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ARE CENTRAL BANKERS CRIPPLING THE GLOBAL SUPPLY CHAIN?
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Charles Hugh Smith
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Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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ARE CENTRAL BANKERS CRIPPLING THE GLOBAL SUPPLY CHAIN?
Gordon T Long and�Charles Hugh Smith�begin 'pealing the onion' on a deteriorating global supply chain and what the root cause is.
Charles Hugh Smith & Gordon T Long
VIDEO: 35 Minutes - 21 Slides
SAMSUNG'S GALAXY BATTERY JUST THE TIP OF THE ICEBERG
Though the Samsung Galaxy Note 7 battery problem is presently receiving a tremendous amount�of media and public attention, what few appreciate is that it is only the tip of the iceberg of cracks�in the global supply chained as a result of unintended consequences of central bank monetary policies. In this 35 minute video�Gordon T Long and�Charles Hugh Smith�begin 'pealing the onion' on a deteriorating global supply chain and what the root cause is.
Economists have been preoccupied since the 2008 Financial Crisis with stimulating economic growth through policies which attempt to�create Demand. It is debatable whether these Keynesian stimulus programs have succeeded, but what isn't debatable is that cheap money has exploded global supply!
PEAK PROFITS
Though Corporate Profits are presently at all time highs, revenue growth and margins are rolling over and cashflows are falling. This has been placing incredible pressures through out the global supply chain. It is resulting in deteriorating product quality when considered in light of total cost of ownership and whether the customer is actually getting more for less or whether they are now receiving less for more!
WHAT WE CAN LEARN FROM WALMART, WELLS FARGO and PEAK PROFITS
The pressures big distribution players like Wal-Mart are placing on�global�product suppliers is well recognized. What is less recognized is how internal cultures are changing due to increasing pressures and demands. This issue has received the glare of the public spotlight through the deviant behavior of Wells Fargo. What we witnessed during testimony before congress because of the fraudulent creation of thousands of fictional accounts and the resulting firing of thousands of apparent guilty parties is that the top down pressures by executives to meet unrealistic goals is causing workers at all levels to "cheat"!
Senior executives are fired for not meeting quarterly financial goals even if the economy is slowing and profits are at historic levels. Something has to give somewhere and that "give" is occurring in the hidden bowels of product quality.
DETERIORATING QUALITY
Gordon's background allows him to critically examine the quality issues he has personally experienced over the last 6 weeks and what these examples�are indicating. �The examples highlighted include:
Marine Propulsion
Automotive Repair
Dell Hard Drives and HP NIC Cards
Gas Range Lighting
Healthcare
TV Programming
The conclusion is that this is only the initial waves of more to come.
In a conversation Gordon had with the head of Global Supply Chain for a major corporation he was told that focus had been taken off this critical area�over the last few years but was now being urgently attended to. Samsung has added additional urgency as the public and regulators will be intolerant the next time such an event occurs..
PUSHING COSTS TO THE UNSUSPECTING
The cost of poor quality is now being pervasively felt across the entire supply chains. It beginning to reach out and impact all participants. It like a cancer which growths quietly and often it is to late when finally detected.
CONSUMERS GETTING LESS FOR MORE
WHAT WE NEED TO RECOGNIZE
In a “Bottoms Up”, Sound Money,�Competitive,�Capitalism Economy�:
You Get MORE for LESS
In a “Top Down”, Manipulated, Over Regulated , Fiat Crony Economy:
You Get LESS for MORE
WHAT WE NEED TO UNDERSTAND
We are Steadily Getting Less and Less for More and More!
(Moving towards Statism)
Eventually You Get Nothing at the Cost of Everything
SPECIAL GUEST HOST:JOHN RUBINO, Author & Publisher of DollarCollapse.com
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SIGNS OF PANIC!
DEUTSCHE BANK
with John Rubino & Gordon T Long
Published 10-01-16
25 Minute Video
John Rubino and Gordon T Long discuss the unfolding mayhem in the European banking sector and specifically what is behind the panic selling in Deutsche Bank stock.
DEUTSCHE BANK - .... then all of a sudden!
Gordon T Long outlines:
"We have seen this coming for some time and is why in the spring we issued a feature report entitled "Is Deutsche Bank EU's (Lehman + Bear Stearns + Enron)**2? " We were pointing out that the Leverage at Lehman Bros, the Bond Portfolio's at Bear Stearns and the Derivatives at Enron which brought these corporations down, pales in comparison to Deutsche bank which sits on all three of these potential Tipping Points which can cause lost investor confidence and a bank run.
John Rubino says:
"We can stop watching the Italian Banks and start watching the German Banks. Counter-Intuitively the most rock solid banks, in the most rock solid country in Europe have become the biggest systemic risk in the global economy! Part of the reason is the German Banks have been doing in effect something called "Vendor Financing"!
"GERMANY IS ON THE HOOK FOR ITALY, SPAIN / PORTUGAL AND GREECE. WHICH MEANS THE PERIPHERAL COUNTRIES IN THE EUROZONE WHICH CAN'T FUNCTION AS CURRENTLY CONFIGURED ARE A MAJOR RISK FOR DEUTSCHE BANK".... It is becoming increasingly evident the peripherals can't pay back their debts!
People are beginning to understand that the pillars of all this debt may soon blow up!
What is looking like another European banking crisis could quickly become a currency crisis as it is likely to impair the Euro. This is even a bigger global issue as it would likely spill over into the bond market.
IMF WARNING: "Central Banks Losing the Deflation Fight"
Since the derivatives book of Deutsche Bank is bigger than the entire Eurozone economy it additionally means that deflationary pressures are going to cause major disruptions at some point when the underlying loans begin to default and debt rollover gets harder to secure.
"It is clear what they do next, proposals are now coming out of the woodwork from the easy money, Keynesian side of the spectrum which involves massive increases in money creation and government fiscal spending."
WHY ARE FOOD PRICES SUDDENLY FALLING?
Grocery prices have fallen for nine straight months and might possibly be a canary in the coal mine.
"Ultra easy money and ultra aggressive fiscal policy hasn't worked and given us a 'rip roaring" inflationary boom that Keynesian economists say you should get from negative interest rates and trillion dollar per year government deficits. So if it hasn't worked yet and were already seeing growing pockets rollover into deflation than threat is catastrophic for an over leveraged society!"
When you owe huge amounts of money you want your currency to go down in value so you can pay off your debts in a less valuable currency. That is what the world's policy makers want.
WHAT IS HAPPENING IS WE ARE CREATING CONDITIONS WHEREBY WE ARE IN A TRAP WE CAN NEVER GET OUT IF INFLATION FAILS TO MATERIALIZE. DEBT WILL BECOME TO LARGE AND EXPENSIVE TO ROLL OVER IF WE FALL INTO A DEFLATIONARY ENVIRONMENT "
... there is much, much more in this 25 minute video discussion.
SPECIAL GUEST HOST:JOHN RUBINO, Author & Publisher of DollarCollapse.com
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DO UNINTENDED CONSEQUENCES & BREIXT MIX?
with John Rubino & Gordon T Long
Published 06-17-16
39 Minute VIDEO
What are the consequences of BREXIT? Maybe more importantly, what will happen when BREXIT mixes with already existing Unintended Consequences of Central Bank Policies?
Unintended Consequences: “How Do I Get Away From Negative Yields?”
BREXIT
The British campaign featured assertions and allegations tossed around with�little regard to the facts.�Both sides played to emotion, and the�most common emotion played upon was fear.
The margin of victory startled even proponents of a British exit. The “Leave” campaign won by 52 percent to 48 percent. More than 17.4 million people voted in the referendum on Thursday to sever ties with the European Union, and about 16.1 million to remain in the bloc.
IMMIGRATION & EU'S FAILURE TO DEAL WITH THE REFUGEE PROBLEM
“Take control,” resonated with voters who feel that the government is failing to regulate the inflow of people from Europe and beyond.While leaders of the Leave campaign spoke earnestly about sovereignty and the supremacy of Parliament or in honeyed tones about “the bright sunlit uplands” of Britain’s future free of Brussels, it was�anxiety about immigration�— membership in the European Union means freedom of movement and labor throughout the bloc — that defined and probably swung the campaign.
IMMIGRATION PRESSURES ON SERVICES: With net migration to Britain of 330,000 people in 2015, more than half of them from the European Union, Mr. Cameron had no effective response to how he could limit the influx. And there was no question that while the immigrants contributed more to the economy and to tax receipts than they cost, parts of Britain felt that its�national identity�was under assault and that the influx was putting substantial pressure on schools, health care and housing.
TURKEY: The Leave side warned that remaining would produce uncontrolled immigration, crime and terrorism, with hordes pouring into Britain from Turkey, a country of 77 million Muslims that borders Syria and Iraq and hopes to join the European Union
EU POLITICAL SPILLAGE
But the damage won’t likely be isolated to the U.K., the world’s fifth-largest economy. “A Brexit victory will also signal victory for populism in Europe,” said Mr. Kirkegaard. “This referendum has unleashed fairly destabilizing elements into the European project.”
Anti-establishment and�far-right parties in Europe, like the National Front of�Marine Le Pen in France, Geert Wilders’s party in the Netherlands and the Alternative for Germany party will celebrate the outcome. The depth of anti-Europe sentiment could be a key factor in national elections scheduled next year in the other two most important countries of the European Union, France and Germany.
Mr. Cameron felt pushed�into announcing the referendum in 2013 by the anti-Europe wing of his own party, amplified by concerns among other Tories that U.K. Independence Party and Mr. Farage were cutting too sharply into the Conservative vote.
SPECIAL GUEST:MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blogspot.com
An espoused self educated Austrian Economist, �Mike Shedlock / Mish is a registered investment advisor representative for�SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at MishTalk.com
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MISH'S MONTHLY MACRO UPDATE
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26 Minute Video
Mish Shedlock lays out some of the Key Macro Messages in his extensive writings over the last month.
Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
with Charles Hugh Smith & Gordon T Long
31 Minutes - 21 Slides
Charles Hugh Smith and Gordon T Long share their thinking on current financial developments in China.
ISSUE #1 - The World Can No Longer Absorb China's Surplus
The good news is that China produces more than it consumes. This is the opposite of the US which consumers more than it produces.
The bad news is that the world can no longer absorb China's surplus (Production minus Consumption). Global trade has slowed dramatically impacting Chinese exports. The problem is further compounded since China as the new global economic engine, has become the dominate importer of other countries production.
The root cause stems from a "tapped" out American consumer and the "gutting" of the US middle class - the long time global economic engine.
This economic slowdown has left China with falling growth in FX reserves and has forced the selling of FX reserves to sustain elevated run-rates which were financing massive infrastructure expansion and investment. Construction has been a major employer and absorber of a growing Chinese worker force even though recently more and more have been employed building ghost cities and malls to keep workers employed.
ISSUE #2 - Insufficent New Capital Formation
Additionally, Capital movement has reversed in China. China now faces a "capital flight" versus new Capital Formation coming into the country which has been powering the Chinese Manufacturing and Industrial explosion over the decade and half.
CONSEQUENCE - China Likely Needs to Devalue the Yuan
The consequence is that China needs to stop capital flight and increase exports and foreign capital investment the country is so dependent on.
China has only a limited number of options which Charles Hugh Smith and Gordon T Long spell with aid of 21 charts.
There is much, much more in this 31 minute video discussion.
SPECIAL GUEST:MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blogspot.com
An espoused self educated Austrian Economist, �Mike Shedlock / Mish is a registered investment advisor representative for�SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at MishTalk.com
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MISH'S MONTHLY MACRO UPDATE
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34 Minute Video
Mish Shedlock lays out some of the Key Macro Messages in his extensive writings over the last month.
EARNINGS ACTUALLY MATTER? OR ARE THEY JUST TOO BAD TO IGNORE?
John Rubino
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SPECIAL GUEST HOST:JOHN RUBINO, Author & Publisher of DollarCollapse.com
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EARNINGS ACTUALLY MATTER?
OR ARE THEY
JUST TOO BAD TO IGNORE?
with John Rubino & Gordon T Long
Published 04-19-16
32 Minute VIDEO
Bank profits are in trouble!. Don't be fooled by the "beat analyst estimates" charade, because that is exactly what it is. First quarter bank earnings can only be described as an unmitigated disaster.
With the aid of 24 charts, John Rubino and Gordon T Long discuss what they see in this 32 minute video, what is important to be aware of and what is being hidden from public scrutiny.
THE EARNINGS' SEASON CHARADE
John Rubino recaps the situation as:
"I think this is hilarious so far! It is the season where banks are reporting earnings and they are reporting really bad numbers Y-o-Y. Citigroup's earnings were down 28% Y-o-Y with a double digit drop in revenue. It is pretty well the same for the Bank of America, JP MorganChase, Wells Fargo BUT the headline in Bloomberg and other major media outlets are oh "Citigroup beats expectations!"
That is the headline because Wall Street plays this game with their big client accounts where when things are headed south the analysts on Wall Street lower earnings projections even faster than earnings are actually dropping, so the companies can say "yes, we lost money and made less money than we did a year ago BUT we beat Wall Street expectations!". THAT becomes the headline.
The only positive headline out there for the big banks are when the results are horrendous! "
John goes on to say that:
"Year seven in a recovery banks should be reporting phenomenal numbers - they should be reporting 'blowout numbers! This is the point of the cycle when lots of people are borrowing, interest rates are down, funding is cheap for the banks - the bankS should be doing really well!" Instead, the banks are rolling over big time. Their earnings are probably (when all is said and done), they are going to be looking at a low single digit decline in Y-o-Y earnings."
"Finance at this late stage of Capitalism is now the biggest part of the economy, so you can't have banks shrinking, reporting losses or lower numbers Y-o-Y, laying people off or pulling back on lending and at the same time have a growing economy! They are mutually exclusive when banks are such a large part of the economy."
THE FINANCIALIZATION 'GIG' IS UP!
Gordon T Long illustrates that through the growth of Financialization, 45% of the equity markets today are Financials. Their spectacular earnings growth is historic and unprecedented and now excessive debt lending, encumbered collateral and rapidly growing non-performing loans are signalling troubles are looming.
