Month: December 2017

Authored by Charles Hugh Smith via OfTwoMinds blog,

Note that widening wealth and income inequality is a non-partisan trend.

One of the core goals of the Federal Reserve's monetary policies of the past 9 years is to generate the "wealth effect": by pushing the valuations of stocks and bonds higher, American households will feel wealthier, and hence be more willing to borrow and spend, even if they didn't actually reap any gains by selling stocks and bonds that gained value.

In other words, the mere perception of rising wealth is supposed to trigger a wave of renewed borrowing and spending.

This perception management only worked on the few households which owned enough of these assets to feel wealthier–the top 5%, the top 6 million out of 120 million households. This chart shows what happened as the Fed ceaselessly goosed financial assets higher over the past 9 years: the gains, real and perceived, only flowed to the top 5% of households earning in excess of $200,000 annually.

Spending by the bottom 95% has at best returned to the levels reached a decade ago in 2007.

By focusing on boosting financial assets to the moon as a means of goosing spending, the Federal Reserve has widened wealth and income inequality to the breaking point. Perception management doesn't actually boost the inflation-adjusted wages of the bottom 95%, which have stagnated for decades. Nor does boosting assets do much good for the vast majority of households which have modest holdings of stocks and bonds, usually in IRA or 401K retirement accounts they can't touch without paying steep penalties.

As the charts below illustrate, the Grand Canyon between the top 5% and everyone else is widening. Let's say a househould has $12,000 in retirement funds and $5,000 in a savings account. (Many households have less than $1,000 in savings, so this example-household is doing pretty well to have $17,000 in cash and financial assets.)

Thanks to the Federal Reserve's Zero Interest Rate Policy (ZIRP), savers have lost ground after adjustments for inflation. The stock market has more than doubled, and most bond funds have appreciated, but precious metals and other commodities have not performed as well. So let's say the household's retirement portfolio rose by a hefty 75%, or $9,000, to a total of $21,000.

Does this modest gain actually change the financial foundation of the household to the point that the household can now afford to buy a new vehicle, college tuition, etc.? The short answer is no; the gains are simply too modest as a percentage of income to make any difference.

Compare this to a top 5% household with hundreds of thousands of dollars of financial assets: gains registered in the hundreds of thousands do indeed move the needle on household wealth and perception management. The top 5% haven't just reaped outsized gains in Fed-goosed assets; they've also reaped the vast majority of any wage gains generated in the past 9 years of "recovery."

As this chart shows, the bottom 90% lost ground, and the really substantial gains have accrued only to the top 1%.

Note that widening wealth and income inequality is a non-partisan trend. The political and financial elites have feathered their own nests while the bottom 95% have lost ground.

The Federal Reserve's perverse policy of perception management has exacerbated wealth and income inequality: "wealth effect" = widening wealth inequality.

*  *  *

I'm offering my new book Money and Work Unchained at a 10% discount ($8.95 for the Kindle ebook and $18 for the print edition) through December, after which the price goes up to retail ($9.95 and $20). Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

via http://ift.tt/2l0IzAK Tyler Durden

From the Slope of Hope: I saw a headline on December 24 which put a damper on my Christmas Eve:

Ummm – – so why on earth would this bug me? I don’t have a dog in this fight. If Theranos goes bankrupt, it doesn’t hurt or help me one bit. If they become the most valuable company in the world (ha!), the situation is the same. Utterly neutral and meaningless. So why should I care?

I’ve been pondering my reaction. Theranos is no stranger to the Slope of Hope, as I’ve written about this train wreck at length on eight separate occasions. For most of 2017, I wondered what had happened to them, because the media went completely silent on them. Ms. Holmes’ own Twitter account hasn’t issued a tweet for over two years (!), and every time I drive by the gorgeous Theranos headquarters here in Palo Alto, I see a completely empty parking lot. So I figured she basically got away with raising $900 million and having a ruined company without any consequence. But it seems I was wrong.

With the $100,000,000 that Fortress Investment is inexplicably throwing at Theranos, the company has now raised a billion bucks. I figure Holmes must have some SERIOUS dirt on somebody, because nothing about this makes any sense at all. Yes, yes, I realize her board of directors used to have every deep state slimeball imaginable, so maybe that helps, but let’s face it, the Theranos name is mud. I would wager its brand has NEGATIVE value. If you were starting a brand new medical device company, and you could give it the Theranos name for, say, ten dollars, would you do it? Yeah, I didn’t think so.

