Broke Bond Markets Mounting: Italy Surpasses Greece As Europe’s Riskiest Sovereign
As yields soar optimistically around the world, pushing negative-yielding debt below $12 trillion – the lowest since June, but hey, it’s still $12,000,000,000,000 of insanity, central-planners’ incessant meddling with global markets has sparked another WTF-moment in capital market history.
A mere twelve trillion dollars worth of nonsense debt remains…
Source: Bloomberg
And, as The FT reports,for the first time since 2008, Greece has lost the dubious distinction of being the riskiest government borrower in the eurozone after its bond yields dipped below Italy’s…
Source: Bloomberg
Greek bonds have soared this year as investors hungry for yields have snapped up debt from former euro area crisis spots — a trend that gained further momentum after S&P’s upgraded Athens’ credit rating to BB- late last month.
As FT notes, the small size of Greece’s bond market – much of its enormous debt load is in the form of low interest loans to the EU and IMF following a series of bailouts – means there is less immediate pressure on government finances compared with Italy, which relies solely on markets to refinance its own huge debt pile.
“We still hold some Greek bonds based on our view that the economy has bottomed,” said Chris Jeffery, a fixed-income strategist at Legal & General Investment Management.
“But much more important is the debt structure. There are very few cash flow requirements for the next five years. With Italy, you always have the rollover risk.”
5Y Greek bond yields topped 60% in early 2012, they are now below 0.50%!!
Source: Bloomberg
Finally, as the chart above shows, Italian debt has also performed strongly during the summer’s global bond rally, but some investors remain wary due to the effects of last year’s political tensions.
However, the real fear – that of Euro redenomination – has now switched from Italy to Spain…
Source: Bloomberg
Although S&P rates its debt several notches higher than Greece’s, Italy has a negative outlook on the rating (but is still investment grade), but given the chart above, we suggest all eyes should be focused on Spain for now for the next round of EU fireworks.
Of course, with Lagarde sure that negative-rates are a good thing, who knows where the next bank-bomb lies.
Where did all the time go? Thirty years ago this week the Berlin Wall fell. Then Soviet chairman Mikhail Gorbachev freed the Baltic states and allowed divided Germany to reunite. It was a geopolitical earthquake of historic proportions – and a major miracle of our times.
The once mighty Soviet Union had become exhausted by its long military/economic/political struggle to keep up with the much wealthier United States and its rich allies. Moscow had 40,000 tanks, but its economic infrastructure, crippled by Marxist ideology, was an empty shell.
A senior KGB general in Moscow told me that, a decade earlier, the renowned Soviet physicist Andrei Sakharov had warned the Politburo that failure by Soviet industry to account for deprecation to modernize and replace outdated equipment would provoke a major crisis by 1990. This is exactly what happened.
By 1990, Soviet industry was broken down, outdated or rusted away. The Kremlin could no longer maintain the Soviet welfare state with its free medicine and education, long holidays, vacation spas, early pensions and unaffordable military spending. Arms alone may have accounted for over 40% of Moscow’s budget.
The Soviet Empire came crashing down after a revolt by East Germans, followed by Baltic peoples and central Europeans. Secretary Gorbachev, an idealistic leader of high ethics, refused to use the Red Army to crush the rebellion.
KGB, fed up with decrepit Communist misrule, abandoned the Party and moved to take control. East Germany broke free of Moscow and joyously reunited with West Germany, altering Europe’s balance of power to the displeasure of Britain and France, Germany’s historic rivals.
According to the Russians, Moscow made oral agreements with Washington, London and Paris that, in exchange for allowing Germany to reunite and then join NATO, the Western powers vowed NOT to extend the alliance into the former Communist states. They agreed to a neutral buffer zone across Eastern Europe and the Baltics.
The West lied. Precisely the opposite occurred. NATO, led by its sponsor, the US, moved relentlessly east, using its economic and political clout to dominate Hungary, Czechoslovakia, Poland (they were delighted), the Baltic states, Bulgaria, Romania and the wreckage of former Yugoslavia. New NATO bases in Romania and Bulgaria gave the US-run alliance much greater access to the Mideast.
The Georgian government, led by Gorbachev’s foreign minister Eduard Shevardnadze, a key player in dismantling Communism, was ousted in a CIA-led ‘color revolution.’
Protests by bankrupt Russia over NATO’s intrusion into Eastern Europe were scornfully dismissed by the West with ‘well, you don’t have anything in writing to confirm your claims of a deal.’
True enough, in the confusion of ‘fin de regime’ Moscow and its Russian diplomats failed to get signed treaties. `We trusted the Western powers,’ came their pathetic reply. Meanwhile, US intelligence agencies were looting Moscow of its military technology and bribing the corrupt government. At times, Russia felt like an occupied nation.
The US poured vast sums of money into Russia to shore up its pro-US oligarchs and robber barons, corrupting everyone in their path. A bunch of drunken former Communist Party bigwigs attempted a clownish coup, only to be blocked by the KGB and military. Another serious drunk, Boris Yeltsin, was helped into power on a route paved with US $100 bills by the West. It was Russia’s darkest hour.
KGB finally seized power by outing Yeltsin and installing one of its brightest officers, Vladimir Putin. He quickly began rebuilding Russia and cleaning Moscow’s Augean Stables. Germany achieved another miracle by its successful reunification with former East Germany.
