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UNSOUND MONEY Inevitably Means A CORRUPT SOCIETY 34 Minutes, 34 Slides
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BONDS - Buy In June After the Swoon Buy (Bonds) In June, After The Swoon? 06-12-13 Zero Hedge In 2006, 2007, 2008 and 2009 we saw 10Y bond yields surge into June only to peak and turn lower aggressively; and in 2010, 2011 and 2012 we saw a 'mini rally' in yields into June that was not sustained, so, as Citi FX's Tom Fitzpatrick notes, while we regularly hear the mantra for the Equity market of "Sell in May and go away" maybe we should have one for the Bond market - "Buy in June after the swoon." There can be no doubt that the predominant factor in rising yields, increased market volatility, turmoil in emerging markets, rising peripheral European yields etc. over recent weeks has been the Fed but Citi still believes that the mention in the past weeks of "tapering" has been a "Kite flying" exercise by the Fed with the premise being to sell 'the markets' on the idea that reducing bond purchases was a “slowing of easing”, a “tinkering” not a tightening. It appears it is not going according to plan and we believe the Fed has got its answer as to what will happen if they announce tapering and it’s not pretty and unless they back away from this 'less easing' path, this policy mistake will have a negative feedback loop in financial markets and the economy leading to the market “easing” again and sending bond yields lower once more. Via CitiFX, ... So the argument from the Fed is that tapering is a slowing of the easing process rather than a tightening process. While mathematically that may be correct consumers do not borrow from mathematicians or for that matter at the “Fed funds rate” The simple fact of the matter is that starting with the employment numbers in May combined with the tapering rhetoric from the Fed this rate has risen 71 basis (low to high) points since 01 May. If pushing mortgage rates lower is accepted to be a form of unconventional monetary easing (given we are looking to recover out of the greatest housing downturn of this generation) then rising mortgage rates have to be viewed as a tightening. So to varying degrees we have seen a rising 10 year yield into June in the last 7 years. The most impulsive moves were seen in the four years 2006-2009. Those moves had characteristics more like what we have seen this year and in all cases we saw dramatic moves lower after a surge higher into June. Three of those four surges peaked between 11 and 13 June.
Bottom line the Fed is singing “Everything will be alright” while the market is singing “Hotel California” (You can check out anytime you like but you can never leave.) Tapering will come, tightening will come but the “patient” is not yet healthy enough to take this shock just yet. To push this prescription at this point risks a relapse. |
06-13-13 | BONDS CREDIT YIELD
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BONDS - A Flight to Safety from An EM Liquidity Crisis? A Treasury bond buying opportunity triggered by an emerging market storm? 06-12-13 Currency Currents As you likely know, there has been a lot of damage to emerging market stocks, bonds, and currencies on a relative basis compared t o the developed world markets. And you may remember that n ot too long ago emerging /developing market (EMs) finance minist ers were beating the drums of “ currency war. ” The b l ame placed squarely on the august shoulders of Mr. Ben Bernanke and company . The IMF was so concerned; they were openly endorsing the use of capital controls to help EMs to handle the pressure . We ll, maybe it ’ s just a cease fire, but EM finance ministers are now intervening to keep their currencies from “ depreciating. ” How quickly things can change? Given the nature of emerging (or developing) world markets, and lack of any depth in their capital markets, i.e. bond markets, relative to the size of money flows from the center from i ndividuals and institutions escaping the zero interest rate regimes and looking for more, the ebb and flow of money can be seen by the track of EM stock market and currency markets. Keep in mind that o ne has to buy the currency to invest in l ocal stocks of an EM, and one has to sell the stocks and sel l the currency locally when one decides to leave. If there was a viable bond market locally, with assorted money market and derivative products available, we likely wouldn ’ t see the currencies so highl y correlated with local stocks . A good example of this can be seen in Brazil. N otice the correlation between the Brazilian real/USD cross and Brazil ’ s stock market in the daily chart below : This price action in stocks and currencies has been playing out in many EMs lately. S o it poses a couple of questions:
Wrestling with the first question and thinking abou t the actions in US Treasuries is a bit confusing. Below is a chart comparing the Thomson R euters BRIC Stock Index (Brazil, Russia, India and China) versus US Treasury Bond Futures ... what I want you to notice here is th at usually when there is a sell - off in the BRIC index, US T reasuries ral ly and vice versa . But notice the action since the latest sell - off in the BRIC index, which began back in early May 2013 — instead or rallying on this price actio n, US Treasury bond prices fell, i.e. the price series moved in the same direction. As JR and I think about this chart, it leads to an interesting set of scenarios. Some a bit more far - fetched than others; but here is what I am thinking: This money flowing out of EM equities is flowing into US and other developed world equity markets. But, the danger here is two - fold: a) Given the deleveraging by European banks out of EM markets; there is a real poss ibility of a liquidity crunch, and b) a liquidity crunch in EMs would likely go hand and hand with a big sentiment shift regard ing global growth, i.e. it might Black Swan Many market conflagrations have been ignited quietly in EMs before growing into a global &^#$ ( four lett er wo rd starting with “ s ” ) storm . Could this be one of the m? Of course we don ’ t know. But, if a storm develops it means US Treasuries , as usual , will be the |
06-13-13 | BONDS CREDIT YIELD
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GOLD - JPM's Gold Vault Needs Watching JPM Vault Gold Drops By 28.4% Overnight, Slides To Fresh Record Low As Withdrawals Accelerate 06-11-13 Zero Hedge With a massive 6,208 (or 80% of the total in the entire Comex system) Customer Delivery issues outstanding against JPM so far in June alone, many have been wondering - how and when will the firm reconcile what is seemingly more demand for JPM vaulted gold than the firm has in its possession? While we still don't have the answer, what we do know is that as of an hour ago when the Comex released its daily vault depository statistics, JPM has said goodbye to another 28.4% of all of its vaulted gold - the largest one day withdrawal since April 25, the result of the departure of 61.5% of its Eligible gold, as hundreds of thousands of registered ounces in the bast few weeks have seen warrant detachment. Which means that as of last night, total gold held by JPM has fallen to a new fresh all time low of just 550k ounces, down from 768K the day before, and total eligible gold of only 136,380 troy oz in inventory (just over 4 metric tonnes) - also a record low. Whoever is "running the JPM vault" shows no sign of relenting. At this pace, the world's biggest gold vault located below 1 CMP, and just next to the Fed's own gold vault, will be empty in about 1.5-2 months.