Of particular concern to Gord is problems in the Leveraged Loans area which is critical to sustaining the growth in Collateralized Loan Obligations (CLOs) which has been steradily weakening. The Shadow Banking industry and bank earnings are critically tied to CLO growth and their extremely profitable fees.
Gord points out that it was the collapse of CDO's that brought the banking industry to its knees in 2008. One the acronyms have changed and the loan problem. It isn't CDO mortgages today but rather CLOs and Student Debt, Auto Debt and Corporate Leverage Debt.
.... there is much, much more in this fascinating 32 minute video exchange..
Financiers Skim Profits While Main Street Stagnates
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Charles Hugh Smith
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Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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with Charles Hugh Smith & Gordon T Long
27 Minutes - 21 Slides
Charles Hugh Smith and Gordon T Long share their thinking on why the middle class in America has been experiencing a steady decline in their real standard of living over the last four decades and why the decline has recently accelerated. Their is a fundamental reason why productivity is falling while corporate profits soar and the employment participation rates falls.
THE "CRIPPLED" CAPITALIST SYSTEM
The Capitalist System is based on the construct that savings are invested into productive assets which increase productivty and in turn increase the standard of living of the whole society within which it operates. This mechanism has worked well for a century and and half. It no longer is working.
Savings come from two sources:
Household Savings
Corporate Profits
Today Household savings borders on being an extinct concept and what there is of it, is invested in financial securities. Therefore savings to be invested into productive assets comes primarily from corporate profits or "Wall Street" financing. We would argue that the capital is no longer flowing into productive assets but rather being directed to other venues which are unproductive and fail to increase the standard of living for society. Be assured how22$100M going to change in their lives?
In fact three approaches today are skimming billions of dollars of that "savings" from investment that will lead to rising standards of livings. This is one of the reasons that standards of living are falling for the vast majority of Americans.
Three of those major skimming mechanism are analysed in this video:
High Frequency Trading (HFT)
Stock Buybacks
The "Carry" Trade
A FINANCIALIZED ECONOMY FLOWS PROFITS TO THE FINANCIAL SECTOR
There is nothing wrong with making profits. However, there is something wrong in an economy when those profits don't flow into productive assets but rather "circularly" flow back into financial products.
THE FINANCIALIZATION "SKIM" IS KILLING THE MIDDLE CLASS IN AMERICA
This insidious and effectively "unsupervised" process has resulted in:
THE RESULTS
Falling Real Incomes
The Wealthiest Now Almost Eclusively ReapThe Benefits
The Middle Class Has Effectively Been "Gutted"
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There is much, much more in this 27 Minute video discussion which is illustrated with 21 slides.
SPECIAL GUEST HOST:JOHN RUBINO, Author & Publisher of DollarCollapse.com
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CAPITALIST SYSTEM & SHARE BUYBACKS
with John Rubino & Gordon T Long
Published 01-22-16
31 Minute VIDEO
John Rubino and Gordon T Long discuss concerns with the financial engineering strategy of stock buybacks and what impact it is having on the capitalist system. In this 33 minute discussion they additionally focus on current Macro Economic developments and announced policy changes in Global Monetary Policy.
Capitalist System & Buybacks - Is Financialization Destroying Capitalism?
Draghi's Latest Bazooka,
Japan's NIRP - Our Future?
What the US Primaries are Telling us about the Broken US Social Contract.
Capitalist System & Buybacks
Gordon T Long speculates on some surprising possibilities in answering the following:
Who is actually buying the bonds the corporations are issuing ?
Why - When they are getting more expensive?
How are they are doing it?
What does it say for the future of the�Capitalist�economic growth when all investment is going into buybacks and not into top-line growth and Capex Investment which is now considered "Risk"?
Is NIRP in the US' Future?
Are Government's Planning on Buying the Markets? (Are They Now?)
.... there is much, much more in this interesting 34 minute podcast discussion.
SPECIAL GUEST:MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blogspot.com
An espoused self educated Austrian Economist, �Mike Shedlock / Mish is a registered investment advisor representative for�SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at MishTalk.com
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MISH'S MONTHLY MACRO UPDATE
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34 Minute Video
Mish Shedlock lays out some of the Key Macro Messages in his extensive writings over the last month.
US Economy: Concerning Signals
Concerns with what Industrial Production, Consumer Spending and Inventories to Sales are telling us,
FOMC Meeting signals fewer and slower number of rate increases,
The End of the Obamacare Lift for Employment,
US Primaries Signal a Crisis in the US Social Contract.
Draghi's Statement Fallout: "This is end of all the Cuts We Can Do"
Euro reacts fairly significantly,
Concerns about EU Bank profits,
ECB to buy Corporate Bonds.
Strange Central Bank Policies: Confidence in Central Banks Becoming a Problem
What May be Coming,
Fiscal "Helicopter Money' and Guaranteed Minimum Incomes / Universal Income
Gold - Has Broken Key Overhead Resistance
Central Bank Policies of NIRP may be the catalyst,
Precious Metals rise in US dollars may be only in the early stages
Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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with Charles Hugh Smith & Gordon T Long
29 Minutes - 21 Slides
Charles Hugh Smith and Gordon T Long take "a walk down memory lane" as they review six predictions they made during Macro Analytic shows between 2012 and early 2014. With 21 slides they also explain what they learned form what they got right and what they got wrong.
THE SIX PREDICTIONS
The Domination and Growth in Financialization,
The Doomed US Middle Class,
The Growth of Government Centralized Planning,
What is Wrong With Japan and Lessons We Should Learn,
What We Should Expect The Global End Game to Be,
The Coming Retail CRE Implosion.
THE BIGGEST THING THEY GOT RIGHT
The collapse of the US Middle Class was notably right.
THE RESULT
THE BIGGEST THING THEY LEARNED
It tends to take longer to unfold than you think it will and then it happens suddenly faster than you expect,
Never Underestimate what Governments and Central Bankers will do to maintain the status quo during times of distress.
There is much, much more in this 29 Minute video illustrated with 21 slides.
Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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with Charles Hugh Smith & Gordon T Long
29 Minutes - 25 Slides
Charles Hugh Smith and Gordon T Long analyze, with 25 slides, the strength in the US Dollar and what we can likely expect going forward.
Both see a strong dollar in the future as it becomes, more and more a flight to safety associated with failed monetary / fiscal policies, weakening current accounts and slowing trade around the world. It isn't that the US$ is a paragon of virtue and value, but rather the "least ugly".
WHAT WE MIGHT EXPECT
1.� A Strong dollar is killing global US corporate profits. This will continue to impact stock valuations,
2.� Currency wars favor the US at this point. Global investors with billions to manage can still earn a yield in 30-year Treasury bonds, and yet they also get exposure to future appreciation vis a vis other currencies.
3.� The stronger dollar (despite recent weakness) acts as a magnet for global capital, leaching capital out of emerging markets, China, Asia and Europe.
4. What happens in a full-blown currency crisis? If history is any guide, gold and the US dollar both soar as panicked investors seek safe havens.
FALLING CURRENCY RESERVES
The collapse in commodity and energy prices, which can only be described as historic, is presently ravaging the current accounts of many countries dependent on the prices paid for these products. Many sovereign nations have been forced to sell currency reserves to protect their currencies.
CHINESE RESERVES
SAUDI RESERVES
The selling of Currency Reserves can clearly be seen in foreign holdings of US Treasuries which has been steadily eroding. Though selling of foreign reserves is temporarily contributing to a weakening US dollar it is likely only short term. In the longer term there is a shortage of reserves in many nations to sustain the current selling before they experience full blown currency dislocations. As global currency instabilities worsen, both video participants see the US dollar as best positioned currency to head higher as the recipient of a flight to "perceived" safety.
FAILING CURRENCY PEGS
Gordon T Long and Charles Hugh Smith both believe ailing Currency PEGs will increasingly take center stage with investors. The Hong Kong Dollar, the Chinese Yuan and the Saudi Arabia Riyal currencies are all focuses of traders and speculators, as are most of the energy exporter nations with a US$ PEG.
Individuals and businesses in five nations across central Asia, the Middle East and Africa are paying anywhere from 4 percent to 136 percent more than official exchange rates to get their hands on dollars. This is a growing tell tail sign as black market trading in the US$ is surging. These are signs of turmoil and a desire for "safety".
JAPAN'S NIRP HAS TRIGGERED SERIOUS DISRUPTIONS TO CAPITAL FLOWS.
According to Graham Summers at Phoenix Capital, Japan just lit the fuse on a $9 Trillion debt implosion. Hundreds of billions of Dollars in capital will begin fleeing Japan to come to the US.
• Bank of Japan implemented Negative Interest Rate Policy, or NIRP.
• It is the second Central Bank to do so.
• The European Central Bank or ECB first went to NIRP in June 2014.
• Thus, between Japan and Europe, over 20% of the world’s GDP is being managed by a Central Bank with NIRP.
• More importantly, TWO major currencies in the world are now at NIRP while the� US Dollar is at 0.5%.����
When the ECB went to NIRP it precipitiated the lift in the US$. The US Dollar has been in a bull market since mid-2014. It is not coincidence that it started when the Euro first went to NIRP, the minute the ECB implemented NIRP money began fleeing the Euro and moving into the US Dollar.
There is much, much more in this 29 Minute video illustrated with 25 slides.
This is an ominous development for the stock market and the economy. Corporate revenue growth has been negative for a while. Earnings are now down and cash flow has hit the skids. Debt continues to accelerate and pretty soon there will be major credit problems, especially in the energy sector.
Gordon Long: If You Think QE Was An Experiment, You Haven't Seen Anything Yet!
Jan. 14, 2016 6:44 AM ET
By FS Staff
Gordon Long, co-founder of Financial Repression Authority, believes that a massive tax grab by government at the federal, state, and local level is coming regardless of which candidate wins the 2016 US presidential election. He also discusses "a peak in the credit cycle," what this means for investors, and why the Fed may have to reverse course this year in light of a potential liquidity crisis.
"There's concern (and you're seeing it in the market from those who understand what's going on)...that because we have so much collateral pledged to support debt and credit right now," Gordon said, "that when that collateral falls in price as we're seeing in oil and commodities, you get margin calls and if you don't have the liquidity you're caught and you're caught in a serious problem."
I think what we're going to go through here in the first quarter is some kind of adjustment or correction-it's healthy...I can't imagine the market will be allowed to go much below 1820 on the S&P before the central banks will react with new policies and if you think quantitative easing was an experiment you haven't seen anything yet."
We are going to see negative interest rates potentially...we already have $5 trillion in bonds around the globe trading negative...there are all sorts of things that the central banks could do other than just interest rates and they will do them when the collateral is in jeopardy because it will bring down the entire system."
Scroll down for more of his comments or click to hear a preview of his interview below.
Gordon Long: "We've had a $30 trillion household net worth increase since 2009...while the government is facing huge issues of underfunded pensions, a baby boom retirement coming, drains on Social Security - so there's a lot of pressures on the government... to increase (taxes) significantly."
SPECIAL GUEST:MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blogspot.com
An espoused self educated Austrian Economist, �Mike Shedlock / Mish is a registered investment advisor representative for�SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at http://globaleconomicanalysis.blogspot.com
Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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with Charles Hugh Smith & Gordon T Long
31 Minutes - 18 Slides
Charles Hugh Smith and Gordon T Long follow-up to their discussion last month of the puzzle of the falling US Civilian Labor Participation Rate. In this session they tackle the issues associated with "Universal Basic Income" which the public narrative has begun to 'offer up' as a solution.
PUBLIC NARRATIVE
"A Solution to Automation—Universal Basic Income for all“
The conventional wisdom is that a guaranteed free-money check from the central state is the solution. This is nothing more that "A Redistribution Scheme: A new form of Subsistence Serfdom"
• It doesn't address how this enormously costly program will be paid.�
• It is Understood that the "Wealthy" will pay for it!
• Runs aground on the reality that upper-middle class and top 5% already pay 93% of all federal income taxes; they actually can’t afford more taxes.
• The top .01% who can afford to pay will continue to buy political protection of their income, and that’s not going to change:
-- A disaster for those getting the welfare check. They are essentially serfs, with no incentives or pathways to build capital.
For the Wealthiest - A Private Tax System That Saves Them Billions
-- ultimately, proponents of basic guaranteed income are relying on borrowing additional trillions of dollars to pay for the scheme. Not only is this financially unsustainable, it is immoral to load debt on future generations to pay for today’s spending.
1- The failed model of WELFARE-FOR-ALL - Communal Poverty
• The central-state welfare model
• Top-down, encouraging dependency and helplessness—and resentment
2- The Social-Economic model of SHARED BENEFITS flowing from working productively together
• The community economy
• Bottom-up, encouraging accumulation of capital, skills, etc.
• Creating the goods and services that are scarce and needed within local communities requires new ways of thinking and organizing work
SUBSISTENCE SERFDOM
• Giving people money without getting any productive work is destructive to participants,
• Those who have to pay for the free-riders (the community) loses the labor of its residents.
• Our goal should be to provide meaningful work to people in their own communities, not give them subsistence welfare,
• Guaranteed income for all is just a new form of subsistence serfdom.
• Those looking to central state “solutions” such as basic guaranteed income are out of touch with the reality that real solutions come from below, in the entrepreneurial Main Street economy, not from above (central banks, politicians enacting new social programs, etc.)
... and much, much more in this 31 minute frank and open discussion.
SPECIAL GUEST HOST:JOHN RUBINO, Author & Publisher of DollarCollapse.com
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SOMETHING IS BURNING IN
HIGH YIELD CORPORATES!
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with John Rubino & Gordon T Long
Published 12-18-15
31 Minute Video
John Rubino and Gordon T Long discuss the alarming developments in the Junk (HY) Bond market. John was warning on his last appearance on Macro about the things he was seeing while Gord was warning of a turn he was seeing in the Credit Cycle. Both previous observations have proven correct so John and Gordon postulate what to expect next. It isn't pretty!
