Wednesday, June 26, 2019

US will lose the trade war with China – Jim Rogers

from Hang The Bankers:

If the Trump administration puts sanctions on China, this would hurt America more because it just forces China and Russia and other countries to cooperate, says investor and financial commentator Jim Rogers.

US Treasury Secretary Steven Mnuchin warned on Tuesday that the US could impose economic sanctions on China if it does not implement the new sanctions regime against North Korea, saying that the restrictions could involve cutting off Beijing’s access to the US financial system.

“If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the US and international dollar system, and that’s quite meaningful,” Mnuchin said at the Delivering Alpha Conference in New York City.

The UN Security Council unanimously approved a resolution banning North Korea’s textile exports and capping its oil imports following Pyongyang’s sixth nuclear test conducted last week.

RT spoke to famous investor, author, and financial commentator Jim Rogers to discuss global perspectives in the case of the US imposing sanctions on China.

RT: What is the likelihood that the US will go through with and actually impose economic sanctions on China if it does not implement the new sanctions regime against North Korea?

 

Jim Rogers: Sanctions are sanctions. They could do sanctions which are not very important or don’t do much damage. And then they will have good public relations which says they have sanctions, but it is meaningless. I would suspect if anything, that is what they will start with. If they put sanctions on China in a big way, it brings the whole world economy down. And in the end, it hurts America more than it hurts China because it just forces China and Russia and other countries closer together. Russia and China and other countries are already trying to come up with a new financial system. If America puts sanctions on them, they would have to do it that much faster and in the end America will lose its monopoly on the financial system, which will hurt America more than anybody.

RT: What do you think, is it an empty rhetoric and saber-rattling from Donald Trump because he said “those [UN] sanctions are nothing compared to what ultimately will have to happen” without specifying what he meant by that. Do you think this is just mere bluff on the part of the US, or would it really use the ‘nuclear option’?

JR: If it uses a nuclear option for sanctions, it will hurt America much more than will hurt North Korea, it will hurt America much more than it will hurt China, Russia and everybody else. It will force the rest of the world to find an alternative to the US financial system. If he does that, it is going to cause a lot of turmoil in the world financial economy and in the end it is going to hurt America more than it is going to hurt anybody else.

I would give you an example, if you look at Russian agriculture right now – America put sanctions on Russian agriculture trying to hurt Russia, but it has helped Russian agriculture. Russian agriculture is booming now. In the end, America has hurt itself more than it has hurt anybody else.

RT: If that happens, what would the consequences be for the global economy? Could this end up becoming a global economic crisis?

JR: We are probably going to have a global economic problem, maybe even crisis, in the next couple of years. This may be one of the things that start it. There is always something which starts a crisis. If America does something like this, this could be the thing that did it. In 1929, it started when America started a huge trade war with the rest of the world and the economists said, “please, this is a mistake,” but America did that anyway. And then we had a great collapse and The Great Depression of the 1930s.

RT: Washington runs a $350 billion annual trade deficit with Beijing. China also holds more than $1 trillion in US debt. How could the US actually threaten China in such circumstances?

JR: Mr. Trump has been saying for over a year, two years, that he was going to start a trade war with China. He was going to put very high tariffs on Chinese goods. In his mind, he wants to do it, he is ready to do it. Some of his advisors are very much in favor of a trade war. It may very well happen. If it happens, it is going to be very bad for the world and it is going to be worse for America than for other people.

RT: How significant is Chinese trade with North Korea?

JR: For North Korea, it is extremely important – that is really the only trade partner. They don’t trade with many people except China. But it is not very important for China. China has got gigantic trade all over the world and North Korea is a very small economy.

Read More @ HangTheBankers.com

China helps Venezuela and Iran against unilateral US sanctions

by Adam Garrie, The Duran:

In economic warfare, like in traditional battle, one’s weapons are only as powerful as the shields which they are up against. This simple concept has not yet sunk in among the powers that be at the US Department of the Treasury. Donald Trump’s Treasury Secretary  Steven Mnuchin has been extremely zealous in passing new unilateral sanctions on the governments, individual politicians and businesses in Iran and Venezuela in particular, as well as in North Korea. But none of this is working because the US financial system and the US Dollar is no longer the only major game in town on the international markets.