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06-13-13 | GOLD | PRECIOUS METALS |
STATISM - A Short History of Big Brother Sam How America Became Orwellian: A Short History of Big Brother Sam 06-09-13 Juan Cole at Informed Comment Cora Currier, Justin Elliott and Theodoric Meyer write at On Wednesday, the Guardian published a secret court order requiring Verizon to hand over data for all the calls made on its network on an “ongoing, daily basis.” Other revelations about surveillance of phone and digital communications have followed. That the National Security Agency has engaged in such activity isn’t entirely new: Since 9/11, we’ve learned about large-scale surveillance by the spy agency from a patchwork of official statements, classified documents, and anonymously sourced news stories. 1978 Surveillance court createdAfter a post-Watergate Senate investigation documented abuses of government surveillance, Congress passes the Foreign Intelligence Surveillance Act, or FISA, to regulate how the government can monitor suspected spies or terrorists in the U.S. The law establishes a secret court that issues warrants for electronic surveillance or physical searches of a “foreign power” or “agents of a foreign power” (broadly defined in the law). The government doesn’t have to demonstrate probable cause of a crime, just that the “purpose of the surveillance is to obtain foreign intelligence information.” The court’s sessions and opinions are classified. The only information we have is a yearly report to the Senate documenting the number of “applications” made by the government. Since 1978, the court has approved thousands of applications – and rejected just 11. Oct. 2001 Patriot Act passedIn the wake of 9/11, Congress passes the sweeping USA Patriot Act. One provision, section 215, allows the FBI to ask the FISA court to compel the sharing of books, business documents, tax records, library check-out lists – actually, “any tangible thing” – as part of a foreign intelligence or international terrorism investigation. The required material can include purely domestic records. Oct. 2003 ‘Vacuum-cleaner surveillance’ of the InternetAT&T technician Mark Klein discovers what he believes to be newly installed NSA data-mining equipment in a “secret room” at a company facility in San Francisco. Klein, who several years later goes public with his story to support a lawsuit against the company, believes the equipment enables “vacuum-cleaner surveillance of all the data crossing the Internet – whether that be peoples’ e-mail, web surfing or any other data.” March 2004 Ashcroft hospital showdownIn what would become one of the most famous moments of the Bush Administration, presidential aides Andrew Card and Alberto Gonzales show up at the hospital bed of John Ashcroft. Their purpose? To convince the seriously ill attorney general to sign off on the extension of a secret domestic spying program. Ashcroft refuses, believing the warrantless program to be illegal. The hospital showdown was first reported by the New York Times, but two years later Newsweek provided more detail, describing a program that sounds similar to the one the Guardian revealed this week. The NSA, Newsweek reported citing anonymous sources, collected without court approval vast quantities of phone and email metadata “with cooperation from some of the country’s largest telecommunications companies” from “tens of millions of average Americans.” The magazine says the program itself began in September 2001 and was shut down in March 2004 after the hospital incident. But Newsweek also raises the possibility that Bush may have found new justification to continue some of the activity. Dec. 2005 Warrantless wiretapping revealedThe Times, over the objections of the Bush Administration, reveals that since 2002 the government “monitored the international telephone calls and international e-mail messages of hundreds, perhaps thousands, of people inside the United States without warrants.” The program involves actually listening in on phone calls and reading emails without seeking permission from the FISA Court. Jan. 2006 Bush defends wiretappingPresident Bush defends what he calls the “terrorist surveillance program” in a speech in Kansas. He says the program only looks at calls in which one end of the communication is overseas. March 2006 Patriot Act renewedThe Senate and House pass legislation to renew the USA Patriot Act with broad bipartisan support and President Bush signs it into law. It includes a few new protections for records required to be produced under the controversial section 215. May 2006 Mass collection of call data revealedUSA Today reports that the NSA has been collecting data since 2001 on phone records of “tens of millions of Americans” through three major phone companies, Verizon, AT&T, and BellSouth (though the companies level of involvement is later disputed.) The data collected does not include content of calls but rather data like phone numbers for analyzing communication patterns. As with the wiretapping program revealed by the Times, the NSA data collection occurs without warrants, according to USA Today. Unlike the wiretapping program, the NSA data collection was not limited to international communications. 2006 Court authorizes collection of call dataThe mass data collection reported by the Guardian this week apparently was first authorized by the FISA court in 2006, though exactly when is not clear. Dianne Feinstein, D-Calif., chairwoman of the Senate intelligence committee, said Thursday, “As far as I know, this is the exact three-month renewal of what has been in place for the past seven years.” Similarly, the Washington Post quoted an anonymous “expert in this aspect of the law” who said the document published by the Guardian appears to be a “routine renewal” of an order first issued in 2006. It’s not clear whether these orders represent court approval of the previously warrantless data collection that USA Today described. Jan. 2007 Bush admin says surveillance now operating with court approvalAttorney General Alberto Gonzales announces that the FISA court has allowed the government to target international communications that start or end in the U.S., as long as one person is “a member or agent of al Qaeda or an associated terrorist organization.” Gonzalez says the government is ending the “terrorist surveillance program,” and bringing such cases under FISA approval. Aug. 2007 Congress expands surveillance powersThe FISA court reportedly changes its stance and puts more limits on the Bush administration’s surveillance (the details of the court’s move are still not known.) In response, Congress quickly passes, and President Bush signs, a stopgap law, the Protect America Act. In many cases, the government can now get blanket surveillance warrants without naming specific individuals as targets. To do that, the government needs to show that they’re not intentionally targeting people in the U.S., even if domestic communications are swept up in the process. Sept. 2007 Prism beginsThe FBI and the NSA get access to user data from Microsoft under a top-secret program known as Prism, according to an NSA PowerPoint briefing published by the Washington Post and the Guardian this week. In subsequent years, the government reportedly gets data from eight other companies including Apple and Google. “The extent and nature of the data collected from each company varies,” according to the Guardian. July 2008 Congress renews broader surveillance powersCongress follows up the Protect America Act with another law, the FISA Amendments Act, extending the government’s expanded spying powers for another four years. The law now approaches the kind of warrantless wiretapping that occurred earlier in Bush administration. Senator Obama votes for the act. The act also gives immunity to telecom companies for their participation in warrantless wiretapping. April 2009 NSA ‘overcollects’The New York Times reports that for several months, the NSA had gotten ahold of domestic communications it wasn’t supposed to. The Times says it was likely the result of “technical problems in the NSA’s ability” to distinguish between domestic and overseas communications. The Justice Department says the problems have been resolved. Feb. 2010 Controversial Patriot Act provision extendedPresident Obama signs a temporary one-year extension of elements of the Patriot Act that were set to expire — including Section 215, which grants the government broad powers to seize records. May 2011 Patriot Act renewed, againThe House and Senate pass legislation to extend the overall Patriot Act. President Obama, who is in Europe as the law is set to expire, directs the bill to be signed with an “autopen” machine in his stead. It’s the first time in history a U.S. president has done so. March 2012 Senators warn cryptically of overreachIn a letter to the attorney general, Sens. Ron Wyden, D-Ore., and Mark Udall, D-Colo., write, “We believe most Americans would be stunned to learn the details” of how the government has interpreted Section 215 of the Patriot Act. Because the program is classified, the senators offer no further details. July 2012 Court finds unconstitutional surveillanceAccording to a declassified statement by Wyden, the Foreign Intelligence Surveillance Court held on at least one occasion that information collection carried out by the government was unconstitutional. But the details of that episode, including when it happened, have never been revealed. Dec. 2012 Broad powers again extendedCongress extends the FISA Amendments Act another five years, and Obama signs it into law. Sens. Wyden and Jeff Merkley, both Oregon Democrats, offer amendments requiring