Paul Feine on America’s Longest War: A Film About Drug Prohibition

Drug
prohibition has failed, says Paul Feine. Drug usage rates have not
declined, and illegal drugs are more available—and cheaper—than
ever before. At the same time, the costs of the drug war are
staggering. More than $1 trillion taxpayer dollars have been spent.
More than 50,000 SWAT raids occur each year. Hundreds of thousands
of non-violent drug offenders are wasting their lives away in
prison at our expense. And more than 60,000 people have been
murdered in Mexico over the past six years. America’s Longest
War 
provides a brief history of drug prohibition,
beginning with Nixon’s declaration of war in 1971 and ending with
Obama’s broken promise to allow states to determine their own
medical marijuana policies. 

View this article.

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The Death And Decay Of Detroit In Real Time, As Seen From The Streets

With the stock market hitting record highs day after day, it is easy to move on and forget that one of American’s once premier cities, Detroit, has been bankrupt for nearly a year. But out of mind doesn’t mean out of sight, especially now that Google has launched its street view Time Machine, which provides for 7 years worth of street images, capturing the time shift of the tumultuous period period starting in 2007. One blogger who decided to take this time lapse data and apply it to the city of Detroit is GooBing Detroit who, as the following time-lapse photos demonstrate, has captured Detoit’s unprecedented slow-motion collapse into death and decay in what is the closest we have to “real time.”

Perhaps what is most stunning about the following series of photos is not the ultimate fate of the bankrupt city, but how quickly a once vibrant metropolis has succumbed to blight and sheer desperation.

Hopefully not coming to a street near you.

All photos from the Goobingdetroit tumblr depict various areas and streets in Detroit, then and now.

Brightmoor neighborhood. 

 

Around 7 Mile, West Side

 


Northwest, near Grand River

 

West Golden Gate, Detroit

 

Southwest Detroit

 

East side, near Alter Road

 

Patton Street, NW Detroit 

Feel like you can kind of see how this scene unfolded:

 

In the top photo, the tree is blocking the view of that yellow house in the middle — that house isn’t in great shape, but it’s ok. The house to the left has neatly trimmed hedges and a chair on the porch. The house on the right has been gutted by fire.

 

I imagine that middle house – since it’s been demo’d by 2012 – caught on fire and caused the further damage to the house at the right. Whoever had been living in the nicely maintained house on the left, moved out, and that house was gutted.

 

In the last photo — with the nicely maintained house farthest to the right — you see another nice house on the left, with a boarded up, but fairly stable, house in the middle. By 2012, both nice houses are gutted, as is the boarded up one in the middle.

 

Springwells Village

 

Near City Airport. Wonder why they didn’t take down the one next door while they were at it…

 

From top to bottom: 2008, 2009, 2011, 2013. Hickory Street between Manning and Pinewood, northeast Detroit.

 

Of the 12,093 properties in this Detroit neighborhood, 1,037 are owned by the City of Detroit, mostly due to tax foreclosure. Another ~4,500 are either subject to tax foreclosure right now, or will be in the next year or two.

 

Eastwood between Queen and MacCray, Northwest Detroit. Just east of Osborn, in “Burbank”… if anyone actually calls it that.  Of the 34 properties on this block, 24 have been tax foreclosed, 13 are at risk of foreclosure, and precisely 1 property is in good tax standing.

 

Corner of Thaddeus and S. Leigh Street, Southwest Detroit. That’s a lotta washing machines…

 

Hazelridge between Celestine and MacCray, Northeast Detroit

This block is incredible. Still pretty dense with housing, but only one of them is occupied. If you go a block to the west, the housing stock changes to brick and the neighborhood looks pretty stable.

 

The New York Times visited this block during the Motor City Mapping survey:

 

“Blight, as Karl Baker, one Detroit resident, has seen, tends to spread. Along his block of Hazelridge Street on the East Side, he is the only remaining tenant. “Everyone went bye-bye,” Mr. Baker said the other day as he walked up the center of the silent street to get to his house since no sidewalks had been shoveled.

