Month: January 2016

Submitted by Lukas Vez via The Mises Institute,

Brazil is undergoing what is considered its worst economic crisis in seventy years, and there is usually no agreement when it comes to the causes of this situation. President Rousseff and the Labor Party say that it was the corollary of the “International Crisis,” a ghost of the 2008 depression created in their minds. The reality, however, is different. Since ex-president Lula Da Silva of the Labor Party entered office in 2003, the government has clung to the typical Keynesian project of growth-by-government-spending. Interest rates were lowered constantly, the amount of loans grew to an unprecedented level, savings per capita dropped, and government spending continued to grow.

For the advocates of government intervention, the country’s economy was heaven on earth. It should be of no surprise that Paul Krugman, the defender of America’s Quantitative Easing, said that Brazil was not a vulnerable country. However, those policies so strongly defended by some economists and by bureaucrats led the country toward the terrible situation in which it is now.

From the Brazilian government’s point of view, it could hardly get any worse: the country is facing an economic depression that is likely to last at least two more years, the country’s rating was downgraded to junk by Standard & Poor’s, and a corruption scandal may lead to the impeachment of the country’s president, Dilma Rousseff. We must recognize, however, that even though this was the result of the government’s action, it simply put in practice the most prevalent ideologies of the country, which is a mixture of Marxism in politics and in the universities with Keynesianism in economics. This national ideology praises, in general, a complete dependence of the people on the government. The fact that “Brazil’s tax burden already amounts to 36 per cent of GDP” is held with pride by professors and economists throughout the country, who spread the word that public policies will create jobs and contribute to people’s welfare.

Brazil and the Austrian Business Cycle Theory

In order to grasp what is happening to Brazil, and to understand why some economists have long ago predicted the current disaster, it is crucial to understand Austrian business cycle theory, since it yields a concrete critique of government’s involvement with currency and credit expansion — two factors that the Brazilian government used as tools for economic growth — and its misuse is what generated the crisis.

As Mises pointed out, “the cyclical fluctuations of business are not an occurrence originating in the sphere of the unhampered market, but a product of government interference with business.”

Indeed, those “boom-bust” cycles, as the one that happened in Brazil, are generated by monetary intervention in the market in the form of bank credit expansion. Thus, they are an outcome of central planning and government intervention, the very opposite of a free market.

It is, however, important to make the distinction between bank credit expansion in the form of loans to business and other forms of credit expansion. The former is usually a method that government uses to boost the economy of the country, lowering the interest rates “below the height at which the free market would have fixed it,” and this is why it is so important in our analysis.

On the graph below we can see the absurd rise in the amount of loans (given in millions of reais, the Brazilian currency) made to businesses, especially since 2006 (and reinforced from 2008 on, as a way to “fight” the international crisis) when the government tried to generate an unsustainable boom. (The red line represents the loans given by public banks and the blue line the loans given by private banks.)

Figure 1. Amount of Credit Lent to Business in Brazil Over Time

This new type of credit that would not be available without the interference of the government generating the so-called “boom.” This boom caused businessmen to, as described by Rothbard in America’s Great Depression, “take their newly acquired funds and bid up the prices of capital and other producers’ goods, and this stimulate[d] a shift of investment from the ‘lower’ (near the consumer) to the ‘higher’ orders of production (furthest from the consumer) — from consumer goods to capital goods industries.”

This shift of investment from consumer to capital goods is a characteristic mark of the boom and explains, as opposed to other theories, why capital goods’ industries are affected first in the beginning of the depression. We can see on the next graph how those industries were affected in the Brazilian scenario. The green line represents the capital goods industries, and the slump that we see happened during the very early stages of the depression, in the end of 2013.

Figure 2. Index of Industrial Production and Key Components

It is also worth noticing that this slump happened right after the government started to raise the interest rates again, which occurred after a period of an all-time low in the interest rates of the country. As we can see below the Brazilian government lowered the interest rates to an unprecedented low level, and when the government tried to raise interest rates to curb the inflation generated by its “easy money” policies, the boom came to an end. 

Figure 3. Brazil’s Interest Rates Over Time (Source: Financial Times.)

As Murray Rothbard observed (again from America’s Great Depression),

businessmen were misled by bank credit inflation to invest too much in higher-order capital goods, which could only be prosperously sustained through lower time preferences and greater savings and investment; as soon as the inflation permeates to the mass of the people, the old consumption — investment proportion is reestablished, and business investments in the higher orders are seen to have been wasteful. Businessmen were led to this error by the credit expansion and its tampering with the free-market rate of interest.

As observed by Mises in his essay “Middle-of-the-Road Policy Leads to Socialism,” we must pay attention to the fact that “the attempts to lower interest rates by credit expansion generate, it is true, a period of booming business,” which in Brazil’s case occurred mostly between 2006 and 2013. “But the prosperity thus created is only an artificial hot-house product and must inexorably lead to the slump and to the depression. People must pay heavily for the easy-money orgy of a few years of credit expansion and inflation.” The depression that is currently happening in the country is, therefore, not an evil that should be fought against with more and more government policies. The depression is the cure.

As we have seen, most of what the Austrian business cycle theory described can be well applied to Brazil. It is important to admit that other factors also played important roles, such as the price of the dollar relative to the real and the slowdown of China’s demand on Brazilian commodities, but most of them were usually, and to some extent, only a consequence of the policies that we have already analyzed. The bottom line is that the country went through a major credit and money supply expansion, together with years of low interest rates. It is crucial to note that, contrary to other explanations, “Mises’s theory of the trade cycle … meshes closely with a general theory of the economic system. The Mises theory is, in fact, the economic analysis of the necessary consequences of intervention in the free market by bank credit expansion.”

Consequently, we can see how Brazil’s current crisis is nothing but an outcome of government’s meddling with the market. The scenario of the country’s economy is indeed scary, but we have reason to believe that Brazil’s intellectual situation is going through a new and promising change. It may be true, as Lord Keynes said, that “in the long run we are all dead,” but if we are to get out of this terrible crisis, to prosper and to enjoy a constant improvement in our standard of living, “it is high time to transform the country’s state capitalism into a free market system.”

via Zero Hedge http://ift.tt/1Pk5sZb Tyler Durden

On Tuesday, the People’s Daily laughed at George Soros.

Literally.

On the heels of comments Soros made in Davos last week about China’s “hard landing,” the Party mouthpiece ran an “op-ed” that carried the title “Declaring War On China’s Currency? Ha, Ha.”

It’s not clear that George Soros intends to “declare war” on the RMB. However, he did say he was betting against Asian currencies and because his reputation precedes him when it comes to breaking central banks, the Chinese apparently wanted to get out ahead of what the PBoC assumes will be an attack on the yuan. “Given how people know Soros and what he did in 1992 and during the 1997-1998 Asian crisis, he’s too important to ignore, so China felt that they had to counter any negative comments,” Tommy Xie, a Singapore-based economist at Oversea-Chinese Banking told Bloomberg.“They have to reassure local savers and show them a willingness that the government is looking after them and their savings.”