more disclosure about the law’s impact. The proposals fail. April 2013 Verizon order issuedAs the Guardian revealed this week, Foreign Intelligence Surveillance Court Judge Roger Vinson issues a secret court order directing Verizon Business Network Services to turn over “metadata” — including the time, duration and location of phone calls, though not what was said on the calls — to the NSA for all calls over the next three months. Verizon is ordered to deliver the records “on an ongoing daily basis.” The Wall Street Journal reports this week that AT&T and Sprint have similar arrangements. The Verizon order cites Section 215 of the Patriot Act, which allows the FBI to request a court order that requires a business to turn over “any tangible things (including books, records, papers, documents, and other items)” relevant to an international spying or terrorism investigation. In 2012, the government asked for 212 such orders, and the court approved them all. June 2013 Congress and White House respondFollowing the publication of the Guardian’s story about the Verizon order, Sens. Feinstein and Saxby Chambliss, R-Ga., the chair and vice of the Senate intelligence committee, hold a news conference to dismiss criticism of the order. “This is nothing particularly new,” Chambliss says. “This has been going on for seven years under the auspices of the FISA authority, and every member of the United States Senate has been advised of this.” Director of National Intelligence James Clapper acknowledges the collection of phone metadata but says the information acquired is “subject to strict restrictions on handling” and that “only a very small fraction of the records are ever reviewed.” Clapper alsoissues a statement saying that the collection under the Prism program was justified under the FISA Amendments of 2008, and that it is not “intentionally targeting” any American or person in the U.S. Statements from the tech companies reportedly taking part in the Prism program variously disavow knowledge of the program and merely state in broad terms they follow the law. |
06-13-13 | THESIS | |
STATISM - Why The Surveillance State Must Be Erased
In America today there is a great rushing storm, a swirling hurricane of clashing opinions and ideologies that defy coherent organization and classification. This social tempest has been triggered by certain revelations among the general public on issues which we in the Liberty Movement have long been aware. The fact that our government is bought and paid for by international corporate interests, the fact that our government has positioned itself to spy on ALL Americans without warrant and without probable cause, the fact that our government is instituting policy initiatives that target common citizens as enemy combatants, the fact that every one of our Constitutional rights is being deliberately torn away; these things are not news to us, but to many once ignorant people, they are a shock to the system. Open corruption on the part of a criminal establishment has a funny way of politicizing everyone, even those people who go out of their way to avoid the bigger picture. In the end, no man or woman gets a pass. Whether you like it or not, one day soon, you will have to choose a side; freedom or tyranny. There is no middle ground. There is no Switzerland. With all the rationalizations and counter-rationalizations flying around concerning the current avalanche of admissions and data leaks, it is easy to lose track of the root of the overall conflict. It’s as if we have been dropped into the heart of an Amazonian swamp, our feet encased in a thick sludge of social inaction as a dark cloud of mindless mosquito-people buzz about us, pecking hungrily at our veins with their warped and uneducated world views. The deafening chorus distracts us from what is truly important. Here is the reality of our situation: 1) Both the Bush Administration and the Obama Administration supported FISA domestic surveillance legislation. FISA is the legal tool which the federal government now uses to justify the monitoring of journalists and recently exposed mass surveillance programs such as PRISM. Politicians from both the Republican and the Democratic parties have defended the use of FISA and PRISM. Both parties support the destruction of your 4th Amendment rights. 2) The Obama Administration openly admits to the monitoring of journalists phone and email records in an attempt to thwart whistleblowers that might actually bring the truth of what the government is doing into the light of day. Obama of course defends this position by claiming that “national security” is at stake. 3) Part of the motivation for surveillance measures against journalists has clearly been the Benghazi conspiracy, which is a thorn in the side of the establishment that refuses to go away. Like Watergate, or Iran-Contra, the White House has been caught with its pants down and instead of admitting its guilt, has decided to attack the messengers instead. 4) Another motivation was certainly the exposure of the ATF’s “Fast And Furious” program, which funneled U.S. firearms into the hands of Mexican drug cartels so that American firearms dealers and owners could be blamed for the escalation of deadly violence south of the border. Again, Obama and his handlers seek to use a suffocating surveillance grid in order to thwart whistleblowers and prevent federal crimes from being aired in public. 5) The use of the IRS as a weapon against the political enemies of the establishment (namely Tea Party groups) verifies that government surveillance without oversight can indeed lead to political profiling and unjustified punishment. 6) The PRISM scandal, leaked by former CIA operative and NSA contractor Edward Snowden, has given the general public a raw naked look at the reality of the FISA spy initiative. In the past, Liberty Movement champions have been derided as “paranoid” for pointing out that there were no limitations to FISA, and that the entire nation might one day be monitored and catalogued like animals in a great technological cage. Today, the public now knows that this concern is concrete and undeniable. EVERYONE is being watched. Reports now estimate that NSA hackers harvest over 2.1 million gigabytes of data on American citizens per hour. 7) Privacy rights have been so debased that the invasion of our electronic communications is the least of our worries. The Supreme Court has ruled in Maryland v. King that police now have the authority to extract DNA samples from any person placed under arrest, without a warrant, and without due process. This means that the second a law enforcement officer places you in cuffs, your genetic materials are no longer your property, even if the charges against you are erroneous, if charges are ever filed at all. The government admits to having at least 10 million people catalogued in their genetic database already. 8) Since 9/11, U.S. cities have added approximately 30 million new CCTV cameras on top of those already in operation. After the Boston Bombing, even more are expected to be installed. There are few places in most major cities where you are not being watched, and even smaller municipalities with miniscule crime rates are beginning to follow suit. It would seem that our government has somehow overlooked the 4th Amendment of our Constitution, and statist rationalists would do well to study it before defending their actions. Let’s read it, shall we? The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. Now let’s examine the arguments of the establishment in favor of the Surveillance State: Argument #1: Mass Surveillance Has Been Going On For A Long Time And Is Nothing New Dianne Feinstein and Lindsey Graham, perhaps the most evil political duo since McCain and Lieberman, have both used the above talking point in order to rationalize the mass surveillance of FISA and PRISM. But let’s put this in perspective… Feinstein and Graham are essentially saying that because the government has criminally trespassed on our privacy for years, we should not complain when we discover that the invasion was a bit more elaborate than we had originally suspected. They are saying that because we allowed them to get away with taking an inch, we might as well allow them to get away with taking a mile. This is the logical fallacy of incrementalism, and tyrants use it in their arguments all the time. Despotism rarely establishes itself overnight. Rather, it slithers slowly into the midst of a society like a parasite, and carefully entrenches itself under our skin bit-by-bit so that we do not notice until it is buried so deep we fear removing it at all. A line must be drawn in the sand eventually. Past mistakes are not a license for future failures and future regrets, and anyone who claims otherwise is trying to take something away from you. Argument #2: If You’re Not Talking To Terrorists, Then You Have Nothing To Worry About Another debate point from the bottom feeding Lindsey Graham. First off, our Constitutional rights are not predicated on whether or not we are guilty of “terrorism”. Even a so-called terrorist is supposed to be protected under the Bill of Rights. The law is very clear, and this is not a negotiable position. Every American, regardless of government suspicion, has a right to privacy, and is protected from unreasonable search and seizure without probable cause. Period. Graham’s argument perpetuates the fallacy that the word “terrorism” is somehow a magical password that allows the federal government to bypass Constitutional barriers. I’m sorry to tell Lindsey that he is greatly mistaken. Secondly, the very foundation of a free society requires that every person be treated as INNOCENT