, 2, 2. Got that? But that’s not our ceiling. We don’t really care what the ceiling is, but we want to break through that 2% ceiling. The sky’s the limit, but if we can’t break 2% then it makes us look incompetent, as though we can’t actually cause prices to rise. There hasn’t been a central bank in history that’s been incapable of causing a hyperinflationary crisis, and we don’t intend to be the first.

  QUESTION: So, like, you mentioned uncertainty, and, like, uncertainty caused you not to hike rates this month. And, like, so, what are the kinds of uncertainty that cause you not to raise rates, and what kind of uncertainty can you ignore?

  YELLEN: That’s a tough question. But you should trust us that we’re carefully evaluating all the data. But the most important data are the unemployment rate and the inflation rate, and everything is viewed through how it’s going to affect those rates. Or at least that’s what we want the public to believe.

  QUESTION: Could you talk a little bit more about the foreign developments that you’re discussing? We’re assuming it’s China, so are you concerned about the Chinese markets? And how about US markets, what do you think about them?

  YELLEN: Yes, we’ve focused on China, but we’re convinced that their central planners know what they’re doing. After all, our central planning here is working wonders, right? But we’re also looking at declining oil prices and how that’s going to affect a number of countries and what the spillover effects might be. And yes, we s*** bricks every time the Dow drops a few hundred points. That’s why we have the Plunge Protection Team, but we can’t admit that we intervene to prop up markets, so I’ll just give you a BS statement about how we’re purely focused on the US economy and not at all reacting to market turbulence. Oh, and the economic outlook is peachy keen.

  QUESTION: Given global interconnectedness and low inflation rates around the world, are you concerned about not being able to escape the era of zero interest rates?

  YELLEN: No, of course not. We don’t take into account the possibility or likelihood of any extreme scenarios, and I can guarantee you that when the s*** hits the fan we will be completely blindsided and unprepared.

  QUESTION: If the economy improves along the lines of your projections, and you still predict low inflation, what’s the big hurry in raising rates?

  YELLEN: We’re going to keep printing goo-gobs of money, and we’re hoping that will start driving prices up. We know every central bank in history that has tried to engage in monetary policy has had to deal with lags in response to monetary policy, and we don’t want to engage in a pattern of trying to fine-tune by tightening, then loosening, etc. Despite the fact that that’s what’s going to end up happening anyway, because there’s no way for 12 people to possibly plan an entire economy, we’re going to pretend that we can do things smoothly and just try to bluster our way through any difficulties.

  QUESTION: One of your colleagues wanted negative interest rates. I’m more interested in the cute reporter chick sitting next to me than I am in listening to anything President Kocherlakota says, so I was completely blindsided by something this obvious. Is the Fed going to move to negative interest rates?

  YELLEN: Well, we’re a little embarrassed about Kocherlakota too, so we tried to ignore him. And even though the whole world knows that we’re going to have to launch QE4 at some point in the future, we want to publicly state that we would never need any extra stimulus. But in the event that we do need some more stimulus, we would carefully evaluate all the tools in our toolbox, even something as stupid as negative interest rates.

  QUESTION: Do you still expect a rate hike before the end of the year? And some people have blamed global turbulence on the possible Fed rate increase. What do you think of that?

  YELLEN: I don’t want to give you my own personal opinion, but I think it’s fair to say that the Committee as a whole expects a rate hike before the end of the year. And I think global turbulence is due to concerns about the global economy, not due to anyone getting upset that the Fed might hike rates.

  QUESTION: You talked about the strong dollar, do you see your policy decisions affecting the dollar?

  YELLEN: Despite the fact that our policy actions are the strongest factor influencing the dollar’s value, I’m going to downplay it and redirect the focus of your question by stating that monetary policy doesn’t necessarily affect the exchange rate? See what I did there? Yes, we devalue the dollar and reduce its purchasing power, but if other countries do the same to there currencies and exchange rates stay relatively constant, then we can say that we’re not really devaluing the dollar. I love the floating fiat money regime.

  QUESTION: Can you talk about the housing market? How much are you counting on the housing market for future growth?

  YELLEN: We’re hoping it continues to rebound, because there’s still some weakness. But it’s a very small sector of the economy. I mean, if you got rid of the entire housing sector and nobody had a place to live, the effects would be minuscule, right? We’re really focused on boosting consumer spending. Come on people, start buying cars that you don’t need and ringing up tons of debt on your credit cards. That’s the path to prosperity.