I walked through the deserted main building of East Germany’s Stasi secret police and the abandoned HQ of the quarter million-strong Group of Soviet Forces in Germany. Files were strewn on the floors; sheets of paper marked ‘Top Secret’ blew about. It was spooky and miraculous.
I was reminded of poet Shelley’s great poem Ozymandias:
US Threatens Sanctions On Serbia, Scrambles To Thwart Possible S-400 Purchase
In a largely unreported but hugely important story that played out this week in the Balkans, Washington is putting immense pressure on Serbia to shelve future plans for acquiring Russia’s advanced S-400 air defense missile systems.
The controversy began Wednesday when Serbian President Aleksandar Vucic told a public television broadcaster in an interview that he had a desire to purchase the S-400 but lacked the funding to do so, and at one point said “Serbia was ready to accept S-400s from Russia as a gift,” according to TASS.
“You know, when you have such a weapon, no one would attack you. Neither US nor any other pilots fly where S-400s are operational: Israeli pilots do not fly either over Turkey or Syria, except for the Golan Heights. We have aviation, which the strongest than ever before. We will be strengthening the air defense with Pantsyr systems and other things, which are not on the sanctions list,” Vucic said in the interview.
Vladimir Putin and Aleksandar Vučić, via EWB
This after Serbia is still reeling from what Belgrade and much of the public considers the ‘illegal’ US-NATO bombing of Yugoslavia in 1999, and later formal recognition of breakaway Kosovo as a republic under the Bush administration.
The president explained that he had attended the Slavic Shield-2019 Russian-Serbian drills in order to personally inspect the Russian systems and view their capabilities, which included Pantsyr-S anti-aircraft missiles.
Prior to the interview at least one notable Serbian newspaper reported that Belgrade was mulling purchase of the S-400 anti-air systems on long-term credit, with rumors that Serbian officers had even already begun limited training on the systems.
But as Russia’s TASS reported, all of this was enough to trigger US diplomatic threats and intervention:
The US was quick to respond to Vucic’s statement. US Special Representative for the Western Balkans Matthew Palmer warned in an interview with the Macedonian television during his visit to Skopje that the purchase of S-400 systems from Russia would entail US sanctions against Belgrade.
The sanctions threat worked, according to some Russian sources; however, the spat appears to be ongoing, given Reuters reported Friday that a US diplomat was promptly dispatched to meet with Serbian authorities over the issue.
S-400 Triumph anti-aircraft missile system, via EPA/EFE
U.S. concerns grew last month when Russia sent its S-400 missile defense system and Pantsir launchers to Serbia for a military drill. The move underlined Moscow’s wish to keep a traditional Slavic ally on side as Belgrade pursues links with NATO and tries to join the European Union.
Matthew Palmer, a U.S. envoy for the Balkans, said last week that Serbia could risk sanctions over its arms deals with Russia. Under the sanctions, Serbia could face punishments ranging from visa bans to denial of export licenses.
However, late in the week President Aleksandar Vucic had publicly addressed the country, telling Serbs “not to fear broad sanctions would be imposed on Serbia similar to those of the 1990s during the Balkan wars,” according to Reuters.
Serbia officially has a stance of “military neutrality” with regards to NATO, but joined its Partnership for Peace program in 2015, and remains a traditional close Slavic Balkan ally of Moscow.
Washington has of late actively sought to prevent the proliferation of Russian S-400s and its next generation S-500, especially after Turkey began receiving deliveries in the past months, which has brought US-Turkey relations near breaking point.
A United Nations expert in torture diagnosis has in the past week issued a stark warning that Australian whistleblower Julian Assange is in danger of dying from extreme prison conditions in Britain.
It is testimony to the rank hypocrisy of British and American governments who lecture others around the world about democracy, human rights and international law.
One can only imagine the hysterical outcry among Western governments and media if somehow Assange was being detained in a Russian prison.
The 48-year-old Assange has been held in a maximum-security prison in London since April this year when he was forcibly removed from the Ecuadorean embassy. His arrest was itself a staggering breach of international law. Assange had been confined to the embassy for nearly seven years where he sought asylum to avoid being extradited to the US.
He should have been released on September 22 when his sentence for a past bail infringement had been served out. Instead, a British judge has ordered Assange to be detained until the extradition trial to the US gets underway next year. If Assange is extradited to the US he is facing 175 years in prison if convicted for espionage. Few would believe that he will receive a fair trial in Britain or the US. He has been denied due process of consulting with his defense lawyers.
Assange’s “espionage” charge stems from the fact that his whistleblower site Wikileaks published volumes of damning information exposing massive US and NATO war crimes in Iraq, Afghanistan and elsewhere. His publications of leaked data also exposed Western diplomatic malfeasance in several countries, as well as illegal global spying on citizens by US intelligence agencies in collusion with British counterparts.
Assange has provided vital information to the international public which demonstrates systematic corruption by Washington and its allies. For telling the truth, he is now being persecuted, just as his whistleblowing colleagues, Chelsea Manning and Edward Snowden are. Manning has been repeatedly imprisoned in the US, while Snowden has had to seek asylum in Russia for fear of being summarily incarcerated as a “traitor” if he returns to the US.
Nils Melzer, an internationally recognized expert on torture treatment, visited Assange back in May this year during his ongoing detention in Belmarsh Category A prison under conditions of solitary confinement. He concluded then that Assange was suffering psychological torture by the British authorities. His latest warning is based on up-to-date medical information pertaining to Assange’s health, and it makes for a grim assessment.