So, again, why should I care? Well, I think part of it is this:

Holmes’ whole schtick was how she was the reincarnation of Steve Jobs. From the bizarre diet to the black turtlenecks to the secrecy (“Hey! Our stuff doesn’t work at all! Shhhhhh! Don’t say anything!”), she held herself out as a younger Steve Jobs who wore a B-cup. For a while, the media gobbled it up, and they actually put her on the front cover of national magazines, repeating the claim that she was worth $4.5 billion. She – – how shall I put this? – – wasn’t.

I remain floored anyone would put another dime into this place. As the recent Wall Street Journal article mentioned, “An investigation by the Journal in October 2015 sparked a wave of scrutiny about Theranos’ practices, at a time when the company had a valuation of around $10 billion. Holmes has continued to lead Theranos through settling multiple lawsuits. However, investigations opened by both the Justice Department and the Securities and Exchange Commission are ongoing.” So they are tits-deep in lawsuits and angry shareholders, both Holmes and Theranos have been banned from running labs, and their name has become synonymous with smoke and mirrors. What’s going on here? Just because you throw on a white lab coat doesn’t make you a genius scientist.

Joking aside, I think for me what bugs the holy hell out of me is simply the disappointment. The past eight years have shown us an environment in which fraud, government bailouts, and crooked executives go unpunished, if not celebrated. Once in a blue moon, there’s a piece of shit company which is finally exposed for what it is (other examples – – Color.com and Clinkle.com) and blow up in front of our eyes. We saw that with Theranos, and even though their success or failure doesn’t affect my life one iota, it gave me some minuscule degree of satisfaction that there was still a little bit of judgment, discernment, and fairness to the world.

So when Theranos had an H-bomb dropped on them, and Holmes disappeared from the press, and their parking lot went empty, and their office space went up for least, I thought to myself: there’s still a little bit of sense left out there. But I was wrong. There isn’t. And if you’re a mildly-attractive slender blonde with some razzle-dazzle and the right connections, you can get away with just about anything.

via http://ift.tt/2zy9cRY Tim Knight from Slope of Hope

Roughly one year ago we shared the plans of a billionaire real estate developer in San Francisco who wanted to build communities for the homeless in Bay Area neighborhoods using stackable steel shipping containers (see: San Fran Billionaire Luanches Plan To House Homeless In Shipping Containers).  Not surprisingly, the efforts were met with some resistance from the liberal elites of Santa Clara who, despite their vocal support of any number of federal subsidy programs for low-income families, would prefer that those low-income families, and their subsidies, stay far away from their posh, suburban, “safe places.”

Alas, as the San Francisco Chronicle points out today, like it or not, the boom in “micro-houses” is just getting started in the Bay Area with nearly 1,000 tiny homes, with less than 200 square feet of living space, currently being planned in San Francisco, San Jose, Richmond, Berkeley, Oakland and Santa Rosa.

Planners say that’s just the beginning. “We’re very excited about micro-homes,” said Lavonna Martin, director of Contra Costa County’s homeless programs. “They could be a big help. They have a lot of promise, and our county is happy to be on the cutting edge of this one. We’re ready.”

 

Contra Costa has a $750,000 federal homelessness grant to pay for 50 stackable micro-units of supportive housing, and Richmond Mayor Tom Butt would like to see them in his city. Developer Patrick Kennedy brought a prototype of his MicroPad unit to Richmond in November, and county and city leaders say they are leaning toward choosing it.

 

“They’re very fine, and they make a nice-looking building,” Butt said. “They’d be good for anybody looking for housing.”

The beauty of the tiny units is that they can be built in a fraction of the time it takes to construct typical affordable housing, and at a sliver of the cost, which means a lot of homeless folks can be housed quickly.

The homes have also caught on in San Jose where the City Council just approved $2.4 million to build a village of 40 units to help house the homeless.  Of course, just like in Santa Clara, San Jose residents are lashing out at city officials over plans that they say will only serve to increase neighborhood crime.

