A Summer Of Disappointments Will Lead To An Extended Economic Crash

Authored by Brandon Smith via Alt-Market.com,

The summer season is often about renewed hope and revelry in comfort, and this goes for economic comfort as much as anything else. In parallel to the old tale of The Ant And The Grasshopper, we are all tempted to act like the grasshopper, forget about the trials and tribulations of the world and take a vacation from awareness.

I am seeing quite a lot of this in the past month as mounting global tensions appear to have subsided. But appearances can be deceiving…

I am reminded of the summer of 2008 when those of us in alternative economic analysis were warning of the overwhelming evidence of a debt based deflationary disaster. There seemed to be widespread complacency back then as well.

September finally struck and reality began to sink in, and the rest is a history we are still dealing with to this day. Right now, economic optimism is desperately clinging to news headlines rather than data fundamentals, but this can just as easily sink markets as it can keep them artificially afloat.

Consider the numerous powder keg events coming our way over the next few months and what they will mean for economic sentiment if they go the wrong way.

Federal Reserve Meeting June 12-13

The next week will be packed with public statements from various Fed officials which may hint at how aggressive the central bank will be for the rest of the year in its tightening program. However, I think I can guess rather easily what they will do. The Fed has been sticking to its policy of interest rate hikes and balance sheet cuts as I predicted they would for the past couple years. Nothing has changed under new Fed chairman Jerome Powell.

I believe the June meeting will mark an important mid-year shift for the Fed into even more aggressive fiscal tightening. The mainstream media has been heavily pushing the idea that stagflation is now a true threat to the U.S. economy. This is a notion I actually agree with and have been warning about for quite some time.

As I mentioned in my article ‘Stagflationary crisis: Understanding The Cause Of America’s Ongoing Collapse’, when the mainstream finally admits to a specific fiscal threat which has been gestating for years, we should be concerned, because this likely means a crisis is already upon us.

The Fed will use talk of stagflation as a springboard for accelerated rate hikes, and more importantly, expanded balance sheet reductions. I have no doubt the Fed will raise interest rates again in June, which will disappoint the contingent of stock market traders who were hoping recent poor economic data would influence the central bank to back off. This is not going to happen.

When new balance sheet data comes in at the end of June I expect reductions will be noticeably higher, triggering renewed instability in equities. The Fed, of course, will not make such a move in a vacuum, though. They will need some form of geopolitical distraction.

International Trade War Will Not Be Denied

Despite rhetoric coming from Treasury Secretary and Goldman Sachs alumni Steve Munchin, the ongoing trade war will not be “taking a break”.  Supposed impending deals between China and the US are already falling apart, and Donald Trump is distancing himself from the Mnuchin peace train and indicating discontent with China yet again.

On the surface, trade war escalation seems to have been averted, based on the promise that China will “purchase more U.S. goods” in order to reduce existing trade deficits. Of course, with the climbing dollar (and simultaneous rising prices), purchasing more U.S. goods may be a problem for many countries, including China. The stagflationary crisis building in America does more than just give the Federal Reserve an excuse to pull the plug on its fiat support of stock markets. It will also be the perfect excuse for foreign buyers to further reduce purchases of U.S. goods based on the argument that they are becoming too expensive.

The Chinese offer to buy more from America is an empty offer. There will be little to no follow through and when deficit numbers increase, markets will react negatively.

The focus on the China/U.S. deficit also distracts from further strife in NAFTA trade dealings (of which Mnuchin has said there are “significant issues”), as well as trade with Europe.

Ultimately, this is headed towards bilateral agreements between China and European nations further cutting out the dollar as world reserve.  In fact, the Chinese state run media is suggesting just this strategy as a means to counter what they call ‘U.S. trade unilateralism.’

I do not expect the peace and love theater to last through the summer. The trade war will resume well before Fall.

North Korean Peace Summit Farce

As I warned in my article ‘Syria And Iran Prove There’s No Chance For North Korean Peace’, globalists only ever use peace agreements as a staging period for further war. In that article I also suggested that disruptions to the peace summit with North Korea would arise and that the U.S. would make demands North Korea cannot or will not fulfill. Already we are seeing cracks in the facade as North Korea complains about U.S. involvement in South Korean war games as well as potential de-nuclearization.

NK has now let fly statements on Vice President Michael Pence’s “stupidity” while threatening a nuclear showdown.  Trump has openly stated that the summit could be delayed or may not happen at all.  Those who argued with me that a successful summit was a “done deal” and Trump was on his way to a Nobel Peace Prize should now reconsider their positions and not quit their day jobs.  Again, North Korean denuclearization will NEVER happen; not without a war.

The optimism building around the North Korean summit was rather bewildering to me. The idea that even in the liberty movement people were actually buying into this as viable is disconcerting, because it shows a lack of awareness of the bigger picture.

What we have here, folks, is a carrot and stick approach for the American collective psyche. Tensions are ratcheted up around the world, economically and politically, and then we are given a short reprieve, a moment to take a breath. But, this generally does not last very long as these moments are usually based on false information and assumptions, and the tension is increased yet again. Eventually, something breaks.

Even if the North Korea summit actually takes place and concludes without incident (that’s a BIG “if”), and even if the Trump administration declares “mission accomplished,” there will be no follow through on the part of North Korea as far as disarmament. Count on it.

Beyond that, consider the timing.  The original time for the summit to take place was on the same day as the Federal Reserve’s June meeting.  Would it not be rather convenient for a failed summit outcome to occur while the Fed hits stock markets with another interest rate hike and a large balance sheet cut?  Once again, the Fed will dodge blame for stocks plunging another 1200 points or more as international politics takes center stage.