In comments to the AFP news agency, which this week received little Western media coverage, Melzer said:
“Mr Assange’s health has entered a downward spiral of progressively severe anxiety, stress and helplessness typical for persons exposed to prolonged isolation and constant arbitrariness.”
In a grave conclusion, he added:
“While the precise evolution is difficult to predict with certainty, this pattern of symptoms can quickly develop into a life-threatening situation involving cardiovascular breakdown or nervous collapse.”
Melzer said the measures he urged back in May to protect Assange’s health and dignity have been pointedly ignored. “However, what we have seen from the UK government is outright contempt for Mr Assange’s rights and integrity… Despite the medical urgency of my appeal, and the seriousness of the alleged violations, the UK has not undertaken any measures of investigation, prevention and redress required under international law.”
In a further damning comment, Melzer said that Julian Assange “continues to be detained under oppressive conditions of isolation and surveillance, not justified by his detention status. While the US government prosecutes Mr Assange for publishing information about serious human rights violations, including torture and murder, the officials responsible for these crimes continue to enjoy impunity.”
The appalling assessment corroborates what Assange’s father told Strategic Culture Foundation in an interview published on September 24. John Shipton warned then that he feared his son was being killed extrajudicially by the British and American authorities.
Despite Assange’s award-winning journalism and truth-telling, the Western mainstream media have shown utter disregard for his plight. Indeed, such media have tended to bolster the vilification and character assassination piled on Assange by the American and British governments.
The hypocrisy is further underscored by recent US media attempts to lionize a so-called whistleblower who has helped launch impeachment proceedings against President Trump over alleged corruption in connection with Ukraine. By contrast, the same media in their callous indifference towards Assange are condemning him to torture for acts of whistleblowing which were truly historic in their scope and importance.
However, one thing that has severely disadvantaged the cause of Assange is the smear campaign against him, accusing him of being a “Russian asset” or “cyber terrorist”. These smears have been peddled by Western media.
So, evidently, when so-called whistleblowing serves power it is deemed praiseworthy. But when whistleblowers challenge and discredit power then they are persecuted as criminals, even to the point of death.
Arguably, if President Donald Trump had any scruples he would drop the trumped-up espionage case against Assange. After all, it was Wikileaks’ exposures of corruption by Hillary Clinton and her Democratic Party chiefs which partly boosted Trump’s election in 2016. Assange obtained those leaks from a Democratic insider, not from Russian hackers, as is commonly asserted by deluded “Russiagaters”.
Julian Assange while he was free and now while in prison exposes the systematic criminality and immorality of Western governments and their lackey corporate media. That’s why he finds himself in the hellish dungeon conditions today in a British prison.
We can only hope that mounting public pressure can be brought to bear on Washington and London to restore Assange’s freedom and life. In the meantime, the cruel vindictiveness of both governments, their lawlessness and profound contempt for human rights, is surely an eye-opening spectacle.
The US-Australia-Japan alternative to Belt and Road helps explain why the US sent a junior delegation to Thailand and why India opted out of RCEP…
China’s President Xi Jinping waves during the opening ceremony of the China International Import Expo in Shanghai on November 5. Photo: AFP/Hector Retamal
Chinese President Xi Jinping six years ago launched New Silk Roads, now better known as the Belt and Road Initiative, the largest, most ambitious, pan-Eurasian infrastructure project of the 21st century.
Under the Trump administration, Belt and Road has been utterly demonized 24/7: a toxic cocktail of fear and doubt, with Beijing blamed for everything from plunging poor nations into a “debt trap” to evil designs of world domination.
Now finally comes what might be described as the institutional American response to Belt and Road: the Blue Dot Network.
Blue Dot is described, officially, as promoting global, multi-stakeholder “sustainable infrastructure development in the Indo-Pacific region and around the world.”
It is a joint project of the US Overseas Private Investment Corporation, in partnership with Australia’s Department of Foreign Affairs and Trade and the Japan Bank for International Cooperation.
“The development of critical infrastructure—when it is led by the private sector and supported on terms that are transparent, sustainable, and socially and environmentally responsible—is foundational to widespread economic empowerment,” said Bohigian. “Through Blue Dot Network, the United States is proud to join key partners to fully unlock the power of quality infrastructure to foster unprecedented opportunity, progress, and stability.”
“This endorsement of Blue Dot Network not only creates a solid foundation for infrastructure global trust standards but reinforces the need for the establishment of umbrella global trust standards in other sectors, including digital, mining, financial services, and research,” said Krach. “Such global trust standards, which are based on respect for transparency and accountability, sovereignty of property and resources, local labor and human rights, rule of law, the environment, and sound governance practices in procurement and financing, have been driven not just by private sector companies and civil society but also by governments around the world.”
“Australia is committed to promoting high-quality infrastructure, inclusive approaches, and facilitating private sector investment in the Indo-Pacific region,” said Maude. “I’m pleased that this commitment is shared by East Asia Summit Leaders, and we look forward to working closely with our regional partners to develop Blue Dot Network to take action on this commitment.”
“Blue Dot Network is an initiative that leads to the promotion of quality infrastructure investment committed by G20 countries,” said Maeda. “As JBIC has a long history of infrastructure finance all over the world, JBIC is pleased to share such experience and contribute to further development of Blue Dot Network.”
Now compare it with what just happened this same week at the inauguration of the China International Import Expo in Shanghai.
As Xi stressed:
“To date, China has signed 197 documents on Belt and Road cooperation with 137 countries and 30 international organizations.”
