As President Trump’s “Infrastructure Week” comes to an ignominious end, NIRP Umbrella’s Alex Deluce reminds us that spending money on bridges to nowhere and cities of the future is anything but the stimulating panacea it is talked up to be… Is a Chinese credit bubble in the cards? Well, it will be interesting to see if China’s authorities can get through the unwind of US $3 trillion worth of excess credit and the distressed debt on banks’ balance sheets. From 2009 to 2016, more than 10 trillion of Chinese investment was thrown at infrastructure, ghost cities, and corruption thanks to a helping hand from the Chinese banks and foreign lenders eager to participate in the Chinese growth story. In fact, hundreds of new cities in China are essentially empty. The hope is that rural population someday move in. Roughly 40% of the 300 million Chinese expected to move into a town by 2030 will mostly be moving to smaller cities in the ‘chengzhenhua’ system. As OfTwoMinds’ Charles Hugh Smith recently explained, building bridges to nowhere isn’t just a waste of money in the present; it saddles the economy with productivity-draining costs for decades to come.
This post was published at Zero Hedge on Jun 10, 2017.
Licking the Log American workers, as a whole, are facing a disagreeable disorder. Their debt burdens are increasing. Their incomes are stagnating. There are many reasons why. In truth, it would take several large volumes to chronicle all of them. But when you get down to the ‘lick log’ of it all, the disorder stems from decades of technocratic intervention that have stripped away any semblance of a free functioning, self-correcting economy. The financial system circa 2017, and the economy that supports it, has been stretched to the breaking point. Shortsighted fiscal and monetary policies have propagated it. The result is a failing financial order that has become near intolerable for all but the gravy supping political class and their cronies. Take consumer spending. This is the primary driver of the U. S. economy. Yet it requires vast amounts of credit. In fact, American consumers presently hold $1 trillion in revolving credit. At the same time, they have nowhere near the income needed to finance these debts, let alone pay them off. Remember, the flip-side of credit is debt. Obviously, the divergence of increasing debt and stagnating incomes is a condition that cannot go on forever. But it can go on much longer than any sensible person would consider possible.
This post was published at Acting-Man on May 6, 2017.
Debt is serfdom, capital in all its forms is freedom. If we accept that our financial system is nothing but a wealth-transfer mechanism from the productive elements of our economy to parasitic, neofeudal rentier-cartels and self-serving state fiefdoms, that raises a question: what do we do about it? The typical answer seems to be: deny it, ignore it, get distracted by carefully choreographed culture wars or shrug fatalistically and put one’s shoulder to the debt-serf grindstone. There is another response, one that very few pursue: fanatic frugality in service of financial-political independence. Debt-serfs and dependents of the state have no effective political power, as noted yesterday in It Isn’t What You Earn and Owe, It’s What You Own That Generates Income. There are only three ways to accumulate productive capital/assets: marry someone with money, inherit money or accumulate capital/savings and invest it in productive assets. (We’ll leave out lobbying the Federal government for a fat contract or tax break, selling derivatives designed to default and the rest of the criminal financial skims and scams used so effectively by the New Nobility financial elites.)
Paycheck to Paycheck GUALFIN, ARGENTINA – The Dow was down 118 points on Wednesday. It should have been down a lot more. Of course, markets know more than we do. And maybe this market knows something that makes sense of these high prices. What we see are reasons to sell, not reasons to buy. Nearly half of all American families live ‘paycheck to paycheck,’ say researchers. Without borrowing, 46% couldn’t raise $400 to cover an emergency. This is at least part of the reason why retail sales dropped for the second month in a row in March. Despite seven years of economic ‘recovery,’ millions of Americans don’t have much money. According to Census Bureau figures, 110 million Americans receive benefits from means-tested federal programs – food stamps, disability, and the like. And according to the Bureau of Labor Statistics, about 125 million Americans have full-time work (with another roughly 112 million without jobs). That means there are only 125 million people in full-time jobs supporting the whole kit and caboodle of the U. S. economy, with a total population of 323 million. At that rate, each full-time worker supports about 2.6 people… including almost one person receiving money from the feds. They are also supporting a government debt of $20 trillion and private debt of another $40 trillion or so. That puts the debt-to-full-time-worker ratio at $480,000. The average salary for a full-time worker is just $48,000. At a modest 5% interest, his share of the debt cost would set him back $24,000 each year. He’d have only the remaining $24,000 to support (1) his own family… and (2) all the malingerers, cronies, and zombies who are drawing government benefits. Obviously, those numbers don’t work. But they explain much of the weakness in the U. S. economy. The feds’ cheap credit keeps moving money (mostly in the form of asset price increases) to the wealthiest ZIP codes… while the average person’s budget gets tighter and tighter.