Venezuela has, after many years of discussion, finally agreed to cease trading its vast oil reserves in the US Dollar.

Venezuela recently announced that it is now pricing its oil in Chinese Yuan. This comes weeks after China announced that it will allow for the trading of oil contracts in Yuan which can be easily converted to gold at the exchanges in Shanghai and Hong Kong.

The recent BRICS summit in China, put an increased emphasis on monetary independence among member states, which is of course a not so coded phrase meaning ‘let’s ditch the US Dollar’.

Already, many Asian and Eurasian countries have begun bilateral trade in local currencies and both China and Russia have expressed interest in creating new currencies for  trade throughout not only the BRICS bloc but among the wider partners of BRICS, in what is known as the BRICS + format.

Additionally, Russia and China have expressed an interest in creating a BRICS crypto-currency which if backed by the powerful member states of the bloc, could result in an inter-continental exchange model that could be Dollar free for both small retailers and for sovereign trading partners.

READ MORE: BRICS in talks to create own cryptocurrency in another blow to US Dollar

It has also been announced that the China’s firm CITIC has opened a credit line with Iran which will be worth the equivalent of $10 billion. The credit line will operate in Yuan and Euros, entirely bypassing the Dollar.

China’s investments in Iran which is an important One Belt–One Road partner for Beijing are complimented by smaller though still significant investment inflows from European companies. While the EU tends to be a rubber stamp on US policy, when it comes to Iran, much of Europe is far less cynical than the United States.

All of this has an aggregate effect of the US voluntarily pricing itself out of growing markets. The growing markets themselves have not felt the sting of sanctions due to a combination of self-sufficiency that the US tends to discard as the US is increasingly a non-self reliant nation, in addition to the overriding fact that China can now providing growing economies with all of the capital they need and can do so on terms that are generally far more generous than those which could have been offered by the US.

In spite of Donald Trump’s comical Tweets, the North Korea economy is also growing and much of this is fuelled by internal projects. To this end, North Korea’s proven oil reserves and even its ability to extract and refine this oil is far greater than the US Treasury Department seems to imply.

READ MORE: North Korea has enough oil to survive embargo

It is no wonder therefore that Russia, while expanding its economic ties with South Korea, has also expressed a desire to begin tripartite economic initiatives with both Seoul and Pyongyang. Not only does this make economic sense, but it utilises economic enrichment as a more proven way to de-escalate diplomatic and military tensions than sanctions have ever accomplished.

READ MORE: Two Koreas–One Road–The future of cooperation between North Korea, South Korea and Russia

In reality, sanctions have never accomplished anything apart from increasing international tensions with the disastrous added effect of often starving civilian populations of food, medicine and basic amenities.

By contrast, economic investment has been a proven way to create contented countries which by definition are more at peace with the wider world than those being lectured to and starved.

Now though, the American ability to starve countries is limited by the fact that China is ready, willing and able to capitalise on any door the US leaves wide open for Beijing. This is already the case with Venezuela and Iran. It is only a matter of time and a few likely Russian authored de-escalation agreements before North Korea also joins the club.

Read More @ TheDuran.com

21st Century Shoe-Shine Boys

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by Pater Tenebrarum, Acting Man:

Anecdotal Flags are Waved

“If a shoeshine boy can predict where this market is going to go, then it’s no place for a man with a lot of money to lose.”

– Joseph Kennedy

It is actually a true story as far as we know – Joseph Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat Bologna, asked him if he wanted a few stock tips. Kennedy was amused and intrigued and encouraged him to go ahead. Bologna wrote a few ticker symbols on a piece of paper, and when Kennedy later that day compared the list to the ticker tape, he realized that all the stocks on Bologna’s list had made strong gains. This happened a few months before the crash of 1929.

