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Authored by Michael Snyder via The Economic Collapse blog,

We haven’t seen carnage like this in the global financial marketplace in quite some time. 

On Wednesday, U.S. stocks were down some, but things were much, much worse around the rest of the world.  Global banking stocks are plunging, emerging market stocks are cratering, and emerging market currencies continue their stunning decline.  This represents a dramatic change from the relative stability that we have seen throughout most of 2018.  It is almost as if someone flipped a switch once the month of August began, and the shakiness of global financial markets has many investors wondering what trouble fall will bring. 

What we are witnessing right now is not a full-blown panic yet, but it definitely has the potential to turn into one.

The term “bear market” is being thrown around a lot lately, but a lot of people don’t understand what a “bear market” actually is.

A bear market is generally considered to be when we see a decline of 20 percent or more from the 52-week high, and after the carnage of this past week a lot of those thresholds are now being crossed.

It would probably be too early to call this a “global stock market crash”, but we are well on the way to getting there.  The following are 5 signs that global financial markets are entering a bear market…

#1 Global stocks have now fallen beneath all key moving averages.  Those key moving averages are important psychological thresholds for investors, and if we have a few more days like Wednesday we could see global financial markets go into full panic mode.

#2 European banking stocks have now officially entered a bear market, and all major European stock indexes are now red for the year.

#3 Global banking stocks are down a whopping 23 percent from the peak established earlier this year, and that means that they have officially entered a bear market.

#4 Emerging market stocks have fallen 20 percent from the peak, and that means that they are also now in a bear market.

#5 When demand for industrial metals falls, that indicates that an economic slowdown is coming.  On Wednesday, prices for industrial metals fell to their lowest level in almost a year, and “Dr. Copper officially entered a bear market.

If the financial carnage continues (and that is a big “if”), this could be the beginning of another financial crisis like we experienced in 2008, and that would almost certainly mean a crippling global recession.

And of course once the next global recession begins, it is likely to be more painful than we have ever seen before in modern history, because the global debt bubble is far larger than it has ever been before.

We live at a time of great global instability, and there are so many ominous warnings about our future.  A lot of people reach out to me for advice on how to get prepared for what is coming, and I hope to share quite a few tips in future articles.

Today, I would like to share with you 11 tips that my good friend Ray Gano shared with his readers in his most recent article…

1 – Get Out of Debt: The old saying, “the borrower is the servant of the lender”, is so incredibly true.  The key to insulating yourself from an economic meltdown is to become as independent as possible, and as long as you are in debt, you simply are not independent.  You don’t want a horde of creditors chasing after you when things really start to get bad out there.

2 – Find New Sources of Income: With the birth of The IRA, there simply is no such thing as job security anymore.  If you are dependent on a job (“just over broke”) for 100% of your income, you are in a very bad position.  There are thousands of different ways to make extra money.  What you don’t want to do is to have all of your eggs in one basket.  One day when the economy melts down and you are out of a job are you going to be destitute or are you going to be okay? IF you need some ideas on what you can do, contact me and I can help.

3 – Reduce Your Expenses: Many Americans have left the rat race and have found ways to live on half or even on a quarter of what they were making previously.  It is possible – if you are willing to reduce your expenses.  In the future times are going to be tougher, so learn to start living with less today.

4 – Learn To Grow Your Own / Supplement Your Food: Today the vast majority of Americans are completely dependent on being able to run down to the supermarket or to the local Wal-Mart to buy food.  But what happens when the U.S. dollar declines dramatically in value and it costs ten bucks to buy a loaf of bread?  If you learn to grow your own food (even if is just a small garden) you will be insulating yourself against rising food prices. Another thing is to learn to hunt and fish. There is “low cost” food out there for the taking, you just need to assert yourself. (Low Cost = you still need to pay for hunting and fishing licenses.)

5 – Make Sure You Have A Reliable Water Supply: Water shortages are popping up all over the globe.  Water is quickly becoming one of the “hottest” commodities out there.  Even in the United States, water shortages have been making headline news recently.  As we move into the future, it will be imperative for you and your family to have a reliable source of water.  Some Americans have learned to collect rainwater and many others are using advanced technology such as atmospheric water generators to provide water for their families.  But whatever you do, make sure that you are not caught without a decent source of water in the years ahead.

6 – Buy Land: This is a tough one, because prices are high depending on where you are looking. If you are able to buy land when prices are low, that is going to insulate you a great deal from the rising housing costs that will occur when the U.S dollar does totally go into the tank.

7 – Buy Precious Metals: this is a no brainer, but it still amazes me how many people are not doing this. Right now silver is sitting at $14.41. That is a very affordable price and a price that everyone can afford.  We must start “paying ourselves first” and start pulling in these sort of assets. The best place that I recommend is Renaissance Precious Metals. It is who I purchase from.

8 – Get Partially Off The Grid: An increasing number of Americans are going “off the grid”.  Essentially what that means is that they are attempting to operate independently of the utility companies.  In particular, going “off the grid” will enable you to insulate yourself from the rapidly rising energy prices that we are going to see in the future.  If you are able to produce energy for your own home, you won’t be freaking out like your neighbors are when electricity prices triple someday.

9 – Store Non-Perishable Supplies: Non-perishable supplies are one investment that is sure to go up in value.  Not that you would resell them.  You store up non-perishable supplies because you are going to need them someday.  So why not stock up on the things that you are going to need now before they double or triple in price in the future?  Your money is not ever going to stretch any farther than it does right now.