  QUESTION: There are some people who think that ultra-low interest rates have exacerbated economic inequality and mainly benefit the wealthy, what do you say about that?

  YELLEN: I disagree. Sure, savers and people on fixed incomes are hurt by low interest rates. Sure, low interest rates benefit capital-intensive industries, big banks, and hedge funds. Sure, the interest paid on excess reserves is lining the pockets of Wall Street. Sure, quantitative easing has boosted stock prices. Sure, easy money allows big banks to borrow and buy up all sorts of assets that they can then try to sell or rent at exorbitant prices to the hoi polloi. Sure, the continued devaluation of the dollar drives up the cost of living, leading to price increases that hurt the poor more than the rich. But we paid some Fed economists to produce a paper showing that the Fed’s monetary policy doesn’t worsen income inequality, so that proves that we’re not doing anything harmful.

  QUESTION: What role did a possible government shutdown play in your decision today? And what would you say to Congress about “shutting down” the government?

  YELLEN: Thank you for that softball that allows me to deflect blame from the Fed and redirect it to Congress. Ignore the $4.5 trillion balance sheet we’re carrying, ignore the continued easy money we funnel to Wall Street, ignore the fact that we’re going to drive this country into the ground. Congress is doing really bad stuff. If they don’t increase the debt ceiling and spend trillions more dollars that they don’t have, how are we supposed to monetize that debt by funneling trillions of dollars to the primary dealers?

  QUESTION: If you delay rate hikes, doesn’t that also mean that you’re going to delay reducing the size of your balance sheet?

  YELLEN: Yes, we can’t start reducing the size of the balance sheet until we start to hike rates. But who are we trying to kid? Does anybody really think we’re going to reduce the size of our balance sheet down to a more “reasonable” level? Come on, people, we’re in perma-QE mode here. Turn down for what?

  

  

  

  

  

• Joe "Ridin' With" Biden Close To Announcing White House Bid, Aides Say

  Following the circus that unfolded in real-time on CNN at the Reagan Library last Wednesday, and considering that your choices on the Democratic ticket are essentially limited to an entrenched member of America’s political aristocracy who’s facing an FBI investigation and a radical socialist who wants to implement the largest peacetime increase in government spending in modern history, you’d be forgiven for suggesting that, as bad as things are now in Washington, they may get far worse starting January 1, 2017.

  Over the past three months, we’ve documented the rise of Donald Trump and Bernie Sanders, noting that their shockingly high poll numbers reflect the fact that Americans are fed up with business as usual inside the Beltway and are ready to see real (as opposed to Obama-brand) “change.” 

  That said, Sanders’ plan to turn big government into huge government and Trump’s rather haphazard, ad hoc platform have left some voters wondering if perhaps this isn’t exactly the type of “change” they want after all. 

  With the GOP field showing few signs of narrowing (Rick Perry’s exit notwithstanding) and even fewer signs of getting less crazy, and with Hillary Clinton polling worse now than at the same point in the cycle in 2008, calls for Joe Biden to enter the race have grown and a meeting between the Vice President and Democratic heavyweight Elizabeth Warren last month fueled speculation that Biden was preparing to announce. Now, as WSJ reports, it appears as though Biden will indeed make a run at The White House in 2016. Here’s more:

  Vice President Joe Biden’s aides in recent days called Democratic donors and supporters to suggest he is more likely than not to enter the 2016 race, and their discussions have shifted toward the timing of an announcement, said people familiar with the matter.

   

  While the Biden team is still debating the best time to jump in, the vice president met Monday with his political advisers and talked about the merits of an early entry that would assure him a place in the Democratic debate scheduled for Oct. 13. They also are honing his campaign message and moving ahead with plans to raise money and hire staff, the people said.

   

  “It’s my sense that this is happening, unless they change their minds,” said one person who spoke to Biden aides last weekend.

   

  Mr. Biden’s entry would coincide with Democratic front-runner Hillary Clinton’s ramped-up efforts to reassure her backers that the probes into her use of a personal email server while she was secretary of state won’t derail her candidacy. That controversy has produced a month of bad headlines for Mrs. Clinton and helped boost her chief rival, Vermont Sen. Bernie Sanders, in the polls. A Biden bid could make her road to the Democratic nomination even tougher.

   

  The Democratic debate next month is one of two important events in October that are on the minds of Mr. Biden’s top advisers as they consider a campaign start date.