 Joseph Kennedy in 1914, at age 25 – at the time reportedly “the youngest ever bank president in the US”  Photo credit: John F. Kennedy Presidential Library and Museum, Boston.
Joseph Kennedy in 1914, at age 25 – at the time reportedly “the youngest ever bank president in the US” Photo credit: John F. Kennedy Presidential Library and Museum, Boston.

Kennedy sold all his stock market investments over the next several months and put the money in what he considered the safest banks. He had already made a fortune in the bull market, and reportedly augmented it later by going short in the bear market. We are pretty sure his meeting with the market-savvy shoe-shine boy wasn’t the only reason for which he decided to sell. He did mention the anecdote later in life though and the experience served to solidify a conclusion he had already arrived at: It was very late in the game and the market was likely tocrack badly fairly soon.

We felt reminded of this story when a good friend (who invests for a living) visited us this summer. He inter aliatold us about an acquaintance of his, whom he described as an autopilot investor who only very rarely looks at the market and has a record of getting the wrong ideas at the wrong time. His latest idea was noteworthy: he thought it would be a good idea to “sell volatility” (by writing puts, if memory serves). This was in July, just before the VIX reached a new all time low.

In 2008, the VIX hit a high of 90 points, which was in fact the technical target we were eying at the time. In both 2010 and 2011 it jumped to approximately 47 points. In 2014 it made a high at 32 points, and in 2015 it streaked to 52 points. On these occasions put writing was not very popular with the people mentioned above. But they loved the idea with the VIX between 9 and 11.50. Go figure – click to enlarge.

One shouldn’t jump to conclusions from this just yet – if it wasn’t well-known before, it should be by now: the VIX can remain subdued for a very long time. It only tells us that there is very little concern in the market – there is little demand for option hedges and traders are more inclined to sell volatility than to buy it. And similar to how high bullish sentiment during a bull market is not a contrary indicator most of the time, the lack of concern can be well founded for extended time periods.

We have good reason though to suspect though that this particular game is quite long in the tooth as well. We are going to discuss developments in sentiment data in detail in a separate post. Still, here are a few observations in this context. Sentiment has become even more lopsided lately, with the general public joining the party. It may not “feel” like the mania of the late 1990s to early 2000, but in terms of actually measurable data, the overall bullish consensus seems to be even greater than it was back then.

For instance, mutual fund inflows rose to record highs earlier this year. Along similar lines, here is a recent chart that aggregates the relative cash reserves of several groups of market participants (including individual investors, mutual fund managers, fund timers, pension fund managers, institutional portfolio managers, retail mom-and-pop type investors). It shows that there is simply no fear of a downturn:

Read More @ Acting-Man.com

$4,168 Bitcoin Mining Rig Is A Daily Net Loser After Paying The Electric Bill

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from SilverDoctors:

This is rarely discussed in the cryptosphere: It’s easy to just buy a Bitcoin and let everybody else lose fiat doing all that processing mining. An honest look at the math shows that something doesn’t add up. This information is from Sunday, Sept 17, 2017, so it’s current to the day…

Below is a brand new shiny Bitcoin miner that won’t even be ready for shipment until November.

This rig will set ya back $3900 (starting price before options, plus another $268 for the power supply):

PRODUCT SPECIFICATIONS

Power supply unit is not included.

1. Specifications of the Antminer D3 are as follows:
a) Hash rate: 15 GH/s (Variation of ±5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} is expected)
b) Power consumption: 1200W (at the wall, with Bitmain’s APW3 PSU, 93{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} efficiency, 25°C ambient temp).
c) Dimensions of the miner: 320*130*190mm
d) Hashing algorithm: X11

2. Power consumption figures will vary with your PSU’s efficiency, the ambient operating temperature and the accuracy of the power meter.

3. Bitmain recommends use of the APW3++ PSU with the Antminer D3. One APW3++ PSU can not power more than one Antminer D3.

