Category: zerohedge

Authored by Robert Bridge via The Strategic Culture Foundation,

Perhaps it was expecting too much that the tech giants would check their political allegiances at the door to ensure fairness. Instead, they have let their political affinities disrupt the process every step of the way and this is leading the country down a blind alley.

June 2019 may go down in the history books as the defining moment when the American IT giants – in cahoots with the limping ‘legacy’ media – removed their masks, as well as their gloves, revealing the real threat they have become to the institution of US democracy, fragile as it already is.

The New York Times got the ball rolling when it ran a front-page story (‘The Making of a YouTube Radical’) detailing the trials and tribulations of one tortured Caleb Cain, a college dropout who was “looking for direction” in life but instead tumbled headlong into a rabbit hole of “far-right politics on YouTube” where he eventually found himself “brainwashed” and “radicalized.”

The article, quoting “critics and independent researchers,” which I suppose could mean just about anyone, says the Google-owned platform has created “a dangerous on-ramp to extremism by combining … a business model that rewards provocative videos with exposure and advertising dollars, and an algorithm that guides users down personalized paths meant to keep them glued to their screens.”

Some people would call that the very same business model that keeps the wheels of capitalism rolling: Keep the product hot and spicy so that the consumer comes back for more. The so-called “alt-right,” however, is not serving up extremist beliefs or Nazi ideology to attract viewers, as the New York Times claims, but rather coherent arguments that challenge the tenets of modern Liberal thinking. It may shock a lot of people, but a person does not have to be a Neo-Nazi to want strong national borders, for example, and laws that prohibit children from being taught about transgender lifestyles in grade school. Yet that is exactly how the right-leaning creators are being portrayed. And it is worth noting that these conservative ‘citizen journalists’ are doing a much better job at attracting audiences than the mainstream media, which is hemorrhaging both viewers and profits.

At the same time, the Times’ article assumes many things about YouTube users, none of which are remotely flattering. First, customers of the video platform, according to the Times, lack any sort of free will and independence. Thus, when a video appears in the recommendation box the user – not unlike a helpless heroin addict – will automatically press ‘play’, thereby involuntarily becoming subjected to yet another right-wing indoctrination session. Soon enough there’s a veritable vegetable sitting in front of the computer, helpless to pull itself away from the recommended video selections.

The article also assumes, with amazing naiveté, that people could not have had uneasy feelings about some issue until a crafty content creator came along and presented it to them. That is simply absurd. Such assumptions infantilize the user, making him appear incapable of making rational judgments on everyday social and political issues. The real reason, of course, that many users find a particular video on a particular subject is because they had been searching for answers to the very questions presented. Nevertheless, it is necessary, Google believes, that these YouTube creators be demonetized and banished from the platform, lest the unsuspecting user fall prey to their dastardly ways and radicalize an entire generation to loathe open borders, marijuana, abortion, transgender lifestyles, and any other controversial issue that is dear to the heart of Liberals.

But the Times hit piece was not the only whiff of grapeshot to grab the headlines. YouTube also demonstrated that it will swiftly move to defend other social media giants when it removed a video by the undercover investigative group, Project Veritas, that showed how Pinterest suppressed conservative talking points.

James O’Keefe, Project Veritas founder, slammed YouTube’s decision in a statement posted on Twitter.

“The established media and technology are so afraid of investigative journalism they need to censor it. YouTube calls REPORTING on someone by showing their face and name, and how they added a pro-life group to a porn blacklist, a ‘privacy complaint.’ Would they do this to NYT?” he wrote.

So here we have a situation where the largest American social media companies are able to shame and ban users with impunity, while also deleting efforts by any outside agency that demonstrates their political bias.

This leads us to the crux of the matter: As the social media companies hide behind their ‘private’ corporate status in order to curb political speech on their platforms with total impunity, they are exerting, at the very same time, powerful influence on the political process. In other words, they are empowered to do the very thing that many of their platform users are not, and that is to support their political convictions without fear of reprisal, banning and censorship. They want to have their private cake and eat it too.