This post was published at Acting-Man on April 21, 2017.
When “socialist” states have to impose finance-capital extremes that even exceed the financialization of nominally capitalist economies, it gives the lie to their claims of “socialism.” OK, so our collective eyes start glazing over when we see Marx and Orwell in the subject line, but refill your beverage and stay with me on this. We’re going to explore the premise that what’s called “socialism”–yes, Scandinavian-style socialism and its variants–is really nothing more than finance-capital state-cartel elitism that has done a better job of co-opting its debt-serfs than its state-cartel “capitalist” cronies. We have to start with the question “what is socialism”? The standard definition is: a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. In practice, the community as a whole is the state. Either the state owns a controlling interest in the enterprise, or it controls the surplus (profits), labor rules, etc. via taxation and regulation.
I claim no special power here, nor any inside information. This is simply arithmetic coupled with logic. I’ll give you a “decision tree” sort of format with the critical points outlined. Note that if you’re going to mitigate any of what I see coming around the bend you need to do it right damn now, not wait. By the time you get to those critical points it’s too late. For many people it’s already too late, but if you’re not in that batch then you need to make your lifestyle changes today. I am operating on the premise that the rank corruption that I outlined in the Ticker here will not be addressed. It will not be addressed for the same reason the 17th Amendment will be cited as the reason the American political experiment failed when the book on America is finally closed, as that Amendment permanently removed the ability of the States to call a hard-stop on any expansion of Federal Power they did not consent to. That was designed in to our government by the founders and it was removed intentionally by the 17th Amendment. That balance of power can never be restored absent a Revolution because to do so The Senate would have to literally vote themselves out of a job at a supermajority level which they will never do and there is no means to compel them to do so. For the same reason the 30-year trend in Medicare and Medicaid spending will not be stopped. It may be tinkered with around the edges but it won’t be stopped because to stop it without literally throwing people into the street and letting them die you have to break the medical monopolies and in doing so you will inevitably (1) destroy the graft machine that drives a huge part of DC and at least half of the jobs inside the Beltway, along with the asset values they support, (2) create an immediate and deep (15% of GDP, but temporary) recession on purpose which neither Congress or Trump will ever voluntarily initiate as it would cause a guaranteed 70% stock market crash along with the immediate detonation of about 1/3rd of all in-debt corporations in the United States and (3) expose the outrageous theft of trillions of dollars from taxpayers over the last several decades to fund the medical scam machine at all levels.
Yesterday the NFL granted Mark Davis his request to move the Raiders from Oakland to Las Vegas. The move creates multiple losers: Las Vegas hotel customers who will see room taxes rise to pay for the $750 million in subsidies for the new stadium, the city of Oakland who still carries debt from the Raiders old venue, and the infamous fans that made up the Raiders’ iconic ‘Black Hole’ who are losing their football team just after witnessing their first playoff performance in almost 15 years. Beyond the blatant crony capitalism of government-financed stadiums, there are many reasons to doubt the wisdom of the team’s decision. After all, unlike the Rams and Chargers move to Los Angeles, Las Vegas has no history of supporting professional football. The most significant attempt, the Las Vegas Outlaws of the XFL, only averaged 22,619 fans, ranking 5th out of the league’s 8 teams. Other attempts, including multiple Arena League teams and the short lived UFL, were financial flops. Of course, none of these products have the power of the National Football League, so perhaps this time will be different. At league meetings, a key part to selling relocation was the idea that fans of other teams would travel to Las Vegas to enjoy the city’s attractions along with the game. Of course, if the market had faith in this business model, investment wouldn’t have needed politicians to find investment. It is worth noting that the new Las Vegas NHL team will be playing at a facility backed entirely by private investment. Maxing out at 20,000 seats, it has one-third of the capacity of the Raiders venue – but cost less than a quarter of the projected costs of the Raiders’ future facility.