10 – Develop Stronger Relationships: Americans have become very insular creatures.  We act like we don’t need anyone or anything.  But the truth is that as the we see a socio-economic melt down we are going to need each other.  It is those that are developing strong relationships with family and friends right now that will be able to depend on them when times get hard.

11 – Get Educated And Stay Flexible: When times are stable, it is not that important to be informed because things pretty much stay the same.  However, when things are rapidly changing it is imperative to get educated and to stay informed so that you will know what to do.  The times ahead are going to require us all to be very flexible, and it is those who are willing to adapt that will do the best when things get tough.

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A state senator in Michigan’s legislature is under fire over allegations she used racial slurs to attack her primary election rival in front of voters. 

Rep. Bettie Cook Scott (D-Detroit), who is black, used deeply offensive anti-Asian slurs in describing her opponent Rep. Stephanie Chang (D-Detroit) in a now viral story. 

On Thursday the Detroit Metro Times published a full report, outlining the allegations:

Scott is alleged to have referred to Chang as “ching-chang” and “the ching-chong” to multiple voters outside polling precincts during last Tuesday’s election. She’s also said to have called one of Chang’s campaign volunteers an “immigrant,” saying “you don’t belong here” and “I want you out of my country.” 

Chang and Scott were running in the Democratic primary for state Sen. District 1. Chang won the election with 49 percent of the vote; Scott came in third with 11 percent of the vote. 

Since the series of incidents first surfaced Rep. Scott has been called upon by over a dozen local community groups to issue a formal apology.

National organizations have also weighed in, including the Association of Chinese Americans and the African Bureau of Immigration & Social Affairs, all demanding an explanation from Scott.  

It’s also possible that Detroit Mayor Mike Duggan could be roped into the controversy, as the powerful city leader has provided a key high level endorsement for Scott in her bid to enter the state senate. 

Stephanie Change told the Metro Times, “These comments are offensive to all Asian-Americans,” and added that, “It isn’t about me. It’s about an elected official disrespecting entire populations, whether they be Asian-American, immigrant, or residents of Sen. District 1 or [Cook’s] own current house district.” 

A number of Asian and Pacific-islander interest groups have rallied in support of Chang amidst the allegations, citing that racism against Asian-Americans is deeply under reported and rarely spotlighted in national media. 

The report cites multiple witnesses who heard the offensive slurs that included “ching-chang” and “the ching-chong” when Scott showed up outside polling stations:

The various off-color remarks were heard by multiple people connected with Chang, including Chang’s husband, who spoke with Metro Times. Sean Gray says after overhearing Cook disparaging Chang outside a precinct on the east side of Detroit, “I … asked her not to speak about my wife in that manner. At that time she said to the voter that ‘these immigrants from China are coming over and taking our community from us.’ Further, she said it ‘disgusts her seeing black people holding signs for these Asians and not supporting their own people.'” 

Gray, who is black, says Scott then went on to call him a “fool” for marrying Chang.

And in a separate incident at another precinct, Scott allegedly told a voter, “Thanks for voting for me, you don’t need to vote for that ching-chang.” 

One African-American voting activist and eyewitness who initially reported some of the comments to Detroit reporters commented:

“As an African-American woman, I’ve been called the N-word before in my life and you never forget it,” says Long. “Each time it’s shocking and appalling and disgusting, so when you hear someone that’s a minority and a woman using slurs against another minority that’s a woman, it’s just mind boggling and it just felt dirty.” 

As the story quickly went national through Thursday evening, there’s been a growing chorus of voices calling for an acknowledgement and investigation into Scott’s comments. 

Amidst the avalanche of criticism, Rep. Scott finally issued a belated apology late Thursday, saying “Those are not the kinds of comments that should be made nor are they the kind of comments I would normally make,” she said in a statement issued through her lawyer.

She further admitted the validity of the allegations against her in the following: “I humbly apologize to Rep. Chang and to her husband, Mr. Gray, and to the broader Asian American community,” she said. 

Considering it’s a Democrat under fire for making racially offensive remarks, we can’t help but wonder if it’ll be spotlighted by the major networks. 

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Authored by Kessler Companies’ Eric Hickman via Advisor Perspectives,

People associate leverage with volatility and trouble. The history of finance is littered with examples: the savings and loan crisis of the late 1980s, Orange County in 1994, Long Term Capital Management in 1998 and MF Global in 2011. But personal leverage is common; anyone with a mortgage is leveraging their home. The typical 20%-down mortgage gives the buyer five times leverage to their equity.

Leverage is a productive tool, used within limits.

Enter U.S. Treasury bonds.

Leverage may not immediately seem to belong with a Treasury, but for three important reasons, leveraged U.S. Treasury bonds make sense as an ordinary investment.

1. The cost to borrow is the lowest in the financial markets.

2. Leverage unlocks the yield curve to management.

3. Leveraged U.S. Treasury bonds can compete with or better hedge against equities.

The cost to borrow is the lowest in the system

In lending markets, the better the collateral, the lower the rate. At one extreme, think of credit card rates that can go up to 30% after a missed payment. This is a loan collateralized only with the threat of a consumer’s credit score. At the other extreme are U.S. Treasury bonds, which, with no credit risk and immediate liquidity, are the best collateral and hence finance at the lowest rate in the system.

U.S. Treasury bonds finance near-to the Fed Funds rate – today 1.875%. Because this is less than what they yield, leveraging provides a positive cash flow spread. On one side, you earn the yield of the Treasury and on the other, you pay the financing rate, the subtraction between the two is the spread. While certainly helpful in a portfolio, it comes with an important caveat. Leverage will often increase yield but it is only part of the total return. The other part, price sensitivity, must always be considered in determining how much leverage to apply.