Iranian Peace Agreement Merely A Pause For War Prep

The Iranian peace agreement is now in tatters with Israel on the war path in the region and the U.S. supporting assertions of Iran nuclear development that are still backed by no evidence whatsoever. Many of us remember the outright lies of WMD’s in Iraq which led to the second Gulf War, and the Iranian situation smells of the same exact deception. In fact, some of the same neo-con players from those days are lurking in the White House now, including John Bolton.

With the destabilization of Syria well on the way after western intelligence agencies funded, armed and trained insurgents who would later form ISIS and wreak havoc in the country, Iran’s primary strategic partner is now on the verge of collapse. The direct targeting of the Assad regime is next as the war on ISIS con game has subsided. Russia is also conveniently pulling many of its troops out of Syria opening the door to invasion by other interests.

Any invasion of Syria with the intent to unseat Assad will likely cause an Iranian response, and perhaps this is the goal; to lure Iran into an aggressive posture, thus justifying war.

The timing of growing conflict with Iran should not be overlooked. We have oil prices now rising despite a strong dollar index and continuing oversupply, which adds to the stress over stagflation concerns. And, we also have a potential geopolitical disaster which could provide perfect cover for central banks to continue their decoupling from stock markets without receiving any blame for the consequences.

The Summer of 2018 continues to look like a staging period for considerable economic volatility to come, much like the summer of 2008 was 10 years ago.

*  *  *

If you would like to support the publishing of articles like the one you have just read, visit our donations page here.  We greatly appreciate your patronage.

via RSS https://ift.tt/2se1z1o Tyler Durden

20 Years Of Socialist Utopia In Venezuela Summed Up In 20 Disgusting Seconds

Socialist countries are quite adept at providing excuses for their inevitable failure.

And as GoldTelegraph’s Virginia Fidler recently noted, as socialist utopia Venezuela hits bottom, the latest culprit is oil.

But oil prices have been rising since the fourth quarter of 2017, and Venezuela’s economy has only gotten worse. These higher prices should be a boom for Venezuela by creating greater revenues. Instead, its oil industry is in shambles and decline.

Falling oil prices are not the cause of Venezuela’s misery. It’s socialism. It’s the system whereby government owns the means of production. Historically, governments do a horrible job managing businesses. The Venezuelan government isn’t managing its industries on any level. It’s slowly destroying them. President Maduro has been unable to keep the oil industry running. There are no new investors because the government will confiscate any further exploration.

All oil-producing nations have experienced falling oil prices. Only Venezuela is at the brink of an abyss from which it may never recover. Venezuela is sinking in a quagmire of socialist principles. Inefficiency, corruption, price controls, and out-of-control hyperinflation have created economic madness. Does President Maduro care? It’s hard to say. But he and his military minions are not starving, and they have guns. The population is bound to notice sooner or later. What happens when socialism encounters the forces of reality?

The world is watching this grim development, which undoubtedly will not have a happy ending, and judging by the following short clip, may have reached rock-bottom

In just 20 seconds, viewers can see looters caught on video callously ignoring a dying truck driver…

…as they steal boxes of goods that he had been transporting…

We warned of these kind of attacks on truck drivers previously, as with hunger and scarcity widespread around its crisis-hit economy, Venezuela has seen a frightening upsurge of attacks on its increasingly anarchic roads in recent weeks.

“Every time I say goodbye to my family, I entrust myself to God and the Virgin,” says 36-year-old Venezuelan trucker Humberto Aguilar.

As one would expect, the almost inhuman scene in the clip above saw a torrent of responses on social media. From:

This is 20 years of US sanctions, sabotage & the murderous behaviour of the CIA & local landowners, the latter wanting to go back to everything for the rich & nothing for the poor.”

to…

“Very very sad… they have returned Venezuelans to a primitive state where basic instincts govern each and every action of your life”

Either way, this week’s actions by President Trump are unlikely to help, as The Duran’s Frank Sellers reports on Washington’s efforts to obstruct economic aid (from China and Russia) to Venezuela.

Washington has suddenly discovered its reverence for Venezuela’s law, as it attempts to utilize them as a pretext to discourage Russia and China from extending debt to the South American country, struggling under the isolation from global markets due to the sanctions imposed upon it by America and its allies. The US is insistent that only the Venezuelan National Assembly can arrange for further debt within Venezuela.

Sputnik reports:

WASHINGTON (Sputnik) – The United States has spoken with both Chinese and Russian officials and warned them that the Venezuelan National Assembly is the only entity allowed to provide for the issuance of new debt in Venezuela, a senior administration official said in a press briefing on Monday.

“We have had fairly pointed discussions with the People’s Republic of China on not throwing good money after bad, and we cautioned them that the United States, the Lima Group of nations and others, that made abundantly clear that the only, under the Venezuelan constitution, the only entity which is lawfully authorized to allow or to provide for the issuance of new debt is the National Assembly. We’ve had a similar discussion with Russia,” the official told reporters.

This warning comes as US President Donald Trump issues a new executive order that bans Venezuelan officials from selling public assets at low prices in order to get themselves kickbacks, as well as bans US citizens from all transactions related to the debt of the Venezuelan government.

In the meantime, a newly-elected Maduro is showing more despotic tendencies, allowing a large part of the population to starve to maintain his socialist principles. Starvation and misery have become government policies. There is no other explanation. The situation can only worsen. As people die from hunger, the labor force is reduced, thus reducing the number of available goods, even more, creating even greater catastrophic shortages.

via RSS https://ift.tt/2IRZRK4 Tyler Durden

Why Ron Paul Thinks He Would Likely Be Impeached If He Were President

What would Ron Paul do if he were president?

Alex Jones asked the former United States House of Representatives member and three-time presidential candidate this question in a Wednesday interview at the Alex Jones Show.

Veto the spending bills, bring the US troops home from overseas, and investigate the Federal Reserve and curtail its power are actions included in Paul’s answer.

But, Paul also cautions that a president who took such bold actions would likely be impeached with bipartisan support.