 

Most of the houses nearby are standing but abandoned, and visitors have clearly passed through — empty liquor bottles lie along debris-covered floors near broken windows and doors, every memory of a metal appliance or gutter seems to be gone from some of the homes, and two old couches that were dumped along a lawn are now blanketed by a thick layer of snow.

 

The last neighbor left six months ago, he said, and the single streetlight overhead has not worked for months. “I love the quiet, but if something went wrong, the city isn’t going to come,” Mr. Baker said. “They don’t do anything.”

 

Hoyt between Liberal and Pinewood, Northeast Detroit

 

Arndt between Elmwood and Ellery, East Side, Detroit

Lady waving to the street view car in the first image, c. 2009. Nearby the Heidelberg Project, and in the style, though not sure if a Tyree or not.

 




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China May Build “Artificial Island” Military Base In South China Sea

Submitted by Zachary Zeck of The Diplomat,

China is considering plans to build an artificial island in the South China Sea to use as a military base from which to project power, according to the South China Morning Post.

According to the report, which cited prominent Chinese scholars and a navy expert, the artificial island would be constructed on the Fiery Cross Reef, where China already maintains some installations. The reef is part of the Spratly Islands and is disputed by the Philippines and Vietnam.

“China is looking to expand its biggest installation in the Spratly Islands into a fully formed artificial island, complete with airstrip and sea port, to better project its military strength in the South China Sea,” the report said.

The South China Morning Post report follows similar ones in some of China’s press late last month that said plans had been drawn up on constructing an artificial island on the Fiery Cross Reef. Those reports said that the project would cost $5 billion and take ten years, and would ultimately produce a five-square-kilometer military base. The reports said that the strategic value of the base would “be equivalent to that for building an aircraft carrier.”

“The artificial island at Fiery Cross Reef will be an unreplaceable military base with great strategic significance due to its location and size. Such a base will realize the value of the South China Sea for China and ensure China’s status in South East Asia,” the Chinese-language reports said, according to Filipino media. The Filipino media noted that the base would fall within the Philippines 200-mile Exclusive Economic Zone.

Such a base would greatly enhance China’s ability to project offensive power in the disputed South China Sea.

The South China Sea Morning Post’s sources—which included Jin Canrong, a well-known professor of international relations at Renmin University—said that the artificial island would most likely be used in part to enforce a future Air Defense Identification Zone (ADIZ) in the South China Sea. China caused fierce backlash throughout the region last year when it established an ADIZ in the East China Sea, which overlapped with South Korea, Japan and Taiwan’s existing ones.

At the time the East China Sea ADIZ was first announced, Chinese officials said that future ones would be established when conditions warranted them. The U.S. has since repeatedly warned China explicitly against establishing a South China Sea ADIZ.

Tensions have been especially high in the South China Sea in recent months. Most notably, Vietnam and China have repeatedly clashed over Beijing placing an oil rig in disputed wars. Meanwhile, the Philippines has been accusing China of reclamation of the Johnson South Reef, another one of the Spratly Islands. Manila has also raised concerns about China activities around the Gavin Reef (Gaven Reef) and Calderon Reef (Cuarteron Reef), which Philippine officials said were also consistent with reclamation.

In the SCMP report, Jin, the Renmin University Professor, said that decision on whether to proceed with building the artificial island on the Fiery Cross Reef would depend on progress on reclamation at Johnson South Reef.

“It’s a very complicated oceanic engineering project, so we need to learn from the experience” on Johnson South, Jin said, SCMP reported.

 




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The Onion Satirizes Police Brutality

not the onionThe satirical newspaper The Onion took a
crack at police brutality with a story headlined “New
Law Enforcement Robot Can Wield Excessive Force Of 5 Human
Officers
.” A handful of the new robots can do the work of a
whole precinct:

The tactical robotic units, known as the AP-12, are reportedly
equipped with on-board mechanisms to target both criminals and
innocent bystanders, and possess a variety of retractable
instruments that allow them to effortlessly subdue and restrain up
to four individuals at once. According to sources, just a dozen of
the new robots will be able to collectively carry out the physical
and psychological abuse typically spread out amongst the officers
of an entire precinct.