Sometimes, when the yield curve is inverted, the cost to finance is more than what Treasury bonds yield and, thus, the financing spread is negative. Yet, because an inverted yield curve typically predicts a period of upcoming lower interest rates, this is generally not a bad time to leverage.

Leverage unlocks the whole yield curve to management

U.S. Treasury bonds offer much more than their yield; their prices appreciate when yields fall and depreciate when yields rise. Investors often buy them with an opinion of where yields are going in the short to medium term. But, inconveniently, their price sensitivity (known as duration) varies greatly depending on maturity. For instance, since 1990, 30-year U.S. Treasury performance is about seven times as volatile as 2-year U.S. Treasury performance (see table below).

Without leverage, investors wanting more opportunity from the Treasury market are stuck with longer maturities (i.e., the 30-year UST). Yet, the short-end of the curve has the best long-term risk/return statistics (see Sharpe ratios above). Leverage, with its multiplicative effect on returns and volatility, can give any part of the yield curve the same opportunity for a given move in interest rates. In bond lingo, leverage can provide duration equivalence.

This becomes especially important during periods when the Federal Reserve is lowering interest rates. As you can see in the chart below, in the last three big phases of Fed easing, the 2-year yield falls much more than the 30-year UST. In these periods, it would’ve been more advantageous to own a duration equivalent 2-year U.S. Treasury position than the 30-year U.S. Treasury.

Leveraged U.S. Treasury bonds can compete with or better hedge against equities

While leverage can be used amongst U.S. Treasury bonds to make them more equal, it can also be used to raise their volatility closer to that of other asset classes. This is the risk-parity concept, popularized by Bridgewater Associates in the 1990’s. From Wikipedia,

The risk parity approach asserts that when asset allocations are adjusted (leveraged or deleveraged) to the same risk level, the risk parity portfolio can achieve a higher Sharpe ratio and can be more resistant to market downturns than the traditional portfolio.

Empirically, the equity market (S&P 500) has been about 3.3-times as volatile as the Treasury market since 1990. Using a simple model of leveraging U.S. Treasury bonds 3.3-times shows a similar return to the equity market but with much smaller drawdowns.

This index is a mathematical transformation of the Bloomberg Barclays U.S. Treasury index performed by Kessler. 3.3 times leverage was chosen as the nearest leverage level (to the tenth) that had the same annualized monthly standard deviation as the S&P 500 over this period. Each monthly index return is multiplied by the leverage amount, 3.3, which then has a financing cost subtracted. The financing cost is calculated as the average daily Fed funds effective rate for each month plus a spread of 0.25% (to be conservative), then divided by 360, and finally multiplied by the actual number of days in the month. This unleveraged financing cost is then multiplied by the leverage amount minus one; or 2.3. An excel worksheet with all calculations is available upon request.

Great, but how do you do it?

For large or corporate accounts, leverage is done through the U.S. Treasury repurchase agreement market (repo for short). But, the most important components are available through the Treasury futures market. Stay tuned for the next part of this two part series: “How to leverage U.S. Treasury bonds using the futures market.”

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Silicon Valley’s largest and most iconic companies are employing armies of lawyers to show that their buildings are worth a lot less than what county tax assessors state.

In Santa Clara County, California, Apple Inc., the United States’ first trillion-dollar company by market capitalization, had 489 open cases dating back to 2004, disputing nearly $8.5 billion in property value, according to the San Francisco Chronicle.

The report notes that Apple is the largest taxpayer in the county, spending $56 million in the tax year 2017-18.

The company has had a long history of tax avoidance. In 2016, the European Union slapped Apple with a $15 billion European tax evasion fine, CEO Tim Cook wrote in an open letter that “in every country where we operate, Apple follows the law and we pay all the taxes we owe.”

As a whole, Santa Clara County has a shocking $76 billion in disputed assessments stemming from property valuations. More than half of the disputes are from ten tech companies, including Apple, Google, Applied Materials and Sun Microsystems.

Tax assessors told the San Francisco Chronicle that, for instance, Applied Materials has 94 appeals totaling $6.1 billion in disputed value and Google has 132 appeals covering $2.7 billion in disputed value.

“These are major cases, and publicly, they kind of go under the radar screen,” said Santa Clara County Assessor Larry Stone, whose office has settled multimillion cases with IBM and Cisco over tax assessments. “How much will a company pay in attorneys’ fees and expert witnesses for a potential payday of $100 million? They’ve spent millions, but there’s millions at stake.”

“The source of many of the disagreements is high-tech equipment, which is more complicated to assess because of complex depreciation rules,” Stone said

“The sophistication of our companies and the complexity of our high-tech industries is different,” Stone added. “Machinery, equipment, computers, fixtures … all the stuff going into (the) Apple spaceship, there’s lots of money inside of it aside from land and buildings. So it can get very complicated.

In one appeal filed in 2015, Apple said its Apple Park in Cupertino was worth only $200, while tax assessors valued the buildings at $1 billion.

According to an appeal application, tax assessors valued another property at $384 million, and in Apple’s view, this one was also worth around $200.

Tax assessors told the local paper that large corporations flushed with cash from Trump’s new tax cut had erected armies of lawyers to wear down county governments.

“The megacorporations have enough resources and money to wear a county down to lower their taxes by appealing, appealing, appealing,” said Gus Kramer, Contra Costa County Tax Assessor.