Watch Paul’s interview here:

Source: Adam Dick via The Ron Paul Institute

 

via RSS https://ift.tt/2IOEMEv Tyler Durden

One Billion Chickens May Die As Trucker Strike Paralyzes Brazil

A billion Brazilian chickens and 20 million pigs may die within days – starving to death amid a nationwide truckers’ strike over soaring fuel prices which has prevented critical supplies such as animal feed from reaching their destinations

[E]xport group ABPA said a billion chickens and 20 million swines may die in coming days due to a lack of feed.” –Bloomberg

As the strike entered its fifth day on Friday – completely ignoring a Thursday night agreement, Sao Paulo declared a state of emergency due to the lack of vital resources for its more than 12 million residents. 

President Michel Temer deployed national security forces to unblock roads amid warnings that supply disruptions risk causing a public calamity.

I have actioned the federal security forces to unblock highways and I am asking governors to do the same,” Temer said in a televised address on Friday. “We will not let the population do without its primary needs.”

Those who act in a radical manner are harming the population and they will be held responsible.”

Temer chose to deploy federal forces after meeting with ministers for a “safety assessment” in the country, as the truckers’ strike continued, despite the agreement between the government and representatives of the category on Thursday night.

The government has also called the Federal Supreme Court for the strike of the truck drivers to be declared illegal. –Globo

While the strike initially started on Monday over fuel prices, it has rapidly evolved into a widespread protest against government graft scandals involving several prominent politicians – Temer included. 

Despite the deployment of forces, Carlos Marun, Minister of the Government Department, admitted that the demands of the striking truckers are “just.” When asked whether the government negotiated with the “wrong people,” since roads continue to be blocked despite the Thursday agreement, Marun joked that it wasn’t feasible to talk to all the truckers at once. 

This is a scattered and diffused movement, and I recognize that the leaders we talk to do not have the power to turn off the movement like someone who turns off a power switch,” Maron said, adding “We talked to who we had to talk to, we prepared ourselves since Sunday, and considering fair claims, we decided to negotiate before taking any more radical measures.”

The Government Minister did note, however, that the lack of action by the truckers caused the Friday deployment of government forces and the possible use of force.

“Because of non-compliance, we will have to use what we would not like, the possible use of force … in order not to diminish movement, we are making use of measures that are necessary. , at the moment, it is necessary, “he said.

Meanwhile, supermarkets and restaurants in São Paulo and Rio de Janeiro are running out of supplies, several factories have been shut down, and bus services have been significantly reduced due to the strike. 

In an attempt to end the dispute, oil company Petrobas cut the price of diesel by 10% for two weeks – however all that did was scare investors. The truckers were not impressed, considering that they’ve been subject to fuel price increases of around 50% over the last year.

Petrobras shares plunged after the announcement and are down at least 20 percent this week, leading losses in the Ibovespa index, which has lost 4.3 percent in the period. That pushed the stock market’s monthly drop to 7.7 percent, one of the worst performers among major global benchmarks.

The currency lost 4.3 percent in May amid generalized turmoil in emerging markets and as the central bank unexpectedly halted its easing cycle.

The strike will affect virtually all aspects of Brazil’s economy. RTL Today reports that Brazil’s auto industry completely shut down on Friday due to the strike.

Assembly lines of Brazilian car manufacturers have stopped. The truckers’ strike will affect our results significantly, including for exports,” the National Association of Motor Vehicle Manufacturers said, on the fifth day of the strike.

Meanwhile, the airport in Brasilia reports that its kerosene reserves have run outforcing American Airlines to cancel a flight from Miami originally destined for the Capitol city Friday morning, along with an evening return flight. And in yet another sign of impending calamity, the largest port in Latin America is reportedly running out of soybeans. 

The strike has also significantly damaged conservative President Temer’s reputation, along with those in his orbit. 

While the president has abandoned plans to run for re-election in October, those candidates associated with his government or even those merely sympathetic to its market-friendly agenda have been dealt a major blow. Brazil’s presidential contenders have been reluctant to criticize the strikers, though some have questioned their tactics.

Raul Jungmann, minister of public security, said that authorities would be investigating whether trucking companies were prohibiting employers from working, which would be a violation of Brazil’s “lockout” laws.

via RSS https://ift.tt/2Ls4IDz Tyler Durden

The Necessity Of Bitcoin As A Reserve Asset

Authored by Tom Luongo,

Yes, I said necessity. 

In a recent issue of the Gold Goats ‘n Guns Newsletter I described Bitcoin as “The Mutation That Saved Money.”  In that piece I argued that Bitcoin was born out of the extreme fraud of the financial system under Greenspan and Bernanke.

Leverage ratcheted up post-Y2K to levels which could only be supported through legislative fiat.  It walled off capital from fleeing the system.

And the response was a group of folks applied the teachings of Austrian Economics and Ludwig von Mises’ Regression Theorem to create a digital asset which became less resistant to fraud the more it was adopted.

The result was Bitcoin.

Bitcoin was a catastrophic mutation.  A thing born out of necessity to free human beings from a central issuing authority of new monetary units.  That relationship needs to be broken if we are going to free ourselves from the cycle of tyranny of the few at the expense of the many.

This isn’t to say that Bitcoin itself is the end of the story. No, in fact, it’s simply the beginning of the next story in human development.  But it shows us where we are headed.

What Goes Around …

The ebb and flow of the human generational cycle and its relationship to natural cycles is at the heart of the economic cycle with its booms and busts. They create the interplay of how the rate of wealth generation proceeds.

It’s not possible to end the business cycle, like the Utopian Marxists and their economic brethren the Keynesians believe.

The business cycle is tied to forces far beyond the control of any one person.

The central control of money is an accelerant of both sides of the economic cycle, the boom and the bust.

Excess credit creation, an inevitability during boom times, without underlying assets pull forward production from the future.  It does this by cheating the slower formation of capital through industry and savings.