until proven guilty. Mass surveillance twists this principle, so that all people are treated by the state as guilty until proven innocent. Such a system will inevitably generate a vast rift between the populace and the government because it designates the political elite as the “watchers” and the public as the “watched”. As history has shown us, the "watchers" always become the enslavers, and the "watched" always become the enslaved. I’m not sure why so many people, including U.S. senators, do not seem to grasp this concept. Argument #3: We Must Trust That The Government Is Using The Surveillance Apparatus For Good Barack Obama in defense of the leaked PRISM initiative and all encompassing NSA surveillance stated that Americans must simply “trust” that the federal system is using the data they have criminally harvested for the good of the country. That is to say, we should have “faith” in the White House. I’m sorry, but the Constitution was written exactly because governments are run by men, NOT benevolent gods, and men are notorious for abusing power. The Constitution exists because NO government can be trusted to act in a principled manner. We do not have to “trust” them because tight constitutional restrictions are in place to ensure that they aren’t given enough slack to become dangerous. When those restrictions are diminished, we get programs like PRISM… The checks and balances of due process and warrants are supposed to be absolutely public and transparent so that we can see, with our own eyes, that all is being handled justly and honorably. Mass surveillance in particular is an affront to the 4th Amendment because there is no conceivable way that warrants could ever be issued for the incredible volume of materials gathered, and therefore, there is no conceivable way that any legitimate judicial oversight is being enforced. Secret courts, secret charges, secret programs targeting entire subsections of the population, were expressly forbidden by the Founding Fathers as totalitarian in nature. In February of this year, Obama boasted during a Google Plus “Fireside Chat” that his was “the most transparent administration in history”. The ability of politicians to lie with sociopathic expertise is well documented, hence, my lack of faith. The government and the Obama White House in particular do not deserve our trust. Trust has to be earned… Argument #4: Surveillance Programs Are Essential To The Safety Of The Public At this point I find that anyone who still uses the “safety” position to justify the trampling of our freedoms is a lost cause. Years ago, when the surveillance grid was being put into place through legal chicanery, the common skeptic would insist that such subversive laws had not yet hurt anyone, and that the concerns of the Liberty Movement were “overblown”. Today, it’s no longer about theory. Our cultural pain is real, people are being targeted, people are suffering, and it’s only going to get worse from here on. And, as we warned a long time ago, the concept of “collective safety” would be the primary persuasion technique used to lead America further into oblivion. In a race to spin the leak of PRISM, lawmakers and establishment shills have come out in droves to suggest that the secret surveillance state has “stopped terrorist attacks” and “saved lives”. Of course, because all the details of the program are classified, we’ll never see any proof that such claims are true. What a conundrum. Frankly, I know enough about government sponsored terrorism to understand that even if PRISM thwarted an attack, our clandestine alphabet bureaucracy has created far more death and destruction than they have ever prevented. In the end, I couldn’t care less if PRISM stopped a terrorist act. The point is irrelevant. Our civil liberties are not subject to the supposed success of an unconstitutional government action. The promise of safety does not nullify our rights, nor does it give government capital to do whatever it pleases. Comfort Means Death I believe the establishment has moved away from the denial of so many abuses because it hopes to convince us that this is the “new normal” of our society. They want us to embrace the surveillance state and become comfortable in its cradling arms. I do not plan to get “comfortable”. When political villains no longer fear the exposure of their villainy, it is time to start worrying. There has been a lot of unrestrained conjecture on the motivations of the suddenly world-famous Edward Snowden. The fact is we still know very little about him, and for now I will reserve judgment; partially because I know that one day people like myself could be accused of “fomenting controlled opposition” or “working for the enemy”. Our culture has become so cynical that we refuse to believe that anyone does anything anymore out of a sense of principle. Whatever Snowden’s original intentions, I find his admitted reasons inspiring. When asked why he forced the truth of PRISM into the mainstream, Snowden replied: "I don't want to live in a society that does these sort of things ... I do not want to live in a world where everything I do and say is recorded. That is not something I am willing to support or live under…" "I'm willing to sacrifice all of that [career and former life] because I can't in good conscience allow the U.S. government to destroy privacy, Internet freedom and basic liberties for people around the world with this massive surveillance machine they're secretly building." "My sole motive is to inform the public as to that which was done in their name and that which is done against them…I understand that I will be made to suffer for my actions. I will be satisfied if the federation of secret law, unequal pardon and irresistible executive powers that rule the world that I love are revealed even for an instant." The surveillance machine is the key to control. When each person feels the eyes of the state constantly upon them, dissent and rebellion becomes unthinkable. At the very least, those of us who are aware of the great Orwellian shift before us must take an immovable stand. The right to privacy is an inherent right of natural law. No individual or government system should be allowed legal precedence to invade my privacy, and all people have the right to be treated as innocent until proven guilty rather than guilty until proven innocent. As an individual, I do not owe the collective, or the government, a constant update on whether or not I am a "threat". In fact, I don't owe anyone anything. If someone continues to treat me as an enemy and constantly tramples my natural right to privacy, I am going to fight them, and I am going to hurt them, perhaps mortally. This is what people who support surveillance society need to understand; there will be consequences for their trespasses against the natural rights of others. There can be no negotiation. There can be no compromise. The surveillance state must be erased. |
06-13-13 | THESIS | MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - June 2nd - June 8th |
RISK REVERSAL | 1 | ||
JAPAN - DEBT DEFLATION | 2 | ||
BOND BUBBLE | 3 | ||
EU BANKING CRISIS |
4 |
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SOVEREIGN DEBT CRISIS [Euope Crisis Tracker] | 5 | ||
CHINA BUBBLE | 6 | ||
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision!
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06-10-13 | THEMES | 37 - Cyber Attack or Complexity Failure |
TO TOP | |||
MACRO News Items of Importance - This Week | |||
GLOBAL MACRO REPORTS & ANALYSIS |
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US ECONOMIC REPORTS & ANALYSIS |
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CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES | |||
KEYNESIAN MULTIPLIER - Insufficent Wealth Being Created from Debt Increases More On the Deflationary Bust Risk Charles Gave GavKal via ZH "In an environment of permanent low interest rates there is no impetus on behalf of the private sector to spend for growth, either in the form of capital spending or the hiring of incremental workers. The only net money exchange is the issuance of debt to fund dividends and stock buybacks: or simple EPS-boosting balance sheet arbitrage as shown most recently here." This is what I will, for the purposes of this paper, call my “Keynesian multiplier” - it is simply the arithmetical difference between growth in wealth and growth in public debt—on which I compute the seven-year rate of change. Milton Friedman’s “permanent income hypothesis” - Does it makes sense, or not? i.e., are economic agents rational enough that when they see an increase in government debt, they will increase their savings, safe in the knowledge that they will have to pay for the debt increase down the road? Or whether economic agents are just too shortterm focused to project themselves that far? PERMANENT ASSET HYPOTHESIS: Modifying the above idea somewhat, which probably best applies in asset-rich, ageing countries. Basically, as interest rates move ever lower, retirees, pension funds and insurance companies needing to a certain fixed amount of return are forced to buy ever more fixed income. So low rates and rising public debt issuance, instead of encouraging more risk and renewing animal spirits, instead pushes investors feeling ever poorer into increasingly defensive, and yield generating, assets. In essence, the perception that assets will not generate enough income going forward encourages the average saver to increase his savings, which is the precise opposite of the stated goal. This law of unintended consequences may help explain why the private business sector’s demand for credit remains limp, even though money is being lent for free.