Apple was a vocal supporter of the GOP tax cuts passed last year that lowered corporate tax rates. The company gained tremendous wealth through lowered repatriation rates that allow it to bring assets from overseas back to the US at a lower tax rate. Since the tax cut, Apple increased the compensation of CEO Tim Cook along with the company’s other top executives and unleashed a $100 billion in stock buybacks.

It seems as the US tax system is fundamentally broken if Apple can value a billion dollars in buildings at roughly $200. Tax avoidance by multinationals has significantly exacerbated the global wealth gap and put excessive burdens on local governments. It seems like Silicon Valley, and mainly Apple, are not paying their fair share of taxes.

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Authored by Caroline Ryan via Campus Reform,

This school year, students across the country will attend courses on “Queering the Bible,” “Queering Childhood,” “Queering Theology,” and similar topics.

Students at Pomona College in Claremont, California, for instance, will have the opportunity to enroll in a brand new course titled “Queering Childhood,” which will examine “the figure of the Child and how this figuration is used by politics, law, and medicine to justify continued cultural investment in reproductive heteronormativity and productive ablebodiedness.”

The course description explains that students will examine the childhoods of “queer and crip children,” as well as “childhoods against which the figure of the Child is articulated,” with reference to work related to “gender studies, childhood studies, disability studies, and queer theory.”

Colleges are not only attempting to “queer” childhood, they are teaching students to “queer” Christianity and religion in general, as well.

This fall, Eugene Lang College will offer a course titled “Queering and Decolonizing Theology,” where students will explore topics such as “the sexual ethics and ritualization found in the S&M community,” and “transgender Christs.”  

“Christian theology is often depicted as a violent colonial force standing in particular opposition to LGBTQI lives. However, over the last 30 years people of faith, activists, and theorists alike have rediscovered what is queer within Christianity, uncovered what is religious within secular queer communities, and used postcolonial theory to decolonize lived religious practices and theologies,” the course description asserts.

According to the college, the course “explores secular philosophies of queer and postcolonial theory as well as their critical and constructive application to religion,” focusing on topics like “the sexual ethics and ritualization found in the S&M community, transgender Christs, and the mestiza (or mixed) cultures of Latin America.”

Similarly, students at Harvard Divinity School will be able to attend a course on “Queer Theologies, Queer Religions” this fall, which will explore the “project of ‘queer theology’” and how it relates to “larger aspirations of queer religion or spirituality in America.”

In this course, students will begin by “sampling the efforts to revise traditional Christian theologies in order to accept or affirm same-sex loves.” After that, they will move on to examining “forgotten possibilities in historical engagements between advocates of homosexual rights and established religious bodies (chiefly churches and synagogues).”

“We will consider the boundaries between queer theology and queer theory or between it and other political theologies,” the course description explains.  “We will test the boundaries of ‘Christianity’ while considering the varied forms of queer religion outside familiar religious institutions—in spirituality or spiritualism, in magic or neo-paganism, in erotic asceticism.”

Swarthmore College students, meanwhile, will survey “queer and trans* readings of biblical texts” during a course titled “Queering the Bible,” which will introduce them to “the complexity of constructions of sex, gender, and identity in one of the most influential literary works produced in ancient times.”

“By reading the Bible with the methods of queer and trans* theoretical approaches,” the description promises, “this class destabilizes long held assumptions about what the [B]ible—and religion—says about gender and sexuality.”

The University of San Francisco is also getting into the act with a course on “Christian Feminist Theology” that aims to “develop an understanding of how feminist scholarship provides one fruitful means towards reappropriation of central Christian insights about God.” 

The course will facilitate “critical reflection upon the experience of God, and insights from feminist thought,” according to the description.

In a similar vein, students enrolled in the University of Pennsylvania’s “Gender, Sexuality, and Religion” course “will read religion through a variety of feminist and queer theory lenses- exploring the key characteristics of diverse feminist analyses of religion, as well as limits of specific feminist approaches.”

“In this course we will learn about women’s and men’s rituals, social roles, and mythologies in specific religious traditions,” the course description explains. “We will also look at the central significance of gender to the field of religious studies generally, with particular attention to non-binary genders.”

To that end, the course will address questions such as “How important are the gender differences in deciding social roles, ritual activities, and spiritual vocations?” and “How does gender intersect with nationality, language, and politics?”

Campus Reform reached out to each of the schools mentioned in this report for additional comment on the courses in question, and is currently awaiting responses. This article will be updated if and when any of them provide a statement.

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New Mexico authorities have executed a court order to destroy an encampment where the son of a famous New York Imam ritualistically murdered his three-year-old son and trained nearly a dozen other children to commit school shootings, according to Taos, NM prosecutors. 

The decision to raze the compound is the latest controversial development in the case, after New Mexico judge Sarah Backus on Monday ordered four out of five alleged Muslim extremists free on a $20,000 “signature bond” (meaning they didn’t have to pay), including the suspect in his son’s murder, Siraj Ibn Wahhaj. 

NBC News reports that police seized an RV where eleven children and five adults lived in what was described as squalor, while also bulldozing the entrance to an underground tunnel where the decomposing body of three-year-old Abdul-ghani Wahha, kept there in the hopes that he would resurrect as Jesus and use his psychic powers to help the group target “corrupt institutions and people” with “violent actions.”

Ammo and a bulletproof vest were discovered at the scene after the camp was broken down. 