This is what Blue Dot is up against – especially across the Global South. Well, not really. Global South diplomats, informally contacted, are not exactly impressed. They might see Blue Dot as an aspiring competitor to BRI, but one that’s moved by private finance – mostly, in theory, American.
They scoff at the prospect that Blue Dot will include some sort of ratings mechanism that will be positioned to vet and downgrade Belt and Road projects. Washington will spin it as a “certification” process setting “international standards” – implying Belt and Road is sub-standard. Whether Global South nations will pay attention to these new ratings is an open question.
The Japanese example
Blue Dot should also be understood in direct comparison with what just happened at the summit-fest in Thailand centered on the meetings of East Asia, the Association of Southeast Asian Nations and the Regional Comprehensive Economic Partnership (RCEP).
The advent of Blue Dot explains why the US sent only a junior delegation to Thailand, and also, to a great extent, why India missed the RCEP train as it left the pan-Asian station.
Indian Prime Minister Narendra Modi is still between a rock – Washington’s Indo-Pacific strategy – and a hard place – Eurasia integration. They are mutually incompatible.
Blue Dot is a de facto business extension of Indo-Pacific, which congregates the US, Japan, Australia – and India: the Quad members. It’s a mirror image of the – defunct – Obama administration Trans-Pacific Partnership in relation to the – also defunct – “pivot to Asia.”
It’s unclear whether New Delhi will join Blue Dot. It has rejected Belt and Road, but not, finally and irrevocably, RCEP. ASEAN has tried to put on a brave face and insist differences will be smoothed out and all 16 RCEP members will sign a deal in Vietnam in 2020.
Yet the bottom line remains: Washington will continue to manipulate India by all means deemed necessary to torpedo – at least in the South Asian theater – the potential of Belt and Road as well as larger Eurasia integration.
And still, after all these years of non-stop demonization, the best thing Washington could come up with was to steal Belt and Road’s idea and dress it up in private bank financing.
Now compare it, for instance, with the work of the Economic Research Institute for ASEAN and East Asia. They privilege the ASEAN Outlook on the Indo-Pacific, an original Indonesian idea, instead of the American version. The institute’s president, Hidetoshi Nishimura, describes it as “a guideline for dialogue partners” and stresses that “Japan’s own vision of the Indo-Pacific fits very well with that of ASEAN.”
As much as Nishimura notes how “it is well known that Japan has been the key donor and a real partner in the economic development of Southeast Asia throughout the past five decades,” he also extols RCEP as “the symbol of free trade.” Both China and Japan are firmly behind RCEP. And Beijing is also firmly stressing the direct connection between RCEP and Belt and Road projects.
In the end, Blue Dot may be no more than a PR exercise, too little, too late. It won’t stop Belt and Road expansion. It won’t prevent China-Japan investment partnerships. It won’t stop awareness all across the Global South about the weaponization of the US dollar for geopolitical purposes.
And it won’t bury prevailing skepticism about the development project skills of a hyperpower engaged on a mission to steal other nation’s oil reserves as part of an illegal Syrian occupation.
They say you shouldn’t believe everything you see on the big screen.
However, as Visual Capitalist’s Iman Ghosh explains below, in the case of science fiction, the human imagination has gotten a few things right – especially when it comes to futuristic forecasts. Today, the artificial intelligence (AI) revolution is transforming everything, but it turns out we had a hunch about it all along.
When AI Comes to Life
Today’s infographic from Noodle.ai takes a look at how some movie and television predictions for AI’s capabilities have taken hold in the real world.
Many early “predictions” about future technologies certainly missed the mark—but it seems science fiction was able to accurately forecast a thing or two about AI.
AI Basics: Making Life Better
Artificial intelligence is all about equipping machines with the ability to mimic human decision-making processes. It has a wide range of applications, from basic automation to advanced machine learning models.
AI has proliferated into virtually every aspect of life, and in the graphic, it’s clear that several sci-fi-turned-real inventions are aimed at making things more convenient for us humans.
Of course, these have had varying degrees of success. While Google Glass didn’t initially resonate with the wider public, the augmented reality smart glasses have now proved useful in businesses such as manufacturing.
Elsewhere, sci-fi-inspired advances in industries like healthtech are providing a new lease of life for many patients—and continuously reinventing the frontier of what we think is possible.
Sci-Fi Helps Us Push Boundaries
One monumental event in AI history occurred in 1997, when IBM’s Deep Blue beat a chess master at his own game. This event shook the world when we realized what AI could truly be capable of—even though sci-fi had in fact anticipated it 20 years prior.
But as the graphic shows, not all is rosy in science fiction’s likeness of AI. It’s often depicted as something to fear, and certain predictions have proved to be eerily accurate.
While not all of these are causes for alarm, they clearly demonstrate that sci-fi has the capacity to influence the breakthrough technology we could end up seeing a few years down the line. However, turning reel to real can raise some curious dilemmas.
Rights for Robots?
Last year, the European Parliament debated an interesting question: do robots qualify as people?
The resolution considered granting “personhood” to sophisticated, autonomous robots. However, over 150 AI experts strongly warned against this proposal, arguing it would “blur the relation between man and machine” in a way that is too unethical.
Nevertheless, this thought experiment proves that artificial intelligence is matching our wildest imagined predictions for it.
AI is whatever hasn’t been done yet.
– Tesler’s Theorem
As we move ever closer towards a world where AI is inextricably linked with the everyday, how else could science fiction shape our expectations of the future?