If the multiplier is expanding, this tells us that an increased level of debt should lead to a greater increase in the household net worth over seven years. And vice-versa. This allows us to roughly evaluate how many dollars of private wealth are created by one more dollar of public debt. Let us look now at the relationships between our Keynesian multiplier and certain economic variables. The chart below shows that the marginal efficiency of public debt, at least in the US (public spending in emerging markets from a low base usually improves productivity) has been declining structurally since 1981. And it seems that this marginal efficiency has now reached a negative level. One initial indication that the Keynesian multiplier was now shrinking was the US boom that followed the Clinton/Gingrich balanced budgets and era of government deleveraging between 1997 and 2000. A reality which brings us back to one of the greatest debates between Keynesians and Austrians as to whether Milton Friedman’s “permanent income hypothesis” makes sense, or not; i.e., are economic agents rational enough that when they see an increase in government debt, they will increase their savings, safe in the knowledge that they will have to pay for the debt increase down the road? Or whether economic agents are just too shortterm focused to project themselves that far? Modifying the above idea somewhat, we have, in the past, come up with a “Permanent Asset Hypothesis” which probably best applies in asset-rich, ageing countries. Basically, as interest rates move ever lower, retirees, pension funds and insurance companies needing to a certain fixed amount of return are forced to buy ever more fixed income. So low rates and rising public debt issuance, instead of encouraging more risk and renewing animal spirits, instead pushes investors feeling ever poorer into increasingly defensive, and yield generating, assets. In essence, the perception that assets will not generate enough income going forward encourages the average saver to increase his savings, which is the precise opposite of the stated goal. This law of unintended consequences may help explain why the private business sector’s demand for credit remains limp, even though money is being lent for free. Of course, credit demand may also be weak because there is no immediate reason to expect the rise we have seen in US (and global) financial assets should help boost median incomes. So far it has not: And in a world where it does not pay to borrow, one should expect a structural decline in the velocity of money to take place. Which is what the next chart is indicating: And in a world where it does not pay to borrow, one should expect a structural decline in the velocity of money to take place. Which is what the next chart is indicating: With the Keynesian multiplier now negative, one would expect very low growth in volumes and nominal GDP. And this, of course, is what we are seeing. Despite the massive stimulus, and the improvement in the US trade balance (thanks to the energy revolution and the US manufacturing renaissance), the US economic expansion remains rather unimpressive. The recent moves in bond yields would seem to suggest that markets are expecting that the economic lift-off is finally about to arrive; either that or that Ben Bernanke will soon throw in the towel and start normalizing monetary policies. Given that the odds of the latter are lower than a snowball in hell (from afar, it usually feels as if the Fed chief has made his motto that of George Bidault’s: “I don’t know where we are going, but we will get there without detours”), it is more likely to be the former than the latter. The problem, for me, is that I struggle to believe that we are on the verge of a new global economic expansion. Instead, if structural growth is to now be dragged lower by the fact that the Keynesian multiplier has gone negative, and with governments continuing to spend like sailors on shore leave in Hong Kong despite the drag on productivity and structural growth, then we cannot really expect long rates to move decisively higher. Summarizing the above: if Bernanke is honestly curious why the economy remains broken, and none of his "central" tinkering has done much to boost the Keynesian multiplier and with it any prospects for real economic growth, he suggest he take a long, hard look in the mirror. |
06-11-13 | MONETARY | CENTRAL BANK |
Market Analytics | |||
TECHNICALS & MARKET ANALYTICS |
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BOND MARKET - Tremors Getting Louder Bond Market Tremors Get Louder 06-11-13 Zero Hedge It appears the cracks in the armor of the central bankers created by an over-enthusiastic BoJ's impact on the quadrillion JPY JGB markets are now rippling through the global market place. While every talking head that dares to speak has proclaimed the weakness in bonds as nirvana for equity bulls, it seems they were wrong, very wrong. As bond market tremors ignite everywhere, so equity markets come a little unglued at the prospect that the Fed, ECB, BoJ, and PBOC may not be so omnipotent after all... Bond markets... |
06-11-13 | BONDS YIELD CREDIT |
ANALYTICS |
BOND SCARE - Mainstream Saying Bond Market HAS or IS Reversing Its Long Trend SOCGEN: 'Are We Facing A Bond Crash? Not Yet, But...' 06-10-13 Socgen via BI Recent moves in the US and Japanese bond markets have some people worried if interest rates are doomed to surge. The consensus certainly seems to think so. Goldman Sachs' Francesco Garzarelli has warned clients that the bond sell is "for real" with 10-year Treasury yields likely to head to 2.5% later this year. In a note to clients this morning, Societe Generale's Patrick Legland reminds clients that their analysts expect the 10-year Treasury surging to 2.75% by the end of the year. Legland communicated this in a note titled "Are We Facing A Bond Crash? Not Yet, But..." In the note, he discuss the risk of a disorderly bond market sell-off. Here's the "but" explained:
So, the risk of a bond crash is not imminent, but certainly on the table.
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06-11-13 | BONDS YIELD CREDIT |
ANALYTICS |
EMERGING MARKETS - Feeling the US "Exportation" of Inflation This Is Increasingly Looking Like An Emerging Market Bond Meltdown 06-10-13 BI The massive sell-off across emerging markets continues in force. One of the big themes in global markets over the past month has been the rise in U.S. Treasury yields and the attendant strength in the U.S. dollar. This has caused a big unwind in emerging markets, as EM currencies depreciate against the dollar and higher-yielding EM government bonds look less attractive relative to Treasuries. The 10-year Turkish government bond yield rose 22 basis points to 4.22%. In South Africa, 10-year yields rose 28 basis points to 7.84%. And in Mexico, 10-year government bond yields widened 5 basis points to 3.33%. And if you're looking for a really ugly chart, inflation linkers in Brazil are getting absolutely massacred. (Inflation linkers are just bonds linked to inflation, like TIPS in the U.S.) |
06-11-13 | BONDS YIELD CREDIT
BRIEF |
ANALYTICS |
VALUATIONS - Macro Trends in Wages and Profits The Real Underpinning for Equities 06-11-13 Gavyn Davies, Financial Times Global equities have, so far, survived the bout of global deleveraging which followed Ben Bernanke’s remarks about slowing the pace of QE last month, though there have been nasty signs of volatility in Japanese and some emerging markets. Investors have, unsurprisingly, become temporarily obsessed by whether the Fed will taper its asset purchases in September or December. However, in the great scheme of asset valuation, this is nothing more than a passing detail. In the longer term, what matters is real factors, like
In recent years, the Fed has reduced the bond yield but the market has, simultaneously, required a higher ERP, so the overall discount rate on equities has remained broadly unchanged
This, however, does not necessarily mean that equities are fairly valued. A common concern among investors is that the profit share in the US economy is currently abnormally high, which is one reason why US equities have performed so well since 2009. It is frequently argued that the profit share must eventually “mean revert”, and when that happens the market will have to revise downwards its estimates of the sustainable path for corporate earnings. Equities will tumble, not because of a hostile Fed, but because the fundamental earning capacity of corporate America will be found wanting. This, however, seems to underplay the persistence and global breadth of the rise in the profit share, and the accompanying decline in the wage share, in the last three decades. It is far from clear why this trend should “mean revert” in the foreseeable future. The recent behaviour of the wage and profits share in the US is familiar territory for most investors. After a century or more in which the profit share in GDP had fluctuated around a constant mean, the rise in the last few years has taken it above previous peaks, and the wage share has plumbed unprecedented depths. This has occurred because real wages in the US have grown much more slowly than output per head, which means that all of the gains from productivity growth have dropped into the hands of shareholders rather than workers. I am certainly not making the case that this has been socially desirable, especially since the rise in real wages which has occurred has been concentrated at the very top of the income scale. The resulting change in the distribution of income and wealth is a major political issue (see David Blake’s penetrating analysis here), but from an investor’s point of view, it has provided a critical underpinning for rising share prices. In the past, market economies have tended to erode unusually high profit margins through price competition which has restored real wages to their previous trends. That has always been seen as the natural order of things in a capitalist system. But there is no sign of it happening this time. It is important to recognise that similar patterns have been seen not just in the US, but throughout the developed world, starting in the late 1970s [1]. In fact, the gross profit share in the advanced economies has risen by about 10 percentage points of GDP over three decades, and the wage share has fallen by the same amount (see this analysis just published by the International Labour Organisation, well summarised by Timothy Taylor here). This is an enormous upheaval in the distribution of income in the global economy, and it has happened in an almost continuous straight line over the entire period. It seems to have been impervious to every kind of shock, including
Not only has this pattern been repeated in almost every developed economy (though the UK and some of the less successful eurozone economies are partial exceptions over recent years), it has also been seen in the emerging economies as well. This is even more surprising, since conventional trade theory (ie the Stolper-Samuelson theorem) predicts that the returns to the abundant factor of production, which is clearly labour in the emerging economies, should rise as more trade takes place. The Stolper-Samuelson theorem (explained here) assumes that neither capital nor labour is mobile across borders. With capital increasingly mobile since the 1980s, the predicted rise in the wage share in emerging economies has not happened. What has happened instead is that the returns to capital have increased throughout the world, while the returns to labour have been severely squeezed. Workers have not had sufficient market or political power to prevent this. The cumulative effect on corporate earnings, and therefore on equity markets, has been enormous. Consider the following. If the 10 percentage points decline in the wage share had not occurred, and everything else had (implausibly) stayed the same, then gross profits in the developed economies would have been about one-third lower than they are today and net profits (after depreciation) would have been about two-thirds lower. In addition, since the ILO reports that much of the income transferred from labour to capital has been used to pay increased dividends, the consequent rise in the dividend yield has probably been very large as well. The conclusion is two-fold.
