Because the main street economy is failing, the nation’s entitlement rolls have exploded. About 110 million citizens now receive some form of means tested benefits. When social security is included, more than 160 million citizens get checks from Washington.
The total cost is now $3 trillion per year and rising rapidly. America’s entitlements sector, in fact, is the sixth biggest economy in the world.
Yet in a society that is rapidly aging to the tune of 10,000 baby boom retirees per day, this 50% dependency ratio is not even remotely sustainable. As we show in a later chapter, social security itself will be bankrupt within 10 years.
Still, there is another even more important aspect of the mainstream narrative’s absolute radio silence about the monumental entitlements problem. Like in the case of the nation’s 30-year LBO, the transfer payments crisis is obfuscated by the economic blind spots of our Keynesian central banking regime.
Greenspan, Bernanke, Yellen and their posse of paint-by-the-numbers economic plumbers have deified the great aggregates of consumer, business and government spending as the motor force of economic life. As more fully deconstructed below, however, this boils down to a primitive notion of bathtub economics.
In this bogus economic model, it is assumed that the supply-side of the economy is always fully endowed or even over-provided. By contrast, the perennial problem is purportedly a shortfall of an ether called “aggregate demand”.
So the job of the central bank is to pump reserves and credit into the macroeconomy until the resulting incremental spending by households, business and government has caused “full employment GDP” to be filled to the brim. In effect, spending derived from current production and income is supplemented with proceeds extracted from increasingly indebted balance sheets.
Needless to say, this amounts to borrowing from future production and income, but it does boost the current period GDP so long as there is still runway available on household and business balance sheets. Yet what we call the Keynesian parlor trick—-goosing current economic output by leveraging-up balance sheets—–self-evidently doesn’t work in an economy that is at Peak Debt, as we document in the next section.
There is a similar story when government borrowingis used to fund transfer payments. Overwhelmingly, transfer payment recipients live hand-to-mouth—-so virtually 100% of the proceeds go into the spending stream (PCE) with little leakage or lag.
By contrast,, it’s an altogether different matter when transfer payments are funded out of current taxation.That’s purely a zero-sum game in which income producers have less to spend or save and recipients have more.
So the policy elite’s vestigial Keynesian fetish about “aggregate demand” means that ideas of quality, sustainability, efficiency, discipline, prudence or, for that matter, even economic justice and equity, never enter the narrative. Likewise, the possibility that current spending bloated by debt and transfer payments isn’t sustainable has simply been defined out of existence.
It matters not a whit to the Keynesian policymakers, for example, whether the considerable expansion of household consumption spending (PCE) depicted below originated in disability checks, second mortgages or car loans at 120% loan-to-value. All spending is good, apparently, even if it was deposited by a passing comet.
What counts is the incremental gains in GDP compared to last quarter and in proxies for demand such as job counts and housing starts versus prior month. That’s what fuels bullish spasms in the Wall Street casino. And when the business cycle eventually ends, there is always a scape-goat to blame, such as an oil price shock or a financial market meltdown.
The graph below depicts how the establishment’s “growth” swindle actually works. There are currently 126 million prime working age persons in the US between 25 and 54 years of age. That’s up from 121 million at the beginning of 2000
Yet even as the current business cycle is rolling over, the 77.1 million persons employed full-time from that pool is still 1.2 million below its turn of the century level!
That’s right. Only 61% of the prime working age population has full-time jobs. That compares to 65% as recently as the year 2000.
So it might be wondered. How is it possible that real consumption expenditures rose by a whopping $3.1 trillion or 38% during the same 16-year period that the number of full-time prime age workers was actually dropping?
Yes, the employment shown in the chart below is supplemented by part time workers, where the ranks have grown modestly, and also by the steadily rising participation rate of Wal-Mart greeters among the over 65 cohort. But the fact remains that on the margin the 38% real gain in consumer spending since the year 2000 shown below was funded from sources other than pay envelopes.
spending since the year 2000 shown below was funded from sources other than pay envelopes.
Among the alternative sources which played a major role in funding the nation’s shopping cart, of course, was the explosion of government transfer payment. In fact, during the last 16 years government transfer payments have grown at 6.2% annually or by nearly 2X the 3.3% growth of nominal wage and salary disbursements.
Accordingly, as shown in the chart below, transfer payments soared by $1.7 trillion during the period. This means the gain in transfer payments amounted to nearly 50% of the entire gain in wage and salary disbursements to the nation 150 million employed persons.
Needless to say, that astonishing and unsustainable trend have been completely ignored by the Wall Street/Washington peddlers of consumption based economics.
The Fed has never once mentioned the rapidly deteriorating quality of household income and spending during the last 15 years. And in crowing about all the part-time and “born again” jobs it has purportedly created, the Obama White House has never remotely acknowledged that its vaunted “recovery” has been largely built on transfer payments and debt.
So “deterioration” is not an inappropriate word. As a matter of public policy, $2.7 trillion per year of transfer payments may represent a bargain that society has chosen to make for reasons of equity and social welfare. But that doesn’t gainsay the fact that the underlying economics are an altogether different matter.
To wit, in May 2016 total transfer payments amounted to fully one-third of all the wage and salaries disbursed to the entire work force of the United States. And if you grant the old-fashioned assumption the government salaries are funded by taxation rather than production, then transfers amount to nearly 40% of wage and salary disbursements to private sectors employees.
So let’s put the chart below in plain english. Sixteen years is not a blip; it’s an embedded trend. When the transfer payment flows to “takers” over that span have fast approached the earnings of “producers”, you have a system that will, at length, go tilt.
In a shocking example of the fallout from low oil prices coupled with years of easy-money-enabled malinvestment, the collapse of Canada's non-conventional oil production has forced a northern Alberta oil-boom-town to be put up for auction… including 1200 person accomodation work-camp, hospital, gym, running track, and waste-water treatment plant.
After years of invincibility, this happened…
And that has simply imploded the once 'boom' oil towns of Alberta.
After 55 years in business, Ritchie Brothers says"nothing really comes close in sheer physical size to this unique asset we're selling by private treaty: a 1,200-person workforce accommodation camp located approximately 50km north east of Peace River, AB, Canada."
Imagine a camp the size of a small town, but with all the modern conveniences of the big city: full-service dining, medical clinic, modern living suites, bar/lounge and recreation suites, and wireless internet.
This work camp has a fully-equipped gym complex complete with indoor running track, squash courts, weights and aerobic equipment. The camp even has its own power and utilities system. Take a virtual tour in the video below.
The ghost-town – constructed by ATCO in 2013 – is divided into several complexes, and three wings of living areas with 1,232 fully-furnished executive-style rooms.
