Sunday, October 20, 2019

The Self-Destructive Trajectory of Overly Successful Empires

by Charles Hugh Smith, Of Two Minds:

It’s difficult not to see signs of this same trajectory in the U.S. since the fall of the Soviet Empire in 1990.

A recent comment by my friend and colleague Davefairtex on the Roman Empire’s self-destructive civil wars that precipitated the Western Empire’s decline and fall made me rethink what I’ve learned about the Roman Empire in the past few years of reading.

Dave’s comment (my paraphrase) described the amazement of neighboring nations that Rome would squander its strength on needless, inconclusive, self-inflicted civil conflicts over which political faction would gain control of the Imperial central state.

An early attempt at standardizing Money using international Gold Coins

by JP Koning, BullionStar:

Last month in November, representatives of 54 nations met at a gathering of the International Bureau of Weights and Measures (BIPM) and unanimously voted to redefine the kilogram. For over a century, an actual weight housed in the BIPM’s basements has been used to define the kilogram. Now it will be defined by reference to Planck’s constant

Given how easily we are able to modify our global standard for measuring weight, isn’t it remarkable that we have never been able to set an equivalent standard for monetary value? Some 180 currencies are currently being used around the globe, most of them floating haphazardly against each other.

Shocking Look at Average vs Median Household Savings


by Mish Shedlock, The Maven:

I have been on a rampage about average vs median income. Here’s a report about average vs median savings.

Treasury Admits It Lost $1.2 TRILLION in 2017


by Mark Nestmann, The Burning Platform:

In 1971, President Richard Nixon told an ABC News reporter that he was “now a Keynesian in economics.”

Nixon’s statement was an acknowledgment that he agreed with the ideas of John Maynard Keynes. Keynes was an economist whose theories once underpinned the economies of every major country.

Nixon’s endorsement of Keynesian economics was shocking. To understand its impact at the time, consider how the world would react today if the leader of ISIS converted to Christianity. Or if the National Rifle Association endorsed a ban on semi-automatic weapons.

Meet Dark Money’s Secret $68 Million Donor

by Pam Martens and Russ Martens, Wall St On Parade:

In 2010 we broke the newsthat a secretive nonprofit called Donors Capital Fund (with the fingerprints of billionaire Charles Koch all over it) had forked over $17,778,600 to fund a widely distributed race-baiting film in the weeks before the 2008 election – an election in which the first black man, Barack Obama, was the Democratic candidate for President. Donors Capital Fund accepts donations from multiple donors and keeps their identities secret, so exactly who funded the actual payment for the film is still unknown.

Global Gold Investment Demand To Overwhelm Supply During Next Market Crash


by Steve St. Angelo, SRSrocco:

When the next market crash occurs, global gold investment demand will likely overwhelm supply.  When this occurs, we could finally see the gold price surpass its previous high of $1,900.  Now, this isn’t mere speculation, as we already have seen this taking place in the past.  When the broader markets crashed to the lows in Q1 2009 and the 10{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} correction in Q1 in 2016, these periods were to two highest quarters of Gold ETF investment demand.

I don’t really care on whether the physical gold is actually in the Gold ETF’s, rather I like to look at it as an important indicator that shows us how much investor fear there is in the market.  Moreover, with the amount of leverage and debt now in the system, when the market crashes this time around, it will push gold investment demand up to a record we have never seen before.

The chart below shows the amount of physical global gold investment demand over the past 14 years.  As the gold price increased, so did amount of gold bar and coin demand:

As we can see, during the U.S. Banking and Housing Market crash in 2008, gold bar and coin demand doubled to 868 metric tons (mt), up from 434 mt in 2007.  That was quite a lot of gold bar and coin demand as it totaled nearly 28 million oz (1 metric ton = 32,150 oz).  Furthermore, as the gold price jumped to $1,571 in 2011, gold bar and coin demand shot up to nearly 1,500 mt (48 million oz).

Now, the reason for the huge spike in physical gold investment in 2013 was due to the huge price smash as the gold price fell from nearly $1,700 in the beginning of the year to a low of $1,380 by the middle of April.  Investors thought this was a huge sale on gold so demand for bars and coins reached a new record of 1,716 mt.

