by Paul Craig Roberts, Paul Craig Roberts:
For a decade central banks have printed enormous quantities of new money. The excuse is to stimulate the economy by reviving inflation. However, the money has, for the most part, driven up the prices of financial assets instead of consumer and producer prices. The result has been a massive increase in the inequality of income, wealth, and opportunity.
The quantitative easing policy followed by central banks is based on belief in an economic relationship between inflation and GDP growth—the Phillips curve—that supply-side economics disproved during the Reagan administration. The belief in the Phillips curve persists, because supply-side economics was misrepresented by the financial media and neoliberal junk economics.
The fact that something as straightforward and well explained as supply-side economics can be misrepresented for 35 years should give us all pause. When successive chairmen of the Federal Reserve and other central banks have no correct idea what supply-side economics is, how can they formulate a workable monetary policy? They cannot.
Phillips Curve R.I.P.
Paul Craig Roberts
Republished with permission from The International Economy
The Phillips Curve is the modern day version of the Unicorn. People believe in it, but no one can find it. The Fed has been searching for it for a decade and the Bank of Japan for two decades. So has Wall Street.
Central banks’ excuse for their massive injections of liquidity in the 21st century is that they are striving to stimulate the 2% rate of inflation that they think is the requirement for sustained rises in wages and GDP. In a total contradiction of the Phillips Curve, in Japan massive doses of central bank liquidity have resulted in the collapse of both consumer and financial asset prices. In the US the result has been a large increase in stock averages propelled by unrealistic P/E ratios and financial speculation resulting in Tesla’s capitalization at times exceeding that of General Motors.
In effect pursuit of the Phillips Curve has become a policy of ensuring financial stability of over-sized banks by continually injecting massive amounts of liquidity. The result is greater financial instability. The Fed is now confronted with a stock market disconnected from corporate profits and consumer disposable income, and with insurance companies and pension funds that have been unable for a decade to balance equity portfolios with interest bearing debt instruments. Crisis is everywhere in the air. What to do?
The Phillips Curve has been working its mischief for a long time. During the Reagan administration the Philips Curve was responsible for an erroneous budget forecast. In the 21st century the Phillips Curve is responsible for an enormous increase in the money supply. The Reagan administration paid a political price for placing faith in the Phillips Curve. The price for the unwarranted creation of money by central banks in the 21st century is yet to be paid.
The Phillips Curve once existed as a product of Keynesian demand management and high tax rates on personal and investment income. Policymakers pumped up consumer demand with easy money, but high marginal tax rates impaired the responsiveness of supply. The consequence was that prices rose relative to real output and employment. Supply-side economists said the solution was to reverse the policy mix: a tighter monetary policy and a “looser” fiscal policy in terms of lower marginal tax rates that would increase the responsiveness of supply.
During the 1980s the economics establishment was too busy ridiculing supply-side economics as “voodoo economics,” “trickle-down economics,” “tax cuts for the rich,” and for allegedly claiming that tax cuts pay for themselves, to notice what I pointed out at the time: the dreaded Phillips Curve with its worsening trade-offs had disappeared. The high GDP growth rates of the economic expansion beginning in 1983 were accompanied by inflation that collapsed from near double-digit levels to 3.8% in 1983 and 1.1% in 1986. Of course, the economics establishment wasn’t interested in such embarrassing results, and so the story became the “Reagan deficits.” The establishment reduced supply-side economics to the claim that tax cuts paid for themselves, and the deficits proved supply-side economics to be wrong. Case closed. This remains the story today as told by Wikipedia and in economic classrooms.
The implementation of the Reagan administration’s policy was disjointed, because Fed chairman Paul Volcker saw the supply-side policy as a massive fiscal stimulation that would send already high inflation rates soaring. Concerned that monetarists would blame him for what he thought would be the inflationary consequences of irresponsible fiscal stimulus, Volcker slammed on the monetary brakes two years before the tax rate reductions were fully implemented. This was the main reason for the budget deficits, not a “Laffer Curve” forecast that was not made. The Treasury’s forecast was the traditional static revenue estimate that every dollar of tax cut would cost a dollar of revenue.
In effect, the Phillips Curve became an ideology, and economists couldn’t get free of it. Consequently, they have misunderstood “Reaganomics” and its results and subsequently policymakers have inflicted decades of erroneous policies on the world economy.
As so many have observed, if we don’t understand the past, we cannot understand the present. To understand the past, let’s begin with Reaganomics.
So what Was Reaganomics?