A HUGE POTENTIAL PROBLEM
Since the Financial Crisis the US Federal Reserve has increased its balance sheet by approximately $3.5 Trillion. In this same period the Junk Bond (HY) issuers have issued $2.2T of debt which the markets have 'gobbled' up to achieve yield. The question is what happens if they start selling some of that debt to avoid capital losses. This problem is compounded by regulations since the financial crisis which has significantly curtailed banks making markets in these instruments. Many worry that Investment Grade (IG) bonds also issued over the same period will be "infected", especially with a historic $1.3T being sold for the first time in 2015 to significantly fund stock buybacks and dividend payouts. This is a 'witch's brew' for a potential disaster.
CORPORATE LEVERAGE
With Corporate Leverage back to the point at which past default cycles started kicking in, there are more reasons to worry, as corporate cash flow and EBITDA fall while the Federal Reserve raises rates.
Worsening cash flow to debt ratios normally force credit downgrades making credit more expensive and harder to get. This is coming at a time when major Junk Bond issuers in the Energy and Commodity sector are being hardest hit by falling pricing. They are trapped and investors know this and are now worried about junk bond liquidity.
A SLOWING GLOBAL ECONOMY
John and Gord both see a steadily deteriorating global economy which will bring further pressures to an already troubling situtation.
John lays out the torrent of bad news coming as the Fed begins raising rates:
The question is whether the Fed will be able to follow through with its stated policy direction.
WORRY OF CONTAGION
The problems in the Junk Bond market are not isolated to just the hard hit commodity and energy sectors. The protracted period of "easy money" created by Fed policy has sowed its seeds across all economic sectors.
A CRITICAL 90 DAY WINDOW
The next 90 days are going to be both quite worrying to investors and highly volatile for the financial markets, as the Credit Cycle, Rate Cycle and Business Cycle all send confusing signals before the future economic direction becomes clear.
Let's all hope that is not spelled: "Recession".
.... there is much, much more in this comprehensive 31 minute video discussion.
Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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with Charles Hugh Smith & Gordon T Long
25 Minutes - 22 Slides
Charles Hugh Smith and Gordon T Long discuss the puzzle of the falling US Civilian Labor Participation Rate in which all the pundits express concern but few agree on what the root cause is.
RELENTLESS TECHNOLOGY ADVANCEMENT - Gaining The Right Perspective
Together they show that it is instructive to start with the larger picture going back to 1970 when massive historic computer technology advancements truly began to be adopted.
Schumpeter's Creative Destruction was in full swing and accelerated as every industry was re-invented by labor saving technology. As this wave gained momentum real, family supporting full time jobs became scarcer while fewer equivalent paying new jobs were created when the ratio to population growth was properly factored in.
RAPID ENTRY OF WOMEN IN THE WORK FORCE DISTORTS COMPARISONS
Examining the actual participation rate chart from 1970 there is clear evidence of the initial rapid entry of women into the workforce. This surge distorts effective comparisons to today's developments and the cause of the more recent accelerating problem.
THREE KEY DRIVERS OF THE POST 2008 DECLINE
During the post 2008 financial crisis period, there has been at least three key drivers of the further acceleration in the decline of the US labor participation rate. This is in addition to the ubiquitous adoption of productivity enhancing technology and the effective de-industrialization of America:
Childcare Costs & Forced Part Time Hours,
Labor Age Youth Unemployment and Growth of non-paying "Internships",
Rate of Job Obsolescence versus retraining opportunities.
... all of these drivers are discussed with insightful discussion on the subject with supporting graphics and illustrations. Listen below:
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Thursday
November 19th
2015
MISH SHEDLOCK talks: Paris Crisis and EU Refugee Problem, Japan 5th Recession, Possibility of a US Recession and the Coming Sub-Prime Auto Bust
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"Mish" Shedlock
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SPECIAL GUEST:MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blogspot.com
An espoused self educated Austrian Economist, �Mike Shedlock / Mish is a registered investment advisor representative for�SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at http://globaleconomicanalysis.blogspot.com
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MISH'S MONTHLY MACRO UPDATE
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30 Minute VIDEO
PARIS CRISIS & THE EU REFUGEE PROBLEM
Mish incredulously points out that�Laurent Fabius, France’s foreign minister told France Info radio “If Abaaoud has been able to travel from Syria to France, it means that there are failings in the whole European system.” That there could be "failings in the whole European system" is shocking news? Just look at the policies and actions taken:
Chancellor Merkel and EU President Jean-Claude Juncker welcome refugees from war-torn countries with open arms.
Millions of refugees allowed entry.
Fake passports not detected.
Belgium, France and other countries allow citizens to go to Syria and fight alongside ISIS and return as if nothing meaningful transpired.
France receives multiple terrorist warnings from Turkey but ignores them.
Germany intercepts massive weapons cache headed for Paris but essentially does nothing.
Surely, at least one of those "strong controls" should have worked? Alas, things slipped through the cracks, and we are now faced with the shocking revelation by Laurent Fabius that there may be "failings in the whole European system."
"If there is one border that makes sense to close it is Greece and Turkey! Maybe also Turkey and Bulgaria!"
JAPAN'S FIFTH RECESSION
It may be the second under Shinzo Abe but�this chart suggests it has been a Quintuple-Dip Recession. Abenomics has been a total failure, as expected..... but it did weaken the yen sending the stock market soaring!
Blooomberg Notes: "Weakness in business investment and shrinking inventories contributed to the contraction amid concerns over slower growth in China and the global economy that prompted Japanese companies to hold back on spending and production. While growth is expected to pick up in the current quarter, the GDP report could put pressure on Abe and Bank of Japan Governor Haruhiko Kuroda to boost fiscal and monetary stimulus.
SLOWING GLOBAL ECONOMY & POSSIBILITY OF A US RECESSION
Global trade has slowed dramatically on a value basis (think corporate cash flows) and it is being felt on earnings and investment decisions!. US freight and shipping data suggests that slowing global trade has "washed ashore" in America.
THE COMING SUB-PRIME AUTO BUST
"I have been surprised for sometime that the sub-prime auto party hasn't ended by now, and it hasn't! It is like the energizer bunny that just keeps on ticking" .....
"Typically banks react too late, after most of the damage has been done. It's the same every cycle. By the time credit is available to those on the bottom rung, the party is about over. Regardless, and as I have pointed out numerous times, the surge in autos is one of the few things holding up consumer spending and is also the only bright spot at all of manufacturing. What cannot go on forever won't. And it's nearly the end of the line for autos. Repercussions will be deeper than economists expect!"
Gordon T Long agrees with Mish's conclusions and in fact published this study and video for his subscribers in September:
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....and there is much, much more, in this fast paced 30 minute Video.
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IS HELICOPTER MONEY, NIRP & COLLATERAL GUARANTEES IN OUR FUTURE?
John Rubino
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SPECIAL GUEST HOST:JOHN RUBINO, Author & Publisher of DollarCollapse.com
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IS HELICOPTER MONEY, NIRP &
COLLATERAL GUARANTEES IN OUR FUTURE?
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with John Rubino & Gordon T Long
Published 10-17-15
30 Minute Video
John Rubino and Gordon T Long discuss the strong possibility of of a sequence of "QE4 for the People", Helicopter Money, NIRP and Collateral Guarantees now being in our economic future as the US and Global Economies rapidly slow. The evidence is clear for all to see, with little debate, except in the hallowed halls of the US Federal Reserve!
Gordon T Long argues that there are three cycles that must be closely monitored. Of the three, the Credit Cycle always leads and it has now turned. He believes the evidence shows that the Business Cycle has also turned and that the Rate Cycle has been disconnected from reality since it skipped a "Cyclical Beat" due to Central Bank Monetary Malpractice.
John Rubino agrees but believes no on should be surprised that the Business Cycle has turned and a recession is a real possibility after experiencing over 6 years of an apparent cyclical recovery. What is particularly ominous and unique about this slowdown he feels is that it is arriving during a period when we have:
1- HISTORIC LOW INTEREST RATES: Little conventonial Monetary Policy available to be a counter force mounting recessionary momentum.
2-CHINA SLOWING DRAMATICALLY: China's massive build out and credit expansion since the 2008 Financial Crisis has powered Emerging & Frontier Economies. Now the Chinese economic engine is sputtering and by some measures is not growing at all,
2- A GLOBAL COMMODITY CRASH: We are in the midst of a major global commodity crash which is impacting corporate earnings, sovereign current accounts and employment,
3- GROWING WAGE PRESSURES IN THE US: Years of corporate profit increases without wage increases has left many corporations under fire and earnings pressures, most evidently seen with labor issues at WalMart,
4- REGIONAL PROBLEMS IN CHINA, JAPAN AND THE EU: Leaving no economy bright light for reversing the US Economic Slowdown.
"How do you have an equity bull market and a recovery in economic growth in general at a time when the main engine for growth (China) is sputtering and corporate profits (in the US in particular) are starting to turn down HARD? The answer is you don't! You can't grow under those circumstances."
CANARY IN THE COAL MINE
The dramatic collapse in HY (High Yield) Bonds is signaling serious problems for the continuation of cheap corporate funding. It also has the potential for contagion as liquidity is a problem when large amounts have been bid up on price due to the explosion is the use of ETF's to buy HY bonds.
BOTTOM LINE
As the UK Guardian newspaper recently declared:
"The world needs inventive responses. It needs a bigger reinvigorated IMF whose constitution should reflect the global balance of economy power and that can rescue the emerging markets. It needs western governments to launch massive economic stimulus centered on infrastructure spending. It needs new smart money policies that will allow negative interest rates."
This is exactly what is going to sell political in the coming year!
The bottom line is the central bankers of the world are now left with few choices and none are traditional approaches and the political pressures on them have almost pre-ordained the policies of: "QE4 for the People", Helicopter Money, NIRP and Collateral Guarantees to keep markets levitated.
"There is no political alternative but to 'double down' on existing policy approaches. The only alternative is austerity and we witnessed in one country after another in the EU what happens when this is attempted! ..... the only thing that will sell now is 'we are going to give you something'! "
.... there is much, much more in this 30 minute video discussion.
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Friday
October 9th,
2015
IS HELICOPTER MONEY TO FOLLOW QE3?
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Charles Hugh Smith
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Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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with Charles Hugh Smith & Gordon T Long
35 Minutes - 21 Slides
Charles Hugh Smith and Gordon T Long discuss the notion of "Helicopter Money" in the context of the following:
1- The What, Why and How of Helicopter Money,
2- Who is likely to be first off the pad?
3- The Recipients: The Expected Winners.
4- The Payers: The Expected Losers.
WHAT TO EXPECT GOING FORWARD - "QE for the People"
THE WHAT, WHY AND & HOW OF HELICOPTER MONEY
Support is growing around the world for increasing stimulus needs to be funded by “People’s QE.” The idea behind “People’s QE” is that central banks would directly fund government spending and even inject money directly into household bank accounts, if need be. As you would expect, the idea is catching on.
The European Central Bank is buying bonds of the European Investment Bank, an E.U. institution that finances infrastructure projects.
The new leader of Britain’s Labor Party, Jeremy Corbyn, is backing a British version of Helicopter Money.
You can count on it be very popular with the public.
Who will protest when the feds begin handing money to “mid- and low-income households”?
There is a serious problem however with this scheme as Gordon T Long points out. To him it signals the end and that we have crossed the Rubicon.
.. and much, much more of insightful discussion here!
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SPECIAL GUEST HOST:JOHN RUBINO, Author & Publisher of DollarCollapse.com
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STARK WARNINGS ON GLOBAL TRADE
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with John Rubino & Gordon T Long
Published 09-25-15
24 Minute Video
John Rubino and Gordon T Long discuss the September FOMC decision, Brazil, Japan in the context of the large number and size of recent international bank layoff announcements. They talk about what is really going on here that no one wants to talk about publicly.
FOMC DECISION - An Incredibly Fragile Situation
Rubino says "It would have been a surprise if the Fed had raised rates! What is going out there is mostly pretty bad. The Fed is in a box right now and anything they do cares the potential for some sort of very serious unintended consequences.If they don't act in raising interest rates then that implies to the rest of the world that the Fed sees slow growth which scares the markets to do what they are doing(see chart to the right)."
"We are so leveraged right now that even a 'garden variety' equity bear market of -20% in the US and abroad cares the potential of pushing us into some sort of deflationary crash or 1930's style depression!"
"THE GUYS IN CHARGE HAVE NO IDEA WHAT TO DO! EXPECT A SHIFT TOWARDS RENEWED EASING.... ITS GOING TO BE 'BIGGER AND BADDER'.... 2016 is going to be a fascinating year for continued monetary experimentation."
We are currently seeing the build up in the intellectual framework from which this will happen.
BRAZIL
Brazil for a period of time was the Latin American country that initially got it right! They appeared to be on the verge of becoming a 'developed country' before it all fell apart. The US dollar spiked and Brazilian investment companies that had borrowed a lot of US dollars, investing them in high yielding Brazilian bonds of extraction oriented commodity companies. Now they are on the wrong site of the 'carry' with corruption concerns steadily surfacing.
"The corruption seems to have gone all the way to the top of the government! They have a political crisis as well as an economic crisis."
JAPAN
Japan has had the most aggressive debt monetization program of anyone in the world over the last three years where they basically tripled the balance sheet of the BOJ. It hasn't worked and Japan is not growing anymore! There inflation rate is basically zero and potentially dropping into deflation AFTER all this new money creation.
"It is clear what they do next, but proposals are now coming out of the woodwork from the easy money, Keynesian side of the spectrum which involves massive increases in money creation and government spending."
WE WILL SEE INTEREST RATES PUSHED TO NEGATIVE LEVELS IN MOST OF THE DEVELOPED WORLD AND CASH (ONE WAY OR THE OTHER) BE HOBBLED AS A STORE OF VALUE TO MAKE THAT HAPPEN!"
"For a long time global trade grew faster than GDP. More and more of our wealth was coming from trade. It turns out that most of that was do to China borrowing $15-$20 Trillion to snap up most of the global commodities. Everyone was getting richer on paper but that is turning out to be a mirage."
... there is much, much more in this 24 minute video discussion.
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Tuesday
September 15th,
2015
ITS STARTING TO GET UGLY OUT THERE!
