Mar 132015
 March 13, 2015  Posted by at 11:03 am Finance Tagged with: , , , , , , ,  7 Responses »

NPC Hendrick Motor Co., Carroll Avenue, Takoma Park, Maryland 1928

Rising Stocks, Homes Boost US Household Wealth To Record $83 Trillion (AP)
Rate Cuts: 24 Countries So Far And There’s More To Come (CNBC)
Watch Out: China Could Join The Currency War
The U.S. Has Too Much Oil and Nowhere to Put It (Bloomberg)
Get Ready for Oil Deals: Shale Is Going on Sale (Bloomberg)
Daniel Hannan Explains How Democracy Died In Europe (Zero Hedge)
Draghi Makes Greenspan Look Like A Rank Amateur (Albert Edwards via ZH)
Tsipras Promises Greece Will Keep Its Word Amid German Spat (Reuters)
Greece Complains About Schaeuble in Deepening Conflict (Bloomberg)
ECB Increases Greek ELA Ceiling by €600 Million (Bloomberg)
Central Bank Stimulus Is Ancient Recipe for Trouble (Bloomberg)
Tsipras Says Greece Doing Its Part In Eurozone Deal (Reuters)
Why The Fed Failed Two Of Europe’s Biggest Banks (CNBC)
How Putin Blocked the US Pivot to Asia (Whitney)
‘Claims SU-25 Shot Down MH17 Unsupportable’ (RT)
Knights Templar Win Heresy Reprieve After 700 Years (Reuters)
Arctic Melt Brings More Persistent Heat Waves to US, Europe (Bloomberg)

70% minimum (90%?!) of which is entirely virtual.

Rising Stocks, Homes Boost US Household Wealth To Record $83 Trillion (AP)

Fueled by higher stock and home values, Americans’ net worth reached a record high in the final three months of 2014. Household wealth rose 1.9% during the October-December quarter to nearly $83 trillion, the Federal Reserve said Thursday. Stock and mutual fund portfolios gained $742 billion, while the value of Americans’ homes rose $356 billion. The typical household didn’t benefit much, though. Most of the wealth remains concentrated among richer families. The wealthiest 10% of U.S. households own about 80% of stocks. Still, greater wealth could help lift spending and economic growth. Higher stock and home values can make people feel more financially secure and more willing to spend, and consumer spending fuels about 70% of the economy.

The Fed’s figures aren’t adjusted for population growth or inflation. Household wealth, or net worth, reflects the value of homes, stocks and other assets minus mortgages, credit cards and other debts U.S. corporations are also seeing sharp improvements in their finances, the Fed report showed. Businesses amassed $2 trillion in cash by the end of last year— a record high — up from less than $1.9 trillion three months earlier. Cash-rich corporations could spend more on investments in machinery, computers and other equipment. That would make workers more productive and accelerate economic growth. They could also use some of their cash to raise pay at a time when many employees have been stuck with stagnant wages.

Some economists have criticized publicly traded companies for spending heavily on repurchasing their own shares, which boosts profits and serves shareholders rather than employees. Businesses are also taking advantage of low interest rates by taking on more debt, which typically signals confidence in the economy and future growth. Business debt rose 7.2% in the fourth quarter, the sharpest quarterly increase in more than six years. During the Great Recession, which officially ended in June 2009, Americans’ net worth plummeted as stock and home values sank. Household wealth tumbled to $55 trillion in the first quarter of 2009 from a pre-recession peak of $67.9 trillion. Wealth didn’t surpass that peak until the third quarter of 2012.

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Once you get to 124, may be some will wake up.

Rate Cuts: 24 Countries So Far And There’s More To Come (CNBC)

An interest rate cut from South Korea Thursday takes the number of central banks that have stepped up their monetary easing this year to 24 and that number is likely to rise, analysts say. South Korea’s decision to cut its key rate by 25 basis points to a record low of 1.75% follows a rate cut by Thailand’s central bank on Wednesday and easing by central banks in China, India and Poland since March began. Russia and Malaysia are among the countries that economists say could join the growing list of central banks that have slashed borrowing costs since the start of the year. The main reason for such a flurry of action, they add, is a backdrop of falling or low inflation which is highlighting the need to boost lackluster economic growth.

“I find it interesting that people say that these [rate cuts] are surprises and we heard that when it happened in Australia, when it happened in India, Indonesia and today in Korea,” Joshua Crabb, head of Asian Equities at Old Mutual Global Investors, told CNBC Asia’s “Squawk Box.” “But if we look at inflation, it is coming down dramatically, real rates are high and the economy is weak so it makes a lot of sense that we see these cuts and we will see that continue to happen,” he said. Thanks in part to the sharp fall in oil prices since last June, many economies are facing falling or low inflation rates.

Data on Thursday for instance, showed Spain’s consumer price index rose to 0.2% in February from -1.6% the month before. In Indonesia, annual inflation stood at 6.29% last month, down from 6.96 in January. “Fundamentally, the easing around the world is driven by inflation turning out lower across the board,” Anatoli Annenkov, senior European economist at Societe General, told CNBC. “There is a debate about currency wars, monetary easing to push currencies lower, but fundamentally this is a story about growth and inflation,” he added.

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More rate cuts.

Watch Out: China Could Join The Currency War

Central banks may be spreading deflation by easing monetary policy and weakening their currencies, but the biggest threat is that China will wade into the battlefield, analysts say. “The three trillion dollar question is whether the People’s Bank of China (PBoC) will allow the yuan to depreciate and export their own disinflation to the rest of the world, setting off a series of competitive devaluations in the region,” Nicholas Ferres, investment director at Eastspring Investment said in a note on Friday. Twenty-four central banks have eased monetary policy this year amid slowing economic growth and deflationary pressure as oil prices hover near six-year lows. In February, the PBoC cut the one-year deposit rate by 25 basis points to 5.35%.

For now Chinese authorities continue to keep the yuan in a tight daily trading band against the U.S. dollar; the yuan has lost just 0.9% against the dollar year to date. By contrast, the dollar is up 3.3% again the Korean won and 4.2% against the Singapore dollar. But the euro’s around 12% decline against the greenback so far this year “will likely put more pressure on China to devalue the yuan… [which would] signal that China is joining the currency war,” Bank of America Merrill Lynch and Rates strategist David Woo said in a note published on Monday. “[This is] the biggest tail risk of 2015,” he said.

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“Morse and his team of analysts at Citigroup have predicted that sometime this spring, as tanks reach their limits, oil prices will again nosedive, potentially all the way to $20 a barrel.”

The U.S. Has Too Much Oil and Nowhere to Put It (Bloomberg)

Seven months ago the giant tanks in Cushing, Okla., the largest crude oil storage hub in North America, were three-quarters empty. After spending the last few years brimming with light, sweet crude unlocked by the shale drilling revolution, the tanks held just less than 18 million barrels by late July, down from a high of 52 million in early 2013. New pipelines to refineries along the Gulf Coast had drained Cushing of more than 30 million barrels in less than a year. As quickly as it emptied out, Cushing has filled back up again. Since October, the amount of oil stored there has almost tripled, to more than 51 million barrels. As oil prices have crashed, from more than $100 a barrel last summer to below $50 now, big trading companies are storing their crude in hopes of selling it for higher prices down the road.

With U.S. production continuing to expand, that’s led to the fastest increase in U.S. oil inventories on record. For most of this year, the U.S. has added almost 1 million barrels a day to its stash of crude supplies. As of March 11, nationwide stocks were at 449 million barrels, by far the most ever. Not only are the tanks at Cushing filling up, so are those across much of the U.S. Facilities in the Midwest are about 70% full, while the East Coast is at about 85% capacity. This has some analysts beginning to wonder if the U.S. has enough room to store all its oil. Ed Morse, the global head of commodities research at Citigroup, raised that concern on Feb. 23 at an oil symposium hosted by the Council on Foreign Relations in New York. “The fact of the matter is, we’re running out of storage capacity in the U.S.,” he said.

If oil supplies do overwhelm the ability to store them, the U.S. will likely cut back on imports and finally slow down the pace of its own production, since there won’t be anywhere to put excess supply. Prices could also fall, perhaps by a lot. Morse and his team of analysts at Citigroup have predicted that sometime this spring, as tanks reach their limits, oil prices will again nosedive, potentially all the way to $20 a barrel. With no place to store crude, producers and trading companies would likely have to sell their oil to refineries at discounted prices, which could finally persuade producers to stop pumping. If oil supplies do overwhelm the ability to store them, the U.S. will likely cut back on imports and finally slow down the pace of its own production, since there won’t be anywhere to put excess supply. Prices could also fall, perhaps by a lot. Morse and his team of analysts at Citigroup have predicted that sometime this spring, as tanks reach their limits, oil prices will again nosedive, potentially all the way to $20 a barrel.

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“.. the largest producer in North Dakota’s Bakken shale basin put itself up for sale..”

Get Ready for Oil Deals: Shale Is Going on Sale (Bloomberg)

A decision by Whiting Petroleum, the largest producer in North Dakota’s Bakken shale basin, to put itself up for sale looks to be the first tremor in a potential wave of consolidation as $50-a-barrel prices undercut companies with heavy debt and high costs. For the first time since wildcatters such as Harold Hamm of Continental began extracting significant amounts of oil from shale formations, acquisition prospects from Texas to the Great Plains are looking less expensive. Buyers are ultimately after reserves, the amount of oil a company has in the ground based on its drilling acreage. The value of about 75 shale-focused U.S. producers based on their reserves fell by a median of 25% by the end of 2014 compared to 2013, according to data compiled by Bloomberg.

That’s opening up new opportunities for bigger companies with a better handle on their debt, said William Arnold, a former executive at Shell. “In this market, there are whales and there are fishes, and the whales are well armed,” said Arnold, who also worked as an energy-industry banker and now teaches at Rice University in Houston. “There are some very vulnerable little fishes out there trying to survive any way they can.” Smaller producers with significant debt that depend on higher prices to make money are the most likely early targets for buyers such as Exxon Mobil or Chevron, companies that have bided their time for years as the value of some shale fields soared to $38,000 an acre from $450 just a few years earlier.

The market crash is creating “a consolidation game,” Concho CEO Timothy Leach said on a Feb. 26 call with investors. “It’s harder to be a small company today than it has been in the past.” In the pre-plunge days, acquisitions were dominated by foreign buyers overpaying to get a seat at the shale boom table. That buying frenzy was followed by an explosion in asset sales as companies pieced together their ideal drilling portfolios. Joint ventures were a popular way of funding what seemed like an unstoppable drilling machine.

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Europe now exists to protect us from democracy…

Daniel Hannan Explains How Democracy Died In Europe (Zero Hedge)

With Greece on the edge of being kicked out of the Eurozone , either voluntarily or otherwise, with an anti-austerity party on the verge of taking over the reins of power in Spain, with Beppe Grillo waiting in the corridors for his chance to pounce in Italy and with Marine le Pen and her nationalist party on the verge of becoming the biggest shocker of Europe over the coming years, here, according to Daniel Hannan, is what killed democracy in Europe. Europe itself. Here are the punchlines, which are all based documented fact:

We were told the Euro would be an antidote to extremism, that it would make countries get on better, and make moderate politics more mainstream. Well, how’s that working out for you. Look at the elections in Greece – a Trotskyist party came first, a Nazi party came third. And as for the national animosities read the way the German newspaper now refer to the Greeks and vice versa. Would you say this is soothing or stoking national rivalries in Europe?