Here's an overview of the camp layout.
A. Core complex
B. Gym complex
C. Living areas
D. Waste water treatment plant
E. Backup generators, utilities and more
F. 3 external luggage storage containers
G. Security trailer (office/kitchen/toilet/storage-furnace room/septic tank)
H. Electrified fence line around the perimeter of the workforce accommodation
The fully-equipped, professional-grade kitchen and dining facility located in the core complex is capable of catering to all 1,232 hungry residents in just 1.5 hours!
The fully-equipped, professional-grade kitchen
Plus, the complex also features a commissary, training areas & offices, medical bay & treatment rooms, the bar/lounge area, and rec room complete with golf simulators, pool tables, table tennis, foosball and more. "Roughing it" doesn't even cross your mind in this camp.
Some photo highlights of the camp.
The gym complex with 200M indoor running track, squash courts and more.
The bar/lounge area with pool tables.
One of the executive-style rooms in the living areas.
Camp available for immediate sale and removal.
* * *
Who would buy such a massive item? Any billionaire preppers out there looking for an all-in-one habitat for their own private army in the middle of Montana? Or perhaps Angela Merkel is looking for a self-contained refugee shelter?
Gold Now in a Sustained, Structural Bull Market; On Average, History Suggests ~175% Incremental Upside
The last time we discussed gold on the site was a few weeks back in this post; therein we suggested a break-down in USDZAR was at hand and that should history hold, it would help propel and/or coincide with additional upside in the metal.
However, the above was merely a tactical, nearer-term call.
Strategically, it’s been even longer since we updated our longer-term framework for gold. In fact, it’s been three months since we did that in this post. In that May piece we suggested the metal continued to track favorably vs. our bullish expectations, but in the near-term it faced a major test having rallied nearly +25% off its Dec-15 low, a historical demarcation point whereby cyclical retracement rallies were either snuffed out with a resumption of a secular bear beginning afresh, or, the same moves continued higher, indicative of a new secular bull being underway.
Where do we now stand vs. that +25% demarcation point?
As of month-end today, gold is up over 27% from its Dec-15 lows.
This a major milestone – any time gold has managed a move of at least 25% off a major low, it has continued higher every single time with incremental gains ranging from 21%-412%, with the average totaling 175%.
In the chart below I’ve used the vertical, dotted green lines to show any month where gold closed at least 25% off a major low for the first time; the bright green annotations show the incremental upside for the metal until another major peak was put in place following these signals; the red annotations show that gold’s two major head-fake rallies off noteworthy lows – those being the 1993 and initial 1999 lows – never managed to get to +25% off those lows, stalling out just below +24% and +17%, respectively.
In terms of the type of incremental upside scenarios for gold that the chart above outlines, keep in mind the analog I put up in my last and aforementioned gold update post. That analog showed that vs. history’s other major bubbles (i.e., gold-80; Nikkei-89, NDX-00, Housing-05, etc.), gold’s to-date selling off its 2011 highs had been the strongest move in history at every single post-high weekly trading juncture, looking nothing like the material weakness witnessed in the others coming off their respective highs. Its rally since bottoming in Dec-15 has only reinforced its differences vs. the others.
Using this comparison, one is left with the fairly ineluctable conclusion that if gold was a “bubble” from 2000 onward as most have claimed, it certainly doesn’t look like its high has yet to be registered. In that regard, if gold has rallied anywhere from 21%-412% after closing at least +25% off a major low on a monthly basis as it’s doing in July, I am much more inclined to believe that one’s expectation for incremental upside this time around should skew larger, not smaller, as its 2011 highs are a mere ~10% away.
Here’s what the analog looks like now:
As the above occur, the metal is getting ever closer to the $1,375-$1,450 target I suggested it could reach by the second week of August in this post from March, which was an update to an analysis we initially presented in in this February post.
That initial post noted that in rallying ~550 bps in a week where the overall CRB index fell more than 100 bps, gold had registered what amounted to a 99.8th percentile out-performance event in the second week of February. It went on to show that the few times such wide weekly performance disparities have occurred historically, it effectively always led to material upside in the metal over all forward time-frames.
The tables below show each of the historical signals, their forward returns through +24 mo and the price targets implied for gold coming off of the most recent signal during the week of 2/12/16.
Thus far, with two weeks left until we hit the +6 mo mark at 8/12/16, the +9% return off that early February signal is the lowest and is tied with the forward return off the Sep-08 signal.
The average of all the previous signals at +6 mo is ~15%, suggesting gold reach ~$1,420 as we approach that +6 mo milestone. However, we might want to exclude the Sep-08 signal’s forward returns at the +6 mo mark. Remember, though gold was in an up-trend, right after this signal gold temporarily crashed ~20% into Nov-08 amid GFC-forced margin call liquidations, thus impairing its returns through the +6 mo mark as rebounded from this aberration of selling. If we exclude Sep-08, the average +6 mo gain of the others yields ~+17%, implying gold could reach as much as $1,450 in a few weeks.
Thereafter, all but the Mar-80 signal yielded additional, major gains for the metal at the +12 and +24 mo marks. The average gain across all signals at the +12 mo mark, or as of Feb-17, is +36%, implying gold could reach nearly $1,700 by early next year! Ex the Mar-80 forward return, the average of the others at +12 mo was +47%, implying in excess of $1,800 by Feb-17!
For those that push back on the tables above being a small data set with one noteworthy negative result from Mar-80, let me remind you that the Mar-80 signal came a mere two months off gold’s all-time high follwing what had been a ~4x rally in the previous year; thus, that signal is nothing like the others, including the most recent in Feb-16, whereby gold was coming out of major recent sell-offs and just beginning sustained rallies. Further, though small, this data set is but one more quiver in a hat bedazzled with other, corroborating quivers that have accumulated over the past year to suggest sustained upside for PMs.
In my view, the accelerated upside the table above posits for gold as we begin to work through August will likely be driven by a break-out from the bullish, descending wedge b/t lines (1) and (2) that it is currently testing the resistance of in the monthly chart below. Said resistance line (1) runs off the 2011 high and the subsequent late-2012 retracement rally high that closely preceded the major sell-off gold then endured into Dec-15.
Another thing gold increasingly has going for it – something that could further propel accelerated upside in the nearer-term along with the break-down in USDZAR we mentioned a few weeks ago – is the recent advance in CHFUSD, which is very close to breaking out of a bullish descending wedge pattern of its own that has similarly been in place since 2011 like gold’s in the chart above.
