The Irony of Stable Inflation

In February 2000, the FOMC quietly switched from the CPI to the PCE Deflator as its standard for inflation measurement. There were various technical reasons for doing so, including the CPI’s employment of a geometric mean basis (which was in 2015 finally altered to a Constant Elasticity of Substitution formula). But it was one phrase that in hindsight did the Fed no favors, as it explicitly cited the expected fruits of the PCE Deflator’s methodology which would ‘avoid some of the upward bias associated with the fixed-weight nature of the CPI.’
I am not a conspiracist by any means, but there are times when you have to shake your head as these economists lack even a modicum of self-awareness. The central bank has been given a legal mandate for price stability, so the average American might wonder why that central bank is allowed to choose the measure most inherently stable (and low). At the very least, it seems like a conflict of interest, one among so many.
In that regard, the last five years have been almost fitting. The PCE Deflator has, as expected, avoided the higher beta tendencies of the CPI and in both directions. For that, it has remained stable, alright, but stable below target no matter what the Fed does with its own balance sheet. I hope the irony is not lost on them, especially as it was oil prices that ‘achieved’ what they could not despite considerable expenditure on their part.

This post was published at Wall Street Examiner on May 1, 2017.

Venezuela Is The Wild Card In The OPEC Deal Extension

News coming out of Venezuela over the past two years has reeked of corruption and failed political leadership: a long list of shortages, rampant poverty, incrimination of the opposition, and a recent move that puts the regime of Nicolas Maduro one step closer to a dictatorship. And these are only the developments that are recorded, with a recent LA Times Op-Ed suggesting that a Venezuelan homicide epidemic rages ‘unreported’ due to the country’s scrapping of crime statistics reporting over a decade ago.
Despite all of this, the Organization of Petroleum Exporting Countries (OPEC) expects Venezuela, endowed with the world’s largest oil reserves (depending on who you ask), to play a major role in the cartel’s plan to curb global supply. In OPEC’s November agreement, Venezuela accounted for almost 10 percent of the net supply cut from member nations (calculated as cuts minus allotted increases)

This post was published at Zero Hedge on Apr 11, 2017.

South Korea Removes President Park Geun-hye

A South Korean court removed the president on Friday, a first in the nation’s history, rattling the delicate balance of relationships across Asia at a particularly tense time.
Her removal capped months of turmoil, as hundreds of thousands of South Koreans took to the streets, week after week, to protest a sprawling corruption scandal that shook the top echelons of business and government.
Park Geun-hye, the nation’s first female president and the daughter of the Cold War military dictator Park Chung-hee, had been an icon of the conservative establishment that joined Washington in pressing for a hard line against North Korea’s nuclear provocations.
Now, her downfall is expected to shift South Korean politics to the opposition, whose leaders want more engagement with North Korea and are wary of a major confrontation in the region. They say they will re-examine the country’s joint strategy on North Korea with the United States and defuse tensions with China, which has sounded alarms about the growing American military footprint in Asia.

This post was published at NY Times

Has The American Establishment Opted for Thermo-Nuclear War?

If you want to be an American TV talking head or a Western presstitute, you are required to be braindead and integrity-challenged like Bill O’Reilly, CNN, MSNBC, and the New York Times, Washington Post, Wall Street Journal and all the rest.
In an interview with President Donald Trump, O’Reilly said: ‘Putin is a killer.’
O’Reilly is indifferent to the fact that thermo-nuclear war is a killer of planet Earth. For O’Reilly, President Trump’s desire to normalize relations with Russia is an indication that the President of the US is comfortable making deals with killers, as if America’s last three presidents have not been mass killers comfortable with their destruction in whole or part of many countries and millions of peoples.
President Trump’s response to O’Reilly’s was: ‘We’ve got a lot of killers. What do you think – our country’s so innocent?’
The only thing wrong with President Trump’s response is that it implicitly accepts that Putin is no different from Obama, George W. Bush, and Bill Clinton. Yet there is no evidence that Putin is a ‘killer.’ This accusation is an assertion from those who prosper from having a ‘Russian threat’ to keep the money and power flowing to themselves.

This post was published at Paul Craig Roberts on February 8, 2017.