“Soros’s war on the renminbi and the Hong Kong dollar cannot possibly succeed — about this there can be no doubt,” the People’s Daily continued, before calling the aging billionaire a “crocodile” and a “predator.”

As we noted yesterday, “China won’t be able to arrest Soros and beat a confession out of him like Beijing is fond of doing to others suspected of launching ‘malicious’ short attacks, but the brash commentary does indicate that Chinese authorities are becoming increasingly sensitive to suggestions that a steeper RMB devaluation is a foregone conclusion.”

Of course a steeper RMB depreciation is a foregone conclusion because as we’ve outlined on several occasions, the days of China sitting idly by while the dollar peg saps the country’s export competitiveness are long gone and Beijing now seems determined not only to participate in the ongoing global currency wars, but in fact to win.

But China is keen on orchestrating a controlled depreciation (despite the fact that getting it over with at once might be the better option if Beijing wants to limit capital flight) which means keeping hold of the narrative and using the captive Chinese media to fight back against those who, like the “crocodile” Soros, would seek to employ “malicious” tactics to spark a panic.

Against this backdrop we get another hilarious “commentary” piece out of the Politburo on Wednesday, this time via Xinhua. The piece, presented in its entirety below, explains why Soros and the ubiquitous “short-sellers” “make claims that run counter to reality.”

*  *  *

From Xinhua

China has ample reasons to stay confident in face of speculators. Far from some speculators’ claims, China is not a source of trouble but an important engine of global economic growth with its growing demand and investment.

Here are the numbers. China registered a growth rate of 6.9 percent last year amid a sluggish global economy, contributing more than 25 percent of global economic growth.

Chinese tourists spent 1.2 trillion yuan (182.4 billion U.S. dollars) overseas, while the country’s investors pumped 735 billion yuan (111.7 billion dollars) into other economies.

Speculators claimed they see a hard landing for China. It is true that the growth of the world’s second largest economy is experiencing a relative slowdown compared with the blistering growth of the past decade. But as we know, decision makers have now opted for a slower pace in order to make the country’s growth more sustainable in the future.

Moreover, a growth rate of 6.9 percent is the envy of most other economies. China’s added economic output last year was more than the GDP of Sweden or Argentina.

George Soros, who recently claimed he saw a hard landing for China at the World Economic Forum in Davos, Switzerland, has made the same prediction several times in the past.

It’s an exaggeration to say that China increases global deflationary risks. Imagine the world without the demand and growth from China, global economic growth would have been much worse, possibly at higher risk of deflation.

The world economy is having trouble because of the sluggish growth and slow recovery of many economies. International investor Jim Rogers said recently that the monetary policies of the U.S. Federal Reserve and the expansion of government debt are the original sources of the problems.

Meanwhile, China’s economic transformation is currently underway.

Figures show that foreign investment in China’s service sector saw robust growth in 2016, and the country attracted 136 billion U.S. dollars of foreign direct investment.

Thanks to government policies encouraging innovation and the streamlining of procedures, entrepreneurship is flourishing and bringing fundamental change to Chinese society. In the first half of 2015, the number of newly registered businesses exceeded 10,000 on a daily basis.

Employment creation is strong too, which, coupled with a sound growth rate and strong capital formation and innovation, means that the world’s second largest economy is unlikely to experience a hard landing.

So why do speculators make claims that run counter to reality? Analysts said it is because either the short-sellers haven’t done their homework or that they are intentionally trying to create panic to snap profits.

*  *  *

Yes, “analysts” say Soros hasn’t done his “homework” and just wants to “create panic” on the way to “snapping profits.” Xinhua also says Soros’ views may indicate he’s “partially” blind.

Unfortunately for the Chinese, Soros probably has “done his homework” and his claims do not “run counter to reality.” The “reality” here is that China’s economy is decelerating and in all likelihood, the yuan will continue to move lower as the currency shoulders the burden of the hard landing.

This won’t be the first time Soros squares off against Asian officials over flagging currencies. As Bloomberg also points out, former Malaysian PM Mahathir Mohamad (known as the founding father of modern Malaysia) once called the billionaire a “moron” for helping to trigger the ringgit’s collapse.

So strap in, because the PBoC is in for a bumpy ride in 2016 as everyone from domestic depositors to nefarious, predatory, “speculators” bets on continued yuan weakness. 

We close with a quote from Michael Every, head of financial markets research at Rabobank in Hong Kong:  

“They can write as many op-eds as they want, but two plus two doesn’t make five.”

via Zero Hedge http://ift.tt/1PTH9NQ Tyler Durden

Submitted by Brandon Smith via Alt-Market.com,

As economic turmoil worldwide becomes increasingly apparent, I have been receiving messages from readers expressing some concerns on the public “perception” of collapse. That is to say, there are questions on the average person’s concept of collapse versus the reality of collapse. This is a vital issue that I have discussed briefly in the past, but it deserves a more in-depth analysis.

What is collapse? How do we define it? And, are some of the notions of collapse in the public consciousness completely wrong?

It’s funny, because skeptics opposed to the idea of a U.S. collapse in particular will most often retort with a question they think I cannot or will not answer – “So, Mr. Smith, when specifically is this supposed collapse going to take place? What day and time?”

My response has always been – “We’re in the middle of a collapse right now; you really can’t see it right in front of your sneering face?”

The reason these people are incapable of grasping this kind of answer is in large part due to the popular mainstream conceptions of systemic collapse. These are conceptions that are for the most part delusional and not in line with the facts. The public idea of collapse comes predominantly from Hollywood, and not from personal experience. For the masses (and some preppers, unfortunately), a collapse is an “event” that happens visibly and usually swiftly. You wake up one morning and behold; the television and phones don’t work anymore and zombies are at your doorstep! Yes, it’s childish and cartoonish, but anything less than a Walking Dead/Mad Max scenario and many people act as if all other threats are benign.

This is the driving reason why many Americans are absolutely oblivious to the economic instability that is rampant and blatant within our system the past few months. They might see the same signals that alternative analysts see, but these signals do not register in their brains as dangers.

Look at it this way; say you told a person their whole life that a tiger is a 10-foot tall behemoth with four heads that breath fire while urinating flesh-rending acid. Say you make movies and TV shows about it and they never have any experience to the contrary. When they finally come across a real tiger, they might try to pet the damn thing instead of running in terror or searching for a means of defense.

To use another vicious animal analogy, when I encounter skeptics with false assumptions of what a collapse actually is, I am often reminded of that woman in Anchorage, Alaska who jumped an enclosure fence at the zoo to get a closer picture of Binky the polar bear. These people have been made so inept when it comes to identifying threats that they will continue arguing with you as the animal takes a football-sized bite out of their meaty thigh.