San Jose resident Sue Halloway told the council she was afraid putting the village near residences would increase “neighborhood crime, neighborhood blight (and) poor sanitation,” and predicted that it would be “a magnet for more homeless.”

 

City Councilman Raul Peralez said he understands such concerns, but that “there are no facts surrounding these tiny homes and whatever blight or crime they might bring, because we haven’t done them yet.”

 

“I tell people you really have two options,” said Peralez, who said he wants the village in his downtown district. “You can allow the homeless to live on the streets, or you can provide not only shelter but services in a confined area — with security. In my mind, that’s a way better option for managing this community in an organized way.”

So, what do the stackable units look like?  As seen in the video below, prototypes from one manufacturer, MicroPad, come complete with full bathrooms and kitchens and have up to 160-180 square feet of living space…

“These micro-homes may seem small at 160 to 180 square feet, but they’re actually pretty spacious when you’re in them,” she said. “And they go up very fast.”

 

Kennedy’s MicroPads have showers, beds and kitchens. Individually they resemble shipping containers, but once they’re bolted together with siding and utilities, they look like a regular building.

…which is more or less considered a mansion by struggling New York artist standards…

via http://ift.tt/2Dim9lk Tyler Durden

Authored by Ron Patterson via OilPrice.com,

This assessment is based on the data in the 2017 BP Statistical Review of World Energy available here. As such it uses that review’s definition of oil which is crude and condensate and natural gas liquids, uncompensated for their different energy contents or values of refined product components.

Figure 1: World Oil Production 1990 – 2017

(Click to enlarge)

This analysis was prompted by a chart by Ovi showing that Non-OPEC production less Russia, Canada and the United States has been in decline since 2004. That decline rate is 0.25 million barrels/day/annum. It had previously risen strongly from 1990.

Figure 2: Production Rate Change 2007 – 2016

(Click to enlarge)

The United States LTO patch is widely credited with having caused the oil price collapse of 2014. American production had risen by six million barrels per day since 2007. The United States was not alone with four other countries totaling six million barrels per day of production increase. Iraq and Saudi Arabia contributed two million barrels per day each with Russia and Canada contributing one million barrels per day each.

Figure 3: World Oil Consumption 1990 – 2016

(Click to enlarge)

OECD consumption has been flat even as OECD countries have had an increase in GDP.

Figure 4: Where the Oil Went

(Click to enlarge)

The fall of non-OECD consumption from 1990 to 1996 was due to the dissolution of the Soviet Union. Since then consumption growth has been steady at about 835,000 barrels/day/annum. Chinese consumption growth was 240,000 barrels/day/annum up to 2002 and then steepened to 512,000 barrels/day/annum since. OECD consumption growth was strong up to 2007 and then demand contracted due to higher oil prices. From here it looks like OECD consumption has plateaued. China may have also plateaued. Non-OECD consumption is likely to continue rising with a large part of that being due to India.

Figure 5: World Oil Production from 1990 with a Projection to 2025

(Click to enlarge)

This projection is based on U.S. conventional production resuming long term decline and U.S. LTO production continuing to climb, driven by the Permian Basin. Russian production is in a long plateau. Canadian production continues its slow, capital-intensive climb. Other non-OPEC production continues its established decline of 0.25 million barrels/day/year. Iraqi production rises by 2.0 million barrels/day to 2025. It could be higher than that. Other OPEC production had risen by 3.0 million barrels/day from 2000 to 2005, in response to the lifting of production restrictions, and has been in a plateau since. The projection assumes a decline of 0.3 million barrels/day/year.

The projection shows a gap of about eight million barrels per day by 2025 relative to the established growth rate indicated by the dashed line. This could largely be filled if Permian Basin production ramps up faster than projected and Iraqi production growth ramps up faster than projected now that their civil war is over.