“Reaganomics” was the media’s name for supply-side economics, which was a correction to Keynesian demand management. Worsening “Phillips curve” tradeoffs between employment and inflation became a policy issue during the Carter administration. The Keynesians had no solution except an incomes policy that had no appeal to Congress. This opened the door to a supply-side solution.
Demand management treats the aggregate supply schedule as fixed. Fiscal and monetary policies were assumed to have no impact on aggregate supply, a function of technology and resources. Changes in marginal tax rates, for example, would, if expansionary (lower rates), move aggregate demand along the aggregate supply schedule to higher employment; if contractionary (higher rates), the policy would reduce inflation by reducing aggregate demand and employment.
Read More @ PaulCraigRoberts.org
by Wolf Richter, Wolf Street:
We keep hearing the good news, and we love it. During the four-day weekend, “Star Wars: The Last Jedi,” became the highest-grossing movie of 2017 with 58.1 million tickets sold in the US and $517 million in ticket sales so far, according to movie data provider The Numbers. “The Last Jedi” was released on December 15 and grossed $220 million that weekend, making it the movie with the biggest weekend of the year.
And it continues to sell tickets into 2018. This, as the Wall Street Journal put it, gave Walt Disney “another banner year at the box office that left rival studios fighting for leftovers.”
These are big numbers. And ticket sales for “The Last Jedi,” which continue into 2018, will likely remain behind the record $937 million in domestic box office sales raked in by “The Force Awakens” in 2015.
The number of actual tickets sold in US movie theaters in 2017 fell 3.6% year-over-year to 1.25 billion tickets, according to The Numbers. That’s down 21% from “Peak Ticket Sales” in 2002, when box offices sold 1.58 billion tickets. In fact, the number of tickets sold in 2017 was the lowest since 1995.
This chart shows what’s going on in terms of filling seats in brick-and-mortar movie theaters in the US:
Sharp price increases per ticket Band-Aided the pain of dropping ticket sales until 2012. Since then, even those price increases haven’t been enough. According to The Numbers, the average ticket price has more than doubled from $4.35 in 1995 to $8.90 in 2017.
I have to say that it has been years since I paid less than $10 a ticket for a major movie. For example, a ticket for “The Last Jedi” goes for $22.49 — not for a family of three, but for just one adult — at one of the AMCs in San Francisco. Not exactly an encouragement to go see it. But there are cheaper movies out there, and there are cheaper cities too, and national averages might not parallel personal experience.
Since Peak-Ticket-Sales in 2002, the average price has jumped 53% from $5.81 to $8.90 in 2017. At the same time, the number of tickets sold has plunged 21%. Connection? Maybe. One thing’s for sure: When ticket sales drop, the industry has to raise prices to make up for the drop; and the more the industry makes up with price increases for dropping ticket sales, the more consumers start looking for alternatives.
Thus overall ticket sales in dollars only inched down 0.8% in 2017 to $11.13 billion. Fewer and fewer people go to the movies, but they pay more and more each time, and as ticket prices have soared (right scale), overall ticket sales in dollars (left scale) are only languishing rather than plunging:
Read More @ WolfStreet.com
In a day that turned from boring, to bizarre, to berserk in just a few short hours, the newsflow continued when Lohud, a news source for Rockland and Westchester counties in New York, reported that firefighters were responding to a fire at Bill and Hillary Clinton’s house in Chappaqua.
New Castle police have confirmed a fire at the Clintons’ home in Chappaqua, however, it was not immediately clear if the Clintons were at home when the fire erupted just before 3 p.m.
#BREAKING: Firefighters responding to a fire at Bill and Hillary Clinton's house in Chappaqua.
— lohud.com (@lohud) January 3, 2018
Police declined to give further details on the fire at 15 Old House Lane where Bill and Hillary Clinton have lived for nearly 20 years after buying it for $1.7 million in 1999.
But scanner reports said it was a bedroom fire and has been extinguished.
The house, built in 1889, features five bedrooms over 5,232 square feet and a pool on its 1.1 acres.
In August 2016, the former president and past presidential hopeful bought the four bedroom house next door, at 33 Old House Lane, for $1.16 million. In October, they got in trouble for not having a permit for a kitchen renovation and filling in the in-ground pool.
The following video reveals the Clinton’s house in Chappaqua on Old House Lane.
Putting it all together:
Read More @ ZeroHedge.com
by Ben Spencer, Daily Mail:
A woman who battled blood cancer for years without success finally halted the disease with turmeric, it has been reported.
Dieneke Ferguson is now leading a normal life after giving up on gruelling treatments that failed to stop it.
Doctors say her case is the first recorded instance in which a patient has recovered by using the spice after stopping conventional medical treatments.