So what is the root of the problem beyond Hollywood fantasies? Well, the problem is that social and economic collapse is not a singular event, it is a PROCESS. Collapse is a series of events that sometimes span years. Each event increases in volatility over the last event, but as time goes on these events tend to condition the masses. The public develops a normalcy bias towards crisis (like the old “frog in a boiling pot” analogy). They lose all sense of what a healthy system looks like.

It is not uncommon for a society to wade through almost a decade or more of violent decline before finally acknowledging the system is imploding on a fundamental level. It is also not uncommon for societies to endure years of abuse by corrupt governments before either organizing effectively to rebel, or caving in and submitting to totalitarianism.

But how does one recognize a failing system? How does a person know if they are in the middle of a collapse rather than on the “verge” of collapse? Here are some signals I have derived from research of various breakdowns in modern nations and why they indicate we are experiencing collapse right now…

The Criminals Openly Admit To Their Crimes

The surest way to know if your society is in the midst of disintegration is to see if the criminals who created the instability in the first place are openly discussing a collapse scenario or warning that one is imminent.

A year ago, central bankers presented little more than a chorus of recovery propaganda. Today, not so much. The Royal Bank of Scotland is now warning investors to “sell everything” ahead of a “cataclysmic” year in markets.

The Federal Reserve’s Richard Fisher has admitted that the Fed “frontloaded” (manipulated) stock markets into a bubble and that payment is about to come due in the form of severe economic volatility (up to 20% crash in equities).

The Bank for International Settlements, the central bank of central banks, has a track record of warning the public about collapse conditions – right before they happen, leaving little or no time for people to prepare. They have followed their habit by warning in September and December that a Fed rate hike would “shatter” the uneasy calm in markets.

The former Chief Economist of the BIS now says the economy is in worse shape than it was in 2008 and is headed for a larger fall.

What happened between last year and this year and why are these internationalists suddenly so forthcoming about our economic reality? The fact that central bankers are the cause of our current collapse leads me to believe that such admissions are designed to deflect guilt. If they put out a few warnings now, they can then later claim they are prognosticators rather than culprits, and that they were trying to “help us.” Beyond that, the reality is that our situation was just as dire in 2014/2015 as it is today; the difference is that now we are about to enter a new phase in the ongoing collapse, a much more detrimental phase, but still a phase of a breakdown that has been progressing since at least 2008.

The Fundamentals Break Through The Manipulation Barrier

Governments and central banks do not have the capacity to artificially create demand for goods or a supply of well-paying jobs in a crashing economy. What they can do, though, is hide the visible problems in supply and demand with false numbers.

I examined such false economic statistics in great detail last year in a six-part series titled “One Last Look At The Real Economy Before It Implodes.” I will not cover them all again here. I would only point out that recently the fundamentals of supply and demand have begun to break through the deceit of manipulated numbers, and this is a sign that the collapse is about to move from one stage to the next.

With global shipping and trucking freight in steep decline, with retail inventories in stasis and current oil consumption falling to levels not seen since 1997 despite a larger population, the mainstream can no longer deny that consumer demand is crumbling. If demand is falling dramatically, then the financial system is in the middle of falling dramatically; there is simply no way around this truth.

Stocks And Commodities Become Violently Erratic

Let's be clear, if stock markets represent anything at all, they are merely lagging indicators of economic instability.  Stock markets are NOT predictive indicators of anything useful.  Therefore, any person who does nothing but track equities each day is going to be completely oblivious to the bigger picture behind the economy until it is too late.  They will be so mesmerized by the green numbers and red numbers and lines on minute-to-minute graphs that they will lose all sense of reality.

Violent swings in stocks are a sign of a financial system that is at the middle or end of the collapse process, not the beginning.

It is also important to note that extreme shifts in stocks and commodity values to the upside are just as much a signal of instability as shifts to the downside.  For instance, if you witnessed the recent 9% explosion in oil markets and thought to yourself "Ah, the markets are being stabilized again and nothing is different this time…", then you are an idiot.

Of course, the next day oil markets lost almost all of the gains they made the day before.  And this is how markets behave when they are about to die; they expand and implode chaotically each day on nothing more that meaningless news headlines rather than hard data.  This heart attack in equities inevitably trends downwards as the weeks and months pass.  Keep in mind, equities are down nearly 10% from their recent highs, and oil is down approximately 50% in the past six months.  Every time there is a dead cat bounce in stocks skeptics come out of the woodwork to call alternative analysts "doomers", yet they are nowhere to be found when markets come crashing back down.  They are not looking at the overall trend because their short attention spans hinder them.  Again, extreme swings in markets, whether up or down, are a sign of progressing collapse.

Deterioration Of Cultural Values, Heritage And Identity

I have written extensively over the years about the Cloward-Piven strategy; a strategy used by collectivists to destabilize social systems by dumping overt numbers of foreign immigrants into the population without demand for integration. This process has been obvious in the U.S. and Europe for quite some time, but only now is it peaking to the point that collapse is seen as an inevitable result by the public. Europe is worse off than the U.S. in this regard as millions upon millions of Muslim immigrants are injected into the EU’s already dying body; immigrants that intend to transplant their culture from their own failed societies rather than adopting the values and principles of the societies that have invited them in.

Natural-born Americans and legal immigrants with aspiration of integration appear to be fighting back against the Cloward-Piven strategy with some success by holding onto traditional American values despite being labeled “barbarians” and “racists.” Illegal immigration, though, is still completely unchecked.

In the EU, the long campaign of cultural Marxism has made natural-born Europeans perhaps the most self-hating people on the planet as well as the most passive and weak. Organized opposition to massive immigration programs in the EU should have taken place years ago. Now it is far too late, and the European system is finishing a social implosion which should have already been obvious to average citizens.

Open Discussion Of Totalitarian Measures

When corrupt leadership moves from quiet totalitarianism to more open totalitarianism, your society is in the FINAL stages of collapse, not the beginning of a collapse. The U.S. in particular has been slowly strangled with subversive legal directives and political policies ever since the so called “War on Terror” began. However, there are now multiple signals of a much deeper and open tyranny in the works.

A few recent examples stand out, including Barack Obama’s insistence that the office of the president has the legal authority to issues executive orders that affect constitutional protections such as the 2^nd Amendment. As many liberty movement activists are aware, there is absolutely no constitutional precedent for the use of executive orders and such powers are not mentioned anywhere in the document. They were simply created out of thin air to be used by the federal government and sometimes state governments to supersede normal checks and balances.

While numerous presidents have issued executive orders, including some that were outright tyrannical, like Franklin Delano Roosevelt’s unconstitutional internment of Japanese Americans into concentration camps, George W. Bush and Barack Obama have been the most subversive in their bypassing of the Constitution. Obama, in particular, has tried to hide the number of executive actions he has taken by issuing hundreds of “presidential memorandums,” which are basically the same dirty play by another name.