Along with the student loan debt bubble and other major financial factors, the looming pensions crisis is bound to be the death of us all. Because it’s based on a future promise to pay, it has long been a benefit dangled to solve strikes and union disputes – because, in the end, it is just more debt, whether private or public. With tens of trillions in unfunded liabilities, the weight of an avalanche remains dangling over our heads. An aging population is cashing in on needed retirement benefits while the younger generations must support multiples that are unsustainable financially. Somewhere between the retiree that needs clothing, food and lodging, and the bankruptcy of cities and state governments is the makings of the next economic crisis. via AgainstCronyCapitalism.org:
This post was published at shtfplan on March 15th, 2017.
Submitted by John Whitehead via The Rutherford Institute, ‘This light of history is pitiless; it has a strange and divine quality that, luminous as it is, and precisely because it is luminous, often casts a shadow just where we saw a radiance; out of the same man it makes two different phantoms, and the one attacks and punishes the other, the darkness of the despot struggles with the splendor of the captain. Hence a truer measure in the final judgment of the nations. Babylon violated diminishes Alexander; Rome enslaved diminishes Caesar; massacred Jerusalem diminishes Titus. Tyranny follows the tyrant. Woe to the man who leaves behind a shadow that bears his form.’ ? Victor Hugo, Les Misrables Let’s talk about President Obama’s legacy, shall we? This was a candidate who was ushered into office promising hope and change, pledging to put an end to the endless wars that were bankrupting the country (he was actually awarded the Nobel Peace Prize in anticipation of his efforts to bring about world peace), and vowing to put an end of the corporate revolving door that had turned our republic into an oligarchy. After eight years in office, Barack Obama leaves our nation with a weakened Constitution that has been dealt one crippling blow after another by court rulings and government overreach, with more militarized police empowered to shoot first and ask questions later, with more SWAT team raids, with more government corruption, with more debt than ever before ($19 trillion and rising), with more racial tensions bubbling over into confrontations, with even greater surveillance intruding into the privacy of the citizenry, with less tolerance for free speech and thought, with taxpayers groaning under the weight of even more taxes disguised as fines and fees, with a more ‘imperial’ president empowered to act unilaterally through the use of signing statements and executive orders, with a greater risk of blowback from military occupations, drone strikes and endless wars abroad, and with a citizenry more broken and oppressed than ever.
This post was published at Zero Hedge on Jan 9, 2017.
This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission. An analysis from independent financial research firm Morningstar, released yesterday by The Wall Street Journal, brought to light numerous new potential conflicts of interest for President-elect Donald Trump. These conflicts of interest specifically relate to Trump’s debt, such as 1) the institutions to which he owes money, and 2) the amount of money he actually has left to pay. You see, in a May 2016 financial disclosure with the U. S. Office of Government Ethics, Trump claimed he owed money to just 10 businesses.
Rapacity performed by an outgoing Democratic president is intentionally downplayed or simply ignored by the mainstream media. We saw such unbridled rapacity in the atavistic way the Clintons left the White House when they departed in 2000. They stole and/or vandalized furniture and furnishings of the White House and left it in a deplorable state. From a perspective of his official actions, Bill Clinton did things such as pardon Tommy Rich and closed a few loopholes to ensure his Clinton Foundation deals did not fall apart after he surrendered the Oval Office. The Obamas are not following suit in the manner of the Clintons with pillaging the White House for three reasons. Firstly, although he committed dozens of offenses that would have merited it, Obama was not impeached, whereas Clinton was. For those who may hold askance with the conditions of impeachment for Obama, let us remember that under the parameters of the National Defense Authorization Act and the tenets of more than half a dozen overlapping executive orders, the United States (and the world) were ‘redefined’ as a ‘battlefield’ in the war on terror. The emergency status has never been lifted: that status was affirmed and inculcated under the Bush administration shortly after 9/11 that categorized us as being in a state of war (against terrorism) and a continuous state of emergency. Under such ‘wartime’ conditions, the words of Obama in 2012 were clearly treasonous and constituted an impeachable offense.