However, net gold investment demand in 2013 was only 804 mt because Gold ETF’s experienced a massive outflow of 912 mt.  Basically, the gutting of the Gold ETF’s by the gold price takedown allowed investors to purchase that record amount of gold bar and coin.  Moreover, Gold ETF flows continue to be negative in 2014 and 2015.  Over the three years, (2013-2015) a total of inventory of the world’s Gold ETF’s declined by 1,221 mt.  Thus, net global gold investment remained below 1,000 mt from 2013 to 2015.

But, this changed in 2016 when the U.S. stock market experienced a 2,000 point drop during the first quarter.  The Dow Jones Index fell from 17,500 in the beginning of January to a low of 15,500 within a month:

During this first quarter of 2016, Gold ETF inflows spiked to 349 mt, up from a net outflow of 66 mt in Q4 2015.  You see, gold continued to flow out of Gold ETF’s right up until the point the market fell 11{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in the first quarter of 2016.  As I mentioned before, the only other quarter that experienced a higher amount of Gold ETF inflows was the first quarter of 2009 when the Dow Jones was falling precipitously to a low of 6,600 points.  Gold ETF inflows surged to 465 mt in Q1 2009 versus 95 mt Q4 2008.

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End of the 9-Year Rental Housing Boom?


by Wolf Richter, Wolf Street:

Since the Financial Crisis, the number of renters surged at a blistering pace, and renters became a majority in 42 cities, but the trend has now reversed.

The number of people living in rented housing in the US has surged by 23 million over the past 10 years. This is the period that includes the Housing Bust. But the number of people living in owner-occupied homes (“homeowners”) inched up only by 679,000.

Over the same period, the total US population has increased by 23.7 million. In other words, the growth in the renter population absorbed nearly the entire growth in the population.

In 2006, of the 100 largest cities, only 20 had a higher renter population than owner population. Ten years later, 42 cities do.

Of the top 100 cities, only three experienced a decrease in rentership rate: Anchorage, AK (-1.3%), Irving, TX (-2.5%) and Winston-Salem, NC (-3.6%). The other 97 cities all experienced an increase in rentership rates, according to a report by RentCafé, based on data from the Census Bureau’s American Community Survey.

The list below shows the 25 cities where the rentership rate has increased the fastest from 2006 to 2016. Gilbert, AZ, is number one. Its rentership rate grew by 53.4%. But Gilbert is special. While the absolute number of renters in Gilbert surged over the decade, the city’s overall population experienced a spectacular boom, and the number of homeowners surged too, and the rentership rate, at 30.6%, remains the second lowest of the top 100 cities, though it grew the fastest.

By contrast, Toledo is number five on this list. In 2006, its rentership rate was 38.3%. Over the past 10 years, the rate grew by 31.3% to reach 50.3%. But Toledo’s overall population declined over the period, which helped boost the rentership rate.

The cities in the list are in order of how fast their rentership rates grew (right column). Even for number 25, Baton Rouge, the rentership rate still grew by over 22%!

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Gundlach Warns “The Order of The Financial System Is About To Be Turned Upside Down”

from Zero Hedge:

“I’m not a big fan of bonds right now,” may seem like an odd way for the so-called Bond King to begin, but in an audience at Vanity Fair’s Establishment Summit, DoubleLine’s Jeff Gundlach told Bethany McLean, “I haven’t been really [a fan of bonds] for the past four years, even though I manage them, and institutions have to own them for various reasons.”

As Vanity Fair’s William Cohan reports, Gundlach admitted “I’m stuck in it,” of his massive bond portfolio, adding that interest rates have bottomed out and been rising gradually for the past six years.

Gundlach said his job now, on behalf of his clients, “is to get them to the other side of the valley.”

When the bigger, seemingly inevitable hikes in interest rates come, “I’ll feel like I’ve done a service by getting people through,” he said.

“That’s why I’m still at the game. I want to see how the movie ends.”

But it can’t end well. To illustrate his point about the risk in owning bonds these days, Gundlach shared a chart that showed how investors in European “junk” bonds are willing to accept the same no-default return as they are for U.S. Treasury bonds, pointing out that this phenomenon has been caused by “manipulated behavior” by central banks.