The risk associated with that credit is almost certain to be under-priced via the loan’s interest rate because the lender didn’t earn the money it is lending.

The result is a high probability that the loan will not be repaid as the project was unsupported by the pool of real savings within the economy.  Gene Callahan’s excellent book, “Economics for Real People” covers this brilliantly in the first few chapters.

Excess credit creation thanks to the imperfect knowledge of all economic actors accelerates the boom and exacerbates the subsequent bust as the credit money is destroyed and the assets it was supporting fall in price.

Misaligned Incentives

Centralized money issuers have a vested interest in selling more monetary units.  Because they make their wealth on the arbitrage between the price of what they buy now versus the higher price later.

They institutionalize the underpricing of capital risk by issuing money at lower interest rates than the economy can support.  The result is a shift of the demand for money farther out in time because the most interest rate sensitive projects are the most capital intensive with the longest time horizons to completion.

This not only subsidizes uneconomic capital spending building roads to ghost cities but also crowds out investment in the projects the society actually needed because that capital was bid away from those projects.

Once the pool of real savings is exhausted because borrowers can’t generate enough revenue to cover the cost of the loans the whole system starts to collapse.  Borrowers miss payments, the banks get caught short of cash and liquidations and bankruptcies rise.

The banks are leveraged up, having lent up to ten times the amount of money they have in their ‘vaults.’  Once the borrowers stop paying, the savers have to be paid their part of the interest on the loan and the bank runs out of cash.

Welcome to a bank run.

The Lobster Trap

Inflation is the result of more money chasing the same number of goods. And prices are a reflection of the knowledge of the two participants in the transaction.  There is a mismatch between the two if there is a central issuer of new currency.

For example, say I’m a central banker who whips up $1000 for my weekly lunch tab. I know that $1000 will inflate prices later.  New money gets spent at today’s prices because the restaurant owner doesn’t know where the money came from.

He just knows business is good and that I buy the most expensive lunches he offers.  This gives him the false signal to up the price of that dish, say lobster.  He knows he can then outbid his competition for lobsters, driving up the price.

I’ll always pay the new, higher market price for the lobster.

Because why the heck not?  I’m printing money out of ‘thin air’ and sticking taxpayers with the bill.

This form of income, unearned through honest labor, is called rent. 

And so on.  With each transaction the new money raises prices along the way.  The closer you are to the issuer of the new currency, the more of the total arbitrage between the original price and the final higher price you receive.

This is why wealth inequality is accelerating in the Age of Central Banking at an exponential rate.

As the central banker pay off Congress, the banks, the lawyers, the media and everyone else with my new money first to ensure I can continue foisting the costs of my life off on the taxpayers.

The old system was simply debasing the coinage by cutting down the amount of gold or silver in the coins.  The modern system is to issue new money units as debt against someone else’s labor, i.e. the taxpayers.

Bitcoin and the blockchain say nuts to all that.  They say new money units should be divorced from human desires and their capacity for corruption.  Let’s have math govern that and let the humans figure out how to earn wealth through the system itself.

Tying Risk Down

Sovereign consumers are always looking for ways to grind out arbitrage by bidding as little as possible for what they buy.  Enforcers of control are always looking to earn rent by keeping prices higher than consumers want.

Bankers love inflation, consumers love deflation.

Bitcoin, alongside gold, is the ultimate weapon against the rent-seekers because its supply is not governed by humans.  This small difference changes everything.  There is certainty as to what the supply of money will be tomorrow or next week.

And as such demand for it can be more predictably forecast by market actors.  There is no guess work as to what the central bankers are going to do at the next meeting.  There are no gonzo gold deposits that could radically change the supply of it on the horizon.

While market forces guide the hands of the central bankers and the gold miners to some extent, nothing is changing how many Bitcoins will be available tomorrow.  Yes, there is loss due to attrition and small, uneconomical balances lying around in wallets all over the world.  But, there is a known maximum of coins, governed by math, that removes the human element from money creation.

And because of that eventually Bitcoin, or some other suitable cryptocurrency or basket thereof, will form the reserve asset pool against which all other assets are measured.  Because that stability of supply and its growth will grind out opportunities to collect rent created by the uncertainty and unfairness of the current system.

It simply costs too much to regulate dollars, euros, etc.   Those lowered costs will now be passed to consumers who retain ownership over the value of their money.

Bitcoin returns sovereignty back to the consumer, the rights-holder, which is exactly where it belongs.  It distributes (in theory) the ownership of the transaction network and pays them to maintain it.  Consumers are the ones who have money to convert into goods.  They should be the sole arbiters of their money’s exchange rate, not a President, Board of Directors or Banker.

If the market needs more money in the short term it will create it.  Banks can issue credit based on its Bitcoin balances.  But, they will be constrained in how they do this because no Federal Reserve stands behind them ready to bail them out.

So, be good at risk assessment or be driven out of business.

Hard forks and other blockchains can create new cheaper currency units and keep the owners of the older network honest through competition and potentially better service, e.g. Bitcoin Cash, Zcash, Litecoin, etc.

And So it Begins…

And that’s why consumers will over time choose to do business in cryptocurrencies over debt-based ones.  The value of their money is based on the operational excellence of the owners of the network not the needs of corrupt bankers and politicians.

The miners/witnesses/notaries update and improve it to meet consumers’ needs rather than sitting behind a wall of laws and dictating that inflation is too low and dumping a bunch of euros on the market, devaluing your wages and your savings.

The costs of paying the network operators will be regulated by the market far more efficiently than the current system.  And those cost advantages will translate up and down the financial services industry to steal market share from traditional banks over time.

That arbitrage is what is fueling the growth of the cryptocurrency markets now.  We’ll still see all the same things that happen today happen in a world governed by cryptocurrencies – bank runs, bad loans, too much or little credit, etc.