But worst of all is the impact on democratic accountability. After the Greek election results came in, the German finance minister said “elections change nothing.” He was talking specifically about Greece but this could be a watchword describing the entire Brussels racket. As Jean Claude Juncker put it the next day, “there can be no democratic choice against the European treaties.” This is the same European Commission that in late 2011 in Italy and Greece engaged in practice in civilian coups, toppling elected prime ministers and replacing them with former technocrats.

As the former president of the European Commission Barroso puts it, “democratic governments are often wrong. If you trust them too much they make bad decisions.” And so we have this syste,min Europe where power is deliberately vested in the hands of people who are invulnerable to public opinion. Being against that shouldn’t make you anti-Europe, it doesn’t make you Euroskeptic, it makes you pro-democracy. What a tragedy that in the country where democracy was born, in the part of the world that evolved this sublime idea, that our rulers should be accountable to the rest of us, in that same country that wonderful idea that laws should not be passed nor taxes raised except by our own representatives, has been abandoned.” Tragedy indeed, and while nobody else is willing to admit it, only a violent overthrow of this unelected group of self-serving oligarchs is the only probably outcome.

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Draghi Makes Greenspan Look Like A Rank Amateur (Albert Edwards via ZH)

We have long fulminated against strategists who are unwilling to predict sharp market moves. The violent downmove in the euro over the last few weeks is a case in point. Mario Draghi and the ECB’s manipulation of asset prices makes Greenspan’s Fed look like a rank amateur. More shocking though than the plunge in the euro, and more shocking even that 25% of sovereign eurozone bonds now trade in negative territory, is what has happened to eurozone equity valuations. For, as we approach the sixth anniversary of the US cyclical bull market (a post-war record), the PE expansion of eurozone equities is simply off the scale. History suggests this will end very badly indeed. Ask Alan!

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I promise to keep insulting you…

Tsipras Promises Greece Will Keep Its Word Amid German Spat (Reuters)

Prime Minister Alexis Tsipras tried to reassure euro zone partners on Thursday that Greece would stick to an extended bailout agreement with its international creditors even as a war of words rumbled on between Athens and Berlin. Tsipras used a visit to the Paris-based Organization for Economic Cooperation and Development, an inter-governmental think-tank, to make his case for a long-term restructuring of Greece’s debt while promising to implement agreed reforms. “There is no reason for concern… even if there is no timely disbursement of a (loan) tranche, Greece will meet its obligations,” he told reporters.

“We are here in order for the OECD to put its stamp on the reforms that the Greek government wants to push on with and I believe that this stamp in our passport will be very significant to build mutual trust with our lenders.” His soothing words contrasted to the tone of recrimination between Greece and Germany over austerity, relations between their finance ministers and demands for reparations over the World War Two Nazi occupation of Greece. Greece submitted a formal protest to the German Foreign Ministry, accusing Finance Minister Wolfgang Schaeuble of having insulted his Greek counterpart, Yanis Varoufakis, further eroding a relationship that has been strained by Berlin’s tough stance on the Greek debt crisis.

Schaeuble denied having called Varoufakis “foolishly naive”, as reported by some Greek media, telling Reuters it was “nonsense” to say he had insulted the Greek minister. Greek Foreign Ministry spokesman Constantinos Koutras told Reuters the complaint was about the general tone of Schaeuble’s remarks, questioning data presented by Greece and doubting its willingness to meet its commitments. Recounting a private meeting with Varoufakis this week, Schaeuble told reporters on Tuesday in Brussels: “He said to me ‘The media are dreadful’. So I said: ‘Yes but the first impression you made on us was that you were stronger at communication that on substance. That may have been a mistake’.”

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One for the bleachers.

Greece Complains About Schaeuble in Deepening Conflict (Bloomberg)

Greece’s war of words with Germany deepened as Greece renewed demands for war reparations and formally complained about Finance Minister Wolfgang Schaeuble. Germany and Greece confirmed Thursday that the Greek ambassador in Berlin made an official protest late Tuesday to the German Foreign Ministry over comments made by Schaeuble. Schaeuble and his Greek counterpart Yanis Varoufakis have traded barbs in recent weeks, with Schaeuble suggesting on Tuesday that Varoufakis needed to look more closely at an agreement Greece signed in February and commenting on his fellow minister’s communication strategy. Schaeuble said Thursday that any suggestion he had insulted Varoufakis was “absurd.”

Tensions have risen between Greece and Germany since the election of Prime Minister Alexis Tsipras on Jan. 25 on a platform on ending the austerity his Syriza party blames Chancellor Angela Merkel for pushing. Germany is the biggest country contributor to Greece’s €240 billion twin bailouts and the chief proponent of budget cuts and reforms measures in return. The latest spat centers on Tuesday’s press conference in Brussels, when Schaeuble referred to a Feb. 20 declaration that Varoufakis had signed, saying that “he just has to read it. I’m willing to lend him my copy if need be.” He also said he talked with Varoufakis about the latter’s treatment at the hands of the media, saying that he had told his Greek counterpart: “In terms of communication, you made a stronger impression on us than in substance. But that may well have been a false impression. That he should suddenly be naive in terms of communication, I told him, that is quite new to me. But you live and learn.”

According to Deutsche Presse-Agentur, Schaeuble was cited in some Greek media as calling Varoufakis “foolishly naive” in his handling of the press. Greek Foreign Ministry spokesman Konstantinos Koutras rejected suggestions that the government’s complaint had been based on a “wrong translation” of Schaeuble’s remarks. “On the contrary, the reason for this complaint to the government of a friend, counterpart and ally country was based on the essence of what Mr. Schaeuble said,” Koutras said in an e-mail.

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Hand out.

ECB Increases Greek ELA Ceiling by €600 Million (Bloomberg)

The European Central Bank increased the maximum Emergency Liquidity Assistance that Greek banks can get from their national central bank by €600 million, according to two people familiar with the decision. The amount matches the request by the Greek central bank, said the people, who asked not to be named because the talks are private. The ECB’s Governing Council held a phone conference on Thursday to set the limit, which policy makers had increased by €500 million to €68.8 billion on March 5. The council is scheduled to review the level again on March 18.

“The ECB is saying you better reach an agreement and you better do as you’re told, or else,” said Gabriel Sterne, head of global macro research at Oxford Economics. “This is an extraordinarily small extension. It seems to say: we’re just going to drip feed you liquidity, no more, no less, just exactly what you need and no breathing space.” Greek banks didn’t absorb all ELA funds available under the previous ceiling and have about €3.5 billion in liquidity left, said a Bank of Greece official, who asked not to be named because the matter is private.

The ECB is reviewing ELA weekly, reflecting concern that banks will use it to finance the Greek government and so violate European Union law. The newly elected administration in Athens is struggling to gain access to aid payments as a cash crunch looms before the end of the month. “Where the government is unable to tap the market and where banks are unable to tap the market, in my view there are concerns about monetary financing if ELA is used to purchase treasury bills or to roll over treasury bills,” Bundesbank President Jens Weidmann said in a Bloomberg Television interview in Frankfurt after the decision.

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Central Bank Stimulus Is Ancient Recipe for Trouble (Bloomberg)

Central bankers would do well to learn lessons about monetary stimulus from history – ancient history. The practice of governments boosting the amount of money in circulation to spur economic growth isn’t as unconventional as one might think, according to Kabir Sehgal’s new book, “Coined: The Rich Life of Money and How Its History Has Shaped Us.” In it, the 32-year-old former equities salesman at JPMorgan looks at the economics, history and psychology of currencies and the role they play in life. “You need paper money to engender short-term riches to get us out of a crisis, but what ends up happening is it’s hard to keep that in check,” Sehgal said in an interview.

“Currencies devalue, there’s inflation. Then there’s a monetary crisis which leads to an economic crisis.” After carrying out unprecedented stimulus in the wake of the financial crisis, the U.S. Federal Reserve now stands out among major central banks in accepting a higher exchange rate as a sign of economic strength. Peers from Tokyo to Frankfurt, Zurich and Sydney are cutting rates and buying government bonds to stimulate growth and, in the process, sometimes weakening their currencies Rulers have used the supply of hard and paper money to pursue economic and political goals as early as the Roman Empire and in Kublai Khan’s 13th-century Mongol Empire, according to Sehgal.

In the U.S., Benjamin Franklin and Abraham Lincoln advocated printing more paper currency to spur trade and commerce. “The lesson that keeps coming up is really a Faustian bargain,” he said. “It seems great, but eventually it leads to economic trouble.” Sehgal, also a Grammy-award winning jazz producer, left his position as a vice president for emerging-market equities at JPMorgan this week.

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“Now is the time to give a message of hope to the Greek people, not only implement, implement, implement and obligations, obligations, obligations..”

Tsipras Says Greece Doing Its Part In Eurozone Deal (Reuters)

Greece’s problems are euro zone’s problems and the single currency area should send Greece a message of solidarity as Athens stands ready to deliver on promises to reform in exchange for more loans, Greek Prime Minister Alexis Tsipras said. “Greece has already started fulfilling its commitments mentioned in the Eurogroup decision of 20 Feb so we are doing our part and we expect our partners to do their own,” Tsipras told reporters after meeting the speaker of the European Parliament Martin Schulz. “And I’m very optimistic … that we will find a solution because I strongly believe that this is our common interest. I believe that there is no Greek problem, there is a European problem,” he said. Eurozone finance ministers agreed on Feb 20 to extend Greece’s financial rescue by four months, averting a potential cash crunch in March that could have forced the country out of the currency area.

But the extension was granted to give Athens time to negotiate a list of reforms by the end of April that would unblock further aid to the country, whose leftist-led government pledged to reverse austerity. Tsipras, who was also meeting European Commission President Jean-Claude Juncker on Friday, called for a change in the message the euro zone was sending Greece. “Now is the time to give a message of hope to the Greek people, not only implement, implement, implement and obligations, obligations, obligations,” he said. “The message that the European institutions will give help and solidarity with particular rates, in order to over come this very bad situation at the social level,” he said referring to the unemployment rate at 26%.

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Primary dealers, you can tickle them but….

Why The Fed Failed Two Of Europe’s Biggest Banks (CNBC)

The U.S. operations of Germany’s and Spain’s largest banks had their knuckles rapped by the U.S. Federal Reserve late Wednesday. The Fed failed Deutsche Bank and Santander in key tests of their ability to withstand a future financial crisis. But what exactly have they done wrong? After all, they are two of Europe’s most prestigious and largest banks which passed the European Central Bank’s October stress tests comfortably. To start with, the Fed is anxious about having to support the U.S. operations of non-U.S. banks in the event of a future economic crisis, so it is subjecting them to tough scrutiny. While both banks were judged to have enough capital to pass the Fed’s minimum capital requirements, “widespread and substantial weaknesses across their capital planning processes” were identified by the central bank.

Essentially, the banks have not failed in terms of their capital position, but in the quality of their analysis of risk. Some investors argue that this is not much to worry about. This is the second year in a row Santander has failed the tests, while Deutsche’s U.S. unit failed them the first year it took them. However, It was the first time all of the U.S. domestic banks passed the stress tests since they began in 2009. “The European banks have only failed at the margins,” Dennis Gartman, the influential investor and author of the “Gartman Letter”, who dismissed the tests as “borderline silly”, told CNBC Thursday. “I’m not that concerned, nor do I think anyone else should be.

In the case of the stress tests, we know when they will be administered and what questions they have to answer – the fact that anyone will have failed is beyond belief.” Until the U.S. divisions of Deutsche Bank and Santander come up with new capital plans, the Fed has barred them from raising dividends or making stock buybacks. This is not likely to derail any plans for shareholder rewards this year – Deutsche Bank said it didn’t request any dividend payments anyway, and Santander has permission to keep a dividend payout announced earlier this year.