Rex Tillerson Confirmation: ‘Exxon State Dept… Like Appointing Ronald McDonald to Agriculture’

A very powerful man is now facing the whole country in a very public way for what may be the first time. He appears a bit nervous and perhaps rehearsed.
Rex Tillerson, Donald Trump’s pick for Secretary of State, is facing confirmation hearing today as the next administration prepares to begin. Here’s some biographical info.
Nevertheless, it seems that former Exxon Mobil CEO will likely be confirmed as Secretary of State with ease. Many of the questions have been quite friendly, and perhaps even soft ball.
Key issues include foreign policy, his past ties with Russia, Middle East issues, a commitment to defense and use of war ‘to back up diplomacy.’
Also discussed were potential conflicts of interest with ExxonMobil, the company he spent his entire career with, as well as climate change policies. Oil (and natural gas) as a weapon of foreign policy has been little appreciated until now, but has played a huge role in Venezuela’s volatile economic crisis, and has stoked tensions with Russia.

This post was published at shtfplan on January 11th, 2017.

Could Venezuela Become The Next Syria?

Speaking of poor policymaking, hyperinflation and violence – Venezuela is sliding closer and closer to the brink of collapse, with some sobering consequences.
This was among the topics of conversation this week at the Mining & Investment Latin America Summit in Lima, Peru. While there, I had dinner with a couple of Canadian lawyers who represented a few Latin American oil producers, some of them based in Venezuela.
Things have gone from bad to worse, they informed me. Since 2013, when Nicols Maduro took power after the death of Hugo Chvez, the socialist country has struggled with skyrocketing inflation, food and medicine shortages, a shrinking economy and rising violence and corruption. (Its capital city of Caracas recently overtook San Pedro Sula, Honduras, for having the world’s highest homicide rate.)
These have only intensified since oil prices fell by half more than two years ago, as oil accounts for 95 percent of Venezuela’s export earnings.

This post was published at Zero Hedge by Frank Holmes, originally posted ValueWalk.com Oct 30, 2016.

The Elite is Accelerating Earth Changing Events in a Rush to Implant Hillary in Power

As we move into the final month prior to this year’s presidential election, the tempo of dramatic world events and developments that are breaking daily is mind-boggling. Every single day we are seeing more outrageously desperate actions on the part of the globalists and their US government minions. Among the latest unfolding developments this week all fast tracking towards world war against Russia is NATO’s violation of international law deploying AWACS (Airborne Radar Warning and Control system) in Syria despite only Syria and Russia possessing the legal right to control the embattled country’s airspace. With both US and Turkish boots on the ground in northern Syria and US-led coalition airstrikes regularly invading the sovereign nation’s airspace, recently targeting Syrian soldiers andplans to kill more, along with former acting CIA director Mike Morell’s recent call to begin killing Russian soldiers, the latest warpath rant comes from Army Chief of Staff General Mark Milley who is now threatening Russia (as well as China and Iran) with nuclear war. Spoken just like a true grade school bully on a playground, he boasts, ‘We will beat you harder than you have ever been beaten before!’ This is the kind of moronic leadership that rises to the top of the Empire food chain? I’m afraid so.
God help us when his most likely next commander-in-chief is the warmongering bulldog herself Hillary Clinton who’s not any more civilized nor humane. She’s already made it very clear that any real or perceived cyberspace attack on America coming from anywhere in the world constitutes an act of war and a military response against the cyber-perpetrators’ country. After already vowing to bomb Iran and with her constant accusations blaming Putin for everything gone wrong in her miserable life, including exposing her DNC corruption scandal responsible for rigging her presidential election, she is also all but promising to launch World War III against nuclear powered Russia. Incisive insider Paul Craig Roberts and even Putin have both said so. The neocon insanity that she represents is committed to perpetrating both suicidal and genocidal mass murder.
With a total of 7,100 US nuclear warheads as of August 2016 and an estimate reported two years ago of 2,150 operationally deployed nukes, America could destroy itself four times over while Russia’s 7,300 nuclear weapons would likely carry the same tremendous overkill power. When we’re all dead, it hardly matters who has what? As the Benghazi ringleader who gave the stand down order that sealed the fate of four murdered Americans would say,’What difference does it make?’ The sheer madness in control of our planet right now actually believes the elite can simply hunker down in their underground luxury bunkers, take a long nuclear winter’s nap and a few years later emerge like Rip Van Winkle unscathed in their grandiose fairy tale. Talk about madness!