NEW DEVELOPMENT: Authorities have partially bulldozed the #NMCompound – trailer that was the main dwelling on the property has been dragged out and seized. ammo/bulletproof vest/paperwork remain. @NBCNews pic.twitter.com/yGDV1I8wYa

— Gadi Schwartz (@GadiNBC) August 15, 2018

Judge Backus drew harsh rebuke from prosecutors, law enforcement and New Mexico Governor Susana Martinez, who said she “strongly disagreed” with the decision to release the suspects on signature bail. “Unfortunately, it highlights how extreme the New Mexico Supreme Court has been in dictating pretrial release for all kinds of dangerous criminals.” 

THREAD: This week we were given rare access inside the NM compound where authorities think children were getting weapons training to carry out school shootings. This is part of the tunnel that extends out from the property. @NBCNews pic.twitter.com/1tuGlkeHzX

— Gadi Schwartz (@GadiNBC) August 11, 2018

Backus – who survived a petition to replace her in 2016 with a “Qualified judge,” wrote that the State of New Mexico “apparently expected the court to take the individuals’ faith into account” in determining whether or not the defendants accused of operating a radical Islamic training camp pose a danger to the community, notes the Daily Caller. 

pic.twitter.com/czeS90TCpj

— Gadi Schwartz (@GadiNBC) August 14, 2018

Taos County Sheriff Jerry Hogrefe said that during the initial serving of the search warrant, their tactical team came upon children holding boxes of ammo, and at least one child was armed when he was found. The defendants’ attorney tried to downplay the “heavily armed” portion of the case.  

While cross-examining of Hogrefe, the suspects’ defense attorneys each took their chance to try and distance the suspects as far from the weapons as possible, and the connotations of violence they imply. One defense attorney suggested it’s “prudent” that children learn how to use firearms safely, which Hogrefe agreed to.

The sheriff also confirmed that Alcohol, Tobacco and Firearms is investigating the legalities surrounding the occupants’ possession of firearms. 

Another defense attorney pointed out, and Hogrefe confirmed, that the compound’s occupants did not shoot at the tactical team as they raided the compound. He did say, however, that Morton was “struggling” and “resisting” while being arrested by deputies. –KOB.com

For her decision to free the suspects, Backus says she has received over 200 threats, including death threats, which resulted in the evacuation of a New Mexico courthouse on Tuesday. 

Backus has received more than 200 threats, according to Barry Massey, a spokesman for New Mexico Courts. Callers have threatened physical violence against Backus, including some people who threatened to slit Backus’ throat and smash her head, Massey said. People also lashed out on social media and also threatened court staff, Massey said. –CNN

Backus has been called an “Islamic terrorist sympathizer” and a “disgusting garbage human,” according to Massey. 

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Authored by Alex Deluce via GoldTelegraph.com,

Has coffee become an unattainable luxury? It is if you live in Venezuela’s capital of Caracas.

In July, the price of a cup of coffee was 2 million bolivars. In a country where the minimum wage has been raised to 3 million bolivars, coffee has become as unaffordable as food, housing, clothing, and medicine.

Venezuela is in crisis mode. Ninety percent of citizens live in poverty conditions. Most of them have lost up to 25 pounds due to lack of food. Call it the Maduro Quick Weight-Loss Plan. President Maduro, who has blamed everything but his own socialist policies for the economic disaster, points out that he has raised the minimum wage to 3 million bolivars. For Venezuelans, this is utterly meaningless when prices are doubling every 18 days. Economists predict that hyperinflation will hit an unprecedented 1,000,000 percent by the end of the year. The Bolivar can be officially considered without value.

It is easy to forget that just a few decades ago, Venezuela was one of the richest countries in South America. It had the world’s largest oil reserves and plenty of gold.

Along came President Chavez and his populist policies and schemes to redistribute the wealth. Following years of overspending and inflation, his successor, President Maduro, has continued those policies, except there is no more wealth left to distribute. In a recent election many consider rife with fraud, Maduro’s win has ensured six more years of hellish disaster for Venezuela. He has announced that he intends to fight hyperinflation by removing five zeroes from the bolivar. His announcement did not include an explanation of how devaluaing the valueless Bolivar, even more, will help the country.

Venezuela has gone beyond an economic disaster and is now in a humanitarian crisis. Without food or medicine, the country won’t be able to survive. At this time, it is being propped up by Russian and Chinese aid.

Don’t think #Gold is important? 🇻🇪🇻🇪

In Venezuela, an ounce of the yellow metal would have gone for 211 million bolivars—an increase of more than 3.1 million percent from just the beginning of the year.

People with #Gold has successfully preserved purchasing power! pic.twitter.com/6bD2RNJNmo

— Gold Telegraph (@GoldTelegraph_) August 13, 2018

Venezuela has sold off most of its gold reserves to pay off debts. The country barely has any gold left in reserve. Its massive oil supplies were once its largest export. Now, the country has announced that it will export only one million barrels of oil a day next year, down from three million barrels a day in 2011. Where has all the wealth gone? Between government mismanagement and corruption, no one can say. Of course, President Maduro and his massive army, hired to protect him, aren’t starving. They may be the only ones.

Millions of Venezuelans are fleeing the misery, crossing the borders to any country with jobs and food. Families fortunate enough to have family jewelry is selling them. Other are mining for gold illegally. Illegal gold mining, mostly gold dust, constitutes 90 percent of Venezuela’s current gold production. This illegal gold can be sold at a fraction of the going price.