Needless to say, such hypocrisy and double standards on the part of the social media behemoths cannot continue in the so-called ‘land of the free.’ And with US presidential elections approaching in 2020, tensions over such arbitrary power by the social media companies will only intensify when the people come to understand their voices are being silenced. The situation may get bad enough that the question of social media freedoms will even be heard on the debate floor during the campaigns. At least we can dream; it seems to be all we have left these days.

via ZeroHedge News http://bit.ly/2RuagAW Tyler Durden

Authored by Antony Sammeroff via The Mises Institute,

Most of us have heard the arguments from the Left on the emancipatory power of the Universal Basic Income Guarantee to free us from the chains of work, stress and poverty, and to liberate the creative impulses of man. We also hear from conservatives like Charles Murray, who stress that welfare cliffs under the current system create a poverty trap, where by earning more people will take home less, creating a permanent disincentive to work which the UBI would partially solve.

There is a contingent of libertarians who also hold the view that the UBI is better than the current system. They highlight the fact that bureaucratic costs will be lower and, theoretically, many public sector workers could be axed from welfare departments — reducing the overall size of the state. Government outgoings on law enforcement could be reduced, if the UBI leads to a drop in poverty-driven crime. And, if people are already receiving the basic means of survival, we can cut regulations around hiring and firing people and labor laws, since workers, faced with poor conditions, will have the f-you money to walk away from them. What’s more, if people can shop around for services currently provided by the government then some programs can be cut into the bargain.

Ultimately, since people would be given their basic income directly to spend as they please, it would preserve the market economy relative to more intrusive forms of government assistance or central planning, where officeholders and bureaucrats attempt to organize production “on behalf of the poor” (or “the workers” or “the people”) leading to a disastrous misallocation of resources and authoritarian dictatorship.

At least that’s what the pro-UBI libertarians claim.

I want to present four alternative arguments for why we should not be unduly taken by these views. They are not the tried and tested arguments such as, “The UBI will place a huge tax burden on working while rewarding idleness,” or “The UBI will cause spiraling inflation!”

While those have some validity, we have all heard them before.

These are my arguments appealing specifically to libertarians rather than economic progressives.

One: the UBI will not make statists go away because it will not, and cannot, address the underlying causes of poverty and inequality — which is that poor people have low skills and no capital.

There is nothing about a UBI that makes people at the bottom of the ladder more self-sufficient and able to command, for themselves, a higher wage, or gain a share of corporate profits by investing them in the stock market or property. All that will happen is that poor people will take their UBI to the shops, spend it on products, and it will go straight back into the pockets of the rich people. The Left will continue to complain about inequality and the fact the poor are beholden to large corporations, and advocate for more government programs to solve these issues rather than fewer.

All that is happening is money is being taken from the deep end of the swimming pool and shoveled into the shallow end (with large quantities of it being spilled along the way). This is not a zero-sum game. There will be a huge loss of capital investment resulting from the UBI. When you tax the rich to pay for the Basic Income they will not be able to invest in machines, factories, and technologies which make everyone richer by reducing the cost of goods and services.

To illustrate: suppose the owner of a chain of stores is taxed $10 million to pay for the UBI, but that money is given to his customers who come straight back into his shops and spend the money they have been given. All this means is he has $10 million less goods which he has to replace. That means less money to invest in employing people or in machines to bring the cost of his products down. People at the bottom, whose primary outgoings are the essentials, will suffer the most from higher prices

Two: With the UBI, the state is potentially handing out a large sum of money each month to people who may spend it to ruin their own health, or destroy their lives. Individuals with substance addictions, gambling problems or bad spending habits which get them in trouble. People who are addicted to computer games or Facebook might benefit from getting out to work in a bar or cafe and mingling with the public for some occupational therapy. But the UBI will allow them to isolate themselves further. Thus, in many cases with the UBI, payments may not actually be helping people. Recipients lives could be made worse by payments.

It takes a pretty callous person to say, “Well, it’s their life, they’ve got a right to ruin it. Let them take out their UBI and spend it on hard drugs if they want to.” While it’s true people ought to be able to spend their own money as they see fit,  how they spend other people’s money is another matter. Handing a suicidal person a bottle of sleeping pills might not be identical to murdering them, but it’s still highly questionable ethically.

Three: Even if the UBI will allow us to replace all sorts of systems and reduce the size of government, that will not be the end of the story. UBI will inevitably grow arms and legs.

After the UBI is instituted, it will only be a matter of time until we hear this group or that group should be earning an even higher basic income. “I am disabled, I should have a higher basic income, some may say. Or other may object “All my relatives live in a more expensive city, so I need a higher basic income.” And so on. Then people will advocate for a higher UBI for the elderly, disabled, people who live in areas where the rents and costs of living are high, or where they have to travel long distances to work, and so on. Ad infinitum.