Eleven years ago, Satoshi Nakamoto announced the bitcoin whitepaper to the world. Coinbase, a large cryptocurrency exchange, recently celebrated this milestone with a retrospective.
I’m going to remix Coinbase’s narrative to tell a different account of bitcoin’s last 11-years.
The thing that fooled us all for a while, myself included, is that we all thought bitcoin was solving a monetary or payments problem. It was labelled a coin, after all, and coins fall within the realm of monetary economics. To further complicate matters, Satoshi told his story using phrases like “electronic cash system” and “non-reversible transactions”. Perhaps we deserve to be forgiven for not seeing bitcoin’s underlying nature. After all, tearing down the existing monetary system and building a new one was a fresh and exciting narrative.
Anyways, Coinbase still believes this old tale.
“As with other technologies, money has gone through many upgrades over the years,” its marketing team writes.
“Bitcoin is the latest breakthrough in a technology that’s millennia old.”
What is now apparent is that bitcoin was never a monetary phenomenon. No, bitcoin is a new sort of financial betting game. It is a digital, global, highly-secure, and fairer version of the old-fashioned chain letter.
The premise behind bitcoin-the-game is that the current wave of buyers must guess when (or if) a subsequent wave of buyers will emerge, this second next wave’s participation being contingent on when (or if) they believe a third wave of buyers to emerge. If they guess right, the early birds win at the expense of the late ones. And they can win a lot of money, as Coinbase points out in its post:
Think of bitcoin as a pure mind game, a Keynesian beauty contest in which we “devote our intelligences to anticipating what average opinion expects the average opinion to be.” Those old fashioned chain letters that you (or your parents) used to get in the mail were an early type of beauty contest. The price that Alice was willing to place on a chain letter was a function of whether she expected the next recipient, Bill, to play by the rules and send it on, Bill’s expectation in turn depending on the odds that Jack would join the game.
But chain letters had a major flaw. The chain order could be easily compromised by a fraudster who miscopied the list and put their name at the front. Bitcoin fixes this by introducing robustness to chain letter-type games. Bitcoin’s blockchain is an unbreakable public record of where in line game players stand. Altering this chain order would require tremendous amounts of computer power, as Coinbase illustrates in this chart:
Bitcoin-the-game has been spectacularly successful. As Coinbase points out, it “went from an idea in 2008, and a first transaction in 2009, to over 27 million users in the US alone in 2019, or 9% of Americans.” Below, Coinbase has charted the number of active bitcoin addresses that have been created over the years:
Why did bitcoin-the-game succeed?
First, it’s a fun and cutting-edge game. Many people dream of thrusting themselves out of financial obscurity into millionaire land. Bitcoin is a technologically-sophisticated way to get there. No one wants to play grandpa’s lottery.
Secondly, the way that bitcoin is designed helps it spread. Most of the legacy financial games that bitcoin competes with (poker, lotteries, sports betting) are regulated by the government. Strict rules prevent game providers from reaching a wide audience. For instance, online casinos may be prevented from serving out-of-state players, problem gamblers may be banned, and those who are under 18 must be excluded. These financial games are usually centralized. This means they are hosted on a single website, or at a physical location like a casino, or by a government-run lottery corporation. Which makes it easy for regulators to shut down game providers who break the rules.
But bitcoin is different. Because it is a decentralized and digital financial game, it can’t be regulated or shut down. And so it can serve the entire globe with impunity. Which it has done by spreading into every crack and cranny on earth. As is illustrated by another of Coinbase’s charts:
Based entirely on whisps and storms of psychology, the price of bitcoin is inherently volatile. Its core volatility has stayed pretty much constant over the last 11-years. Users should expect the same for the next 11 years. Even if more people join a Keynesian beauty contest, the average opinion of the average opinion will always be a fickle, inconsistent thing, and so price will always be jittery.
So what about bitcoin-as-money? Yes, people do use bitcoin for payments. But this gets dwarfed by its popularity as a financial game. The problem is this. Bitcoin payment functionality is implemented on top of a highly volatile chassis, a fun but fickle beauty contest. Which hobbles the effectiveness of the payments platform. Regular folks won’t use the stuff to pay. They don’t want the value of their spending stash to fall by 20% overnight. And game players don’t want to waste their tokens on buying goods & services. That could mean potentially missing out on a life changing jackpot. That’s why the promise of mainstream bitcoin payments has died a thousand deaths over the last 11 years.
That being said, the demand for bitcoin in economically volatile regions such as Venezuela has hit record highs. Coinbase suggests that thanks to inflation and capital controls, bitcoin is finally being used as the electronic cash for which it was originally designed.
Coinbase could be right. In places like the U.S. with functioning monetary systems, bitcoin is just too awkward to serve as a payments alternative. But in places where monetary breakdowns have occurred, regular folks may be more willing to put up with the inherent pitfalls of transacting with bitcoin. And so we finally get to see bitcoin-as-money emerging.That’s a good thing.
But bitcoin’s popularity in Venezuela is also consistent with the bitcoin-as-game narrative. When people are desperate to improve their lives, they may have little other option but to roll the dice. In Run Lola Run, Lola needs to quickly make 100,000 Deutschmarks to save her boyfriend’s life. She races to a casino and plays roulette. Likewise, in the face of societal collapse, Venezuelans may simply be gambling on whatever potentially life-changing bet they can find. Bitcoin is one such a bet. Unwinding what portion of Venezuelan usage is due to bitcoin-as-game versus bitcoin-as-money is tricky.
