Visualizing The Short History Of America’s Trade Wars

History is full of trade wars.

In the majority of cases, the consequences are mostly economic – trade barriers are enacted, and then retaliatory measures are used to counter. Relations can continue to escalate until an understanding can be reached by both parties.

In the minority of cases, trade wars can lead to world-changing consequences.

You may remember that the Boston Tea Party of 1773 was a bold response to an unfair trade measure imposed by a ruling power, and it proved to be a key catalyst that led to the American Revolution.

Meanwhile, the Opium Wars occurred after the Qing Dynasty (China) tried to prevent British merchants from selling opium to the Chinese in the 1830s. These trade barriers led to armed conflicts, and effectively put the nail in the coffin of the Qing Dyasty – the start of China’s infamous “century of humiliation”.

U.S. TRADE WARS

Today’s chart pulls together details on some of the biggest trade conflicts in modern U.S. history.

Courtesy of: Visual Capitalist

Here are some of the more interesting U.S. trade wars, and how they compare to the current spat that is evolving with major trade partners:

1. Smoot-Hawley, 1930

Imposed during The Great Depression, the Smoot-Hawley Act is almost universally recognized by economists and economic historians as triggering a trade war that exacerbated the recovery.

2. Chicken Friction, 1963

Factory farming of chicken in the U.S. ended up catching European farmers off guard. French and German authorities responded by imposing tariffs, and the U.S. then taxed imports such as trucks and brandy.

3. Jabs at Japan, 1981

Japan’s mid-century rise led to the country becoming an export powerhouse. As Japanese cars flooded the U.S. market, intense pressure eventually led to the signing of a Voluntary Export Restraint (VER) agreement that limited sales in the United States. During this same timeframe, the two countries also squabbled about other goods like electronics, motorcycles, and semiconductors.

4. War of the Woods, 1982

The Canada-U.S. Softwood Lumber dispute kicked off in 1982, but it inevitably resurfaces in the news every few years.

5. Pasta Spat, 1985

The U.S. was displeased with the level of access for citrus products in Europe, and put a tariff on pasta products. Europe retaliated by taxing walnuts and lemons from the States.

6. Battle of the Bananas, 1993

Another agricultural trade war, the Battle of the Bananas occurred after Europe slapped tariffs on the import of Latin American bananas. Many of these companies, owned by Americans, were not impressed. In response, there were eight separate complaints filed to the World Trade Organization (WTO). They weren’t resolved until 2012.

7. Steel Salvoes, 2002

These were the last major U.S. steel tariffs introduced before the more recent ones. The goal was similar: to revive the steel industry in the country. However, after a period of brief stability, jobs continued to decline. The European Union responded by taxing oranges exported from Florida.

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US “Super Spy” Program May Explain Mysterious Diplomat Brain Injuries

Authored by Finian Cunningham via The Strategic Culture Foundation,

Over the past two years there have been increasing reports of supposed “sonic injuries” among US diplomats. First in Cuba and more recently in China. Controversial implications are that the US officials may have been maliciously targeted by a “sonic weapon” in host countries. However, a more likely explanation is that the alleged victims are the result of US attempts to create “super spies”.

The number of American diplomats reportedly suffering from suspected “sonic injuries” is increasing, with 11 officials evacuated earlier this month from China. Initially, the mysterious incident was reported at just one US consular location in the city of Guangzhou. Now the suspicion of brain injuries has spread to American diplomats stationed in Beijing and Shanghai.

Some 250 US diplomats in China are reportedly undergoing neurological medical tests to ascertain if they have succumbed to the same kind of brain trauma diagnosed in other colleagues. A study of 21 diplomats evacuated from Cuba found last year that they had incurred brain injuries, but, it was diagnosed, not from physical impact to their heads.

Typically, the symptoms reported include cognitive impairment, visual impairment, hearing of strange sounds, dizziness and sleeplessness.

US doctors have so far been confounded by what may have caused the apparent injuries. Last week, the State Department said that ongoing investigations had not established a causal link to the cited medical problems among diplomats.

However, previously President Donald Trump had explicitly blamed Cuba for being responsible for the reported injuries to diplomatic staff. Trump’s accusation has no evidential foundation. The Cuban government denied having any involvement in presumed sonic attacks on American envoys. It has offered to assist any US investigation. Nevertheless, the evacuation of US staff from Cuba and Trump’s accusations have set back the recent detente in relations between the two Cold War foes which former President Obama had embarked on.

With regard to China, the US has been more circumspect in dealing with the reported cases of apparent sonic injuries, refraining from accusing Beijing of malicious activity. China has previously dismissed any suspicion of sonic attacks as “inconceivable”. Beijing has also hit out the US State Department issuing “health warnings” to its staff in China because such notifications convey an implication of wrongdoing by the host country.

In the context of Trump’s escalating trade war with China, there is the danger that reported cases of injury among diplomats could be politicized by Washington, thus adding to the already acrimonious relations.

Some factors so far missing from the subject need to be addressed.

First, it seems strange that the mysterious brain injuries are only reported by US diplomats. No other country has reported similar incidents among their diplomatic staff.

Secondly, the American brain-injury cases have happened in two countries which could be deemed as politically sensitive. Why have similar cases not been reported among staff based in territories belonging to allied nations?

Thirdly, when US staff are described as “diplomats”, as they invariably are in Western media reporting, we should perhaps be more precise than this innocuous-sounding terminology. If we think of the personnel as “spies” then a more skeptical inference comes into play. Especially, given the sensitive nature of the two countries involved. If the concerned US staff were indeed serving as spies that raises the question about what sort of training and preparation programs they were subjected to ahead of their assignments.

The speculation that Cuban and Chinese state agents could have used some kind of sonic weapon to attack US diplomats is more in the realm of science-fiction fantasy. Both countries deny any such activity. There is no such weapon known to exist. Also, the US doctors who examined the diplomats evacuated from Cuba could not find any casual explanation. The absence of an external source for the injuries appears to be the official US position too, according to the State Department last week.

Significantly, the US doctors studying the Cuban cases said that all the individuals may have undergone a common experience related to their brain injuries.

Rather than speculating about a foreign agency being responsible for the injuries among American diplomats, or rather spies, perhaps the focus should be put on their own side. Were these individuals subjected to some form of hi-tech training run by the Pentagon or the CIA?

It is known that the Pentagon’s Defense Advanced Research Project Agency (DARPA) is investigating brain stimulation devices to greatly enhance learning ability in subjects.

DARPA, as recently as last year, reported the successful use of trans-cranial Direct Current Stimulation (tDCS) devices to boost the cognitive skills among experimental monkeys. It was claimed that subjects given treatment from such devices strapped to the head would later display a significant increase in learning and intelligence compared with control individuals receiving no treatment. DARPA reported a 40 per cent increase in learning ability among macaque monkeys subjected to the brain stimulation device.

One of the lead doctors in the program is quoted as saying: “In this experiment, we targeted the prefrontal cortex [of the brain] with individualized non-invasive stimulation montages.”