In summary, the market is likely to remain in balance and sustained price excursions are unlikely.

via http://ift.tt/2BGlKbJ Tyler Durden

While the establishment may breathe a sigh of relief looking back at political developments and events in Europe – which was spared some of the supposedly “worst-case scenarios” including a Marine le Pen presidency, a Merkel loss and a Geert Wilders victory – in 2017, any victory laps will have to be indefinitely postponed because as Goldman writes in its “Top of Mind” peek at 2018, Europe’s nationalist and populist tide was just resting, and as Pascal Lamy, the former Chief of Staff to the President of the European Commission admitted earlier this year, “Euroskeptic politicians are largely following the pulse of domestic sentiment. The fact is that the public is less enthusiastic about Europe than it once was.“

Echoing the sentiment by the europhile, Goldman’s Allison Nathan writes that while the Euro area’s most immediate political risks—i.e., populist or euroskeptic parties winning key elections this year— did not materialize, these movements have continued to gain traction.

• In the Dutch elections in March, the far-right Party for Freedom performed worse than polls had once predicted, but still increased its share of the vote relative to the 2012 elections. It remains the second-largest party in parliament.
• In France, concerns about the prospect of Marine Le Pen winning the presidency gave way to optimism over Emmanuel Macron’s reform agenda; nonetheless, Le Pen posted the best-ever showing for her party in a presidential race.
• In Germany, Chancellor Angela Merkel’s CDU-CSU retained the largest number of seats in the Bundestag, but the far-right Alternative für Deutschland (AfD) entered it for the first time with 13% of the vote.
• And elsewhere in Europe, populist parties on various parts of the political spectrum performed well enough to participate in government coalitions; indeed, an anti-establishment candidate in the Czech Republic recently became prime minister

Some other observations and lessons from recent European events in the twilight days of 2017:

• The transition from campaigning to governing has proved difficult. Europe’s increasingly fragmented political landscape has made coalition-building challenging. In the Netherlands, it took over 200 days to form a government with only a single-seat majority. Similarly, German coalition talks with the Green party and the Liberal (FDP) party collapsed in November. But, after having planned to move into the opposition, the SPD—Merkel’s former coalition partner—decided at its congress last week to open talks with the CDU-CSU. Talks were set to begin this week.
• Other sources of uncertainty remain unresolved. Spain continues to grapple with the standoff between Madrid and Catalonia; regional elections in Catalonia on December 21 will influence the trajectory of the situation. Meanwhile, the UK and EU-27 seem likely to agree to move past the first phase of the Brexit talks (covering separation issues). But in a setback for UK Prime Minister Theresa May, UK lawmakers recently voted for an amendment to the Brexit bill that will guarantee Parliament a vote on the final deal agreed with the EU.
• The decline in political risk bolstered European assets, though fundamentals likely played a decisive role. The market-friendly outcome of the French elections dovetailed with a pick-up in European growth, supporting European equity markets. US inflows into European equities rose significantly but have since stabilized with the acceleration in growth and the decline in the risk premium likely behind us. Receding political risks also contributed to a stronger euro, which is up 12.5% against the dollar this year. Given the currency move, the SXXP is up roughly 7.5% in local terms and 20.6% in USD terms year-to-date.

Next, here’s what Goldman expects and will look for in 2018 and beyond:

• A continuation of the populist pull. The socioeconomic and cultural factors driving public opinion are unlikely to dissipate. Indeed, they may come into greater focus if growth moderates on a sequential basis starting in mid-2018.
• Constraints to further fiscal integration. Opposition to fiscal transfers within the Euro area makes incremental revisions to existing EU programs more likely than transformational change. Key to watch will be Macron’s credibility as a champion of integration, which will hinge on his ability to push through reforms in the face of political and economic constraints.
• Risks around Italian elections set to take place in March. Polls show the largest populist party, the 5 Star Movement (M5S), leading with roughly 27% of the vote. However, the new electoral law and M5S’s unwillingness to join a coalition suggest a centrist coalition is most likely. Such a government, while pro-EU/euro, would likely struggle to implement reforms.
• An eventual resolution of political issues in Germany and Spain. We believe Germany’s major parties will work to avoid new elections, given limited public appetite for a new vote and the risk of AfD gaining more seats in parliament. In Spain, economic and policy uncertainty could persist, but in our view, it is not likely to have lasting or systemic implications. Eventually, we expect a compromise that grants Catalonia greater autonomy within Spain.
• A bumpy road to Brexit. Expect the UK and EU to eventually agree to a two-year “status quo” transition plan.

