Tuesday, September 23, 2014

Who Is The Federal  Reserve
Working For? 5*
[Will America Ever Figure Out That It Works For Its Owners
& That Is Not The American People]
CNBC Rick Santelli video is from LAST YEAR BUT IT IS STILL APPLICABLE. The Financial Services Modernization Act of 1999 has done wonders for profits & bonuses on Wall Street at the expense of middle class America
LINK HERE to the Zero Hedge commentary
Tuesday Morning Special
The Bond Bubble Will End Very Badly
Investment legend Julian Robertson*, co-founder & chairman of Tiger Management LLC, & William Conway, co-founder & co-chief executive officer of The Carlyle Group LP discuss the financial markets, private equity, hedge funds & investment strategy .. Bloomberg Markets Most Influential Summit in New York .. 25 minutes in total program
The Ponzi Economy
Gordon T Long* summarizes the ponzi economy characterized by John Hussman this week .. "The central point is this: The U.S. economy has shifted course from one of productive capital accumulation to a reliance on continuous expansion of debt in excess of the economic ability to repay it. Call this the Ponzi Economy." .. The U.S. Ponzi Economy is one where:
1. Domestic workers are underemployed and consume beyond their means;
2. Household and government debt make up the shortfall;
3. Corporate profits expand to a record share of GDP as revenues are sustained by household and government deficits;
4. Local employment is replaced by outsourced goods and labor;
5. Companies refrain from productive investment, accumulate the debt of other companies and issue new debt of their own, primarily to repurchase their own shares at escalating valuations;
6. Our trading partners (particularly China and Japan) become our largest creditors and accumulate trillions of dollars of claims that can effectively be traded for U.S. property and future output;
7. Fed policy encourages the yield-seeking diversion of scarce savings toward speculation in risky securities; and
8. As with every Ponzi scheme, everyone is happy as long as nobody seeks to be repaid.
link here to the Hussman essay posted yesterday
Crony Capitalism Redistributes
Wealth Until ..?
American Thinker posted essay on the fusion of government & major corporations we have come to call "crony capitalism" .. the essay takes the position that crony capitalism evolves as the private sector's creative powers gradually decay amidst a government intent on the confiscation & redistribution of wealth .. "As the political state is incapable of creating wealth, as wealth can only arise in the private sector, the very act of confiscation and redistribution of that private sector wealth severely inhibits the investment that sustains the private sector's creation of it. The result is that the private sector's creative powers gradually decay. The source of new wealth cut off, wealth depletes. This degradation can only be delayed, not abated, by some sort of crony capitalism in which the state attempts to force private investment either by mandates and penalties or giving special subsidies; by picking winners .. I've come to the conclusion that no matter how far left the political philosophy that guides political decisions, the net depletion of economic wealth to be distributed will always lead to some sort of crony capitalism. As wealth depletion continues from weak private investment, confiscatory taxation, restrictive labor laws and the like, the welfare state relies ever more heavily upon coercion, both social and legal, and upon economic subsidies to favored firms to sustain itself .. France exemplifies this system."
LINK HERE to the essay

"Pension Funds Will Be Taken To
Fund Government Infrastructure"
"The G20 Central Bankers and Finance Ministers met in CAIRNS, Australia, Sept 21st, 2014. This Summit reflects the attitudes about manipulating the economy where they just do not get it .. I warned what Obama was up to with the pension funds in trying to create an Infrastructure Fund ..... Calpers, California pension fund, is selling off $4 billion of hedge funds to divert that money to be wasted in Obama’s dream project – the infrastructure fund .. This idea was floated and endorsed at CAIRNS ..  These are being called Public Private Partnerships (PPP), and will be extremely critical in the future for here lies the final destruction of the pension funds precisely as Japan bankrupted the Japanese Postal Saving Fund using that private money for political purposes to try to stimulate the economy, which failed. With PPP, public funds will be sold to the public as being a highly professional long-term investment that will further shrink economic growth and liquidity. They cannot possibly work .. How do pension funds make money on repairing infrastructure? Toll booths will pop up everywhere."
- Martin Armstrong
link here to the reference
Why Government & Central Bank
Financial Repression Will Fail
Interview with David Morgan, a precious metals expert, on why financial repression mechanisms imposed by governments & central banks will ultimately fail .. 12 minutes
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Monday, September 22, 2014