But all of those things will not be institutionalized and protected by laws. They will be isolated and far better contained as long as they are allowed to develop as companies free from government interference.  The discipline of a crowded market will inspire innovation in risk management.

As we approach the moment in history when the confidence we have in central banks will be tested to the extreme, the timing of cryptocurrency adolescence couldn’t be better.  When the monetary system seizes up and people look for new solutions the ‘cryptos’ will be there to keep things flowing.

Those that are have cryptos in their portfolio of assets now are holding them as savings, hedging against this very risk.  And in the process they are becoming their own central bank holding reserves to protect their wealth unwittingly ushering in the inevitable.

*  *  *

To support more work like this and get access to exclusive commentary, stock picks and analysis tailored to your needs,join my more than 100 Patrons on Patreon and see if I have what it takes to help you navigate a world going slowly mad. 

via RSS https://ift.tt/2IOSCXm Tyler Durden

Millennials Are Now Considered The “Lost Generation”

The Federal Reserve Bank of St. Louis published a new report examining the relationship between a person’s birth year, and measures of his or her family’s economic status, including income and wealth. Fed economists determined that substantial wealth declines were visible across the age spectrum around the Great Financial Crisis (GFC) but found that young families suffered the most.

The report suggested that millennials (born between 1981 and 1996) not be just broke, they are at most significant risk of becoming a “lost generation” regarding wealth accumulation. Coming of age post-GFC has been difficult. Many millennials are stuck in the “gig economy” with stagnating wages. On top of that, this avocado toast generation is fighting against a rapid surge in living costs coupled with mounting debt on their books via auto loans, credit cards, short-term loans, and student debt.

The net worth of a typical millennial household born in the 1980s is about 34 percent below what was expected, the report stated.

A Lost Generation?…Fed economists determined that millennial households lost even more financial ground between 2010 and 2016, falling farther down the economic hellhole and behind the typical wealth life cycle.

” This represents a missed opportunity because asset appreciation is unlikely to be as rapid in the near future as it was during the recent period. Two reasons for optimism are that the 1980s cohort has many years to get back on track and it is the most educated—hence, also potentially the highest-earning— group ever,” the report said.

The Wilshire 5000 Total Market Full Cap Index, a market-capitalization-weighted index of the market value of all stocks actively traded in the United States, outlines the rapid repricing of the market post-GFC. The index advanced +450 percent from 2010 to 2018 — leaving many millennials behind.

In total, just 54 percent of Americans are invested in the market, either through individual stocks, mutual funds, pensions or retirement plans like a 401(k). That is down nearly 11 percent post-GFC.

While Wall Street and Washington push propaganda pieces to attract millennials into the stock market casino, it is the belief that this generation is too broke to even participate in these financial games.

HERE ARE SOME OF THE CHARTS THAT RELATE TO MILLENNIALS, FROM THE FED REPORT:

Figure 1: Median Family Net Worth and Income

Figure 2: Change in Median Net Worth, Relative to 2007

Figure 3: Change in Median Income, Relative to 2007

Figure 8: Change in Estimated Age-Specific Wealth Levels since 1989

The report concludes: “It is far too soon to know whether families headed by someone born in the 1980s will become members of a lost generation for wealth accumulation. To be sure, there are grounds for optimism. Yet there are reasons to be very concerned about the financial outlook for many young Americans.”

Fragile millennials could soon be staring at the next recession with the economic expansion that started in mid-2009 and already the second-longest in modern economics most likely will end around 2020, as the Federal Reserve continues tightening financial conditions through interest rate increases and shrinking of its balance sheet.

Earlier this month, 59 percent of forecasters surveyed by The Wall Street Journal said to expect a recession by 2020. This is not what millennials want to hear.

“The current economic expansion is getting long in the tooth by historical standards, and more late-cycle signs are emerging,” said Scott Anderson, chief economist at Bank of the West, who was among those forecasting a 2020 recession.

When the next great recession/depression strikes, it could deliver the final deathblow to put this “lost generation” out of its financial misery. 

via RSS https://ift.tt/2GQhXKW Tyler Durden

Kanye Finally Said Something We Should Pay Attention To… And The Media Is Silent

Authored by Carey Wedler via TheAntiMedia.com,

Kanye West finally tweeted something important this week, and nobody cares – at least compared to the media feeding frenzy that ensued when the notorious rapper expressed support for President Donald Trump.

On Monday, concluding a string of tweets about people’s addictions to their phones, West shared a link to an in-depth documentary about the history of consumerism and how it became the fabric of American society. The Century of the Self is a four-hour BBC documentary from 2002 that explores the role of Sigmund Freud’s nephew, Edward Bernays — often considered the father of modern public relations (and propaganda) — in molding the collective mindset.


The documentary also explores Bernays’ role as a propagandist for Woodrow Wilson during World War I, helping drum up support among the war-weary public via the Committee on Public Information. In an interview with Bernays featured in the documentary, he discussed attending the Paris Peace Conference with Wilson, recalling that they “worked to ‘make the world safe for democracy’ — that was the big slogan.”

Bernays went on to assist the CIA in a propaganda campaign to justify the agency’s coup against a democratically elected leader in Guatemala who began to confiscate lands from the American United Fruit company, which harvested bananas in the country. As New York Times book review summarized:

Bernays helped forge a network of intelligence agents in Central America expressly to discredit the regime. He circulated unflattering information to influential American newspapers, stigmatizing Arbenz with the Communist label and softening up public opinion for the eventual C.I.A.-sponsored overthrow of the reform-minded Government..”

He had previously worked to sell those bananas to the American public, portraying heavy banana consumption as a patriotic habit that helped maintain United Fruit’s vast fleet, which could be pressed into emergency service during wartime.”

