Disability Overpayments: Low-Hanging Fruit

According to the most recent Trustees Report, the Social Security Disability trust fund, which would have been depleted by the end of this year, will now run dry in 2019, thanks to a little finagling of the payroll tax. But this is a short-term solution to a program that is in desperate need of real reform.
According to National Affairs, the rate of approval for Social Security Disability Insurance (SSDI) applications has remained fairly constant, the program has grown from serving 0.2 percent of the population age 50 to 65 (at which time only this age group was eligible) in 1956 to 5 percent of all adults in 2012. The increased presence of women in the workforce and the aging baby boomer generation explains part of this rise in dependence on the SSDI, but certainly fails to explain the trends in diagnoses and the failure to rehabilitate workers and send them back into the fray. The program’s structure arguably creates a perverse incentive for workers to not even attempt to return to work – beneficiaries often go through a two-year application process that drains their savings, and being approved requires applicants to prove they cannot work in order to benefit, thus nullifying the Social Security Administration’s attempts to convince beneficiaries that they can return to work in some capacity under the Ticket to Work program.
In addition to the perverse work incentives, a major source of contention regarding Social Security’s Disability Insurance that does not get much media attention is the amount of fraud and overpayments that occur. The rate of successful fraudulent applications gaining benefits from the SSDI, according to the White House, is only 1 percent. However, fraudulent applications are not the only way claimants receive ‘bonus funds’ from the government.

This post was published at David Stockmans Contra Corner on Laura Wiltshire, via NCPA ‘ June 30, 2016.

Red Ponzi Update – – Heading For 1929-Style Depression

Andy Xie isn’t known for tepid opinions.
The provocative Xie, who was a top economist at the World Bank and Morgan Stanley, found notoriety a decade ago when he left the Wall Street bank after a controversial internal report went public. Today, he is among the loudest voices warning of an inevitable implosion in China, the world’s second-largest economy.
Xie, now working independently and based in Shanghai, says the coming collapse won’t be like the Asian currency crisis of 1997 or the U. S. financial meltdown of 2008.
In a recent interview with MarketWatch, Xie said China’s trajectory instead resembles the one that led to the Great Depression, when the expansion of credit, loose monetary policy and a widespread belief that asset prices would never fall contributed to rampant speculation that ended with a crippling market crash.
China in 2016 looks much the same, according to Xie, with half of the country’s debt propping up real-estate prices and heavy leverage in the stock market – indicating that conditions are ripe for a correction.
‘The government is allowing speculation by providing cheap financing,’ Xie told MarketWatch. China ‘is riding a tiger and is terrified of a crash. So it keeps pumping cash into the economy. It is difficult to see how China can avoid a crisis.’

This post was published at David Stockmans Contra Corner on June 30, 2016.

The TARGET2 Chart Shows A Breakdown Of The Central Bank Narrative

Money, generally accepted medium of exchange, acts as a veil that confuse and blurs economic relations. This is especially true when it comes to intertemporal considerations. Whilst probably the most important institution in a free market, money can be highly destructive when politicized. Why? Because politics is about power and distribution of real wealth. And since money affect almost every single transaction, politics can span throughout society with ease when in control of money. Amchel Rothschild was spot on when he allegedly said ‘[g]ive me control of a nation’s money supply, and I care not who makes its laws.’ Power over money is power over people and power over people is, well, pure power. Money is thus the most sacred tool in a statist’s toolbox and has become instrumental in their quest to control society and allocate resources as they see fit.
It is within this context the monstrosity called the euro need to be analyzed. By pooling Western European countries within the realm of one central bank, power over people increases immensely. There is a catch though; as power increases, greed and corruption increases with it and the temptation to go too far is obvious for all to see.
Money coordinates production with consumption, saving with investment and properly done, money will create the means for a smooth flow of resources among the millions or even billions of people transacting with each other. Politicize money and economic imbalances, between economic agents and even over time, will grow and destabilize the system. It is no exaggeration to say that the welfare and prosperity of the populace depends on a well-functioning monetary system.