Selling gold, whether legal or illegal, is the only hope any Venezuelans have to obtain food, medicine, or for an escape across the borders. When a currency loses its value, gold can make the difference between life and death. While it is difficult to imagine a scenario more horrendous than present-day Venezuela, it is good to remember that all global fiat currency is losing in value. The price of gold may fluctuate, or sell on the black market of half its price, but gold will never lose its actual value. For many in Venezuela, gold is the last chance for survival.

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The director of the World Health Organization (WHO) is urging a ceasefire between armed groups in the Democratic Republic of Congo (DRC), as raging conflicts in the region have hampered efforts to stop a new Ebola outbreak which is transmitting freely, reports the Daily Mail. 

So far 41 deaths had been reported as of August 1 between the DRC’s North Kivu province, including the cities of Beni and Mangina. 

As the death toll in the outbreak declared on August 1 in DRC’s violence-wracked North Kivu province hit 41, the World Health Organization chief also called for the rapid roll-out of an unlicenced drug being used for the first time to treat Ebola patients.

Tedros Adhanom Ghebreyesus told reporters in Geneva he feared conditions on the ground in the eastern province had created “a conducive environment for the transmission of Ebola.” –Daily Mail

Ghebreyesus, who traveled to the hot zones in Beni and Mangina in recent days, says that while he was worried before his trip – since his return “I am actually more worried.” 

The latest outbreak now encompasses 57 probable and confirmed cases of Ebola in the DRC’s 10th outbreak since 1976, when the disease was first identified near the DRC’s Ebola river. 

Beni was the scene of a 2016 massacre in which at least 64 people were killed by militants, bringing the toll to over 700 dead since October 2014.

in North Kivu, health workers are being forced to navigate their response among more than 100 armed groups, and Tedros said that there have been 120 violent incidents since January alone.

He said the region was sprinkled with so-called “red zones”, or inaccessible areas. –Daily Mail

“That environment is really conducive for Ebola … to transmit freely.”

“We call on the warring parties for cessation of hostilities, because the virus is dangerous to all. It doesn’t choose between this group or that group,” according to Ghebreyesus. 

Meanwhile, there are currently 1,200 people living in the Mangina hot-zone who may all receive vaccinations after at least seven health workers were infected with the disease. 

In a bid to halt the virus’s lethal advance, DRC health authorities said Tuesday that doctors in Beni had begun using a prototype drug called mAb114 to treat patients.

The treatment is “the first therapeutic drug against the virus to be used in an active Ebola epidemic in the DRC,” the health ministry’s directorate for disease control said.

Developed in the United States, the prototype drug is a so-called single monoclonal antibody — a protein that binds on to a specific target of the virus and triggers the body’s immune system to destroy the invader. –Daily Mail

The US National Institute of Allergy and Infectious Diseases (NIAID) said in May that it was launching the first human trials of mAb114 to test for tolerance and safety. The WHO’s Ghebreyesus, meanwhile, said that five patients have received the unlicensed drug thus far, and that WHO is pushing for the roll-out “to speed up as much as possible.” 

The experimental drug comes on the heels of an unlicensed vaccine, rVSV-ZEBOV, which was used during another DRC Ebola outbreak earlier this year after it was deemed safe and effective in trials during the 2013-2015 pandemic in West Africa. The vaccine is credited with playing a significant role in stopping the spread of Ebola throughout Equateur province, and is expected to be particularly useful during this new outbreak. 

So far, 216 people – mostly front-line heal workers, have been jabbed with the vaccine since last week. 

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Authored by Chris Hamilton via Economica blog,

I often read that China may retaliate against US trade sanctions by further decreasing their US Treasury holdings, sending Treasury yields significantly higher, thus blowing out US deficit spending on interest payments.  Trouble is, Chinese Treasury holdings peaked in 2014 (on an annualized basis) and have been declining since.  The Chinese have not only ceased accumulating US Treasury debt, despite continued record trade surplus’ with the US resulting in significant dollar surplus’, but have been decreasing their holdings.  All this, according to the Treasury International Capital (TIC) system.

But this postulation that the Chinese could wound the US via selling a portion (or all) of its Treasury holdings (as Russia recently did) is submarined by the recent actions of the Federal Reserve.  I say this based on the magnitudes greater accumulation and subsequent dumping of specific maturities of US Treasury debt done by the Federal Reserve.

The Federal Reserve accumulated almost $800 billion in 7 to 10 year US Treasury debt (red line, chart below) from 2009 to 2013, and then subsequently dumped $600 billion from early 2014 through the most present August 2018 data.  And the impact on the 10 year yield (blue shaded area, chart below)…essentially zero.  Yes, while the Fed rolled off and/or sold off 7 to 10 year holdings, they were busy buying short term debt.  But this still meant someone had to step up in duration and buy all that longer duration debt the Fed no longer wanted.

To put the relative size of China’s 7 to 10 year holdings in perspective to the Fed’s like holdings, the chart above estimates that a third of Chinese Treasury holdings (likely an overestimation) were of the 7 to 10 year variety (gold line).  The Fed has already rolled off / sold off 1.5x’s more 7 to 10 year debt than the Chinese even have.  The impact on the 10 year Treasury yield while the Fed plus China sold off / rolled off a combined $650 billion of 7 to 10 year debt…essentially zero!!!

But to explain why the yields did not react (and likely never will), I have to take a step back and highlight the changing underlying population and demographics that are driving this.