This post was published at Lew Rockwell on October 8, 2016.

The Debate: Trump’s Three Points for Peace

For all Hillary Clinton’s reputation as a policy wonk, her debate performanceconsisted almost entirely of personal attacks. And while our media is out there proclaiming a Clinton ‘victory,’ their evaluation merely shows how distanced they are from ordinary Americans, who don’t revel in nastiness.
Trump, on the other hand, although he allowed himself to be distracted by her cattiness, was focused on the issues, and in the course of the evening he made three important points of interest to my readers.
1) The most important issue of our time, or any time – nuclear weapons and the looming possibility of nuclear war:
‘The single greatest problem the world has is nuclear armament, nuclear weapons, not global warming, like you think and your – your president thinks. Nuclear is the single greatest threat….
‘I would like everybody to end it, just get rid of it. But I would certainly not do first strike. I think that once the nuclear alternative happens, it’s over.’
This is the most under-noticed – and most significant – moment of the debate. Although, to be sure, it was immediately noted by the folks over atThe Intercept, who opined:
‘That may seem like common sense, but it’s actually a commitment that President Obama has been reluctant to make. The Pentagon argues that unless the U. S. is prepared to threaten a nuclear strike, it is less likely to deter Russian and Chinese aggression.

This post was published at David Stockmans Contra Corner by Justin Raimondo ‘ September 28, 2016.

Q3 Estimates Now In The Red – – -Sixth Straight Quarter Of Profits Decline

The third quarter was supposed to be when earnings growth returned to U. S. companies. Not anymore. Companies in the S&P 500 are now expected to report an earnings decline for the sixth consecutive quarter in the coming weeks, according to analysts polled by FactSet. That slump would be the longest since FactSet began tracking the data in 2008.
The prolonged contraction has raised questions about how far stocks can rise without corresponding strengthening in corporate earnings.
As recently as three months ago, analysts estimated U. S. corporate earnings growth would return to positive territory by the third quarter. As of Friday, they were predicting a 2.3% contraction from the year-earlier period.
Many of the factors pressuring U. S. corporate earnings in recent quarters – including a stronger dollar and falling oil prices – have abated in 2016. The WSJ Dollar Index, which measures the U. S. dollar against a basket of 16 currencies, is down 4% this year, versus up 8.6% for all of last year, and the price of U. S.-traded crude oil has risen 20% in 2016, rebounding from its extreme lows.
Still, those moves haven’t been enough to project an end to the earnings recession.

This post was published at David Stockmans Contra Corner By CORRIE DRIEBUSCH, Wall Street Journal ‘ September 26, 2016.

Iran Is In Full Compliance With The Nuke Deal – – But The Neocon Lies Never Stop

The unrelenting urge among American politicians to keep punishing Iran – or more precisely, to be seen supporting steps with that objective – continues to work against sensible statecraft and U. S. interests in multiple respects. One of those respects concerns how measures taken by the United States affect political competition within Iran.
Here’s the current background to questions of U. S. policy toward Iran. The most important development in recent years regarding such policy – the Joint Comprehensive Plan of Action, the formal name for the agreement that limits Iran’s nuclear activity – has been in effect for over a year. According to the International Atomic Energy Agency, which does the detailed monitoring of the Iranian program, Iran is fully in compliance with its obligations under the agreement.
Those in the United States who have opposed any agreement with Iran all along continue to seek any possible basis for accusing Iran of violations. One of the most recent such accusations concerned some issues of implementation that opponents described as ‘secret exceptions’ granted to Iran. They were in fact not that but rather were typical of the detailed questions that inevitably arise in implementation of any agreement this extensive.

This post was published at David Stockmans Contra Corner on September 20, 2016.