This post was published at Zero Hedge on Jun 30, 2016.

After Lynch’s Mystery Meeting With Bill, Justice Dept. ‘Shields Clinton Foundation Emails’

Yesterday’s mystery meeting on the tarmac between former President Bill Clinton and Attorney General Loretta Lynch has now been clarified.
Obviously, it wasn’t a social visit as Lynch publicly claimed, but an arrangement clarifying how the powerful Clinton dynasty would be kept above the law in the face of heated publicly scrutiny as Hillary Clinton seeks the presidency.
Instead, the Justice Department filed a motion that would keep from release thousands of emails potentially exposing conflicts of interest on the part of the Clinton Foundation and overlapping state department officials, such as Hillary’s chief of staff Huma Abedin.


This post was published at shtfplan on June 30th, 2016.

ARE YOU ONE OF THE 2.2 MILLION PEOPLE BEING TRACKED IN THE LEAKED GLOBAL ‘TERRORISM’ DATABASE?

New York, NY – A security researcher claims to have a copy of a Thomson Reuters database that contains 2.2 million records from their ‘World Check’ database of ‘heightened risk individuals and entities,’ which is used by governments, banks, and law firms around the world.
The security researcher says the database is from mid-2014 and contains millions of ‘heightened-risk individuals and organizations,’which it places in one or more of a number of categories, including terrorism, money laundering, organized crime, bribery, corruption, and’other unsavory activities,’
according to reports.
Reddit user Chris Vickery says he obtained a copy of the database, although he won’t reveal how until ‘a later time.’

This post was published at The Daily Sheeple on JUNE 30, 2016.

Brexit Fears – – -Giant Hoax Or Calm Before The Next Storm

Let us separate matters. We face a political upheaval of the first order, but this is a necessary catharsis. Governments come and go. So do political parties.
We face a much more serious constitutional crisis. It is why some of us want a national unity government, keenly alert to the interests of Scotland and Northern Ireland.
As Professor Kevin O’Rourke from All Souls College argues here, most Leavers waltzed into Brexit with scarcely a moment’s thought for trauma inflicted on both sides of the Irish border. This carelessness must be rectified immediately.
What we do not yet face is a global financial crisis or a ‘Lehman moment’. The world’s central banks were ready for Brexit and have acted in unison.
The S&P 500 index of Wall Street stocks has shrugged off the vote. It is 13pc above its lows in February, when we really did have a nasty fright across the world.
Jerome Schneider from Pimco says there have been none of the tell-tale signs of systemic seizure. Rates on commercial paper have hardly moved. The Libor/OIS spread – the stress gauge – has been well-behaved. So have collateralised funding markets.

This post was published at David Stockmans Contra Corner by Ambrose Evans-Pritchard The Telegraph – June 30, 2016.

Mind The Faltering Unicorns – – San Francisco Real Estate Boom Cooling Rapidly

Office landlords are bracing for a cooling of San Francisco’s red-hot market as weaker startup valuations and lower venture-capital funding temper years of runaway growth in the technology-industry hub.
The city’s office-vacancy rate jumped in the second quarter by the most since the last recession, while the amount of space available for sublease almost doubled, according to a report to be released this week by brokerage Cushman & Wakefield Inc. New lease deals have tumbled so far this year.
With demand seen cooling further, office owners who benefited from years of heated leasing by the likes of Uber Technologies Inc., Airbnb Inc. and Twitter Inc. are now rushing to seal deals and capture rents near record highs. They’re seeking to sign longer leases with creditworthy companies before prices slide, renewing agreements well ahead of their expiration and offering concessions, including free rent and cash for space improvements, according to J. D. Lumpkin, a managing director at Cushman & Wakefield in San Francisco.
‘We may not be in a free fall, but it’s a sign of things to come,’ Lumpkin said. ‘Those who are smart know it’s time to get aggressive and lock in credit tenants that you want for the next five, seven, 10 years in new leases and do whatever it takes.’ The moves represent a turn for a commercial real estate market that until recently had the nation’s lowest vacancy rate, driven by early stage tech firms scooping up space and Silicon Valley giants expanding to accommodate workers seeking an urban lifestyle. Now, the flood of money to startups is slowing and investors expect acquisitions of smaller companies whose valuations are falling, potentially leading to job cuts and office consolidation.