The researcher goes on to explain: “That is the region [of the brain] that controls many executive functions, including decision-making, cognitive control, and contextual memory retrieval. It is connected to almost all the other cortical areas of the brain, and stimulating it has widespread effects.”

Please note the parting caveat from the Pentagon-contracted scientist, viz., “stimulating has widespread effects”.

On the positive side, the Pentagon is evidently searching for a way to boost intelligence and learning in humans. This is by no means a new pursuit. For decades, American military intelligence agencies, as well as Hollywood science fiction, have been in thrall to the idea of harnessing the human brain and exploiting ever-higher levels of intelligence. The CIA is known to have run various drug programs and hypnosis – the notorious MK-ULTRA – as early as the 1950s and 60s. The holy grail was to find “super spies” and “super assassins”.

So, the history of the Pentagon and the CIA conducting systematic experiments in order to produce high-performance in humans is well documented.

We also know from recent Pentagon research that it is indeed using electronic brain stimulation devices to greatly enhance the cognitive performance among monkeys. It is therefore conceivable that the Pentagon has conducted unpublished research experiments on human subjects as well.

On the negative side, the sought-after higher intelligence may very well come with unforeseen injurious side-effects. Note again the Pentagon researcher above saying that stimulating the prefrontal cortex of the brain could have “wide-ranging effects”. These effects, in addition to increased intelligence and learning skills, could include deleterious consequences. Especially because the target area of the brain is crucial for the control of “executive functions”.

It is not disclosed by the Pentagon if its brain devices had any injurious impact on the experimental monkeys.

We also do not know the precise work assignments of the affected “diplomats” in Cuba and China. Were there any routine secretarial staff among the reported casualties, or were they all “field staff”, that is, most likely involved in sensitive spying tasks?

It seems unlikely that the Pentagon or affected staff would ever go public in declaring that they were subjected to some form of brain-stimulation device. In any case, the staff could be easily silenced through warnings over career prospects and future earnings or health insurance cover. It may be more convenient for the Pentagon to foment the suspicion of “sonic attack” by foreign agents. That scapegoating could have serious impact on international tensions, especially between the US and China over its trade war and territorial disputes in the South China Sea.

Nevertheless, despite the unknowns, from what we do know already, it seems a plausible posit that the recent upsurge in brain injuries among US diplomatic staff may have been caused not by “sonic attacks” in their host countries, but by their own superiors at the Pentagon or CIA conducting some form of clandestine program to create “super spies”.

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Army Starts Testing “Ironman-Like” Exoskeleton For Future Hybrid Wars

As discussed previously, the Army’s Training and Doctrine Command, or TRADOC, drafted a new strategy for how soldiers will operate, fight, and campaign successfully across multiple domains—space, cyberspace, air, land, maritime—against all enemies (Russia and China) in the 2025-2040 timeframe.

Warrior Maven has confirmed that the Army is literally “gearing up” for decades of hybrid conflict, and in doing so, testing and prototyping self-generating “Ironman-like” soldier exoskeletons. These “breakthrough” suits are designed to transform the combat mission by supporting soldier movements, generating electricity, powering weapons systems and substantially lowering the weight burden of what soldiers carry on the modern battlefield.

The emerging technology, described by Army developers as a “technical breakthrough” is an energy-harvesting exoskeleton suit that can extend mission life for small units or dismounted soldiers on patrol.

“The design is for an energy-harvesting exoskeleton to address the needs of dismounted soldiers. The system can derive energy from the motion of the soldier as they are moving around,” Dr. Nathan Sharps, mechanical engineer, Army Communications-Electronics Research, Development and Engineering Center (CERDEC) recently told Warrior Maven in an interview.

The implications of this technology would be decisive on tomorrow’s battlefield, and could mean the difference between life and death. Last month, elite soldiers from the 10th Mountain Division, a light infantry division at Fort Drum, New York, started testing exoskeleton technologies from Lockheed Martin that reduces the metabolic cost of transport to improve endurance and reduce fatigue on the modern battlefield.

While the exoskeleton suits have been in development for many years, the technology consistently faces the challenge of finding ways to power the devices to maintain its functionality. While current battery technology has evolved, batteries present significant combat challenges due to recharging and weight. The Army is pursuing various efforts to “lighten the load” for soldiers, including the use of exoskeleton suits, robotic pack mules, and cased telescoped ammo.

“The technologies [exoskeleton suits] we are developing can produce electricity, which can be stored and used to power batteries. This increases the longevity of a mission, decreases the need for resupply and reduces the logistics trail,” Sharps explained.

Sharps told Warrior Maven that in hot zones, casualties frequently occur during logistics resupply missions.

While the exoskeleton suit harvests energy from the motion of soldiers, it also simultaneously provides injury prevention and higher output to complete the mission.

“This decreases the chance of muscular-skeletal injury. We look at the soldier as an individual ecosystem. We’re not just looking at what they cannot do right now, but also at what challenges they are going to face 20 years from now,” Sharps said.

Warrior Maven indicates the suit, currently in the early phase of development, is a collaborative effort between the Army Communications-Electronics Research, Development and Engineering Center (CERDEC) and the Army Natick Soldier Systems Center (NSSC). The engineers said the exoskeleton suit reduces the metabolic cost of transport on the modern battlefield.

“When you move, you bounce up and down, and the gait motion is an inverted pendulum. If you lift every step thousands of times, it is a whole lot of energy you are expending,” said Juliane Douglas, mechanical engineer, CERDEC, told Warrior Maven.

Army engineers are experimenting with various configurations for the exoskeleton, including a suspended backpack, which can slide up and down on a spring, enabling little or no weight impact on the soldier.

“In mechanical engineering terms, if you have masses moving together, there is a kinetic energy difference between the two. We have mechanisms which can convert that linear motion into electricity,” explained Douglas.

* * *

Warrior Maven said emerging systems are now being integrated into exoskeletons, for example, helmets with high-resolution thermal sensors, wearable computers, various kinds of conformal body armor and even many weapons systems are now being built into a range of Ironman-like exoskeletons.

Not surprisingly, many of the listed technologies above, heavily rely upon the mobile power to operate and limit the combat mission.  Energy-harvesting exoskeleton suits would be a gamechanger for soldiers on the modern battlefield to increase combat output while simultaneously decreasing the metabolic cost of transport to complete the mission.

With the Army increasingly expecting hybrid wars in the 2025-2040 timeframe as the Thucydides Trap inflection point nears,  “Ironman-like” exoskeletons are emerging as the dominant strategy to defeat potential enemies (especially ascendant China) in the coming conflicts.

Unless of course China steals the technology, reverse engineers it and comes out with the first working product.

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Did Xi’s Overly-Ambitious Goals Trigger US-China Trade War?

Authored by Katsuji Nakazawa via Nikkei Asian Review,

Talk of becoming world No.1 backfired, hurting even dinner tables…

Soon, all 1.4 billion Chinese will be feeling the pinch of Donald Trump’s presidency an ocean away.

They will look at their dining table and notice their favorite dishes — Chinese-style deep fried chicken, firecracker chicken and twice-cooked pork — are all cooked with lots of oil, much of which is pressed from the seeds of American or Brazilian soybeans.