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Charles Hugh Smith
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Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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with Charles Hugh Smith & Gordon T Long
28 Minutes - 21 Slides
Charles Hugh Smith and Gordon T Long discuss the US Equity Market Technicals. They position the technical charts which they go thropugh in the context of the following primary sources of system risk to the markets:
1. Too much debt globally; public and private debt has skyrocketed since 2008.
2. Mal-investment due to perverse incentives: borrow money for stock buybacks rather than invest in new productive capacity, etc.
3. Stagnant income/revenues: households, companies and nations cannot support more debt
4. The rise of high-frequency trading (HFT) has increased the odds of flash crashes and instability
5. Rising U.S. dollar has triggered capital flight from emerging markets and China
6. China’s economy is grinding to a halt, crushing demand for commodities and commodity-dependent economies
7. Opaque banking: shadow banking in China, dark pools in offshore banking centers, etc. True totals of debt, leverage and quality of collateral are all unknown
8. Deteriorating collateral globally. How many of the 60 million empty “investment” flats in China can be sold for the purchase price?� This is just one example of illiquid, impaired assets that are grossly overvalued.
JUST 3 POTENTIAL TRIGGERS
Gordon T Long takes the lead is laying out three technical market triggers that are currently at play, which he feels will significantly disrupt the markets and heighten volatility:
Have Entered a "Revenue Recession",
Cycle Timing,
Shifting Global Sentiment & Confidence
However, Gordon doesn't see this cyclical bull market to be quite over yet. Though he sees a scare coming in the near term, he feels the central bankers still have three arrows left in their quiver and until they are all fired the markets still have more room to run. He lays this out in his theory of an unfolding final "M" Top.
.. lots of charts here!
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MISH SHEDLOCK talks: Fed Decision, The Illinois Saga and US Industrial Production
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"Mish" Shedlock
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SPECIAL GUEST:MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blogspot.com
An espoused self educated Austrian Economist, �Mike Shedlock / Mish is a registered investment advisor representative for�SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at http://globaleconomicanalysis.blogspot.com
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MISH SHEDLOCK talks:
Fed Decision, The Illinois Saga and US Industrial Production
20 Minute VIDEO
FOMC DECISION -"Its All Actually Absurd!"
Mish had speculated that the Fed would likely hike 1/8th of a point at the critical September 17th FOMC meeting, but it turns out they didn't move at all. It appears that "The Fed is now going to delay so long that they may not even get in a rate hike!"
"Its all absurd to actually think that an 1/8 - 1/4 point hike is going to do anything other than perhaps put an end to the damage they have already done!"
"The Fed has blown this massive asset bubble and as soon as they hike and everything goes to h^&%ll, it isn't going to be because the Fed hiked, is is going to be because they didn't hike and encouraged and blew this asset bubble since March 2009!"
US DOLLAR REACTS & NEAR TERM SUPPORTCHANNEL
US INDUSTRIAL PRODUCTION -Bloomberg Ridiculously Suggests it is the Northeast?
Mish is stunned to read that Bloomberg is suggesting that the rapidly falling US Industrial problem appears to be centered in the northeast after the Dallas Fed, Kansas City Fed, Richmond Fed and the Empire State Manufacturing Report all showed serious deterioration within their economic regions for various reasons.
Auto's will soon have a used car glut as 1/3 of all cars are now on leases of 3 years or less! With all these cars financed through ABS (Asset Back Securities) within the Shadow Banking System it reminiscent of the 2008 Financial Crisis when housing residuals fell below their MBS values.
THE ILLINOIS SAGA - Special Political "Carve Outs" Circumvent Constitutional Budget Issues
"This year the Illinois legislature didn't even attempt to base a balanced budget. It was $8B out of whack and sent it on to Governor Bruce Rauner who refused to sign it. Illinois without a budget can't constitutionally pay its bills. Last year (almost like they knew this was going to happen) the legislature passed a "carve out" for THEMSELVES. No matter what happened the legislators would get paid. Now there is no pressure on them to produce a budget because they get paid anyway." Illinois facing the short term budgetary issue of not being able to pay the public schools additionally "carved out" an exemption for them to avoid the wrath of parents when kids couldn't return to school in September.
"We now have a stand off between the Governor and the Illinois legislators, but more and more bills are going unpaid. They recently stopped paying dentists and the next up are medical bills!"
....and much, much more, including a discussion o China in this fast paced 20 minute Video.
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SPECIAL GUEST: PETER SCHIFF is CEO & Chief Global Strategist of Euro Pacific Capital.Peter Schiff is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market before it began and to have positioned his clients accordingly. As a result of his accurate forecasts on the U.S. stock market, economy, real estate, the mortgage meltdown, credit crunch, subprime debacle, commodities, gold and the dollar, he is becoming increasingly more renowned. He has been quoted in many of the nation’s leading newspapers, including The Wall Street Journal, Barron’s, Investor’s Business Daily, The Financial Times, The New York Times, The Los Angeles Times, The Washington Post, The Chicago Tribune, The Dallas Morning News, The Miami Herald, The San Francisco Chronicle, The Atlanta Journal-Constitution, The Arizona Republic, The Philadelphia Inquirer, and the Christian Science Monitor, and appears regularly on CNBC, CNN, Fox News, Fox Business Network, and Bloomberg T.V. His best-selling book, “Crash Proof: How to Profit from the Coming Economic Collapse” was published by Wiley & Sons in February of 2007. His second book, “The Little Book of Bull Moves in Bear Markets: How to Keep your Portfolio Up When the Market is Down” was published by Wiley & Sons in October of 2008.
Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for over twenty years he joined Euro Pacific in 1996 and has served as its President since January 2000. He is also Chairman of�SchiffGold, a precious metals dealer based out of Manhattan. An expert on money, economic theory, and international investing, Peter is a highly recommended broker by many leading financial newsletters and investment advisory services. He is also a contributing commentator for Newsweek International and served as an economic advisor to the 2008 Ron Paul presidential campaign. He holds FINRA Series 4, 7, 24, 27, 53, 55, 63 & 65 licenses.
PETER SCHIFF talks
GOLD BACKED DEBIT CARDS
Published 08-25-15
A 21 Minute VIDEO
FINANCIAL REPRESSION
"Governments finds all sorts of ways of repressing their citizens and certainly do it for the banking system. In America today if you have a bank account you have no privacy anymore. Your banker is basically an unpaid spy working for the government trying to monitor your activities for anything suspicious so they can turn you into the government!"
"Inflation is a form of repression. If you save in the fiat currency the government creates, it will lose value over time as it orchestrates a deliberate plan of depreciation of the medium of exchange. So therefore you have continuous inflation. Of course to the extent you earn any money the government represses you by seizing a good portion of it with Income Tax, Inheritance Tax, The Payroll Tax etc. There all sorts of ways that the government seeks to repress us!"
BAIL-IN'S & A CASHLESS SOCIETY
Bail-ins are a function of government deposit schemes which really don't work! When these government insured banks fail, rather than having to just create a lot of money they will resort to the bail-in where they dispense the loses among the depositors. Actually (the later) is the right thing to do! We shouldn't have any government insurance for bank deposits! If you deposit your money in a bank and that bank fails, your deposits SHOULD BE at risk! In fact if we had deposits at risk we would have a much sounder banking system like we had before the invention of deposit insurance during the Roosevelt era!"
Peter Schiff points out that not all countries have these deposit schemes and the ones that don't have healthier banking institutions because now you have the market forces reigning in risky banking activity because "when people have to assume the risk of their deposits they do their homework! Banks then compete with each other based on SAFETY".
BITGOLD & EURO PACIFIC BANK
"I don't think bitcoin is going to work!"
"The fatal flaw of bitcoin is that there is no true intrinsic value there! There is nothing behind it, like when you have gold."
"People find it cumbersome. How do I spend my gold? It is very easy to spend it bitcoin but how do I spend gold? I solved that problem a few years ago at my bank (Euro Pacific Bank).. which is a 100% reserve bank that doesn't make any loans. We simply charge fees for our services."
"Right now our service is a prepaid service ... but what is coming is a one step process. BitGold copied what I was doing. They are now offering the same type of pre-paid debit card that I have been offering for three years."
"What I am doing, and this change will likely take place in the next 30-60 days is we will have the first true gold backed debit card!"
There is much more in this video on coming world of gold backed debit cards.
SPECIAL GUEST HOST:JOHN RUBINO, Author & Publisher of DollarCollapse.com
OPEN ACCESS
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PUTTING THE PUZZLE OF GREECE TOGETHER
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with John Rubino & Gordon T Long
Published 07-271-15
33 Minute Video
John Rubino and Gordon T Long discuss the current puzzling developments in Greece and the seemingly impossible choices facing the Greek people and their government.
THE ACCOUNTING CHARADE
To better understand how Greece and the EU found itself in this perplexing problem, John Rubino traces the history of Greece prior to joining the EU. John doesn't hold back in describing the manipulation of economic numbers carried out by Greece, abetted by Goldman Sachs to gain entry into the EU. Greece never met the Maastricht Treaty bar but nevertheless was granted entry. Goldman Sachs and the International Bankers were the big winners. In the short term so were the Greek people.
UNLIMITED SPENDING
John further goes on to detail how cheap money suddenly became available to Greece and the other poor peripheral countries. The exploding growth in debt to them was perceived and treated to be debt backed by the EU. John describes it as:
"It was like giving a teenager an unlimited credit card with no supervision. You should have expected nothing less!"
The situation in the EU with its peripherals was actually not to dis-similar to the bankers' "game plan" regarding US Agency debt (Fannie Mae and Freddie Mac) which were also perceived to be backed by the US government.
When these agencies got into serious financial trouble during the Financial Crisis the US government accepted the liabilities for these agencies and placed them in "conservatorship" thereby burdening US tax payers with the negligent lending practices they had callously incurred. EU tax payers are likewise being handed the bill for what can only be described as a wonderful party of staggering pension benefits and limited taxation for the Greek people and a lending bonanza for the bankers.
PARTY IS OVER AND THE HANGOVER BEGINS
The financing of the debt incurred cannot possibly be financed by Greece's economy nor absorbed by the EU, for fear that the other delinquent debtor nations will demand the same easy way out.
Of course what is happening here is the banks have made enormous profits on loans that should have never been made and are now sliding the responsibility to EU taxpayers.
Many Greeks see no real solution and therefore cash runs on the banks will continue to leave Greek banks insolvent as more money is fruitlessly pumped into them by desperate and naive EU officials.
... there is much, much more in this 33 minute video discussion.
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Saturday
July 25th
2015
JEFF BERWICK talks CRYPTO CURRENCIES
Jeff Berwick
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SPECIAL GUEST: JEFF BERWICK is a Canadian entrepreneur, libertarian�and�anarcho-capitalist�activist who founded StockHouse Media Corporation in 1994, one of the most active financial website in Canada. He remained CEO until 2002. In 2013, Berwick announced plans to co-found the world's first�Bitcoin�automated teller machine�(ATM). He presently resides in Acapulco, Mexico and is Chief Editor of THE DOLLAR VIGILANTE
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JEFF BERWICK talks
CRYPTO CURRENCIES
�
Recorded 07-17-15
A 25 Minute Video Interview
Jeff Berwick, based in Acapulco, Mexico, has formerly been interviewed in this series (https://www.youtube.com/watch?v=O20n_oDUx54 ). He founded the StockHouse Media Corporation in 1994 and was its CEO until 2002. He is publisher of the dollar vigilante website (https://www.dollarvigilante.com/ ), which went online in 2010. Back then, he predicted the complete collapse of the US Dollar and the world financial system within the next five to ten years. He thinks that we are a lot closer now. He recently predicted a massive breakdown for September 2015 based on the seven year “Shemitah cycle“ (http://surviveshemitah.com/ ).
Jeff is concerned about the dependence of governments and financial market institutions on extremely low interest rates, even negative interest rates, which he calls “complete Keynesian insanity”. What is happening in Greece right now is just the beginning. It will eventually happen in other eurozone countries like Spain, Portugal, Italy, France and in countries all around the world, including the US.
Government debt in most countries has become so high that minor increases in the interest rate would lead to immediate default. The explicit US debt is above $18.3 trillion, as shown in the figure below. This however does not include implicit debt and liabilities that the US government has accumulated over the years, for example in the form of social security. Total debt and liabilities according to Jeff amount to $95 trillion.
� ���
“All it takes is, for example, for the Federal Reserve to raise interest rates by .25 per cent and they can bankrupt the entire financial system. This is where we are now. It’s been complete insanity. They tried to fix the 2008 crisis by printing money and going into more debt, which is why they got into that problem in the first place. And we are starting to see the next wave of major collapses and crises.”
As a response to the ongoing war on cash, Jeff suggests to go out of large cash holdings as soon as possible. He sees one potential solution in BitGold and even more so in Bitcoin, as a completely decentralized money and payment system. The price of bitcoin has been rising during the recent Greek crisis, whereas gold and silver have fallen. However, Jeff points out that the prices for gold and silver are systematically distorted on a “very manipulated market.”
“There is no Bitcoin office, there is no BItcoin servers. So no matter what the government does, unless they turn off the internet entirely, they can’t stop Bitcoin. That’s the beauty of Bitcoin.”
Although Mexico is often portrayed as a dangerous third world country, Jeff can tell from personal experience that it is in many respects a better place than the US, as there is far less government involvement in private and business affairs. Mexico will nonetheless face serious problems, because of their close economic ties to the US. The collapse of the American economy will inevitably spill over to Mexico.
“But I think people here [in Mexico] are more used to it. So, for example, they had their peso collapse in the 90s and people lived through it. But Americans aren’t ready for what’s coming. They haven’t seen it in their lifetime. And as you know, half the people in the US are on government assistance now, and a lot of those are on welfare and food stamps. When those EBT cards get shut down, I wouldn’t want to be anywhere near any major population center in the US.”
Jeff generally sees potential in other Latin and South American countries like Columbia, Chile and even Nicaragua, as well as some Asian countries, but definitely not in North America, Europe, Japan or Australia, which all share the same problem: the biggest cohorts of their populations looking for� unsustainable entitlement payments in the near future.�
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SPECIAL GUEST: GUILLERMO BARBA is a Mexican economist and financial blogger writing for Forbes Mexico. �Barba is a follower of the Austrian school of economics.