Above, note how strong the correlation b/t gold and CHFUSD have been in the pos-GFC world as both act as a sort of proxy for off-the-grid, non-conventional stores of value. If CHFUSD breaks out soon, expect it to occur alongside fresh gold highs.
Doing diligence and background checks can be tedious, tough work so Democrats would prefer you just take their word for it. Take for example, Nancy Pelosi’s famous quote where she assured voters on Obamacare, saying:
“It’s going to be very, very exciting. But we have to pass the bill so that you can find out what is in it.”
And that turned out just fine, right? In fact, we recently highlighted the great success of Obamacare in a post which pointed out that certain providers were looking to impose 60% YoY premium increases in 2017. That’s pretty good in a flattish real wage growth environment, right? Oh well, nothing we can do about it now the bill has already been passed but at least now we know! Thanks, Nancy!
The Clinton campaign is now making an eerily similar argument for Hillary. When asked whether Hillary could convince voters that she could be trusted, her campaign manager, Robby Mook, suggested that voters will just have to elect her to find out. In a recent interview with Politico, Glenn Thrush asked Mr. Mook whether the campaign could really “move the dial on trust” with regards to Hillary. His response:
“I don’t think people will fully appreciate who she is until, knock on wood, she’s elected president.”
So why get bogged down with endless, monotonous research on the various scandals surrounding the Clinton campaign? After all, as Tommy Boy taught us, “I can get a good look at a T-bone by sticking my head up a bull’s ass, but I’d rather take a butcher’s word for it.” We might as well just elect her so we’ll know once and for all whether she can truly be trusted. What could go wrong?
The full interview with Robby Mook can be heard below or the full transcript can be read here.
During the Cold War, the Cuban government becomes communist and aligns with the Soviet Union, and many of that country's productive citizens flee to the United States where property rights are more secure and government is more constrained. Cuba's economy predictably fails and is kept afloat for years by foreign aid provided mostly by the Soviets. Meanwhile, Cuban businesses first take root, then flourish in the US, particularly in Miami, including a cigar industry based in Little Havana.
Ironically, many of these cigar manufacturers succeed due to government intervention in the form of the Cuban trade embargo, enforced by the US government. Meanwhile, American demand for Cuban-grown and rolled cigars remains high, and many purchase them in extra-legal markets or on trips abroad — often when "abroad" translates to Mexico or Canada. I once met a man who smoked a Cuban cigar in the 1980s. It was such a profoundly pleasurable experience that he vowed to never smoke another cigar again.
So it went until the Cuban embargo was lifted by the US government last year and questions arose about whether Miami-based cigar manufacturers would survive competition from los cigarros cubanos. Unfortunately, a threat bigger than competition emerged in the form of new rules for cigar manufacturers announced last week by the Food and Drug Administration.
Based on the "duty to protect public health," the FDA is requiring cigar manufacturers to comply with rules drawn up last year for the electronic cigarette market. These include the requirement of so-called "pre-authorization" applications and fees before being allowed to sell their product. These aren't one-time tariffs either, as any decision to change tobacco blends in the future — a common practice in a premium cigar market responsive to consumer tastes and preferences — requires FDA permission involving new rounds of applications and fees.
The costs are enormous and they especially affect the small business, as explained in a recent Miami Herald article:
“I mean I get it — you have to do what Uncle Sam says,” said Sandy Cobas, owner of El Titan, one of the 119 Miami businesses that Miami Mayor Tomás Regalado says depend on hand-rolled cigars. “But how are we going to be able to afford this?”
She isn’t alone, say industry experts like Marvin Shanken, founder, editor and publisher of Cigar Aficionado magazine.
“Miami, and South Florida in general, is the heart of the cigar industry,” Shanken said. “The impact will be most visible there, without a doubt.”
The FDA estimates that small businesses like El Titan, which produces 250,000 to 300,000 cigars per year, will pay $278,000 to $397,000 in application fees and other costs during the initial compliance period. While El Titan will be able to pass some of those fees on to the companies that hire it to make private-label smokes, it will still need to raise prices.
The new rules will have the greatest impact on companies less than a decade old, which will be required to apply for pre-market approval at an average cost of $6,560 per application, according to FDA estimates.
Fourth generation cigar roller, Jose Blanco, who opened Los Cumbres Tabaco in Doral in 2014, figures he will have to submit between 25 and 30 applications, which likely will cost more than $100,000. “For companies starting off in this business, you’re lucky to be breaking even like we are,” Blanco said.
Cigars sold prior to Feb. 15, 2007 — an estimated 60 percent of all cigars sold in the U.S., according to the FDA — are grandfathered in.
Though Tamarac-based Gurkha Cigars was incorporated in 1989 (the brand was first established in 1887), the company estimates it will pay $500,000 in legal costs on top of fees for 800 individual applications.
It's a lot of money that harms small manufacturers to benefit large ones. In fact, it's likely the large ones championed the FDA rules to provide them with more market power in a post-embargo world. It also reflects the first rule of government regulation of business, that regulation always causes secondary effects that are sometimes anticipated, and sometimes not. In this case, we see that previous intervention in the e-cig market (which I wrote about here) might have been causing low-income and teenage e-cig consumers to switch to cigars, and this could not be allowed. Once again, one set of regulations lead to unanticipated consequences that lead to a new round of regulation. (This is a major explanation of government growth described by Mises in the 1920s.)
But such coercive wealth transfers being imposed by the government are actually acts of extortion worthy of the Castro brothers. The FDA's policies — fascist in the sense that they allow for private ownership but government control — mean that, at the end of the day, the portion of the US cigar industry that escaped Cuba simply traded one repressive regime for another. Sadly, they're not the only ones who can go up in smoke. It's also the small businesses and other entrepreneurs who decide it's just not worth adding to the wealth of the world through voluntary trade and the satisfaction of consumer demand, only to have profit confiscated to illuminate the offices of DC lawyers and bureaucrats who actually deserve to have cigar smoke blown in the faces.
The FDA has caused hundreds of thousands of deaths through its policies. In a truly free society, private market regulation would regulate it out of existence. When that happens, I won't be the only one lighting up a Partagás to celebrate.
Several days ago, half jokingly, Edward Snowden gave the best advice on how to determine whether Russia was indeed, as the media has already decided, behind the hack of first the Democratic National Committee, then the Democratic Congressional Campaign Committee and, as of last night, the Hillary presidential campaign itself. This is what Snowden said in a July 25 tweet: “Evidence that could publicly attribute responsibility for the DNC hack certainly exists at #NSA, but DNI traditionally objects to sharing. The aversion to sharing #NSA evidence is fear of revealing “sources and methods” of intel collection, but #XKEYSCORE is now publicly known.”