Libyan, Nigerian Exports Resume – -35% or 1.4 Billion Barrel Stock Gain Projected By YE 2017

Summary
Seadelta loaded Libyan crude, headed to China. Sudden rise expected in exports from Libya and Nigeria. Other producers expected to increase production as OPEC meets this week. Potential additions on the order of 1.4 billion barrels. February low in crude prices may be tested. I recently wrote that OPEC’s ‘production risks to the upside,’ as OPEC’s hopes for a supply-demand balance for 2017 have faded. I specifically mentioned that Libya and Nigeria want to restore production if and when they can.
Mohamed Oun, the country’s envoy to the Organization of the Petroleum Exporting Countries, said in an interview today, ‘Definitely, we will not agree to a freeze without reaching our quota from before,’ which is 1.6 million barrels per day.
On Thursday, a ‘Black Swan Event’ appeared in the news, that Libya was ready to double its production to 600,000 b/d within 4 weeks and to 950,000 b/d by year-end. At the same time, Nigeria was planning to restore more than 500,000 b/d of exports within days. I assessed that this scenario, if it materializes, could cause the crude oil market to re-test its lows of last February.

This post was published at David Stockmans Contra Corner By Robert Boslego, Seeking Alpha ‘ September 19, 2016.

Bust In The US Shale Patch – – $36 Billion Of Negative Free Cash Flow In The Bakken

The Death of the Great Bakken Oil Field has begun and very few Americans understand the significance. Just a few years ago, the U. S. Energy Industry and Mainstream media were gloating that the United States was on its way to ‘Energy Independence.’
Unfortunately for most Americans, they believed the hype and are now back to driving BIG SUV’s and trucks that get lousy fuel mileage. And why not? Americans now think the price of gasoline will continue to decline because the U. S. oil industry is able to produce its ‘supposed’ massive shale oil reserves for a fraction of the cost, due to the new wonders of technological improvement.
I actually hear this all the time when I travel and talk to family, friends and strangers. I gather they have no clue that the Great Bakken Oil Field is now down a stunning 25% from its peak in just a little more than a year and half ago:

This post was published at David Stockmans Contra Corner by Contributor ‘ September 18, 2016.

The Existential Madness of Putin-Bashing

Arguably, the nuttiest neoconservative idea – among a long list of nutty ideas – has been to destabilize nuclear-armed Russia by weakening its economy, isolating it from Europe, pushing NATO up to its borders, demonizing its leadership, and sponsoring anti-government political activists inside Russia to promote ‘regime change.’
This breathtakingly dangerous strategy has been formulated and implemented with little serious debate inside the United States as the major mainstream news media and the neocons’ liberal-interventionist sidekicks have fallen in line much as they did during the run-up to the disastrous invasion of Iraq in 2003.
Except with Russia, the risks are even greater – conceivably, a nuclear war that could exterminate life on the planet. Yet, despite those stakes, there has been a cavalier – even goofy – attitude in the U. S. political/media mainstream about undertaking this new ‘regime change’ project aimed at Moscow.
There is also little appreciation of how lucky the world was when the Soviet Union fell apart in 1991 without some Russian extremists seizing control of the nuclear codes and taking humanity to the brink of extinction. Back then, there was a mix of luck and restrained leadership, especially on the Soviet side.

This post was published at David Stockmans Contra Corner on September 16, 2016.

Mexican Peso Crashes To Record Lows As Trump Odds Surge

While correlation is not causation, it is certainly a wink and a nudge in this case. As Donald Trump’s poll numbers soar so the Mexican Peso has been collapsing against the US dollar, and just broke to fresh record lows…
***
After last year’s annus horribilis that saw the currency shed more than 14 per cent of its value against the dollar, the peso is down an additional 10.5 per cent so far this year – making it the world’s second worst performing major emerging market currency after the Argentine peso, report The FT’s Pan Kwan Yuk and Jude Webber.
Low oil prices have hobbled Mexican president Enrique Pea Nieto’s efforts to open up the country’s energy sector to private investments and forced the government to cut spending and growth forecasts. In addition Mr Pea Nieto has seen his approval ratings sunk to record lows amid anger over his handling of corruption scandals and perceived inability to maintain law and order in Latin America’s second most important economy.

This post was published at Zero Hedge on Sep 16, 2016.