GUILLERMO BARBA talks
FINANCIAL REPRESSION
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Published 09-05-14
A 24 Minute PODCAST
A Mexican Economist, Guillermo Barba never heard of the Austrian school of economics until after graduating. Mexican University teaching still focuses on Marxist philosophy and Keynesian thinking. His subsequent exposure to the Austrian school of Economics was an eye opener which started him on a road which he hopes to help others in Mexico and Latin American become exposed to. He believes that the socialist thinking which South American universities are still oriented towards is one of the cancers in the world and hurting economic development.
"I became a real economist after I met the Austrian School of Economics!"
"The Austrian School has a framework to explain the current 'economic mess' in the world today!"
Barba's popular Mexican blog is focused on financial intelligence because he felt the truth was not being told and it needed to be.
FINANCIAL REPRESSION
"Mexicans know perfectly what Financial Repression means! Living in Mexico means living in the neighborhood of the United States of America. That is a lot of financial repression!"
"The entire world is suffering from Financial Repression because there are Financial Repressors. That is the problem. Who are those financial repressors? As Hugo Salinas Price told him, the entire world is controlled by a group of about 1000 people and a smaller core group control most of the decisions. Most of them are bankers"
Barba believes that t he global reserve system which is based on the US dollar "is basically a scam". According to Barba, to keep the whole system working the powers to be must get people into debt. Debt must grow exponentially.
IMPORTANCE OF SAVINGS
"Pushing people to spend and taken on debt versus savings is insane! Savings is the base and the cornerstone of development. Savings are the cornerstone of capital! The world needs capital accumulation, not debt accumulation!
"Debt accumulation is not sustainable. Capital accumulation is sustainable!"
Guillermo Barba believes the powers to be simply don't know what to do other than just 'print more money'. He also sees the US dollar getting much, much stronger as people generally won't know what to do to protect their wealth. This will offer opportunities to use inflated US dollars to buy real estates at attractive prices.
..... there is much more in this interview on the Mexican and South American economies.
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SPECIAL GUEST: DAVID MORGAN: Seduced by silver at the tender age of 11, David Morgan started investing in the stock market while still a teenager. A precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems ahead and reasons for investing in precious metals.
David considers himself a big-picture macroeconomist whose main job as education—educating people about honest money and the benefits of a sound financial system—and his second job as teaching people to be patient and have conviction in their investment holdings. A dynamic, much-in-demand speaker all over the globe, David’s educational mission also makes him a prolific author having penned "Get the Skinny on Silver Investing" available as an e-book or through Amazon.com. As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications.�Additionally, he provides the public a tremendous amount of information by radio and writes often in the public domain.
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DAVID MORGAN TALKS SILVER
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Published 07-17-15
A 32 Minute Video
An Aeronautical Engineer by training, David brings these analytic skills to his analysis of financial and commodities markets. He believes the inability of the majority of people to properly understand the significance of mathematical science such as the exponential curve is one such important example. A "hockey stick" of debt growth is simply and fundamentally unsustainable!
FINANCIAL REPRESSION
Keeping interest rates low is central to debt ridden governments surviving. Acording to David Morgan the government must keep rates low as long as possible but believes a reset of some sore is inevitable. David sees the mechanics and policies of keep rates repressed as fundamentally defining Financial Repression.
Financial Repression is like a big coffee press, pressing everything down and has suppressed the ability for us to have a free market and thereby enjoy the fruits of our intellect, labor, creativity and purpose as humans."
POTENTIAL RISING INTEREST RATES
Many believe that rising interest rates will hurt gold. David fully expects the Fed to increase rates but sees it as being nothing more that "showmanship". David suggests that:
"his experience shows that it is when REAL RATES get positive that you COULD see gold impacted from an increase in interest rates"
"What you really need to know is what are the real rates versus nominal rates which you see iin the newspapers."
GOLD-SILVER RATIO
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The current gold-silver ratio implies to David Morgan is that silver is presently undervalued relative to gold.
According to Morgan the Gold-Silver Ratio is telling us something else that is important.
"If you have a real economy with sound money you get a deflationary trend. This means your money is worth more over time. It is beneficial to almost everybody. Silver is the best inflation edge and not the best deflation hedge. Gold is the best deflation hedge. Silver anticipated this huge inflationary environment back when QE2 was announced and moved from $26/OZ to $48/OZ. What happened was all that anticipated inflation didn't get into the market place because all the increased debt only resulted in re-liquifying the banks. They forced the money into the banking system and not out into the public sector."
David believes silver is currently a better buy than gold. He still believes silver will outperform gold.
"We are not out of the woods. There is a place for precious metals in your portfolio. 20% for "metal bugs" and 10% for the average public."
There is much, much more in this 32 minute interview with this well respected precious metals and silver expert.
SPECIAL GUEST:James Turk has specialized in international banking, finance and investments since graduating in 1969 from George Washington University with a B.A. degree in International Economics. His business career began at The Chase Manhattan Bank, which included assignments in Thailand, the Philippines and Hong Kong. He subsequently joined the investment and trading company of a prominent precious metals trader based in Greenwich, Connecticut. He moved to the United Arab Emirates in December 1983 to be appointed Manager of the Commodity Department of the Abu Dhabi Investment Authority, a position he held until resigning in 1987. Since 1987 James Turk has written The Freemarket Gold & Money Report, an investment newsletter that publishes twenty issues annually. He is the author of The Illusions of Prosperity (1985), SOCIAL SECURITY Lies, Myths and Reality (1992) and several monographs and articles on money and banking. He founded GoldMoney.com based on two US patents awarded to him for digital gold currency, which enables gold to circulate efficiently as currency.
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JAMES TURK on FINANCIAL REPRESSION
24 Minute VIDEO
With a career in International Banking, including managing the Abe Dubai Investment Authority's Commodities Portfolio, James Turk is an experienced professional who's insights should be thoughtfully considered. He feels strongly that the US needs to return to the sound money principles the framers of the US Constitution outlined and which the US has unfortunately and perilously veered away from.
FINANCIAL REPRESSION
"Financial Repression is government intervention in the market system which distorts the market's signals. .... Government intervention not only distorts the markets but in fact is counter-productive because many times it is government policies which the market are reacting to!"
Instead of changing the policies, governments try and convince the markets (through intervention) that the policies they are following are the correct ones, when in fact they are not.
James feels strongly that governments need to be outside the markets and be primarily focused on maintaining the 'rule of law' and ensuring there is a level playing field for competitive capitalism to operate on. Government intervention results in distorting that playing field to the advantage of themselves and their special interests.
"(Governments & Central Banks) are following policies that basically are not sustainable!"
"The government's 'make believe' is that they are creating wealth through creating currency and distributing it through their various programs. That is not creating wealth, but rather debasing the currency. When you debase the currency this is the worst type of financial repression because you are essentially destroying peoples ability to interact entirely voluntarily within the market place, as we fulfill our needs and wants."
UNDERSTANDING WEALTH
There is only so much wealth in world. It needs to come from somewhere if it is to be distributed in a meaningful way. James Turk believes wealth fundamentally comes in two forms: Tangible Wealth and Financial Wealth.
Financial Wealth comes with counter-party risk and the exposure to insufficient cash-flows required to support the leverage that inevitably comes with pyramiding and the interconnection of financial wealth.
James Turk believes we are presently destroying wealth. Financial Wealth gets destroyed because of the eventuality of insufficient cash-flows (Free DCF) to support the over financialization of the economy.
.... there is much, much more in this fact filled 24 minute Video.
WAR ON CASH & BAIL-INS
The Holy Alliance
Perpetuating the Welfare State
Why we can't trust the banking ssytem anymore.
How banks have become Hedge Funds versus lending institutions,
Why we need to separate the banks function of being a payments system versus being investment fund managers.
CRYPTO CURRENCIES
What is the real purpose is of money,
How the current environment is a historical aberration. We have moved away from a sound money system as the constitution framed.
Why we need to return to the wisdom of the framers of the US constititution,
Why Gold and Silver's proven historical track record is important.
GOLDMoney & BitGold MERGER
Why GoldMoney and BitGold Merged,
What James sees the future to be for the merger.
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Professor Joseph Salerno is a noted Austrian Economist who spoke with the Financial Repression Authority on Financial Repression and his growing concerns with what is referred to as "the War-On-Cash", which he sees leading America and other developed countries in the wrong direction. He sees it as presently gaining momentum in senior policy levels around the world as global debt problems become more acute.
FINANCIAL REPRESSION
"A combination of Deliberate Inflation and very low Interest Rates. Interest rates which are kept low by a variety of what are called "Unconventional Monetary Policies".
"There is talk now of having:
Negative Nominal Rates,
Governments taking over Pension Funds,
Varies 'privileging' of government debt as part of bank capital.
... so it (Financial Repression) is a series of interferences in the financial markets by government with the end being to push interest rate lowers so they can inflate away their debt! They do that by having interest rates even lower than the rate of inflation."
"What Financial Repression does is transfer surreptitiously resources and coming wealth from savers and retirees to the government and its crony banks. I think it exists, it is dangerous and I think many people are being hurt by it!"
WAR-ON-CASH - GETTING TO NEGATIVE NOMINAL BOND RATES
Professor Salerno believes the government wants Negative Nominal Rates but as he points out: "The only way they can do that is to lock peoples deposits into the banking system - that is where the War-on-Cash comes in! They would love to restrict or even abolish the use of cash within the United States if they could. That means they would have to use deposits."
"This is another way of propping up a very unsound and dangerously flawed banking system!"
Professor Salerno has spoken out extensively on this subject, most recently at the Mises Circle event in Stamford, Connecticut
Governments, at least modern western governments, have always hated cash transactions. Cash is private, and cash is hard to tax. So politicians trump up phony reasons like drug trafficking and money laundering to win support for bad laws like the Bank Secrecy Act of 1970, which makes even small cash transactions potentially reportable to the Feds.
Today cash is under attack like never before. Ultra low interest rates are the norm for commercial bank accounts. In Europe, as the ECB ventures into negative nominal interest rates, certain banks threaten to charge customers for depositing cash. Meanwhile, certain European bonds now pay negative yields, effectively turning them into insurance products rather than financial assets. And some economists now call for the outright abolition of cash, which shows just how far some will go in their crazed belief that economic prosperity can be commanded by forcing us to spend rather than save.
The War on Cash is real, and it will intensify.�
PUBLIC FOREIFEITURE
Both bank deposits and withdrawals of cash are now carefully scrutinized by banks and police agencies across America. Safety deposit boxes are seeing increasing restrictions on what can be held in them in the way of cash. People depositing cash often find themselves facing public asset forfeitures and seizures by the police. In some cases when cleared as being innocent then have serious difficulty in getting their seized assets returned. Professor Salerno expounds on this and other troubling new developments in America.
.... there is much, much more in this fact filled 29 minute Video.
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Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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GREECE: A US State & Local Government
Template?
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with Charles Hugh Smith & Gordon T Long
28 Minutes - 214 Slides
Charles Hugh Smith and Gordon T Long discuss what they see as parallels between develpments in Greece and those at the State, City an local Level in the US.
What Greece and US State & Local Governments have in common is two fold:
Neither can print money to bailout their proliferate and reckless spending,
Neither can debase their currency in a politically stealth manner which reduces standards of livings to match mounting debt obligations.
ARE OTHER DEMOCRACIES FUNDAMENTALLY ANY DIFFERENT?
It is easy to to sit in front of our TV set and pass judgement on others without being retrospective on whether we are actually any different? Consider what placed Greece in this "no win" position?
Charles Hugh Smithn suggests Greece found itself in this purgatory of social unrest for the following reasons:
DRIVERS
1. Flaws with the Euro:
-- No fiscal integration to accompany currency integration There are no enforceable limits on state borrowing,
-- Euro removes the re-balancing mechanism of national currencies National currencies enable nations devalue their currency to correct trade imbalances
2. Trade Imbalances between Eurozone members
-- Mercantile exporting nations run enormous trade surpluses, consumerist importing nations run enormous trade deficits, and there is no mechanism for importers to fund their deficits except debt
3. The crushing burden of public and private debt in the Eurozone
-- Greek debt of 340 billion euros is just the tip of the iceberg of total Eurozone debt
4. The debt crisis is an abstraction to exporting nations (Germany, the Netherlands) and a painfully concrete downsizing to importing nations suffering from austerity and high unemployment
5. The demographics of Europe (very low birth rates, social conflicts over immigration) and stagnating employment are very negative for nations with heavy social welfare costs and rapidly aging populations
Now ask yourself: Are any of our US State and Local governments in a position that is anything different than the above?
LENDERS VERSUS BORROWERS
However, when you look at who Greece owes its 323B Euros to we don't see too many bank lenders on the list. Nor do we see too many Greek bonds held by banks and private individuals / institutions? Oh they made the loans all right and are making boatloads of interest.
What we actually see is that the debt is dominantly owed to the Troika. The EU, IMF and ECB.
Bureaucrats don't lose their pensions if things go bad. Politicians don't get claw-backs on their earnings as the peoples' representatives. The Central Bankers who have returned to academia don't lose their tenure. Its all monopoly money to them. It sure isn't to the Greeks standing in front of ATM's or pensioners being told their promises are being slashed to pay debt obligations.
The only people not involved are the depositors and taxpayers who lose everything and then are forced to make impossible decisions.
Watch Greece closely and see who is really in charge and making the demands. Be sure you don't confuse the puppet bureaucrat in front of the camera for the wizards behind the curtain!
Also remember this could be coming to America soon!
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MARK O'BYRNE on Bank Bail-Ins& the Defrauding of Depositors
Mark O'Byrne
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SPECIAL GUEST:MARK O'BYRNE, Founder & Research Director, Goldcore. Mark O'Byrne founded GoldCore more than 10 years ago and today it has clients in over 45 countries. Mark contributes to media internationally and takes part in the Reuters, CNBC and Bloomberg gold and precious metal surveys.