Similarly, many of China’s pigs and chickens are raised on imported soybean meal, the residue left after oil extraction.

Doubanjiang, the chili-bean paste that determines the splendor of Chinese cuisine, also cannot be made without soybeans. Of the above mentioned dishes, cabbage is about the only ingredient the country can fully provide for itself.

President Trump last week imposed 25% punitive import tariffs on Chinese products, citing violations of intellectual property rights. Chinese President Xi Jinping responded immediately, slapping 25% retaliatory import tariffs on American products, including soybeans.

As a result of the soybean levy, the cost of food in China will jump, dealing a serious blow to Chinese farmers and eaters.

The dish on the right is called laziji and is popular among ordinary Chinese. But it and other Chinese staples will cost more due to China’s retaliatory tariffs on U.S. products. (Photo by Katsuji Nakazawa)

To be sure, discontent might also grow in U.S. agricultural states, where farmers are already having difficulty selling soybeans and other produce to China. Trump could end up losing support from those in the agriculture sector.

The big question is why the game of chicken actually broke out. Xi may have nobody but himself to blame.

Since the days of Deng Xiaoping, China had maintained a less-assertive foreign policy, portraying itself as a “developing country.” Deng’s guidance was to keep a cool head, hide one’s claws, bide time and never try to take the lead.

After coming to power as the Chinese Communist Party’s general secretary in the autumn of 2012, Xi ditched that policy and started to talk of the “great rejuvenation of the Chinese nation.” He labeled it as the Chinese dream.

At the Chinese Communist Party’s once-every-five-years national congress in October, Xi went further, floating for the first time the target year of 2035 as the time China would catch up with the U.S. economically.

In November, He Yiting, the vice president of the Central Party School, gave a speech in Tokyo explaining the meaning of Xi’s words. The goal of achieving China’s modernization had long been set at the 100th anniversary of the founding of the People’s Republic of China’s, which falls in 2049. “That goal has now been brought forward by about 15 years,” He told Japanese lawmakers at the parliament building in Tokyo’s Nagatacho district.

He Yiting was unaware of the consequences of President Xi Jinping’s stated goals when he explained them to Japanese lawmakers in Tokyo on Nov. 24, 2017. 

Around the same time, senior party officials were giving similar explanations about Xi’s new policy around the world.

By bringing forward the goal, Xi was telling the world that China will become the world’s number one during his lifetime.

Xi, who would be 82 in 2035, assured his stature in March, when he had a clause allowing a president to serve up to two five-year terms removed from the nation’s constitution.

Little did he or his team imagine that his words would help to trigger a Sino-U. S. trade war. Instead of hiding his claws, Xi had flashed them. And it had come too early.

By expediting the modernization plan, Beijing would also be accelerating the “Made in China 2025” initiative, a blueprint for turning the country into a high-tech manufacturing powerhouse. The plan has been singled out by the Trump administration as a symbol of China’s ambition to gain an advantage in next-generation technology, even if it meant stealing intellectual property.

“Made in China 2025” was compiled three years ago, with Premier Li Keqiang playing a central role. Back then, it was not clear that Xi wanted to bring forward the goal of gaining No. 1 status. It was only after the plan was published, that the new aspiration of catching up and overtaking the U.S. economically by 2035 was added. The step after that would be to outstrip the U.S. both militarily and culturally by 2049.

China has good reason to trumpet its long-term targets at home: It needs to justify the socialist system that it continues to uphold. Although its economy is no longer a purely planned one, China does adopt five-year outlines, and the “Made in China 2025” strategy is closely linked to the current five-year plan.

One notorious plan was the Great Leap Forward of 1958, a high-growth campaign, launched by Mao Zedong but failed miserably. China declared its ambition to catch up with the U.K., then the world’s second-largest economy.

Chinese Premier Li Keqiang played a central role in compiling the “Made in China 2025” plan.   © Reuters

With Mao leading the country, China significantly boosted steel production. But rural areas were devastated, and more than 20 million people starved to death. Mao eventually resigned as head of state.

Today’s China is nothing like the shell it was during Mao’s time. The country’s economy now plays an integral global role.

China ranges over the global economy like a bull elephant roams the savanna. Other grassland wildlife is sensitive to this mammoth’s slightest moves. The ferocious lion, the U.S., is no exception.

China has yet to become fully aware that it is the elephant in the global economy’s boardroom.

But in Washington, Trump was cognizant that he could not stand idly by after China vowed to knock the U.S. off its economic pedestal in just 17 years from now. He campaigned for the presidency by promising voters he would put “America first.”

News of China’s decision to bring forward its modernization target date emerged at a bad time. It came shortly after Xi had promised Trump business deals worth $250 billion. That pledge came in November, when Trump was visiting Beijing, and was portrayed as a salve that would help to heal the U.S.’s massive trade deficit with China.

As expected, it was little more than talk. The trade gap continues to quickly widen.

Alarmed by China’s ambitions and frustrated by the lack of progress in narrowing the U.S. trade deficit, Trump went on the offensive in the spring.

There are good reasons for China coming under U.S. trade fire. It has been the biggest beneficiary of the global trade system since it became a member of the World Trade Organization at the end of 2001.

All the while, it has imposed strict foreign ownership limits in each industrial sector, forced foreign companies that enter China to transfer technologies and has set up various other barriers to its markets.

Backed by huge amounts of government funds, Chinese companies have made splashy acquisitions of U.S. and European companies that own key technologies, especially in the auto and information technology sectors.

Chinese companies can quickly obtain technologies by acquiring or taking equity investments in U.S. and European companies. In the U.S. and Europe, any company can acquire any other company as long as it can obtain the necessary funds.

But it is difficult for U.S. and European companies to acquire Chinese companies. Chinese authorities have numerous regulations at their disposal to block any such attempt.

Chinese President Xi Jinping unwittingly laid the groundwork for the trade war that is now taking place between China and the U.S.   © Reuters

When Xi bared China’s sharp claws, declaring China would overtake the U.S. economically by 2035, he did so for the benefit of a domestic audience and to aid his fierce power struggle with the political factions that had run China for decades.

China is now beginning to realize the high price it is having to pay for Xi’s declaration.

If prices for ingredients in Chinese dishes climb, so too will discontent among Chinese consumers. This could lead to a barrage of attacks against U.S. companies operating in China.

Worried about social instability, the Chinese leadership has been careful not to overplay the trade war in domestic media. In terms of diplomacy, Beijing could go back to hiding its claws again.

But that would only be superficial. At the core, Xi cannot retract a grand target adopted at the Communist Party congress, just as he cannot discard the “Made in China 2025” goal.

In an interconnected world, China’s misty domestic politics will continue to influence the global economy for many years to come.

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Company Hikes Price Of “Cadillac” Ambien Nasal Spray By 800% As Drug Companies Defy Trump

While Pfizer and several drugmakers have loudly touted their decision to roll back some price hikes on popular drugs following pressure from President Trump and the rollout of a new California law designed to discourage drug companies from raising prices, others have continued hiking prices of thousands of drugs. According to Raymond James & Associates drug companies have raised prices 3,653 times on 1,045 different drugs so far this year (drug companies often do one round of price hikes in January and another in the early summer). And according to the Wall Street Journal, the biggest price increases have been reserved for so-called “Cadillac” drugs like a new spray form of the sleeping medication Ambien.