   

  Democratic National Committee leaders have scheduled only four debates before the Iowa caucuses set for Feb. 1. Delaying a presidential announcement would mean passing on a chance to appear before a national TV audience and make the case that he would be a better nominee than Mrs. Clinton. Yet as a sitting vice president, Mr. Biden already has a platform that keeps him in the public eye.

   

  Mrs. Clinton has declined to speculate about a Biden challenge. “I’m certainly not going to comment on my good friend and former colleague,” she said Thursday on CNN. “He has to make up his own mind about what’s best for him and his family as he wrestles with this choice.”

   

  Michael Briggs, a spokesman for Sen. Sanders, said, “If the vice president decides to enter the race, Bernie looks forward to a serious discussion of the issues.”

  Yes, Hillary is “certainly not going to speculate” and Bernie “looks forward to a serious discussion of the issues.” 

  Of course between Clinton’s e-mail scandal and Sanders’ radical plan to expand big government, it’s probably fair to say that should Biden enter, the Clinton campaign will need to “speculate” on how to word a concession speech while Sanders can “look forward” to dropping out altogether, and that’s certainly not a comment on how qualified Biden is for the job, but rather a realistic assessment of where things are likely to head given the current environment. 

  In any event, we’re sure we’ll find ourselves talking more about Joe in the weeks and months to come and so for now, we’ll simply close by noting that if you think it’s entertaining to watch Trump debate the GOP field, just wait until Trump and Biden take the stage together.

  Or, summing up the above…

  

  

  

  

  

  

• "Blood In The Casino Like Never Before" – Riding ZIRP Into Monetary Central Planning's Dead End

  Submitted by David Stockman via Contra Corner blog,

  What the Fed really decided Thursday was to ride the zero-bound right smack into the next recession. When that calamity happens not too many months from now, the 28-year experiment in monetary central planning inaugurated by a desperate Alan Greenspan after Black Monday in October 1987 will come to an abrupt and merciful halt.

  Why? Because Keynesian money printing is in a doom loop. The Fed’s ZIRP policies guarantee another financial crash, which will trigger still another outbreak of panic in the C-suites of corporate America and a consequent liquidation of excess inventories and labor on main street. That’s the new channel of monetary policy transmission, and it eventually leads to recession.

  This upcoming recession, in turn, will prove beyond a shadow of doubt that in today’s financialized global economy you can’t manage the GDP of a single country as if it were isolated in an economic bathtub surrounded by high walls; nor can you attain domestic macro-targets for employment and inflation through the blunderbuss instruments of pegged money market rates and wealth effects levitation of the stock market.

  Instead, the Fed’s falsification of financial asset prices simply subsidizes gambling in secondary markets; enables daisy chains of collateral to be endlessly hypothecated and re-hypothecated; causes vast misallocations and malinvestments of corporate resources, especially stock buybacks and other financial engineering; and sends money managers scrambling for yield without regard to risk, such as in junk bonds and EM debt.

  What it doesn’t do is get households all jiggy, causing them to boost their leverage and spend up a storm. That’s because they reached “peak debt” at the time of the financial crisis, and have been struggling to reduce debt ever since. In the most recent quarter, in fact, household debt posted at $13.6 trillion or 3% lower than in early 2008.

  Stated differently, the household credit channel of monetary policy transmission was a one-time Keynesian parlor trick that is now over and done. All of the Fed’s vast emissions of central bank credit have pooled up in the canyons of Wall Street, and have not triggered a borrow and spend binge on main street.

  Yellen’s post-meeting statement more or less conceded the point that the US economic bathtub is vulnerable to ill winds from abroad and that six years of “extraordinary” money printing and ZIRP have not succeeded in filling it to the brim. After reviewing a domestic economy that is purportedly in the pink of health (“Since the Committee met in July, the pace of job gains has been solid, the unemployment rate has declined, and overall labor market conditions have continued to improve.”), she was quick to introduce the skunk in the woodpile: 

  The recovery from the Great Recession has advanced sufficiently far, and domestic spending appears sufficiently robust, that an argument can be made for a rise in interest rates at this time. We discussed this possibility at our meeting. However, in light of the heightened uncertainties abroad and a slightly softer expected path for inflation, the Committee judged it appropriate to wait for more evidence, including some further improvement in the labor market, to bolster its confidence that inflation will rise to 2 percent in the medium term.