These actions have been progressively setting the stage for the removal of checks and balances entirely in the name of crisis management. They are so broad in their nature and vague in their definitions and applications that they could be interpreted by federal authorities to mean just about anything in any given situation.

If executive actions are not scary enough, corrupt politicians are now becoming blunt in their demands for dominance. Two Republican Senators, Mitch McConnel and Lindsay Graham, are calling for unlimited AUMF-style (authorization of use of military force) war powers to be given to the president. Such powers would allow the president to project U.S. military forces anywhere in the world for any reason without review or time limits. This includes the use of military forces on U.S. soil.

The rationale for this is, of course, the threat of ISIS. The same group of terrorists the U.S. government helped to create.

And finally, if you want perhaps the most nonchalant admission of future tyranny in recent days, check out former General Wesley Clark’s call for “disloyal” Americans to be placed in internment camps through the duration of the war on terror, a war that could ostensibly go on forever.

 

One could argue that all of these measures are meant only to deter “Islamic extremism.” I would point out that government officials could have stemmed that tide at any time by enforcing existing immigration laws, or, by stopping all immigration for a period of years until the problem is handled. Instead, they have allowed open borders to remain, and have even imported potential terrorists while focusing Department of Homeland Security efforts more on evil white guys with guns.

If we accept the violation of the constitutional rights of any group of citizens, if we allow the concept of "thought crime" to become commonplace, then we leave the door open to the violation of our own rights someday. And that is how tyrants trick populations through incremental collapse; by applying despotism to a claimed dangerous minority, then expanding it to everyone else.

America is sitting near the end of the spectrum in terms of economic collapse and in the middle of the spectrum in terms of social collapse.  While more violent events are certainly gestating and are likely to be triggered in the near term, we should not overlook the reality that collapse is happening in stages all around us.  This process gives us at least some time.  All is not lost yet, and the steps we take to organize and prepare today will affect how the collapse process unfolds tomorrow. People who continue to ignore the outright evidence of collapse based on false assumptions of what collapse should look like are only preventing themselves from taking proper action until it is too late. Make no mistake, our system is dying. We cannot allow our false perceptions of this death to cloud the reality of it, or our response to it.

 

via Zero Hedge http://ift.tt/1SKWyWU Tyler Durden

Back in September 2012 we first presented “the world’s biggest hedge fund nobody had ever heard of”: a small, previously unknown company called Braeburn Capital which, however, managed more cash than even Ray Dalio’s Bridgewater, the world’s largest hedge fund.

How had the little firm operating out of a non-descript office building in Nevada achieved this claim to fame? By managing the cash hoard (now well over $200 billion) of the world’s biggest and most valuable company: Apple.

But what was perhaps more notable is where Braeburn was physically located: Reno, Nevada.

We explained the company’s choice for location with one simple word: “taxes”, or rather the full, and very much legal, avoidance thereof.

Three and a half years later we encounter this quiet Nevada town once again, and once again it is Reno’s aura of tax evasion that brings is to the world’s attention courtesy of a Bloomberg report discussing “The World’s Favorite New Tax Haven.”

Only instead of Apple this time, the focus falls on a far more notorious company: the Rotschilds.

As Bloomberg writes, “last September, at a law firm overlooking San Francisco Bay, Andrew Penney, a managing director at Rothschild & Co., gave a talk on how the world’s wealthy elite can avoid paying taxes.  His message was clear: You can help your clients move their fortunes to the United States, free of taxes and hidden from their governments. Some are calling it the new Switzerland.”

Ah, the rich irony: years after Obama single-handedly destroyed the secrecy-based Swiss banking model, the U.S. itself has taken over the role of the world’s biggest, if no longer very secret, tax haven, and the epicenter is this modest Nevada city located next to lake Tahoe, which has become the favorite city, if only for tax purposes, for such names as Apple and the Rothschild family.

The Swiss are not amused:

After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.

 

“How ironic—no, how perverse—that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,” wrote Peter A. Cotorceanu, a lawyer at Anaford AG, a Zurich law firm, in a recent legal journal. “That ‘giant sucking sound’ you hear? It is the sound of money rushing to the USA.”

It will probably come as no surprise, that the firm at the center of it all is the (in)famous financial institution: Rotschild & Company.

Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt.

 

The firm says its Reno operation caters to international families attracted to the stability of the U.S. and that customers must prove they comply with their home countries’ tax laws. Its trusts, moreover, have “not been set up with a view to exploiting that the U.S. has not signed up” for international reporting standards, said Rothschild spokeswoman Emma Rees.

And where the Rothschilds are to be found, everyone else quickly arrives: “Geneva-based Cisa Trust Co. SA, which advises wealthy Latin Americans, is applying to open in Pierre, S.D., to “serve the needs of our foreign clients,” said John J. Ryan Jr., Cisa’s president.”

Trident Trust Co., one of the world’s biggest providers of offshore trusts, moved dozens of accounts out of Switzerland, Grand Cayman, and other locales and into Sioux Falls, S.D., in December, ahead of a Jan. 1 disclosure deadline.

 

“Cayman was slammed in December, closing things that people were withdrawing,” said Alice Rokahr, the president of Trident in South Dakota, one of several states promoting low taxes and confidentiality in their trust laws. “I was surprised at how many were coming across that were formerly Swiss bank accounts, but they want out of Switzerland.”

Next comes the need to legitimize US hypocrisy and to justify how America, in demanding everyone else opens their books, is ignored when not only does it keep its own books closed but is openly welcoming all those millionaires and billionaires whose offshore accounts were closed as a result of US intervention!

Rokahr and other advisers said there is a legitimate need for secrecy. Confidential accounts that hide wealth, whether in the U.S., Switzerland, or elsewhere, protect against kidnappings or extortion in their owners’ home countries. The rich also often feel safer parking their money in the U.S. rather than some other location perceived as less-sure.

 

“I do not hear anybody saying, ‘I want to avoid taxes,’ ” Rokahr said. “These are people who are legitimately concerned with their own health and welfare.”

Picture that: nobody wants to admit they are intent on evading taxes to their financial advisor. How quaint.  But the greatest thing about US-based tax evasion is that it is taking place right under the nose of the world’s allegedly biggest tax-fraud chaser. It also happens to be perfectly legal.

There’s nothing illegal about banks luring foreigners to put money in the U.S. with promises of confidentiality as long as they are not intentionally helping to evade taxes abroad. Still, the U.S. is one of the few places left where advisers are actively promoting accounts that will remain secret from overseas authorities.

Put all that together, and one company has realized there are billions in “fees” to be made by taking advantage of what is now officially the biggest hypocrite in the world: the United States of America. And adding insult to irony is that the “not easy to find” Rothschild Reno office is located just 6 floors away from the U.S. attorney’s office!