With her myeloma spreading rapidly after three rounds of chemotherapy and four stem cell transplants, the 67-year-old began taking 8g of curcumin a day – one of the main compounds in turmeric.
The cancer, which has an average survival of just over five years, was causing increasing back pain and she had already had a second relapse.
But it stabilised after Mrs Ferguson, from north London, came across the remedy on the internet in 2011 and decided to try it as a last resort.
The tablets are expensive – £50 for ten days – but as kitchen turmeric contains just 2 per cent curcumin it would be impossible to eat enough to get the same dose.
Mrs Ferguson, who was first diagnosed in 2007, continues to take curcumin without further treatment and her cancer cell count is negligible.
Her doctors, from Barts Health NHS Trust in London, wrote in the British Medical Journal Case Reports: ‘To the best of our knowledge, this is the first report in which curcumin has demonstrated an objective response in progressive disease in the absence of conventional treatment.’
The experts, led by Dr Abbas Zaidi, said some myeloma patients took dietary supplements alongside conventional treatment but ‘few, if any, use dietary supplementation as an alternative to standard antimyeloma therapy’.
Read More @ DailyMail.co.uk
by Pam Martens and Russ Martens, Wall St On Parade:
The sitting President of the United States, Donald Trump, is actively taunting North Korea on Twitter over who has the bigger, more powerful nuclear button.
On September 23, Trump tweeted: “Just heard Foreign Minister of North Korea speak at U.N. If he echoes thoughts of Little Rocket Man, they won’t be around much longer!” Little Rocket Man is Trump’s preferred insulting moniker for North Korea’s leader, Kim Jong-un. Yesterday, following a New Year’s speech by Kim in which he bragged about his country’s nuclear capability to hit the U.S. mainland, Trump had this to say on Twitter:
“North Korean Leader Kim Jong Un just stated that the ‘Nuclear Button is on his desk at all times.’ Will someone from his depleted and food starved regime please inform him that I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!”
These juvenile taunts over a nuclear war in which millions of innocent civilians and children could die ensure that the historically low confidence that Americans have in the Federal government will persist. According to the polling organization, Gallup, “the federal government has the least positive image of any business or industry sector measured, Congress engenders the lowest confidence of any institution that Gallup tests, and Americans rate the honesty and ethics of members of Congress as the lowest among 22 professions in Gallup’s most recent update.”
Is Congress taking any action to stop this reckless nuclear war mongering on Twitter? As you might surmise, this institution, which enjoys a 12 percent confidence rating from Americans according to Gallup, has taken no action to stop the President from destroying the credibility of the United States on Twitter or Tweeting the country into nuclear war. That job has been left up to a grassroots organization in San Francisco called Resistance SF.
Yesterday, following the latest Trump nuclear taunt on Twitter, the group projected the text “@jack is #complicit” onto Twitter’s headquarters building in downtown San Francisco. The projection was a warning to Twitter’s CEO, Jack Dorsey, who has justified his failure to take action against Trump’s threats and slurs on Twitter on the basis that they are “newsworthy.”
In a 2017 interview on NBC, Dorsey had this to say about allowing Trump’s dangerous Tweets:
“I believe it’s really important to hear directly from our leadership; and I believe it’s really important to hold them accountable; and I believe it’s really important to have these conversations out in the open, rather than have them behind closed doors. So if we’re all to suddenly take these platforms away, where does it go? What happens? It goes in the dark. And I just don’t think that’s good for anyone.”
Newsweek reports that it has been “estimated that Twitter could lose nearly a fifth of its [stock market] value,” were it to ban Trump from its platform.
Dorsey’s weak justification for his tolerance of Trump’s Twitter rampages, which frequently fly in the face of Twitter rules against making threats on its platform, has resulted in Resistance SF calling for protesters to turn out from 5:30-6:30 PST today at the Twitter headquarters at 10th and Market Street in San Francisco. The group explained the protest as follows on its Facebook page:
“Jack Dorsey, CEO of Twitter and Square, has enabled @realDonaldTrump from his first dog whistles in the birther movement to his latest nuclear pissing contest.
“Twitter is endangering the world and breaking its own terms of service to do it. Trump or Jack must go.
“Bring signs, chants, and perhaps your umbrella. We will protest even if it rains.
“If you’d like to endorse or help organize this action, please reach out.”
CNN’s Jake Tapper told his viewers last evening that “It may be difficult for those of you at home to wrap your minds around a US president who makes statements like this about the use of nuclear weapons, which would, of course, murder millions of people.”