Coinbase goes on to spout the typical cryptocurrency industry nonsense about legacy payments. It claims that “sending an international wire transfer by major US banks costs around $45, can take days to process, and can be done only during banking hours.” And here is the chart it uses:
That may be a good critique from ten years ago. But with SWIFT gpi having rolled out a few years back, multinationals can make near real-time cross border payments using the traditional correspondent banking system. For individuals and small businesses, fintech Transferwise offers instant remittances over fiat rails. These can settle on weekends in nations like the UK, which have real-time retail payments systems. I’ve touched on this before.
Continuing along with hyperbole, Coinbase makes the claim that bitcoin remittance fees are minimal compared to fiat. But this ignores the sizable foreign exchange fees that one must pay when converting fiat into bitcoin and back into fiat. I’ve gone into this calculus before.
What’s next for Bitcoin? asks Coinbase in closing. Let me give it a shot. It’s possible that bitcoin-as-game will stay popular for a very long time. And if it does, that could be a good thing. As I’ve suggested before, there is a demand as-such for financial games and bets, specifically early-bird bets. Compared to many of the fly-by-night games out there, bitcoin provides a fair and trustworthy option.
What about the original vision that got us all so excited, bitcoin-as-money? Crippled by bitcoin’s game-based engine, bitcoin payments are probably never going to move beyond the niche role that they currently occupy. That’s better than nothing. When those on the fringes are temporarily cut off from the conventional payments system, they’ll always have an option for making transactions. It might not be a user-friendly option, but at least it’s there.
53 Million Americans Drowning In Cycle Of Low-Wage Work
It’s the “Greatest Economy Ever,” right? Well, it depends on who you ask.
For instance, a new report sheds light on 53 million Americans, or about 44% of all US workers, aged 18 to 64, are considered low-wage and low-skilled.
Many of these folks are stuck in the gig economy, making approximately $10.22 per hour, and they bring home less than $20,000 per year, according to a Brookings Institution report.
An overwhelmingly large percentage of these folks have insurmountable debts if that are student loans, auto loans, and or credit card debt. Their wages don’t cover their debt servicing payments as their lives will be left in financial ruin after the next recession.
While the top 10% of Americans are partying like it’s 1999, most of whom own assets, like stocks, bonds, and real estate, are greatly prospering off the Federal Reserve’s serial asset bubble-blowing scheme and President Trump’s stock market pumping on Twitter.
Today’s artificial economy isn’t working for everyone as the wealth inequality gap swells to crisis levels.
The US is at the 11th hour, one hour till midnight, as the wealth inequality imbalance will correct itself by the eruption of protests on the streets of major metro areas, sort of like what’s been happening across the world in Chile, Hong Kong, Lebanon, and Barcelona.
An uprising, a revolution, people are waking up to the fact that unelected officials and governments have ruined the economy and has resulted in their financial misery of low wages and insurmountable debts.
The report shows almost half of all low-wage workers are clustered in ten occupations, such as a retail salesperson, cooks and food preparation, building cleaners, and construction workers (these are some of the jobs that will get wiped out during the next recession).
Shown below, most of these low-wage workers are centered in areas around the North East, Mid-Atlantic, and Rust Belt.
As we’ve detailed in past articles, millions of these low-wage and low-skilled jobs will never be replaced after the next recession, that’s due in part to mega corporations swapping out these jobs with automation and artificial intelligence.
The solution by the government and the Federal Reserve, to avoid riots in the streets, will be the implementation of various forms of quantitative easing for the people.
There’s a reason why you already hear the debate of universal income, central banks starting to finance green investments, and other various forms of short/long term stimulus, that is because the global economy is grinding to a halt — and the only solution at the moment is to do more of the same.
International Man: Last year, President Trump took the unusual step of bypassing his advisors to announce his intention to withdraw all US troops from Syria quickly. The decision rattled Washington and the mainstream media. It caused former Defense Secretary Mattis to resign. Almost a year later, the US has withdrawn only a token number of soldiers. It still has thousands of troops occupying the part of the country where oil fields are located. What is going on here?
David Stockman: Well, that’s the Deep State at work.
Donald Trump is all by his lonesome. He’s home alone in the Oval Office. Now, half of it, he can blame himself. If he hires someone, a known idiot like John Bolton, what does he expect is going to happen except that everything he wanted to do is going to be undermined.
Nevertheless, he can’t seem to find anybody who can articulate on a day-to-day basis a pathway to the more restrained America First posture that he had in mind.
He’s surrounded by people who constantly countermand his orders. You have James Jeffery, the US Ambassador and special envoy to Syria saying, “Well, Trump didn’t mean that when he said he wanted the troops out of Syria.”
We have the same thing with North Korea. Trump finally said, here we are, 66 years after the armistice and we still don’t have a peace treaty, and we’re still occupying the Korean peninsula, which is of no interest to our national security one way or the other.
You have to do what I would call “contrafactual history.” In other words, if you understand what could have happened the other way, then maybe you’re not going to be so impressed with all this threat inflation.
I go back to why the Korean War happened, because I think it’s important to this whole thing going on now, with Trump trying to make a deal with Kim Jong-un.
In the late ’40s, Washington officials said that Korea is outside our sphere of influence, the line between North and South hastily drawn at the Potsdam war conference in July 1945. Dean Acheson, the US secretary of state in the late 1940s, said it was a mere surveyor’s line; it’s of no strategic influence. What if common sense had prevailed, instead of the hot-headed advice that President Truman got?