Here’s that power supply your gonna need:

A rig like that is acceptable for a person wanting to get in on the action right now. Who knows the life-cycle of a miner? 2 years max before becoming obsolete? Any Bitcoin Miner that’s older than a couple years, or costing less than $4168, and the hashing power will be severely diminished. For anybody who has ever tried to play the latest Call of Duty Black Ops with the $299 Wal-mart back-to-school special laptop, you know what I mean. It will not work. If you wanna play, you gotta pay a good amount of fiat currency for a decent set-up.

CryptoCompare shows that a rig set-up for this would be a net loser daily, monthly, yearly, or however long the miner choses to lose money by turning it on. Since people are looking to “get rich” off of Bitcoin, it’s not like they’re contributing to some sense of community either, because the community is motivated by profit.

Not only losing fiat currency, but probably worse than the stated losses below, because the estimates are under “ideal conditions” (a.k.a theoretical performance).

It seems unlikely a rig would achieve all of the specs in the real world with latency, overheating, and a host of other issues that prohibit perfection:

Those were the exact specs of that set-up with current Bitcoin price and all that other stuff in their disclosure.

So if mining Bitcoin and all the hundreds if not thousands of other cryptocurrencies out there requires this much energy, is there such thing as Peak-Bitcoin? Meaning at some point the cost of electricity will be so expensive, and maybe not even technologically capable of producing any more Bitcoins?

This analysis seems to think the electricity requirement going forward is going to be exponential.

A major issue with Bitcoin, which may eventually undermine success unless it is remedied, is the massive amount of power required for “mining” of the coins.

The mining metaphor is apt because bitcoins are created through specialized computers looking for the correct codes (hash keys), just like digging for gold. That electronic digging takes more and more power as more and more people dig for that virtual gold. Sebastian-Deetman calculated in 2016 that mining would require as much electricity by 2020 as the entire nation of Denmark currently consumes.

That’s just the beginning. Bitcoin’s algorithm requires that it get more and more difficult over time to mine, as long as mining itself becomes increasingly popular. With an approximately 132-year discovery cycle to mine all 21 million bitcoins, mining power demand will go up exponentially.

Read More @ SilverDoctors.com

Operation Freedom – Sunday, September 17, 2017 – Rob Kirby, Catherine Austin Fitts and Turd Ferguson

by Dave Janda, Dave Janda:

Topics Discussed: Technocracy, Globalist Syndicate, Counter-terrorism, Domestic terrorists, Trump Care, ObamaCare, Manipulation of financial markets, Benghazi, New World Order Syndicate, Obama Care, Free Market Health Reform, Putin, The Ukraine, ISIS, Syria, The Constitution, Natural resources, Reserve currency, Corruption, gold, silver, Global Elite, International Banking Cabal, debt, Federal Reserve, Too Big To Fail Banks, Crony Capitalism, Debt Ceiling, Financial implosion, Recession, Economic Depression, Freedom, Liberty

Click HERE to listen to Rob Kirby

Click HERE to listen to Catherine Austin Fitts

Click HERE to listen to Turd Ferguson

Read More @ DaveJanda.com

Holy Moly, Now Wells Fargo Recommends a Credit Freeze in Equifax Hack

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by Wolf Richter Wolf Street:

Third largest US bank reaches out to its customers. A mass credit freeze would have a huge impact.

No one knows yet how the Equifax hack – during which Social Security numbers, birth dates, addresses and, “in some instances,” driver’s license numbers of 143 million consumers had been stolen – will wash out for Equifax, or for the other credit bureaus.

But it increasingly looks like a far bigger and broader mess not only for the credit bureaus but for the overall consumer-based US economy whose grease is easy and often instant consumer credit.

People are trying to put a credit freeze on their data at the three major credit bureaus to protect themselves from identity theft. Victims of identity theft get caught in years of a Kafkaesque nightmare where debt collectors hound them for debts incurred in their name by someone else.