—————————————————————————————– Footnote [1] The data for international economies relate to the “adjusted” wage and profit share, after excluding the self employed. The advanced economies are a GDP-weighted aggregate of the US, eurozone, Japan and the UK. The emerging economies are a simple average of Korea, Turkey, Mexico, Hungary and Poland. Source: EC Ameco database. |
06-12-13 | MACRO VALUATIONS |
ANALYTICS |
EARNINGS - Estimates Becoming Very Suspect For Anyone Who Still Thinks Earnings Matter 06-10-13 Zero Hedge As Mike Tyson once ominously noted, "everyone has a plan until they get punched in the face," and it seems the rampage of equity bulls have some plan that many more prosaic fundamental analysis-based investors are unaware of (as we showed here). The 'punch' in the face will come; but in the meantime the following chart may be just the 'jab' that softens them up. As ThomsonReuters notes, of the 116 second-quarter earnings preannouncements given by S&P 500 companies, 93 of them have been negative, while only 14 have been positive. The resulting 6.6 negative to positive guidance ratio is the most negative since the first quarter of 2001. Nothing to see here, move along. Of course - that doesn't matter - as we already know... fundamentals are irrelevant in a market of expanding hope-driven multiples... because margin 'faith' is keeping the dream alive... Charts: Barclays and ThomsonReuters (h/t Brad Wishak At NewEdge) |
06-12-13 | FUND-METNALS EARNINGS |
ANALYTICS |
PATTERNS - Bond Scare Unfolding as Predicted Treasury Yields Spike To New 14 Month Highs 06-10-13 Zero Hedge 30Y rates are up 4bps and 10Y rates up 5bps as a combination of MBS convexity hedging, Taper chatter, and growth hopiness flutter across the bond market. This has backed 10Y and 30Y rates up to their highest since April 2012 - getting close to some significant support/resistance from the last few years. Mortgage spreads have stabilized up here at their highest since July (around 83bps) but just as a delicate reminder, the last time bond yields spiked to this degree, equities began to wonder just what was going on? With so much of the investing public having bought bond-like-stocks at the behest of every talking head and asset-gatherer under-the-sun, we wonder at what point do the arguments about a great rotation from bonds to stocks (since gosh, 10Y bond prices are down 3% in the last month) turn to a rotation from bond-like-stocks to bond-like-bonds... Or more simply, the market's (or the Fed's) realization that 'normalizing' rates here will crush the economy as interest expense surges (think Japan...) Charts: Bloomberg |
06-11-13 | BONDS YIELD CREDIT
BRIEF |
ANALYTICS |
PATTERNS - Bond Scare Unfolding as Predicted -2 10Y TIPS Yield Above 0%; Highest In 19 Months 06-10-13 Zero Hedge After 19 months in the red, yields on the 10Y TIPS have just shifted into positive territory. We saw a similar surge in TIPS yields in Q4 2010 / Q1 2011 which did not end well for stocks. This comes along with the simultaneous drop in the Fed's inflation gauge - five-year forward breakevens - which is now at its lowest in 9 months. This kind of drop has previously led to further QE action by the Fed, and right on cue...
As Barclays notes:
10Y TIPS yield... 5Y 5Y Forward inflation expectations... The embedded par floors in TIPS have not richened as they have in past episodes of market stress suggesting this move is more a shift in fundamental sentiment than technical/flow driven... Charts: Bloomberg |
06-11-13 | BONDS YIELD CREDIT
BRIEF |
ANALYTICS |
VALUATIONS - Market Expensive According to 5 Year Rolling Forward PE The Stock Market Is Broadly Expensive According To This Uncommon Measure 06-08-13 Morgan Stanley via BI The simplest way to value stocks or the stock market is to take its price and divide it by earnings (i.e. P/E). There are many ways to apply the P/E. For the stock market, strategists often take the price of the index and divide it by the index's earnings. In his June monthly chartbook, Morgan Stanley's Adam Parker considers the stock price against expected earnings (i.e. forward P/E). Then he compares that ratio to the stock's average forward P/E in the past five years. Then Parker saw how many stocks were trading above its average historical forward P/E. That's what's charted below. Simply put, this chart shows that more than half of the stocks in the stock market are trading above their own average valuations. In other words, the stock market appears to be broadly expensive. |
06-10-13 | FUND-MENTALS VALUATIONS PE |
ANALYTICS |
ANALYTICS - Fund Managers forced to Chase Yield Some Charts from Investing Caffeine 06-03-13 PERCEPTION OF REASONABLE PE
FUND MANAGERS MOST GO WHERE THE PERCEIVED YIELD IS FEW BELIEVE BUT SOME MUST CLIMB THE PERCEIVED "WALL-OF-WORRY"
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06-10-13 | FUND-MENTALS EARNINGS |
ANALYTICS |
EARNINGS - Estimates Simply Not Believable This Is What You 'Believe' If You Are Buying Stocks Now 06-10-13 @AndrewYorks via ZH Each and every day we are told by asset-gatherers everywhere that stocks are cheap, money-on-the-sidelines will 'greatly rotate', and now that any 'Taper' is good news as it signals the Fed 'believes'. However, it would appear that the market is either a 'hope-discounting mechanism' or a serial non-linear extrapolator; as, just for clarity, this is the 'hope' that equity bulls are buying currently about the next three years' earnings... what could possibly go wrong? It seems the serial extrapolators are hard at work once again... And as far as QE stoking inflation - still don't think it exists?