Any group which represents a large enough voting block can influence the government to add supplements to their basic income, and there is no compelling reason for any administration not to cater to them to buy votes. On the face of it the argument will sound quite compelling. I mean, why shouldn’t vulnerable groups and those who have to pay more to live get a supplement? It’s only fair, right? But then we are back to towering administrative costs. We’re back to needing public sector workers to figure out who is due what, and to check that people aren’t abusing the system. We’ll need public money for lawyers and judges to prosecute abusers.

Four: And perhaps the scariest aspect of it all is that in most cases when the government creates handouts, there is always a group that stands to benefit and another that stands to lose. With the Universal Basic Income it seems on the face of it that there is no “out” group. Everyone is in on the action.

But that’s not really the case.

The state, policymakers, and government employees will benefit relative to everyone else.

After all, the UBI legitimizes government and brings everyone into a system which they could otherwise often ignore. The state is provider, and each of us becomes its ward.

Once this relationship between individual and state has been established it will be hard to go back. We will enter into a frightening era where the UBI can be weaponized by the government to threaten people with benefits sanctions for not behaving as our rulers see fit. Criminals first. Then unpopular groups. Then political dissidents with opinions like our own. We will be threatened into silence with the threat of the removal of our UBI.

People may be forced to accept a mandatory government ID card in exchange for their UBI. Then they will be asked to show it everywhere they go, and even refused access to venues, events, public transport, or even to the roads. In a time of war you will be asked to enlist or risk losing your UBI for denying your patriotic duty.

It will be worst for the people at the bottom of the economic ladder. They will be forced into a far worse position, particularly if they have been led, by their access to a basic income, not to pursue economic skills that would make them self-sufficient, or to lose the ones they already have because they have not needed to use them in a very long time. They will be completely at the mercy of the state under the threat of poverty or even starvation because they have no hope of being able to provide for themselves or their families.

This would make the basis of a good dystopian science fiction novel, but sadly I’m only too convinced that this is what would end up happening if those in power were to be put in charge of the purse strings.

[For more, see Universal Basic Income — For and Against (with a foreword by Robert P. Murphy).]

via ZeroHedge News http://bit.ly/2IypYIy Tyler Durden

At the end of March, we reported that the biggest concern for Goldman’s clients was the gaping “market jaws”, where stocks have moved sharply higher while yields have tumbled to multi-year lows, sparking investor confusion: is the bond market right in anticipating a period of acute deflation and/or recession, or is it wrong and stocks, which are less than 5% below their all-time highs, correct in their optimistic outlook.

As Goldman’s David Kostin wrote, it was this decoupling that was dominating client discussions:

Ten-year US Treasury yields have plunged to 2.4%. From an investor perspective, stable equity prices coupled with falling interest rates means a wider earnings yield gap and implies a more attractive relative value for stocks assuming the economy does not fall into recession.

And, as Kostin recounted, one client told the chief Goldman equity strategist, that it all really “depends from which direction the jaws close – through higher rates or via lower equity prices.”

In the three months since, the market’s “alligator jaws” have gaped even wider, with the latest thrust coming first after Powell’s early June admission that an easing cycle is imminent, following by last week’s even more dovish FOMC announcement, which confirmed that a July rate cut is in the books, and sent stocks to new all time highs, while bond yields tumbled below 2%, the lowest in three years.

The problem with the above is that the confusion first expressed by Goldman’s clients in March has not only gone away, but has become even more acute.

One attempt to explain this divergence – which is not really that surprising since it is merely an expected market reaction to an activist Fed which may soon buy bonds as QE resumes, sending stocks even higher – comes from Deutsche Bank’s Aleksandar Kocic, who describes the above state as “economic entanglement”, and using a somewhat loose analogy involving Schrodinger’s paradox to explain the market reaction, illustrates “the current dimension of uncertainty”, by imagining a situation “where we are alerted by a sudden crashing noise coming from our kitchen cabinet where our dining plates are stored.”

What happened inside the cabinet — the configuration of the plates — is shown in the figure (for historical reasons this problem is referred to as Schrödinger plates). For the sake of argument, we assume that the cabinet doors are made of wood and we cannot see what is happening inside. Did the plates break or are they intact? If we open the door to check, the plates will fall out and break. If, on the other hand, we do not open the door, they might be intact, but we will never know. The plates are in a superposition of two states: broken and unbroken.