Aytu

Some of the price hikes impacted life-saving drugs like Ampyra, which is used to treat multiple sclerosis. Its owner, Acorda, hiked its price by 20% this year.

Drugs

As for the sleep medication mentioned above, a small Colorado-based company called Aytu Bioscience recently raised the price of the spray formulation sold under the brand name Zolpimist by more than 800%, according to WSJ. 

The median price increase is 8%, but some specific increases have been far greater. Aytu BioScience Inc. raised the list price of a 7.7 milliliter bottle of its sleep aid Zolpimist to $659 from $69.88, while increasing the price of a 4.5 milliliter bottle by 747% to $329.50, according to RELX PLC’s Elsevier Gold Standard Drug Database. The drug is a spray version of zolpidem, the key ingredient in Ambien, which is widely available as cheap generic pills.

In a tactic reminiscent of Valeant Pharmaceuticals and Martin Shkreli’s Turing Pharmaceuticals, Aytu bought the rights to sell Zolpimist in the US from a Canadian firm called Magna Pharmaceuticals, then jacked up the price.

Aytu, of Englewood, Colo., raised the price of Zolpimist on Tuesday, about a month after buying the rights to sell the drug in the U.S. and Canada from Magna Pharmaceuticals Inc. The practice of buying rights and then raising the price, by companies including Valeant Pharmaceuticals under then-CEO Michael Pearson and Martin Shkreli’s Turing Pharmaceuticals AG, has drawn criticism from public officials and others because the companies didn’t invest in developing the drugs.

Asked by the paper for his company’s reason for hiking the price of the drug, Aytu CEO Josh Disbrow said the company was just bringing the price of Zolpimist in line with other comparable drugs. He added that people who can’t afford the spray version can buy the generic pill form instead. The drug, he said, was designed for the small number of wealthy patients who prefer the oral spray over lower priced pills.

Chief Executive Josh Disbrow said Aytu raised Zolpimist’s list price to bring it in line with the cost of other brand-name sleep drugs. He said Zolpimist was for the small number of patients willing to pay more, often out of their own pockets, for the oral spray than for lower-priced pills.

“For those people who want a Cadillac, they can pay for it,” Mr. Disbrow said in an interview.

Aytu’s increase in the list price of Zolpimist was among the biggest increases taken in the middle of this year, according to Elsevier’s data on the wholesale-acquisition cost of prescription drugs. Bloomberg earlier reported the Zolpimist increases.

[…]

Mr. Disbrow said Aytu’s increases for Zolpimist were different than other examples because the drug is for a lifestyle condition rather than a life-threatening disease, and generic options are available.

“It’s a luxury item. Patients can choose to be on the generic. We want to have it out there for patients who value their rapid sleep,” Mr. Disbrow said. He added that Aytu, which sells a drug for low testosterone, doesn’t depend on the Zolpimist price increases to raise sales. Aytu reported $2.7 million in revenue for the nine months ending March 31.

Mr. Disbrow said he expected most sleep-aid patients would buy the generics, and health plans would require people to try the generics before looking at other options. Doctors write more than 30 million zolpidem prescriptions a year, though fewer than 2,000 of them for Zolpimist, he said.

Still, the thousands of price hikes on Zolpimist and other drugs show that presidential pressure isn’t enough to stop drug companies from raising prices and for engaging in tactics like buying selling rights and then hiking prices.

“These types of increases indicate that public criticism, even from President Trump, are not enough to change the trajectory of drug costs,” said Michael Rea, chief executive of Rx Savings Solutions, which sells software to help employers and health insurers lower their drug spending.

Then again, when drug companies can sell one drug in the US for nearly $40,000 – and the same drug in Europe for $8 – there’s quite a bit of incentive for the gangster capitalists who run the world’s pharmaceutical firms to simply submit without a fight.

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Cops Attempt Gun Confiscation Without Warrant; This New Jersey Man Said “No”

Authored by Mac Slavo via SHTFplan.com,

Police in New Jersey have officially crossed the [thin blue] line and literally attempted to confiscate guns from an army veteran without a warrant.  But it didn’t go as planned, because  Leonard Cottrell Jr. refused to comply with the orders of the cops.

Eventually, all gun confiscation will be carried out by the police; who “don’t make the laws, they just enforce them,” and Cottrell found this out the hard way.  After serving two tours in Operation Iraqi Freedom overseas, Cottrell found himself at end of the state’s tyrannical oppression and gun elimination scheme.

According to The Daily Wire, two police officers were given orders to go to Cottrell’s home to confiscate his guns.  The order followers complied, and “because [Cottrell’s] 13-year-old son had made a comment at school about the Millstone Middle School’s security, and the officers wanted to confiscate Cottrell’s firearms as part of an investigation,” NJ.com reported. But Cottrell disobeyed and defied the orders of the police.

Cottrell legally owns a shotgun and a handgun (not quite a cache of weapons by any stretch of the imagination) but based solely on comments made by his 13-year-old son, police demanded all his guns.  According to the report by The Daily Wire, Cottrell says that his wife let the officers into their home and let them search their sons’ room where they did not find any weapons. But the search didn’t end there. The officers then made attempts to try to take his firearms, which “he has all the correct permits to own.”

“No one from the state was going to take my firearms without due process,” Cottrell said, according to NJ.com.  According to New Jersey law, signed into law Cottrell’s disobedience is “illegal.”  Democrat Governor Phil Murphy a bill that makes it incredibly easy for law enforcement to confiscate firearms without due process and for seemingly any reason the state deems.

Cottrell said that his son is also very upset by the situation.

The teenager did not do anything wrong and the entire situation is being misconstrued and blown up.

“He didn’t do anything wrong, and he doesn’t understand why it happened — he was just having a conversation with nothing as far as threats,” Cottrell said. “It shouldn’t have blown up the way it did. But he understands it happened, there are consequences and there’s fallout from his actions.”

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Report Details “Ocean’s 11”-Style Mossad Raid Inside Iran To Steal Nuclear Secrets

The New York Times has published an exclusive look at just how a small group of Israeli Mossad agents pulled off what surely constitutes the most daring secret raid behind enemy lines in recent history which successfully netted tens of thousands of secret Iranian nuclear documents.

It begins spectacularly as if a James Bond spy thriller: “The Mossad agents moving in on a warehouse in a drab commercial district of Tehran knew exactly how much time they had to disable the alarms, break through two doors, cut through dozens of giant safes and get out of the city with a half-ton of secret materials: six hours and 29 minutes.” And yes, the story does make an explicit appeal to Hollywood: Last year, the spies began planning a heist that one senior Israeli intelligence official said bore a strong resemblance to George Clooney’s adventures in “Ocean’s 11”, parrots the NYT.

Times journalists detail the story they received from Israeli intelligence officials (who else?) after being invited to view select documents said to have originated from the theft, which involved less than a dozen Israeli operatives hauling the “half-ton of secret materials” said to be the smoking gun proving Iran has continued to pursue nuclear weapons in spite of agreeing to abandon the program as part of the 2015 JCPOA brokered under Obama.