The robo-cop’s got furtive movements down:

“In many ways, these robots’ actions are indistinguishable from
those of our brave men and women in uniform,” McClintock added.

According to its designers, the AP-12 is outfitted with numerous
features that make it ideal for abruptly resorting to extreme
measures, including a highly sensitive motion detector that
perceives most gestures as an act of resistance necessitating
physical force.

And panic firing:

Engineers say the robot is also equipped with a sophisticated
audio command program that recognizes and subsequently ignores such
phrases as “Stop” and “I give up” and is programmed to apply
pressure to a prostrate suspect’s neck with a force of up to 500
PSI both before and after he’s stopped moving. Its operating system
is also reportedly loaded with advanced visual recognition software
that allows the robot to identify nearly any object in the
subject’s hand as a weapon, prompting it to rapidly empty the clip
on its extendable .40-caliber firearm.

And for those good cops worried about bad apples, the robot cop
won’t let itself be made out into one:

After doing so, the machine is configured to automatically place
a pistol on or near the disabled suspect while wirelessly
corroborating fabricated details of the confrontation with any
other on-scene units well ahead of a potential internal affairs
investigation.

Read about the rest of the
features
here, and Reason on the actual incidences of
police brutality that make this the best kind of satire,
believable, here.

h/t Jason J.

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California’s Parent Trigger Law Is (Finally) Helping Improve Public Schools

Lawmakers in California passed the Parent Trigger law back in
2010. The law allows parents of children attending failing public
schools to force major changes if half of the parents sign a
petition. Last year, parents of children attending Desert Trails
Elementary School in Adelanto, Calif., pulled the parent trigger
and transformed the school to a public charter school called Desert
Trails Preparatory Academy. “We’ve seen major, major progress…since
the beginning of the year,”
says Debra Tarver, executive director of Desert Trails Preparatory
Academy
.  

In other California school districts,
just the threat of Parent Trigger is helping parents get what they
want
.

Back in 2011, Reason TV covered the first ever attempt by
parents, with the help of the non-profit organization Parent Revolution, to use the
Parent Trigger. While the effort by parents at McKinley Elementary
to use the Parent Trigger ultimately failed, parents at other
California schools are figuring out how use the law to their
advantage, and at least seven other states have adopted some form
of the Parent Trigger.

“California’s Parent Trigger Law: Compton Parents Take
on the Public School System,” produced by Paul Feine and Alex
Manning. About 8:30 minutes.

Original release date was March 2, 2011. The original writeup is
below.

Last year, parents of students in failing California public
schools were given a reason to be hopeful when Sacramento
politicians passed something called the “parent trigger” law. The
way the law works is that if 51% of parents at a failing school
sign a petition, they can turn the school into a charter school,
replace the staff or simply use the petition as a bargaining chip
to initiate a conversation about change.

On December 7, 2010, with help from the non-profit group Parent
Revolution, parents of children attending McKinley Elementary in
Compton became the first group of parents to pull the parent
trigger. Their dream was to transform the school into a Celerity
charter school. Instead, the Compton parents were thrust into a
prolonged fight with supporters of the status quo: the Compton
Unified School District, the teachers’ unions, Gov. Jerry Brown and
Tom Torlakson, the newly elected Superintendent of Public
Instruction.

This is the story about a group of parents in Compton who are
fighting to give their children a better education.

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FX: As You Were

The news stream has been busy, but as the dust settles, many investors may simply be encouraged to do what they were already doing. 

 

The US economy’s contraction in Q1 was not the true signal of the underlying economy. Nor does it portend a new recession. Instead, the economy is rebounding back toward 3%. The Fed’s tapering strategy, outlined by Bernanke, remains very much intact, and is still projected to wind down QE3+ completely in Q4.  