This post was published at shtfplan on December 30th, 2016.
Toxic loans as a result of corruption, political kickbacks, fraud, and abuse. The Bank of Italy’s Target 2 liabilities towards other Eurozone central banks – one of the most important indicators of banking stress – has risen by 129 billion in the last 12 months through November to 358.6 billion. That’s well above the 289 billion peak reached in August 2012 at the height of Europe’s sovereign debt crisis. Foreign and local investors are dumping Italian government bonds and withdrawing their funding to Italian banks. The bank at the heart of Italy’s financial crisis, Monte dei Paschi di Siena (MPS), has bled 6 billion of ‘commercial direct deposits’ between September 30 and December 13, 2 billion of which since December 4, the date of Italy’s constitutional referendum. Italy’s new Prime Minister Paolo Gentiloni, who took over from Matteo Renzi after his defeat in the referendum, said his government – a virtual carbon copy of the last one – is prepared to do whatever it takes to stop MPS from collapsing and thereby engulfing other European banks. His options would include directly supporting Italy’s ailing banks, in contravention of the EU’s bail-in rules passed into law at the beginning of this year. Though now, that push comes to shove, the EU seems happy to look the other way. While attention is focused on the rescue of MPS, news regarding another Italian bank, Banca Erturia, has quietly slipped by the wayside.
This post was published at Wolf Street on Dec 18, 2016.
Setting the Financial Course – Crimes and Great Fortunes BALTIMORE – ‘Behind every great fortune is a crime,’ said French novelist Honor de Balzac. Even our modest little pile owes much to a crime, though not our own. But what is behind Wilbur Ross’ billion-dollar fortune? *** In this series, we are describing how crony capitalism works. The cronies don’t break the law; instead, they make the law. That is, they work with their elected representatives, government employees, regulators, and lobbyists to sculpt the field on which they do battle. Naturally and inevitably, they give themselves the high ground. We got onto the ragged edge of that high ground by accident when we began working with Mark Hulbert in 1980 to find out which investment advisers really outperformed the market. The thinking at the time was that none could do it; the efficient market hypothesis suggested as much. We decided to find out. That first wobbly step into the financial world set our course for the next 36 years. It also put us in debt to criminals. Mr. Wilbur Ross should be even more grateful. It was not our own genius or perspicacity that made a rising percentage of the public crave our investment advice; it was the feds’ counterfeit money.
This post was published at Acting-Man on December 14, 2016.
You Got to Know When to Fold ‘Em What Happens If We Don’t Balance the Budget? Howard Ruff, RIP Washington DC, New York, Atlanta, and Florida This will be a shorter letter, in keeping with the need for holiday fun and relaxation. However, last week’s letter with my thoughts on what Trump should do generated more responses than any other letter had in the last 17 years. As you might suspect, with a topic so controversial, not everyone agreed with me. But there were many good questions and comments and some thoughtful disagreements, so I want to address a few of those. And I will specifically go into why I seemingly deviate from core conservative principles regarding taxes. It’s all about debt and the consequences of debt – that’s the overriding factor for me. And I’ll try to make the case that there are times when we just have to make hard, even philosophically unpalatable, choices. Some comments I will excerpt; others I will characterize in general terms; and where appropriate I’ll copy and paste whole comments. So let’s jump in. Allen Jones Univ. of Arkansas Please explain further corporate tax rate of 15% on income above $100,000 with “no deductions period.” Sounds like a 15% tax on sales. What do you mean no deductions? Are operating expenses deductions? Allen, this was probably the most-asked question, and since you asked it most concisely, you get the recognition for it. No, this is not a sales tax. It is a 15% tax on corporate income. That is normal GAAP accounting income. There are something like 3,400 different, legal, congressionally mandated corporate tax loopholes and deductions. (I can’t find the exact number right now.) Many of those tax loopholes apply to only one company or one very small industry and are favors from a Congressman or Senator to their main constituents. So when I say no deductions, I mean get rid of every one of those loopholes. I know, I know – I will be goring practically every business’s ox in some way or other. And that’s the problem: Too many people think their industry deserves some breaks and one little loophole is not that big a deal, and the next thing you know there are 3400 of these puppies. And then you find General Electric paying less income tax than I do while making multiple billions of dollars a year.