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06-10-13 | FUND-MENTALS EARNINGS ESTIMATES |
ANALYTICS |
COMMODITY CORNER - HARD ASSETS | PORTFOLIO | ||
GOLD - Tentacles of Financial Repression France Prohibits Sending Currency, “Coins And Precious Metals” By Mail 06-07-13 Goldcore via Market Oracle France has prohibited the sending of currency, “coins and precious metals” by mail. In new legislation which was enacted May 23rd, the French government decreed that it is forbidden to send all forms of currency - coins and cash and all forms of precious metals – coins, bars and jewellery by mail. The legislation was published on Legifrance, the French government entity responsible for publishing legal texts online and can be seen here. It was not announced by the government and not covered in the media. There were no communications and nobody in the government justified or explained this decision. The legislation says that “the insertion of banknotes, coins and precious metals is prohibited in mailings, including the insured items, registered items and items subject to formalities certifying deposition and distribution. " Some have suggested that the decree is to limit what is known in France as “the anonymous market”, the market in which no taxes are paid and people are free to trade without the supervision of banks and government. However, euro coins and notes and gold bullion coins and bars attract no tax in France and therefore this is more likely to be an attempt to discourage the ownership of gold bullion and cash outside of the banking system and is a form of capital control. It may also be an attempt to restrict the growing private market in France of people buying bullion online through Ebay which is increasingly popular. The freedom of people to trade amongst themselves is a form of civil liberty as is the right to privacy. The selling and the buying of precious metals in France are already subject to strict regulations. Until September 2011, citizens could easily buy and sell gold coins and bars with cash but this was forbidden then when French citizens were forbidden to buy with cash in person and had to buy precious metals by trade mail, crossed cheque and by wire transfer or be “punished by a fine of fifth grade” which is a fine of some €1,500/oz. The government decree does not specify that other independent companies cannot send gold and or silver coins or bars by mail. Indeed, it is only the French public company or national post company, La Poste that is forbidden in the decree. However, 3 months ago in March, Fedex began stopping French people from taking delivery of precious metals. At the start of the year, UPS began stopping French people from taking delivery of precious metals. Perhaps not coincidentally, in recent days Fedex have stopped allowing companies and individuals to send or receive gold and other precious metal bullion coins and bars by insured mail in Germany and the UK. This is an important story that bears watching as it appears that governments internationally, from India to France are attempting to control, restrict and make it difficult for their citizens to own bullion. |
06-10-13 | GOLD | PRECIOUS METALS |
GOLD - Confiscation as Part of Financial Repression is Still A Possibility Don’t Dismiss The Possibility Of Gold Confiscation 06-07-13 Jeff Thomas via Casey Research via ZH If you hold precious metals in your portfolio, there is a good chance you fear hyperinflation and the crash of fiat currencies. You probably distrust governments in general and believe they are self-serving and have no interest in your economic well-being. It is likely that your holdings in gold are your lifeline – your hope to get you through these times while holding on to your wealth. But have you ever given any thought to the possibility of having this lifeline confiscated by the authorities? In my conversations with friends and associates, I have often raised this question. The typical responses:
I consider these "wishful thinking" responses. It's an interesting thought that the greatest threat to gold and silver investment might not be the possibility of losing on the speculation, but the government taking it away from you. It's a thought that I've found few want to even think about, let alone discuss. If you fall into this camp, you're in good company. Some of the forecasters whom I respect most highly also treat it either as unlikely or at best, "something we may need to look at in the future." To date, in conversing with top advisors worldwide, the two primary reasons they believe gold will not be confiscated are:
Yes, this is quite so. They would be changing their official view… which, of course, they do all the time. But I submit that all that they need to do is put the proper spin on it.
I expect that this is also true, but that a plan will be put in place to deal with that resistance. We'll address both of these assertions in more detail shortly, but first, a bit of history. In 1933, Franklin Roosevelt came into office and immediately created the Emergency Banking Act, which demanded that all those who held gold (other than personal jewelry) turn it in to approved banks. Holders were given less than a month to do this. The government then paid them $20.67 per ounce – the going rate at the time. Following confiscation, the government declared that the new value of gold was $35.00. In essence, they arbitrarily increased the value of their newly purchased asset by 69%. (This alone is reason enough to confiscate.) Today, the US government is in much worse shape than it was in 1933, and it has much more to lose. The US dollar is the default currency of the world, but it's on the ropes, which means the US economic power over the rest of the world is on the ropes. I think that readers will agree that they will do anything to keep from losing this all-important power. The US government has essentially run out of options. At some point, the fiat currencies of the First World will collapse, and some other form of payment will be necessary. Yes, the IMF is hoping to create a new default currency, but that, too, is to be a fiat currency. If any country were to produce a gold-backed currency in sufficient supply, that currency would likely become the desired currency worldwide. Fractional backing would be expected. As most readers will know, the Chinese, Indians, Russians, and others see the opportunity and are building up their gold reserves quickly and substantially. If these countries were to agree to introduce a new gold-backed currency, there can be little doubt that they would succeed in changing the balance of world trade. That said, the US government is watching these countries just as we are, and they are aware of the threat of gold to them. The US government ostensibly has approximately 8,200 tonnes of gold in Fort Knox, although this may well be partially or completely missing. Additionally, it ostensibly holds a further 5,000 tonnes of gold in the cellar of the New York Federal Reserve building. Again, there is no certainty that it is there. In general, the authorities don't seem to like independent audits. In fact, there are rumors that the above vaults are nearly or completely empty and that the above quoted figures exist only on paper rather than in physical form. While there is no way to know this for sure, it's not out of the question. Either way, if the US and the EU could come up with a large volume of gold quickly, they could issue a gold-backed currency themselves. It's a simple equation: The more gold they have = the more backed notes they can produce = the more power they continue to hold. By seizing upon the private supply of their citizens, they would increase their holdings substantially in short order. Either that or they could just give up their dominance of world trade and power… What would you guess their choice would be? It is entirely possible that the US government (and very likely the EU) has already made a decision to confiscate. They may have carefully laid out the plan and have set implementation to coincide with a specific gold price. So how would this unfold? Let's imagine a fairly extreme scenario and ask ourselves if it could be pulled off effectively:
Again, this hypothetical scenario is an extreme one. The reader is left to consider just how likely or unlikely this scenario is and what that would mean to his wealth. But bear this in mind: If the above scenario were to take place soon, the average citizen would have mixed feelings. They would be glad that the "evil rich" had been taken down a peg, but they would worry about the idea of the government taking things by force, because they might be next. It would therefore be in the government's interests to implement confiscation only after the coming panic sets in – after the next crash in the market, after it becomes plain to the average citizen that this really is a depression and he really is in big trouble. Then he will be only too glad to see the "greedy rich" go down, and he won't care about the details. As terrible as the thought is, it seems unlikely to me that the government will not confiscate gold, as they have little to lose and so much to gain. Those who own gold would prefer to think that this cannot happen, but they have quite a lot riding on that hope and precious little evidence to support it. It is entirely possible that this scenario will not take place, just as it is possible that confiscation will not take place. The purpose of this article is to spark some serious discussion – both for and against the possibility. Investors are, by their very nature, planners. It may take a community of investors to develop a legal plan to deal with the above eventuality. Time to get started. The government can't easily confiscate what's outside its own borders, which is why it's working night and day to make it as difficult as possible for you to protect your assets abroad. This sad reality means that you need to take action before it's too late. Your first step? Learn how to start internationally diversifying your wealth – and your life. From investing in international markets and opening offshore bank accounts to setting up an offshore LLC or annuity, Going Global 2013 will tell you how and where to expatriate your wealth. It also presents solid, up-to-date information on internationalizing your life, from getting a second passport to choosing a good place to live. Don't allow yourself to be milked by your home government any more. Get started on internationalizing your life today... while it's still possible. |
06-10-13 | GOLD | PRECIOUS METALS |
PRIVATE EQUITY - REAL ASSETS | PORTFOLIO | ||
AGRI-COMPLEX | PORTFOLIO | ||
SECURITY-SURVEILANCE COMPLEX | PORTFOLIO | ||
THESIS Themes | |||
2013 - STATISM |
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PRISM-5 - The Sacrifice it Takes to be A Government Whistleblower NSA Whistleblower Reveals Himself 06-09-13 Zero Hedge
- Edward Snowden, 29, PRISM Whistleblower The US government will be happy to learn it will save several million dollars on the criminal inquiry into the identity of the NSA's PRISM whistleblower because moments ago in a lengthy profile by the Guardian's Glenn Greenwald, said whistleblower has decided to reveal himself to the world: he is Edward Snowden, 29 years old. Originally from Elizabeth City, NC, a Maryland community college dropout and former Special Forces trainee, the 10 year "veteran" with the NSA, most recently in its Hawaii office under the employ of defense contractor Booz Allen Hamilton, has just made history and joined the pantheon of such legendary whistleblowers of the US government' secret activities as the Pentagon Papers' Daniel Ellsberg and Wikileaks' Bradley Manning. Last but not least, Edward is currently residing in Hong Kong, out of harm's (read America's) way. Who is Edward and how did he end up at the NSA? The Guardian has the full story.
Why did he wait so long?
That did not happen. So he proceed to reveal what he knows about the NSA to a newspaper which the NYT pejoratively referred to as a "British News Site." Well, he certainly did not go with any of the news sites on favorable terms with the current administration. Instead, "He purposely chose, he said, to give the documents to journalists whose judgment he trusted about what should be public and what should remain concealed." Which of course brings up the question: now what, and why risk what was otherwise a "comfortable life" in a Hawaiian paradise?