Rothschild’s Reno office is at the forefront of that effort. “The Biggest Little City in the World” is not an obvious choice for a global center of capital flight. If you were going to shoot a film set in Las Vegas circa 1971, you would film it in Reno. Its casino hotels tower above the bail bondsmen across the street, available 24/7, as well as pawnshops stocked with an array of firearms. The pink neon lights at casinos like Harrah’s and the Eldorado still burn bright. But these days, their floors are often empty, with travelers preferring to gamble in Las Vegas, an hour’s flight away.

 

The offices of Rothschild Trust North America LLC aren’t easy to find. They’re on the 12th floor of Porsche’s former North American headquarters building, a few blocks from the casinos. (The U.S. attorney’s office is on the sixth floor.) Yet the lobby directory does not list Rothschild. Instead, visitors must go to the 10th floor, the offices of McDonald Carano Wilson LLP, a politically connected law firm. Several former high-ranking Nevada state officials work there, as well as the owner of some of Reno’s biggest casinos and numerous registered lobbyists. One of the firm’s tax lobbyists is Robert Armstrong, viewed as the state’s top trusts and estates attorney, and a manager of Rothschild Trust North America.

A little history: the trust company was set up in 2013 to cater to international families, particularly those with a mix of assets and relatives in the U.S. and abroad, according to Rothschild. It caters to customers attracted to the “stable, regulated environment” of the U.S., said Rees, the Rothschild spokeswoman.

“We do not offer legal structures to clients unless we are absolutely certain that their tax affairs are in order; both clients themselves and independent tax lawyers must actively confirm to us that this is the case,” Rees said.

Reread that sentence again, and this time try not to laugh: imagine a world in which both clients and tax lawyers, who are both conflicted and incentivized monetarily to lie, affirmatively confirm that they are not tax cheats? This is almost as good as Wall Street policing itself.

The managing director of the Nevada trust company is Scott Cripps, an amiable California tax attorney who used to run the trust services for Bank of the West, now part of French financial-services giant BNP Paribas SA. Cripps explained that moving money out of traditional offshore secrecy jurisdictions and into Nevada is a brisk new line of business for Rothschild.

 

“There’s a lot of people that are going to do it,” said Cripps. “This added layer of privacy is kicking them over the hurdle” to move their assets into the U.S. For wealthy overseas clients, “privacy is huge, especially in countries where there is corruption.”

Here are some examples of families whose affairs are in order (after active self-confirmation of just that):

One wealthy Turkish family is using Rothschild’s trust company to move assets from the Bahamas into the U.S., he said. Another Rothschild client, a family from Asia, is moving assets from Bermuda into Nevada. He said customers are often international families with offspring in the U.S.

America’s gain is Switzerland’s, that centuries-old tax haven’s, loss: Switzerland has been the global capital of secret bank accounts. That may be changing. In 2007, UBS Group AG banker Bradley Birkenfeld blew the whistle on his firm helping U.S. clients evade taxes with undeclared accounts offshore. Swiss banks eventually paid a price. More than 80 Swiss banks, including UBS and Credit Suisse Group AG, have agreed to pay about $5 billion to the U.S. in penalties and fines.

Guess who was among them? why yes, Rothschild Bank AG last June entered into a nonprosecution agreement with the U.S. Department of Justice. The bank admitted helping U.S. clients hide income offshore from the Internal Revenue Service and agreed to pay an $11.5 million penalty and shut down nearly 300 accounts belonging to U.S. taxpayers, totaling $794 million in assets.

Well, Rothschild is doing it all over again, only this time in Uncle Sam’s back yard. Wait, you mean paying a $11.5 million penalty didn’t teach it a lesson? No way.

But even more tragicomic is the US push for tax transparency, known as the FATCA. Well, a push everywhere except in the US itself.

The U.S. was determined to put an end to such practices. That led to a 2010 law, the Foreign Account Tax Compliance Act, or Fatca, that requires financial firms to disclose foreign accounts held by U.S. citizens and report them to the IRS or face steep penalties. Inspired by Fatca, the OECD drew up even stiffer standards to help other countries ferret out tax dodgers. Since 2014, 97 jurisdictions have agreed to impose new disclosure requirements for bank accounts, trusts, and some other investments held by international customers. Of the nations the OECD asked to sign on, only a handful have declined: Bahrain, Nauru, Vanuatu—and the United States.

 

“I have a lot of respect for the Obama administration because without their first moves we would not have gotten these reporting standards,” said Sven Giegold, a member of the European Parliament from Germany’s Green Party. “On the other hand, now it’s time for the U.S. to deliver what Europeans are willing to deliver to the U.S.”

As it turns out the US had no qualms about implementing global tax disclosure standards… as long as it itself would be exempt and benefit from the entire world parking its criminal money on US territory:

The Treasury Department makes no apologies for not agreeing to the OECD standards. “The U.S. has led the charge in combating international tax evasion using offshore financial accounts,” said Treasury spokesman Ryan Daniels. He said the OECD initiative “builds directly” on the Fatca law.

 

“To the extent non-U.S. persons are encouraged to come to the U.S. for what may be our own ‘tax haven’ characteristics, the U.S. government would likely take a dim view of any marketing suggesting that evading home country tax is a legal objective,” he said.

And since the US now openly welcome all forms of hot, laundered, embezzled, or otherwise misappropriated money, there are countless banks willing to provide the service of parking that money in the US… for a commission. What amounts are we talking about?

Well, trillions.

At issue is not just non-U.S. citizens skirting their home countries’ taxes. Treasury also is concerned that massive inflows of capital into secret accounts could become a new channel for criminal money laundering. At least $1.6 trillion in illicit funds are laundered through the global financial system each year, according to a United Nations estimate.

And most of those funds are now being parked in the US, where a key portal is Rothshild’s Reno, NV office.

But what makes this particular case of tax evasion particularly abominable is that it is nothing less than a symbiosis between proven and charged tax evaders and a U.S. government which has once again proven it can be bought for pennies on the dollar by banks like Rothschild, and legislate to make sure the bank continues pocketing billions in fees for the foreseeable future.

We dare readers to read the following several concluding sections without sending their blood pressure to dangerously homicidal levels:

For financial advisers, the current state of play is simply a good business opportunity. In a draft of his San Francisco presentation, Rothschild’s Penney wrote that the U.S. “is effectively the biggest tax haven in the world.” The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.”

 

Rothschild says it takes “significant care” to ensure account holders’ assets are fully declared. The bank “adheres to the legal, regulatory, and tax rules wherever we operate,” said Rees, the Rothschild spokeswoman.

Except in cases like Switzerland where it didn’t exactly “adhere to the legal, regulatory, and tax rules.” This time will be different though.