This post was published at David Stockmans Contra Corner By Alison Vekshin, Bloomberg Business ‘ June 30, 2016.

Chinese Yuan Slumping Again – – Heading for Worst Quarter On Record

The yuan’s worst quarterly performance on record is raising the risk of capital flight.
China’s currency has slumped 2.9 percent since the end of March, the most since the nation unified the official and market rates at the start of 1994, to trade near its lowest level in five years. Losses deepened after the U. K.’s vote to secede from the European Union led to a jump in the dollar and dented the outlook for Chinese exports.

This post was published at David Stockmans Contra Corner By Kyoungwha Kim, Bloomberg Business ‘ June 30, 2016.

Mooning the Elite

Connecting Dots BALTIMORE – U. S. stocks bounced on Tuesday, with the Dow up 269 points [and even further on Wednesday, ed.]. Was that all there was? Is the ‘Brexit’ scare over? We don’t know… but we’re going to take a pause today. Instead of trying to connect the new dots, we’re going to take a look at the old dots we’ve already strung together. We’ve been connecting the dots every day (except weekends) for the last 17 years. And today, for the benefit of new readers, old dear readers, and our own benefit too… we step back. What do we see?
As for Brexit – British voters’ decision to leave the European Union – it is simply a case of the common man mooning the elite. It doesn’t matter whether he says ‘schedule’ or ‘skedule,’ he’s dropping his pants, fed up, even if he doesn’t exactly understand what he is fed up with.
Let us begin in the beginning; maybe we can help him out. Markets do not set prices. They discover prices. The difference is critical. Prices change every minute the markets are open… with buyers and sellers always scrambling to find the right one.
Prices are signals. Capitalism is fundamentally a learning system, not a get-rich system. And prices – honest, freely-discovered prices – are vital information. They direct investment, consumption, savings – everything.
Fiddle with the prices – as the Fed now does with the most important price of all: the price of credit – and you cause distortions, corruptions, and breakdowns. What is anything really worth when you don’t know what money is worth?

This post was published at Acting-Man on June 30, 2016.

Signs Of Stress In Draghi-Land – – – Target2 Imbalances Close To Record Levels

Money, generally accepted medium of exchange, acts as a veil that confuse and blurs economic relations. This is especially true when it comes to intertemporal considerations. Whilst probably the most important institution in a free market, money can be highly destructive when politicized. Why? Because politics is about power and distribution of real wealth. And since money affect almost every single transaction, politics can span throughout society with ease when in control of money. Amchel Rothschild was spot on when he allegedly said ‘[g]ive me control of a nation’s money supply, and I care not who makes its laws.’ Power over money is power over people and power over people is, well, pure power. Money is thus the most sacred tool in a statist’s toolbox and has become instrumental in their quest to control society and allocate resources as they see fit.
It is within this context the monstrosity called the euro need to be analyzed. By pooling Western European countries within the realm of one central bank, power over people increases immensely. There is a catch though; as power increases, greed and corruption increases with it and the temptation to go too far is obvious for all to see.
Money coordinates production with consumption, saving with investment and properly done, money will create the means for a smooth flow of resources among the millions or even billions of people transacting with each other. Politicize money and economic imbalances, between economic agents and even over time, will grow and destabilize the system. It is no exaggeration to say that the welfare and prosperity of the populace depends on a well-functioning monetary system.
The most important function money has, in our view, is its ability to create recessions, or as we like to call it, disruptions of unsustainable resource flows.