5* David Stockman*
There Is A Keynesian
Train Wreck Ahead
Why should we write essays when we can find ones like this? It is a transcript of an epic speech by David Stockman* given last year at Harvard University .. A small sample: "The Federal Reserve was created in 1913, and during its first 73 years it grew its balance sheet in turtle-like fashion at a few billion dollars a year, reaching $250 billion by 1987—at which time Alan Greenspan took over the Fed and chanced to discover the printing press in the basement .. Alas, the Fed’s balance sheet is now nearly $4 trillion, meaning that it exploded by sixteen hundred percent in the last 25 years, and is currently emitting $4 billion of make-believe money each and every business day .. So we can summarize the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government which are domiciled there—that is, the warfare state, the welfare state and the central bank .. What is flailing, by contrast, is the vast expanse of the Main Street economy where the great majority has experienced stagnant living standards, rising job insecurity, failure to accumulate any material savings .. And what is positively falling is the lower ranks of society whose prospects for jobs, income and a decent living standard have been steadily darkening .. I call this condition Sundown in America."
LINK to the speech/transcript
John Mauldin* provides another version of what we call
"THE CHART THAT SAYS IT ALL"
Where's The Growth?
More Debt Produces Less & Less Growth
"In places like the United States and Japan, where neo-Keynesian thought leaders have already traded higher public debt levels and larger central bank balance sheets for unspectacular economic growth and the kinds of asset bubbles that always lead to greater instability in the future, their policies have failed to jump-start self-accelerating recoveries. Even in the United States, when QE3 has been fully tapered off, I would expect to see the broader economy start to lose momentum once again. We’ve tried countercyclical deficit spending to resist recessions, procyclical (and rather wasteful) deficit spending to support supposed recoveries, and accommodative monetary easing all along the way (to lower real interest rates and ease the financing of those pesky deficits); but growth has been sluggish at best, inflation has been hard to generate, and labor market slack is making it difficult to sustain inflation even when real interest rates are already negative. Call me a heretic, but I take a different view than the economists in charge. To my mind, the sluggish recovery is a sign that ..
central banks, governments and the 'textbook' economists are part of the problem."
LINK HERE to the letter
Click "Mauldin September 20" to download Mauldin's letter (may need to provide your email address), or hit "View Fullscreen" at the bottom next to the Scribd logo to enlarge viewing .. John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore

Sluggish Economic Performance? When will people realize that central banks, governments and the 'textbook' economists
ARE THE PROBLEM
The Tribute The World 
Pays To Today's Empire
Hugo Salinas Price* sees the entire world paying "tribute" to the U.S. "empire" which currently issues its currency as the world's reserve currency .. this status allows the U.S. to effectively borrow from the rest of the world to finance its debt, its deficits, its wars, its reckless spending etc .. "The bald truth is that $12 trillion dollars is the imperial tribute extracted from all the countries that do not issue a reserve currency, and delivered to the countries that issue the reserve currencies, in the course of the last 43 years. It cannot be anything other than imperial tribute, because those funds represent bonds that will never be paid. Exports exchanged for bonds that will never be paid are tribute which the exporting world has delivered to the United States and Europe .. When Caesar invaded Britain in 54 B.C. his legions had to cut to pieces several thousand Britons. After the Britons surrendered, he imposed upon Britain a yearly tribute or stipendia, to be delivered in the form of assorted valuable goods. This tribute the Britons paid for the next four hundred years. Tribute is what sustains and feeds an Empire .. However, never in history has there been any collection of imperial tribute on the scale of the present financial scheme, of paying for imports with bonds that will never be paid. The devilish thing about it is that hardly anyone understands it." .. if link is not working, his website may be temporarily unavailable - please try again later
LINK HERE to the essay
How Skyscrapers Can 
Indicate Economic Contraction
Wall St for Main St interviews Dr Mark Thornton, who is a Senior Fellow at the Mises Institute .. discussions on Thornton's interesting theory on how Skyscrapers are a good indicator for economic contraction .. discussion on the Federal Reserve, government intervention in the economy .. 32 minutes
click to enlarge
A Run to Silver & Gold?
Discussion with precious metals specialist David Morgan .. Morgan thinks it is only a matter of time before the debt & the derivatives market crash, catapulting precious metals prices exponentially higher .. "the debt markets is where the problem is really. When that problem blows up, there’s going to be a run to gold unlike anything in the history of mankind. . . . The spillover into silver will be phenomenal, as well, because once it (debt markets) starts down, everyone that understands what’s going on, which will be very few, will be running to gold. They will try to get gold in any form that they can, and again, a huge spillover into the silver market. All of a sudden, even at the retail level, and at the wholesale level or commercial level, or the futures market or bar level—it’s over. A big ETF type or silver holding company will call up and say I want to buy $50 million of silver, or $150 million or $200 million, which is peanuts compared to the bond market. . . . The answer is going to be ‘we don’t have it.’ When that happens, it’s over." .. 36 minutes
The Counter-Intuitive Rise 
of the U.S. Dollar
"Given the many weaknesses of the U.S.-- ballooning social-welfare and crony-capitalist liabilities, free money for financiers monetary policies, etc.-- a strengthening dollar (USD) strikes many as counter-intuitive .. The USD serves both transactional (global trade) markets and the global need for currency reserves (i.e. as a store-of-value). Sorting out the various influences on its relative value in each capacity is complex enough, but there is also the X Factor--the hard-to-quantify components of any currency's relative value .. For the USD, the X Factor is hegemony, which includes financial dominance based on debt issued/denominated in USD and what might be called the real-world assets of the issuing nation: that nation's food, energy and water security (what I call the FEW resources), its proximity to potential enemies, its external environmental costs, its overseas financial assets, the strength of its legal system in protecting private assets,its demographic profile and of course its ability to project power to defend its interests .. By these basic measures, the U.S. scores pretty well .. It's also critical to look at the relative scale of the money-printing that erodes the value of currencies: - China's credit expansion is much larger as a percentage of its economy and financial system than the Fed's money-printing as a percentage of the U.S. financial system."
- Charles Hugh Smith*
link here to the reference
G20 Warns
Buildup Of 
"Excessive Risk"
The G20 met this past weekend in Australia .. a memo was issued by the G20 finance ministers & central bankers saying "low interest rates are contributing to a potential increase in financial market risk, as major policy makers rely on monetary stimulus to bolster growth .. We are mindful of the potential for a build-up of excessive risk in financial markets, particularly in an environment of low interest rates and low asset price volatility .. We welcome the stronger economic conditions in some key economies, although growth in the global economy is uneven."
LINK HERE to the article
LINK HERE to get the memo