Penney, who oversees the Reno business, is a longtime Rothschild lawyer who worked his way up from the firm’s trust operations in the tiny British isle of Guernsey. Penney, 56, is now a managing director based in London for Rothschild Wealth Management & Trust, which handles about $23 billion for 7,000 clients from offices including Milan, Zurich, and Hong Kong. A few years ago he was voted “Trustee of the Year” by an elite group of U.K. wealth advisers.

 

In his September San Francisco talk, called “Using U.S. Trusts in International Planning: 10 Amazing Feats to Impress Clients and Colleagues,” Penney laid out legal ways to avoid both U.S. taxes and disclosures to clients’ home countries.

 

In a section originally titled “U.S. Trusts to Preserve Privacy,” he included the hypothetical example of an Internet investor named “Wang, a Hong Kong resident,” originally from the People’s Republic of China, concerned that information about his wealth could be shared with Chinese authorities.

Instead Wang will buy, sight unseen a Manhattan duplex for call it $50 million or whatever amount the seller demands, using a Nevada LLC with which to shield his purchase. In the process Wang’s purchase, under the sage advice of Rothschild’s Mr. Penney, assures that the luxury US housing bubble grows so big, and real estate prices rise so high, not a single law-abiding US citizen can afford to buy any form of luxury real estate.

Putting his assets into a Nevada LLC, in turn owned by a Nevada trust, would generate no U.S. tax returns, Penney wrote. Any forms the IRS would receive would result in “no meaningful information to exchange under” agreements between Hong Kong and the U.S., according to Penney’s PowerPoint presentation reviewed by Bloomberg.

Keep in mind: all of this is legal, and with the express permission of a US government, which one can rightly say is as criminal as any of the advisors who are merely explaining to their wealthy clients how to cheat the system best.

There was a catch: not all western governments are muppets for the Rothschilds of the world:

“Penney offered a disclaimer: At least one government, the U.K., intends to make it a criminal offense for any U.K. firm to facilitate tax evasion.”

Of course not the US, even though with that line it makes it very clear that what the US is doing is encouraing the criminal offense of facilitating tax evasion. Or maybe not.

Rothschild said the PowerPoint was subsequently revised before Penney delivered his presentation. The firm provided what it said was the final version of the talk, which this time excluded several potentially controversial passages. Among them: the U.S. being the “biggest tax haven in the world,” the U.S.’s low appetite for enforcing other countries’ tax laws, and two references to “privacy” offered by the U.S.

 

“The presentation was drafted in response to a request by the organizers to be controversial and create a lively debate among the experienced, professional audience,” Rees said. “On reviewing the initial draft, these lines were not deemed to represent either Rothschild’s or Mr. Penney’s view. They were therefore removed.”

And that was that.

* * *

While none of the above should come as a surprise to anyone who has been following our series since 2012 showing how US real estate has been used by foreign oligarchs to park illegal cash, what we would find very interesting in the next and final expose in this series, is for Bloomberg’s Jesse Drucker to find how many billions (or maybe only millions – the US government is a very cheap whore) were paid under the table by Rothschild et al to bribe the US government to enable this kind of circular, incestuous legalized tax fraud on US soil, one for which Rothschild will collect billions in financial advisory fees for the indefinite future, and which blatantly steals from those who do pay their taxes: the middle class.

via Zero Hedge http://ift.tt/1SKWzKq Tyler Durden

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Though she had no intention of being funny, we laughed out loud, as undoubtedly many did with us, when incumbent and wannabe IMF head Christine Lagarde said last week in Davos that China has a communication issue. Of course, Lagarde knows full well that Beijing has much bigger problems than communication ‘with the market’. Or, to put it differently, if Xi and Li et al would ‘improve’ their communication by telling the truth about their economy, nobody would be talking about communication anymore.

Mixed signals from China, which is attempting to shift its economy away from exports and investment to a consumer-driven model, have deepened concerns about the outlook for world growth, she said. Uncertainty is “something that markets do not like”, Ms Lagarde told a panel of business leaders and economic regulators in the snow-blanketed Swiss ski resort. Investors have struggled with “not knowing exactly what the policy is, not knowing exactly against what the renminbi is going to be valued”, she said, referring to China’s currency. “I think better and more communication will certainly serve that transition better.”

 

The world’s second-largest economy this week announced its 2015 GDP growth as 6.9%, its slowest in a quarter of a century. The figure cast a shadow over the summit, where IHS chief economist Nariman Behravesh told AFP that Chinese policymakers had “fumbled” and had “added to the uncertainty and the volatility by their behaviour”. Mr Fang Xinghai, the vice-chairman of China’s securities regulator, said at the same panel that “in terms of communication, we should do a better job”. “We have to be patient because our system is not structured in a way that is able to communicate seamlessly with the market,” he added.

The real issue is what people would think if Beijing announced a more realistic 2% or less GDP growth number. The thought alone scares Lagarde as much as anyone, including the Politburo. The sole option seems to be to keep lying as long as you can get away with it. But how and where the yuan will be valued by China itself has become entirely inconsequential compared to how markets value the currency.

The PBoC spent a fortune trying to straighten the offshore and onshore yuan(s), only to see the two diverge sharply again, as Shanghai stocks posted the biggest loss on Tuesday, at 6.4%, since the ‘unfortunate’ circuit breaker incident. That puts additional pressure on the Hong Kong dollar peg, and ultimately on the mainland China peg to whatever it is they’re trying to peg to.

Beijing might solve some of these problems by devaluing the yuan by 30%, or even 50%, but it would invite a large amount of other problems in the door if it did. Like a full-blown currency war. Still, it’s just a matter of time till Xi and Li either do it voluntarily or are forced to by ‘the market’.

What they are trying very hard NOT to communicate is how much pain their Ponzi debt burden has put them in. It’s not even fully clear to what extent Xi himself is aware of this, but he knows at least enough to keep his mouth shut on the topic. It’s quite possible that some of his top aides dare not reveal the real tally to their boss for fear of their jobs and heads.

In concert with denial and obfuscation, pride and hubris may be clouding the image the Chinese have of themselves and their economy. The rest of the world has followed them in that to a large degree, but it’s got to wake up at some point. If what the WSJ quotes a Beijing-based investor as saying is halfway true, and Xi realizes the opportunity it provides him, a huge devaluation may be imminent after all, if Shanghai shares keep falling the way they are.

Yuan’s Fall Is Just ‘Noise’ Amid Deeper China Woes

The country is already littered with “zombie” factories, empty apartment blocks that form ghostly suburbs, mothballed power stations and other infrastructure that nobody needs. But yet more wasteful projects are in the pipeline, even as the government talks about cutting industrial overcapacity. “That’s the misalignment—everything else is noise,” says Rodney Jones, the Beijing-based principal of Wigram Capital Advisors, who was a partner at Soros Fund Management during the 1990s. If debt keeps piling up at the current rate, China faces an eventual financial crisis, perhaps leading to years of subpar growth, mirroring the fate of Japan after its bubble burst in the early 1990s.