Does one really need quantum mechanics to explain what is a simple byproduct of central bank intervention perverting reflexive market return expectations across asset classes, one which Bloomberg explained far  more succinctly in “Fed Loses Its Patience and Almost Everything You Can Trade Goes Nuts”? Well, since the author is Aleks Kocic, the financial equivalent of James Joyce and Jacques Lacan, the answer is yes. Here is what Kocic writes:

In the same way as Schrödinger plates, the economy at the moment is in a superposition of two states – it is both booming and it is headed for a recession. The two states of the economy are entangled. However, we cannot know which state we are in without interfering with it.

After reaching out to an actual quantum physicist with this explanation, we got the following response:

“There’s no superposition at all. The plates are either broken or unbroken, there’s absolutely no uncertainty about the physical state of those plates at any moment. The fact that one does not know because one cannot see without opening the cabinet means nothing about the state of the plates themselves because there is no physical superposition to collapse. It’s amazing how confused people are about a basic quantum mechanical concept. But more staggering is why, if they don’t understand it, they continue to insist to use it.

The economy is also not in any superposition. It also has a well defined state. My god.”

Yet while we appreciate such purist anger at attempts at cross-disciplinary narrative pollution, Kocic does have a an interesting point: the jaws will continue to stretch as long as the Fed remains activist and perpetuates the economic instability which relies on the market’s expectation that the Fed will step in at any moment to prevent a wholesale recession, to wit:

If the Fed does not cut rates (we open the door), the recession is likely.

If the Fed cuts rates, however (we do not open the door), the recession is averted, but we wouldn’t know if the cuts were needed.

His conclusion: “in either case, Fed actions interfere with the state of the economy and affect the outcome, and in both cases we face the consequences.” What is more troubling is that we have reached a point where the consequences of the Fed’s actions are dire in either case, resulting in either recession or loss of Fed credibility and independence:

In the case of unresponsive Fed it is a recession, while in the case of an accommodative Fed it is the loss of central bank independence and potentially another round of trade wars and even more pressure on the Fed to cut rates with further markets addiction to stimulus and possibly higher inflation etc.

In not so many words, that is the ultimate Catch 22 that the Fed has created: the market and economy are only viable as long as the Fed is backstopping them; once the support goes away, the wave function – to extend the flawed analogy – of the economy and market collapses, and the true state of both is exposed (at the cost of trillion in risk asset losses).

We don’t know when this market (or quantum) paradox will resolve itself; indeed, just a few days ago we asked precisely this question, wondering if Powell would finally resolve the “entangled” economic state, and break a few plates, on FOMC day:

Will the jaws close on Wednesday? pic.twitter.com/Ok7rLEEMOn

— zerohedge (@zerohedge) June 17, 2019

As observed above, the answer was no, which only means that once the jaws do close with an even greater delay, the consequences for both the Fed and the market will be that much greater. Until then, all we can do is wait, whether through the perspective of the “Schrodinger’s plates” narrative, or through the growing angst of Goldman’s clients who with every passing day are even more clueless and worried about what happens next.

via ZeroHedge News http://bit.ly/2Fs6yD9 Tyler Durden

After meetings with advisers focused on Iran at Camp David on Saturday, President Trump said “major additional sanctions” will be imposed on Iran, to be unveiled Monday.

“Iran cannot have Nuclear Weapons! Under the terrible Obama plan, they would have been on their way to Nuclear in a short number of years, and existing verification is not acceptable,” he said, explaining his rationale for keeping up the “maximum pressure” campaign through more sanctions. 

“We want to be proportionate,” Trump told reporters previously on Saturday, while saying he’ll never fully rule out using military force on Iran. “It’s always on the table until we get this solved,” he said of future potential US military attack. “We have a tremendously powerful military force in that area.”

Iran cannot have Nuclear Weapons! Under the terrible Obama plan, they would have been on their way to Nuclear in a short number of years, and existing verification is not acceptable. We are putting major additional Sanctions on Iran on Monday. I look forward to the day that…..

— Donald J. Trump (@realDonaldTrump) June 22, 2019

….Sanctions come off Iran, and they become a productive and prosperous nation again – The sooner the better!

— Donald J. Trump (@realDonaldTrump) June 22, 2019

He made surprising remarks Saturday after the prior dramatic events of Thursday night, where he reportedly called off a major attack in response to Iran’s shooting down an American drone. During the Saturday pressing briefing just before departing to Camp David he said he would be Iran’s “best friend” and that it could be a “wealthy” country if it renounced nuclear weapons, according to the AFP.