 

The ECB took action, and its rate cuts and forward guidance triggered a rally in European core and peripheral bonds. Equity market saw the news as favorable, and new highs were recorded. In the foreign exchange market, the euro’s resilience has many investors (and policy makers) scratching their heads.

 

Our view has been straight forward. The euro’s decline in May was corrective in nature as participants adjusted positions ahead of the ECB’s action. A rather typical “sell the rumor, buy the fact” behavior unfolded which we had anticipated. We suspect the correction is completed and expect the euro to move toward $1.38 and sterling to $1.6900-25 initially.  

 

The yield on 10-year  US Treasuries may need to sustain a move back above 2.6% area to increase the likelihood of the greenback move through the JPY102.80 level against the yen. While the higher yieldss may underpin the dollar-bloc,  the Canadian dollar may under-perform in a generally soft US dollar environment and with a backdrop of disappointing data.

 

Dollar-Index: The Dollar Index staged a key reversal in reaction to the ECB. After hitting 81.00, the Dollar Index slumped to 80.25 before the weekend. This corresponds to a retracement objective of the advance from early May. Our initial target is near 79.70. A bounce into the 80.65-75 area may offer dollar-bears a new entry opportunity. The RSI is neutral, while the MACDs are about to turn lower.

 

Euro: The euro fell about 5 cents from early May through last week. It has begun retrace those losses.  The RSI and MACDs are constructive and are consistent with a euro advance back to the $1.3800 area. Given the strong rally off the ECB induced low near $1.35, some consolidation at the start of the new week. A pullback toward into the $1.3570 is the most that can be reasonably expected, if the downdraft is over, as we suspect.

 

Yen: A trendline drawn off the early January and April highs comes in near week JPY103.00-20. This is just above the retracement of the down move from the April attempt at JPY104 (~JPY102.90). Support is seen in the JPY101.80-JPY102.00 area. With US Treasuries remaining firm, it is difficult to see the dollar breaking out to the top side against the yen. The euro tested the JPY140 level several times in the second half of last week. A break above the JPY140.20 area would likely coincide with a firmer dollar against the yen as well.

 

Sterling: The dominant technical consideration for sterling is the downtrend line down off the May highs caught sterling’s pre-weekend high near $1.6845, which also corresponds to a retracement objective. A break of this are would be encouraging but additional resistance is seen in the $1.6880-$1.6925 band. A pullback into the $1.6755-70 range may be a new opportunity to participate from the long side.

 

Canadian dollar: Technical factors seem aligned with the disappointing fundamentals and suggest near-term weakness of the Canadian dollar. The RSI and MACDs are headed up. Provided the CAD1.09 area remains intact, the greenback may continue to recover from the April and May slide. The first retracement target is near CAD1.10 and then CAD1.1050.

 

Australian dollar: Over the past two months, the Australian dollar has carved out a base near $0.9200. On the upside, the there is a trend line down off the April and May highs that intersect near $0.9375 at the stat of the new week. The RSI is neutral, but the MACDs are turning up. A pullback toward $0.9280 may be a low risk opportunity for those who expect signs that the Chinese economy may be stabilizing and that Australia’s high rates will offer it support in the post-ECB environment.

 

Mexican peso: The Mexican central bank surprised investors by aggressively cut the overnight rate by 50 bp. This arrested the move to push the dollar below MXN12.80. The trendline drawn off the January, and February highs caught the April high and stopped the US dollar’s bounce at the start for last week. It comes in near MXN12.9550 early in the new week. The speculative community is very long the peso, and the risk is that some may have to be shaken out before it can post another leg up.

 

US 10 Treasury yields: The 10-year yield has been in a clear downtrend this year. The trendline drawn off the January and April high stopped the rise in yields last week at about 2.64%. A break of this area is needed to lend more credence to our suspicions that US rates have bottomed. If this view is right, the 10-year yield should stay above 2.50%.