Though Bernays decried the negative connotations of the term “propaganda” and believed his efforts simply helped foster order in society and were vital to the democratic process — he also advised numerous presidents — his ideas and tactics also influenced Nazi propaganda minister Joseph Goebbels.

His ideas remain highly relevant today. For example, he suggested that young would-be politicians should be sent “to work for Broadway theatrical productions or … as assistants to professional propagandists” before being recruited into politics.  In the age of Donald Trump and even Barack Obama — a highly charismatic figure who built a powerful celebrity image and now has a content deal with Netflix — Bernays insights proved correct.

Despite the immense influence of his work, he remains relatively unknown to the masses. As a result, it’s unsurprising that West’s tweets about him drew significantly less attention than his praise for Donald Trump. Whereas the rapper’s widely-covered Trump tweet drew 336,000 likes, 84,000 retweets, and 28,000 comments, his tweet about Bernays’ cigarette campaign has received just 14,000 likes, 2,300 retweets, and under 1,000 comments. His tweet linking to The Century of the Self received even less traction.

There has been little to no mainstream media coverage of Kanye’s Bernays tweets despite the media’s obsessive focus on his comments just earlier this month (side note: Bernays worked frequently with media and news outlets, including the Hearst company, during his prime).

This should come as no surprise, as commentary on widespread, systemic manipulation and corruption is less appealing to a dogmatic, divided public than inflammatory comments that incite strong emotions with both factions of America’s two-party system.

Despite his influence over the public, mass manipulation would not be possible without the public’s consumption of carefully calculated content. As Bernays observed in his first book, Crystallizing Public Opinion,

 “The truth is that while it appears to be forming the public opinion on fundamental matters, the press is often conforming to it.”

Whichever came first – propaganda to manipulate the masses or the masses’ demand for it – is ultimately irrelevant as people choose to engage in, in Kanye’s case, superficial outrage over pro-Trump tweets instead of actual information and history.

(For more information on these lesser-known control tactics, watch Adam Curtis’ most recent documentary, Hypernormalisation, which goes into further detail on false realities constructed by the ruling class to the detriment of people around the world.)

via RSS https://ift.tt/2krDRv4 Tyler Durden

For $200K, You Can Buy A Mansion In Cleveland, Or A Closet In Manhattan

When it comes to housing, the median price per square foot can vary wildly depending on whether you’re in a “hot” housing market like New York City or a less popular market like Cleveland. In a graphic created by PropertyShark, the research company puts these differences into perspective by showing, comparatively, how much home a person could buy for $200,000 – the median home price for the US.

In Cleveland, where the median price per square foot is $53, one could buy a 3,700 square foot home – enough to fit a few spare rooms. But in Manhattan, where that number is nearly $1,600 per square foot, you’d barely be able to afford a closet (at that rate, $200,000 would only get you 126 square feet).

Map

San Francisco, Boston and San Jose are in a situation similar to Manhattan. The market is hot and prices are sky high.

But cities like San Antonio and Memphis have an affordability that’s closer to Cleveland. For $200,000, you could buy a 400 to 600 square foot home in Los Angeles and San Diego.

Or you could buy a home as large as 2,000 square feet in Nashville or Orlando, the latter of which can be seen as a kind of alternative to LA.

Or if you have your heart set on a major US city – but want something that’s slightly more affordable than LA – you could find a decent living in Miami for $200,000 (it would get you 835 square feet), Portland (773 square feet) and Chicago (1,102 square feet).

US

The American South has some of the best deals.  If you don’t mind the heat, Austin (1,341 square feet) and Dallas (1,824 square feet) are strong candidates. For $200,000, you could live comfortably in a 1,119-square-foot home in Atlanta. In Charlotte, you could get 1,619-square feet.

Regardless, even in second- and third-tier cities, the revival in many urban real-estate markets means you’ll probably need more than the US median price to afford a home.

via RSS https://ift.tt/2GNSSQM Tyler Durden

Mauldin: The 2020s Might Be The Worst Decade In U.S. History

Authored by John Mauldin via Forbes.com,

I recently wrote about a looming credit crisis that’s stemming from high-yield junk bonds. The crisis itself will have massive consequences for investors. But that’s not the worst part.

The crisis will create a domino effect and trigger global financial contagion, which I usually refer to as “The Great Reset.”

The collapse of high-yield bonds will hit stocks and bonds. Rising defaults will force banks to reduce their lending exposure, drying up capital for previously creditworthy businesses.

This will put pressure on earnings and reduce economic activity. A recession will follow.

Global Recession

This will not be just a U.S. headache, either. It will surely spill over into Europe (and may even start there) and then into the rest of the world. The U.S. and/or European recession will become a global recession, as happened in 2008.

Europe has its own set of economic woes and multiple potential triggers. It is quite possible Europe will be in recession before the ECB finishes this tightening cycle.

As always, a U.S. recession will spark higher federal spending and reduce tax revenue. So I expect the on-budget deficit to quickly reach $2 trillion or more. Within four years of the recession’s onset, total government debt will be at least $30 trillion.

This will further constrain the private capital markets and likely raise tax burdens for everyone—not just the rich.

Political Backlash

Meanwhile, job automation will intensify, with businesses desperate to cut costs. The effect we already see on labor markets will double or triple. Worse, it will start reaching deep into the service sector. The technology is improving fast.

The working-class population will not like this and it has the power to vote. “Safety net” programs and unemployment benefit expenditures will skyrocket.

Studies show that the ratio of workers covered by unemployment insurance is at its lowest level in 45 years. What happens when millions of freelancers lose their incomes?

The likely outcome is a populist backlash that installs a Democratic Congress and president. They will then raise taxes on the “rich” and roll back some of the corporate tax cuts and increase regulatory burdens.

At a minimum, this will create a slowdown but more likely a second recession. Recall (if you’re old enough) the back-to-back recessions of 1980 and 1982. That was an ugly time for those of us who lived through it.