This post was published at David Stockmans Contra Corner on June 30, 2016.

The EU’s Failed Neo-Liberal Policies and BREXIT

Andrew Ross Sorkin is back, so unintentional self-parody is again the order of the day. Wall Street’s sycophant-in-chief, introduces his column with a 98 m.p.h. fastball aimed at the reader’s chin.
This isn’t meant to scare you, but let’s consider the absolute worst-case scenarios of ‘Brexit.’
Sorkin’s column then presents his specific example of his absolute worst-case scenario. See if you can spot what is missing from that scenario.
Consider this: Italy’s government is considering pumping as much as $45 billion into its banking system after the Brexit vote. Shares of the biggest Italian banks have fallen more than 20 percent since the results of the vote were announced. And Italian banks are considered particularly vulnerable because they hold hundreds of billions of euros in bad loans. If Brexit forces a material economic slowdown across the Continent, Italy’s banks – without a rescue plan – could significantly suffer.
OK, Italy’s elite bankers made ‘hundreds of billions of euros in bad loans’ that are still on their books nine years after the onset of the Great Recession. That should have prompted deep analysis by Sorkin about why the bankers made the loans, what role they caused in producing Italy’s crises, and why the regulators have allowed the bankers to ‘extend and pretend’ the bad loans as if they were good loans for nine years.
No one reads Sorkin for financial analytical expertise. We read Sorkin because he regurgitates to the public the elite bankers’ concerns and propaganda.

This post was published at Wall Street Examiner on June 29, 2016.

An Ill-Wind Not Blowing – – China’s Wind Farm Boondoogles

Trouble may be brewing in China’s renewable energy industry if idled wind farms are anything to go by.
The nation’s clean-energy investment binge has made it the world leader in wind, accounting for about one in every three turbines currently installed, according to the Global Wind Energy Council. In turn, Xinjiang Goldwind Science & Technology Co., which makes the machines, has pushed past its western rivals such as Vestas Wind Systems A/S and General Electric Co.
Yet even with double the wind capacity, China still produces less electricity from turbines when compared with the U. S. That’s because it’s installing lower-quality machines using less reliable breezes and doing so more quickly than the distribution grid can take in the flows. ‘The numbers are striking,’ said Justin Wu, head of Asia-Pacific for London-based Bloomberg New Energy Finance. ‘They say China is building wind faster than it can be absorbed.’

This post was published at David Stockmans Contra Corner By Bloomberg News – June 29, 2016.

The Curse Of ‘Wealth Effects’ Central Banking

The robo-machines and perma-bulls are at it again, delivering another volumeless dead-cat bounce in a market that has churned sideways for 600 days now.
That’s right. The S&P 500 first crossed the 2060 threshold around mid-November of 2014, and has made upwards of 40 attempts to rally since then – -all of which have failed to be sustained.
Nevertheless, there is a reason for the churn and there is a culprit behind the abortive rallies.
As to the former, it’s all about the cycle peak. The profits cycle peaked six quarters ago when S&P 500 reported earnings came in at $106 per share for the LTM period ended in September 2014. For the LTM ending in March 2016, by contrast, reported earnings were $87 per share.

This post was published at David Stockmans Contra Corner by David Stockman ‘ June 29, 2016.

Hong Kong’s Downturn is a Harbinger of Further Decline

Exports of goods and services declined in the first quarter, a continuation of the territory’s downbeat trade outlook, and private consumption growth plummeted to less than half of its 2015 rate.
And according to a new note from BMI Research, things are only going to get worse. Hong Kong’s performance earlier this year wasn’t an anomaly – it was an indicator of a long decline to come. Accordingly, BMI downgraded its 2016 real-gross-domestic-product growth forecast for Hong Kong to 1.2% from 1.7% and cut its 2017 forecast to 1.7% from 2.2%.
One of the reasons behind Hong Kong’s decline in momentum has been the territory’s economic links to mainland China, which has also been facing a growth slowdown. Earlier this year, Moody’s downgraded its outlook for Hong Kong to ‘negative’ from ‘stable’ in part because of the political riskiness of the connection.