Oil Glut Set to Worsen as Nigeria and Libya Fields Restart

Amid the most enduring global oil glut in decades, two OPEC crude producers whose supplies have been crushed by domestic conflicts are preparing to add hundreds of thousands of barrels to world markets within weeks.
Libya’s state oil company on Wednesday lifted curbs on crude sales from the ports of Ras Lanuf, Es Sider and Zueitina, potentially unlocking 300,000 barrels a day of supply. In Nigeria, Exxon Mobil Corp. was said to be ready to resume shipments of Qua Iboe crude, the country’s biggest export grade, which averaged about 340,000 barrels a day in shipments last year, according to Bloomberg estimates. On top of that, a second Nigerian grade operated by Royal Dutch Shell Plc is scheduled to restart about 200,000 barrels a day of flow within days.
While there are reasons to be cautious about whether the barrels will actually flow as anticipated, a resumption of those supplies – more than 800,000 barrels a day in all – could more than triple the global surplus that has kept prices at less than half their levels in 2014. It would also come just as members of the Organization of Petroleum Exporting Countries and Russia are set to meet in Algiers later this month to discuss a possible output freeze to steady world oil markets.
‘If you have some restart of Nigeria and some restart of Libya, then the rebalancing gets pushed even further out,’ Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by phone. ‘It complicates matters a lot before the meeting in Algeria.’

This post was published at David Stockmans Contra Corner By Laura Hurst, Elisha Bala-Gbogbo and Angelina Rascouet, Bloomberg Business ‘ September 15, 2016.

Hanjin Fall Is Lehman Moment for Shipping, Seaspan CEO Says

The fall of South Korea’s biggest container line Hanjin Shipping Co. is similar to the 2008 collapse of Lehman Brothers Holdings Inc. and has materially impacted the shipping industry, Seaspan Corp. Chief Executive Officer Gerry Wang said.
Seaspan, the Hong Kong-based container-ship leasing company that has three vessels chartered to the distressed line, is evaluating all options and examining systemic risks resulting from Hanjin’s bankruptcy filing, Wang said in an interview with Bloomberg Television. In June, Wang had rejected Hanjin’s requests for charter-rate cuts before the shipping line filed for court receivership last month.
‘The fallout of Hanjin Shipping is like Lehman Brothers to the financial markets,’ Wang said. ‘It’s a huge, huge nuclear bomb. It shakes up the supply chain, the cornerstone of globalization.’

This post was published at David Stockmans Contra Corner on September 14, 2016.

More Bad Economic News From The Oil Patch

At the end of August, the US Energy Information Administration reported that it had been overstating domestic demand for oil and energy products to a considerable degree. Using imprecise and lagging data, the calculations for the amount of product being exported overseas was understated by an average of 16%. That meant more output was being used elsewhere, thus less product being used here. While that is a positive for US producers being able to ship wherever they can, it was a more savage reflection on the economy especially this year.
In other words, nothing terribly surprising in oil unless you are expecting dramatic improvement for the US economy through something like a ‘full employment’ liftoff. Instead, viewing oil as a primary intersection between finance and economy, the ‘rising dollar’ part of the eurodollar decay unsurprisingly remains as an ongoing process – not a cycle to be moved into and then quickly out of. All the same mechanisms that were shocking economists in late 2014 and early 2015 are still visible here in the summer of 2016. It’s not going to just go away; like oil and gas inventory, it only gets worse a little more each time in these uneven waves.
Today it was the influential International Energy Agency’s (IEA) turn to deliver more such bad news. When oil prices first crashed starting in late 2014 and really January 2015, commentary was filled with the words ‘supply glut.’ Particularly related to US fracking as the biggest contribution to non-OPEC growth, the intent in using those words almost exclusively was to downplay the possible negative implications of a serious commodity crash (especially what was causing it) given that such crashes are monetary by nature. At most, there would be some words expressed about economic ‘concerns’, but for the most part oil prices were purported to be the victim of too much success.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ September 13, 2016.