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Not a great Whitney fan necessarily, but he’s got this one quote right.

How Putin Blocked the US Pivot to Asia (Whitney)

On February 10, 2007, Vladimir Putin delivered a speech at the 43rd Munich Security Conference that created a rift between Washington and Moscow that has only deepened over time.  The Russian President’s blistering hour-long critique of US foreign policy provided a rational, point-by-point indictment of US interventions around the world and their devastating effect on global security.   Putin probably didn’t realize the impact his candid observations would have on the assembly in Munich or the reaction of  powerbrokers in the US who saw the presentation as a turning point in US-Russian relations. But, the fact is, Washington’s hostility towards Russia can be traced back to this particular incident, a speech in which Putin publicly committed himself to a multipolar global system, thus, repudiating the NWO pretensions of US elites. Here’s what he said:

“I am convinced that we have reached that decisive moment when we must seriously think about the architecture of global security. And we must proceed by searching for a reasonable balance between the interests of all participants in the international dialogue.”

With that one formulation, Putin rejected the United States assumed role as the world’s only superpower and steward of global security, a privileged position which Washington feels it earned by prevailing in the Cold War and which entitles the US to unilaterally intervene whenever it sees fit. Putin’s announcement ended years of bickering and deliberation among think tank analysts as to whether Russia could be integrated into the US-led system or not.  Now they knew that Putin would never dance to Washington’s tune. In the early years of his presidency, it was believed that Putin would learn to comply with western demands and accept a subordinate role in the Washington-centric system. But it hasn’t worked out that way. The speech in Munich merely underscored what many US hawks and Cold Warriors had been saying from the beginning, that Putin would not relinquish Russian sovereignty without a fight. 

The declaration challenging US aspirations to rule the world, left no doubt that  Putin was going to be a problem that had to be dealt with by any means necessary including harsh economic sanctions, a State Department-led coup in neighboring Ukraine, a conspiracy to crash oil prices, a speculative attack of the ruble, a proxy war in the Donbass using neo-Nazis as the empire’s shock troops, and myriad false flag operations used to discredit Putin personally while driving a wedge between Moscow and its primary business partners in Europe. Now the Pentagon is planning to send 600 paratroopers to Ukraine ostensibly to “train the Ukrainian National Guard”, a serious escalation that violates the spirit of Minsk 2 and which calls for a proportionate response from the Kremlin. Bottom line: The US is using all the weapons in its arsenal to prosecute its war on Putin.

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By all means, let’s keep talking, but please not on the basis of baseless accusations..

‘Claims SU-25 Shot Down MH17 Unsupportable’ (RT)

Electronic countermeasure pods are no longer reliable source of information, so anyone who says the radar has identified a SU-25 aircraft in the MH17 tragedy is trying to mislead people, Gordon Duff, senior editor of Veterans Today newspaper, told RT.

RT: Though the preliminary results of the investigation into the crash of Malaysian Airlines flight MH17 over Ukraine won’t be known until July new theories of what happened appear every day. One claim is that the Boeing was brought down by an SU-25 fighter jet. But its chief designer has now told German media that’s impossible, because it can’t fly high enough. What do you make of that?

Gordon Duff: The claim that it was an SU-25 is unsupportable. Since 2010, NATO has begun using electronic countermeasure pods. They are designed by Raytheon and BAE Systems. When attached to an aircraft, an SU-27, an SU-29 maybe even an F-15, these allow the backscattering – that is when you use radar, and this is what was said the radar identified as two SU-25 aircraft. Well these pods that attach to any plane can make a plane look like an SU-25 when it’s not an SU-25 or a flock of birds or anything else. It’s a new version of poor man’s stealth…It’s called radar spoofing, so with radar spoofing anyone who says they have identified an aircraft by radar is trying to mislead people because that’s no longer a reliable way of dealing with things.

If I could go on with the SU-25, the claimed service ceiling is based on the oxygen’s supply in the aircraft. Now there is a claim that this plane will only work to 22,000 feet. At the end of the WWII a German ME-262 would fly at 40,000 feet. A P-51 Mustang propeller plane flew at 44,000 feet. The SU-25 was developed as an analogue of the A-10 Thunderbolt, an American attack plane. The planes have almost identical performance except that the SU-25 is faster and more powerful. The A-10 Thunderbolt has a service ceiling of 45,000 feet. The US estimates the absolute ceiling, which is a different term, of the SU-25. And we don’t know whether the SU-25 was involved at all, we are only taking people’s word and people we don’t trust. But the absolute ceiling for the plane is 52,000 feet.

RT: Do you agree with the statement that “many more factors indicate that the Boeing 777 was hit by a ground-to-air missile that was launched from a Buk missile system”? How much technical expertise would it take to fire a Buk launcher?

GD: We’ve looked at this. I had an investigating team, examiners, which included aircraft investigation experts from the US including from the FAA, the FBI and from the Air Line Pilots Association. I also had one of our air traffic and air operational officers…with the Central Intelligence Agency look at this. And one of the things we settled is that in the middle of the day if this were a Buk missile the contrail would have been seen for 50 miles. The contrail itself would have been photographed by thousands of people; it would have been on Instagram, Twitter, all over YouTube. And no one saw it.

You can’t fire a missile and on a flat area in a middle of the day leaving a smoke trail into the air and having everyone not see it. There is no reliable information supporting that it was a Buk missile fired by anyone. And then additionally we have a limited amount of information that NATO and the Dutch investigators have released, forensic information, and that is contradicted by other experts that have looked at things. We don’t have reliable information to deal with but the least possible thing, the one thing we can write off immediately – it wasn’t a ground-to-air missile because you simply can’t fire a missile in the middle of the day without thousands and thousands of people seeing it and filming it with camera phones.

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“Poor Fellow-Soldiers of Christ and of the Temple of Solomon”.

Knights Templar Win Heresy Reprieve After 700 Years (Reuters)

The Knights Templar, the medieval Christian military order accused of heresy and sexual misconduct, will soon be partly rehabilitated when the Vatican publishes trial documents it had closely guarded for 700 years. A reproduction of the minutes of trials against the Templars, “‘Processus Contra Templarios — Papal Inquiry into the Trial of the Templars'” is a massive work and much more than a book – with a €5,900 euros price tag. “This is a milestone because it is the first time that these documents are being released by the Vatican, which gives a stamp of authority to the entire project,” said Professor Barbara Frale, a medievalist at the Vatican’s Secret Archives. “Nothing before this offered scholars original documents of the trials of the Templars,” she told Reuters in a telephone interview ahead of the official presentation of the work on October 25.

The epic comes in a soft leather case that includes a large-format book including scholarly commentary, reproductions of original parchments in Latin, and — to tantalize Templar buffs — replicas of the wax seals used by 14th-century inquisitors. Reuters was given an advance preview of the work, of which only 799 numbered copies have been made. One parchment measuring about half a meter wide by some two meters long is so detailed that it includes reproductions of stains and imperfections seen on the originals. Pope Benedict will be given the first set of the work, published by the Vatican Secret Archives in collaboration with Italy’s Scrinium cultural foundation, which acted as curator and will have exclusive world distribution rights. The Templars, whose full name was “Poor Fellow-Soldiers of Christ and of the Temple of Solomon”, were founded in 1119 by knights sworn to protecting Christian pilgrims visiting the Holy Land after the Crusaders captured Jerusalem in 1099.

Read more …

Human kindness overflowing.

Arctic Melt Brings More Persistent Heat Waves to US, Europe (Bloomberg)

The U.S., Europe and Russia face longer heat waves because summer winds that used to bring in cool ocean air have been weakened by climate change, German researchers said. Rapid Arctic warming disturbs air streams in ways that have “significantly” reduced summer storms, raising the likelihood of heat waves, the Potsdam Institute for Climate Impact Research said in a report Thursday in the journal Science. Hot weather in Russia in 2010 devastated crop harvests and caused wildfires. “Unabated climate change will probably further weaken summer circulation patterns which could thus aggravate the risk of heat waves,” co-author Jascha Lehmann said in a statement e-mailed by the institute.

“The warm temperature extremes we’ve experienced in recent years might be just a beginning.” With heat-trapping gases from burning oil, coal and natural gas at record levels, global temperatures are set to warm by 3.6 degrees Celsius (6.5 Fahrenheit) by the end of the century, according to the International Energy Agency. That’s the quickest climate shift in 10,000 years. Temperature gains can disrupt air flows that govern storm activity, the Potsdam report showed. “When the great air streams in the sky above us get disturbed by climate change, this can have severe effects on the ground,” lead author Dim Coumou said. The study used data on atmospheric circulation in the Northern Hemisphere from 1979 to 2013.

Warming in the Arctic, where temperatures rise faster than elsewhere as ice caps melt, is believed to narrow temperature differences and thus weaken the jet stream — air motion that’s important for shaping our weather, according to the scientists. “The reduced day-to-day variability that we observed makes weather more persistent, resulting in heat extremes on monthly timescales,” Coumou said. “The risk of high-impact heat waves is likely to increase.”

Read more …

Jan 202015
 January 20, 2015  Posted by at 11:08 pm Finance Tagged with: , , , , , ,  20 Responses »

Unknown Charleston, SC, after bombardment. Ruins of Cathedral of St John and St Finbar 1865

After 6+ (BIG +) years of deepening poverty and rising stock markets, of creative accounting, of QE and ultralow interest rates, of extend and pretend and outright propaganda and of what have you, all of which have led us to where we are today, facing yet more rounds of stumbling from crisis into multiple crises, it would seem clear that the model, if not the mold, is broken. In order to fix it, let alone replace it altogether, we need to understand to what extent it is broken. And to do that, we first need to know what exactly the model is.

Now, it would be tempting, even seem logical, to consult with the people who designed and built the model. Who, after all, not only claim to be the only ones capable of fixing the broken mold, but who also have occupied all positions of power that have any say in the process. But that’s less obvious than it may seem. Because, mind you, the model is broken. They built a flawed model. Or rather, they built one that works for them, for some, but not for the rest of us.

There are gatherings and festivities ongoing in Davos. Only some are invited: the rich, the powerful and their court jesters. Those who profited most from the broken model. They’re least likely to fix it, they won’t even admit to it being broken. It works just fine for them. The people in Davos believe in one model only, the one of ever increasing centralization and globalization, because that’s the model that got them where they are.

That means that what’s in their interest is 180º removed from what’s in your interest. And it means that whatever these people propose you do, you should probably do the exact opposite.

The more our economic activities become part of the global economy, the more the rich can skim off. That ‘principle’ got them where they are. They all, to name one thing, keep talking about the need for more reforms, in order to make economies more competitive. Even sounds reasonable at first glance; but only because we haven’t thought it over. It’s mere propaganda.

When it comes to basic necessities, to food, water and shelter, we shouldn’t strive to compete with other economies. That is not good for us, or for our peers in those other economies; it’s good only for those who skim off the top. The larger and more globalized the top, the more there is to skim off. All the ‘reform’ is geared towards making our economies ever more dependent on the global economy. And that is not in our best interest.

It’s not all just even about money, it’s about our security, and independence. Everybody likes the idea of being independent, but at the same time few realize that globalization is the exact opposite of independence. Global trade is fine, as long as it’s limited to things we don’t need to survive, but it’s not fine if and when it takes away the ability of a community or a society to provide for itself.

Protectionism has acquired a really bad reputation, as if it’s inherently evil to try and protect your community from being gutted by economic ideas and systems it has no defense against, or to make sure it can generate and provide for its own basics at all times. But that’s just propaganda too.