Mark O'Byrne feels that holding a Degree in Greek and Roman Civilization with a focus on their economic and monetary history. This gives O'Byrne insights into the cyclical nature of societies that few other writers have. It is these insights that Mark shares in this 35 minute video. Bank Bail-Ins are only a modern day indicator of financially collapsing societies. "Unfortunately, we don't learn the lessons of history to our own downfall!"
FINANCIAL REPRESSION
"Given the large amount of debt in the world today we are seeing almost 'anti-free market philosophies' whereby the governments don't like price signals and the pricing mechanism, so they are trying to repress this to repress interest rates."
"By artificially suppressing the pricing mechanism, similar to forcing an inflated beach ball under the water, it will shoot up in another direction and can go in the opposite direction to what is initially intended!"
BANK BAIL-INS
"We are told Bail-Ins are to protect the taxpayer from the government having to bail-out the banks. But the depositors are the tax payers? Bail-Ins are just to protect the Senior Secured Debt holders!"
This is wrongful deception as people belief their money is safe in the bank It is intended to protect the assets of the Senior Secured Creditors within the banks capital structure. Private individuals and depositors are not holders of Senior Secured Credit to the banks which is strictly the relm of select international banks.
CONFISCATING DEPOSITORS FUNDS MEANS DEFLATION
"If you confiscate depositors funds (in a Bail-In) you will cause deflation like you would not believe!"
If you follow Mark O'Byrne's analysis you quickly realize that Bail-Ins are both economically very dangerous and basically nothing more than regulations to protect elements of the bank financial structure. The question may be: are regulations today to protect tax payers from the banks or to protect the banks from taxpayers (depositors)?
"Maybe today we need to come to the obvious realization that the government is no longer regulating the banks, but rather the banks are regulating the government!" Gordon T Long
INTERNATIONAL DIVERSIFICATION IS THE ANSWER - While the Doors are Still Partially Open
....and much, much more in this fact filled 43 minute Video.
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SPECIAL GUEST:RONALD-PETER STOEFERLE , Incrementum Liechtenstein
Prior�he�worked for�Raiffeisen Zentralbank�(RZB) in the field of Fixed Income/Credit Investments and then later on joined Erste Group Bank, covering International Equities, especially Asia.�In 2006�he began writing reports on gold and gained media attention when�he�expected the price of gold to rise to USD 2,300/ounce when the current price was only at USD 500.His�six benchmark reports called "In GOLD we TRUST" drew international coverage on CNBC, Bloomberg,�the Wall Street Journal, Economist and the�Financial Times.�He�was awarded "2nd most accurate gold analyst" by Bloomberg in 2011.�He�also writes reports on crude oil.�Mr. Stoeferle�is managing two gold mining-baskets and one basket for silver mining-equities.�He�studied business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign.�Mr. Stoeferle is also a Chartered Market Technician (CMT) and a Certified Financial Technician (CFTe).
Today, the 2015 edition of the gold report “In Gold We Trust” was launched. It is the 9th edition (read the 2013 and 2014 edition). With a global reach of some 1 million readers, it is probably the most read gold report worldwide. The In Gold We Trust 2015 is written by Ronald Stoeferle. He is the managing partner of a global fund at Incrementum AG in Liechtenstein, focused on the principles of the Austrian school of Economics.
2015 EDITION: "IN GOLD WE TRUST"
The gold price has stabilized in 2014, after its collapse in April and June of 2013. Investors' interest in the yellow metal is los. Hence, market sentiment vis-�-vis gold is standing at a multi-year low, maybe even a multi-decade low. History learns that extreme underperformance usually lasts for one year. If history is any guide, than there should be a recovery in the gold price in the foreseeable future. Even with the severe underperformance since 2013, gold is up approximately 9% per year since it started to trade freely in 1971. As seen on the next chart, depending on the currency in which it trades, the average yearly performance is excellent for investors with a long term horizon. In other words, gold does what is always has done throughout history: preserve value and purchasing power.
Preservation of wealth is the primary reason why one should hold gold nowadays. Monetary policies of central banks are extremely unusual. The U.S. Fed could be talking about “normalization,” but with 7 years at zero percent interest rates we are nowhere near “normal” conditions. The most extreme monetary conditions, today, are being seen in Japan. It is really no coincidence that the gold price in Yen is near its all time highs. The gold price in Yen is simply reacting on the extreme expansion of the monetary base by the Japanese central bank. As the next chart shows, the balance sheet of the Bank Of Japan (BOJ) is approximately 65% of the country's GDP. In other words, the assets that the BOJ is holding nears 2/3 of the total economic output of the country. When compared to other regions, it is clear that is a monstrous amount. It seems that Japan is near its endgame.
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One of the “reasons” gold has gotten so little attention in the last two years is that investors have been focused on stock markets around the world. The U.S. stock market has seen a huge rally since October of 2012, European stocks catapulted higher when the European version of QE was announced earlier this year, Japan keeps on making multi-year highs in the wake of an ever expanding monetary policy. Meantime, however, stocks are not cheap anymore. On a historic basis, when expressed in a� price/earnings ratio according to the Shiller method, the stock market in the U.S. sits at relatively high levels (although no extremes). Although it is not given that the stock market is about to go south, there always is a possibility that the top is set in which case gold should see positive returns. As the next chart shows, during periods of the worst performance of the S&P 500, stocks and commodities have lost significant value while gold remained steady.
A correction in the stock market is certainly in the cards. Why? Because traditionally the gold/silver ratio is mostly negatively correlated with the S&P 500. In other words, as the gold/silver ratio goes down which means there is a disinflationary environment, stocks come down as well. Over the last 25 years, that correlation has held very well, but started to diverge strongly 3 years ago.
Gold is underperforming in a disinflationary environment. That has been one of the key observations in the last In Gold We Trust reports. There was enough evidence in the datapoints so far, but the most up-to-date chart says it all (see below). While the real rates were standing at -4% in 2011, they have gone up steadily since then, and are again in positive territory this year. The gold price has moved in the opposite direction in that same time period. The In Gold We Trust Report 2015 focuses, among many other things, on the correlation between the gold price and inflation expectations. Gold is an inflation sensitive asset. The U.S. 10-Year real yields provide an indication of inflation expectations. As readers can see, a strong divergence is in place since 2013, arguing for a strong revaluation of the gold price as inflation expectations are in an uptrend since then.
Suppose, however, that inflation expectations will change their trend … would that be bad for precious metals? The answer to that question is to be found in the last chart. During deflationary periods, like the ones starting in 1814 or 1864, the Great Depression of the 30ies or the financial crisis of 2008, gold did remarkably well. It is during those periods of “financial stress” that gold shows its real value, i.e. preserve wealth and provide protection against other assets.
The themes in this years 2015 "In Gold Trust Report" are the real value of gold as a financial asset and the end of gold's underperformance.
SPECIAL GUEST: PAUL BRODSKY spent several decades trading bonds and other securities for such Wall Street firms as Drexel Burnham Lambert, Kidder Peabody, and Spyglass Capital, where he actively managed mortgage-backed derivative funds for over a decade (over 85% of investor capital in that fund was returned by June 2006, before the wide-scale credit contraction occured). He was co-founder and co-managing member of QB Asset ManagementQ which serves accredited investors. He is currently sarting a a consultative resource for professional investors, advisors and fiduciaries called Macro Allocation Inc.
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PAUL BRODSKY talks
FINANCIAL REPRESSION
46 Minute VIDEO Interview
Paul Brodsky introduced himself as a presenter at the Park Plaza Hotel (NYC, NY) to 200 of the world's largest Institutional Investors from large Sovereign Wealth Funds, Pensions Funds, Endowments and Foundations .... "I'm Paul Brodsky, I'm a Gold Bug!" This not only took guts but serious credibility in front of an audience that doesn't consider gold in their portfolio allocation decisions. So why would he do this?
Paul had been asked to present the "Case for Gold". It was 2010 and Gold had just had a run. Though Gold had been the elephant in the room for previous 9 years , Paul surmised the organizers simply felt gold needed some sort of obligatory representation. His presentation focused on the Global Monetary System and sheepishly admits he actually never mentioned the world Gold again! This summarizes the thinking within the community of Global Managers of serious money.
Paul says he felt he got the invitation because of the thrust and struggle of QB Asset Management, the hedge fund he co-founded. It showed in Paul's writings to QB's clients while seeking the truth. He sought an understanding of Price and Value (which are often quite different) in addition to Alpha generation for clients.
FINANCIAL REPRESSION
"Its easy to think there is a grand conspiracy out there is terms of the banking system, the policy makers and politicians in the political dimension. It is very easy to draw lines between all these groups connecting them. I think what we have is a natural set of incentives that are drawn together by how the system works. For example, Politicians usually like to spend money they don't have and the banking system can let them do that! So it is a very symbiotic relationship - one feeds the other - there is little need that a word be said! There is no back room, smoke filled discussions going on."
"After the 1971 Nixon Shock, for the first time ever we had a global monetary system where there wasn't one currency that was 'hard' - that is, backed by anything scarce. What that did was make everything relative. It made currencies relative and it made financial assets relative. Ultimately it made performance relative!"
"When everything becomes relative it makes thing very easy for authorities to manage the system because there is no governor on them to bring things back into balance!"
"What was once "the role of the Fed to take away the punch bowl when the party got going", it was now the Fed that was 'spiking' the punch bowl."
FRACTIONAL RESERVE BANKING
"The system as it is constructed using fractional reserve lending and fractional reserve banking is the real 'bugaboo'!" Paul is quick to point out there are two sides to this argument. "Yes, the hard money crowd is correct - it has allowed us to spend money beyond what may be considered sound, but also this "funny money" for example helped defeat communism and helped fund the dotcom frenzy which left a technology footprint that may not have occurred as quickly without it."
"It has been a terrible flowering of baseless credit, debt that has never been extinguished. It may all come down in a Minsky like debt deflation that is ugly - or it may force the Fed and other central banks around the world to create much more base money through QE and other lines of credit that diminishes the value of not only our currency but all others - that gets us back again to relative value and performance!"
"The central banks are devaluing their currencies and devaluing against themselves in a 'tag team' manner. They are also devaluing against Production. There used to be only four ways you could get a dollar. You could produce something, you could borrow it, you could reinvest what you had already earned or you could steal it. Now banks can make money out of thin air without any discipline. There is nothing on the other side. Debt is created through the loan process and it never has to be extinquished if the monetary authority doesn't demand that."
"We have gone through this great leveraging over the last 35 years. It has been encouraged by Monetary Authorities in the US and elsewhere. Now we are at zero interest rates we can't refinance ourselves to another round of leveraging. We have to find a new outlet for credit or there is going to be some sort of reconciliation. When you ask about Financial Repression, I think it has been forced on Monetary Authorities (though its their own doing). It had to happen. It is a consequence of the past 35 years."
"I think they are boxed, as is everyone else (like the IMF) that is involved"
WHO IS GOING TO STAND UP TO THIS?
"It is also in China and Russia's interest to have a baseless currency and even fractional reserve banks. What it does is centralize power to decide what wealth looks like in their nations and economies."
"My sense is we have to accept that this is the reality. That for the first time ever .... I think there is going to be increasing coordination amongst all sorts of Monetary Authorities and the net loser is going to be the saver or pensioner in real terms. It is not necessarily a negative on equities, real estate or anything that relies on credit. It may be bullish on nominal pricing but bearish on real pricing and value. That is what Financial Repression is bring us."
.... there is much, much more in this broad ranging 46 minute interview with a very thoughtful and experienced Wall Street insider telling it the way it really is:
Why the death of the infamous Bond Vigilantes occurred and how they got trampled by the Fed,
Why we have had a slow migration from Capital producing economies to Credit producing economies or Financialism,
Why a policy of unsound money has allowed China and Russia to transition to modern societies without becoming militaristic,
Why the global over supply is driving pricing pressures and deflation,
The eermergence of China's new private mercantilism system,
The political dimension of the $555T global SWAPS market exposure.
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Regular Co-Host:CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com
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The Coming Era of
PENSION POVERTY
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with Charles Hugh Smith & Gordon T Long
27 Minutes - 20 Slides
Charles Hugh Smith and Gordon T Long discuss what they see as the Coming Era of Pension Poverty.
To show why this happen, Charles and Gordon attempt to answer two questions:
Why are the pensions and benefits promised to public employees unsustainable?
Why is the Social Security System at risk?
Why are the pensions and benefits promised to public employees unsustainable?
1. Demographics: back in the day, there were 10 workers for every retiree. That slipped to 5 to 1, and it is now around 2 to 1: only two full-time workers for every retiree.
2. Low Yields in a ZIRP economy. Pension funds were based on a minimum annual investment return of 7% or more.� Returns of 3% or less mean the promised pensions cannot be paid out of investment earnings—they must be paid by higher taxes.
3. Increased risk of pension fund investments. Pension managers have compensated for low yields by shifting more of the fund’s capital into high-risk investments such as junk bonds as a way of capturing higher yields.� This strategy has paid off in a ‘risk-on” environment but has the potential to yield catastrophic losses in a “risk-off” downturn.
4. Many public unions have exploited the system by buying political favors. Many retire at 55 and game the pension plans to retire with 90% pay based on their last year of service, which includes huge overtime pay; questionable disability claims that make their pensions tax-free, etc.� This has changed the public employee pension plans from models of modest payouts to cash cows in which employees rake in $250,000 payouts upon retirement, are hired back as consultants (double dipping) and a host of other abuses.
5. Voters squeezed by stagnant incomes and steep increases in healthcare and educations costs cannot afford to pay higher local government taxes without crimping their consumption.� Forcing voters to pay for public pensions with sharply higher taxes will trigger a self-reinforcing recession as consumption declines lower consumption/sales taxes, lowering local government revenues despite higher taxes.
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Why is the Social Security System at risk?
1. Social Security is “pay as you go”—the Trust Fund is a fiction, IOUs that are empty promises, not tradable securities.� The deficits in Social Security must be paid with higher taxes or by selling Treasury bonds, i.e. increasing Federal debt.
2. Demographics: there are only 2 full-time workers for every Social Security/Medicare recipient.
3. Social Security is already running deficits:
Social Security Ran $47.8B Deficit in FY 2012; Disabled Workers Hit New Record in December: 8,827,795
4. Social Security is supporting an increasing number of non-retirees, i.e. disabled.
5. Demographics: the number of baby Boomers who qualify for Social Security and Medicare is set to soar--60+ million Boomers are entering these programs while the economy only supports 115 million full-time jobs.