And finally, here is a map showing where the forces of populism are expected to remain strong – and grow – across the continent.

via http://ift.tt/2DUrkZL Tyler Durden

Authored by Toni Airaksinen via Campus Reform,

A group of feminist professors recently discovered that Instagram selfies taken by women in college can reinforce “traditional gender roles.”

In a study led by Mardi Schmeichel, a University of Georgia (UGA) professor specializing in “feminist theory,” a team of professors analyzed 233 selfies that were posted in 2013 within 24 hours of the first UGA football home game of the semester.

Schmeichel and her team analyzed these selfies to see if they represented “the idealized symbol of the southern lady,” which they note is an aesthetic trope that “has had significant and enduring consequences on notions of femininity in the South.”

This symbol of the southern lady, they argue, is typified by students’ formal wear, soft and flowy dresses, a significant amount of jewelry, and clothes that emphasize “feminine curves without revealing what might be considered ‘too much’ skin.”

Bright red lipstick and white teeth are also considered emblematic of this southern aesthetic, Schmeichel argues.

After analyzing selfies posted in the time surrounding the first 2013 UGA home game, Schmeichel found that 25 percent of women who posted photos embody this harmful aesthetic.

“The clothing, makeup, posing and editing used in the southern lady images work together to achieve a hyperfeminine gender performance that differs significantly from the images of women in the other selfies,” Schmeichel laments.

 

“In the southern lady images, attention to a traditionally gendered performance has been emphasized,” Schmeichel writes, lamenting that “the southern lady images that circulate in these selfies reinscribe a traditional femininity organized around/on a binary.”

She also notes that students’ embodiment of femininity can be troubling.

“The celebration of traditional femininity has been is [sic] a vexing concern for some feminists, who have interpreted it as a rolling back of hard-won progress to eliminate women’s association with these rigidly gendered and often marginalized subject positions.”

 

“If we are committed to destabilizing gender binaries and working toward a world in which bodies, and images of them, are not traded as capital, then there must be some attention paid to ways in which women’s [Instagram] practices and behaviors can get in the way of these goals,” Schmeichel concludes.

Campus Reform reached out to Schmeichel and her team for comment, but did not receive a response in time for publication.

via http://ift.tt/2l2LcSz Tyler Durden

First Appearing on HedgeAccordingly.com

Fifth in a series.  Part 1, Part 2, Part 3, Part 4

By @sellputs

Let us regard the wonders of technology & innovation: Suddenly, we now have multiple easy ways to lose money betting on bitcoin. Giddyup!

With incredible speed, from your laptop or even your smartphone and without even thinking about it, you can open up a new account, inject real U.S. dollars into it, use that to buy a teensy piece of your favorite cryptocurrency, and begin surfing the bitcoin wave. Or begin getting crushed by that wave, depending on your timing, smarts and luck.

This occurs to me on a recent Thursday night, as I visit an old friend in Brooklyn and bring along Big Guy, a college pal who stands 6-feet-4 (“and a half,” he feels it necessary to point out).  The Big Guy and I had been hanging out at the famed Waverly Inn in the West Village in Manhattan, where I had the vodka martini, marked down on special: just $28, down from $30 list.

This next point has nothing to do with bitcoin, okay? I gotta say: Anybody who regularly spends 30 bucks on a martini is a P.T. Barnum-scale sucker.  What a waste of money.  Waste it, instead, on something really irresponsible. . . . like bitcoin.

Anyway, we’re standing around a table in my friend’s apartment in Brooklyn, and Big Guy is taking swigs from a bottle of Blue Point Winter Ale and staring into the screen of his smartphone, as if mesmerized by some new videogame. Instead, he is tracking his own cryptocurrency trades.

“Uh oh, Ethereum is flash-crashing,” he says. He had gotten got into Ethereum (ETH), a newer “altcoin” alternative to bitcoin, a few days earlier at $620, watching it rise to $740 in a day or two and holding on, only to see it crash instantly down to $650 just this moment.  Should he sell?

Guy resists the urge and doubles up on his bet, adding to his ETH holdings (as well as Litecoin, LTC) “to lower my cost basis and scalp the bounce-back from the flash crash,” as he describes it later.  By 3 a.m. that same night, Ethereum had re-inflated to rise back up even higher, to $850. Whew.