Population / Demographics

The 25 to 54 year old US population and employment among them (and subsequent capability to consume) consistently grew in the post WWII period until 2000.  But in 2000, the population growth decelerated (brown line, chart below) and employment among them significantly fell (blue line).  The 25 to 54 year old population has only minimally grown since 2000 and not grown at all since 2007…but employment among the core (that makes up 70% of the US workforce and pays the vast majority of the Social Security taxes) is essentially right where it was in 2000.

To broaden the view, check the 15 to 64 year old US total population (red line, chart below) versus year over year changes in that population (blue columns).  Obviously, the peak year over year population growth took place in 1998 (adding 2.7 million persons in that year alone) but growth has decelerated over 80% since that peak growth.  The heyday of fast growing populations (at least, those under 65) and increasing quantities of employees, tax payers, and/or consumers has run its course…yet politicians and the Fed still target and tout economic growth, as if nothing had changed.  However, the continued growth in US employment (and consumption) is simply mathematically running out of able bodies (Detailed HERE).  Plus, the population growth estimates through 2030 shown below are premised on continuing significant rates of immigration.  Absent a significant net inflow of immigrants, the under 65 year old population will be in outright decline.  Of course, the changing population growth and demographics (particularly among the populations that do the vast majority of consuming) is a global issue (Detailed HERE).

Conversely, the 65+ year old population really began rocketing upward about 2008 and will hit its year over year peak growth in 2024.  The population of 65+ year olds will increase by 20+ million from ’18 through ’30 versus an increase of less than 4 million among the 15 to 64 year olds.  But worse still, over half that growth will be among the 75+ year olds.  This will be the death knell of many poorly thought out programs premised on perpetual growth.

This has resulted in a debt fueled “extend and pretend” frenzy.  The chart below shows annual 15 to 64 year old US population growth (yellow line) versus stacked columns showing annual consumer, federal, and corporate debt growth.  One has to be very highly compensated to miss the explosion in debt tied to the slowdown in core population growth.

Federal Debt and the Intra-governmental Trust Fund

First, a look at US federal debt, split between US Public debt (marketable) and US Intra-Governmental debt (Social Security and other trust fund surplus’).  Up to 2007, the Social Security and other federal trust fund surplus’ were mandated to purchase and hold US debt, to the tune of 44% of total US debt.  But since 2007, federal debt issuance has been skyrocketing while the pace of IG purchasing continues decelerating.  This means 85% of Treasury debt issued since ’07 has been marketable (marketable debt has risen $10.6 trillion versus a $1.8 trillion increase among the IG trust funds).  This is a clean tripling of marketable debt and the IG trust funds will peak and begin declining likely prior to 2020, and 100%+ of all Treasury debt will be marketable from that point forward.

Which is to say, the remaining three sources of buying will have to really step up their appetite for US debt.  But foreigners and the Federal Reserve have already ceased buying (net), and the sole buyer remaining is the domestic public (domestic insurers, banks, mutual funds, pensions, etc.).

Foreigners

From 2000 to 2007, foreigners purchased $1.3 trillion in net Treasury debt but from 2008 through 2014, foreigners stepped up to the plate nearly tripling their holdings, buying $3.8 trillion in net debt.  However, since late 2014, foreigners have not only ceased buying US debt (net) but have followed the Fed’s lead and are presently net sellers.

Focusing on the three largest foreign holders of US Treasury’s; China, Japan, and the BLICS (Belgium, Luxembourg, Ireland, Cayman Islands, Switzerland).  China holdings peaked way back in 2011 while Japan and the BLICS peaked as QE ended and have been declining since.  Upon the termination of QE, foreigners simply lost their appetite for US debt.

Below, a close up on the BLICS.  What is noteworthy is the great scramble in these shadow banking capitals, particularly during each of the recent financial upheavals.  And judging by the sharp movements again taking place in these unregulated, off-shore shells for hot money…things are again (perhaps not surprisingly) in upheaval.

Federal Reserve

The chart below details the size and shifting maturities of the Treasury’s held on the Federal Reserve balance sheet from 2003 to present.  The total holdings of Treasury’s tripled and the Fed has now decreased total holdings from the peak by about $130 billion.  However, the maturities held on their balance sheet have radically changed.  The Fed has maintained nearly all their 20 to 30 year holdings. sold off two thirds their 7 to 10 year holdings, while initially buying in bulk 1 to 5 year but now piling into less than 1 year debt.

The Fed (and foreigners) ceased buying and turned to net sellers by 2015 as the IG trust fund buying continued decelerating against ramping Treasury issuance.  This meant there was only one buyer left, the domestic public.  But for domestic buyers, the spread between short term borrowing and long-term yields was falling from over 250 basis points in early 2014 to the current 26 basis points (grey shaded area in the chart below versus Fed’s shifting holdings).

Essentially, the utilization of leverage to enjoy the spread of borrowing short to buy long nearly evaporated while the relative benefit of buying short has outweighed the risk of going long.  But we are to believe that as the Fed went on a short duration buying spree since 2015 (purple line below) coupled with a 7 to 10 year dump (yellow line) domestic sources piled into 7 to 10 year US debt (unleveraged?) to soak up the flood of assets destined to underperform inflation?!?

Domestic Public

So who among the domestic public is buying all that 7 to 10 year unleveraged debt, destined to underperform inflation?  Not banks, or insurers, or state and local pensions…no, according to the Treasury Bulletin its a group originally intended as a catch all for the rounding errors, “other”.  So “other”, with an assist from mutual funds, is saving America from having to face an interest rate Armageddon!?!  The Treasury Bulletin defines “other” as follows; “includes individuals, Government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors.”  Make of that what you will, but I’m pretty confident buying 7 to 10 year debt, at this point, would be a quick means to significantly underperform and thus, real buyers wouldn’t do so…which means it’s a buyer(s) without profit motive that is “extending and pretending” our current economic and financial system for as long as possible.  How much further this can go is difficult to say…but the shrinking number of  winners and growing numbers of losers is more easily calculated.