A credit freeze is the best protection against identity theft. It has now been recommended by State Attorneys General, the US Government, the biggest mainstream media outlets, and numerous other outfits including from the first moment on – the evening of September 7 when the hack was disclosed – my humble site. In over 400 comments on my three articles (herehere, and here), readers have shared tips and frustrating experiences trying to deal with overloaded websites that crashed, sent people in wrong directions, or failed in other ways to produce results.

The credit bureaus claim that they have staffed up their call centers, beefed up their websites, etc. etc. But it’s still a mess. And it has been going on for ten days!

So we know there is a surge of consumers trying to protect themselves by putting a credit freeze on their data at the three major credit bureaus. But only the credit bureaus know the actual number. And they keep it close to their vest.

Now even Well Fargo, the third largest bank in the US by assets, posted an “Equifax Alert” on its customer login-page. This is the page millions of customers see when they log into their accounts.

“Here’s what you should know about the recent data compromise,” it says. The link take you to a Wells Fargo page that makes four standard and very sound recommendations on how to deal with the Equifax data hack – including the single most important: “Consider placing a freeze on your credit.”

It encourages its customers to “visit the Federal Trade Commission’s (FTC) dedicated Credit Freeze FAQs.” And it links to it.

When a bank encourages its customers to get a credit freeze and refers them to a federal government website that shows how to go about doing it, people take notice. Other banks may already have posted similar information to encourage their customers to protect themselves, or may soon do so.

This is huge because banks are reaching people who are not paying attention to the news – people who would normally miss the entire debacle. It makes many more millions of people aware of what to do.

And if enough people follow through, it will alter the way an easy-credit dependent consumer economy operates. Here are some of the potential impacts:

Revenues of credit bureaus take a licking. A credit freeze prevents them from selling your data to other companies with which you don’t already have an established credit relationship.

Companies use enhanced “risk modeling” to bypass credit bureaus. A mass credit freeze makes it tough for companies – such as banks, utilities, auto lenders, and credit card companies – to set up new accounts. So they will try to find other ways to confirm the credit worthiness of applicants, bypassing the credit bureaus. Ford Credit already announced enhanced “risk modeling” prior to the Equifax disclosure. These efforts will strengthen.

Read More @ WolfStreet.com

The Equifax Hack Is The Most Disastrous Data Breach In History Because Now Hackers Have The Credit Information Of 143 Million Americans

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by Michael Snyder, The Economic Collapse Blog:

Talk about a nightmare.  It is being reported that criminals were able to hack into Equifax and make off with the credit information of 143 million Americans.  We are talking about names, Social Security numbers, dates of birth, home addresses and even driver’s license numbers.  If this data breach was an earthquake, we would be talking about a magnitude-10.0 on the identity theft scale.  We have never seen anything like this before, and to say that this will be “disastrous” for the credit industry would be a massive understatement.

What really disturbed me about this story is that this hack reportedly occurred between “mid-May and July of this year”

Credit monitoring company Equifax has been hit by a high-tech heist that exposed the Social Security numbers and other sensitive information about 143 million Americans. Now the unwitting victims have to worry about the threat of having their identities stolen.

The Atlanta-based company, one of three major U.S. credit bureaus, said Thursday that “criminals” exploited a U.S. website application to access files between mid-May and July of this year.

So why didn’t we learn about this until September?

Somebody out there really needs to answer that question for us.

And even though the “143 million” number is being thrown around constantly, according to USA Today we may never know the true number of victims…

When asked if there’s a way to quantify how many people have been harmed, John Ulzheimer, a credit expert and former employee at Equifax and credit score firm FICO, said: “There’s no way to know, and there may never be a way to know.”

Personally, I don’t see how Equifax can possibly survive after this.  Their stock price is already crashing, and now it has come out that they had put a “music major” in charge of data security…

When Congress hauls in Equifax CEO Richard Smith to grill him, it can start by asking why he put someone with degrees in music in charge of the company’s data security.

And then they might also ask him if anyone at the company has been involved in efforts to cover up Susan Mauldin’s lack of educational qualifications since the data breach became public.

It would be fascinating to hear Smith try to explain both of those extraordinary items.