Evidence that could publicly attribute responsibility for the DNC hack certainly exists at #NSA, but DNI traditionally objects to sharing.
It appears that the NSA has taken up Snowden on his advce, because as ABC reports, U.S. government hackers at the National Security Agency are now targeting Russian government-linked hacking teams “to see once and for all if they’re responsible for the massive breach at the Democratic National Committee.” ABC cited three former senior intelligence officials. It’s a job that the current head of the NSA’s elite hacking unit said they’ve been called on to do many times before, ABC notes.
Robert Joyce, chief of the NSA’s shadowy Tailored Access Operations, declined to comment on the DNC hack specifically, but said in general that the NSA has technical capabilities and legal authorities that allow the agency to “hack back” suspected hacking groups, infiltrating their systems to gather intelligence about their operations in the wake of a cyber attack.
“In terms of the foreign intelligence mission, one of the things we have to do is try to understand who did a breach, who is responsible for a breach,” Joyce told ABC News in a rare interview this week. “So we will use the NSA’s authorities to pursue foreign intelligence to try to get back into that collection, to understand who did it and get the attribution. That’s hard work, but that’s one of the responsibilities we have.” Meanwhile, the NSA has deferred questions about its potential involvement in the DNC hack investigation to the FBI, which is the leading agency in that probe. Representatives for the bureau have not returned ABC News’ request for comment. Lisa Monaco, President Obama’s homeland security and counterterrorism advisor whose responsibilities include cyber policy, declined to comment.
As we reported last week, a former senior U.S. official said it was a “fair bet” the NSA was using its hackers’ technical prowess to infiltrate two Russian hacking teams that the cybersecurity firm Crowdstrike alleged broke into the DNC’s system and were linked to two separate Russian intelligence agencies, as first reported by The Washington Post. In some past unrelated cases, the former official said, NSA hackers have been able to watch from the inside as malicious actors conduct their operations in real time.
So are the US and Russian now in a state of cyberwar?
Rajesh De, former general counsel at the NSA, said that if the NSA is targeting the Russian groups, it could be doing it under its normal foreign intelligence authorities, as the Russian government is “clearly… a valid intelligence target.” Or the NSA could be working under the FBI’s investigative authority and hacking the suspects’ systems as part of technical support for investigators, said De, now head of the cyber security practice at the law firm Mayer Brown.
While U.S. officials have told news outlets anonymously they concur with Crowdstrike and other private cybersecurity firms who have pointed to Russian culpability, the U.S. government has declined to publicly blame the Russians. The Russian government has said the hacking allegations are “absurd”. Director of National Intelligence James Clapper told the audience at the Aspen Security Forum Thursday that the U.S. intelligence community was “not quite ready to make a call on attribution,” though he said there were “just a few usual suspects out there.” The next day CIA Director John Brennan said that attribution is “to be determined” and a lot of people were “jumping to conclusions.”
Professional hackers often use proxies, Brennan said, so investigators have to make two or three “hops” before tracing cyber attacks back to a state’s intelligence agency, which makes the attribution process more difficult.
The NSA’s Joyce said that in general it’s very difficult to properly frame someone for a complex attack, since too many details have to be exactly right, requiring a tremendous amount of expertise and precision. But Joyce said that before the U.S. government pins blame on anyone for a cyber attack publicly, the evidence has to pass an “extremely high bar.” So when they do come forward, he said, perhaps based on the results of attribution techniques that have not been publicly described, “You should bank on it.”
For some, however, there is no doubt that Putin is “desperate” to crush the democrats and to install his “puppet” Trump as the next US president, or something… People like Michael Buratowski, the senior vice president of cybersecurity services at Fidelis Cybersecurity, who said the evidence pointing to the Russians was so convincing, “it would have had to have been a very elaborate scheme” for it really to have been anyone else.
Kenneth Geers, a former cyber analyst at the Pentagon who recently published a book about Russian cyber operations, told ABC News earlier this week that he didn’t necessarily doubt it was the Russians, but said that even in the best cases when doing cyber investigations, “You can have a preponderance of evidence — and in nation-state cases, that’s likely what you’ll have — but that’s all you’ll have.”
That, he said, opens the possibility, however remote, that a very clever hacker or hacking team could be framing the Russians.
Someone as clever as the NSA perhaps, the same NSA which is using the unconfirmed “Russian” hack to counterhack the Russians now, in what someone may be tempted to call is a false flag escalation, meant to lead to just one thing: a convenional response from the Kremlin.
* * *
Meanwhile, earlier today, Russia’s intelligence service said on Saturday that the computer networks of 20 organizations, including state agencies and defense companies, have already been infected with spyware in what it described as a targeted and coordinated attack. The Federal Security Service, the FSB, said the malware and the way the networks were infected were similar to those used in previous cases of cyber espionage found in Russia and other countries. The agency did not say who it suspected of being behind the attacks.
Now that the NSA is actively “hacking” Russia, however, we doubt that what is rapidly emerging as the first official cyberwar between the world’s two hacking superpowers will remain under wraps for long. We can only hope that said war remains in the cyber domain.
We just got another extremely disappointing GDP number. It was being projected that U.S. GDP would grow by 2.5 percent during the second quarter of 2016, but instead it only grew by just 1.2 percent. In addition, the Census Bureau announced that GDP growth for the first quarter of 2016 had been revised down from 1.1 percent to 0.8 percent. What this means is that the U.S. economy is just barely hanging on by its fingernails from falling into a recession. As Zero Hedge has pointed out, the “average annual growth rate during the current business cycle remains the weakest of any expansion since at least 1949″. This is not what a recovery looks like.
In addition, Barack Obama remains solidly on track to be the only president in all of U.S. history to never have a single year when the economy grew by at least 3 percent. Every other president in American history, even the really bad ones, had at least one year when U.S. GDP grew by at least 3 percent. But this has not happened under Obama even though he has had two terms in the White House.
And many are anticipating that this latest extremely disappointing GDP number will discourage the Federal Reserve from raising interest rates any time in the near future…
The disappointing report could keep the Federal Reserve on hold longer as it considers another interest rate hike. The Fed lifted its key rate in December for the first time in nine years but has held it steady since.
According to the pundits in the mainstream media, this was supposed to be the year when the U.S. economy finally returned to “normal”, but that has not happened at all. In fact, in recent days we have gotten a spate of bad news about the economy. We just learned that the homeownership rate in the United States has hit the lowest level ever, and Gallup’s U.S. economic confidence index has fallen to the lowest level so far this year.