 

Observations from the speculative positioning in the futures market:

 

1,  Speculative position adjustments were only significant in two currencies in the latest CFTC Commitment of Traders report that covered the week through June 3.  The first was gross long euro positions.  They were cuts by 13.6k contracts to 57.1k.  Gross short positions edged 2k higher to just over 90k contracts.  The second was the gross short yen positions. They grew to by nearly 11k contracts to almost 87k.  Of 14 gross speculative positions we track, 10 of them changed by less than 4k contracts.

 

2.  There was a tendency to add to gross speculative short positions.  The exceptions were the Swiss franc that as a 1.5k contract reduction to just less than 14k contracts; and the Australian dollar that saw less than a 1k contracts were pared to 35.3k.

 

3.  Going into the ECB meeting the speculators had the smallest long position since last July.  It has been halved since mid-March.  The gross short position was the largest since last August.  It remains larger than the gross yen position.

 

4.  Speculators extend gross short positions in the 10-year Treasury futures contract after the previous week’s bout of short covering.  The gross short position was extended by 28k contacts to a little more than 426k contacts.  The gross longs rose 3.8k contracts to 383.1k, leaving the net position short 43.3k contracts (vs -19.1k the previous week).




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Famous “Big Tobacco” Lawyer Launches Class Action Lawsuit Against HFT

In 1994 a lawyer did what most thought was impossible: he took on big tobacco on behalf of the state of Mississippi and won a record $368.5 billion judgment paid out by the 13 biggest tobacco companies to cover the cost of treating illnesses related to smoking. 20 years later he is trying the impossible again, this time launching a class action lawsuit against High Frequency Traders, and specifically 13 stock exchanges and subsidiaries on behalf of Harold Lanier “individually, and on behalf of all others similarly situated”. Ironically, the lawyer behind the lawsuit is also named Michael Lewis, no relation to the famous author whose book simplifying just how rigged the market has become as a result of HFT (and of course the Fed, but that is the topic of the forthcoming “Liberty 33 Boys”).

And while most comparable lawsuits have been mocked because the HFT lobby (understandably) believes that no jury of non HFT peers can ever “grasp” the sophisticated predation and parasitism that is HFT, Lewis simplifies it: “This is a case about broken promises,” the 40-page document begins. It is signed by eight different lawfirms, mostly from the south, which in recent years seem to have the most luck in explaining complex things to simple people. It is also just the first of many comparable lawsuits that will be filed in the coming weeks, now that the anti-HFT crusade has such a prominent participant as the many who extracted a a third of a trillion from big tobacco. Because if he smells blood, so will every one else.

From the lawsuit:

This case is about broken promises. Plaintiff Harold Lanier, and other Subscribers, (collectively “Subscribers”) entered into Contracts with the defendants, all of which are securities exchanges (“Exchange Defendants”), to receive electronic market data services offered by the Exchange Defendants. The Exchange Defendants promised to be fair by: (1) providing the market data service in a non-discriminatory manner; and (2) providing the Subscribers with “valid” data (i.e., the actual data that is accurate and not stale). The Exchange Defendants did not live up to either promise.

 

First, the Exchange Defendants failed to live up to their promise to provide Subscribers with the market data in a non-discriminatory manner. In an effort to increase their profits, the Exchange Defendants entered into lucrative side deals with certain customers to whom the Exchange Defendants sold advance access to the market data that Subscribers had contracted for through (1) direct feeds (“Private Feeds”) and (2) co-location services (“Preferred Data Customers”). As detailed in Section IV.C. of this Complaint, for a price, the Exchange Defendants provided access to the data to Preferred Data Customers through arrangements that guaranteed they would receive the data substantially in advance of the Subscribers.

 

Unbeknownst to Subscribers, these side deals resulted in Subscribers receiving data that was obsolete because the Preferred Data Customers had advance access to the data.