Big Guy had put $10,000 into a new account he opened at Coinbase, a digital exchange akin to the New York Stock Exchange (except it is unregulated and carries no particular guarantees, far as I can see).  He had bet his stake all on bitcoin, pulling out after a 53% gain in a week, after commissions.

Guy opened up a second account, this one on GDAX, a 24/7, online platform in the rather unregulated, Wild West of crypto (it is owned by Coinbase). GDAX offers FDIC guarantees up to $250,000 (what happens to your money as a result of your trades is on you). On GDAX, he bet his bitcoin profits on the two lesser lights, ETH and LTC.  He says he can take profits out of Litecoin in only minutes, while transferring money out of bitcoin would take several hours. (LTC is lighter-traded than the binge-fueled bitcoin.)

GDAX charges him 25 basis points (0.25% of the total value of the trade) for “taking markets,” that is, buying coin shares on offer, and no fee at all for “making markets,” or selling on the platform.  Coinbase’s buying fee, at 1.5%, is fives times as much that of GDAX. A few days after he sat out the mini-flash-crash, Guy transfers some LTC from his GDAX account to another coin platform, Binance, where he wants to sell LTC and spread the proceeds among various coins trading below $5 apiece.

And a day or two after that, Big Guy is beaten down: He was up 75% and lost most of it all when he panicked and fled ETH and LTC at the bottom of a later plunge. Too fidgety. Easy come, easy go. He’s back in Ripple, though, and it has been “outperforming.”

Yes, the Big Guy admits, he does worry that in a flash crash or especially high trading volume, he may not be able to minimize his losses and take out cash.  In cryptocurrency trading, the bigger question than whether to sell may be: Can you sell? 

Coinbase limits how much money you can pull out of your account after you sell your crypto and convert the proceeds back to U.S dollars or whichever “real” currency you desire. So, in the event of a crash or some sudden, sharp de-valuation in bitcoins, your ability to act fast and sell your coins might be hampered, and selling your coins could be all but impossible.

Think of it as a football packed with cheering buyers, most of them unaware that there’s only one exit—and it is the size of a doggy door.  Buyer beware.  Puppies, too.

Next up: The high fees for buying bitcoin.

via http://ift.tt/2BVTXbP HedgeAccordingly

A staggering new analysis from Zillow highlights perfectly the unintended consequences of central banking policies that drive massive asset bubbles but minimal job/wage growth.  According to the study, surging home prices and rising rents have now resulted in a record 30% of American adults, up from 21% in 2005, being forced take on roommates just to afford monthly rent payments.

As rent consumes a growing share of household income in many cities, some people must relocate or find ways to offset rising prices. An increasingly popular way to cut costs is by adding a roommate. Nationally, 30 percent of working-age adults—aged 23 to 65—live in doubled-up households, up from a low of 21 percent in 2005 and 23 percent in 1990.

 

We define a doubled-up household as one in which at least two working-age, unmarried or un-partnered adults live together. For example, a 25-year-old son living with his middle-aged parents would constitute a doubled-up household, as would two 23-year-old roommates who are not partnered to each other. A doubled-up household contains people who might choose to live apart under different circumstances, financial or otherwise.

Not surprisingly, large metropolitan areas like New York, LA, Miami and San Francisco saw the highest percentage of their adult populations doubling up on housing.

Of course, as the following chart illustrates, there is a strong correlation between doubling-up and rent affordability with the most expensive cities seeing more than 40% of their adult residents living with roommates.

“As rents have outpaced incomes, living alone is no longer an option for many working-aged adults,” said Zillow senior economist Aaron Terrazas. “By sharing a home with roommates — or in some cases, with adult parents — working adults are able to afford to live in more desirable neighborhoods without shouldering the full cost alone. But this phenomenon is not limited to expensive cities. The share of adults living with roommates has been on the rise in historically more affordable rental markets as well. Unless current dynamics shift and income growth exceeds rent growth for a sustained period of time, this trend is unlikely to change.”

As we’ve noted frequently, the biggest increases in doubled-up houses has come from the millennial generation as thousands of college seniors, armed with their $250,000 anthropology degrees, are apparently finding it difficult to land their dream jobs after graduation.  That said, while millennials have seen the biggest increases, people across the age spectrum have also become increasingly reliant on roommates to meet their monthly rent obligations…

…so at least we all have that to look forward to in retirement.