If our societies are not designed and constructed to provide for themselves, they’ll end up with no choice but to go to war with each other. Along the same lines, if our societies don’t have strict laws in place that guarantee we can’t and won’t destroy the natural resources of the land we live on comes with, we’ll also end up going to war with each other.

We’re not going to solve the Gordian knot of the entire global economy and all the hubris and propaganda the present leading politicians, businessmen and ‘reporters’ bring to the table. And we probably shouldn’t want to. Our brains did not develop to do things on a global scale. The clowns will blow themselves up sooner or later. We should focus on what we can do, meanwhile, in our immediate surroundings.

And it’s pretty easy from there, really. The economic problems we have are mostly artificial. They have been induced by the broken economic model the Davos crowd, the central bankers and you know who else would have us believe is the one and only, and that they are busy fixing for our sake and greater glory. But they care only about their own glory.

The IMF lowered its global GDP forecast yet again. But who cares? Who has any faith in the IMF? Those numbers are released for consumption by the masses, and duly reported by the media six ways to Sunday. China says its economy grew 7.4% in 2014. But there is no more reason to believe China than there is the IMF. If China’s economy had really grown 7.4% in 2014, oil would not be below $50.

Trying, and desiring, to be part of this global economy idea the clowns propagate, or even a new world order, which can only lead to misery and mayhem for billions of people just because of the way it was set up, is the worst thing we can do now. We owe it to our people, and our children, to leave them with something better than that.

It’s fine to compete with others when it comes to technology and fashion and gadgets and whatever luxury items you can or cannot yet imagine. But it’s not fine to compete with them for the food and water your own children will need to survive. But still, that is the path we’re on. The path the Davos crowd has set us on. Because they get richer as we compete for food and water. Divide and rule stems from Roman times, if not before. And ‘we’ – or they, if you like that better – have perfected it. To the extent that we are now so divided amongst ourselves that a small minority can see its wealth grow at ever increasing speed at our cost.

The Davos crowd are not the important people, it’s just propaganda that makes you see them in that light. There’s no glory in wealth. The important people are your neighbors, your families, and most of all your children. And the answer to their insidious schemes is really simple; its that very simplicity which may well be the reason you never saw it.

You see, a dollar spent on locally made products goes much further than one spent on products that are shipped in. About 4 times further. Because if you buy local products, you support local jobs, which in turn support the community you live in through taxes that pay for strengthening the community, and so forth. Ergo: if something produced locally costs twice as much as what’s available from 1000 miles away, you’d still be better off. Even if it’s three times more expensive, you’ll still end up richer.

The only setback is, you’ll have to work to make it work. You’ll have to get people around you to understand why buying what their neighbors make at double or triple the price of what they pay for what comes from China will make them richer and better people. Sounds stupid and naive and easy to dismiss and unrealistic at first bite, I know. But I don’t mind, because I’m none of those things.

And, moreover, this is the only road out of Davos. All you need to do is wean yourself off the clowns. And I know you can’t do it alone, but then, why should you want to?

Jan 112015
 January 11, 2015  Posted by at 9:22 pm Finance Tagged with: , , , , , ,  6 Responses »

Ann Rosener Reconditioning spark plugs, Melrose Park Buick plant, Chicago 1942

We need to do a lot more thinking, and take a far more critical look at ourselves, than we do at present. We’re not even playing it safe, we’re only playing it easy. And that’s just not enough. The marches in Paris and numerous other cities today were attended by people who mean well, but who should ask themselves if they want to be part of what was predictably turned into a propaganda event by ‘world leaders’. One thing is for sure; the murdered Charlie Hebdo staff would not have approved of it.

The leaders hark back to usual suspect slogans like we defend ‘Liberty’, ‘Freedom of Expression’ and ‘Our Values’. But we can’t turn our backs on the fact that ‘our values’ these days include torture and other fine ‘tactics’ that make people in other parts of the world turn their backs on us. We might want – need – to march to express our feelings about torture executed in our name, as much as to express our horror at cartoonists we never heard of being the target of automatic weapons.

There are major armed conflicts going on in 6 different Arab countries, and ‘we’ play a part in all of them. We get up in the morning and prepare to march against violence in our own streets, but we should perhaps – also – protest the violence committed in our name on other people’s streets just as much. We may feel innocent as we’re marching, but that’s simply because we refuse to look at ourselves in the mirror. And we must be able to do better than that. Both to be the best we can be (which is still a valid goal), and to prevent future attacks.

And that’s not nearly the entire story. Our governments play ‘divide and rule’ both domestically and abroad. They play nations against each other in far away parts of the globe, and poor vs rich and generation vs generation at home. If you want a better world, don’t look at your leaders to make that happen. They like the world the way it is; it got them where they are. Moreover, they’re all beholden to numerous supra-national organizations that are the real power behind the throne across the globe; NATO, IMF, EU, World Bank et al.

If you want a better world, and one in which the risk of attacks like the one this week goes down, you’ll have to look at yourself first, and take it from there. Marching in a mostly self-righteous parade in which the wrong people form the first line is not going to do it. You’re not going to solve this sitting on your couch. Our world is not just financially bankrupt, and in deep debt to boot, it’s also about as morally broke as can be.

We therefore have to rethink our world just about from scratch. Or else. We’ve lived chasing the recovery carrot for years now, but the economy won’t recover; it can’t. There hasn’t been any real growth since at least the 1980s, the only thing there’s been is increasing debt levels that we mistook for growth.

A great first example of how to do this rethinking was provided late last year, and I referred to it before, by UofM Amherst economics professor James K. Boyce:

Protecting Money or People?

Imagine that without major new investments in adaptation, climate change will cause world incomes to fall in the next two decades by 25% across the board, with everyone’s income going down, from the poorest farmworker in Bangladesh to the wealthiest real estate baron in Manhattan. Adaptation can cushion some but not all of these losses. What should be our priority: reduce losses for the farmworker or the baron? For the farmworker, and a billion others in the world who live on about $1 a day, this 25% income loss will be a disaster, perhaps the difference between life and death.

Yet in dollars, the loss is just 25 cents a day. For the land baron and other “one-percenters” in the U.S. with average incomes of about $2,000 a day, the 25% income loss would be a matter of regret, not survival. He’ll find a way to get by on $1,500 a day. In human terms, the baron’s loss pales compared with that of the farmworker. But in dollar terms, it’s 2,000 times larger. Conventional economic models would prescribe spending more to protect the barons than the farmworkers of the world.

It’s how we think. Boyce describes it perfectly. We chase money, no questions asked, and even call it no. 1. And unless we change the way we think, one Manhattan land baron will be saved, and 1000 Bangla Deshi farmers and their entire families will either drown or be forced higher inland, where there are already too many people just like them. A dollar or a person. Our present economic models know which one to choose. But we should have more than mere economic models guide us.

Michael Lewis – yes, him – provides another wonderful example in the New Republic. I tried to make the quote as short as I could, but, hey, Lewis is .. Lewis. The original title was ‘Extreme Wealth Is Bad for Everyone – Especially the Wealthy’ (Getting rich won’t make you happy. But it will make you more selfish and dishonest). The Week turned in into this:

What Wealth Does To Your Soul

When I was 14, I met a man with a talent for restoring a sense of fairness to a society with vast and growing inequalities in wealth. His name was Jack Kenney, and he’d created a tennis camp, called Tamarack, in the mountains of northern New Hampshire. The kids who went to the Tamarack Tennis Camp mostly came from well-to-do East Coast families, but the camp itself didn’t feel like a rich person’s place: It wasn’t unusual for the local health inspectors to warn the camp about its conditions, or for the mother of some Boston Brahmin dropping her child off, and seeing where he would sleep and eat for the next month, to burst into tears.

Kenney himself had enjoyed a brief, exotic career as a professional tennis player — he’d even played a doubles match on ice with Fred Perry – but he was pushing 60 and had long since abandoned whatever interest he’d had in fame and fortune. He ran his tennis camp less as a factory for future champions than as an antidote to American materialism – and also to the idea that a person could be at once successful and selfish.

Jack Kenney’s assault on teenaged American inequality began at breakfast the first morning. The bell clanged early, and the kids all rolled out of their old stained bunk beds, scratched their fresh mosquito bites, and crawled to the dining hall. On each table were small boxes of cereal, enough for each kid to have one box, but not enough that everyone could have the brand of cereal he wanted. There were Froot Loops and Cheerios, but also more than a few boxes of the deadly dark bran stuff consumed willingly only by old people suffering from constipation.

On the second morning, when the breakfast bell clanged, a mad footrace ensued. Kids sprung from their bunks and shot from cabins in the New Hampshire woods to the dining hall. The winners got the Froot Loops, the losers a laxative. By the third morning, it was clear that, in the race to the Froot Loops, some kids had a natural advantage. They were bigger and faster; or their cabins were closer to the dining hall; or they just had that special knack some people have for getting whatever they want. Some kids would always get the Froot Loops, and others would always get the laxative. Life was now officially unfair.

After that third breakfast, Kenney called an assembly on a hill overlooking a tennis court. He was unkempt and a bit odd; wisps of gray hair crossed his forehead, and he looked as if he hadn’t bathed in a week. He was also kind and gentle and funny, and kids instantly sensed that he was worth listening to and wanted to hear what he had to say.

“You all live in important places surrounded by important people,” he’d begin. “When I’m in the big city, I never understand the faces of the people, especially the people who want to be successful. They look so worried! So unsatisfied!” Here his eyes closed shut and his hands became lobster claws, pinching and grasping the air in front of him. “In the city you see people grasping, grasping, grasping. Taking, taking, taking. And it must be so hard! To be always grasping-grasping, and taking-taking. But no matter how much they have, they never have enough. They’re still worried. About what they don’t have. They’re always empty.”

“You have a choice. You don’t realize it, but you have a choice. You can be a giver or you can be a taker. You can get filled up or empty. You make that choice every day. You make that choice at breakfast when you rush to grab the cereal you want so others can’t have what they want.”

On the fourth morning, no one ate the Froot Loops. Kids were thrusting the colorful boxes at each other and leaping on the constipation cereal like war heroes jumping on hand grenades. In a stroke, the texture of life in this tennis camp had changed, from a chapter out of Lord of the Flies to the feeling between the lines of Walden. Even the most fantastically selfish kids did what they could to contribute to the general welfare of the place, and there was not a shred of doubt that everyone felt happier for it. The distinction between haves and have-nots, winners and losers, wasn’t entirely gone, of course. But it became less important than this other distinction, between the givers and the takers.

So far for the Jack Kenney story. Michael Lewis continues:

What is clear about rich people and their money — and becoming ever clearer — is how it changes them. A body of quirky but persuasive research has sought to understand the effects of wealth and privilege on human behavior — and any future book about the nature of billionaires would do well to consult it.

One especially fertile source is the University of California at Berkeley psychology department lab overseen by a professor named Dacher Keltner. In one study, Keltner and his colleague Paul Piff installed note takers and cameras at city street intersections with four-way Stop signs. The people driving expensive cars were four times more likely to cut in front of other drivers than drivers of cheap cars.

The researchers then followed the drivers to the city’s crosswalks and positioned themselves as pedestrians, waiting to cross the street. The drivers in the cheap cars all respected the pedestrians’ right of way. The drivers in the expensive cars ignored the pedestrians 46.2% of the time – a finding that was replicated in spirit by another team of researchers in Manhattan, who found drivers of expensive cars were far more likely to double-park.