European interest rates “should be much higher than they are today,” he said,

“…[and] once Draghi realizes this, the order of the financial system will be turned upside down and it won’t be a good thing.

It will mean the liquidity that has been pumping up the markets will be drying up in 2018…

…Things go down. We’ve been in an artificially inflated market for stocks and bonds largely around the world.

“My job is to find scary things,” Gundlach told McLean

“My critics say, ‘You find seven risks for every one that exists.’ Guilty. That’s my job. My job is to try to find out what can go wrong, not cover my ears and hum. It’s better to keep your eyes open.”

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Inflation Is Back, Part 7: Just Check Out This Chart


by John Rubino, Dollar Collapse:

Monthly economic readings tend to be full of noise and are therefore unreliable. So it’s best to save the excited assertions for established trends.

The US Consumer Price Index appears to have reached that point:

As most readers probably know, the CPI is widely believed to understate the true rate of inflation because of statistical tricks like hedonic adjustment and substitution. So when this index starts rising you know the real action is even more extreme.

James Corbett: “What is The Price of Bitcoin in Dollars – Precisely the Wrong Question”


by Rory Hall, The Daily Coin:

Cryptocurrencies are not anonymous and they are not decentralized, period. This is to say nothing of the dangers they pose as being “pirate money” that can create real world problems for a persons life. If you don’t believe me simply ask Randall LordRoss Ulbricht or anyone that has had their “wallet” hacked or stolen on any number of exchanges where cryptocurrencies are bought and sold. Whom can they turn when the wallet is drained of 100% of it’s contents?

I am all for free markets and free market innovations. I have been and will continue to be skeptical of a technology that was introduced to the world by a ghost. A ghost is something that comes out of the ether, has no material being and is not part of this world. Well, that perfectly describes Satoshi Nakamoto. Is it a little suspicious the “bitcoin” white paper was introduced to the world on Halloween 2008 at the very height of the financial meltdown or is it just me that sees this through a lens of skepticism?

Is it a little suspicious the foundation for Satoshi Nakamoto’s white paper was actually developed by the NSA and MIT in 1996 and now we learn the all important SHA-256 technology was also developed by the NSA.

The piece of the Bitcoin code created by the NSA is a hash function called SHA-256. SHA stands for Secure Hashing Algorithm. The hash is the expected outcome. An algorithm can be executed on a piece of data, and the output of that algorithm should match the hash. But you can’t figure out what the data was with just the hash. It only works in one direction. And there are enough different combinations that it is virtually impossible for any two pieces of data to create the same hash. Source

The evidence continues to mount that shows these cryptocurrencies are part of a beast system intent on enslaving the masses. The evidence is coming not only from governments and bankers but more importantly from the cryptocurrency experts themselves. The more that I know the more terrifying cryptocurrencies become.

I have been told time and again that I just don’t understand and I just need to research and study how cryptocurrencies work. Well, I have been studying and researching, but I am not interested in what the “charts” are telling me or “how rich I’m going to be” or how cryptocurrencies are going to revolutionize the currency system. No, let’s research what the policy makers are saying and, more importantly, what the policy makers are doing. Well, come to find out, they are saying and doing a lot about a handful of “pirates” attacking their source of power and control. Seems as if no one, with the exception of myself and Ken Schortgen and Chris Duane are actually looking behind the curtain to see what the developers are doing and ask who are these developers. It doesn’t matter what the crypto-crowd says, or doesn’t say, and it doesn’t change the facts.

We have reported what Andreas Antanoppolis stated a couple of years ago when ask the question – “do you have a totalitarian government? because I don’t want to live under that type of government.” Well, Andreas you already do. You just haven’t bothered to look around, earnestly, to see the walls closing in on your life, property and wealth.

It’s no secret that governments around the world are being strangled with unplayable debt. It is no secret the banking system, the too big to fail banks, became insolvent in 2008. These corrupt enterprises need a new “game” to continue the ponzi scheme charade and continue tricking the people into believing that government has all the answers and banks are how you conduct financial transactions. Neither of which is true but the mass of people do not understand this and, therefore, continue to allow these corrupt enterprises to dictate their lives.