This post was published at David Stockmans Contra Corner By Chloe Pfeiffer, Business Insider ‘ June 29, 2016.

Why Oil Is Still Heading For $10 A Barrel

Back in February 2015, the price of West Texas Intermediate stood at about $52 per barrel, half of its 2014 peak. I argued then that a renewed decline was coming that could drive it below $20, a scenario regarded by oil bulls as unthinkable. But prices did fall further, dropping all the way to a low of $26 in February. Since then, crude rallied to spend several weeks flirting with $50 per barrel, a level not seen since last year. But it won’t last; I’m sticking to my call for prices to decline anew to $10 to $20 per barrel.
Recent gains have little to do with the fundamentals that led to the collapse in the first place. Wildfires in the oil-sands region in Canada, output cuts in Nigeria and Venezuela due to political unrest, and hopes that American hydraulic fracturing would run out of steam are the primary causes of the recent spurt.
But the world continues to be awash in crude, and American frackers have replaced the Organization of Petroleum Exporting Countries as the world’s swing producers. The once-feared oil cartel is, to my mind, pretty much finished as an effective price enforcer. Even OPEC’s leader, Saudi Arabia, is acknowledging the new reality by quashing recent attempts to freeze output, borrowing from banks and preparing to sell a stake in its Aramco oil company as it tries to find new sources of non-oil revenue.

This post was published at David Stockmans Contra Corner By A. Gary Shilling, Bloomberg Business ‘ June 29, 2016.

The Income Deficiency of The Fed’s Purported ‘Full’ Employment

In some contrast to spending or even ‘demand’, the economic problem is and has always been the lack of income growth. The difference in economy between income and spending is debt. As noted earlier, it was clear that the asset bubbles, based on debt via eurudollar expansion, created a boost in overall ‘demand’ as represented in GDP’s Real Final Sales to Domestic Purchasers. On the other side, income, particularly disposable income, we find that like the labor statistics the weakness or potential dislocation point was much earlier than the Great Recession (or Great Dislocation).
As usual, descriptions of the latest update for Personal Consumption Expenditures (for May 2016) and Personal Income liberally and incorrectly apply the word ‘strong.’ An example from Reuters:
Wednesday’s fairly strong report released by the Commerce Department pointed to an [sic] acceleration in economic growth in the second quarter.
The accounting fails both in relative comparison to prior periods where ‘strong’, fairly or not, would have been more appropriately applied and further the overall context of spending and income. DPI is about a quarterless than it should have been given a constant baseline tracing back decades. In other words, income growth for a very, very long time was rather consistent in its long run trend – until the start of the 21st century. Unlike spending, income began to underperform during the housing bubble, once again demonstrating the illusory effect of so much additional debt. It was never prosperity or successful economic policy, it was unbridled monetary expansion globally wreaking havoc.

This post was published at David Stockmans Contra Corner on June 29, 2016.