In yet another study, the Berkeley researchers invited a cross section of the population into their lab and marched them through a series of tasks. Upon leaving the laboratory testing room, the subjects passed a big jar of candy. The richer the person, the more likely he was to reach in and take candy from the jar — and ignore the big sign on the jar that said the candy was for the children who passed through the department.

Maybe my favorite study done by the Berkeley team rigged a game with cash prizes in favor of one of the players, and then showed how that person, as he grows richer, becomes more likely to cheat. In his forthcoming book on power, Keltner contemplates his findings:

If I have $100,000 in my bank account, winning $50 alters my personal wealth in trivial fashion. It just isn’t that big of a deal. If I have $84 in my bank account, winning $50 not only changes my personal wealth significantly, it matters in terms of the quality of my life — the extra $50 changes what bill I might be able to pay, what I might put in my refrigerator at the end of the month, the kind of date I would go out on, or whether or not I could buy a beer for a friend. The value of winning $50 is greater for the poor, and, by implication, the incentive for lying in our study greater. Yet it was our wealthy participants who were far more likely to lie for the chance of winning fifty bucks.

There is plenty more like this to be found, if you look for it. A team of researchers at the New York State Psychiatric Institute surveyed 43,000 Americans and found that, by some wide margin, the rich were more likely to shoplift than the poor. Another study, by a coalition of nonprofits called the Independent Sector, revealed that people with incomes below 25 grand give away, on average, 4.2% of their income, while those earning more than 150 grand a year give away only 2.7%. A UCLA neuroscientist named Keely Muscatell has published an interesting paper showing that wealth quiets the nerves in the brain associated with empathy.

If you show rich people and poor people pictures of kids with cancer, the poor people’s brains exhibit a great deal more activity than the rich people’s. “As you move up the class ladder,” says Keltner, “you are more likely to violate the rules of the road, to lie, to cheat, to take candy from kids, to shoplift, and to be tightfisted in giving to others. Straightforward economic analyses have trouble making sense of this pattern of results.”

But that wouldn’t work, you think? Not for you, not in today’s world, and certainly not for the political class? Well, we happen to have the example of a real life president of a nation who questions all we tend to think is ‘normal’. Back in October, HuffPo had this portrait of Uruguayan President José Mujica. And please see this against the backdrop of US presidential candidates raising hundreds of millions of dollars even just for their preliminary campaigns.

Mujica says what I often have, that money should be kept out of a political system, because if it isn’t it will end up buying and eating that system whole. Too late for the US and Europe, but perhaps not for Uruguay.

‘World’s Poorest President’ Explains Why We Should Kick Rich People Out Of Politics

People who like money too much ought to be kicked out of politics, Uruguayan President José Mujica told CNN en Español [..] “We invented this thing called representative democracy, where we say the majority is who decides,” Mujica said in the interview. “So it seems to me that we [heads of state] should live like the majority and not like the minority.” Dubbed the “World’s Poorest President” in a widely circulated BBC piece from 2012, Mujica reportedly donates 90% of his salary to charity.

Mujica’s example offers a strong contrast to the United States, where in politics the median member of Congress is worth more than $1 million and corporations have many of the same rights as individuals when it comes to donating to political campaigns. “The red carpet, people who play – those things,” Mujica said, mimicking a person playing a cornet. “All those things are feudal leftovers. And the staff that surrounds the president are like the old court.”

“I’m not against people who have money, who like money, who go crazy for money,” Mujica said. “But in politics we have to separate them. We have to run people who love money too much out of politics, they’re a danger in politics… People who love money should dedicate themselves to industry, to commerce, to multiply wealth. But politics is the struggle for the happiness of all.”

Asked why rich people make bad representatives of poor people, Mujica said: “They tend to view the world through their perspective, which is the perspective of money. Even when operating with good intentions, the perspective they have of the world, of life, of their decisions, is informed by wealth. If we live in a world where the majority is supposed to govern, we have to try to root our perspective in that of the majority, not the minority.”

“I’m an enemy of consumerism. Because of this hyperconsumerism, we’re forgetting about fundamental things and wasting human strength on frivolities that have little to do with human happiness.”

He lives on a small farm on the outskirts of the capital of Montevideo with his wife, Uruguayan Sen. Lucia Topolansky and their three-legged dog Manuela. He says he rejects materialism because it would rob him of the time he uses to enjoy his passions, like tending to his flower farm and working outside. “I don’t have the hands of a president,” Mujica told CNN. “They’re kind of mangled.”

Mujica is the kind of man, make that human being, who should be in charge of all countries. Money and politics don’t mix, or at least not in a democracy. And I don’t see any exceptions to that rule. Mujica is right: if and when the majority of people in a country are poor, which is true just about everywhere, and certainly in the Anglo world and most EU countries, then their president should be poor too.

And inevitably, if you would follow the example of your president, so should his people. Not dirt poor, not starving, just being content with basic necessities for you and your family. And then tend to your flower farm, or your vegetable farm, your kids.

Sounds stupid. I know. But we haven’t had any real growth in decades, and the wizard’s curtain is being lifted on the fake growth we did have since too. So maybe the economy’s not all that cyclical after all, or maybe the cycles are longer than we would like, Kondratieff 70 year like. Or even longer.

Ask anyone if they would like to have $1000, or $10,000 or $1 million or more, and you know that the answer would be. But Michael Lewis shows that none of it would make you any happier, if you already have – or make – enough to survive on. Still, it’s generally accepted that more is always good.

And then you have the president of Uruguay, admittedly a small country and in South America to boot, who says that only poor people can truly represent poor people, who will always be in the majority in whichever country you may live in, and that that is the core of democracy.

Here’s thinking we are absolutely clueless when it comes to the value of wealth, and that we keep chasing more of it because we’re not smart enough to recognize that value. And that that’s why we have torture and wars and all the other things that make us so ugly. We have absolutely no clue what the value of wealth is. And as long as we don’t, we shouldn’t have any.

Nov 022014
 November 2, 2014  Posted by at 9:34 pm Finance Tagged with: , , , , ,  14 Responses »

John Vachon Boy on porch of general store, Roseland, Virginia April 1938

I often find myself wondering what people, people in the street, western people in general, my readers perhaps, think when they see something like the recent Unicef report, Children of Recession: the Impact of the Economic Crisis on Child Wellbeing in Rich Countries, which states that child poverty in developed nations has risen significantly.

How many of you who live in Europe still see the EU as something good and beneficial when you see that not only does Greece today has 25% unemployment and 55% youth unemployment, and its child poverty rate also went up from 23% to 40.5% since 2008? Or do you put the blame not with the EU, but elsewhere?

It’s not just those numbers, I wonder to what extent you Europeans think the numbers are about yourselves, to what extent you feel responsible, what they do about it. Same for Americans, who live in a country where 1 in 3 children grow up in poverty. How much of that do you think has to do with you? What would you say you can or cannot do to make those numbers better, and what do you actually try to do?

Do you even think less child poverty is better for society, and for yourself, or that less unemployment is a good thing, or do you see that as perhaps for instance the proper way to generate growth in an economy, Darwin-style? Lots of people seem to think that way, so at least you wouldn’t have to feel alone.

Obviously, the UnIcef report should be linked to recent reports that state the number of billionaires in the world has doubled in the same time slot, the past 5-6 years. One can’t very well argue that these things have nothing to do with each other. What the two combined say is that our societies are changing in very fundamental ways.

And at some point you need to ask yourself what you think about that. And if you find this a negative development, what you can do to correct it, as well as what you are in practice doing, today. If there’s too large a discrepancy somewhere in that picture the next question is obvious: why don’t you do more?

Are you comfortable getting up in the morning, go to your job, come home and watch TV, go to sleep and rinse and repeat? Are you not doing something, or not doing more, because you’re afraid if you do your own private daily rinse and repeat routine will be disturbed?

It’s an interesting issue, to which extent we share responsibility for those around us, and for the societies we share with them. We need to realize that if and when we allow large, and growing, numbers of people around us to be desperate, the societies we cherish will of necessity change. When we allow more children to grow up in poverty, our societies will change for many years to come.

There’s no inbuilt mechanism that will revert them to a situation that we would prefer; we have to put in energy to make them what we would like them to be. Our rinse and repeat lifestyles put zero energy into improving, even maintaining, and so they deteriorate. Like anything else in the world.

And there’s always that same question: why do we allow for it to happen? Are our little private cocoon lives really so important to us that we willingly allow the world outside of them to go to hell in a handbasket? Do we just not care? Or do we maybe trust a bunch of people we vote for every so many years to solve all related problems for us, so we can watch TV?

In most western countries youth unemployment is over 25%, in some it’s much higher. For those young people that do find work, wages and benefits are much lower than for their parents’ generation. Still, these young people have to compete with their parents for the amenities of life, like housing, pensions etc., and they haven’t got a chance. Unless they literally fight. is that what you want?

The EU was supposed to be a union, all for one and one for all. But it hasn’t worked out that way. The richer countries have the edge over the poorer, and within nations the richer boomers squeeze the younger generation, their very own children. While all politicians, in every country and from every faith and creed, promise a return to growth waiting just around the corner that will solve all problems.

Not one even dare suggest that growth may not return, and that even if it does, it’s immoral to sacrifice millions of children’s lives while we wait for it. That in other words, a redivision of our wealth may be needed that enables the young to find a meaningful goal in life, even if the older generations would need to give up part of their lifestyles to achieve that.

The choice we are all making right now is to make our own riches more important than the poverty that is increasingly rampant among our children. It’s hardly a political choice, because our political systems don’t offer a way out. They offer different approaches to achieving – more- riches, but none to anything other than that. A true political choice would venture beyond that narrow frame.

If you vote, you vote for more growth, even if that’s an entirely obsolete thing to do. You do it anyway because it soothes your worries, and it allows you to think you can hold on to what you got. While most people in the west could be just as happy – or unhappy – with a bit less than what they have and spend so much time trying to keep. And while you try to keep holding on to it, it slips through your fingers.

And you tell yourself that child poverty is not really your fault. It happened while you were busy doing other things. Maybe it’s time to change your priorities. Like first make sure the society you live in is alright, that the people around you live good lives, and only after that put energy into increasing your own comfort level even more.

We are the richest people who ever lived, and who ever will. We are tens of millions of medieval kings and queens. What is it that is going so horribly wrong that we need to let our children live without purpose, even without food and shelter? I think it must be a short circuit in our brains.

Most of us could easily give up half our incomes and wealth and be at least just as happy, we could save the planet and do much more that would benefit those around us. But instead we choose to destroy it all, just for some imaginary wealth we don’t even need. And blame it all on someone else. It’s not our kids who are the lost generations, we are. We’re very busy losing everything.

Oct 182014
 October 18, 2014  Posted by at 8:12 pm Finance Tagged with: , , , , , , , ,  7 Responses »

NPC Dedication, George Washington Masonic Memorial, Alexandria, VA Nov 1 1923

A comment on an article that comments on a book. I don’t think either provides, for the topic they deal with, the depth it needs and deserves. Not so much a criticism, more a ‘look further, keep digging, and ye shall find more’. And since the topic in question is perhaps the most defining one of our day and age, it seems worth it to me to try and explain.

The article in question is Charles Hugh Smith’s Why Nations (and organizations) Fail: Self-Serving Elites, and the book he references is Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson.

Charles starts off by saying:

The book neatly summarizes why nations fail in a few lines:

(A nation) is poor precisely because it has been ruled by a narrow elite that has organized society for their own benefit at the expense of the vast mass of people. Political power has been narrowly concentrated, and has been used to create great wealth for those who possess it.