Of course, that presumes a recession before the 2020 election. It may not happen—I put the odds at about 60%–70%.

The Great Reset

Unemployment may approach the high teens by the end of the decade and GDP growth will be minimal at best.

What do you call that condition? Certainly not business as usual.

Long before that happens, the Federal Reserve will have engaged in massive quantitative easing.

As this recession unfolds, we will see the Fed and other developed world central banks abandon their plans to reverse QE programs. I think the Federal Reserve’s balance sheet assets could approach $20 trillion later in the next decade.

Not a typo—I really mean $20 trillion, roughly five times as much as what we had after 2008.

The world simply has too much debt, much of it (perhaps most) unpayable. At some point, the major central banks of the world and their governments will do the unthinkable and agree to “reset” the debt.

How?

It doesn’t matter how, they just will. They’ll make the debt disappear via something like an Old Testament Jubilee.

I know that’s stunning, but it’s really the only possible solution to the global debt problem. Pundits and economists will insist “it can’t be done” right up to the moment it happens—probably planned in secret and announced suddenly.

Jaws will drop, and net lenders will lose.

While all that is brewing, technology will keep killing jobs. As we get into the 2020s, the presidency and Congress will again be whipsawed, and we will begin to discuss Bernie Sanders’ “crazy” universal basic employment idea, or others like it.

By then, the idea will not be considered crazy, but the only feasible choice. Even conservative politicians can see the light when they feel the heat.

All of this is going to lead to the most tumultuous decade in U.S. history, even if we somehow (hopefully) avoid throwing a war into the mix, as is typical of a Fourth Turning.

Typically, the end of a Fourth Turning (which started in 2007, according to Neil Howe), has been accompanied by wars. This one could, too, though I think we will more likely see multiple low-grade skirmishes.

If we somehow get through all that, and particularly the Great Reset, the 2030s should be pretty good. In fact, think incredible boom and future. No one in 2039 will want to go back to the good old days of 2019. Our kids will think it was the Stone Age. But we have to get there first.

*  *  *

Get a Bird’s-Eye View of the Economy with Thoughts from the Frontline – My weekly newsletter is a must-read for investors who want to find out about the trends to watch out for. Get it free in your inbox

via RSS https://ift.tt/2GSmxYW Tyler Durden

Moody’s Puts Italy On Downgrade Review, Junk Rating Possible

In a quite direct ‘threat’ to the newly formed Italian coalition, Moody’s warned that Italy will face a downgrade from its current Baa2 rating (potentially more than one notch to junk status) due to the lack of fiscal restraint in the new “contract” and the potential for delays to Italy’s structural reforms.

While Italy’s current rating is Baa2, and a downgrade would leave it at Baa3 (still investment grade), one look at Italian debt markets this week and one can be forgiven for thinking it is pricing in a multiple-notch downgrade to junk… and thus potentially making things awkward for its ECB bond-buying-benefactor and its banking system’s massive holdings of sovereign bonds.

Full Moody’s Report:

Moody’s Investors Service has today placed the Government of Italy’s ratings on review for possible downgrade. Ratings placed under review are the Baa2 long-term issuer and senior unsecured bond ratings as well as the (P) Baa2 medium-term MTN programme, the (P)Baa2 senior unsecured shelf, the Commercial Paper and other short-term ratings of Prime-2/(P) Prime-2 respectively.

The key drivers for today’s initiation of the review for downgrade are as follows:

1. The significant risk of a material weakening in Italy’s fiscal strength, given the fiscal plans of the new coalition government; and

2. The risk that the structural reform effort stalls, and that past reforms such as the pension reforms implemented in 2011 are reversed.

Moody’s will use the review period to assess the impact of the fiscal and economic policy platform of the new government on Italy’s credit profile, with a particular focus on the effect on the deficit and debt trajectories in the coming years. The review will also allow Moody’s to assess further whether the new government intends to continue to pursue growth-enhancing structural reforms, or conversely to reverse earlier reforms, such as the 2011 pension reform, as well as other economic policy initiatives in the coming months that may have an incidence on the country’s growth potential over the coming years.

Italy’s long-term and short-term foreign-currency bond and deposit ceilings remain unchanged at Aa2 and P-1, respectively. Italy’s long-term local-currency bond and deposit ceilings also remain unchanged at Aa2.

RATINGS RATIONALE

RATIONALE FOR PLACING RATING ON REVIEW FOR DOWNGRADE

On 23 May, more than two months after the general elections on 4 March, the president mandated the prime ministerial candidate put forward by the Five Star Movement (5SM) and the Lega to form a coalition government. Together, the two parties command a reasonably solid majority in the lower house and a narrower majority in the upper house, and should therefore receive a vote of confidence in both chambers of parliament, with the votes likely to take place in the coming days.

When Moody’s affirmed Italy’s rating with a negative outlook in October 2017, the rating agency noted that Italy’s key credit vulnerability is the government’s very high debt burden. Moody’s explained that it would consider stabilizing the Baa2 rating if it had a high level of confidence that the debt ratio would be put onto a sustained downward trend, which would require a reorientation of fiscal policy towards achieving higher primary surpluses on a sustained basis.

Conversely, Moody’s stated that the rating would likely be downgraded if policies enacted or anticipated proved insufficient to place the public debt ratio on a sustainable, downward trajectory in the coming years.

The first key driver of today’s decision to place the rating on review is Moody’s concern that the new government’s fiscal plans suggest that the latter will indeed be the case.

Far from offering the prospect of further fiscal consolidation, the “contract” for government signed by the two parties includes potentially costly tax and spending measures, without any clear proposals on how to fund those. While Moody’s notes that some of the coalition parties’ original proposals have been modified in the final coalition agreement, they would still lead to a weaker, not a stronger, fiscal position going forward. So far, Moody’s has assumed a gradual deficit reduction over the coming years, which in turn would allow for a very gradual decline in the public debt ratio.