With the election coming up rapidly, this is the kind of news that Hillary Clinton definitely does not need. She needs to be able to sell the American people on the idea that the Obama years have been very good for the U.S. economy. If things take a sharp turn down in the coming months, that may be enough to cost her the election.
So far, Hillary Clinton’s economic agenda has not received that much scrutiny, but the truth is that she hopes to increase taxes in a whole bunch of ways which would be very harmful for the economy. The following comes from an excellent piece by John Kartch and Alexander Hendrie…
Hillary has endorsed several tax increases on middle income Americans, despite her pledge not to raise taxes on any American making less than $250,000. She has said she would be fine with a payroll tax hike on all Americans, she has endorsed a steep soda tax, endorsed a 25% national gun tax, and most recently, her campaign manager John Podesta said she would be open to a carbon tax. It’s no wonder that when asked by ABC’s George Stephanopoulos if her pledge was a “rock-solid” promise, she slipped and said the pledge was merely a “goal.” In other words, she’s going to raise taxes on middle income Americans.
Hillary’s formally proposed $1 trillion net tax increase consists of the following:
Income Tax Increase – $350 Billion: Clinton hasproposed a $350 billion income tax hike in the form of a 28 percent cap on itemized deductions.
Business Tax Increase — $275 Billion: Clinton has called for a tax hike of at least $275 billion through undefined business tax reform, as described in a Clinton campaigndocument.
“Fairness” Tax Increase —$400 Billion: According to her published plan, Clinton has called for a tax increase of “between $400 and $500 billion” by “restoring basic fairness to our tax code.” These proposals include a “fair share surcharge,” the taxing of carried interest capital gains as ordinary income, and a hike in the Death Tax.
Taxes tend to be a pet peeve of mine, so looking at that list of proposed taxes definitely makes me cringe.
If Donald Trump wants to hit the Democrats really hard on the economy, all he has to do is point out the fact that Barack Obama is going to be the only president in American history to never see 3 percent economic growth for an entire year, and he had two entire terms in which to try to turn things in a positive direction.
Sadly, things are very likely going to be worse for the economy no matter who wins the election. Under Obama, our national debt, our trade deficit, and most of our other long-term economic problems have gotten much, much worse, and so the table is set for a major economic disaster during the next presidential administration.
And if what I have to share about the future of America in my new book is correct, we are definitely moving into a “perfect storm” that will not just be economic in nature. The things that are coming are going to shake this nation to the very core, and I believe that we will soon face the consequences for decades of exceedingly foolish decisions.
So in the end, we may look back and long for the days of 1.2 percent economic growth, because what is on the horizon is going to make that look like a Sunday picnic.
The traditionally outspoken Steve Wynn continued doing what he does best during the quarterly WYNN earnings call, which is rage against what he sees as the problem du jour in the US economy. Recall that last quarter he set his sight on the manipulated US stock market, and HFT traders in particular:
“The other day I was watching the stock open up, and it went up on share volumes of a few thousand shares. I mean, every trade was a tick up. That’s not the way it should operate in an honestly or intelligently run exchange. But that’s the thing, all those guys sold their dark pools and their order flow and the positioning on the floors of the servers to the HFTs. And it’s made a couple of guys that I’m friendly with very rich because they are high-frequency traders. But I don’t respect the activity, and I’m severely critical of it. And don’t mind saying so, either.”
This time, during the July 28 Q2 earnings call, the 74 year old billionaire chimed in on the most important topic for the US economy over the next 4 months: the presidential election, and – in typical brutally frank fashion – he cuts right to the chase. Here is the key segment, with our highlights, responding to a question on what to expect from the US election.
* * *
From the Q2 WYNN Conference call
The election in the United States. I think we’re all in the same position. It’s almost impossible to predict exactly what effect that will have without getting into an economics discussion.
Sooner or later, our political establishment is going to be forced, regardless of party affiliation, to deal with $19 trillion in debt that’s climbing by around $1.6 billion a day. That means that in the Treasury auction each month in Downtown Washington, we’re printing money at the rate of $40 billion or $50 billion a month which is of course increasing the money supply and directly impacting the living standard or the buying power of the U.S. dollar for people who are being paid like everybody on this call today.
Now, part of the frustration in America is the fact that the deficit is having an enormous impact on the living style and the living standard of Americans, but not all of this is well understood by the folks, to use Bill O’Reilly’s term. The folks are being – their living standard being clipped by the deficit and by the printing of money and the increase in the money supply.
How long can this go on? In the history of the Western world, inflating your way out of this kind of a problem taken to its extreme, to use the Weimar Republic as an example, people went grocery shopping with wheelbarrows full of currency. Now, before the recession, the euro was $0.85 on a dollar. During quantitative easing one, two and three, it went up to $1.48. That was a devaluation of American currency by 20%. Now, it’s $1.10, and to use that as a benchmark for a moment, it isn’t that the dollar got stronger. It’s that the euro got weaker because they started quantitative easing and printing money in the euro community.
So this deficit issue impacts the mental health, the frustration, the positive sense of tomorrow that working people feel in America. It doesn’t have anything to do with rich folks. It’s got to do with government, fiscal and monetary policy. We have $14 trillion in public debt and $5 trillion in intergovernmental debt. The coupon on that $19 trillion and climbing is around 2.3%, and that’s with short-term interest rates at zero, virtually. Now the Fed, the current Fed, the lady is going to keep interest rates where they are. That of course protects all of the credit card debt of $1 trillion that’s out there, and so we don’t have mass panic on the credit card interest. But I know that the government is in a quandary as to what to do about this.
Now, the issue about what’s going to happen with the election isn’t so much an issue of Trump versus Clinton at the moment. It’s a question of whether the House and the Senate and the executive branch can get together and make Americans feel safer and have a fiscal and monetary policy that isn’t self-destructive, which currently it is.
I know that in this time of year, everybody is making all kinds of promises and declarations that they can do things, or they will do things, but of course they cannot without exacerbating the problems that are currently plaguing the country. What is lamentable is that the public discourse today on both sides misses the point entirely. We’re in the chicken-for-every-pot season where everybody’s promising the moon.
I recall that one of the most popular themes this year is that we’ve got to get student loans and the burden of student loans off the back of the kids. Well, when the Affordable Care Act was passed, and it was going to have a negative impact on the deficit which it sponsors, it promised it wouldn’t. The sponsors went looking for a way to offset $8 billion or so in additional deficit, and they came up with a kind of a stunt that we did with Fannie Mae and Freddie Mac when we eliminated mortgage brokers and we just took the loans directly into Fannie Mae and Freddie Mac, and that led to the collapse at $5 trillion of the system.