The Amazon blurb for the book states that the writers “conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it)”, and continues with examples used such as ancient Rome, North Korea, Zimbabwe, the Congo, to make the point that some countries get rich and others don’t, because of differences in leadership structures. That in itself certainly seems true, but that doesn’t necessarily make it the whole story.

In the case of the Congo, for instance, the perhaps richest place on earth when it comes to resources, there’s not only the devastating history it’s had to endure with incredibly cruel Belgian colonial powers, there’s to this day a lot of western involvement aimed at keeping the region off balance, and feed different tribes and peoples with weaponry up the wazoo, in order to allow the west to keep plundering it. It’s not just about national goings-on, it’s – also – a supra-national thing.

That’s one of two shortcomings in the material, the breadth and width of why nations and organizations fail their people but serve their masters. In the present day, national boundaries, whether they are physical or merely legal/political, are not the best yardsticks anymore by which to measure and gauge events.

The second shortcoming, in my view, is that inequality, a theme so popular that even Janet Yellen addressed it this week in what can only be seen as her worst possible impression of Marie Antoinette, and expressed her ‘worry’ about wealth inequality in America. The very person publicly responsible for that inequality thinks it’s ‘just awful’. Go bake a cake, gramps.

Wealth inequality is but a symptom of what goes on. Charles Hugh Smith has a few graphs depicting just how bad wealth inequality has become in the US. We all know those by now. It’s bad indeed. But where does that come from? Charles touches on it, but still hits a foul ball:

I submit that this dynamic of failure – the concentrated power and wealth of self-serving elites – is scale-invariant, meaning that it is equally true of communities, towns, cities, states, nations and empires alike: all fail when they’re run for the benefit of a narrow elite. There is a bitter irony in the ease with which American pundits discern this dynamic in developing-world kleptocracies while ignoring the same dynamic in America.

One would imagine it would be easier to see the elites-inevitably-cause-failure in one’s home country, but the pundits by and large are members of the Clerisy Upper Caste, well-paid functionaries, apparatchiks, lackeys, factotums, toadies, sycophants and apologists for the very elites that are leading America down the path of systemic failure as the ontological consequence of their self-serving consolidation of wealth and power.

Here’s the thing: especially after WWII, though before that already as well, the western world woke up to the need for international co-operation. Dozens of organizations were established to structure that co-operation. But then, in yet another fountain of unintended consequences, something man is better at than just about anything else, we let those organizations loose upon the world without ever asking what happened to what they were intended for, or whether the original grounds for founding them still existed, and whether they should perhaps be abolished or put on a tight leash.

These are questions that should be asked about any large-scale organization. Be they multinational corporations, global banks, Google or indeed the United States of America. We can’t just assume these powers, which gather more power as time goes by, share and serve the purposes of the people. What if they gradually come to serve only their own purpose, and it contradicts that of the people? Should we not get that leash out?

Turns out, we never do. If someone would suggest today to break up the USA, because its present status contradicts that which the Founding Fathers had in mind (and there are plenty of arguments to be made that such contradictions exist in plain view), (s)he would not even be sent to a nuthouse, because no-one would take him/her serious enough to do so.

But wealth inequality still rises rapidly within America, and it doesn’t serve the people. So why does it happen, and why do we let it? Because the inequality that matters most is not wealth, but power. And we’ve been made to believe that we still have that power, but we don’t. Voting in elections has the same function today as singing around a Christmas tree: everyone feels a strong emotional connection, but it’s all just become one giant TV commercial.

Even if families are genuinely happy to meet up and exchange gifts and stories, it’s all modeled after the building blocks handed to us by chain stores. It isn’t really our story anymore, and Jesus certainly wasn’t born in a manger: he was born in a MacMansion and the first thing the child saw was his mom’s fake boobs, a wall-sized TV and an iPhone.

In that same vein, we lost the stories bitterly fought and suffered for by our grandparents through two world wars and the brutal invasions of Vietnam and Iraq, the stories of how we can best keep ourselves safe and out of – international – trouble. Not just military trouble, but economic and political trouble. These things are no longer our decision. We founded supra-national, indeed global, institutions for that. And then let them slip out of our sight.

The US is a bit of an outlier here, simply because it’s older. But the IMF, the World Bank, UN, NATO and the EU absolutely all fit the picture of organizations that have – happily – grown beyond our range of view, and that exhibit the exact same inverted pyramid characteristics we see on wealth inequality, only for these organizations it’s not wealth that floats and concentrates increasingly from the bottom to the top, it’s power.

Wealth comes after that. And one shouldn’t confuse that order. Because power buys wealth infinitely faster than wealth buys power.

All these supra-national institutions were established with good intentions – at least from some of the founders. But then we forgot, ignored, to check on them, and they accumulated ever more power when we weren’t watching (we were watching TV, remember?)

And what we see now is that any effort, any at all, to break up the IMF, World Bank, UN, NATO and EU would be met with the same derision that an effort to break up the USA would be met with. We have built, in true sorcerer’s apprentice or Frankenstein fashion, entities that we cannot control. And they have taken over our lives. They serve the interests of elites, not of the people. So why do we let them continue to exist?

What powers do we have left when it comes to bailing out banks, invading countries, making sure our young people have jobs when they leave school? We have none. We lost the decision making power along the way, and we’re not getting it back unless we quit watching the tube (or the plasma) and fight for it. Until we do, power will keep floating to the top like so much excrement; it’s a law of – human – nature.

That the people we voluntarily endow with such control over our lives would also use that control to enrich themselves, is so obvious it barely requires mentioning. But that doesn’t mean this is about wealth inequality, that’s not the main issue, in fact it’s not much more than an afterthought. It’s about the power we have over our lives. Or rather, the power we don’t have.

Jun 102014
 June 10, 2014  Posted by at 6:30 pm Finance Tagged with: , ,  3 Responses »

Arthur Rothstein Drought refugees from Glendive, MT, leaving for WA July 1936

It’s common knowledge at this point, even if there’s never a shortage of voices who will insist on denying it, that many of the numbers we see allegedly describing our economic realities, are not real at all. Unemployment, GDP, the issue is familiar. And if the US government, or any government for that matter, thinks it’s such a great idea to “massage” their numbers, then to quite an extent those of us who pay attention can shrug them off as largely irrelevant, even if they greatly distort many people’s views of where we find ourselves. The nonsense comes in so fast and furious we need to realize we can’t win ’em all. But we should never be tempted into thinking much of what we read are anything else than fake, virtual zombie numbers. Still, it’s when fake numbers get real life consequences that we need to raise our voices, even if that’s for the umpteenth time. A report issued yesterday by the Boston Consulting Group (BCG) makes for such a moment. Here’s what the BBC had to say:

Global Private Wealth Rises To $152 Trillion

The amount of private wealth held by households globally surged more than 14% to $152 trillion last year, boosted mainly by rising stock markets. Asia-Pacific, excluding Japan, led the surge with a 31% jump to $37 trillion, a report by Boston Consulting Group says. [..] The report takes into account cash, deposits, shares and other assets held by households. But businesses, real estate and luxury goods are excluded. [..]

The amount of wealth held in equities globally grew by 28% during the year [..] Economies in Asia have been key drivers of global growth in the recent years. China has been the biggest driver – with private wealth in the country surging more than 49% in 2013. The wealth held in the region is expected to rise further, to nearly $61 trillion by the end of 2018.

And since the BBC missed some numbers that Bloomberg caught, and vice versa, here’s the latter as well:

China Riches Fuel Asia as World Wealth Tops $150 Trillion

China leapfrogged Germany and Japan in the past five years to trail only the U.S. in a ranking of countries by private financial wealth. China’s $22 trillion is expected to increase more than 80% to $40 trillion by 2018, while the U.S. may grow to $54 trillion from $46 trillion over the same period, BCG said. Globally, stock-market gains averaged 21% in 2013, providing the primary driver of growth in private wealth, especially in North America, Europe and Japan [..] North America wealth gained 16% to $50.3 trillion.

India, which may more than double private wealth assets to $5 trillion by 2018, and Russia, where wealth may advance more than 80% to $4 trillion. BCG expects rich households to have almost $200 trillion worldwide by 2018, with the Asia-Pacific region contributing about half of global growth.

I guess the crucial question here is: how is this wealth? What is wealth to begin with? And how did these huge surges come about in the first place? We know that central banks and governments, who typically these days are as independent from each other as your run of the mill Siamese twin can be, have a role. The Chinese communist party – what’s in a name? – has pumped an estimated $25 trillion into its economy since 2008, and let the shadow banks add another, let’s take a wild guess, $5-$10 trillion or so?! The Qingdao copper, aluminum, timber, peanut oil and what have we scheme seems to indicate a widespread and accepted practice of rehypothecating assets, whether they actually exist or not. The scheme is far too profitable to have remained some small scale thingy. I saw John Mauldin today put the total damage (or is that profit?) at $1.3 billion, but we might as well add a few zeroes.

The US added many more trillions in stimulus. I’d say $15 trillion, easily. The ECB has been a bit more cautious – which is why everyone wants them to do more -, but when you add it all up, 28 separate countries, governments and central banks and all that, put them at $10 trillion minimum. And Japan is, well, Japan, they were at it much sooner, early 1990s, and Abenomics is the everything-on-red move; I can’t see that being less than $15 trillion. And that’s just the 4 biggest economies; you think the rest didn’t chime in? This is where you’re inclined to say that before you know it you’re talking real money. But it’s not. That’s exactly what it’s not. The entire thing has been made up out of thin air, and to make matters much worse, it’s been borrowed too.

Creating credit out of thin air equals borrowing from the future. Even though we – prefer to – see that as hardly relevant. Which is a deception all by itself, insult and injury. Everything about our so called recoveries appears to be true only because of stimulus measures. We buy ourselves a feel-good time today at the expense of those who come after us. Well, unless we achieve this magical ‘escape velocity’, but how can we expect to do that when all gains since 2008, dollar for dollar when you look at the ‘stimulating’ numbers, appear to be originating in central bank inputs? Without them, we’re standing still, at best.

But the Chinese, who have issues in their housing industry, and their growth numbers, and their exports, yada yada, saw their private wealth rise by close to 50% in just one year, 2013. Now, I didn’t read the full Boston Consulting Group report, but I know for a fact that neither the BBC nor Bloomberg even hinted at a possible connection between that number and the $25+ trillion Beijing poured into China’s economy. But here’s the clincher: The Chinese can make up as much ‘money’ out of nothing as they want, and the rest of the world will accept it as currency, because they all do the same, albeit on a somewhat smaller scale. So all the zombie Middle Kingdom money gets to buy up half of Africa, the best beaches in Greece, entire streets in London and New York, and no-one in charge is batting an eye because if they doth protest, they’d have to reveal their own out of thin air deception that props up the FTSE and the S&P.

Yeah, sure, but the (not so) funny zombie yuan displaces Greeks and Londoners and New Yorkers and Africans, who if they had access to similar fake funny cash could have just stayed where they are and outbid the Chinese for their tribes’ and parents’ own properties. Now they have to leave because there’s a game or contest going on of who can out-nothing the other.

The world’s private wealth didn’t increase one bit. The entire world borrowing from their children’s future did. And that’s a recipe for zombie disaster. Only not today. Which is what is keeping us fooled, but we do we like it that way? Are we not smart enough, or don’t we want to be? That increase in wealth the BCG ‘study’ reports is a big loud bad red-flashing warning sign, but our once reliable media talk about it as if somehow it’s a good thing. And we gobble that up as gospel because we can’t face the truth about our own lives.