Bombs Away! A 9/11 Retrospective On Washington’s 15-Year Air War

On the morning of September 11, 2001, al-Qaeda launched its four-plane air force against the United States. On board were its precision weapons: 19 suicidal hijackers. One of those planes, thanks to the resistance of its passengers, crashed in a Pennsylvania field. The other three hit their targets – the two towers of the World Trade Center in New York City and the Pentagon in Washington, D. C. – with the kind of ‘precision’ we now associate with the laser-guided weaponry of the U. S. Air Force.
From its opening salvo, in other words, this conflict has been an air war. With its 75% success rate, al-Qaeda’s 9/11 mission was a historic triumph, accurately striking three out of what assumedly were its four chosen targets. (Though no one knows just where that plane in Pennsylvania was heading, undoubtedly it was either the Capitol or the White House to complete the taking out of the icons of American financial, military, and political power.) In the process, almost 3,000 people who had no idea they were in the bombsights of an obscure movement on the other side of the planet were slaughtered.
It was a barbaric, if daring, plan and an atrocity of the first order. Almost 15 years later, such suicidal acts with similar ‘precision’ weaponry (though without the air power component) continue to be unleashed across the Greater Middle East, Africa, and sometimes elsewhere, taking a terrible toll – from a soccer game in Iraq to a Kurdish wedding party in southeastern Turkey (where the ‘weapon’ may have been a boy).
The effect of the September 11th attacks was stunning. Though the phrase would have no resonance or meaning (other than in military circles) until the U. S. invasion of Iraq began a year and a half later, 9/11 qualifies as perhaps the most successful example of ‘shock and awe’ imaginable. The attack was promptly encapsulated in screaming headlines as the ‘Pearl Harbor of the Twenty-First Century’ or a ‘New Day of Infamy,’ and the images of those towers crumbling in New York at what was almost instantly called ‘Ground Zero’ (as if the city had experienced a nuclear strike) were replayed again and again to a stunned world. It was an experience that no one who lived through it was likely to forget.

This post was published at David Stockmans Contra Corner on September 12, 2016.

The Real Economy: What The Interest Rate Fallacy Truly Means

Just a little over a year ago, the Institute for Supply Management (ISM) released its purchasing manager index for the services sector for August 2015. Though the level was down slightly from July, coming amidst the immediate aftermath of the ‘shocking’ financial quakes starting in China and spreading to markets all over the world, the 59.0 non-manufacturing PMI was welcome relief. In the mainstream narrative where the unemployment rate was meaningful, any positive indication about the services economy allowed economists and policymakers to assert that any weakness was either temporary or isolated.
When oil prices first dropped starting in late 2014, the narrative was far more the former (‘transitory’). By August last year, when financial markets far beyond WTI were drawn inward into the ‘unexpected’ maelstrom, the narrative changed to admit that weakness might be a problem but only for manufacturing. In writing about the ISM Non-manufacturing PMI for August 2015 the Wall Street Journal assured us:

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ September 6, 2016.

Luxury Manhattan Housing Market Plunges 21% YTD

Prospective buyers at one Upper East Side condo project are quietly being offered a 5 percent discount. At an almost-completed Midtown building, five-bedroom homes will be divided into smaller units. Brokers whose clients sign deals at a downtown tower before Labor Day are getting $5,000 gift cards.
Such tactics have become more common in Manhattan, where developers are coping with a luxury-condo glut and adjusting to a new reality after years of building to meet seemingly insatiable demand. With the market now sputtering, they’re altering sales plans and making behind-the-scenes deals in an attempt to create momentum at their projects before an onslaught of even more competition.
‘Right now, time is your enemy,’ said Jacky Teplitzky, a luxury broker with Douglas Elliman Real Estate. ‘The first question that people ask is how long has an apartment been on the market?’
Global economic turmoil, slumping oil prices and the uncertainty of this year’s presidential election are weighing on luxury-home buyers’ decision-making across the U. S. In New York, where more than 3,500 new apartments are hitting the market this year, developers have to work even harder for a sale. It’s a turnabout from the boom days just a few years ago, when investors quickly plunked down record-shattering sums for homes still in the planning stages. Wealthy buyers now are taking time to browse multiple options and negotiate before committing to a purchase – if they make one at all.

This post was published at David Stockmans Contra Corner By Oshrat Carmiel via Bloomberg Business ‘ September 2, 2016.