What if Truman had said, “Okay, we’re vacating this damn peninsula”? Well, it would have become a quasi-province of China, just like all the rest of them.
They’d probably be making all kinds of stuff, sending it to Walmart today, and nobody would know the difference.
Instead, we had a war. If I remember right, 54,000 servicemen were killed. The whole peninsula was pummeled, carpet bombed, and literally destroyed. It was like a wasteland in the north. There are reasons why the Kim family has survived all these years, because they hate us for what happened. People remember. It was really scorched earth. I mean, it was in some sense genocide, even then.
So, all of that happened, and Eisenhower comes in and is astute enough to say that we don’t really have national security on the line. He negotiated an armistice, and yet the War Party kept tension on the DMZ for all those years because it had to be in the playbook of threats.
I remember well when I was fighting the big Reagan defense build-up, back when I was budget director. It was always, we need all these different new tanks and attack aircraft and resupply logistics capabilities, because we have to have the ability to fight two and a half wars.
Well, where was the half war? I knew where the other ones were. The half war was in Korea. Well, why did we have to have a half war in Korea? But nevertheless, that was part of the rationalization—justification—for this massive military force that really is a tool of empire and not a tool of homeland defense.
Today, we have Trump finally saying, let’s let the Koreans decide how to run the future of Korea—and back off this long-running, 65-year confrontation.
And yet as courageous in some ways as he has been, he’s constantly being undermined by his own people, who as soon as he’s not looking send real nasty messages to the North Koreans—that will only set Kim back on his heels—and therefore nothing gets done. Even though it could very easily be done.
When you have a regime change policy—and this was the one real positive thing Trump brought to the table. He said regime change has failed; we’re not going to do it under my policy.
Why do you think the North Koreans are quasi-starving? And I know the Communist elite and Kim’s family and so forth live a pretty fat life, but nevertheless they’re in dire straits economically.
Why do they invest all this money in developing nuclear capability and missile capability? Because they don’t want to be regime changed. Kim is a young man, he’s in his mid-30s, and he doesn’t want to be another Muammar Gaddafi or Saddam Hussein.
He knows what happens. You get hung on national TV if you’re a Hussein, or you get tortured and drugged behind a Jeep if you’re a Gaddafi.
Obviously, this stuff has consequences. These idiots in Washington and all these think tanks that talk about regime change and bringing democracy to the world and so forth—never even think about the consequence—the message that these violent episodes send—and the unfortunate reaction that people take in order to defend themselves.
International Man: With John Bolton out of the picture, do you see US talks with North Korea bearing fruit for Trump?
David Stockman: I think it’s touch and go.
The problem is there’s lasting damage when you engage in all this regime change over so many years and episodes. They don’t trust you.
Trump has worked very hard, using an odd, idiosyncratic personal diplomacy to build up trust with Kim. It seems to be working, but there are just so many forces at work behind the scenes that are aiming to undermine that trust-building so that nothing happens.
They want to keep 29,000 troops in South Korea, in harm’s way, as a tripwire, so that the North Koreans obey us as we tell them to behave. It’s crazy.
I would give it a 50/50 chance. I know he wants a big victory, a foreign policy win. He’s desperate for one, because not much is happening elsewhere and what he intended to do is being totally undermined.
Maybe there’s a chance that something could happen here, but I am so distrusting of the Deep State machinery and their need for perennial threats.
If you take away the Korean threat, if you recognize the Iranians aren’t a threat, if you see that Russia is a tiny little country that’s not going to invade Western Europe and crash through the Brandenburg Gate in Berlin, and so forth—
All of a sudden somebody is going to do the math as we get into the coming fiscal crisis and say, “We can’t afford all this defense that we don’t need. Let’s cut it back dramatically.”
They don’t want this to happen. And so, they have to keep these hot spots burning and these threats maintained or inflated, because they know if the real truth of the world were considered by Congress, the defense budget would be slashed dramatically.
International Man: So far, President Trump has had a very different foreign policy than Candidate Trump. What will happen to Trump’s chances for re-election if he doesn’t make any progress on ending the war in Afghanistan, withdrawing from Syria, and bringing peace to Korea?
David Stockman: I think his re-election is binary.
If the stock market holds up and the economy manages to skirt recession, he’ll be in good shape. But I don’t think that’s going to happen.
I think the stock market is in its last days of bubble excess. I think the economy is slouching toward recession within a matter of a few quarters or months. If that happens, Trump is toast. Elizabeth Warren becomes president, and then that’ll be a whole new ball game that is hard to figure.
International Man: What kind of role do you see foreign policy playing in the 2020 election?
David Stockman: It won’t be the normal sense of debating policy—where there’s usually the bipartisan duopoly, with nuanced shades of difference that they like to debate and pretend are meaningful.
That isn’t even going to happen this time. Foreign policy has been totally taken over by the Democratic paranoia about Russia and Putin and meddling in our elections.
Now it’s extended to the whole impeachment inquiry and Ukraine-gate. That’s what the whole debate is going to be about. The debate is going to be about a sideshow.
The underlying issues are why we are constantly steaming warships into the Black Sea. That’s like the Gulf of Mexico to Russia.
Why are we sending warships into the Baltic?
Why are we constantly doing big maneuvers in Poland and in the Baltic states, right on Russia’s doorsteps with these tens of thousands of forces going through these maneuvers and exercises? What the hell are we doing all this for?
Those are the issues. But they’re not even going to get debated.