We’d rather have the most audacious zombie printers – both domestic and abroad – take our land and our homes and the chairs we sit in away from under our behinds than fess up that we ourselves screwed up royally. If we observe our place in the world from that angle, how can we possibly claim we do not get what we deserve? Mind you, though, that’s the only thing we’re going to get. But it gets both better and worse: the payload isn’t going to hit us most, but our kids. And I’m wondering: do you find that comforting?

What a report on zombie wealth like this tells us is not that things are getting better, it’s telling us they’re getting worse at a fast clip. The more fake numbers, the further we slip and slide away from having functioning societies. It’s not our wealth that increases, but our debt.

Global Private Wealth Rises To $152 Trillion (BBC)

The amount of private wealth held by households globally surged more than 14% to $152 trillion (£90tn) last year, boosted mainly by rising stock markets. Asia-Pacific, excluding Japan, led the surge with a 31% jump to $37tn, a report by Boston Consulting Group says. The number of millionaire households also rose sharply. The report takes into account cash, deposits, shares and other assets held by households. But businesses, real estate and luxury goods are excluded. “In nearly all countries, the growth of private wealth was driven by the strong rebound in equity markets that began in the second half of 2012,” the firm said in its report. “This performance was spurred by relative economic stability in Europe and the US and signs of recovery in some European countries, such as Ireland, Spain and Portugal.” The amount of wealth held in equities globally grew by 28% during the year, Boston Consulting Group (BCG) said.

Economies in Asia have been key drivers of global growth in the recent years. And households in the region have benefitted from this growth. Within the region, China has been the biggest driver – with private wealth in the country surging more than 49% in 2013. High saving rates in countries such as China and India has also been a key contributing factor to this surge. The wealth held in the region is expected to rise further, to nearly $61tn by the end of 2018. “At this pace, the region is expected to overtake Western Europe as the second-wealthiest region in 2014, and North America as the wealthiest in 2018,” BCG said. The pace of wealth creation in China was also evident in the growth in the number of millionaire households – in US dollar terms – in the country, rising to 2.4 million in 2013, from 1.5 million a year ago. Overall, the total number of millionaire households in the world rose to 16.3 million in 2013, from 13.7 million in 2012.

Read more …


How Europe’s Amazing Bond Rally Could End In New Crisis (The Tell)

Take a good look at the chart above. It’s a picture of investors going crazy for Spanish government bonds in a low-interest rate, loose monetary-policy environment in Europe. But buyer beware — analysts warn that the rally in peripheral Europe’s sovereign bonds could come to an abrupt end if the region’s sluggish growth rates and worringly low inflation levels don’t pick up. For the first time since April 2010, the yield on 10-year Spanish bonds on Monday fell below the borrowing costs of 10-year U.S. notes as part of a wider rally for European assets. Spain’s 10-year yield slipped to 2.556%, inching below the 2.623% recorded for the U.S. counterpart, according to Tradeweb data.

Not only is this a major improvement from Spain’s plus-7% yields from the height of the euro-zone crisis in 2012, but the current trading level is also a fresh multi-century all-time low, according to Deutsche Bank. And Spain isn’t the only euro-zone nation to see its borrowing costs comfortably decline. Irish 10-year borrowing costs fell to a record low of 2.39% on Monday as well, while Italy’s yield on 10-year bonds are around the lowest level since 1945, according to Deutsche Bank.

“If anyone is in any doubt how extraordinary this period is in economic history then please take a look,” said Deutsche Bank’s Jim Reid in a note on Monday morning.

Read more …

Answer: More theft.

The ECB & The Fed: After 5-Years Of Coordinated Theft, What Next? (Alhambra)

With Japan providing no competition for global bond assets (their 10 year yields a paltry 0.6%), the hands down winner in the global developed bond market rate competition would appear to be the US Treasury. That assumes, of course, that currency values are determined by interest rate differentials, something that is widely believed but hard to square with the available historical data. Rates do matter at some point, but one would probably be better advised to buy currencies based on expectations of economic growth. If the ECB s monetary easing is successful in raising the growth prospects of Europe, stocks there seem likely to attract a bid (not that they ve been lacking for buyers; European stocks are up 160% from the lows). That might derail Draghi’s plans for a lower Euro if the demand for European stocks outstrips the demand for bonds.

It might also depend on the effectiveness of the newly announced policies, something that is far from assured. Like the US, Europe s growth problems are mostly structural and potentially impervious to more monetary easing. And certainly, Japan s experience with unconventional monetary policy would not seem to provide any reason for optimism about its ultimate effectiveness. They’ve been trying for over two decades to escape the malaise of poor demographics, high taxation and a coddled corporate culture through monetary pumping only to find themselves deeper in debt and still searching for consistent growth. Notably, the lack of growth and the lowest interest rates in the world hasn’t been conducive to a cheaper yen (until recently) and Draghi may find himself facing the same conundrum.

Indeed, there has been a plethora of research released over the recent past suggesting that too easy monetary policy is itself causing the very deflationary tendency it is designed to combat. The Minneapolis Fed chief, Narayana Kocherlakota first mentioned the possibility way back in 2011 but quickly backed off. The St. Louis Federal Reserve s Stephen Williamson published a paper last November arguing that the Fed s purchase of so many Treasuries was actually pulling down inflation rates. Last but not least the Bank for International Settlements (the central banks central banker), taking a longer term view, said recently that the world s addiction to monetary stimulus may be expansionary in the short term but contractionary over the long term as it just steals growth from the future.

Read more …

Where the money is these days.

Currency Carry Trades Rise in ECB’s Negative-Rate World (Bloomberg)

Mario Draghi is becoming one of currency traders’ only friends. With the $5.3 trillion-a-day foreign-exchange market poised to deliver its worst first-half returns on record, the carry trade is about the only way traders are making money by exploiting differences in global borrowing costs as volatility tumbles. That strategy became more profitable after the European Central Bank president cut interest rates on June 5. “The ECB has signaled risk is on again,” Eric Busay, a Sacramento-based money manager at the California Public Employees’ Retirement System, the largest U.S. public pension fund with $294 billion in assets, said in a June 6 phone interview. “People are concerned when to exit the trade and they understand the rush to exit could be crowded. But at the same time, you have to be in it to win it.”

A Deutsche Bank AG index that measures returns from a trade that buys the world’s five highest-yielding currencies, including South Africa’s rand and the New Zealand dollar, has jumped 1.3% since Draghi’s announcement, bringing its advance to 4.4% this year. Deutsche Bank’s Currency Valuation Excess Return index that makes investments based on relative purchasing power was little changed since Draghi cut rates, while the Currency Momentum Excess Return gauge, which buys assets that are rising the fastest, declined 0.6%. The indexes gained 0.7% and lost 4.6% this year. Draghi’s announcement of rate cuts and hints of further measures to come gave markets the confidence that global central banks aren’t finished with the policies that are suppressing volatility and allowing carry trades to thrive.

Read more …

A dumb-ass assessment from Mo. Get a life …

What If the Fed Has Created a Bubble? (El-Erian)

Investors might be surprised to learn that they have a lot riding on something that they pay very little attention to: macro-prudential regulation, or what central banks and other government agencies do to reduce the risk of systemic financial disasters. The aim of such regulation is to lower both the probability and potential costs of financial accidents. It does so by enhancing the resilience of the system, establishing circuit breakers to prevent problems in one area from contaminating others and, at the extreme, containing the detrimental impact on the broader economy when failures occur.

Macro-prudential regulation has been significantly enhanced in the aftermath of the global financial crisis. Authorities around the world have imposed higher and more intelligent capital requirements, required financial institutions to value their assets more conservatively and to hold more easy-to-sell assets, placed constraints on allowable risk-taking, insisted on more stable funding, and demanded greater provisions against bad loans. The impact of the revamped regulation has gone far beyond the targeted banks and other financial companies. It has allowed central banks to be bolder in maintaining and evolving exceptional monetary and credit stimulus, which in turn has significantly bolstered the prices of stocks, bonds and other assets as a means of stimulating the economy.

The more confident central bankers are in their macro-prudential approach, the greater their willingness to persist with stimulus policies today that could involve a bigger risk of financial instability down the road — a trade-off that has been noted recently by Minneapolis Fed President Narayana Kocherlakota, Boston Fed President Eric Rosengren and former Fed Governor Jeremy Stein. Essentially, the Fed has been pushing stock and bond prices up to “bubblish” levels, in the expectation that they will inspire the kind of consumer spending, physical investments and hiring required to subsequently justify them. The hope is that the convergence will occur in the context of full employment and inflation near the Federal Reserve’s target of 2%. So far, though, the wedge between asset prices and economic reality remains large, as last week’s juxtaposition of new stock-market highs and still-anemic wage-inflation data demonstrated.

Read more …

Farrell thinks the climate will carry Hillary to the White House in a throne. What has she done lately?

The 1 Big Reason GOP Will Lose The Presidency In 2016 (Paul B. Farrell)

Warning to GOP: A new poll says you can kiss the presidency goodbye for 10 more long years: Why? “Voters have little tolerance for a presidential candidate in 2016 who doesn’t believe that climate change is caused by human activity.” More on that below. But that means the GOP is destined to be on the outside of the White House for 10 more years, playing by the same total-defense playbook that didn’t work the last two presidential elections. Why? You can’t blame the tea party. Nor voter suppression and self-defeating immigration policies. Not minimum wages, debt, taxes, abortion, gun laws, pipelines nor same-sex marriage. Not health care, inequality nor the weak recovery. Not even rapidly shifting demographics. Yes, these trends will increase your handicap, radically changing the GOP’s next-generation base. But that’s not why the GOP won’t win back the presidency.

And what about taking back the Senate? Don’t cheer too loudly. That advantage won’t last long. More defensive battles fighting an incumbent president with veto power. Bad for the image. And then, in 2016, not only the presidency is up from grabs, 23 GOP senators and only 10 Dems are up for re-election. It gets worse: From now till the 2014 elections, the GOP will double down with the same hard-right strategy that plays well to a conservative base. But then from 2014 to 2016 you must shift to a center-left strategy to appeal to the emerging new American voter if you want to win over a national fan base for 2016. But that doubling-down also puts the GOP in a double-bind: By 2016, any left-leaning candidate will anger the hard-right base that wins back the Senate in 2014. A huge dilemma.

GOP’S biggest problem 2014-2024? The one and only … Big Oil Yes, Big Oil will be the GOP’s biggest problem for years. And the big reason the GOP can kiss the presidency goodbye. Why? Big Oil won’t change. For one, they’ll fight any carbon tax. But to win the presidency, the GOP must change. A classic double bind. That’s why no Republican will occupy the White House likely till 2024. One reason: Big Oil, ExxonMobil, Shell, BP, ConocoPhillips, Chevron, and, of course, the Koch billionaires. Yes, the GOP’s in love with Big Oil. The money keeps them in Washington. They’re mutually dependent, addict-and-supplier, obsessed-and-object, master-and-servant, trapped in a symbiotic dance of death. So blindly dependent they can’t see, cannot break free of their dependency.

One has the money and power, needs to manipulate the law. The other craves money, status and an illusion of power. A classic dependency syndrome. Both hold tight, won’t wake up, till it’s too late after they bottom-out, trigger a collapse, like 2000 and 2008, that takes down the economy, forces them to create a new business model, new political game strategy. Unfortunately, the collapse will be traumatic, painful, not only for Big Oil, the GOP, also a million car owners, and the world economy. So for years to come, the so-called “Party of Big Business” will keep losing the presidency because their Big Oil suppliers control the GOP votes, dictate how to vote, and when the GOP gets its fix. But for now, Big Oil’s game plan is profitable: A pittance to politicians yields billions in tax breaks, favorable regulations, a fabulous return on investment for Big Oil.