6. Faulty actuary assumptions.� When Social Security was established, it was assumed there would always be 5 workers for every retiree, people retired at 65 and that the average age at death was mid-to-late 60s.� The system was not set up for people retiring at 62 and living into their 80s.
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MISH SHEDLOCK COMES OUT SWINGING ON: Illinois, Public Pensions and Greece
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"Mish" Shedlock
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SPECIAL GUEST:MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blog.
An espoused self educated Austrian Economist, �Mike Shedlock / Mish is a registered investment advisor representative for�SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at http://globaleconomicanalysis.blogspot.com
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MISH SHEDLOCK COMES OUT SWINGING ON:
State of Illinois, Public Pensions and Greece
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30 Minute VIDEO
STATE OF ILLINOIS & CITY OF CHICAGO -Never Ending Financial Obfuscation
From Seven Illinois cities, to the City of Chicago, to the State of Illinois, Public Pensions are bringing the proud 'Land of Lincoln' to its "financial knees"!
Decades of politically expedient l promises and over generous Public Pension concessions to appease powerful public unions have left all levels of government with few financial alternatives. Many are now be forced to consider bankruptcy.
The Fourth Financial Repression Pillar of "Obfuscation" has been the practiced tactic for some time which has camouflaged this cancer. This obfuscation involved many clever accounting games which according to Mish Shedlock:
"Illinois' Pension Plans are funded on average something like 39% and of course that creates a conflict of interest after judges have ruled on Pension Plans. The courts ruled that a bill Governor Rauner signed is unconstitutional and now sends things back to the drawing board. That (the bill) was supposed to save Illinois about $2B per year. Judges were in on it, Actuaries were in on it, the Rating Agencies - everyone was in on it."
"Moody's cut Chicago's rating to junk. The City of Chicago promptly removed Moody's from rating its bonds and instead hired another third party to rate its bonds. This is "rate shop whoring" and that is what I call it! The same process goes on with "actuarial whoring" because no city wants to admit that their pensions are as underfunded as they are!"
"Many of the pensions allow workers to retire at 50 after putting in 20 years of service, or whatever the requirement was. What do they do? They retire, collect their pension and then go to work for another government agencies and accrue benefits for yet another pension! - The whole system is untenable!"
"The taxpayers in Cook County are paying 50% of the tax revenues - not for services - instead it goes towards interest and pension obligations!"
... and IT'S STEADILY GETTING WORSE!
SOARING STATE TAXES - Sacrosanct Public Pensions Are Forcing Increased State Taxes
LOCAL PROPERTY TAX INCREASES
"To shore up Chicago's Pension System they would have to hike Illinois property taxes by approximately 50%. - My (Mish's) property taxes are already $14K/year!"
City, Local & Town Taxes in America are about Property Taxes. We can expect to see and explosion going forward in property taxes to pay unfunded public pensions.
Could this be a potential Death Knell For Real Estate Prices?
Could this trigger a collapse in 'Tax Free' Muni Bond Values?
GREEK CRISIS HAS COME TO A HEAD - Public Service Pensions A Major Sticking Point
"You have to actually wonder if the Greek Government is giving Greeks time to get their money out of the banks - only the dumb money is now left?"
....and much, much more in this fast paced 30 minute Video.
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JORDAN ELISEO talks: "Dire Straits - Money For Nothing, Debt For Free"
Jordan Eliseo
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SPECIAL GUEST:JORDAN ELISEO Chief Economist, ABC Bullion, Australia. Jordan Eliseo is a much sought-after and respected financial commentator and economic analyst with close to 20 years experience in the financial sector. After working for some of the biggest names in the global financial marketplace including Deutsche Bank, JP Morgan and AMP Capital, Jordan has amassed a wealth of experience analyzing investment markets. Jordan set up his own precious metal and mining fund back in 2003, when most people had never even heard of precious metal investment, and is also the founding partner of a national financial advice business, helping Australians take control of their finances and maximize their superannuation. l control of their finances. With a background in funds management and investment analysis, including coverage of some of Australia’s largest superannuation funds.�
Jordan holds a BA in Banking and International Finance from Flinders University and a Graduate Diploma in Applied Finance and Investment from FINSIA. He also holds the Diploma in Financial Planning (Financial Services) with specialist SMSF accreditation.
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JORDAN ELISEO talks: "Dire Straits -
Money For Nothing, Debt For Free"
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36 Minute VIDEO Interview
FINANCIAL REPRESSION
"The subsidizing of debtors and the attempt to provide essentially a fake support for asset prices - while punishing savers and mis-allocating capital!"
"In Australia we have some of the highest debt levels in the world. Some people in Australia like Financial Repression because it is making it easier for them to pay off their mortgage (or at least afford their mortgage). The flip side is retirees, or people trying to live off fixed income and the like, are finding life very very difficult now because they have taken a very significant "pay cut" on the income which they were able to earn on the capital that they had been able to save throughout their working lives."
WHAT'S DIFFERENT IN AUSTRALIA?
"Australia is effectively "catching down" to the rest of the world. - it is approximately four to five years behind western word."
"Australia was incredibly fortunate the first time around to. We had a huge stimulus from China which lead to quite literally an unprecedented boom in capital investment in our mining sector. Trades stayed incredible strong because iron ore, coal prices and even gold was supported from a long time. Also because even at this point Australia has a a government debt level that is still quite manageable".
"Imbalances have continued to build over this period and now that the mining boom is over, iron ore prices are closer to $60 dollars (not $160) and capital investment is drying up - we are finding we don't have anything to re-balance to with private debt levels preventing any real pickup in consumer spending in any meaningful way!"
"Australia is about to enter a fairly serious "lull"'
EXPECT DECLINING STANDARDS OF LIVING
The next phase in Australia that Jordan Eliseo expects "is where people begin to lose faith with Central Banks and start to more fully appreciate the complete lack of connection of what is going on in the real world / real economy and what is going on in asset / financial markets."
"I think that when that happens financial markets have a lot of "catching down" to do!"
"The road that the government and central banks have led us down is actually a road that is going in the wrong direction! Standards of living are going to continue to decline as we go down that road and it is going to be a very difficult period for investors and individuals just trying to maintain their standard of living."
WALL STREET IS DISCONNECTED FROM MAIN STREET!
"The end result of current economic policies have caused the disconnection (between Wall Street and Main Street). You can understand the emergency measures that were taken during the financial crisis but all it has done is fuel rampant asset speculation. We haven't seen any meaningful growth in corporate capital investment or a rise in full time job creation (with a real living wage)."
"If you look at what is happening around the world we are seeing the prioritization of asset speculation over actual investment. It is impacting everyone from individuals, to CEOs, to Boards in making decisions around dividends / stock buybacks versus investing in their own operating businesses!"
"People in Australia on paper are more wealthy because their house price keeps going up, but they have less money to spend because the money they earn on their term deposit & savings continues to decline!"
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... and much, much more in this 36 minute VIDEO interview on global macro issues ...
Why the Central Bank play book is very clear for investors,
Why we will see a growing appetite for Precious Metals & why it is now imprudent not to acquire some element of precious metals within portfolios,
Why we have $5T in Negative Nominal Sovereign Bonds,
Why Superannuation is the only investment for 22M people in Australia,
Why lower interest rates are ahead for Australia,
Why Financial Diversification. Liquidity and Internationalization have become so important.
G7 EXITING - WITH MINIMAL GOLD HOLDINGS - WHY?
MEANWHILE CHINA, RUSSIA AND NON-G7 ARE ENTERING GOLD MARKET - WHY?
CHINA
RUSSIA
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SPECIAL GUEST: JEAN MARIE EVEILLARD is a legendary French international investor who currently serves as the senior investment adviser to First Eagle Funds. Eveillard, who served more than a quarter century as a portfolio manager, was co-honored in 2001 by Morningstar, Inc. as "Stock Manager of the Year" and was a finalist for their 2009 "fund manager of the decade award for non-U.S. stocks". In 2003, the group gave him a "Fund Manager Lifetime Achievement" award.
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JEAN MARIE EVEILLARD talks
FINANCIAL REPRESSION
27 Minute Podcast Interview
FINANCIAL REPRESSION
"One characteristic of Financial Repression is extremely low interest rates. That is what the Federal Reserve, ECB and Bank of Japan have done over the past few years in reaction to the financial crisis of 2008. They have in a sense manipulated interest rates by doing what they call Quantitative Easing, which is the purchasing by the central banks of a number of fixed income securities - in the process taking short term interest rates and long term yields down as much as possible. In doing so they are trying to encourage investors but it is of course detrimental to savers!!"
"In a way they are being pushed into equities ... the authorities have created what I think is a bubble in stocks, bonds, high end real estate and art"
REGULATORY "RING FENCING"
"By forcing the banks to inflate their capital, the banks are being forced into buying sovereign securities!".
This type of regulatory policy chicanery helps finance the growing government debt at the expense of savers, retirees and small business. Eventually sovereign economic growth is affected.
NEGATIVE UNINTENDED CONSEQUENCES
There are many unintended consequences and moral hazards of such policies. They lead to mal-investment, lack of price discovery and the mispricing of risk. Jean Marie Eveillard cites "economists have warned about potential mal-investment and today we are right there with the problem .... there is no ambiguity when they say they will do whatever it takes!"
"SAVE & INVESTMENT" VERSUS "LEND & SPEND"
"Today the emphasis of economists is to consume, versus save and invest!"
"Sustained cheap money increases supply much more than it does demand. We presently have over investment resulting in global over supply. This is not being matched by only moderate global demand based primarily on consumerism. This mismatch leads to a lack of pricing power, which eventually defeats policies of Quantitative Easing and ZIRP which were never intended by their academic architects to be sustained policies." Gordon T Long
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SPECIAL GUEST: JAYANT BHANDARI is constantly traveling the world looking for investment opportunities, particularly in the natural resource sector. He advises institutional investors about his finds. Earlier, he worked for six years with US Global Investors (San Antonio, Texas), a boutique natural resource investment firm, and for one year with Casey Research. Before emigrating from India, he started and ran Indian subsidiary operations of two European companies. He still travels multiple times a year to India. He is an MBA from Manchester Business School (UK) and B. Engineering from SGSITS (India). He has written on political, economic and cultural issues for the Liberty magazine, the Mises Institute (USA), Mises Institute (Canada), Casey Research, International Man, Mining Journal, Zero Hedge, Lew Rockwell, the Dollar Vigilante, Fraser Institute, Le Qu�b�cois Libre, Mauldin Economics, Northern Miner, Mining Markets etc. He is a contributing editor of the Liberty magazine. He runs a yearly seminar in Vancouver titled Capitalism & Morality.
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GLOBAL MINING ANALYST JAYANT BHANDARI
"ITS AN OVER SUPPLY PROBLEM!"
FINANCIAL REPRESSION
"There are two parts of the world in my opinion. One is the western developed civilization and the other is the non-western civilization. The western civilization was primarily based on reason and respect for the individual. This has considerably deteriorated over the last few decades. Increasingly the coming of the police state in particularly the USA. In the West-European part of the western civilization the regulatory controls have become particularly horrendous as well. The welfare system of these economies is deteriorating these societies now. Culturally the western civilizations are increasingly on a slippery slope."
"The non Western civilizations have adopted the consumerism and wealth creating mechanism of the western civilizations, but I am not sure they have really adopted these things properly! Democracy has not done well in these countries. As a result consumerism is making these countries very unstable. The only countries I feel relatively positive about right now are China and some of the smaller countries like Singapore, Hong Kong, Mauritius - these countries are doing very well."
HARD ASSETS & NATURAL RESOURCES
The problem is with the investors who have over-funded mining. They shouldn't have ramped up mining as much as has been done!
'The places to invest are places like Canada, Scandinavia, Australia and parts of South America. You need consistency in the political climate. You want the stability for people to invest billions of dollars in these countries."
"I don't think global demand has fallen. If you look at Iron Ore the world is using three times more Iron Ore. The world requires three times more Iron Ore than it used to 10-15 years ago. What is changed is that we have started to supply more commodities than the world demand is there for it. The problem is with the investors who have overfunded mining. They shouldn't have ramped up mining as much as has been done!
PERVASIVE GLOBAL OVER-REGULATION
"Global western economies are stagnating and this is a direct result of over regulating business in those countries."
"Businesses are suffocating in the west now. There is pretty much zero growth. You need to understand the off balance sheet liabilities these businesses have, and continue to increase. They have benefited from technological evolution and the low hanging fruit over the last twenty years." This has now changed.
The US$ shows that though the US is deteriorating according to Jayant Bhandari "it is deteriorating slower than the rest of the world!"
"Economic repression is a fact of the day everywhere in the world"
Where growth is happening it is because of increasing consumerism and this is not good for the future because growth should be happening as a result of the increase in supply of products - which would mean we should be saving more - which would mean we should be producing more than we are consuming!"
INCREASINGLY BULLISH ABOUT GOLD
"I have never been too bullish about gold but increasingly I am very bullish about gold. The reason is a lot of people misunderstand why Indians buy gold. The reason Indians and Chinese buy so much gold is that for example in India the yield on investment is negative. It pays them to invest in something that gives them positive real yield. In my view India is going to increase its consumption of gold and the Chinese will keep doing it."
"Once the US$ becomes too over-valued people will begin putting their money in precious metals!"
.... and much more in the video interview. Listen to the whole interview.
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SPECIAL GUEST: PURU SAXENA is Founder and Chief Executive Officer of Puru Saxena Wealth Management in Hong Kong. Mr. Saxena has extensive investment experience and he is a registered investment advisor/money manager with the Securities & Futures Commission of Hong Kong. Highly respected in the investment management business, he is a regular guest on various media such as CNN, BBC, CNBC, Bloomberg, Reuters and a host of other channels. Furthermore, he is regularly featured in several publications such as Barron’s, Hong Kong Economic Times, South China Morning Post, Benchmark magazine, Hong Kong Business and China Daily. Mr. Saxena is also the editor of our monthly economic report – Money Matters. Our highly acclaimed publication is read by professional and retail investors in numerous countries. He first began publishing his monthly economic report in June 2000 and it has now attracted a wide following.