 

Second, the Exchange Defendants failed to live up to their promise to provide Subscribers with valid data. The validity of the data is what made the electronic data services offered by the Exchange Defendants valuable to the Subscribers. But by entering into the side deals with the Preferred Data Customers, the Exchange Defendants effectively provided to Preferred Data Customers the data that Subscribers had paid for, while giving Subscribers  data that was stale. In other words, as a result of the side deals, the Exchange Defendants deprived the Subscribers of the fundamental benefit of their Contracts, i.e., fair access to valid data. Plaintiff and the other Subscribers thereby suffered injury and damage as a result of the Exchange Defendants’ conduct.

 

* * *

 

This Complaint alleges ordinary state law claims, the crux of which revolve around the sale of stale data to Plaintiff. In other words, the gravamen of Plaintiff’s Complaint is that the services he purchased from the Exchange Defendants (specifically, the data provided through the exchanges) were not delivered as promised. This Complaint does not involve any claims regarding the purchase or sale of securities or investors’ losses, nor does Plaintiff seek  any relief related to the purchase or sale of any security.

And an interesting excerpt from the lawsuit framing the concept that is the crux of the issue: time.

The Significance of Time in the Financial World

 

Market data is purportedly made available to the Processor and Preferred Data Customers at the same time. However, the Exchange Defendants actually transmit the data to Preferred Data Customers before they send the same data to the Processor, such that the data arrives at the Processor well over a thousand microseconds later than the same data distributed over faster channels reaches the Preferred Data Customers. This does not even account for  the additional time required to subsequently transmit the data from the Processor to the Subscribers.

 

 

In human perception, those microseconds might appear unimportant, far less time than the blink of an eye. But in today’s financial markets, one thousand microseconds is a virtual eon. And given that it only takes the Preferred Data Customers a handful of microseconds to cancel orders and  execute trades, it is more than enough time for them to generate tremendous profits from the advance receipt of the market data.

 

The illustration below shows the flow of market data from the exchanges to both Subscribers (through the Processor) and to Preferred Data Customers. Through the use of high speed Private Feeds and co-location services, the Preferred Data Customers can receive the data in as little as one microsecond and can begin acting on the data immediately. Meanwhile, due to the (1) size of the connection of the feed between the Exchanges and the Processor, (2) the procedure involved in transmitting data between the Exchanges and the Processor, and (3) the co-location of Preferred Data Customers’ computer servers with the Exchanges’ servers, the data for Subscribers is still en route from the Exchanges to the Processor long after the Preferred Data Customers have received, and acted on, the information to their advantage. On average, the data is received by the Processor approximately 1,499 microseconds after the Preferred Data Customers receive it. The Processor then aggregates the data and only then is it disseminated to the Subscribers.

Much more in the full lawsuit below, which we urge HFTs to read because very soon they will have to explain to a jury of Joe Sixpacks just why what they do is “fair”.




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Veronique de Rugy Says Free the Horse Masseuses

Celeste Kelly, Grace Granatelli, and
Stacey Kollman make their living by providing massage services to
horses and other animals. For more than a decade, these three women
have supported themselves by doing what they love while alleviating
the pain of animals and bringing comfort to their owners. But if
established veterinarians and bureaucrats in the state of Arizona
and Maryland have their way, the women will not only be barred from
their chosen livelihood, they could face up to $3,500 in fines and
six months in jail. The therapists are in trouble because they lack
official licenses from their local State Veterinary Medical
Examining Boards. But obtaining a license is absurdly difficult.
And unfortunately, writes Veronique de Rugy, this abusive treatment
of American entrepreneurs isn’t confined to horse masseuses.
Unlicensed hairdressers, barbers, and hair braiders, too, were
under attack in Washington, Utah, the District of Columbia,
California, Mississippi, Minnesota, and Ohio before the Institute
for Justice step in.

View this article.

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Historic ECB Gamble, Looks Set To Print Euros And Debase Currency Versus Gold

Gold was 0.2% higher for the week and silver was 1.17% higher. Gold has a marginal loss of just 0.02% yesterday. Silver slipped to as low as $18.90 before it also rallied back higher and ended unchanged on the day.