Well, they did the same thing with the Department of Education. They gave the student loans directly from the Department of Education and eliminated any middle people. And then they charged 6.5 points or 650 basis points for student loans instead of passing the savings because the Department of Education doesn’t really have a cost of money. But they’re making the student loans direct since the Affordable Care Act. Bernie Sanders didn’t talk about that.
But that 650 basis points, that carry is being made by the government to offset what would have been an even greater impact on the deficit by the Affordable Care Act. Well, if you really were sincere about making a better life for the kids, you would have passed the loans from the Department of Education to the kids at cost, which would have been interest-free. But this kind of hypocrisy, which sort of is endemic to the whole system regardless of party, has got to come to a halt, because if it doesn’t, then it insinuates itself into economic demand for services and products. It certainly insinuates itself into the price of everything, from Walmart to shoes and sneakers. Those things haven’t been by themselves become more precious. The value of the dollar has declined.
I know that we talk about China, fooling with their currency. The United States has fooled with its currency even more aggressively than the People’s Republic of China. I’m not an apologist for China or anybody. I’m simply stating a fact. But you won’t see this in the conventions of either party. You won’t hear this sort of thing because it’s so uncomfortable to talk about it. But the election, the election could put America on a better track if all the senators and congressmen and the presidents and the cabinet members decide that they should, or it won’t. I don’t know about anybody on this call, but I’m not in a position to make that prediction, but it surely, surely impacts the life of every American. Tax policy and all the rest all roll into this. And businessmen across the country and people at work in businesses will be affected by this as sure as sunrise tomorrow. And there seems to be a fear to deal with it directly. So count me as one of those old white guys that’s frustrated.
Leading up to this week’s Democratic Party convention, Hillary chose Blue Dog Senator Tim Kaine of Virginia as her VP. This was followed by the Wikileaks release of Democratic National Committee (DNC) e-mail files showing it acting as the Clinton Campaign Committee even to the point of using the same lawyers as her own campaign to oppose Bernie Sanders.
The response across the Democratic neocon spectrum, from Anne Applebaum at the Washington Post to red-baiting Paul Krugman and the Sunday talk shows it was suggested that behind the Wikileaks to release DNC e-mails was a Russian plot to help elect Trump as their agent. Former US ambassador to Russia Michael McFaul lent his tattered reputation to claim that Putin must have sponsored the hackers who exposed the DNC dirty tricks against Bernie.
The attack on Trump was of course aimed at Sanders. At first it didn’t take off. Enough delegates threatened to boo DNC head (and payday-loan lobbyist) Debbie Wasserman Schultz off stage if she showed her face at the podium to gavel the convention to order. The down-note would have threatened the “United Together” theme, so she was forced to resign. But Hillary rewarded her loyalty by naming her honorary chairman of her own presidential campaign! If you’re loyal, you get a pay-off. The DNC was doing what it was supposed to do. No reform seems likely.
The Democratic machine orchestrated a media campaign to distract attention by attributing the leaks were to a Russian plot to undermine American democracy (as if the e-mails did not show how undemocratic the DNC had operated in stacking the primaries). A vote against Hillary would be a vote for Trump – and a vote for Trump would really be for Putin. And as Hillary had explained earlier, Putin = Hitler. The media let it be known that attacking Wasserman Schultz – and by extension, Hillary’s neocon policies – makes one a Russian dupe. This theme colored the entire convention week.
Endorsing Hillary’s presidential bid on Monday evening, Sanders joined in the chorus that this November will pit Good against Evil – or as Ray McGovern put it on RT’s Cross Talk, at least proxies for Netanyahu vs. Putin. Wall Street Senator Chuck Schumer went on TV to heave a sigh of relief that the party was indeed united together.
Many Sanders’ supporters felt no obligation to follow his obeisance. Many walked out after he closed Tuesday’s state-by-state roll call by throwing his support behind Clinton. Others chanted “Lock Her Up”.
VP Kaine as Hillary’s Stand-in if She’s Indicted or Seems Unelectable
The potential “Hillary Republicans” who are turning away from Trump – whose ranks include Mike Bloomberg, the neocon Kagan family (Robert and Victoria Nuland) and William Kristol – far outnumber the Sanders supporters who may stay home or vote for Jill Stein on the Green Party ticket. Hillary sees more votes (and certainly more campaign contributions and future “speaking fees”) from the Koch Brothers, George Soros, Wall Street, Saudi Arabia and the corporatist Chamber of Commerce.
Kaine recently has fought to “free” small and medium-sized banks from being subject to the Consumer Financial Protection Agency. He has long supported the TPP, deregulation of Wall Street, and most everything that Sanders opposes. Appointed as DNC head by President Obama in 2008, he dismantled Howard Dean’s 50-state strategy, not bothering to fight Republicans in the South and other solid Republican states. His move let them elect governors who gerrymandered their voting districts after the 2010 census.
The DNC designated these “neglected” states to come first in the presidential primaries. They were the ones that Hillary won. Sanders won most of the swing states and those likely to vote Democratic. That made him the party’s strongest nominee – obliging the DNC to maneuver to sideline him. His criticism of big donors and Citizens United threatens to dry up the source of funding not only for Hillary but also for the DNC. They are going after the money – whose chief providers are Wall Street, neoliberal corporatists and New Cold War neocons.
Bernie’s campaign targeted Wall Street and corporate deregulation (the essence of TTP and TTIP) as the key to the One Percent’s monopolization of income and wealth since Obama’s post-2008 sacrifice of the economy on the altar of rescuing banks and their bondholders. That is why the Wall Street’s Donor Class that controls the Democratic Party machine want to discourage new voter enrollment and turnout. The last thing they want is an influx of new voters advocating real reform. Millennial newcomers are more progressive, born into a generation that has no opportunity to obtain jobs and housing as easily as their parents. So it’s best to keep out independents in favor of the old-time voters with brand loyalty to Democrats.
Demonizing Trump for Saying what Bernie Sanders Has Been Saying
Trump made his quip about Russia in what actually was an eloquent and funny press conference.
The media took this out of context to depict him as urging the Russians to hack into our e-mails. What he actually said was that if Russia – or China, or somebody “sitting in his bed” – did indeed read Hillary’s State Department and Clinton Foundation dealings, they should do the world a favor and release them to reveal her self-dealing.
Trump is right in saying that there has not really been a recovery for the Rust Belt or for the 99 Percent. Hillary brazens it out by claiming that Obama’s neoliberal economics have helped wage-earners, despite the debt deflation blocking recovery. She promises to continue his policies (backed by his same campaign funders).