One last point: Trump had raised the question, isn’t NATO obsolete? The Soviet Union is gone. The 50,000 tanks allegedly on the central front facing western Europe have been melted down for scrap. And yet, he can’t even do anything about NATO.
He’s had to double-talk his way into saying, “Well, the other countries are going to commit some more money they don’t have. They’re going to waste more money on defense.” That’s all that’s come of it.
The point is we ought to be debating what the hell are we doing with NATO 25 years after the Soviet Union disappeared from the face of the earth?
Why isn’t Washington and the president leading the world with this disarmament conference so that we can begin to reduce this massive expenditure for weapons that nobody can afford?
This is what Washington should be doing. The president of the United States should be leading the great global disarmament conference of 2021, and yet that won’t even come up. It’s not even on the radar screen.
It’s not even mentioned because, as I say, the Warfare State machinery essentially squelches any kind of debate, suffocates any kind of thought that at all deviates from the status quo.
The big issue in the world today is war and peace, and we’re facing a campaign in 2020 where it won’t even be mentioned.
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California Approves $3.2 Billion Bond For High Speed Train To Nowhere
The high speed train is dead, long live the high speed train.
Less than a year after California Gov. Gavin Newsom brought California’s dreams for a LA to San Fran bullet train crashing down, when he said in February that he is ending the state’s hugely expensive and hopelessly quixotic high-speed rail line fiasco (which would have been completed in 2033 at a staggering cost of $77 billion), California is about to unleash another high speed train project, and this one is even more idiotic.
The California Infrastructure and Economic Development Bank (IBank) has authorized a $3.2 billion tax-exempt, fixed-rate revenue bond issuance to help DesertXpress Enterprises, an affiliate of Virgin Trains USA, build a high-speed train from Victorville, California, to Las Vegas. The new XpressWest service, at speeds of up to 180 miles per hour, will take about 90 minutes one way.
There is just one problem: Victorville, located in SoCal’s high desert, is quite literally in the middle of nowhere.
More on that in a second.
DesertXpress will be able to use the money to pay for the 135 miles of the project located within the state of California. This, according to ConstructionDrive, includes the costs of design, development, construction, operation and maintenance of the rail system itself; a passenger station; a maintenance facility; train cars; and electrification infrastructure. DesertXpress will also be able to use the bonds, which are sponsored by the California county of San Bernardino, to establish a debt service reserve fund, as well as pay for interest and other bond-related expenses. While total spending is listed at around $4.8 billion, “hard construction costs” are $3.6 billion.
Construction, which is expected to begin in the second half of 2020 and wrap up in 2023, according to an IBank staff report, will generate more than 15,800 temporary construction jobs.
That’s the good news. The bad news is… what the hell are they thinking?
In theory, it’s not a terrible idea: California has for decades sought to find a fast path between Los Angleles and Las Vegas. In practice, the fact that the train runs to Victorville assures that the project is DOA.
The XpressWest between California and Las Vegas, according to the IBank staff report, will take about half the time of a car trip, but Randal O’Toole, a senior fellow at the Cato Institute, thinks that there simply won’t be enough potential passengers — at least enough to make the new bullet train a success.
“If you’re driving from Los Angeles to Victorville, by the time you get there, you’re pretty much halfway to Vegas,” O’Toole said, “so why would you stop and leave your car somewhere and take a train and then have to walk to wherever your destination is — or take a cab or an Uber or Lyft — when you can just drive your car there?”
That’s probably a question the creators of the project should have asked first.
Here’s the problem: the distance between Los Angeles and Victorville is about 90 miles and about 190 miles from Victorville to Las Vegas.
“Driving from Los Angeles to Victorville,” O’Toole said, “you’re driving through all the traffic — you’re driving over the mountains … and you get to Victorville and it’s just a straight shot to Las Vegas. It’s more miles, but there’s very little traffic.
“If they were going to go from Los Angeles to Las Vegas, they might have a chance of attracting some customers, but going through the mountain would be extremely expensive,” he said. “They’re building the easy part of the rail line but not the part that they need to build to actually attract customers.”
Virgin Trains USA is a majority owner of Virgin Trains USA Florida, formerly known as Brightline, and currently owns and operates an express rail passenger rail system that runs from Miami to West Palm Beach. The company is building a $4 billion extension to Orlando International Airport. The estimated completion date is sometime in 2022.
And while the company’s projects may be viable in Florida, they will be another epic waste of funds in California.
Meanwhile, when we said that the first high speed train is dead, well that wasn’t quite right: the construction of the original California bullet train is still chugging along, albeit on a reduced scale. While Governor Gavin Newsom shelved the California High-Speed Rail Authority’s plans for a $77 billion rail line between San Francisco and Los Angeles after amid concerns over escalating costs and schedule delays, the governor limited work to the $20 billion Central Valley portion of the project that will take passengers between Bakersfield and Merced.
In other words, another high speed train going from nowhere to nowhere.
So why does California continue to press along with not one but two train projects it knows will be a disaster? The answer is simple: “free” Federal money. The High-Speed Rail authority is trying to beat a Dec. 31, 2022 deadline in order to not lose a $929 million Federal Railroad Administration grant for that particular segment.
In other words, instead of saving almost a billion dollars in taxpayer funds, and applying them to something useful, California is willing to begin a project which everyone knows will be a catastrophic waste of funds, but since the money has to be spent, even if it means digging holes just to fill them up again… well, so be it. After all, this is the government hard at work.