With that, here are the full results from Zillow:

via http://ift.tt/2CbBnt7 Tyler Durden

Authored by Robert Gore via Straight Line Logic,

What a difference eleven months make.

Shortly after Donald Trump was inaugurated he fired Michael Flynn.

What’s become the conventional subtext is that the intelligence agencies have launched a “soft coup” against Trump, he has been significantly weakened, and the Deep State has scored a major victory.

“Plot Holes,” SLL, 2/26/17

Rejecting that subtext, SLL developed in “Plot Holes” and later articles a series of interrelated hypotheses. We posited that Trump was smarter and the Deep State weaker and more incompetent than generally reckoned. Also, that the Deep State’s animus towards Trump was based chiefly on fear of exposure and prosecution for its long history of corruption and criminality, not policy differences, notably concerning Russia. Finally, we suggested Trump is chiefly motivated by a drive for power. These hypotheses yielded testable predictions.

As predicted, the Russiagate investigation, based as it is on nothing, is now recognized as a monumental blunder. It forced the Deep State into the open and revealed its prosecutorial forbearance towards Hillary Clinton, its effort to help her and hinder Trump during the election, and its attempt to depose Trump afterwards. The FBI has been exposed as the antithesis of a concept implied by the word investigation: impartiality. Holdovers from the Obama Justice Department have been compromised.

The tables are turned. As the Russiagate investigation fades, Trump is left with investigatory gold mines: Uranium One, Fusion GPS, FBI and Department of Justice political meddling and obstruction of justice, Hillary Clinton’s emails, and the Clinton foundation. Trump could fire Robert Mueller with only a minor political uproar, but Mueller’s making a fool of himself to Trump’s political benefit. Why stop him?

As for those gold mines, Trump will decide if the threat of an investigation or an actual investigation best satisfies his leverage and power calculations and proceed accordingly. There has been no general swamp draining, nor will there be. Trump uses investigatory threats as a Machiavellian tactic to extract what he wants from compromised political actors in useful positions. The Clintons and James Comey, no longer in power and thus, no longer useful, are the most likely to be investigated and prosecuted.

In foreign policy, recognizing Jerusalem as the capital of Israel emphasizes Trump’s pronounced tilt toward Israel. Acquiescing to Saudi Arabia’s hapless war against Yemen and Mohammed Bin Salman’s recent purge confirms his support of that regime. In return, Israel and Saudi Arabia have sat still for Trump’s discontinuance of the US policy of supporting Islamic extremists to further regime changes (see “Powerball, Part Two”). This has meant accepting a de facto victory for the Russian-Shia alliance in Syria. US support for the Middle East’s Sunni bloc and Israel as Russian backs the Shiite bloc may lead to a standoff that brings a reduction in violence in that troubled region. It has already begun to reduce refugee flows from the area to Europe.

This is not to say that Trump’s rhetorical broadsides against Iran will stop, but the claims that the US is on the verge of war are overblown. Such a conflict would lead to a Middle East conflagration and the third officially recognized world war.

Trump’s blasts against North Korea are more problematic. His task there is more difficult than Iran; North Korea has nuclear weaponry purportedly able to strike most of the US. Trump has two options: a military strike designed to wipe out North Korea’s nuclear arsenal and Kim Jong-un’s regime, or negotiations that ratify the status quo, with Russia and China applying continuing pressure to enforce Kim’s compliance. At this point Trump may not know what he’s going to do, other than more verbal shots at North Korea and continuing displays of military strength in the region.

Trump has started no new wars. His administration has rolled back some regulations and he just won a legislative victory on tax reform. That may give him enough of a headwind to readdress Obamacare, which has neither been repealed nor replaced. He has his enemies on their back feet. Only fringe elements are still talking about impeachment. The government’s statistics indicate growth is running at above 3 percent, better than trend Obama growth, and the stock indexes keep making new records.

In 2017 SLL made contrarian, optimistic predictions for the president and pessimistic predictions for the economy and stock market (see “Hard Core Doom Porn”) We’ve been more right on the former than the latter…so far. For 2018, we’re with the minority who see clouds and thunderstorms, not silver linings. This is about as good as it gets for Trump.