  That’s right. They are waiting for moar inflation in the face of a gale force deflation blowing in from China and its food chain of EM materials and components suppliers. Yet as we pointed out in conjunction with the tiny 0.2% year over year change in the August CPI, waiting for the overall index to hit 2.0% is a fool’s mission because the latter is currently a meaningless average of hot and cold.

  But now you have a clean bifurcation in the price indices that proves the utter pointlessness of so-called inflation targeting. One the one hand, virtually everything which is directly priced and traded on world markets is carrying a negative sign on a year-over-year basis.

   

  That includes gasoline, which is down 23.3% since last August; fuel oil, which is lower by 34.6%; and gas and electric utilities, which are down by 11.5% and 0.5%, respectively.

   

  Likewise, all other commodities are lower by 0.5%, while goods prices were materially lower than a year ago nearly without exception. For example, women’s apparel prices were down by 2.1%, window and floor coverings by 4.9%, appliances by 3.5%, household equipment and furnishings by 3.1%, furniture and bedding by 0.9% and tools and supplies by 0.3%

   

  At the same time, the balance of the BLS table tells the Fed’s covey of inflation doves to shut-up and sit down. By any practical reckoning, upwards of two-thirds of living costs for average households are accounted for by shelter, transportation, medical care, education, entertainment and the like. Yet the year-over-year price change for the first three of these items was 3.1%, 2.1% and 2.2% respectively, while the cost of going to restaurants was up 2.7% and education costs (not shown) were up by 3.5%.

   

  Nor are these one-year gains for the principal domestic services categories some kind of recent aberration that will lapse back into sub-2% inflation land if the Fed does not keep interest rates pinned to the zero bound. In fact, the 2.6% gain since last August for all services less energy services, as shown above, is spot on a trend that has been extant for the entirety of this century to date.

   

  …it does not take a PhD in economics to figure out that the resulting “average” rate of price change for the BLS’ dubious market basket of consumer items is purely a statistical accident, and absolutely outside of the Fed’s ability to shape.

  I was obviously wrong about the Fed’s capacity to see the obvious. The posse of PhDs domiciled in the Eccles Building opted to keep shoveling free money into the Wall Street casino when not only is the above data self-evident, but it is exactly this bifurcation of the index components, not the weakness of the US economy, that has been holding down the overall consumer price index for the last three years.

  Indeed, ever since the China/EM commodity boom peaked in mid-2012 and the central bank driven global credit boom began to decelerate, the world price of commodities and manufactured goods has been falling. Needless to say, that trend thoroughly and effortlessly penetrated the imaginary wall of the US economic bathtub with which the FOMC is so wrong-headedly preoccupied.

  Since then, CPI energy prices have fallen at a 5.2% annual rate and durable goods at a 1.2% CAGR, while domestic services less energy services have risen at a 2.5% annual rate. When you net all the puts and takes you get an overall CPI change of 1.1% annually for the past 36 months.

  

   

  Are these paint-by-the-numbers Keynesian fools incapable of even elementary pattern recognition? Worse still, why are they confident that the tide of global deflation has run its course, and that it will soon fade after three years of the above?

  Inflation has continued to run below our 2 percent objective, partly reflecting declines in energy and import prices. My colleagues and I continue to expect that the effects of these factors on inflation will be transitory. However, the recent additional decline in oil prices and the further appreciation of the dollar mean that it will take a bit more time for these effects to fully dissipate……As these temporary effects fade….we expect inflation to move gradually back toward our 2 percent objective.

  That is not only a faith-based statement of monetary policy; it’s totally implausible as an empirical matter. It took nearly two decades for the global credit inflation to each its apogee in 2012-2014. Now the payback phase of this unprecedented crack-up boom will take years to unfold.

  This means that when the FOMC surveys the “incoming data” in October and December and for months thereafter, it will see rising evidence of domestic weakness, domestic consumer inflation printing at a bifurcated sub-2% level and the Fed’s favorite new indicator, the Goldman Sachs financial conditions index (GSFCI), pointing to ever “tighter” financial conditions.

  Indeed, as the stock average continue to roll-over while the dollar gains and credit spreads blow-out, you can count on a repeat of Yellen’s thinly disguised reference to the spurious statistical contraption that B-Dud invented while serving as Goldman’s chief economist:

  Developments since our July meeting, including the drop in equity prices, the further appreciation of the dollar, and a widening in risk spreads, have tightened overall financial conditions to some extent. These developments may restrain U.S. economic activity somewhat and are likely to put further downward pressure on inflation in the near term.