That would seem to be a losing strategy for this year’s election – unless the Democrats gain control of the electronic voting machines, especially in Ohio. But the Republicans may decide to throw the election to Hillary, who is fortunate to have Donald Trump as her opponent. Demonized as Putin’s “Siberian candidate,” he has become the Democrats’ unifying force: “Hillary isn’t Trump.”
That’s what voting for the “lesser evil” means. Hillary’s message is: “Even though we support TPP and a New Cold War, at least you’ll have a woman at the helm. Anyway, you have nowhere else to go, because the other side is even more evil!” Her logic is that (1) if you criticize Hillary, you’re supporting Trump; (2) Trump is the Siberian candidate; hence (3) Criticism of Hillary, NATO’s New Cold War escalation or the TPP’s anti-labor treaty and financial deregulation is pro-Russian and hence anti-American.
All that strategists for the One Percent need to do is fund an even worse party platform to the right of the Democrats. So the choice will be between Evil A (economic evil with ethnic and sexual tolerance) and Evil B (without such tolerance).
It doesn’t have to be this way. But Sanders gave up, not feeling up to the task. Having mocked him as a socialist, Hillary is acting as the Joe McCarthy of the 2010s, mobilizing a wave of commie bashing against her Republican opponent.
On Monday leading up to the convention, the Democratic Party’s cable channel MSNBC kept juxtaposing pictures of Trump and Putin. Criticizing Hillary’s neocon stance supporting Ukraine’s military coup is depicted as support of Russia – while other commentators followed President Obama claiming that criticism of TPP means making China the new leader of Asia. The message is that criticizing NATO’s adventurism risks being called a Soviet – I mean, Russian – puppet.
Bernie’s Dilemma – and That of Other Would-Be Reformers of the Democratic Party
Back in the 1950s and ‘60s I heard labor leaders ask whether there really was nowhere to go except the Democratic Party. Most who joined got co-opted. Instead of moving the Democratic Party to the left, its leadership machine corrupted labor, and in due course the anti-war movement and socialists who joined hoping to move it to the left.
What then is Bernie’s plan to save his followers from being forced to make one compromise after another? The party machine demonizes policies with which Hillary’s neocons disagree, and demand support of NATO escalation and Obama’s (and Hillary’s and Kaine’s) underlying support of the TPP on the pretense that this will help rather than hurt labor. Hillary has denounced Bernie’s socialized medicine on the ground that it is utopian (as if Canada and the eurozone are anti-capitalist utopias).
While Trump sent out tweets and gave interviews about how Hillary and Debbie have screwed Bernie’s supporters, Sanders made no parallel attempt to ask why progressive Democrats didn’t applaud Trump’s assertions that he would wind down confrontation with Russia, that NATO is obsolete and needs restructuring, and his opposition to the TPP. Bernie didn’t seize the opportunity to mobilize non-partisan support for their critique of neoliberal economic policies. He cast his lot with Hillary, contradicting his claim during the primaries that she was not qualified to be president.
After Sanders ended Monday evening’s opening by endorsing Hillary Clinton, the MSNBC camera crew went down to talk to his supporters. They eagerly asked the first one who she would vote for, after hearing Bernie’s endorsement. “For Jill Stein,” the lady said, explaining that there was no way she would vote for Hillary.
The next interview produced a similar result. “I just don’t trust her,” the Bernie supporter said. A third said the same thing. The MSNBC booth tried to save face by assuring viewers that everyone they talked to had said they were going to vote for Hillary. But it sounded hollow. I suspect that viewers didn’t trust the TV media any more than they trusted Hillary.
The problem facing Hillary’s rivals is that she has wrapped herself in the legacy of President Obama. Having shied from criticizing the president, Sanders and his supporters are facilitating what may be a Lame Duck session sellout after the November election. My fear is that Obama will try to “save his legacy” by joining with the Republicans to drive through the TPP, and also may escalate the New Cold War with Russia and China so as to make it easier for Hillary to sign onto these moves.
Selecting Tim Kaine as her running mate means neoliberal, pro-TPP business as usual. Hillary didn’t oppose TPP. She just said she would put in rhetoric saying that its “purpose” was to raise wages – whereas most voters have shown themselves to be smart enough to realize that the effect will be just the opposite.
Yet Sanders endorsed her. Evidently he hopes to keep his position within the Party chairing the Senate Minority Budget Committee, while simultaneously trying to promote a revolution outside the Democrats. I was reminded of a Chinese proverb: When there is a fork in the road, a man who tries to take two roads at once gets a broken hip joint.
This straddle may have led Sanders to miss his big chance to make a difference. He is trying to take two roads at once, continuing to run as an Independent senator while caucusing with the Democrats without being able to block TPP and new Wall Street giveaways and more favoritism to the One Percent he has so eloquently denounced. Revolutions are a matter of timing. As a former YPSL he might have recalled what happened when Trotsky shied from breaking from Stalin after Lenin died early in 1924. Soon it was too late, and all Stalin’s opponents were purged. The moment was not seized.
Bernie has been an effective catalyst in this year’s election campaign. But as in chemistry, a catalyst is not really part of the equation. It merely helps the equation take place. Sanders didn’t say, “Thank god for Wikileaks. It shows that I was right and the DNC needs radical reform.” He left it to his supporters to hold up anti-TPP signs. His new message was “trust Hillary.” But even so, she will not forgive him for being against her before he was for her. He may still end up being marginalized in 2017.
I had hoped that in addressing the convention, Sanders would have said that its aim was not only to elect a president but congresspersons and officials all down the line. He could have mentioned the people he is supporting, starting with Wasserman Schultz’s opponent in Florida’s House race (supported by Obama as well as Hillary).
Bernie’s supporters who walked out on Tuesday have been duly radicalized. But he himself seems akin to be an American Alex Tsipras. Tsipras thought withdrawal from the eurozone was even worse than capitulating to austerity, while Sanders believes that withdrawing from the Democrats and backing a political realignment – perhaps electing Trump in the interim is even worse than Hillary’s pro-Wall street Obama-like agenda.
Matters were not improved when Bill Clinton gave a hagiographic biography of Hillary emphasizing her legal aid work to protect children, without mentioning how the 1994 welfare “reform” drastically cut back aid to dependent children. Madeline Albright said that Hillary would keep America safe, without mentioning Hillary’s promotion of destabilizing Libya and backing Al Quaeda against Syria’s government, driving millions of refugees to Europe and wherever they might be safer.
The many anti-TPP signs waved by Sanders delegates on Wednesday saw Hillary say that she would oppose TPP “as currently written.” This suggests that a modest sop thrown to labor – a rhetorical paste-on saying that the TPP’s aim was to raise living standards. This simply showed once again her sophist trickery at lawyering, giving her an out that she and long-time TPP supporter Tim Kaine were sure to take.