“This is not about the straits,” Trump said, referring to the vital Strait of Hormuz, through which some one-fifth of the world’s total oil supply passes. “This is about Iran cannot have a nuclear weapon, very simple.”

He also addressed rumors of a deep split and animosity over Iran policy between himself and his top advisers, including national security advisor and notorious hawk John Bolton. 

“John Bolton is doing a very good job, but is taking a generally tough posture,” Trump said. “I have here people who don’t have that posture. Only one that matters is me. Having people on both sides is very important.”

Reports in the immediate aftermath of the Thursday night called-off airstrikes and missile attacks on Iran suggested the White House secretly messaged Tehran’s leaders via the government of Oman to request urgent last minute dialogue, which Iran’s leaders reportedly rebuffed.

However, Iran formally denied that report; but it does appear Trump is indeed extending an open hand to restart talks, something which Iran will no doubt continue to reject given the US unilateral pullout of the 2015 nuclear deal over a year ago in May 2018. 

via ZeroHedge News http://bit.ly/2IzYrXe Tyler Durden

Authored by Jeffrey Snider via Alhambra Investments,

Behind The Blame Game

After what is all but certain to be the final “rate hike” in this cycle, Bloomberg reported that President Trump had previously explored all possible legal ramifications of demoting Federal Reserve Chairman Jay Powell. The issue has become a major one, in the media, anyway, now that Mr. Powell has indicated his error. There will be no further hikes this year, rate cuts now pretty much a done deal from here.

Given the situation, it’s at least understandable how no one is in much of a mood to talk about it publicly. The President’s Chief Economic Advisor, Larry Kudlow, said this week:

I’m not going to comment. It happened six months ago, and it’s not happening today, and therefore I have nothing to say about it. We are not taking actions to change his status.

The central bank is ostensibly independent, which has been its biggest error of all. Not because it is or isn’t attached to the government in some fashion, rather there is no accountability for anything. That’s all independence has meant; central bankers get to decide how well the central bank has performed.

Unsurprisingly, the most Chairman Powell would say recently about QE and the like was, “views differ on the effectiveness of these policies.” Interest rates and money curves are far more certain about them.

The President is saying that the Fed has made another policy error. But in making the claim he is also making an error. A policy error gives the central bank too much credit. It simply isn’t that powerful. If you really believe 2.40% federal funds crashed the economy, I doubt any amount of evidence would convince you otherwise.

It isn’t a policy error it is a forecast error. There’s a big difference. The policy is irrelevant. The Fed wasn’t tightening, it was raising rates believing the economy was so good it required some response. The problem isn’t the response it was the belief leading up to it.

Believing the central bank has that much influence, you’re likely to also believe rate cuts will help; or that a central banker will be in any way helpful. I wrote last July:

The shape of the current curve is saying the same thing now as it did in early 2000, only at such a diminished nominal level only a central banker could miss the curve’s primary message.

It’s the eurodollar, stupid.

The reason there is so much constant forecast error, especially the last ten years, is that one. That’s why there is no economic growth nor inflation risk as both the eurodollar as well as the UST curves flatten out far closer to zero than normal. They call it R* or the neutral (and natural) interest rate, but all those things describe an economy that just isn’t going to grow and the deepest, most important markets that all believe (eurodollar futures plus UST’s) this isn’t about to change.

At that very moment, the FOMC’s forecasts were really starting to diverge from the reality pictured in the increasingly inverted eurodollar curve. While the projections remained fixed on growth and inflation acceleration, over the next several months the entire global economy moved closer to what really was a landmine.

There is no doubt what happened during October, November, and December at least as an economic matter (the technical details as to what exactly went wrong and where, those are much harder to pin down). The data keeps pointing in that direction.

IHS Markit’s PMI estimates on the US economy (as well as others) reconstructs the aftermath of the detonation. The latest Composite PMI reading released today is now just above 50. At just 50.6, the flash estimate for June 2019 was is right in the same vicinity as the lowest point during Euro$ #3 three years ago in early 2016.

The manufacturing PMI came in at 50.1 – the lowest since 2009. Since it is trade in goods which requires so much financing and money, especially in global conditions, it is always the manufacturing sector which first picks up on the economic damage wrought by monetary explosion(s). Markit’s index topped out unsurprisingly last April, beginning its downward trend in the month that contained May 29.

The real plummet began in November and then like bond yields all over the world it sank in December, taking an almost straight line path downward ever since (making a fool out of my constant reminder of how things never go in a straight line; both bond yields and manufacturing PMI’s beg to differ).