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PURU SAXENA talks
FINANCIAL REPRESSION
31 Minute Video Interview
FINANCIAL REPRESSION
"We have been through a huge financial crisis in 2008 which brought the world's banking system to it knees. The US housing market was on it knees. It was the worst recession, if not depression that the US faced in a long time. It affected all the global markets. So rightly or wrongly - wrongly in my view - the central banks decided to bailout everyone in site by keeping interest rates near zero and launching Quantitative Easing programs (which is essentially bond buying or asset swapping) which is printing new money and buying toxic bonds from the banks and thereby cleaning up the banks balance sheets - making sure the banking system survives."
"In the process they have held interest rates at zero for a long long time, not only in the US, Europe and a lot of other countries in the developed world, which is penalizing the savers to the benefit of the borrowers and debtors. They are especially hurting people at retirement or close to retirement because suddenly their passive income which they had worked so hard to accumulate all their life disappears!"
"It is essentially a transfer of wealth from savers to the borrowers and debtors."
"This has managed to stabilize the system temporarily but is really not good for society!"
UNINTENDED CONSEQUENCES
"The problem is everyone has become accustomed to being bailed out! Now there is no such thing as a bankruptcy! Everyone knows (especially the banks), if they make mistakes someone will bail them out either the central banks or the government. It has increased risk taking.
"It has increased risk taking."
"I never felt QE was capable of increasing business activity because this is not really a supply side problem but a demand side problem. You have households all over the world already choking on debt. The last thing they want to do is borrow more money even if you drop rates to zero or give them money to borrow, they just are not going to do it!
A DEMAND PROBLEM
"When people ask why QE hasn't caused inflation or hyperinflation, the answer is simple: households in the west were in no position to borrow money at even zero interest rates. The aggregate demand for new debt or credit was simply not there. By swapping assets the central banks have managed to cleanup the banking system but they have not been able to ignite the risk appetite at the household level".
"We have a Demand problem, NOT a Supply Side problem!"
This is a global problem! "Even in Hong Kong, 2 years ago it was teaming with mainline Chinese tourists which now are simply not coming. Retail sales in Hong Kong have fallen significantly. Spending is hurting as the middle class has been obliterated! The rich have become richer as assets have increased and savers have been penalized. This policy of QE and Financial Repression has really helped the elite of the world - who have had access to financial leveraging."
LOW GROWTH ECONOMIC ENVIRONMENT
The core problem to Puru Saxena is:
The low growth economic environment we find ourselves in,
The deflationary pressures in Europe and Japan
"Historically we have seen, whenever an economy passes through an extremely slow growth, sluggish environment where there is a lack of aggregate demand and you have deflationary pressures, long term interest rates have always gone down. The tendency of long-term interest rates is to drift lower in this environment. Long-term interest rates are normally set by the rate of economic activity as well as the real rate of inflation. At the moment we don't really have much inflation or at least forces on inflation anywhere in the developed world and economic activity is zero or even negative!"
Long-term interest rates are price appropriately for the current economic activity!
There is much, much more in this 31 minute macroeconomic view of the world and the investment opportunities it presents.
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SPECIAL GUEST:JIM ROGERS is the author of the bestseller, Investment Biker: Around the World with Jim Rogers. His other books include Adventure Capitalist: The Ultimate Road Trip,A Gift to My Children: A Father's Lessons for Life and Investing, Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market, and A Bull in China: Investing Profitably in the World's Greatest Market. Jim grew up in Demopolis, Alabama, and got started in business at the age of five, selling peanuts. Winning a scholarship to Yale, Rogers was coxswain on the crew. Upon graduation, he attended Balliol College at Oxford. After a stint in the army, he began work on Wall Street. He cofounded the Quantum Fund, a global-investment partnership. During the next ten years, the portfolio gained more than 4,000 percent, while the S&P rose less than 50 percent. Rogers then decided to retire--at age thirty-seven--but he did not remain idle.Continuing to manage his own portfolio, Rogers served as a professor of finance at the Columbia University Graduate School of Business and as moderator of The Dreyfus Roundtable on WCBS and The Profit Motive on FNN. At the same time, he laid the groundwork for his lifelong dream, an around-the-world motorcycle trip: more than 100,000 miles across six continents. He has contributed to Fox News, Worth, CNBC and others.
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JIM ROGERS talks
FINANCIAL REPRESSION
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23 Minutes
FINANCIAL REPRESSION
"Financial Repression can mean many things but basically in a nutshell it is a lack of free market finance and human activity, where the government thinks it is smarter than we are!"
"History has shown many times that we are smarter than governments, politicians and the bureaucrats - but they don't like to give up power. When they make mistakes they blame it on us and try and make us pay for it! When they see a problem arise their first instinct is to try and suppress the public and markets. They try and do things they think will make things better, but of course it doesn't, and only makes things worse!"
GOVERNMENT CONTROLS & REGULATIONS
"When problems arise they put on exchange controls which is a time honored tradition of politicians and bureaucrats to correct mistakes they have made. We will have exchange controls in the US again - no question. We already have exchange controls to some extent such as FATCA and other things to make it more and more difficult for Americans to do anything as far as finances are concerned. They will put on trade controls, tariffs quotas - they will come up with all sorts of things."
Politicians don't know what they are doing. History proves many times that politicians make things worse instead of better because what they do since they don't know anything themselves, they ask the bureaucrats how they can save themselves. The bureaucrats rush in and say "this is the way you save yourself". "It isn't your fault, it is the markets fault and those evil speculators and the people! They then come up with regulations and controls. They don't know what they are doing!"
Regarding ZIRP, Operation Twist and three rounds of Quantitative Easing, Jim Rogers predicts:
"We are going to have to pay a horrible price for yet another mistake made by the bureaucrats"
WHAT SHOULD INVESTORS BE THINKING ABOUT?
"The first thing investors should do is only do things they know a lot about! Don't listen to me or anyone else who you don't know what they are talking about. Do not so something that you yourself don't understand perfectly."
"Everyone should know about having assets outside their own country. We all have fire insurance which we hope we will never use. Look upon international diversification as a kind of insurance. ... diversify internationally.
"If you don't know about other asset classes then please, for goodness sake, learn about them because there are going to be many strange things happen in the next decade.
THE CERTAINTY OF ECONOMIC SLOWDOWN
"History shows in the US we have had economic slowdowns every four to seven years since the beginning of the republic. We are going to have them again no matter what people tell you. If someone tells you we will never have another economic slowdown - please put your money in your pocket and head as far away as you can!"
"It is going to be much, much worse than 2008. There is higher debt everywhere than previously!"
"We have never had history all the central banks printing such vast amounts of money at the same time! There is a hugh ocean of liquidity floating around out there!"
... and much more
Coming Exchange, Trade and Quota controls,
The dangers the coming Cashless Society,
The $5T Nominal Negative Interest Rate Sovereign Bonds,
The destruction of the US savings and working class,
The slowing Chinese Economy,
Why recessions are healthy. Why the avoidance of recessions leads to serious malfeasance.
The importance of investing in productive assets.
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Prof. THORSTEN POLLEIT on THE NATURAL INTEREST RATE
Dr Thorsten Polleit
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SPECIAL GUEST:Thorsten Polleit, PhD is chief economist of the precious-metals firm Degussa and co-founder of the investment boutique Polleit & Riechert Investment Management LLP. He is honorary professor at the Frankfurt School of Finance & Management and associated scholar of the Mises Institute.
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative
Some economists have been arguing that the “equilibrium real interest rate” (that is the “natural interest rate” or the “originary interest rate”) has become�negative, as a “secular stagnation” has allegedly caused a “savings glut.” The idea is that savings exceed investment, and that a negative real interest rate is required for bringing savings in line with investment. From the viewpoint of the Austrian school, the notion of a “negative equilibrium real interest rate” doesn’t make sense at all.
The market interest rate is the outcome of the supply of and demand for savings in the market place. It can be observed, for instance, in the deposit, bond, or loan market for different maturities and credit qualities. The originary interest rate is a�category of human action, saying that acting man values goods available at present more highly than goods available in the future. In other words:�Future goods trade at a price discount relative to present goods. For instance, 1 US$ available today is preferred over 1 US$ available in one year’s time.
If 1 US$ to be received in one year’s time is valued at, say, 0.909 US$, the originary rate of interest is 10 percent. (1 US$ divided by 0.909 minus 1 gives you 0.10, or 10 percent, for that matter.) 10 percent is here the originary interest rate (disregarding any other premia).
The “Originary Interest Rate” Reflects a Value Differential
The originary interest rate is expressive of a�value differential, which results from so-called�time-preference.�The term time-preference denotes that acting man prefers an earlier satisfaction of wants over a later satisfaction of wants. Time-preference is always and everywhere positive, and so is the originary interest rate. This is, first and foremost, what common sense would tell us.
The notion that time-preference and the originary interest rate could be zero, does not only sound absurd, it is also a�logical�impossibility: Positive time-preference and a positive originary interest rate are logically implied in the irrefutably true “axiom of human action.”
Human action is purposive behavior, implying the use of means to achieve ends. Action requires time (it is impossible to think otherwise). Thus, time is an indispensable and scarce means for achieving ends. As such, it must be economized, which necessarily implies that an earlier satisfaction of wants is preferred over a later satisfaction of wants.
For (praxeo-)logical reasons, therefore, time preference and the originary interest rate cannot fall to zero, let alone become negative. The implications of a negative originary interest rate cannot even be conceived by the human mind: A zero originary interest rate already implies no action ever into eternity.
The End of the Market Economy
Should a central bank really succeed in making�all�market interest rates negative in real terms, savings and investment would come to a shrieking halt: as time preference and the originary interest rate are always positive, “capitalistic saving” — the accumulation of goods designed for improving the production process — would come to an end.
Capital consumption would ensue, throwing mankind back into poverty. It would be the end of the market economy.
The True Purpose of Negative-Interest-Rate Policy
For some reason, those who argue that the originary interest rate has become negative seem to overlook that the originary interest rate is a phenomena which is not confined to credit markets. It pervades all markets in which present goods are exchanged for future goods. For instance, the originary interest rate prevails at each stage of the economy’s time-consuming roundabout production. The originary interest rate also exists in the stock market, where investors exchange present money against a claim on future money (that is a firm’s dividend payment).
If they wanted to be consistent, the believers in a negative originary interest rate would have to call for a policy that does not only make interest rates negative in real terms in the credit market, but also in the markets for, say, stocks and housing.
However, a policy that advocates destroying firms’ values and peoples’ housing wealth wouldn’t be taken too kindly by the public at large; and those economists recommending it couldn’t expect being cheered.
The consequence of a policy of a negative real market interest rate should have become obvious by now:
It is an actually perfidious policy for debasing the real value of outstanding debt; and it is a recipe for wreaking havoc on the economy.
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Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time.�Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.
THE CONTENT OF ALL MATERIALS:� SLIDE PRESENTATION AND THEIR ACCOMPANYING RECORDED AUDIO DISCUSSIONS, VIDEO PRESENTATIONS, NARRATED SLIDE PRESENTATIONS AND WEBZINES (hereinafter "The Media") ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY.
The Media is not a solicitation to trade or invest, and any analysis is the opinion of the author and is not to be used or relied upon as investment advice. Trading and investing� can involve substantial risk of loss. Past performance is no guarantee of future returns/results. Commentary is only the opinions of the authors and should not to be used for investment decisions. You must carefully examine the risks associated with investing of any sort and whether investment programs are suitable for you. You should never invest or consider investments without a complete set of disclosure documents, and should consider the risks prior to investing. The Media is not in any way a substitution for disclosure. Suitability of investing decisions rests solely with the investor. Your acknowledgement of this Disclosure and Terms of Use Statement is a condition of access to it.� Furthermore, any investments you may make are your sole responsibility.�
THERE IS RISK OF LOSS IN TRADING AND INVESTING OF ANY KIND. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
Gordon emperically recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, he� encourages you confirm the facts on your own before making important investment commitments.
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DISCLOSURE STATEMENT
Information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities.
Please note that Mr. Long may already have invested or may from time to time invest in securities that are discussed or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.
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COPYRIGHT� � Copyright 2010-2011 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.
Bank profits are in trouble!. Don't be fooled by the "beat analyst estimates" charade, because that is exactly what it is. First quarter bank earnings can only be described as an unmitigated disaster. 
Savings come from two sources: 
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Gordon Long, co-founder of Financial Repression Authority, believes that a massive tax grab by government at the federal, state, and local level is coming regardless of which candidate wins the 2016 US presidential election. He also discusses "a peak in the credit cycle," what this means for investors, and why the Fed may have to reverse course this year in light of a potential liquidity crisis.
CORPORATE LEVERAGE
Cycle always leads and it has now turned. He believes the evidence shows that the Business Cycle has also turned and that the Rate Cycle has been disconnected from reality since it skipped a "Cyclical Beat" due to Central Bank Monetary Malpractice. 
FOMC DECISION - An Incredibly Fragile Situation 
Stagnant income/revenues: households, companies and nations cannot support more debt
JUST 3 POTENTIAL TRIGGERS
FOMC DECISION -"Its All Actually Absurd!" 
BITGOLD & EURO PACIFIC BANK
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"By artificially suppressing the pricing mechanism, similar to forcing an inflated beach ball under the water, it will shoot up in another direction and can go in the opposite direction to what is initially intended!"
FINANCIAL REPRESSION
From Seven Illinois cities, to the City of Chicago, to the State of Illinois, Public Pensions are bringing the proud 'Land of Lincoln' to its "financial knees"!
WHAT'S DIFFERENT IN AUSTRALIA?
HARD ASSETS & NATURAL RESOURCES 
"In the process they have held interest rates at zero for a long long time, not only in the US, Europe and a lot of other countries in the developed world, which is penalizing the savers to the benefit of the borrowers and debtors. They are especially hurting people at retirement or close to retirement because suddenly their passive income which they had worked so hard to accumulate all their life disappears!