  Needless to say, Vice-Chairman Bill Dudley’s preposterous argument that the Fed does not need to stench the flow of free money to the Wall Street casino because the market has “self-tightened” may well convince a majority of the FOMC to keep deferring the date of “lift-off”. But it will no longer cause the robo-traders to buy-the-dips.

  What happened after the Thursday decision announcement is that the in-grained six-year algorithms failed. In response to Fed meeting statements in the future, therefore, the bots will be increasingly programmed to sell the resulting FOMC confusion and incoherence, not buy the dips.

  So there will also be blood in the casino like never before. Once the Fed is exposed as flat-out paralyzed, rent with public disagreements and out of dry powder, the gamblers and 1 percenters will not only desperately dump their “risk assets” in the mother of all meltdowns; they will also come to detest and loath the FOMC—-thereby setting the stage for show trials on Capitol Hill where the Keynesian posse responsible for fueling Wall Street’s stupendous gambling spree will hopefully feel the wrath of the nation’s awakened sleepwalkers and their currently clueless representatives.

  Indeed, if you don’t think the financial markets are headed for a big spot of trouble, please click-on to Janet Yellen’s press conference. Yes, it’s painful to listen to and even worse to watch, but the exercise will make one thing abundantly clear. Namely, that the most powerful economic agent in the world is naïve, superficial, paint-by-the-numbers Keynesian bathtub plumber who has no clue about the incendiary forces that the Fed and other central banks have unleashed in the global financial system.

  Among the most insidious of these is that the corporate C-suite has been morphed into a stock trading room. The mountains of cheap corporate debt that have been sold to yield hungry asset managers has enabled companies to literally rig their own stock prices higher and higher via $2.5 trillion of buybacks since March 2009. At the same time, the Fed’s wealth effects policy and free money to the carry trades has fulsomely rewarded buy the dips robo-machines and hedge fund gamblers, thereby insuring that the cash register keeps ringing on executive stock options.

  Accordingly, corporate management of labor and inventory is now tethered to the stock averages, and that has especially perverse effects as the Fed’s financial bubble cycle ages. To wit, the C-suite becomes inordinately bullish and complacent as the stock averages move ever higher and executives’ net worth soars.

  But when the financial bubble eventually bursts owing to unexpected “black swans” or the fact that the last sucker in the casino has hit the bid, the C-suite is caught short and lapses into panicked cost cutting and retrenchment. The evidence from the Great Recession cycle could not be more dispositive.

  As shown in the chart below, the official dating for the recession incepted in December 2007, but total business inventories (manufacturing, wholesale and retail) kept building through a peak in August 2008, when they reached $1.54 trillion. Then came the stock market carnage of September through March, which elicited a violent liquidation of inventories.

  

   

  In fact, during the next 13 months inventory investment plunged by $230 billion or nearly 15%, causing a cascading curtailment of current orders and production throughout the US supply chain. Only after the stock market put in a convincing bottom in March-August 2009 did the liquidation come to a halt, and the process of reinvestment begin.

  Stated differently, the Obama $800 billion fiscal stimulus had virtually nothing to do with the turnaround depicted in the chart because only small amounts of its had actually hit the spending stream by August 2009.

  Likewise, the violent shedding of labor occurred after the stock market collapse, not when the recession commenced. Specifically, during the eight months between December 2007 and August 2008, the rate of job loss was about 150,000 per month. Then during the next eight months it accelerated to 675,000 per month.

   

  

  Similar to the case of inventories, however, the convincing rebound of the stock market after April 2009 brought the jobs contraction to an abrupt end. While the total non-farm payroll count did not hit bottom for another 10 months, the rate of job loss shrunk to less than 200,000 per month.

  Needless to say, the C-suite channel of monetary policy transmission has not attained even the slight notice of the monetary politburo. Indeed, these retro-Keynesians are so manically focussed on the “labor market” that they can see almost nothing else.

  But what they ought to be noticing is that US business sales have already rolled over, and the inventory to sales ratio is rising rapidly, just as it did in 2008 before the Lehman collapse.

  

  In short, the US economy does not resemble in the slightest the labor market focussed picture painted by Yellen on Thursday. It is at a point of extreme vulnerability late in the business cycle in the context of a 20-year global credit boom that is now dramatically reversing.