Last April, Israeli Prime Minister Benjamin Netanyahu made precisely these charges in a televised address in which he unveiled the stolen cache of about 55,000 pages of documents and 183 CDs that he claimed comprises Iran’s alleged “atomic archive” supposedly proving the existence of an illegal and ongoing secret program to “test and build nuclear weapons” called Project Amad.

Days after the usually colorful and prop-laden Netanyahu presentation, President Trump announced he would follow through on prior threats to pull out of the Iran nuclear deal. Observers noted at the time that Netanyahu’s address had a single audience in mind in the person of Trump during the very week the White House was intensely mulling a final decision over whether to finally pull the plug on the JCPOA.

Thus we might consider this latest NYT piece, which reads like a spy hagiography with few critical questions asked of what at first glance sounds like impossible logistics of an operation that placed Mossad agents deep into Iranian territory, a propaganda victory lap of sorts meant to further bolster Mossad’s reputation for far-reaching high-risk operations abroad.

After casing an inconspicuous warehouse for two years in a commercial district which had no official ties with Iran’s past nuclear development sites or with the Ministry of Defense, Mossad agents, who Israeli officials now confirm had inside help, planned to penetrate the facility which had since 2016 become a single collection point for “thousands of pages spread around the country documenting how to build a weapon, how to fit it on a missile and how to detonate it.”

“Innocent looking compound” – Israeli PM Netanyahu presenting the Iranian documents in Tel Aviv in April.

The Israelis say that because authorities were trying to keep the building completely off the radar of noticeable activity, “There were no round-the-clock guards or anything else that would tip off neighbors, or spies, that something unusual was happening there.”

So the team of Israeli agents planned the break-in during night hours when the facility was left unguarded, according to The New York Times:

The agents arrived that night, Jan. 31, with torches that burned at least 3,600 degrees, hot enough, as they knew from intelligence collected during the planning of the operation, to cut through the 32 Iranian-made safes. But they left many untouched, going first for the ones containing the black binders, which contained the most critical designs.

The unusual and perhaps most daring aspect to the operation was that files were physically hauled out of the country and not merely copied or photographed. When it was first revealed in April, one senior Israeli intelligence official was widely quoted as saying of the covert operation“We didn’t take everything because it was too heavy.” 

According to the latest Times report:

In most Mossad operations, spies aim to penetrate a facility and photograph or copy material without traces. But in this case, the Mossad chief, Yossi Cohen, ordered that the material be stolen outright. That would drastically shorten the time that the agents — many, if not all, of them Iranians — spent inside the building. But the Israelis wanted to be able to counter Iranian claims that the material was forged and offer it up for examination by international groups.

And the Ocean’s 11 level of planning, as the unnamed Israeli intelligence official put it, came into play in circumventing the alarm system and cracking nearly three dozen safes:

Clearly, the Israeli spies had inside help. They had learned which of the 32 safes held the most important information. They watched the habits of the workers. They studied the workings of the alarm system, so that it would appear to be working even though it would not alert anyone when the agents arrived around 10:30 p.m.

Notably, the raid was so successful in terms of not tipping off the normally paranoid and security-focused Iranians that the Mossad agents were able to make a seemingly effortless and quiet escape out of the country, as the NYT details further based on Israeli accounts:

For all the cinematics of the raid, the immediate aftermath was absent much drama. There was no chase, said Israeli officials, who would not disclose whether the documents left by land, air or sea — though an escape from the coast, just a few hours’ drive from Tehran, appears the least risky.

Fewer than two dozen agents took part in the break-in. Fearing that some of them would be caught, the Israelis removed the materials on several different routes. At exactly 7 a.m., as the Mossad expected, a guard arrived and discovered that the doors and safes were broken. He sounded the alarm, and the Iranian authorities soon began a nationwide campaign to locate the burglars — an effort that, according to an Israeli official, included “tens of thousands of Iranian security and police personnel.”

Though the journalists don’t attempt to poke holes in the over the top sounding heist narrative itself, the Times does throw the captured archives into doubt, noting that “There is no way to independently confirm the authenticity of the documents, most of which were at least 15 years old, dating from the time when an effort called Project Amad was ordered halted and some of the nuclear work moved deeper under cover” and further that “The Israelis handpicked the documents shown to the reporters, meaning that exculpatory material could have been left out.”

Israeli PM Netanyahu presenting the Iranian documents in Tel Aviv in April.

The Iranians say that the entire trove is fraudulent and called Netanyahu “an infamous liar” who “can’t stop crying wolf” after his unveiling the documents in the televised address, and have previously pointed out that PM Netanyahu was personally instrumental in selling the Western public on Iraq WMD claims in the lead-up to the 2003 invasion

The NYT ultimately concludes:

From what the Israelis showed to the reporters in a secure intelligence facility, a few things are clear.

The Iranian program to build a nuclear weapon was almost certainly larger, more sophisticated and better organized than most suspected in 2003, when Project Amad was declared ended, according to outside nuclear experts consulted by The Times. Iran had foreign help, though Israeli officials held back any documents indicating where it came from. Much was clearly from Pakistan, but officials said other foreign experts were also involved — though they may not have been working for their governments

Thus the new Times report is interesting for what’s revealed in terms of Israel’s testimony of how it came into possession of the nuclear archive, but still lends credence to the IAEA’s official position, reiterated immediately following Netanyahu’s April 30th speech, of there being “no credible indications” supporting Netanyahu’s claims of a continued Iranian nuclear weapons program after 2009. 

Indeed one Iran specialist in a previous op-ed for the New York Times written in the wake of Netanyahu’s dramatic presentation called the supposed Israeli Mossad intelligence haul a big “nuclear nothingburger” full of things already well-known to the world, with the further implication that the intelligence operation that netted the files itself appears hokey and untrustworthy.

Middle East analyst Steven Simon noted in the prior Times piece that:

The archive had been stored in what Mr. Netanyahu described as a derelict warehouse in Tehran. The photos he displayed indicated that there did not even appear to be a lock on the door. One wonders how important the Iranians thought these documents were, given the slapdash approach they took to storing them. In any case, the Mossad operation that netted this haul apparently took place in January and President Trump was briefed on it shortly afterward.

Also at the time, former Israeli National Security Advisor Uzi Arad in response to Netanyahu’s claim that Iran lied about its nuclear program, said that “at no point was there any indication that Iran violated the agreement.”

The Israelis have reportedly shared the documents with allied intelligence agencies, specifically the CIA, and are said to be continually translating the trove of tens of thousands of Persian language documents, which also include photographs and video of sensitive nuclear facilities. 

It will be interesting to see if a true and irrefutable “smoking gun” document does eventually emerge from the trove as so far not even the Times seems fully convince, despite the jaw-dropping account of the heist.

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IceCap Asset Management: “Eruption”

Submitted by Keith Decker of IceCap Asset Management

Similar to volcanic lava flows, financial contagions start slowly at first and then end by destroying many things in its path. Inbetween the beginning and the ending, is a baffling experience that can only be understood from afar. Once the eruption begins, people everywhere want to look, see and feel this infrequent experience.