Exotic Derivatives 
Making A Comeback
Despite Memories Of
The Financial Crisis
Canadian-posted article on how structured credit products are making a comeback in the marketplace, even though nightmare memories remain on Canada's asset backed commercial paper (ABCP) crisis ..  "The derivative-based fixed income investments at the centre of arguably the worst economic downturn since the Great Depression is on its feet again and gaining traction with a number of yield-hungry Canadian investors."
LINK HERE to the article
Slow Money
Peak Prosperity interviews Woody Tasch on putting capital to work for local food resilience .. The Slow Money movement focuses on deploying capital, locally, to strengthen small food enterprises. Its goal is to improve the quality, dependability & sustainability of our food source, while financially nurturing communities & delivering an attractive return on investment to native investors .. 46 minutes

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It’s Terrifying To Look 
At What’s Really Happening 
"It’s just a shame that the doves at the Fed never learn from mistakes
-- even those made just a few years ago."
"We are nearing the end of 2014, and to the debt markets it is almost as if the financial crisis collapse never happened. It appears that borrowers and lenders are suffering from a severe case of collective amnesia. Yes, consumer debt levels took a slight breather .. But today total consumer credit in the United States has risen by 22% over the past 3 years, and at this point 56% of all Americans have a subprime credit rating .. By the end of 2014 total U.S. credit card debt is expected to rise by $54.8 billion and average household credit card debt will surpass the $7,000 mark .. Adding to these disturbing figures is student loan debt that is at a nationwide all-time record of $1.2 trillion, which is an 84% jump since the beginning of the financial crisis .. The financial crisis was born out of a romance between the U.S. consumer’s insatiable desire to spend and financial institutions’ voracious desire to issue debt, which compelled them to lend money regardless of the borrower's ability to make payments .. This dysfunctional relationship ended badly and both parties swore each other off. But, with the Fed in the background playing the violin, recent data shows today these two lovebirds can’t stay away from each other . An aggressive Fed will immediately cause our overleveraged and asset bubble-driven economy to collapse. It’s just a shame that the doves at the Fed never learn from mistakes -- even those made just a few years ago."
 - Michael Pento
link here to the article
The Ponzi Economy
In his latest essay, John Hussman reflects on the deteriorating standard of living in the U.S., emphasizes the country has attempted to insulate itself from its own declining productivity by the continuing its consumption through the accumulation of debt & the printing of money .. "Meanwhile, financial repression by the Federal Reserve has held interest rates at zero, discouraging savings while encouraging and enabling households to go more deeply into debt. Various forms of deficit-financed government assistance and unemployment compensation have also been used to make up the shortfall, allowing consumption, and by extension, corporate revenues and profits, to be sustained. As long-term economic prospects have deteriorated, the illusion of prosperity has been maintained through soaring indebtedness, coupled with yield-seeking speculation in risky assets that has repeatedly (albeit not always immediately) been followed by crashes throughout history .. The central point is this. The U.S. economy has shifted course from one of productive capital accumulation to a reliance on continuous expansion of debt in excess of the economic ability to repay it. Call this the Ponzi Economy."
LINK HERE to the essay
"Dollar Ponzi Scheme 
Will Collapse"
The Daily Bell transcript of discussion with Andy Hoffman of Miles Franklin, one of America's oldest, largest bullion dealers .. Hoffman sees an accelerating race to debase on currencies being performed by the Federal Reserve, the ECB, the BOJ, the BOE, & the SNB .. "Consequently, currencies the world round have experienced dramatic declines – on average, more than 20% in the past three years – yielding dramatic inflation increases .. purchasing power against real items of value – it has declined significantly."
LINK HERE to the transcript