The real issue for both President Trump and Chairman Powell isn’t rate hikes, nor is it trade wars. While the two are going to keep pointing fingers at each other, they and we would be so much better off heeding the advice of the bond market (for once). It was neither of those things which led us into this mess, and therefore focusing on them will only ensure there’s worse to come.

Which, by the way, is exactly how the curves are positioned right now. As I’ve been writing for a while, Euro$ #4 looks to be one of the nastier global monetary shortages. The composite PMI equals the low of Euro$ #3 while the manufacturing PMI is underneath already. By those viewpoints, the economy even now is in a state which is consistent with the last near recession.

And it’s just getting started. Matching the worst of the last one (and the one before that), the bond market is pricing how the worst of this one is yet to come.

It’s still the eurodollar, stupid.

via ZeroHedge News http://bit.ly/2RtEDaN Tyler Durden

Just ahead of US Secretary of State Mike Pompeo’s visit to India next week, the State Department reiterated US frustration with New Delhi over its deal to purchase S-400 antiaircraft missile system from Russia.

India already appeared to blow off last week’s US urging it not to go through with the purchase, which comes at a delicate time of severe strain with Turkey over precisely the same issue. A State Dept. briefing hinted at the Turkey issue alongside ally India seeking to procure the advanced Russian system:

“With respect to the S-400, we’re urging all of our allies and partners, India included, to forgo transactions with Russia that risk triggering the CAATSA sanctions,” an official said during a background briefing Friday.

The “Countering America’s Adversaries Through Sanctions Act” is the 2017 law allowing the White House to impose sanctions on countries buying Russian weapons. 

“This is a time we will be encouraging India to look at alternatives,” the US official added. However, it appears a whole litany of countries over the past year have shown increasing interest in pursuing the S-400. 

Last year the military analysis magazine Military Watch put together the following list of US allies, NATO members, as well as non-aligned states lately showing “considerable interest” in the S-400. They include: 

• Iraq 
• Qatar
• Saudi Arabia
• Morocco
• Egypt
• Turkey
• India
• Vietnam
• South Korea

And then there’s Russia defense clients China, Belarus, Algeria, and Iran as well. Turkey has remained unmoved even amid an unprecedented rift with Washington and talk of sanctions and even threats of Ankara’s own counter-sanctions. 

India’s English-language daily The Economic Times indicated this week that the Indian government’s course will remain unwavering:

The Ministry of External Affairs had earlier made it clear that India had no plans to scrap its S-400 deal with Russia despite the US posturing. The Indian government is not comfortable with Donald Trump administration repeatedly trying to dissuade India from purchasing the S-400 system. 

Though during Pompeo’s visit to New Delhi next week economic and job matters are expected to top the list — especially reassurances that Washington has no plans to impose a cap on issuing the highly sought after H-1B visas used widely by Indian IT professionals — the S-400 deal with Russia will be a tense lingering issue, likely to be brought up by Pompeo.

India is categorized as having “Strategic Trade Authorization Tier-1 status” in Washington, yet not even Turkey’s full NATO membership status has prevented it from coming under the White House’s wrath over the past year, further resulting in blocked F-35 stealth fighter purchases. 

via ZeroHedge News http://bit.ly/2FsnucA Tyler Durden

Authored by EconomicPrism’s MN Gordon, annotated by Acting-Man’s Pater Tenebrarum,

An Epic Folly for the Ages

Today we begin with a list.  A partial list.  And in no particular order…

Angela Merkel. Donald Tusk. Mario Draghi. Donald Trump. Jerome Powell.  Shinzo Abe.  Haruhiko Kuroda.  Theresa May. Boris Johnson. Mark Carney. Xi Jinping.  Emmanuel Macron.  Vladimir Putin. Justin Trudeau. Juan Trump.  And many, many more…

Politicians and bureaucrats of the modern age of statism and central planning… fighting a rearguard action doomed to fail. [PT]

These central planners – though they may not know it – are facing a no-win situation. They have extrapolated the past and are attempting to preserve the status quo into the future.  Yet their efforts to perpetuate the upward growth curve of their countries and unions are useless against the relentless turn of history.

The political, financial, economic, and social foundations that have been in place over the last 75 years – and perhaps, over the last 220 years – are breaking down.  And no policy directive, no interest rate adjustment, no trade tariff, no five year plan, no extraordinary measures, no green new deal, and no technocratic prevarication is going to stop it. Big Government doesn’t stand a chance.