Yet by the end, few actually recognise how the crisis spreads before subtly engulfing everything in its path and ending in a full-on, blow-out contagion. The financial lava flow has started.

Emerging market bonds and currencies are already experiencing the scorching effect of a capital outflows. Next up will be the European experience.

The culmination of the end of ECB money printing, the end of Angela Merkel’s grip on power, and the end of strict German austerity policies will see the financial lava flow first through Italy, then Spain and then before you realise it – France too. From there, the contagion spreads far and wide. Few bond markets will be spared and few interest rate sensitive equities will be safe.

All investors, including pension funds, bank owned mutual funds and individual investors have a tremendous opportunity – anticipate and proactively embrace the financial lava, or do nothing and claim ignorance.

We know which action we are taking.

It Happened

Well, it has happened. IceCap made a significant strategy change to our portfolios – we INCREASED our allocation to equities. Those that know us well, are fully aware of our cautious, meticulous, and OBJECTIVE approach to managing clients’ hard earned wealth.

Those that are just getting to know us, will come to understand, embrace and look forward to hearing, and reading our rationale for our long-term view, and how it reconciles with short-term market fluctuations. Whereas descriptions and announcements of strategy changes will be included in our IceCap Global Outlook, clients benefit from these changes immediately in their portfolios.

When we make a strategy change it is always based upon objective decisions driven by data dependent analysis – we check subjectivity at the door.

One thing we are very proud of here at IceCap is that we have unequivocally demonstrated an ability to change our mind, change our view and most importantly, change our portfolio strategies. In other words – we do not stick our heads in the sand. We never dig in our heels, and it would be absolutely shocking if we ever refused to entertain the thought that maybe our strategy, outlook and perspective is wrong.

Back in 2011, our portfolios held a 20% allocation to gold bullion. The reasons for holding gold were astonishingly clear, and when prices tipped $2000/oz, these reasons seemed even more clear. For those that remember, gold hit the $2000 ceiling and started a sharp, excruciating and painful decline to $1280 levels.

Recognizing trend and technical support levels were broken we quickly sold all of our positions with the last sale at $1648. Even though the fundamental reasons for holding gold had not changed – the technical/market reasons for holding gold had changed.

We share this with you to demonstrate that although all investment managers have long-term views on various markets, many do not have the ability, or the inclination to re-wire their brains and produce independent thoughts to enact significant change. Unfortunately, “same-old-same-old” actually is a very popular investment philosophy. But not at IceCap.

We haven’t been back into gold since. Yet we have a very clear vision as to how the gold re-entry path will look, and until the time when markets guide us in that direction, we’ll sit on the sidelines. During the same time frame (2011-2012) our portfolios were positioned to protect client capital from the potential of a sharp decline in equity markets.

Again, the fundamental reasons for expecting this event to occur were quite strong – and today, many bearish managers continue to shout and scream the same fundamental reasons as to why stocks should collapse. But they haven’t.

Back around that time, our thinking and perspective changed to better understand not why stock markets were avoiding collapse, but instead to understanding why they were going higher.

Now, there is a subtle difference in what we just said. And our approach to solving the riddle was to change our perspective. Instead of beginning with a thesis that all bad things in the world eventually create a crisis, which is then always reflected in a stock market crash – we took a different perspective. And this perspective led us to understand two crucially important things:

  1. the risks in the world today are not in equity markets – instead they are in sovereign debt markets;
  2. the reason few have correctly diagnosed this disease, is due to no one in our (limited) lifetime ever having the displeasure of experiencing a crisis in government bond markets.

Put another way, all the bads that we experienced over the past 50 years have always been a result of excess largess from companies and individuals.

And every single time, governments and central banks have come running to the rescue of financial markets.

Which have culminated in the rather odd and peculiar situation the world finds itself in today. One turned upside down by zero and negative interest rates. One pushed offsides by preventing bad banks from going under. And one dominated by 180 degree turns in the political arenas. From our perspective, it is crystal clear that the majority of investors, are completely uneducated towards the current global financial environment.

In some ways, you can’t blame them. After all, for many, their informational world is completely monopolized by domineering media, big banks, and perhaps, most harmful of all – social values which force and expect you to behave, eat, sleep and breath “correctly.”

And this brings us to today and our latest decision to increase equities.

We’ve been very transparent and very consistent with our view that we expect the US Dollar and equities to go higher due primarily to a growing crisis in bond markets. We’ve also been very transparent and very consistent with our view that corrections will occur and unless serious technical support has been broken, we’ll continue with our holdings and strategies.

As an investor, you are well aware that equity markets declined sharply in January 2018 and have largely remained range-bound ever since. In our February 2018 IceCap Global Outlook we wrote that none of our models were indicating a serious downturn was unfolding and it was very likely that the bottom has been reached and if it was confirmed by our research – we would add to our equity positions.

Well, over the last few weeks our models did in fact turn positive which provided us with a green light to do exactly as we indicated – buy more stocks.

As a global investment manager, we absolutely reserve the right (and expectation) to change our views and strategies.
At this point in time, our market view remains completely on track.

This means that anyone who is bearish on stocks, bearish on the US Dollar and believes the bond markets will provide safe footing are about to be hit with a major dose of reality.

Reality

A few years ago, I had a conversation that not only caused my head to turn and eyebrows to rise, but it also confirmed my suspicions towards the pension investment industry. And the conversation was with an 8 year old kid.

Me: “How’s your Dad these days?”

Kid: “Great. Did you know he’s a pension lawyer and pension lawyers can charge higher rates than other lawyers.”

Me: “Well, it is a faceless client”

Kid:

As we know, kids do say the darndest things. And we also know, kids know very little about the pension investment industry.

Hence, when I hear the pronouncement about various vendors being able to charge higher fees to pension funds, it only further affirms the inherent dangers and risks within the pension industry. And it is all due to culture.

Culture is everywhere. It’s in countries. It’s in specific regions of countries. It’s in languages. And it’s in organizations, industries and companies too. As well, culture is never right or wrong – it is what it is.

Yet, recognizing culture and objectively understanding the pros and cons within a culture is absolutely vital to correctly (and objectively) developing a projection of what will happen.

Although many investors do not have significant direct exposure to the pension industry – especially Defined Benefit Pension plans, everyone has indirect exposures as to how these extraordinarily large pools of money are invested.

The best way to understand how and why, you will be affected by the pension industry’s culture, look no further than the “greater fool theory”. The greater fool theory is quite simple – it means the price of something is determined not by its intrinsic value, but rather by the irrational beliefs and expectations of other buyers.

Because we do not live in a risk-free financial world, the moment the pension industry was born, sharp people with sharp pencils and sharp calculators came out of the wood work. After all, when you’re dealing with pension monies, you’re talking about a pool of money that is suppose to last for a very, very long time.

And when you combine a very long time period with a very large number of other moving parts – it has been decided that a very large number of smart people need to be involved to ensure monies are always available to meet retirement payment commitments.