Also, we are now finding out that Equifax has not just had security problems here in the United States.

According to the New York Post, data breaches have been taking place all over the globe…

Hackers had access to the names, dates of birth and e-mail addresses of nearly 400,000 people in the United Kingdom, said Equifax’s British subsidiary in a statement last week.

In Canada, sensitive data belonging to 10,000 consumers may have been hacked in the breach, said a statement from the Canadian Automobile Association.

In Argentina, one of the company’s portals was so easily accessible that it allowed quick exposure to the personal information of more than 14,000 people.

As noted above, the public didn’t learn about any of this until September.

But once top Equifax officials learned what had happened, some of them started dumping their shares of Equifax very rapidly

Three Equifax executives — not the ones who are departing — sold shares worth a combined $1.8 million just a few days after the company discovered the breach, according to documents filed with securities regulators.

Equifax shares have lost a third of their value since it announced the breach.

Needless to say, the SEC is going to be looking into this very closely.

As we move forward, there is a tremendous amount of concern as to how much this data breach will affect the U.S. economy.

Only time will tell, but without a doubt it will have an impact.  For example, according to Bloomberg this data breach could potentially have an absolutely disastrous impact on store-branded credit cards…

Equifax Inc.’s massive data breach could make an already tough market outlook even more daunting for the firms behind Gap Inc.’s and Ann Taylor’s store-branded credit cards.

Those retailers’ banking partners, including Synchrony Financial and Alliance Data Systems Corp., could see fewer account originations as more consumers freeze their credit to avoid hack-related fraud. Consumers have to take extra steps — including calling the credit bureau, going online or paying fees — to lift a block and get a new card.

“If people are defaulting to credit freezes, then if you’re a Macy’s retailer trying to sell credit cards, you can’t get that done at the point of sale,” said Vincent Caintic, an analyst at Stephens Inc. “It could become a regular thing, these freezes. It does slow down the origination process and it’s probably going to increase acquisition costs.”

If you believe that your data may have been compromised in this breach, there are some things that you can do right away to help protect against identity theft.  You can sign up for 24 hour a day credit monitoring, you can request fraud alerts, you can enable “two factor authentication” and beyond all of that you could go as far as to freeze your credit.

But if everybody in America suddenly started freezing their credit, that would slow down economic activity dramatically.  So needless to say authorities are hoping that does not happen.

Read More @ TheEconomicCollapseBlog.com

Pension Storm Warning

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by John Mauldin, Mauldin Economics:

This time is different are the four most dangerous words any economist or money manager can utter. We learn new things and invent new technologies. Players come and go. But in the big picture, this time is usually not fundamentally different, because fallible humans are still in charge. (Ken Rogoff and Carmen Reinhart wrote an important book called This Time Is Different on the 260-odd times that governments have defaulted on their debts; and on each occasion, up until the moment of collapse, investors kept telling themselves “This time is different.” It never was.)

Nevertheless, I uttered those four words in last week’s letter. I stand by them, too. In the next 20 years, we’re going to see changes that humanity has never seen before, and in some cases never even imagined, and we’re going to have to change. I truly believe this. We have unleashed economic and technological forces we can observe but not entirely control.

I will defend this bold claim at greater length in my forthcoming book, The Age of Transformation.

Today we will zero in on one of those forces, which last week I called “the bubble in government promises,” which I think is arguably the biggest bubble in human history. Elected officials at all levels have promised workers they will receive pension benefits without taking the hard steps necessary to deliver on those promises. This situation will end badly and hurt many people. Unfortunately, massive snafus like this rarely hurt the politicians who made those overly optimistic promises, often years ago.

Earlier this year I called the pension mess “The Crisis We Can’t Muddle Through.” Reflecting since then, I think I was too optimistic. Simply waiting for the floodwaters to drop down to muddle-through depth won’t be enough. We face an entire new ocean, deeper and wider than we can ever cross unaided.

Storms from Nowhere?