Enter a “way out” of the banking system and way around government control – a new currency called cryptocurrency. The magic bean has been discovered! There is just one problem – it’s not magic and it doesn’t work as purported by 99% of the people telling you how great cryptocurrencies are and how freeing cryptocurrency are for the masses.

We recently reported on a debate between Peter Schiff and Peter van Velckenberg. Peter V, is a bitcoin advocate and was debating the virtues of bitcoin with Peter S. Only one problem. Peter V told the truth about bitcoin and spoiled his own party.

Now the non-traceable is the other aspect I wanted to address. We talked about the fundamental innovation as to how this thing (bitcoin) works. It works because there’s a ledger. Not only is that ledger traceable, with perfect fidelity, and there’s only one version of it; not a bunch of records kept by five different international correspondent banks that don’t record beneficial ownership of shell companies that open accounts. There’s one ledger it’s called the blockchain. If you know that someone received a payment at an address on that blockchain you see with perfect fidelity every transaction into and out of that address and this is exactly the type of technological tool that law enforcement has used to apprehend the people that have used these networks for bad purposes. Ross Ulbrecht, the guy that created the Silk Road he was caught with his laptop in front of him. They opened it up, they found the public address where he was receiving payments from the Silk Road drug market and that’s unimpeachable evidence that he benefited from every single atomistic transaction for drugs or heroin that happened on that website. Source

You see Peter V simply explains, in plain english, how perfectly well the blockchain tracks 100% of your transactions and ties 100% of your transactions together with ALL transactions – that’s right, 100% of every transaction, one ever makes! Every time funds come into your account the blockchain ties 100% of the transactions leading up to you receiving those funds back to all those transactions associated with those funds and every time your account sends funds out it tracks all those transactions and ties it back to you regardless of where those funds came from or where they go or how they are used – it is now tied directly to you as well!

Let’s say you receive funds from someone on the blockchain and 47 transactions prior to you receiving those funds someone used some of those funds to commit an act of fraud or embezzlement. The funds in your account are tied directly to that illegal transaction. Not only did you not know anything about the situation you don’t know any of the people involved. Then you send some of those funds out and 138 transactions later someone uses some of the funds in an an illegal drug deal. You are now associated with both acts and it doesn’t matter that you don’t know 99.9% of the people before or after the funds arrived/leave your wallet as you are still associated with those illicit transactions. Pretty cool, aye? This is exactly what Peter V explains above – please re-read what Peter V said and let me know what I missed.

Now, we learn from one of the smartest people in the alternative media space, James Corbett, that bitcoin and cryptocurrencies in general, are not all what we have been told they are. If someone would like to have a battle of wits with Mr. Corbett on this subject you would do well to have all your information gathered properly as I can assure you he has done the deep research and has all the tools necessary to present his side of the debate.

To use cryptocurrencies in the way it was intended or at least in the way some people have intended it for, is a type of “pirate money” is the best way to describe it.

Is it possible, more or less, to use cryptocurrencies sudnonymously (sp?) there is no anonymous use of cryptocurrencies at this point precisely, because as we know, the NSA, GCHQ  and other agencies like that do have access to the trunk line of the internet. So it would be rather naive to think that we are able to mask internet traffic and really baffle them with that. But at any rate. Transactions can remain sudnonymous(sp?) and If they are handled the right way they can be done directly, peer to peer, without the influence of third party middle men. Including across international state boundaries and that can enable a new type of market. A cryptocurrency market internationally.

This is where James really digs in and explains the value of bitcoin and all other cryptocurrencies in a way that is undeniable. This has been part of my argument as well. Chris Duane has been the most vocal about this aspect of cryptocurrencies as they are nothing more than, literally, blips on a screen.

Right now everyone is focused on what is the price of bitcoin in dollars. Which is precisely the wrong question to be asking if you are looking at this as truly disruptive technology. The real question would be “what can I actually get with these bitcoin” without having to change anything to dollars; without having to buy any bitcoins with dollars. Can I earn bitcoin, can I sell things for bitcoin? OR not bitcoin in particular because there are many, many different cryptocurrencies. But the point would be to try to create a cryptocurrency economy that is not dependent on that interface with fiat currency.

The video below begins at the 13:00 mark where Mr. Corbett over the next five minutes will explain everything one needs to understand about bitcoin, cryptocurrencies and the lack of value these digital-illusions bring to the market.