This election cycle has been a national disgrace. It finally comes to an end Tuesday, when a deeply divided nation heads to the polls. I recall having a tinge of hope eight years ago that there was a commitment to more inter-party cooperation and less partisan vitriol. There’s not even lip service this time around. As an optimist, I would like to believe that a period of healing commences Wednesday. The analyst inside knows things will continue to worsen before they get better. Our nation and the world are paying a very heavy price for a failed experiment in Inflationism. At this point, economic stagnation, wealth redistribution and inequality, financial insecurity and corruption are rather obvious consequences. ‘Money’ and Credit have inflated, right along with government, securities markets, financial institutions, corporate influence and greed. Along the way, there have been many subtle effects. To this day the majority still cling to the view that central bankers are essential to the solution – rather than the problem. But they are at the very root of disturbing national and international, economic, financial, societal and geopolitical degeneration. For close to 30 years now, central bank policies have nurtured serial inflationary booms and busts. It’s a backdrop that has repeatedly forced investors, homebuyers and others into serious harm’s way. Buy or you’ll be left behind. Get aboard before it’s too late. It’s a system that systematically targets the unsophisticated and less affluent to take on a tenuous debt position to buy homes, cars and things in the name of promoting economic growth. It’s a system that devalues the wealth of savers. Somehow it’s regressed to a system with a policy objective to coerce savers and the risk averse, to ensure their buying power instead inflates the value of risky securities market assets
If there is any truth to the allegation that Russia is behind the hacking of emails being released by WikiLeaks, then the American public owes Russia a huge debt of gratitude. At a time when the American people are sharply focused on how the leader of the free world is chosen, WikiLeaks is giving us an unprecedented, historical opportunity to understand how corporate money in politics has corrupted everything we believe in as a democracy. This week, for example, emails from WikiLeaks show that President Obama, using the email address of email@example.com, was communicating directly with Michael Froman of Citigroup in 2008, who fed Obama lists of recommended appointments to his cabinet. In an email from Froman dated October 6, 2008, with Froman using his Citigroup email address of firstname.lastname@example.org, Hillary Clinton shows up on Froman’s list for Secretary of State or head of the U. S. Department of Health and Human Services (HHS). In a separate list attached to the email, Eric Holder was recommended for U. S. Attorney General at the Department of Justice or as White House Counsel. (See the email and the attachments here.) In less than a month after Obama’s election as President on November 4, 2008, Obama had nominated Clinton to be his Secretary of State and Holder as his Attorney General. Despite the unprecedented corruption rooted out on Wall Street by regulators, Holder failed to prosecute any of Wall Street’s top executives for the crimes that led to the greatest financial crash since the Great Depression.
‘The goal of socialism is communism.’ Vladimir Lenin Inferential Analytics (IA), the forecasting method we have created and use, has generated a new theme. IA themes define significant macro developments that are in progress. IA themes almost always become full-blown realities in time. This is our first article about the new theme, which is particularly threatening and disturbing. If this theme develops as the IA model projects, the resulting new reality will have a profound effect on every United States citizen living either within or outside the country. (U. S. citizens are taxed no matter where in the world they reside.) While the entire American experience will be re-shaped by this new reality, citizens’ financial freedom, and therefore their overall liberty is particularly at risk. This theme extends beyond the United States, especially to Europe, but in this article we will focus on the U. S. situation. Before introducing and detailing the new theme, here is some context. Until now, the United States has been able to fund its massive, structural deficits and debts by leveraging its unique position as issuer of the world’s reserve currency, the dollar, frequently referred to as the petrodollar. The dollar’s reserve privilege has enabled the nation to artificially enhance America’s financial quality of life by creating out of nothing colossal quantities of the currency. By perpetuating a system that forces other nations to use the dollar, strong, unnatural demand has kept the currency from imploding in value despite its hyper-creation.