This year marks the first time on record that two Category 4 hurricanes have struck the US mainland in the same year. Worse, Harvey and Irma landed directly on some of our most valuable and vulnerable coastal areas. So now, in addition to all the problems that existed a month ago, the US economy has to absorb cleanup and rebuilding costs for large parts of Texas and Florida, as well as our Puerto Rico and US Virgin Islands territories.

Now then, people who live in coastal areas know full well that hurricanes happen – they know the risk, just not which hurricane season might launch a devastating storm in their direction. In a note to me about Harvey, fellow Rice University graduate Gary Haubold (1980) noted just how flawed the city’s assumptions actually were regarding what constitutes adequate preparedness. He cited this excerpt from a recent Los Angeles Times article:

 

The storm was unprecedented, but the city has been deceiving itself for decades about its vulnerability to flooding, said Robert Bea, a member of the National Academy of Engineering and UC Berkeley emeritus civil engineering professor who has studied hurricane risks along the Gulf Coast.

The city’s flood system is supposed to protect the public from a 100-year storm, but Bea calls that “a 100-year lie” because it is based on a rainfall total of 13 inches in 24 hours.

“That has happened more than eight times in the last 27 years,” Bea said. “It is wrong on two counts. It isn’t accurate about the past risk and it doesn’t reflect what will happen in the next 100 years.” (Source)

Anybody who lives in Houston can tell you that 13 inches in 24 hours is not all that unusual. But how do Robert Bea’s points apply to today’s topic, public pensions? Both pension plan shortfalls and hurricanes are known risks for which state and local governments must prepare. And in both instances, too much optimism and too little preparation ultimately have devastating results.

Admittedly, public pension liabilities don’t come out of nowhere the way hurricanes seem to – we know exactly where they will strike. In many cases, we know approximately when they’ll strike, too. Yet we still let our elected officials make impossible-to-fulfill promises on our behalf. The rest of us are not so different from those who built beach homes and didn’t buy hurricane or storm surge insurance. We just face a different kind of storm.

Worse, we let our government officials use predictions about future returns that are every bit as unrealistic as calling a 13-inch rain in Houston a 100-year event. And while some of us have called pension officials out, they just keep telling lies – and probably will until we reach the breaking point.

Puerto Rico is a good example. The Commonwealth was already in deep debt before Irma blew in – $123 billion worth of it. There’s simply no way the island can repay such a massive debt. Creditors can fight in the courts, but in the end you can’t squeeze money out of plantains or pineapples. Not enough money, anyway. Now add Irma damages, and the creditors have even less hope of recovering their principal, let alone interest.

Puerto Rico is presently in a new form of bankruptcy that Congress authorized last year. Court proceedings will probably drag on for years, but the final outcome isn’t in doubt. Creditors will get some scraps – at best perhaps $0.30 on the dollar, my sources say – and then move on. We’re going to find out how strong those credit insurance guarantees really are.

“That’s just Puerto Rico,” you may say if you’re a US citizen in one of the 50 states. Be very careful. Your state is probably not so much better off. In 10 years, your state may well be in the same place where Puerto Rico is now. I’d say the odds are better than even.

Are your elected leaders doing anything about this huge issue, or even talking about it? Probably not.

Read More @ MauldinEconomics.com

Iran Accord, War and the Doomed Dollar

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by Finian Cunningham,  Daily Reckoning:

US President Barack Obama has given an extraordinary ultimatum to the Republican-controlled Congress, arguing that they must not block the nuclear accord with Iran. It’s either “deal or war,” he says.

In a televised nationwide address on August 5, Obama said: “Congressional rejection of this deal leaves any US administration that is absolutely committed to preventing Iran from getting a nuclear weapon with one option: another war in the Middle East. I say this not to be provocative. I am stating a fact.”

The American Congress is due to vote on whether to accept the Joint Comprehensive Plan of Action signed July 14 between Iran and the P5+1 group of world powers –the US, Britain, France, Germany, Russia and China. Republicans are openly vowing to reject the JCPOA, along with hawkish Democrats such as Senator Chuck Schumer. Opposition within the Congress may even be enough to override a presidential veto to push through the nuclear accord.