That said, he has left the US and is now in Hong Kong, which in the New Normal is a safer venue for those exposing what until recently was considered a massive conspiracy theory.
Snowden's future is bleak to say the least, and if Bradly Manning's recent travails are any indication, a life in prison may be an upside option:
Now the great debate begins: is sacrificing it all in the name of ethical principles under a totalitarian regime now fully set on destroying you, worth it? And since we are dealing with one grand revealed conspiracy, another one will naturally emerge: is Snowden's explanation of his motives honest and accurate? Why now and why him? Surely at least one other person has worked at the NSA in the past decade whose thought process has been identical and who put the value of democracy over and above that of one's personal career development and safety. Most importantly, the ball is now in Obama's court, and the constitutional scholar's every action will be studied under a microscope by civil liberty defenders (both real and paid for) everywhere while one Jon Corzine withdrawls millions of dollars from East Hampton ATM machines unhindered, and without any scruples. Finally, we would like to thank Snowden for putting a nail into the coffin of all those who use the term "conspiracy theorist" pejoratively. Because whatever his motives, whatever the outcome of this dramatic escalation between the people's right to know and a government intent on hijacking all civil liberties one by one, Snowden has showed that the distance from Conspiracy Theory to Conspiracy Fact is just one ethical judgment away. For those curious, here is the full text of the US-Hong Kong Extradition treaty. * * * Snowden's interview with the Guardian's Glenn Greenwald (produced by WaPo's Laura Poitras) can be seen after the jump. |
06-10-13 | THESIS | |
2012 - FINANCIAL REPRESSION |
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DEBT DEATH SPIRAL - Now Below the Event Horizon The Smoke And Mirrors Are Running Out 06-11-13 Monty Pelerin's World blog via ZH Those who believe the economy is recovering are ignorant of the facts. Other than the Great Depression no US recovery (and I don’t believe we are in a recovery) taken longer. Eventually it may take more than a decade like the 1930s. Or perhaps it will be like Japan which is in its third decade of “recovery.” Politics and Economics The truth is that our economy is spent, exhausted and filled with misallocations and distortions made much worse by government interventions. There is no recovery, nor will there be one until a massive purge (usually referred to as a depression) occurs. This event will result in bankruptcies that release scarce, misallocated physical capital from unproductive and unwanted areas to places where it is needed and can be utilized efficiently. Rather than allow this pre-condition to an economic recovery and a growing, efficient economy, politicians want to prevent it. They use smoke, mirrors and propaganda (lies) to hide the reality of our sick economy. Their obfuscations continue, but the effective life is limited. What politicians do to the country beyond their term in office means nothing to them. Their concern is only for themselves and the short-term that exists between elections. As a result they rob from the future to hide the true conditions of the present. Those still unborn will be paying for their criminal economic charade. Economic Conditions So how bad is the economy? Michael Shedlock, “Mish” is among the more prolific as well as more incisive financial analysts on the web. His site is always worth reading, but a recent post is essential. To impress upon you the seriousness of the situation and to encourage you to read his post, I quote some of his points (anything in red is my emphasis):
In terms of debt and inflation, Mish determined that:
The debt to GDP ratio reached the highest in history just before the 2008 collapse. It remains in this record territory and is just as unsustainable now as it was in 2008:
Consumers reduced their debt levels, although probably not enough. They are still strapped with more debt than many can properly service. Consumption, as a result, has dampened as more income goes to debt service and less debt is added. That appears to be a condition that should prevail for several more years. Remember, the announced reason for the loose Fed policy was to drive consumption. As Mish observed:
Obviously, it has not worked. Read Mish’s article to view most of his observations in chart format. Desperate Government Although Mish does not make this point, I believe it is a relevant one. Government continues to borrow and spend in an effort to hide the truly rotten condition of the economy. This action was begun under the guise of stimulating a recovery. It is obvious that it has not worked. It was obvious to some that it could never work. Despite its obvious failure, theft from future generations continues. There are two main reasons for this, in my opinion:
Government has exhausted its faux solutions. Nothing they do, except reduce spending, can help the economy. Reducing spending means another Great Depression and the exposure of the economic scam they have been running. Thus, spending will likely continue as will the Federal Reserve enabling, euphemistically called quantitative easing. A Fly In The Ointment There is a limit on how long the fraud continues. The government is in what is known as a debt death spiral. They must borrow money to repay prior debts. It is as if they are using their Visa Card to make an American Express payment. The rate of new debt additions dwarf any rate of growth the economy can possibly achieve. The end is certain, only its timing is unknown. Once interest rates begin to rise, and they will, it is game over. Short-term Treasury interest rates are normally 3% with no inflation. In an inflationary environment, a premium for expected inflation is tacked on to that 3%. Under today’s conditions, ST Treasuries could easily rise to 6 – 9%. The low end of the range represents a rise in rates of more than 5.5%. If the debt outstanding, most of which is short-term, is $17 Trillion, that would been a rise in interest expense of close to a Trillion dollars annually. That would be added to deficits which are expected to be around a Trillion dollars per year. The high end of the range would produce a deficit in excess of $2.5 Trillion per year. At the low end of the interest rate range, deficits would exceed more than 10% of GDP, putting us right up there with the sick European countries. At the high end, we would be like Greece without its glorious history and climate. It gets worse than the above numbers convey. When interest rates rise, the economy will contract and probably severely. Then cries for more stimulus would be heard. An additional Trillion dollars or so would likely be added to the deficit, although many would want multiples of that. In either case, we become Greece on steroids. Another Fly In The Ointment There are those who say the US government cannot go broke because it has a printing press. They argue that the level of deficits don’t matter because the US can just print more money. Monetary fraud, which this is, also has a limit. Only paper and ink limit the amount of currency the government can print. However, government does not control the value of the money which is determined by the public. Printing money depreciates the value of money (otherwise known as inflation). Market forces (economic actors) determine what this value is via supply and demand interaction. When money is expected to buy less tomorrow than it does today, people will spend it sooner. This drives inflation even higher. Ludwig von Mises described this end phase as a crack-up boom:
Mises spent much of his life studying money, the business cycle and inflation. He correctly identified the choice that now stands before our political class (my emboldening added):
In the event of the total catastrophe, savings and fixed income become worthless. The middle class of a country is wiped out in terms of wealth. Poverty abounds except at the top where those with large wealth and insider information are able to protect themselves and enhance their real wealth. Inflation does not destroy wealth; it merely redistributes it. How Does It End? Neither ending is attractive, but opportunities for one or the other have been squandered. Sadly, the decision as to which route is taken is in the hands of our criminal political class. Their behavior suggests that they will do whatever it takes to continue the charade. They want to maintain their scam for as long as they can.. If they are successful, a crack-up boom is coming. History shows this ending in most all countries in our condition.
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06-11-13 | THESIS | |
2011 - BEGGAR-THY-NEIGHBOR -- CURRENCY WARS |
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2010 - EXTEN D & PRETEND |
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THEMES | |||
CORPORATOCRACY - CRONY CAPITALSIM | |||
THE REALITIES OF "TOO BIG TO FAIL!" Politics is ablout Power and It's Mother Milk: Money! |
CRONY CAPITALISM
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GLOBAL FINANCIAL IMBALANCE | |||
SOCIAL UNREST |
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CENTRAL PLANNING |
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STANDARD OF LIVING |
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CORRUPTION & MALFEASANCE | |||
NATURE OF WORK | |||
CATALYSTS - FEAR & GREED | |||
GENERAL INTEREST |
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Tipping Points Life Cycle - Explained
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