Read more …

I have a fourth: QE.

3 Reasons The Dow Doesn’t Deserve To Be At 17,000 (MarketWatch)

We’re straddling 17,000 on the Dow Jones Industrial Average. But it just doesn’t feel right. It has to be the most unenthusiastic rally in a generation — maybe more. It’s not that there isn’t reason to be buying stocks. We are now five years into an economic recovery that began in mid-2009, according to the National Bureau of Economic Research. It’s been a slow slog. It’s been paced. Those are actually good reasons to be buying stocks. A rapidly growing economy, which coincided with the dot-com boom and the housing bubbles, usually go belly up as quickly as they rise.

And the stock market always leads the economy. Investors tend to buy cheap and ride the wave of ever-increasing earnings and premiums added to their holdings. But a 155% rise in the Dow since the 2009 nadir of the financial crisis? A 31% rise in the past 18 months? Yes, the gains look that more striking because of the lows we hit in the Great Recession. Still, that’s a fantastic run considering that last week we finally recovered the jobs lost since the financial and housing crises hit. At that point the Dow was 18% lower than it is today. There are many reasons this rally feels empty. But here are the biggest, most obvious reasons:

No one is really buying. Stock prices are edging higher, but it’s not retail investors driving the trend. Lipper reported that investors last week actually pulled $921 million from U.S. stock mutual funds in the week ended June 4, and $451 million the previous week.

Corporate earnings are flat. You’d think that as the market reaches this milestone, corporate profits would be churning, or a least growing. They aren’t. The Bureau of Economic Analysis reports that its measure of corporate profits declined 9.8% in the first quarter. It was the largest drop since the fourth quarter of 2008, and during the past four quarters, corporate profits have fallen 3%. Market analyst and adviser Doug Short noted last week that the market SPX is overvalued in the range of 51% to 85% when measured by price-to-earnings ratios and the lesser known Q ratio (total price of the market divided by replacement cost).

There are no alternative investments. Rather than higher prices for goods and services and a devalued currency, the real consequence of the Federal Reserve’s efforts to stimulate the economy through lower interest rates, bond buying and easy credit seems to be inflation in the stock market.

Read more …

Not that hard a guess to make.

Goldman Explains How The China Commodity Unwind Will Happen (Zero Hedge)

Over a year ago we were the first to bring the topic of China’s shadow banking system’s problematic rehypothecation issues to the general trading public. In “The Bronze Swan Arrives: Is The End Of Copper Financing China’s “Lehman Event”?” we explained how the Chinese commodity financing deals (CCFDs) worked and how they would inevitably be a systemic event for the nation so dependent on the shadow banking system for its credit (and its “growth”). The day has arrived when the Bronze Swan is landing (and it’s unlikely to be soft). As we have discussed recently, the probe into ‘missing’ collateral (or multiple-used collateral) at China’s Qingdao warehouse is a major problem… and now Goldman confirms, the Qingdao situation likely to continue ongoing CCFD unwind and has the potential to leave foreign banks with undercollateralized loans and/or losses. Via Goldman Sachs:

Qingdao situation and the copper market outlook – According to reports, an onshore trading company is being investigated for allegedly pledging commodities (aluminium and copper) multiple times with different banks in order to gain access to cheap FX funding (specifically via repurchase agreements, or “repo” business). This has the potential to leave foreign banks with undercollateralized loans and/or losses. Given this, a number of foreign banks may suspend their repo business in China, as well as shrink their commodity financing positions in China in general. The Qingdao issue could be a catalyst for further CCFD unwinding In our view the developments in Qingdao are likely to continue the significant scaling back of FX inflows from foreign banks into China via commodity financing business.

This would disincentivize the physical holding of commodities in bonded warehouses, increasing ‘visible’ inventories and placing more downward pressure on physical (cash prices) than upward pressure on futures prices. As foreign banks reduce their exposure to Chinese commodity financing deals (CCFDs), the profitability of these could be reduced meaningfully (via an increase of US rates and/or a lower FX loan quota to CCFD participants), more physical metal previously tied up in financing deals would be freed up for the physical market, helping ease the current temporary regional tightness. With respect to copper in particular, we expect more copper will either flow back to China or LME, depending on which market is relatively stronger. Indeed, there are signs of unwinding in near-dated tightness in the market recently, as indicated by the significant easing of both Shanghai premia and LME time spreads (Exhibits 2).

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We don’t know the half of it.

Lean Retirement Faces U.S. Generation X as Wealth Trails (Bloomberg)

Good timing is not the age group’s forte. Many took out mortgages just before prices plunged, making them the most disadvantaged by the housing crisis, while the 2008 stock-market slump dealt them a further setback. Only one-third of Generation X households had more wealth than their parents held at the same age, even though most earn more, The Pew Charitable Trusts found. When their working years end, Gen-Xers might have to live on just half of their pre-retirement income, compared with 60% for the Baby Boom generation, Pew said last year. “Generation X is at this really critical historical spot,” said Diana Elliott, a research officer in financial security and mobility at Pew, a non-profit global research and public policy organization in Washington. “They are not doing well relative to the last generation. It should give us concern as a country.” [..]

Gen-Xers lost about half of their wealth between 2007 and 2010, according to a Pew Economic Mobility analysis last year. Even before the housing collapse, they were having trouble keeping up with their parents in building assets, according to Pew, which defines Generation X as people born between 1966 and 1975. “Gen-Xers are the least financially secure and the most likely to experience downward mobility in retirement,” the Pew analysis found last year. The bursting of the dot-com bubble, which culminated in a 67% drop in the Nasdaq from 2000 to 2002, was a particularly severe blow to Gen-Xers just starting their careers. While most didn’t directly own stocks, the economy slipped into recession and unemployment for 25- to 34-year-olds in 2003 hit its highest level in almost a decade.

Student loans also slowed asset-building, said Signe-Mary McKernan, an economist at the Washington-based Urban Institute. “Under the impact of successive booms and busts, many Xers have struggled to afford a family or keep their home, much less do better than their parents,” Neil Howe, co-author with William Strauss of books on generations in American history, said at a May 8 research symposium in St. Louis. “Then came the Great Recession, which hit Xers much harder.” The median income for 35- to 44-year-olds dropped 9.1% in the three years ended in 2010, according to the Federal Reserve’s Survey of Consumer Finances. Incomes of those age 35 or less, including the youngest Gen-Xers and Millennials, fell 10.5%. While incomes of 35- to 44-year-olds deteriorated less than those of younger Americans, their net worth slumped by 54%, the most for any age group, as the value of stock holdings and properties declined. The median net worth of those younger than 35 declined 25%.

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Jobs Friday: What The Bubblevision Revelers Missed (David Stockman)

Yes, the nonfarm payroll clocked in at 138.5 million jobs and thereby retraced for the first time the point at which it stood 77 months ago in December 2007. This predictably elicited another milestone of progress squeal from the mainstream media. So you have to wonder. Did these people skip history class? Do they understand the vital idea of context ? Are they so mesmerized by paint-by-the-numbers agit prop from Wall Street and Washington that they have come to mindlessly embrace the notion that any number that is better than the last print is all that it takes regardless of composition, quality or longer-term trend? Thus, consider the ancient days of the Reagan era. Back then there were actually 15.0 million new jobs by the time that 77 months had elapsed after the June 1982 bottom.

And these were honest-to-goodness new jobs that had never before existed, not born again jobs of the type that CNBC has made a jobs Friday fetish out of ever since the Great Recession was officially declared over in June 2009. So if you want to try a little context absurdity recall this. So far we have created a trifling 100k new jobs since the last cyclical peak. During the equivalent 77 months in the Reagan era the US economy actually generated 150 times more jobs! And, no, that wasn t due to a demographic windfall of new employable bodies. During that 77 month period the civilian population age 16 and over increased by 8% or 13.3 million. This means that 113% of the growth in the pool of employable adults was converted into job-holders.= This time around, the pool of working age adults grew by quite respectable 14.4 million; and that amounted to a not shabby gain of 6% from December 2007.

But self-evidently, during the 77 months since then virtually zero percent of the labor pool growth was converted into job holders. So the yawning difference between the Reagan era and now is not a surfeit of demography, but a dearth of job creation. And this has nothing to do with Ronald Reagan hagiography since the jobs gains of the 1980s were purchased in part with grotesque peacetime deficits of a magnitude never seen previously. Nor would they be seen again until the Bush-Obama era showed what real fiscal profligacy looks like. But the larger point is that each cycle since the 1980s has generated net new jobs, albeit at a steadily declining rate. The truth of the matter is that we have now reached the point where no new payroll jobs have appeared for 77 months which is to say, over the entire span of a historically ordinary peak-to-peak business cycle. Rather than a cause for celebration, therefore, the Friday jobs print ought to stand out as a wake-up call.

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And even that …

Britain Readies ‘Last Resort’ Measures To Keep The Lights On (Telegraph)

Britain may be forced to use “last resort” measures to avert blackouts in coming winters, Ed Davey, the energy secretary, will say on Tuesday. Factories will be paid to switch off at times of peak demand in order to keep households’ lights on, if Britain’s dwindling power plants are unable to provide enough electricity, under the backstop measures from National Grid. The Grid is expected to announce that it will begin recruiting businesses that will be paid tens of thousands of pounds each simply to agree to take part in its scheme. They will receive further payments if they are called upon to stop drawing power from the grid. It is also expected to press ahead with plans to pay mothballed gas power plants to ready themselves to be fired up when needed. “Both the new demand and supply balancing services will be used only as a last resort – and are a safety net to protect households in difficult circumstances, such as a hard winter or very high surges in demand,” Mr Davey will say.

Critics have suggested the measures, which were first mooted last summer, would represent a return to 1970s-style power rationing. But Mr Davey will refute this, saying: “It is entirely voluntary. Nobody will get cut off. No economic activity will be curtailed.” Mr Davey is on Tuesday also expected to publish a new gas “risk assessment” in response to the Ukraine crisis. He said this would show Britain could “comfortably” withstand extreme cold weather or the loss of key supplies. Energy regulator Ofgem warned last summer that Britain’s spare power capacity margin – the difference between peak demand and supply – could fall as low as 2pc in winter 2015-16 as old power plants close and new ones are not yet built. The risk of blackouts could be as high as one in four unless consumers cut demand, it said.

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Your world.

Thousands Of Irish Orphans Were Used As ‘Drug Guinea Pigs’ (RT)

Over 2,000 care-home kids were secretly vaccinated against diphtheria in the 1930s in medical trials undertaken by international drugs giant Burroughs Wellcome, Irish media reveal. Among the testing sites was a recently discovered mass grave. The medical records cited by the Irish Daily Mail show that some 2,051 children and babies across several Irish care homes may have been subjected to the practice. Michael Dwyer, of Cork University’s School of History, found the data after foraging through tens of thousands of archive files and old medical journals. What he did not find is whether any consent was gained for these alleged illegal drug trials or any records of the effects on the infants involved.

Dwyer discovered that the tests were carried out shortly before the drugs were made readily available in the UK. The homes involved included Bessborough, County Cork, and Sean Ross Abbey in Roscrea, County Tipperary. “What I have found is just the tip of a very large and submerged iceberg,” Dwyer told the paper. “The fact that reports of these trials were published in the most prestigious medical journals suggests that this type of human experimentation was largely accepted by medical practitioners and facilitated by authorities in charge of children’s residential institutions.” The Newstalk Breakfast on Monday show also found out that nearly 300 children living in care homes in the 1960s and 70s were used as guinea pigs in medical trials. Ireland had no laws pertaining to medical testing until 1987.

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