In his drastic prediction of war, one might assume that Obama is referring to Israel launching a preemptive military strike on Iran with the backing of US Republicans. Or that he is insinuating that Iran will walk from self-imposed restraints on its nuclear program to build a bomb, thus triggering a war.

But what could really be behind Obama’s dire warning of “deal or war” is another scenario — the collapse of the US dollar, and with that the implosion of the US economy.

That scenario was hinted at by US Secretary of State John Kerry. Speaking in New York on August 11, Kerry made the candid admission that failure to seal the nuclear deal could result in the US dollar losing its status as the top international reserve currency.

“If we turn around and nix the deal and then tell [US allies], ‘You’re going to have to obey our rules and sanctions anyway,’ that is a recipe, very quickly for the American dollar to cease to be the reserve currency of the world.”

In other words, what really concerns the Obama administration is that the sanctions regime it has crafted on Iran — and has compelled other nations to abide by over the past decade — will be finished. And Iran will be open for business with the European Union, as well as China and Russia.

It is significant that within days of signing the Geneva accord, Germany, France, Italy and other EU governments hastened to Tehran to begin lining up lucrative investment opportunities in Iran’s prodigious oil and gas industries. China and Russia are equally well-placed and more than willing to resume trading partnerships with Iran. Russia has signed major deals to expand Iran’s nuclear energy industry.

American writer Paul Craig Roberts said that the US-led sanctions on Iran and also against Russia have generated a lot of frustration and resentment among Washington’s European allies.

“US sanctions against Iran and Russia have cost businesses in other countries a lot of money,” Roberts told this author.

“Propaganda about the Iranian nuke threat and Russian threat is what caused other countries to cooperate with the sanctions. If a deal worked out over much time by the US, Russia, China, UK, France and Germany is blocked, other countries are likely to cease cooperating with US sanctions.”

Roberts added that if Washington were to scuttle the nuclear accord with Iran, and then demand a return to the erstwhile sanctions regime, the other international players will repudiate the American diktat.

“At that point, I think much of the world would have had enough of the US use of the international payments system to dictate to others, and they would cease transacting in dollars.”

The US dollar would henceforth lose its status as the key global reserve currency for the conduct of international trade and financial transactions.

Former World Bank analyst Peter Koenig says that if the nuclear accord unravels, Iran will be free to trade its oil and gas — worth trillions of dollars — in bilateral currency deals with the EU, Japan, India, South Korea, China and Russia, in much the same way that China and Russia and other members of the BRICS nations have already begun to do so.

Read More @ DailyReckoning

Long-Term Mortgage Delinquencies Seriously Under-Reported

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by Mish Shedlock, MishTalk:

Keith Jurow, a real estate analyst and author of the Capital Preservation Real Estate Report, pinged me a few days ago with his analysis that suggests long-term mortgage delinquencies are seriously under-reported.

Hi Mish,

I thought you might be interested in the important clarification I just received from my contact at the NY State Dept. of Financial Services.

A few weeks ago, I sent you the latest update (attached again) of pre-foreclosure notices sent to delinquent homeowners in NYC and LI. I had noticed that 80{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} were listed as delinquent for less than 60 days. I asked my contact why that percentage was so high when he had been telling me for several years that over 40{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of these notices were repeat notices – sent to long-term delinquents.

His response was that for repeat notices, the mortgage servicers often provided the same information as on the original notice. For example, if a repeat notice was sent two years after the initial one, the length of delinquency was not changed from that first one. That was why a second notice where the borrower might be three years delinquent could show a delinquency of 60 days.

This clarification confirmed my belief that many – if not most – of the borrowers were now delinquent for several years.

Keith Jurow

New York Loan Delinquencies

Out of 65,523 loans, a whopping 52,218 supposedly fall into the 60-days or less delinquent bucket.

90-Day Pre-foreclosure Notices Filed with the NY Department of Financial Services

Read More @ MishTalk.com