The entire apparatus, from social welfare programs to a ridiculously complex capital structure, is based on perpetual growth. But growth, as we are all presently discovering, is ephemeral. The rapid creation of fake money by central planners may be able to forestall the downside that follows a mega-growth cycle. But it cannot avert it.

Still, the central planners are doing anything and everything to resist the downside. They are taking emergency actions. They are employing extreme currency debasement. They are slapping price controls across the economic landscape. They are starting wars. They are harnessing populism. They are doing all of these – and more.

They are also slipping and sliding and falling and flailing.  Indeed, this is an epic folly for the ages.  With this as context, what follows are several of this week’s choice proceedings…

Perpetual Stimulus

On Tuesday, German Chancellor Angela Merkel suffered visible tremors while listening to the German national anthem.  She was standing next to Ukrainian President Volodymyr Zelensky at a welcome ceremony in Berlin when the heat and stress got to her.  Can you blame her?

Angela Merkel trembles through the national anthem [PT]

Merkel has spent 14 years in office, toiling to keep the European project from fragmenting.  That’s a long time for anyone to stare down doom on a daily basis. Fortunately, after consuming three glasses of water, Merkel was doing much better.

On the same day, European Central Bank President Mario “whatever it takes” Draghi reaffirmed his commitment to currency debasement. His objective is to, somehow,provide perpetual stimulus to the euro zone economy. Much like  Elizabeth Warren’s Economic Patriotism plan, Draghi aims to boost exports via the destruction of money.

Following Draghi’s utterances, the great European bond bubble expanded into the outer stratosphere.  The yield on the German 10-year Bund dropped to a record negative 32 basis points.  What’s more, the yield on the 10-year French OAT briefly slipped into negative territory for the first time in recorded history.  But that is not all…

Europe’s chief monetary crank Mario Draghi promises to implement an even looser monetary policy and sends German 10-year Bund yields tumbling further into the nether region of negative yields-to-maturity. This is insanity writ large. [PT]

Draghi’s utterances stimulated President Trump to fire the following Twitter shot:

“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have getting away with this for years, along with China and others.”

Of course, Trump’s intended recipient of this tweet wasn’t Draghi; it was Fed Chair Jerome Powell…

Feeling the Heat of a Civilization on the Downside

On Wednesday, as fate would have it, Powell took his turn feeling the heat of a civilization on the downside.  Trump, no doubt, wants Powell to debase the dollar and engineer a cheap credit induced economic boom and stock market bubble to coincide with election day on November 3, 2020. He has been publicly ridiculing Powell’s monetary tightening policies for months.

Powell’s mandate coming out of the June FOMC meeting this week was to appease Trump while pretending the economy is doing just great. Hence, as Powell prepared to release the Fed’s FOMC statement, he registered a Pucker Factor 9 (PF9) out of 10 on the military’s Pucker Factor scale.  However, he did manage complete his task without succumbing to visible tremors.

US 10-year t-note yield – at its current level, it is trading well below the Federal Funds rate.

So far, Powell appears to have achieved his mandate.  The central planners at the Fed held their licked fingers up to the wind and concluded they’ll continue fixing the federal funds rate between 2.25 and 2.5 percent.  And to appease Trump, Powell included following in his opening remarks:

“The case for additional accommodation has strengthened.”

The credit market and the stock market both celebrated the Fed’s assurance of future currency debasement. The yield on the 10-year Treasury note fell below 2 percent.  Then, on Thursday, the S&P 500 Index clinched a new closing high of 2,954.  The Dow Jones Industrial Average also made another run at 27,000.

You see, with enough monetary gas, and misplaced confidence, financial markets can go vertical.  But what good is it if the actual economy is left behind?

The stock market is hurrying toward new all time high territory, celebrating a string of recent weak economic date releases which have kindled hopes for more monetary pumping from the Fed. Bizarrely, the Fed seems eager to oblige. If anyone had told us a year ago that the Fed would seriously contemplate rate cuts with the unemployment rate at 3.6% and the S&P 500 Index at an all time high, we would never have believed it. And yet, that is where we are now. [PT]

Remember, it takes prudence, wisdom, and industry to acquire and build wealth.  The fact that central planners are attempting to circumvent these steps by issuing gobs of fake money is confirmation of a degraded human mind.