The review will allow Moody’s to seek more clarity on the new government’s plans in this regard, and in particular on the scope of the tax and spending pledges, specifically the “flat tax” and “citizen income” proposals, as well as their potential financing sources and the timeline for their implementation. The parties have also stated their intention to avoid the legislated increase in the VAT rate for next year, which would bring additional revenues worth around 0.7% of GDP. Higher budget deficits would hamper any reduction in Italy’s very high public debt ratio of over 130% of GDP.

At the time of the last rating action, Moody’s also noted that the outlook could be stabilized if a more ambitious programme of structural reforms were to be implemented, which would result in a sustainably stronger growth performance of the Italian economy. Conversely, a failure to articulate and present a credible structural reform agenda would put downward pressure on the rating.

A second driver of today’s action is Moody’s concern that, again, the latter will in fact be the case, and indeed that some important past reforms might be reversed. The rating agency will therefore also use the review period to assess some of the new government’s other pledges contained in the coalition agreement. The agency will explore what – if any – plans the government has to continue, in some form, the reform effort of the previous governments with further growth-enhancing economic and fiscal reforms.

A particular focus will be on the possible reversal of earlier reforms, such as the 2011 “Fornero” pension reform. In that particular case, marginal corrections with limited impact are not a source of concern. But a more generalized reduction in the retirement age would have a more material impact on the sustainability of the pension system. Moody’s notes that Italy already spends close to 16% of GDP on pensions, one of the highest ratios in advanced economies. While current long-term estimates forecast relatively stable pension spending as a share of GDP over the coming decades — in contrast to some other EU countries — those estimates rely on optimistic assumptions for population growth and employment trends. Rather than a reduction in the retirement age, Italy will probably require additional measures to maintain pension spending at a broadly stable ratio.

RATIONALE FOR NOT LOWERING ITALY’S Baa2 RATING AT THIS TIME

Moody’s recognizes that there inevitably exists substantial uncertainty whenever a new government is formed regarding that government’s intentions and capacity. Italy has maintained reasonably solid public finances for a long period of time and under different governments. Moody’s notes that the parties forming the new government seem to have accepted the need to maintain small budget deficits, given the limited fiscal space due to the very high debt ratio. It is also noteworthy that the new government’s “contract” does not include previous proposals that raised questions about the government’s commitment to Italy’s euro membership. More time is needed to assess what policies the new government is in fact likely and able to pursue.

The rating is also supported, for now at least, by the very low risk of a severe deterioration in Italy’s credit profile, such as could result from a far more confrontational stance vis-à-vis the euro area. Strong checks and balances and constitutional constraints exist which would impede any government from seeking to achieve fundamental changes to its role in, or obligations towards, the euro area in a way that would damage Italy’s credit profile. The Italian president holds significant power in ensuring that any Italian government honours its international commitments including those assumed by dint of membership of the euro area. Accordingly, while some of the above mentioned spending and tax plans place further doubt over Italy’s willingness and ability to meet its obligations under the EU fiscal compact and balanced budget rules, the risk of much more credit negative outcomes, up to and including exit from the euro area, remains very low.

The risk of a government liquidity crisis is also low, in Moody’s view. The government’s outstanding debt has a reasonably long average maturity (around seven years), debt management is very prudent and experienced, and while borrowing needs are substantial for this year and next (at around 22% of GDP), even significantly higher interest rates for newly issued debt would take a number of years to be reflected in materially higher government spending on debt interest. Monetary policy will remain an important support for government bond yields in all the euro area countries, including Italy.

Moody’s also notes that the Italian economy maintains significant underlying strengths and has been recovering from a prolonged period of very low growth. Italy’s economy is the third-largest in the euro area and its export and manufacturing sectors have experienced a solid recovery in recent quarters. While the public sector is highly indebted, the private sector generally has a much stronger balance sheet position. Leverage is low and households in particular have significant wealth and high levels of savings, an important buffer in a situation of stress.

WHAT COULD CHANGE THE RATING DOWN/UP

Rating drivers are essentially unchanged from the time of the previous action. Moody’s would likely downgrade the rating if, having assessed the new government’s proposed policies during the review, it were to conclude that its policies will be insufficient to place the public debt ratio on a sustainable, downward trajectory in the coming years. A failure to articulate and present a credible structural reform agenda which would enhance Italy’s economic growth prospects on a sustained basis, would be similarly negative for the rating.

Given the review, an upgrade is highly unlikely in the near future. Moody’s would consider confirming the Baa2 rating if, following the review, it had a high level of confidence that the debt ratio would be put onto a sustained downward trend. As before, this would require a reorientation of fiscal policy towards achieving higher primary surpluses on a sustained basis. The rating could also be confirmed if an ambitious programme of structural reforms were to be implemented by the new government, which would result in a sustainably stronger growth performance of the Italian economy.

The committee was called outside of the sovereign calendar dates for EU sovereign ratings, based on the event of the nomination of a new Italian government with a decidedly credit-negative fiscal and economic policy platform.

  • GDP per capita (PPP basis, US$): 36,877 (2016 Actual) (also known as Per Capita Income)
  • Real GDP growth (% change): 0.9% (2016 Actual) (also known as GDP Growth)
  • Inflation Rate (CPI, % change Dec/Dec): 0.5% (2016 Actual)
  • Gen. Gov. Financial Balance/GDP: -2.5% (2016 Actual) (also known as Fiscal Balance)
  • Current Account Balance/GDP: 2.6% (2016 Actual) (also known as External Balance)
  • External debt/GDP: [not available]
  • Level of economic development: High level of economic resilience
  • Default history: No default events (on bonds or loans) have been recorded since 1983.

via RSS https://ift.tt/2Ls4xrQ Tyler Durden