CNN political reporter, Stephen Collinson, also weighed in, writing the following about Trump’s Tweet:
“Trump’s move was remarkable on many levels. It illustrates how he has turned the United States from being a bulwark of stability and sobriety in the international system into an agent of disruption and unpredictability in his own volatile image.
“It also undercuts the idea that his unpredictable instincts are reined in by more experienced administration officials, such as Defense Secretary James Mattis.
“There was no immediate reaction from the White House or elsewhere in the US government about Trump’s shocking tweet on Tuesday night.”
Read More @ WallStOnParade.com
from Zero Hedge:
Earlier today, we reported that according to a press reports, Intel’s computer chips were affected by a bug that makes them vulnerable to hacking. Specifically, The Register said the bug lets some software gain access to parts of a computer’s memory that are set aside to protect things like passwords, and making matters worse, all computers with Intel chips from the past 10 years appear to be affected. The news, which sent Intel’s stock tumbling, was later confirmed by the company.
In a statement issued on Monday afternoon, Intel said it was working with chipmakers including Advanced Micro Devices Inc. and ARM Holdings, and operating system makers to develop an industrywide approach to resolving the issue that may affect a wide variety of products, adding that it has begun providing software to help mitigate the potential exploits. Computer slowdowns depend on the task being performed and for the average user “should not be significant and will be mitigated over time” the company promised despite much skepticism to the contrary.
As Bloomberg helpfully puts it, Intel’s microprocessors “are the fundamental building block of the internet, corporate networks and PCs” and while Intel has added to its designs over the years trying to make computers less vulnerable to attack, arguing that hardware security is typically tougher to crack than software, there now appears to be a fundamental flaw in the design.
In a vain attempt to mitigate the damage, Intel claimed that the “flaw” was not unique to its products.
“Intel and other technology companies have been made aware of new security research describing software analysis methods that, when used for malicious purposes, have the potential to improperly gather sensitive data from computing devices that are operating as designed,” the Santa Clara, California-based company said. “Intel believes these exploits do not have the potential to corrupt, modify or delete data.”
The extent of the vulnerability is huge
As Bloomberg writes, “the vulnerability may have consequences beyond just computers, and is not the result of a design or testing error.” Here’s how the bug “works”:
All modern microprocessors, including those that run smartphones, are built to essentially guess what functions they’re likely to be asked to run next. By queuing up possible executions in advance, they’re able to crunch data and run software much faster.
The problem in this case is that this predictive loading of instructions allows access to data that’s normally cordoned off securely, Intel Vice President Stephen Smith said on a conference call. That means, in theory, that malicious code could find a way to access information that would otherwise be out of reach, such as passwords.
Security vulnerability aside, the fix may be just as bad: it would result in a significant slowdown of the CPU, and the resultant machine.
Because the exploit takes advantage of a technology intended to accelerate the performance of the processors, the fix slows them, said the person. In devices with the current generation of Intel chips, the impact will be small, but it will be more significant on older processors. Microsoft is still looking at the impact on the speed of cloud services and how it will compensate paying customers, the person said.
“The techniques used to accelerate processors are common to the industry,” said Ian Batten, a computer science lecturer at the University of Birmingham in the U.K. who specializes in computer security. The fix being proposed will definitely result in slower operating times, but reports of slowdowns of 25 percent to 30 percent are “worst case” scenarios.
Intel’s troubles will likely spread far beyond just the company: Intel CEO Brian Krzanich told CNBC that a researcher at Google made Intel aware of the issue “a couple of months ago.”
Google identified the researcher as Jann Horn, and said it has updated its own systems and products with protections from this kind of attack. Some customers of Android devices, Google laptops and its cloud services still need to take steps to patch security holes, the internet giant said.
“Our process is, if we know the process is difficult to go in and exploit, and we can come up with a fix, we think we’re better off to get the fix in place,” Krzanich said, explaining how the company responded to the issue.
On the call, Intel’s Smith said the company sees no significant threat to its business from the vulnerability.
“I wouldn’t expect any change in acceptance of our products,” he said. “I wouldn’t expect any concrete financial impact that we would see going forward.”
In response to the bug, Microsoft on Wednesday released a security update for its Windows 10 operating system and older versions of the product to protect users of devices with chips from Intel, ARM and AMD. The software maker has also started applying the patches to its cloud services where servers also are affected by the issue.
Meanwhile, Advanced Micro Devices, whose stock surged on news of Intel’s misfortune, said “there is near zero risk” to its processors because of differences in the way they are designed and built. “To be clear, the security research team identified three variants targeting speculative execution. The threat and the response to the three variants differ by microprocessor company, and AMD is not susceptible to all three variants,” the company said in a statement.