And whenever you have a large group of people bandied together, with the same cause and with the same training and pedigrees – you get group-think, and this is bad, very bad.

This is where culture comes into play. And those who know culture, knows it is extremely difficult to change, move or alter.

And understanding this culture will help you see exactly why the bond market is going to completely blindside the majority of pension plans and turn those happy retirement years into ones of bitter resentment towards those entrusted with keeping everything in-line.

Yes – these are harsh words but they are absolutely needed to be heard, read and then re-heard and re-read. The best way to explain why the culture of the investment industry will prevent itself from seeing beyond its nose, is to understand how it is structured.

To start with, the pension fund is created by an employer for its employees and the employer is either a company or a government entity.

Next, you must completely understand there is always a risk that the pension assets (investments) will not be enough to make all of the promised future pension payments. And, all of this shortfall (deficit) must be made up by the company/government entity.

This is where the risk part comes into play, and this is also where and why all of the consultants, actuaries, pension lawyers, investment committees, trustees and board of directors enter the picture.

As you’ll agree, the future is sometimes tricky to predict – especially when you’re dealing with how long people live, how healthy they remain while living, and financial market returns.

Yet, the number 1 item that affects all of the above is actually NOT that hard to predict – long-term interest rates.

Yes, long-term interest rates directly or indirectly drives all of the above factors including health and longevity (medical research and discoveries are significantly impacted by funding available which in return is affected by long-term rates).

Therefore, simply understanding where long-term rates are going is really the key to solving the looming pension crisis. And as we’ve detailed in our previous IceCap Global Outlook publications, long-term interest rates are on the verge of exploding higher which will create significant losses for everything affected by long-term interest rates – including pension funds.

The reason for this is twofold.

First, practically all pension funds hold anywhere between 15% to 100% of their investment assets in bonds and/or other investments directly affected by interest rates. The vast majority of the professional investment management industry theorizes that the future cannot be predicted.

The investment industry also lectures that stock markets produce higher returns and than bond markets, and stock markets also contain greater risk than bond markets.

And since pension funds are suppose to be professionally and conservatively managed – they will always err on the side of caution and therefore hold a combination of stocks and bonds.

Which presents us with the voila moment!

The preferred mandate for pension funds (as well as the most common strategy for most individual investors) – the balanced fund, or a similar version of the same including life cycle funds, and target dated funds.

The key part here is that the culture of the industry whole-heartedly believes that the future cannot be predicted.

Naturally, there’s a little bit of truths and untruths in this statements. Yes, the future is difficult to predict – especially during a mid-cycle period. No, the future is not difficult to predict – especially during an end-cycle period.

Today, in the land of interest rates – we’ve reached the end of the mother-of-all interest rates cycles.

And because the pension industry is so tightly wound and wrapped-up in its culture, the majority of those fiduciaries are unable to see the future.

It simply isn’t in their genes, and chromosomes and it certainly isn’t reflected in the most important make-up of all – their assumptions for the expected long-term rate of return and the discount rate for liabilities.

Let’s start first with the Rate of Return Assumption. This number is provided to pension funds by actuaries and it is simply a number used to smooth out return expectations over the life of a pension fund.

The error with these numbers is that it is using past performance to predict future performance.
As any investor will tell you – this is the first disclaimer stamped all over any performance data from every investment fund.
But not the pension fund.

The error with this expected return number lies in the assumption used for fixed income returns. As fixed income returns are completely dependent upon the directional movement of long-term interest rates, historical data from the past 36 years has completely skewed the average performance returns for the bond market.

Chart below shows the historical yield of the US 10-year Treasury Bond, which is the proxy for global bond markets.
Put simply, when long-term interests are increasing (red line 1960 to 1982), bond funds are horrible investments.

The opposite is also true. From 1982 to 2018, long-term interest rates (green line) declined, creating the most incredible period ever for bond market returns. And this simple observation, creates another voila moment.

Virtually everyone working within the industry today either worked during this green arrow period or were trained by mentors who worked during this green arrow period. In other words – all everyone has ever known is a period of declining long-term interest rates.

This unintentional happenstance is going to produce a lot of angst.

Today, long-term interest rates are at 3%. Which means, the only way possible for bond strategies to return greater than 3% is for long-term interest rates to remain at 3% or lower forever. We can assure you this will not happen. And anyone who is using bond return estimates greater than 3% will be disappointed.

To demonstrate that there are pension groups that have been blinded by culture, spend a few minutes with the table on the next page. This public data is from one of Canada’s largest private sector pension funds and shows the expected long-term rate of returns. There are several items that jump off the page, with the most significant being:

1) The 55.2% allocation to Nominal Bonds
2) The +3.4% expected return from Nominal Bond strategies

IceCap can assure you that there is zero probability of this pension fund’s nominal bond strategies producing a return  +3.4% or greater. In fact, as long-term rates surge higher, the assets in this pension plan will decline -20% or more.

When this occurs, the culture of the pension industry reveals itself with board room whispers and proclamations that “no one saw this coming.”

We are telling you that it is coming.

Read on in the full presentation below (link)

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Coinbase Gets Approval To List Coins Deemed Securities

With its internal probe into suspected insider trading ahead of its listing of bitcoin cash still ongoing, Coinbase, one of the most popular cryptocurrency marketplaces in the US, has gotten the green light to move forward with a trio of acquisitions that will give the company the licenses it needs to list and trade federally-regulated securities, something that’s expected to significantly broaden the number of cryptocurrencies that will be available on the platform, according to Bloomberg.

The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority approved Coinbase’s purchase of Keystone Capital Corp., Venovate Marketplace Inc. and Digital Wealth LLC, a company spokesman said Monday. The acquisitions enable the firm to offer so-called security tokens, and also place the businesses under federal oversight. Coinbase has primarily been regulated by a patchwork of state authorities.

The move provides Coinbase licenses to operate as a broker dealer, an alternative trading system and a registered investment adviser, the San Francisco-based company said in June. Alternative trading systems operate outside traditional public stock exchanges.

With these newfound licenses, Coinbase could soon begin listing hundreds of ICO tokens and other cryptocurrencies. Right now, Coinbase customers can only buy bitcoin, bitcoin cash, ethereum and litecoin. Coinbase said Friday that it’s looking into letting users trade five new digital currencies, Cardano, Basic Attention Token, Stellar, Zcash and Ox, but couldn’t say for certain that it would list them. The company said it’s possible some coins might only be available in certain regions.

It’s reportedly still working on adding ethereum classic, which was excluded from being beholden to securities laws last year. 

Bitcoin

As Bloomberg points out, regulated trading platforms could eventually host hundreds, possibly thousands, of ICOs. Despite a crackdown by the US, China and other countries, ICOs have already raised more than $12 billion in 2018, more than triple what they did during all of 2017. The SEC has said most of the coins are securities, which means issuers must register and comply with federal securities laws, as must exchanges that list the tokens.

The federal government has every reason to support Coinbase’s expansion. The company has a reputation with regulators, and it has already willingly handed over information on its customers to the IRS, which suggests it might also be willing to cooperate in the future.