 

Mr. Jones argues that global equity markets haven’t property adjusted to this risk, even after a 16% decline in U.S. dollar terms from their May peak. “The world will have to learn to live without demand from China,” he says. “It’ll come as a shock.” A sharp devaluation won’t fix these distortions, and might even make matters worse if, as likely, it were to trigger financial mayhem in China’s trading partners. An alternative—further clamping cross-border currency controls—would be a humiliating retreat from Beijing’s policy of making the yuan more international.

If China imports continue to fall the way they have recently, a development that has already relentlessly hammered global commodities markets and exporting emerging nations, the advantages of a large devaluation could become irresistible even for a proud president. With capital flight in 2015 estimated at $1 trillion, and a roughly equal chunk of foreign reserves thrown at attempts to ‘stabilize’ the yuan, that pride is getting costly.

..

But it occureed to me today that perhaps I simply haven’t been cynical enough yet when pondering the matter. The support for a strong yuan, the one thing that is constantly ‘communicated’ to the world, may be just another facade. Beijing may have long decided to go for the jugular. China will have to adjust to the popping of its growth fairy tale and Ponzi economy no matter what it tries to do to prevent it.

Might as well swallow the bitter pill in one go then and get it over with?! It would make exports much more attractive at a time when more expensive imports are much less of an issue. As nice example is the very disappointing sales of iPhones in the country, prompting this comment from Apple CEO Tim Cook today: “We’re seeing extreme conditions unlike anything we’ve experienced before just about everywhere we look.” I think he might want to consider that what happened before was extreme, not what is now.

Beijing did a few things recently that triggered my cynicism radar. First, they targeted George Soros.

China Accuses George Soros Of ‘Declaring War’ On Yuan

Chinese state media has stepped up a salvo of biting commentaries against George Soros and other currency traders as the yuan comes under pressure, with the billionaire investor accused of “declaring war” on the unit. At the annual World Economic Forum in Davos last week, Soros told Bloomberg TV that the world’s second-largest economy was heading for more troubles. “A hard landing is practically unavoidable,” he said. Soros [..] pointed to deflation and excessive debt as reasons for China’s slowdown.

 

[..] Soros “publicly ‘declared war’ on China”, the paper said, citing the 85-year-old as saying that he had taken positions against Asian currencies. But some readers questioned whether the official rhetoric could fuel Chinese investors’ fears. “They say a lot of loud slogans, but do official media even know that Chinese investors are in hell?” said one poster on social media network Weibo. “I’m afraid that Chinese investors will die in a stampede before Soros even shows his hand.”

And I’m thinking: why should you go after Soros in a very public way when you know the whole world will take note and there’s nothing you can do other than stomp your feet and thump your chest? “Look, everyone, the world’s most notorious and successful short seller is after us, but we’re so much smarter!” Maybe they think Chinese mom and pop investor juggernauts will fall for their ‘whatever it takes’ tale, but they have to deal with the entire planet here.

Could this be simple stupidity? At a certain point that gets hard to believe. An even better example, and one that is really brow-raising, was the announcement of an inquiry into China’s statistics chief:

Head Of China’s Statistics Bureau Investigated For Corruption

The head of China’s statistics bureau is being investigated for corruption, the country’s watchdog said on Tuesday. “Wang Baoan is suspected of severe disciplinary violations, he is currently under investigation,” the Central Commission for Discipline Inspection said in a one-line statement on its website, using a phrase that is usually used to refer to corruption. The announcement came just hours after Wang appeared at a media briefing in Beijing on China’s economy in 2015. Last week the National Bureau of Statistics released data that showed China’s economy grew at the slowest pace in 25 years. Wang reiterated on Tuesday that the country’s GDP calculations were reliable, Chinese media reported, despite widespread criticism of the data.

Here’s a guy seeking to soothe his audience, which in present circumstances includes the whole globe, and you cut him off at the knees just hours after? He says all’s fine, and then you sent a message to the world that he can’t be trusted?

The timing seems crucial here. They could have waited a week, or two, so the connection between the two events (Wang’s statement and the inquiry announcement) would have been much less obvious. They could also, of course, have had the inquiry but kept it hush-hush. Instead, as in the Soros case, there’s a big public declaration.

Wang is head of a statistics bureau that, says the NYT, is tasked with:

Inquiry in China Adds to Doubt Over Reliability of Economic Data

The statistics bureau has a variety of responsibilities that are hard to balance even in the best of times. The bureau is supposed to provide China’s leaders with an unvarnished assessment of the country’s economic strengths and weaknesses, even while reassuring the public about growth and maintaining consumer confidence. It is also supposed to release enough detailed and accurate information for investors and corporate leaders to make sound decisions about economic and financial prospects.

That leads us right back to the start of this article. Wang must provide “enough detailed and accurate information” for investors”, but how can he do that if the real numbers are as bad as I strongly think they are? In that case, accurate information would drive most investors away and drive others towards shorting the yuan.

He must also “provide China’s leaders with an unvarnished assessment of the country’s economic strengths and weaknesses”, and perhaps he screwed up there (too much varnish). Xi may have found out something real bad that Wang didn’t tell him about. But even then, the fact stands that Xi risks triggering exactly what he pretends to want to prevent, by taking this to the press.

To summarize: yes, it’s possible that Beijing has a communication problem. I’ve never had the idea that Xi understands that now his power dream has come true, he finds that power is not absolute, if and when he wishes to have a financial market that allows for China to get richer through trade. That he realizes the price to pay for that is having much less than total control.

Still, after glancing through this stuff, I wouldn’t be at all surprised if the decision for a very substantial devaluation of the yuan has already been taken. It would be a panic move, with largely unpredictable consequences, but then Beijing has plenty to panic about.

And I can’t wait to see what Lagarde has to say when she figures out her new currency basket baby turns around to bite her in the ass.

PS: Something I scribbled last week: Time and again, I see ‘experts’ claim that the fact that the Chinese services sector now makes up half of GDP, is a positive. But, even if we forget for now that much of its growth is due to financial services, the real meaning is the opposite. The services sector has been able to become so important simply because the manufacturing sector is plunging as badly as it is.

via Zero Hedge http://ift.tt/1nz6HcE Tyler Durden

Confirming what we detailed earlier this week, queen of the unicorns Elizabath Holmes is in big trouble…

• *THERANOS 'NOT IN COMPLIANCE' WITH GOVERNMENT RULES, AGENCY SAYS
• *CENTERS FOR MEDICARE AND MEDICAID SERVICES COMMENTS IN LETTER
• *THERANOS HAD 'DEFICIENT PRACTICES' AT LABORATORY, CMS SAYS
• *PRACTICES POSED 'JEOPARDY TO PATIENT HEALTH AND SAFETY'

As Bloomberg reports,

Deficiencies at a laboratory run by medical testing startup Theranos Inc. “pose immediate jeopardy to patient health and safety,” U.S. government regulators said in a letter to the company released Wednesday.