Brexit: The Case For Competition And Decentralized Political Authority

Is Brexit a move toward British independence? Some Leave and Remain partisans may believe so, differing only over whether that’s good or bad.
But, as usual, things are more complicated. We should hope that, in one respect, Britain’s exit from the EU will create a kind of dependence that did not exist while it was still a member of the union.
To see how, one must take note of the original (classical) liberal case for competing political jurisdictions rather than one unified authority: competition tends to generate liberty and prosperity by lowering the cost of ‘exit’ – that is, of voting with one’s feet to relocate from more-onerous to less-onerous jurisdictions.
Legal and political scholars have long understood that decentralization of power in Europe accounts in large measure for its unique achievements both in terms of individual autonomy and prosperity. During the Middle Ages, instead of one superstate united with a single religious authority, Europe consisted in many small jurisdictions and a transnational church, each of which jealously guarded its prerogatives. In England, when kings tried to consolidate their power, they met resistance from barons and others who expected to lose from the centralization of power.
Although the players in this drama did not intend to liberate the common people, to an important extent, that was the world-changing consequence of this struggle, aided by direct popular resistance to oppression when opportunities arose. When the Middle Ages ended, this proto-liberal tradition, though under assault, was invoked in defense of liberty and economic progress. The result, imperfect as it has been and constantly in jeopardy from those who favor power over freedom, is what we call the western liberal spirit.

This post was published at David Stockmans Contra Corner by Sheldon Richman ‘ June 29, 2016.

British Independence Day – – -Why It Happened, What Comes Next

Thursday, 23 June 2016, will go down in history as the United Kingdom’s own Independence Day. American readers will hopefully appreciate the irony.
The take-home message is that people in the UK lost confidence in a complacent and corrupt European Union (EU) elite that wouldn’t listen to them and was dragging them against their will towards ever closer integration.
There is a deeper message too. Virtually the entire establishment, inside and outside the UK, were telling the UK electorate that they had no choice but to vote ‘Remain.’ Inside the UK, the government, the major political parties, the majority of MPs, the Treasury, the Bank of England, the big economic research institutions, almost the entire UK economics profession, and most Big Business CEOs were all telling them to Remain. Outside the UK, almost every world leader from Barack Obama on down, every central bank governor, every major international institution, Goldman Sachs and Paul Krugman were repeating the same message. They did everything possible to scare the voters: the world would end if they had the effrontery to vote ‘Leave.’
The bloody-minded Brits then gave them all the V sign.
Above all, the Brexit vote reflects a phenomenon we are witnessing across much of the Western world: a repudiation of the ruling elites that are failing to deliver. It is the same phenomenon that is reflected in the United States by the rise of Donald Trump.
We can also think of the result as a bad case of ‘Bastards’ Revenge.’ Back in 1993 the then-Prime Minister, the extreme Europhile John Major, voiced his anger against Euroskeptic Tory MPs who were giving him a hard time. Not realizing that the conversation was still being taped, Major opened up to a reporter and gave vent to his real feelings: these colleagues were ‘bastards’, he said. He wished they would just shut up and do what they were told. It was very embarrassing when his comments then leaked out.

This post was published at David Stockmans Contra Corner on June 29, 2016.

Revenge Of The Rubes – – Why They Days Of The Financial Elite’s Rule Are Numbered

Talk about not waiting for the body to get cold. The establishment oracles are out in force today proclaiming that Brexit has already been cancelled. Apparently, like in the case of the first negative vote on TARP, two days of currency and stock market turmoil have taught the rubes who voted for it the errors of their ways.
The argument is that the unwashed masses outside of Greater London have shot themselves in the foot economically based on some atavistic fears of immigrants and cultural globalization. Why, right soon they will demanding a second referendum in order to get back on the EU’s purported economic gravy train.
Thus, Gideon Rachman, one of the Financial Times’ numerous globalist scolds, professed that his depression about the Brexit vote has already given way to a worldly vision of relief:
But then, belatedly, I realised that I have seen this film before. I know how it ends. And it does not end with the UK leaving Europe.
Any long-term observer of the EU should be familiar with the shock referendum result. In 1992 the Danes voted to reject the Maastricht treaty. The Irish voted to reject both the Nice treaty in 2001 and the Lisbon treaty in 2008.
And what happened in each case? The EU rolled ever onwards. The Danes and the Irish were granted some concessions by their EU partners. They staged a second referendum. And the second time around they voted to accept the treaty. So why, knowing this history, should anyone believe that Britain’s referendum decision is definitive?

This post was published at David Stockmans Contra Corner on June 28, 2016.