Conclusion:

In short, Bernie Madoff would blush at the farce that is now the US Treasury market (further manipulating all downstream interest rate sensitive markets).  A little lie or meddling led to more lying and more meddling…and suddenly the free market no longer exists.  It should be clear that a buyer without profit motive is intervening in the Treasury market to maintain a bid and sustain continued low rates on US debt…all this because America has matured but those in control still want to synthetically maintain growth rates (hello China) via unrestrained debt issuance.  Regardless how much debt the US issues and how few buyers remain, don’t look for interest rates to rise in kind.

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No sooner did Charlie Gasparino at Fox Business News drop the bomb today that Tesla’s legal team is “bracing for billions of dollars in potential liability from private lawsuits” than a second proposed SEC formal whistleblower has now entered the picture, and according to Jalopnik, drumroll, he alleges that Tesla failed to let shareholders know that the DEA had previously uncovered an alleged Mexico-based drug trafficking ring involving “large quantities” of cocaine and crystal meth at the company’s Nevada Gigafactory.

The situation looks like it could be quickly spinning out of control at Tesla. Earlier this week, the New York Times reported that the board, who so far has come off as heavily sedated and generally missing from the picture, was finally apparently at odds with CEO Elon Musk about his use of Twitter and the potential liability he may have brought onto the company. It was then proclaimed by numerous former SEC attorneys on various news networks that SEC action based on Musk’s “go private” Tweet is likely unavoidable. These sentiments were echoed today by a former SEC attorney on streaming financial news network Cheddar. 

Then, on Wednesday, whistleblower Martin Tripp (before he decided to delete his Twitter account  due to hacking) took to the social media platform and dropped a list of Model 3 VIN numbers that he claims are vehicles carrying punctured battery packs.

Now, after all of that, a former employee named Karl Hansen, who worked for Tesla’s security and investigations division has sought formal whistleblower status with the SEC. What Hansen alleges is very different than what Tripp has claimed – and potentially just as serious.

Hansen’s complaint was filed on August 9 and was released by whistleblower attorney Stewart Meissner, the same attorney who is representing Martin Tripp. Jalopnik was first to break the story.

Among his allegations is one that the United States Drug Enforcement Administration apparently revealed substantial drug trafficking by Tesla employees at its Nevada Gigafactory and that the company failed to disclose this to shareholders. Hansen alleges that the company received written notification from the DEA in May that there may be a trafficking ring involving “significant quantities of cocaine and possibly crystal methamphetamine” on behalf of a Mexican drug cartel at the Gigafactory.

As an investigator, Hansen notified the company in early June that he had “corroborated connections between certain Tesla employees at the time and various alleged members of the Mexican drug cartel identified in the DEA report as located in Mexico, that he urged Tesla to disclose his findings to law enforcement and to the DEA task force, but that Tesla refused to do so and instead advised him that Tesla would hire ‘outside vendors’ to further investigate the issue,” according to the Jalopnik article.

After reportedly notifying three supervisors, he claims that the company‘s Board of Directors, comprised of people like Elon Musk’s brother Kimbal Musk, was ultimately not notified of the findings. 

Hansen also allegedly discovered that $37 million worth of copper and raw materials were stolen from the Gigafactory earlier this year. He was reportedly told to also not report this theft to law-enforcement. Shortly thereafter, in mid July, he was terminated.

This sounds similar to claims made in early May by another ex-employee who claimed that they were also terminated for exposing theft at Tesla. Jalopnik, which also broke that story, reported the story of Daniel Trinh, who allegedly received good performance reviews at his job until 2017, a point when he claims he went to Tesla’s human relations department to report the theft of auto parts, such as wheels and tires, by another manager of the company:

Daniel Trinh worked as an Operations Associate Manager at Tesla’s assembly plant in Fremont, California, up until his termination last October, according to the complaint filed on Tuesday in Alameda Superior County Court.

He received positive performance feedback from supervisors until 2017, when he raised concerns to his supervisors and Tesla’s Human Resources department “about theft of auto parts, including wheels and tires, by another manager,” the suit alleges.

Trinh alleges the stolen parts “were likely to cause significant losses to Tesla’s customers.” He also complained that Tesla’s alleged “failure to properly track customer inventory was likely to result in theft losses.”

“Tesla’s management team and HR department ignored Plaintiff’s complaints, and failed to properly investigate them,” the suit says. “Rather than taking proper responsive action, Defendants management team set about a course of action with the purpose of setting Plaintiff up for termination.”

In the suit, he blamed the theft on the company‘s inability to properly track inventory – a similar complaint to the mismanagement of inventory claim being launched against the company by whistleblower Martin Tripp.

The lawsuit alleged that Tesla failed to address Trinh’s complaints and instead sent him on a track to be terminated, not unlike what Hansen is claiming. Trinh alleged that after he brought reports about potential theft to Tesla HR, he was given a performance evaluation that was full of “misleading, inaccurate and deliberately false accusations” about his job performance.

According to the Jalopnik, the second whistleblower Hansen also said that after the departure of alleged saboteur Martin Tripp, the company installed special equipment at the Gigafactory to capture cell phone communications made by its employees.

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