During the last year of his reign of error, our beloved Nobel Peace Prize winner, Obama ran out of government accounting gimmicks to falsely proclaim Federal deficits have been falling. His legacy of debt accumulation will go down in history as the last dying gasps of a crumbling empire built upon Keynesian delusions, political corruption, and a Deep State establishment hellbent upon retaining power at the cost of global war and financial collapse. The entirely fabricated government propaganda data point known as the Federal deficit skyrocketed by 34% in fiscal 2016 (Federal year is Oct. 1 to Sept. 30). The reported deficit in FY15 was a mere $438 billion. Obama and his brain dead minions had boasted about such a small deficit. The country has been in existence for 227 years and Obama had the balls to boast about ‘achieving’ the 8th highest deficit in our history. Just for some context, the savior also led the country to the 1st, 2nd, 3rd, 4th, 5th, and 6th highest deficits in the country’s history. Bumbling Bush achieved the 7th highest in the glorious year of 2008. The $149 billion surge in the reported deficit to $587 billion is a national disgrace and happened during a year in which we supposedly aren’t waging any real wars. Even with artificially suppressed interest rates, interest on the national debt went up by $30 billion. The Obamacare abortion has caused healthcare spending to soar, blowing a hole in the Federal budget. Remember Obama bloviating about Obamacare not adding one dime to the national debt? He was right. It’s adding trillions of dimes to the national debt. But, at least every family in America has gotten that promised $2,500 savings in their annual premiums. Right?
For a long time, I’ve advocated that the world’s governments should default on their debt. I recognize that this is an outrageous-sounding proposal. However, the debts accumulated by the governments of the U.S., Japan, Europe and dozens of other countries constitute a gigantic mortgage on the next two or three generations, as yet unborn. Savings are proof that a person, or a country, has been living below their means. Debt, on the other hand, is evidence that the world has been living above its means. And the amount of government debt and liabilities in the world is in the hundreds of trillions and growing rapidly, even with essentially zero percent interest rates. This brings up several questions: Will future generations be able to repay it? Will they be willing to? And, if so, should they? My answers are: No, no and no. The ‘should they’ is one moral question that should be confronted. But I’ll go further. There’s another reason government debt should be defaulted on: to punish the people stupid enough, or unethical enough, to lend governments the money they’ve used to do all the destructive things they do. I know it’s most unlikely you’ve ever previously heard this view. And I recognize there would be many unpleasant domino-like effects on today’s over-leveraged and unstable financial system. It’s just that, when a structure is about to collapse, it’s better to have a controlled demolition, rather than waiting for it to collapse unpredictably. That said, governments will perversely keep propping up the house of cards, and building it higher, pushing the nasty consequences further into the future, with compound interest. With that in mind, a few words on the euro, the E.U. and the European Central Bank are in order.
China is turning Japanese. That’s the increasingly held view of observers comparing China’s frenzied real-estate market with the epic bust that more than two decades ago hobbled one of its biggest economic rivals. While the two scenarios aren’t a carbon copy, similarities between China’s record credit boom in recent years and Japan’s bubble era have been made at various times by a number of economists and investors. Now, those voices are being heard more often – even within China. Huang Yiping, a Peking University professor who advises China’s central bank, warned Saturday about leverage that continues to climb, saying that the top risk is more and more investment generates less growth. ‘That’s exactly the story that unfolded in Japan.’ The worry is that China repeats Japan’s mistake of not reining in excess credit and shutting down insolvent borrowers quickly enough, exacting longer-term damage to growth in the world’s No. 2 economy. With potential expansion rates coming down across developed nations, the global pain would be magnified. ‘What really troubles me is that this extended real-estate bull market has gone hand-in-hand with an extended period of rapid credit growth, debt accumulation, and some questionable practices on the part of both lenders and borrowers,’ said Russell Jones, who had a front-row seat working as an analyst in 1990s Japan during that country’s demise.