Though regulators will no doubt be watching closely after the rollout of bitcoin cash trading on Coinbase appeared to provoke what looked like insider trading in the bitcoin cash market.

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Greyerz: The Global Reset Will Come Like A Thief In The Night

Via KingWorldNews.com,

As the world edges closer to the next crisis, today the man who has become legendary for his predictions on QE and historic moves in currencies, told King World News that the global reset will come like a thief in the night.

Where have all the dollars gone? Long time passing
Where have all the dollars gone? Long time ago
Where have all the dollars gone? Uncle Sam has spent them everyone

When will he ever learn? When will he ever learn?

The Global Reset Is Coming

Egon von Greyerz:  “When Pete Seeger wrote the famous song “Where have all the flowers gone” back in 1955, little did he know that the total US debt, which was a few hundred billion dollars at the time, would, 63 years later, be almost $70 trillion. 

But there is no reason why Seeger should have known. He was a singer-songwriter and his legacy will last a lot longer than Nixon’s, Greenspan’s, Bernanke’s, and all the other players that have contributed to this massive growth in credit and destruction of the dollar. While Seeger’s song – a work of art – is likely to be around for at least another 50-100 years or longer, all the opportunists that have destroyed the US economy, and thus the world economy, will soon be forgotten…

Egon von Greyerz continues:  “It is absolutely unreal how the world pays so much respect to mediocrity or even incompetence when it comes to running the financial system. Central banks and their heads have created this monster balloon which is now waiting to be popped. They have given the world the impression that they have been instrumental in saving the world economy. The central bank chiefs that managed to retire before the balloon burst can count themselves lucky. In my view, the luck is now in the process of running out for the present ones.

These chiefs believe so much in their own ability as saviors of the world that they don’t understand that all they are doing is creating a much bigger monster by printing and printing and printing. They are so arrogant that they can’t even call their actions by an honest name. What they are doing is sheer Money Printing or MP. But instead they call it QE or Quantitative Easing. What an absolutely ridiculous name that is designed to hide their own inadequacies as well as cheating the people. Nobody understands what QE means and that is, of course, deliberate. They simply confuse the people and mislead them into believing that their hocus pocus is actually some alchemistic formula that creates eternal prosperity. 

These central bank heads are now so confident of their control of the situation that they are turning the QE to QT (Quantitative Tightening). That is, of course, utter and sheer arrogance. QE hasn’t worked. All it has done is to turn a fragile financial system into the biggest bubble in history. Even with zero or negative interest rates combined with massive MP, real GDP is not growing (measured with real inflation). Also, several dollars, euros or pounds of credit expansion are required in order to create just one dollar, euro, etc, of GDP growth.

Since QE, MP, or whatever you call it, hasn’t worked, why the hell does anyone think that QT will work? This is like taking away the punchbowl from a chronic alcoholic who will die from his drink or die due to lack of drink. And it is exactly the same for the global economy. It will collapse with more QE and and will collapse from QT. So QE / QT = TE (THE END). 

“When will they ever learn, when will they ever learn” that you can’t create prosperity by printing money? And remember that money printing is not just what central banks do directly. Money printing also means credit expansion by banks, credit card, and finance companies, etc. All of these lend out 10-50 times the deposits or capital they receive. There is, of course, only one way to learn a lesson properly, which is the hard way. And the hard way in the case of the world economy is that the monster bubble pops. And like with many bubbles, this one only contains hot air.

Thus, the $2.5 quadrillion monster bubble contains just empty promises that all disappear when the bubble is popped. These promises are not only words, but also $2.5 quadrillion of monetary promises or IOUs. To keep the bubble from deflating, central banks have had to constantly pump it up bigger and bigger. So more and more debt will fill the bubble together with inflated assets and even more empty words from bankers and politicians to make it all look plausible. 

The debt explosion is not just a US disease. It is a US-led global phenomenon that has infiltrated most nations around with a central bank that can print money. Just look at the chart below illustrating how global debt has tripled since 1999 from $80 trillion to $240 trillion today.

GLOBAL DEBT: The $240 Trillion Nightmare

When the global debt and asset bubble pops, the world will find out that there was nothing inside. Of course, there are real assets and real wealth, but the problem is that when the bubble pops, all the debt will implode because no one can repay it, and with that, a lot of the assets will become worthless. 

The only question is if stocks, bonds, property, and other assets, will go down by 75% or 95%. In my view, the biggest bubble in history will lead to the biggest collapse. There is no one that can save the world from the biggest financial calamity in history. MP (QE) will have zero effect except for causing temporary hyperinflation. A lot of assets will decline by 100%, such as money in the bank, bubble companies which are heavily leveraged – like Tesla – and many others. Even very valuable assets will be able to be purchased (in today’s money) for pennies on the dollar, euro or pound. 

Paper money has always come and gone throughout history since no fiat currency has ever survived. For 5,000 years gold has represented stable purchasing power and the only money that has lasted for thousands of years. This is why countries that understand the importance of physical gold continue to accumulate, countries such as Russia, China and India. In the meantime, the rest of the world has invested less than 0.5% of world financial assets into physical gold. 

Just look at China’s astonishing gold accumulation in the chart below. Another 140 tonnes was purchased in June, taking the total up to 16,000 tonnes with virtually all of it acquired since 2007.

China’s Gold Purchases Since 2007 Exceed 16,000 Tonnes!

Like A Thief In The Night

When the monster, ‘everything’ bubble pops, so will the paper markets in gold, silver, and other precious metals. The size of this market is at least 100-times bigger than the physical market. The rise of this market is very much linked to manipulation of the precious metals by central banks, the Bank for International Settlements (BIS), and bullion banks. When the paper metals markets pop, there will be no gold (or silver) offered at any price. This is the time when overnight or over a weekend the price will go from $1,250 to $10,000 or even $100,000. This might sound totally unreal to some, but this will be the most likely consequence of the monster bubble popping and everyone in markets running for the exit. 

Most people believe that the status quo can go on forever and that central banks will continue their ridiculous game of pretending that air is real money that can create wealth. The few people who believe that there is a serious risk that the system will not survive in its present form, and that their assets — be it cash, bonds, or stocks — could decline substantially in value, must seriously consider insurance. 

The next decline in financial markets is likely to start in late 2018 or early 2019. And this will not be an ordinary decline or normal correction. Instead, it will be the beginning of the biggest global bear market in history. And this time central banks and governments will fail in their attempts to save the system. They will, however, certainly print a lot of money and try to reduce interest rates. But as global bond markets collapse, rates will go up rapidly. This means that bonds and stocks will both crash along with most assets.

The only real insurance against what is coming is physical gold and some silver, obviously held outside the banking system. There is absolutely no argument against holding precious metals to protect against the risks in the financial system. The only question is, should you hold 10% of your financial assets in gold or more than 50% as some of our wealth preservation clients do? In my opinion, this is the time in history that you need to be fully protected. The reality is that each individual needs to decide for themselves what full protection means. Just remember that this time it will be costly to underinsure. Hopefully no one reading this will ask when it is too late:“When will we ever learn?” 

For those who would like to read more of Egon von Greyerz’s fantastic articles CLICK HERE.

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