Futures trading volume remains lacklustre and was 42% below the average for the past 100 days yesterday, according to data compiled by Bloomberg. This week gold bullion’s 60 day historical volatility fell to the lowest since April 2013.


ECB, Frankfurt, Germany

The slightly better than expected jobs number, did not see gold come under pressure as was expected. Yesterday’s ECB decision is actually much more important to the long term outlook for gold.


The ECB made a historic decision and became the first major central bank to take the extraordinary step of charging interest on deposits. ECB President Mario Draghi cut the deposit rate to minus 0.1% and lowered the key interest rate to a record 0.15%. Draghi signalled that QE and debt monetisation is still on the table and may be seen in the coming months.

While the euro strengthened against the dollar by the end of trading, it fell against gold. This suggests the move may not have the desired effect of lowering the value of the euro. Market participants may realise that competitive currency devaluations are set to continue and no major nation is, at this time, willing to see its currency appreciate versus another major trading partner.

The ECB’s move should lead to the euro further weakening against gold and increase demand for gold in Europe as investors move to hedge their euro exposure. Hard pressed savers may also allocate some of their non yielding savings to gold.

Ultra loose monetary policies, negative interest rate policies (NIRP) and the possibility of the ECB printing euros to buy bonds will make the gold shorts nervous and should contribute to a pickup in demand for gold – especially in Europe.


European and bonds rose yesterday, buoyed by the ECB’s promise of another tidal wave of money.


Benchmark 10 year yields on Italian, Spanish and Irish government bonds all plunged to their lowest ever in early trading on Friday, with the Irish yield almost 10 basis points below comparable U.S. borrowing costs.

The global bond bubble just got more bubbly … it is unlikely to end well.

Stock markets, following Wall Street’s march to yet another record peak on Thursday, rose too, with high risk bank shares leading the way. The pan European index of Europe’s leading 300 shares is on track for its eighth consecutive weekly gain as “irrational exuberance” continues in global markets.



Gold in Euros -2 Years – (Thomson Reuters)

Germany saw loud criticisms of the recent move, both from the political spectrum but also from the industry, finance, banking and pension sectors. German saver and pension groups expressed their fear, long echoed here,  that hitting banks’ profits would merely prompt them to cut their interest payments to ordinary savers.

Der Spiegel deemed it was the “end of capitalism”, while Die Welt described Mr Draghi as Europe’s Bismarck and as a near autocrat beyond control.

A senior member of German Chancellor Angela Merkel’s coalition joined banks, insurers and pension companies in denouncing the ECB’s historic gamble.

Critics of the ECB President Mario Draghi said he is debasing the currency and expropriating German savers. Ralph Brinkhaus, the finance spokesman in parliament for Merkel’s Christian Democrats, said in an e-mailed statement that “the ECB has to watch out that it doesn’t exceed the limits of its mandate,” according to Bloomberg.

Draghi’s decision, reopened a rift between Merkel and German economists and lawmakers who are concerned about currency devaluation and the risk of inflation.


The ECB’s decision will “go down in the history books as ineffective,” the Berlin-based VoeB state banks federation said. The historic low interest rate will undermine efforts of millions of Germans to save for retirement, said the GDV, which represents Allianz SE and Talanx AG.


“The bill is being footed by all of those who are investing money for the long term, the savers and holders of life insurances,” Sinn said.


‘Alternatively for Germany’, the growing anti-euro protest party that won 7% of the vote in European elections this month, renewed its call to dismantle the single currency.


Draghi “is exclusively concerned with holding the euro area together at any price” and his policy “amounts to expropriation” of savers, Joachim Starbatty, a University of Tuebingen economist, said in a statement from the party.


Starbatty was among plaintiffs who lost a bid in 2011 to get Germany’s constitutional court to stop German participation in the first bailout for Greece, the country that set off the euro’s debt crisis in 2009.

 

“And Germans have to pay the bill once again,” he said today.