And then there are the questions about revenue and lost profit.
Quoted by Bloomberg, Frank Gillett, an analyst at Forrester Research, said that providers of computing over the internet will have to upgrade software to work around the potential vulnerability, which will require additional lines of code, computing power and energy to perform the same functions while maintaining security.
by Gabriela Barkho, Inverse:
Brooklyn renters looking for a picturesque brownstone in the Fort Greene neighborhood were surprised to learn they could pay for their new new digs with bitcoin. That’s right, you can use the cryptocurrency that everyone and their dog is now investing in to put down a payment on an apartment.
As bitcoin began its rapid rise in the last few months, the aforementioned listing’sreal estate broker, Ari Weber, saw an opportunity: accepting the cryptocurrency as a form of rental payment.
“We are doing something to attract young clients,” Weber tells Inverse. “I was asked recently if we accept bitcoin, and so we quickly built the backend to accept bitcoin for rental deposits.”
The decision to start accepting the crypto giant came only a few weeks ago, and was put into action swiftly.
Among a sea of real estate firms catering to renters in the city, Weber sees bitcoin as a way to stand out in a crowded market. The bitcoin integration is just one part of a system to create a seamless real estate experience in today’s on-demand economy. Weber and his team are already well-versed in tech and automation within Brookliv’s operations, which include bot-booked showings of listings.
When asked what would happen if bitcoin eventually “crashes,” Weber doesn’t seem too worried. Now that the currency has stabilized, on average, around $13,500, he doesn’t think using it for purchases is a big risk.
“We can take a little bit of a hit if it does dip, but it’s worth it,” Weber says.
So far, Brookliv has already accepted deposits via bitcoin wallets from three tenants in the past few weeks.
The company is part of a new wave of bitcoin-accepting real estate firms. Platforms like ManageGo, an online rental payments system, has began allowing property managers to accept multiple cryptocurrencies like bitcoin, litecoin and ethereum. It does this by converting the rent payments to U.S. dollars and then depositing into their bank accounts.
Read More @ Inverse.com
by Peter Schiff, SchiffGold:
Could 2018 be a breakout year? Well, it depends on where you’re looking.
2107 was certainly a great year for the stock market. A record year in fact with the Dow busting through several milestones. The Dow Jones was up every month in 2017. Naturally, analysts and mainstream media pundits were giddy as they looked back on the year last week.
Meanwhile, gold was up over 12% and closed above $1,300 for the first time in five years. What did the pundits have to say about that? Well, according to CNBC, gold has “lost its luster.”
In his last podcast of 2017, Peter Schiff said that is pretty absurd.
Even though it was up 12%, that means you’ve lost your luster. But the conclusion of CNBC was the Fed is going to keep raising rates, so gold’s not going up. But wait a minute. The Fed raised rates three times this year and gold went up 12%. So obviously, rate hikes are not an impediment to the gold price going up.”
In fact, as we’ve reported, rising interested may well be good for gold.
Peter did note that a lot of people haven’t paid much attention to gold this year because of the focus has been on the skyrocketing stock market and cryptocurrencies.
Yes, I think gold was not in the limelight, but I think that is going to change a lot in 2018.”
So, what about the stock market? Well, Peter doesn’t share the unbridled optimism of the mainstream.
To me, this type of unprecedented rise does not happen at the beginning of something. It happens at the end of something. So, anybody who believes 2018 is going to be more of the same really is going to be in for a rude awakening.”
The Dow tanked in the final few minutes of trading in 2017, falling 118 points on the final day of the year. Peter said this could be a foreshadowing of what’s to come. Nevertheless, there seems to be almost universal optimism that the stock market is going to keep going up.
Peter said it reminds him of last year when everybody was bullish on the dollar. Despite the optimism in January, the greenback fell almost 10% in 2017. It was the first annual decline in the dollar since 2012 and the biggest drop since 2003. That marked the beginning of a multi-year bear market in the dollar that was saved only by the 2008 financial crisis.
It’s not going to be that lucky next time. There isn’t going to be a crisis to save the dollar. The dollar is going to be the crisis. So I think again, this is the beginning of a multi-year bear market (for the dollar) that nobody saw coming at the end of last year or the beginning of this year. And it’s the same way nobody sees the problems in the stock market.”
Peter looked back over the last several years and noted that there has been a bigger lag than he expected between all of the Federal Reserve money printing and the advent of inflation as reflected in consumer prices. But he said we are on the cusp of a major bubble pop that will unleash a tidal wave and make 2018 a breakout year.
Read More @ SchiffGold.com