Deft—by this analysis—as Trump has been, his biggest challenge lies ahead. The government is bankrupt, and demographics will push it ever-deeper in the hole. The global economy is struggling under monstrous and unsupportable debt. Fiat money something-for-nothing has a sell-by date, sooner or later the stock market and economy will head south. Historically, there’s been a tight correlation between stocks, the economy, and presidential popularity.

“Is Trump Winning?” SLL, 8/6/17

Debt has been Trump’s siren song his entire career, and more than once he’s crashed on the rocks. Big triumphs have been followed by big disasters, hubris undoubtedly playing a role.

Stock market and cryptocurrency pyrotechnics have obscured an incipient bear trend in a much more important market, bonds, which in the US apparently topped out in July 2016. Falling bond prices mean rising interest rates. The world has never been more indebted; a global bear market in bonds would be toxic to equity markets and economies (and perhaps cryptocurrencies). Tellingly, high yield bond prices are diverging from rising stock prices, indicating increasing credit stress. According to David Stockman, tax reform will increase the government’s borrowing to $1.25 trillion in fiscal year 2019. Rising rates would add more to the government’s interest bill, and hit indebted businesses and individuals as well. They would offer relief to savers long abused by the Fed’s interest rate suppression tactics, but savers are a much smaller group than borrowers, and they spend less.

Rising debt and ever-expanding government are in large part responsible for a long-term decline in trend economic growth rates across the developed world. Much of what growth there has been was funded with debt. If you buy $100 dollars worth of good or services on credit you have not increased your income, your personal “gross domestic product.” If the government does the same, it registers as an increase in the gross domestic product. Back out such debt-funded “growth” and it’s unclear if there’s been any growth at all since 2009.

In the US, real incomes have stagnated since the turn of the century. Rising equity markets and falling growth rates mean that corporate valuations are in the stratosphere. Joined with off-the-chart measures of optimism and declining central bank support, equity markets are poised for a fall. That it hasn’t happened yet doesn’t mean it won’t. It’s never “different this time.” Given the leverage and speculation embedded in the market, the fall could be breathtaking, a quick drop of 50 percent or more.

As noted, falling stock markets and economies generally take the popularity of incumbent politicians with them. Trump, the most polarizing political figure since Franklin Roosevelt, is not all that popular to begin with. The Deep State that has ruled this country since World War II is down; it would be unwise to count it out. It will certainly capitalize on financial and economic turmoil to launch a counterattack against Trump.

Next year’s silver lining may be that it marks peak government. Governments have coopted much of the world’s resources and put a gigantic lien on its future production. In a severe economic contraction, the wherewithal from taxes and credit markets that would allow them to grow even bigger—and thus more intrusive and repressive—simply won’t be there.

A financial and political focal point will be pension and medical funds. Many such funds are visibly under stress. Widespread insolvency is inevitable, especially if equity and credit markets head south. The resultant fear and fury will be uncontrollable, obliterating today’s widespread, quasi-religious faith in government and its works. The upheaval would make present discord look like a picnic in the park.

It would be unwise to rely on anything but one’s own resources, family, and friends during the coming turmoil. It would be wise to shore up those defenses, and soon.

via http://ift.tt/2l2GsMP Tyler Durden

With Americans left with only one option – indentured servitude – to maintain any semblance of normal quality of life – especially at Christmas – we thought it worthwhile considering which US States have the most people in debt.

Using data from anonymous consumer-level records from a major credit bureau, the Urban Institute was able to release figures on debt levels across America.

Statista's Niall McCarthy points out that nationwide, 33 percent of people have debt that has gone into collections which means they have unpaid bills creditors have either closed or are trying to collect.

You will find more statistics at Statista

Between states, the share of people in debt fluctuates considerably and the lowest levels were recorded in Minnesota (17 percent), South Dakota (18 percent) and North Dakota (19 percent).

Louisiana is at the opposite end of the scale with nearly half its residents in debt with collections. Last year, 46 percent of people living in Louisiana were in debt and the median amount owed was $1,486.

The majority of U.S. states with high levels of debt are concentrated in the south. Texas is second with 44 percent of its residents in debt and South Carolina comes third with 43 percent.

via http://ift.tt/2DUjEXf Tyler Durden