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The Fed Won’t Be Able to Stop What’s Coming

by Graham Summers, via Silver Doctors:

The Fed’s recent decision to cave on its hawkishness is not a good thing. Here’s why…

While the media focuses on the political hot topic du jour, major corporations are telling us that a recession is fast approaching.

Economic bellwether and industrial Caterpillar missed estimates and downgraded its guidance for 2019. It now joins Amazon, Apple, Samsung, LG, Fed Ex, Johnson & Johnson, Nautilus, Tesla, Tailored Brands, Signet Jewelers, Delta, Skyworks, Macy’s, Kohl’s, and American Airlines… all of which have lowered forward guidance in the last month.

Wage Inflation is Finally here, and it’s Toxic for the Fed


by Wolf Richter, Wolf Street:

Even uber-doves are now looking over their shoulder.

There have been all kinds of carefully phrased semi-hawkish statements emanating from carefully contained semi-hawkish Fed governors recently. Today, Dallas Fed President Robert Kaplan repeated what he has been saying for a while – that the “base case” should be three rate hikes this year, and that there could be four, warning, “if we wait to see actual inflation, we’ll be too late.”

But it’s the most fervent “doves” – when they start getting cold feet as doves – that matter the most when it comes to tightening monetary policy.

One of the most persistent, most vocal doves on the policy setting FOMC has been Minneapolis Fed President Neel Kashkari. He voted against all three rate hikes in 2017, and was vocal about why he did: inflation was too “low.”

He also does not see the asset bubbles all around us, not even the housing bubble, though other Fed governors have fretted about them. He claimed in an essay that “spotting bubbles is hard,” that even if the Fed could see them, it shouldn’t do anything to stop them because it had only “limited policy tools,” and because “the costs of making policy mistakes can be very high.”

That’s the kind of fervent dove he is. But today, he started looking over his shoulder.

There was a number in the jobs report this morning that got his attention: Average hourly earnings in January gained 2.9% year-over-year, the largest gain since June 2009, hallelujah, finally. Pressures are building up in parts of the economy, and companies are griping they cannot hire enough workers in some professions – or that they would have to pay more, God forbid, to hire them.

Pay increases at the bottom of the wage scale, where they have been sorely lacking, had a lot to do with it: In 18 states and in numerous cities, minimum wages increased on January 1. This also caused spillover effects on wages a few notches up the scale. According to the Economic Policy Institute, these new minimum wages, not counting the spill-over effects, have raised the incomes of 4.5 million workers all at once on January 1.

“The most important thing that I saw in a quick review of the jobs data is wage growth,” Kashkari told CNBC on Friday.

“We’ve been waiting for wage growth. Everyone has been declaring that we’re at maximum employment. More Americans have been coming in, which is a really good thing. But there hasn’t been much wage growth. This is one of the first signs that we’re seeing wage growth finally starting to pick up. That’s good for the public as a whole. I think it’s good for the economy overall. But I do think if wage growth continues, that could have an effect on the path of interest rates.”

The path of these interest rates is already winding uphill. For now, everyone at the Fed when they advocate for higher rates keeps repeating the qualifier, “gradual.” But so far, Kashkari has used every opportunity to vote and speak out against any and all rate hikes.

Yet the moment wages tick up, suddenly it gets his attention. It gets every Fed governor’s attention. Wage increases give them the willies.

Creating asset price inflation, including the most glorious housing bubble imaginable, became the Fed’s publicly stated policy goal under Chairman Bernanke – his infamous “wealth effect” doctrine. And consumer price inflation must always be high enough to eat up wage gains and help companies show growing revenues, but not so high that it blows down the whole house.

But wage inflation is toxic for the Fed. Wage inflation means that people get paid more for the same amount of work. A higher income due to promotions, for example, is not part of wage inflation.

So Kashkari explained to CNBC why he voted against every rate hike last year:

“We’ve been undershooting our inflation target for basically 10 years. And there has been very muted wage growth.” So to “assess supply and demand in the labor market,” you “start by looking at the price. And the price of labor – wages – had not been climbing. This jobs report now at least shows some signs of wages picking up.”

While “there might still be some slack in the labor market,” he said, “the wage measure is really important.”

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