  Except this time when the stock market bubble collapses, there will be no ZIRP and QE to ride to the rescue and rekindle bullish greed in the C-suites. Instead, this time there will be a real, prolonged recession as the excesses and deformations from two decades of the Keynesian con game conducted from the Eccles Building are wrung out of the financial markets.

  At the end of the day, cowardice and intellectual incoherence do not will out. By opting for the 81st month of ZIRP, the foolish usurpers of free market capitalism and its vital processes of price discovery who currently rein from the Eccles Building have lashed themselves to a doom loop.

  It will eventually mean the end of monetary central planning, but not until tens of millions of innocent main street savers, workers and entrepreneurs have been unfairly and unnecessarily battered by its demise. Yellen and Co should be so lucky as to only face torches and pitch forks.

  

  

  

  

  

• China's Latest Craze: Sperm For iPhone

  The biggest scare haunting Apple stock in recent months has been whether the slow at first, then quite sudden collapse in both the Chinese economy, not to mention its burst stock market bubble (which in Chinese propaganda retrospect, is now a great thing), will put the breaks on Chinese purchases of Apple’s most important and profitable product – the iPhone. Indeed according to a just released UBS report, while it takes the average New York worker about 24 hours to afford a 16GB iPhone 6, this number rises to 218 hours in Beijing. And the great China’s economic slowdown the higher the number will go, and the lower Apple’s revenues in the coming quarters.

  However, for China’s middle class, whose dreams of market bubble riches just went up in a margin call, there is still hope to pretend to be richer than one’s neighbor courtesy of a faux rose gold cell phone. The answer: a tablespoon of sperm.

  As Xinhua reports, “technophiles may not have to reach far to find the cash for Apple’s latest model. According to an advertisement with the Shanghai Sperm Bank – all you have to do is donating.”

  “No need to sell a kidney…Shanghai sperm bank can make your iPhone 6s dream come true,” says the ad which has gone viral on China’s most popular social networking app WeChat this week.

  

  From Xinhua:

  Capitalizing on the country’s lust for new technology, the sperm bank hopes to fix a shortage in donors ahead of the release of the iPhone 6s next week. Those who qualify to donate can receive up to 6,000 yuan for 17 ml of semen. The latest Apple model is expected to cost around 5,288 yuan.

  The morbid jokes just write themselves:

  “Why sell your kidney when you can donate sperm? It’s a great deed that can bring happiness to a whole family,” said microblog Weibo user “Wojiushiwutong”.

  As a reminder, while “selling kidneys” is usually just a phrase, in China it became all too real in 2011 when a teenager sold one of his kidneys to buy and iPhone and an iPad. “To sell a kidney has become a well-known metaphor for the fever pitch surrounding Apple products.”

  A sperm bank in central China’s Hubei Province posted a similar ad highlighting a picture of the new rose gold iPhone 6s, a color created mainly to attract Chinese consumers. The Shanghai ad is bluntly titled “New Solution to Get iPhone 6s”, evoking some criticism that the sperm bank is being insensitive.

  “I don’t like the idea of making money out of sperm donation to buy new iPhones. Sperm donation is a very serious cause for public good,” one Weibo user said. But a spokesperson with the Shanghai sperm bank told Xinhua the campaign has worked well so far, raising awareness and attracting potential donors.

  The reason why 17 ml of sperm are so valuable in China is because not only are there thousands of infertile couples in China, but all sperm banks across the country face donation shortages because many young men are unaware or too embarrassed to donate, forcing the banks to turn to social media.

  Even if they do find a sufficient pool of potential donors, certain criteria must be met to be eligible. Donors must be between 22 to 45 years old, hold a college degree and have high-quality semen that can survive the rigors of freezing and thawing.Which still keeps the pool of eligible candidates in the tens if not hundreds of millions.

  It was not exactly clear how potential female consumers of iPhone are supposed to capitalize on this latest Chinese craze, and while there are countless, and very humorous, places one can take this latest manifestation of capitalism perhaps gone too far, one potential Chinese “channel check” may have appeared: masturbation as a leading indicator of iPhone sales. Because just when sales were starting to turn flaccid, here comes China’s sperm-for-iPhones Hail Mary, promising at least several more quarters of firm stock reactions to EPS beats.

  

  

  

  

  

Digest powered by RSS Digest