 

Theranos violated at least five regulations governing clinical laboratories that operate medical diagnostics used to do things like test blood levels or assess disease, the U.S. said in the letter, which is dated Jan. 25.

 

Theranos has 10 days to show the Centers for Medicare and Medicaid Services it is taking action to immediately fix the issues.

Full CMS statement below:

*  *  *

This deficiency report is critical to Theranos future relationship with its main retail partner Walgreens Boots Alliance,

The drugstore operator has 41 blood-drawing “wellness centers” in stores in Arizona and California, which are Theranos’s primary access to consumers. Walgreens had aimed to expand the sites nationwide but has suspended those plans until Theranos answers questions about its technology, said the people familiar with the matter.

 

In recent weeks, Walgreens has debated whether to close the wellness centers, and the results of the latest inspection by CMS could lead the retailer to take an even harder look at what remains of its partnership with Theranos, these people said.

 

Since October, Walgreens representatives have met a number of times with Theranos Chief Executive Elizabeth Holmes and her executive team but were dissatisfied with their responses, the people added.

 

An earlier review of the contract led Walgreens officials to conclude that it would be difficult to exit the agreement, but the inspection findings could alter that conclusion, according to people familiar with the matter.

Just what does this say about the following 12 members of the Theranos board?

 

Or perhaps that was the idea…

This is a board that may have made sense (twenty years ago) for a defense contractor, but not for a company whose primary task is working through the FDA approval process and getting customers in the health care business. (Theranos does some work for the US Military, though like almost everything else about the company, the work is so secret that no one seems to know what it involves.)

 

The only two outside members that may have had the remotest link to the health care business were Bill Frist, a doctor and lead stockholder in Hospital Corporation of America, and William Foege, worthy for honor because of his role in eradicating small pox. My cynical reaction is that if you were Ms. Holmes and wanted to create a board of directors that had little idea what you were doing as a business and had no interest in asking, you could not have done much better than this group of septuagenarians.

via Zero Hedge http://ift.tt/1nz6IgW Tyler Durden

With grocery prices surging, amid the collapsing currency, the powers that be appear to have turned to their mainstream media puppets to initiate the 'mocking' propaganda of the banks against an increasingly fearful Canadian citizenry (especialy those under 35) who are hoarding cash.

 

With the Canadian people losing faith in their government's ability to save their corner of the world as their currency loses value by the day, it is perhaps unsurprising that the always supportive of the status quo media comes out with a somewhat mocking "cash hoaring on the sidelines is foolish" puff piece… (via Financial Post)

 

Cash positions have been rising since the 2008 recessions, so the recent increase comes on top of what Canadians were already sitting on in their portfolios.

The result is the largest hoarding of cash in Canadian history.

 

So, FinancialPost explains, if you are holding on to that cash out of fear rather than need, you should consider jumping back in and benefiting from what is essentially a 20 per cent discount on stock prices.

But what if you need cash right now, because you’ve just hit your retirement years, or you need to liquidate some of your registered education savings plans because your child will soon be starting a university or college program?

The short answer is that you should have planned ahead: You want to have a certain amount of cash in your portfolio to meet more immediate needs so you’re not cashing out your investments at the bottom of the market.

It appears Canadians are ignoring the "sage" advice of CIBC World Markets: "While holding cash can guard against short-term spikes in volatility, it’s certainly a long-term drag on portfolio returns," and moving to cash rather than have their capital destroyed by unwinding carry trades and deflating bubbles blown by their central bank overlords…

 

CIBC World Markets economists Benjamin Tal and Royce Mendes note that while they don't have a crystal ball for when markets will recover, but says that by the time they do,  “it will be way too late” for Canadians on the sidelines to take advantage, because most recoveries happen in the early stages.

*  *  *

There – do you get the message Canadians – pile all that cash into the stock market – fear is for losers.

via Zero Hedge http://ift.tt/1VsKyam Tyler Durden

In an otherwise dreary manufacturing recession landscape, one in which even the services sector is getting increasingly more troubled by the day, and where nothing the Fed says or does can keep animal spirits inflated, there was one ray of light: the one company that benefits from over a billion people posting pictures of their dogs or stalking their significant other’s best friend: Facebook.

Moments ago Mark Zuckerberg’s social network reported that in Q4 it generated $5.84 billion in revenue, far higher than the $5.37 billion expected…

… driven entirely by an ongoing surge in mobile users. Indeed, of the 1.038 billion DAU at Dec. 31…

… over 90%, or 934 million, were mobile, an increase of 25%.  As the company notes, mobile advertising revenue represented approximately 80% of advertising revenue, up from 69% in Q4 2014.

Even more impressive is that somehow, nearly 1.6 billion people 1.6, or about a quarter of the world’s entire population, supposedly visits Facebook at least once a month. Furthermore, Facebook represents that over 60% of the total US and Canada population – this includes tens of millions of children and eldery – is a monthly Facebook user. We are a little sceptical about this, but surely the management team would never lie.

Another notable chart is the number of monthly only users which rose by almost 100 million in the past quarter rising to 823 million, or about 80% of total.

The key highlights of the quarter:

• Mobile advertising revenue – Mobile advertising revenue represented approximately 80% of advertising revenue for the fourth quarter of 2015, up from 69% of advertising revenue in the fourth quarter of 2014.
• Capital expenditures – Capital expenditures for the fourth quarter of 2015 were $692 million.
• Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $18.43 billion at the end of the fourth quarter of 2015.
• Free cash flow – Free cash flow for the fourth quarter of 2015 was $2.14 billion.

And the full year :

• Revenue – Revenue for the full year 2015 was $17.93 billion, an increase of 44% year-over-year.
• Income from operations – Income from operations for the full year 2015 was $6.23 billion.
• Net income – Net income for the full year 2015 was $3.69 billion.
• Free cash flow – Free cash flow for the full year 2015 was $6.08 billion.
• Daily active users (DAUs) – DAUs were 1.04 billion on average for December 2015, an increase of 17% year-over-year.
• Mobile DAUs – Mobile DAUs were 934 million on average for December 2015, an increase of 25% year-over-year.
• Monthly active users (MAUs) – MAUs were 1.59 billion as of December 31, 2015, an increase of 14% year-over-year.
• Mobile MAUs – Mobile MAUs were 1.44 billion as of December 31, 2015, an increase of 21% year-over-year.

Finally, while earnings for FB remain irrelevant, here is the net income broken down between GAAP and non-GAAP”

via Zero Hedge http://ift.tt/1nz6I0k Tyler Durden