GoldCore Conclusion
It is not just Germans that are paying the bill of the ECB’s policies. Mr Starbatty should go and meet hard pressed taxpayers in Ireland, Cyprus, Greece, Spain, Italy and Portugal. He should also go and meet hard working savers in all countries who are being penalised by the ECB’s ongoing financial repression.

Struggling taxpayers have been lumbered with the huge debts of reckless and insolvent banks.

The challenge across Europe is massive levels of debt across all stratas of society. This challenge of huge debt levels will not be addressed by reducing interest rates to zero or negative interest rates. The scale of the debts is too great for this.

The only long term sustainable solution is to have a comprehensive debt restructuring and debt forgiveness programme in the EU and indeed globally.

The key problem today is not the cost of money or borrowing, it is the scale of the debts. Printing euros to buy bonds will only compound the problem as more debt is piled upon existing debt. When interest rates eventually rise, which inevitably they will, the increased levels of debt and the impaired ECB balance sheet will see a problem of greater magnitude than the one seen in recent years.

A failure to address this and adopt a programme of debt restructuring and debt forgiveness will lead
to the failure of the monetary union. As periphery nations will be left with no choice but to revert to their national currencies in order to prevent economic dislocations and collapse.

Ultra loose monetary policies have not worked in the U.S. since 2008 or in Japan where interest rates have been below 2% for more than 13 years, since 2000.

Why on earth should this gamble work in the EU?

The Germans have long been vocal about the risks that this would not work and it would lead to currency debasement. However, the consensus view amongst many experts and much of the media has been to ignore the Germans as their historical experience makes them paranoid about inflation.

But, what if the economic consensus is wrong again? As it was prior to the financial crisis.

And what if the Germans are right? We have long said that we believe the Germans are right to look to their history and learn the lessons of the past.

Maybe the cosy consensus that the panacea to this crisis is more cheap money, competitive currency devaluations and currency debasement is wrong?


Gold in Euros – 5 Years – (Thomson Reuters)

As we said yesterday, cheap money, financial repression and currency debasement are classic recipes for short term financial and economic gains. Throughout history, they have been the easy options for emperors, kings, queens and governments. They are the easy option of central banks today.

However, throughout history currency printing and money debasement have never been a recipe for creating jobs and for long term sustainable economic growth and prosperity. Indeed, they inevitably lead to the general populace suffering the ravages of inflation.

The ramifications of today’s extreme ultra loose monetary policies, that are being seen internationally, are yet to be realised. Complacency abounds.

Will banks respond by beginning to charge savers an interest rate for their deposits? Savers, the backbone of the our capitalist system, are already suffering from negative real interest rates with bank deposits generally yielding less than government headline inflation in many countries.


Further financial repression, could be ‘the last straw which breaks the laden camel’s back.’

Indeed, it could lead a minority of depositors to remove some their cash from already vulnerable  banks and deposit them in less risky banks internationally that offer a yield. It could also lead them to invest in safer assets that offer a yield such as AAA rated government and corporate bonds – thereby weakening an already fragile banking system.

Gold has always been criticised due to its lack of yield, unlike stocks, bonds and deposits. However, given the ECB’s historic decision yesterday and the continuation of ultra loose monetary policies, many investors and depositors will now rightly see non yielding gold as an increasingly attractive diversification.

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Baylen Linnekin on New York City’s Loser Soda Ban

SodaThis week the New York State Court of Appeals,
the state’s highest court, heard New York City’s appeal of the
city’s soda ban. The ban has already been soundly rejected
(“slammed down,” as one New York news station puts it) by two lower
courts in the state. It’s also faced furious opposition from
millions of New Yorkers and Americans around the country of all
political and ideological stripes, and has served to galvanize the
cause of food freedom like perhaps no other issue to date.

This week’s hearing served as a reminder that the ban may be on
its last legs. If the Court of Appeals upholds the lower court
rulings, writes Baylen Linnekin, then the ban is as dead as he
predicted it likely would be back in August.

View this article.

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