Obama’s brilliant demagogy left many eyes glazed over in admiration. Nobody is better at false sincerity while misrepresenting reality so shamelessly. Probably few caught the threatening hint he dropped about Hillary’s plan for corporations to share their profits with their workers. This sounds to me like the Pinochet plan to privatize Social Security by turning it into exploitative ESOPs (Employee Stock Ownership Programs). The idea is that wage withholding would be steered to buy into the company’s stock – bidding it up in the process. Employees then would end up holding an empty bag, as occurred recently with the Chicago Tribune. That seems to be the great “reform” to “save” Social Security that her Wall Street patrons are thinking up.
One might think that the Democrats would see the Obama administration as an albatross around their neck, much as Gore had Bill Clinton around his neck in 2000. Gore didn’t want him showing his face in the campaign. Yet Hillary presents herself as continuing the Obama policies with “business as usual,” as if she will act as his third term.
Voters know that Obama bailed out the banks, not the economy, and that Hillary’s campaign backers are on Wall Street. So this year would seem to have been a propitious time to start a real alternative. Hillary is mistrusted, and that mistrust is spreading to the Democratic Party machine – especially as the Koch Brothers and kindred backers of failed Republican candidates find neoliberal religion with Hillary. A third party Green/Socialist run might indeed have taken off – with Sanders stealing Trump’s thunder by pre-empting his critique of TPP, free trade and NATO, adding Wall Street and Citizens United campaign financing.
This Fall’s Presidential Debates
Hillary and even Bernie assured the Democratic convention again and again how much President Obama has revived the economy from the “mess” that Bush left. While Trump centers his disdain on the TPP (much as he knocked Jeb Bush out by saying that the invasion of Iraq was a mistake), he can reply, “What recovery? Have you voters really recovered from 2008?”
Hillary and other speechmakers at the Democratic convention criticized Trump for saying that “things are bad.” But according to the July 13 NBC/WSJ poll, 73% of voters believe that the country is going “off on the wrong track.” If Trump shifts his epithet from simply “Crooked Hillary” to the more nuanced “Crooked Wall Street and their candidate, Crooked Hillary,” he’ll score a ratings spurt.
Debt deflation and shrinking markets over the next two years do not provide much hope for increasing the minimum wage – which wouldn’t help much if one can’t find a job in the first place! By 2018 the continued stagnation of the 99 Percent may lead to a midterm wipeout of Democrats (assuming that Hillary wins this year against Trump), catalyzing an alternative party (assuming that she does not blow up the world in her neocon military escalation on the borders of Russia and China).
The problem with Trump is not mistrust; it is that nobody knows what policies he will back. The media are giving him the same silent treatment they did with Bernie, while accusing him of being in Putin’s pocket. He did admit selling some real estate to Russian nationals. Perhaps some of these gains fueled his presidential campaign …
The solution is not to save the Democratic Party, but to replace it. The debate reminds me of that about the Soviet Union in the 1950s: Is it a degenerated workers’ state, or a Stalinist bureaucratic mutation going the opposite direction from real socialism?
I wonder how many years it will take for Hillary to end up booed so loudly that she has to leave hotels and other speaking venues via their back alleys, much as Lyndon Johnson had to sneak out to avoid the anti-war booers leading leading up to the 1968 election.
The top three U.S. oil companies released their financials today and the results were completely awful. Exxon Mobil was the only one of the three that still made a profit for the first half of the year, however it was down a stunning 62% compared to the same period last year.
Unfortunately, Chevron and ConocoPhillips results were much worse as they suffered a combined net income loss of $4.7 billion for the first half of 2016. We must remember, these are the major U.S. oil companies that are supposed to be highly profitable. I hear this all the time from politicians and folks who believe in lousy conspiracies.
If we take a look at the chart below, we can see how much blood is flowing from the top three U.S. oil companies:
As I stated, Exxon Mobil still was able to show a profit of $3.5 billion, but this was down 62% compared to the $9.1 billion net income during the same period last year. Chevron actually enjoyed a positive net income of $3.1 billion during the first half of 2015, however this became a net loss of $2.2 billion 1H 2016. And then we have ConocoPhillips that suffered a $2.5 billion loss 1H 2016 versus a small profit of $93 million during the same period last year.
If we combine the total for these three major U.S. oil companies, they reported a $12.3 billion profit in the first half of 2015 compared to a net loss of $1.2 billion in the first six months this year.
So, individuals who don’t believe in peak oil because the U.S. oil companies are making big profits, need to wake up and look at the data. The low oil price and the rising debt levels on these oil companies balance sheets are destroying them. While Exxon Mobil is still making a profit, it is nothing compared the BIG MONEY it was making a few years ago.
I don’t have a chart for this, but look at these figures:
Top 3 U.S. Oil Companies Net Income (1H 2011 vs 1H 2016)
Exxon Mobil: (1H 2011) = $21.8 billion
Exxon Mobil: (1H 2016) = $3.5 billion
Chevron (1H 2011) = $13.9 billion
Chevron (1H 2016) = -$2.2 billion
ConocoPhillips (1H 2011) = $4.7 billion
ConocoPhillips (1H 2016) = -$2.5 billion
What a difference in five years… aye? These top three U.S. oil companies made a combined net income profit of $40.4 billion during the first half of 2011 versus a net loss of $1.2 billion 1H 2016. And… I believe the situation will become a lot worse for these companies going forward.
The U.S. Energy Sector is in serious trouble. I believe the United States and world will suffer a SENECA CLIFF collapse in the future. I discussed this in my interview on Finance & Liberty:
The Precious Metal Prices Continue To Rally
As the oil price continues to fall, gutting the entire U.S. oil industry, the precious metals continue to rally. Today, the price of gold is up $12.40 to $1,347, while silver is higher by $0.11 to $20.23.
This is a very interesting disconnect as U.S. economic indicators point to a contraction on top of deflating energy prices. Some analysts have been forecasting a huge deflation with falling gold and silver prices. I don’t think this will happen. Gold and silver may have different plans, especially if we see more problems coming out of the European banks.
Investors need to prepare themselves for the coming collapse of most paper assets and real estate values. I don’t see the oil price recovering anytime soon, so this will put severe pressure on the U.S. oil industry. Without rising energy production, ECONOMIC ACTIVITY GOES SOUTH… in a BIG WAY.
The idea that investors should only purchase 5-10% of their assets in gold or silver will become a HUGE MISTAKE going forward.