At this point, you can practically count the days until we suffer the ruin of their folly.

via ZeroHedge News http://bit.ly/2Iy7urA Tyler Durden

Rep. Ilhan Omar has once again poked the hornet’s nest, backing fellow congresswoman Alexandria Ocasio-Cortez (D-NY) who said that the white house is operating “concentration camps” on the US-Mexico border. 

When asked by a reporter if she agreed with AOC, Omar defended the comments using a literal description of ‘concentration camps’ – saying “There are camps and people are being concentrated,” adding “This is very simple. I don’t even know why this is a controversial thing for her to say.” 

NEW VIDEO: Ilhan Omar doubles down on @AOC’s concentration camp slur. pic.twitter.com/sBaUkAKLQI

— The Rebel (@TheRebelTV) June 21, 2019

Prominent Jewish leaders did not take kindly to Omar’s remarks.

Rep. Lee Zeldin (R-NY) tweeted on Friday that AOC and Omar “prefer mass hysteria & false comparisons over pursuing bipartisan fixes/progress.” 

AOC was wrong to invoke the Holocaust in deriding what she calls US “concentration camps”. Omar & others are trying to defend it, here saying a concentration camp is a camp that’s concentrated. They prefer mass hysteria & false comparisons over pursuing bipartisan fixes/progress. https://t.co/G07vqbkmDV

— Lee Zeldin (@RepLeeZeldin) June 21, 2019

Former New York Democrat Assemblyman Dov Hikind tweeted on Friday “For those who know @Ilhan well by now could have bet with precision that it was only a matter of short time before she would follow @AOC in distorting Holocaust history for political gain!” In a followup, he said that Omar is invited to go on an educational tour of Nazi concentration camps. 

We’ve invited @Ilhan to join @AOC on an educational tour of Nazi Concentration Camps so they can see, come back, and then make the same statement to the American people. https://t.co/XxI7GYMJkb

— Dov Hikind (@HikindDov) June 21, 2019

Major GOP donor Dan K. Eberhart tweeted: “.@IlhanMN already has a history of incredibly insensitive and anti-Semitic remarks, so of course she would support @AOC’s incredibly offensive and intellectually dishonest “consecration camps” remarks.”

.@IlhanMN already has a history of incredibly insensitive and anti-Semitic remarks, so of course she would support @AOC‘s incredibly offensive and intellectually dishonest “consecration camps” remarks. https://t.co/4BnyJsesFF

— Dan K. Eberhart (@DanKEberhart) June 21, 2019

Recall just three months ago House Democrats almost censured Omar over two remarks considered anti-Semitic, only to pivot and turn the resolution into a general “anti-bigotry” vote. She now sits on the Black-Jewish Congressional caucus on which Rep. Zeldin also sits.

Ocasio-Cortez sparked controvery during a Monday evening instagram video in which she casually compared the border crisis to the holocaust, drawing wide condemnation from Jewish groups and others. 

AOC compares Trump to Hitler here:

-‘Never Again’ references the Holocaust
-Concentration camps are a reference to the Holocaust
-AOC mentions WWII internment camps Japanese Americans were forced in
-Calling Trump a “fascist” is comparing him to Hitler given the time period

— Ryan Saavedra (@RealSaavedra) June 18, 2019

As we noted on Wednesday, the Jewish Community Relations Council of New York slammed AOC – writing in a Tuesday statement: “We are deeply disturbed by the language used in your recent Instagram live video which seeks to equate the detention centers on America’s southern border with Nazi-era Concentration Camps.” 

On Saturday, she doubled (or is it tripled?) down.

The GOP has supported building mass concentration camps on the southern border. Kids & families are dying.

Now they want money for more – w/ ZERO negotiation on how $ is spent.

We can’t do that. They‘ve shown that when they get more money, they build more camps. #CloseTheCamps https://t.co/DYhXuU9Crz

— Alexandria Ocasio-Cortez (@AOC) June 22, 2019

via ZeroHedge News http://bit.ly/2FryGGi Tyler Durden

Authored by Adam Taggart via PeakProsperity.com,

…and now that $1,400/oz has been breached, there’s plenty of room to run…

Grant Williams pithily summed up the situation that has been plaguing gold since 2013: No One Cares.

Yes, it’s highly likely that the price has been suppressed. But not enough buyers cared to fight the bullion bank/central bank cartel or make life difficult enough for the politicians — and thus, the regulators — to change things.

So gold languished. For years.

But last August, gold quietly entered a bull market after breaking above $1200.

As the price began rising (for both fundamental & technical reasons), we’ve been tracking its progress closely.  We do so on a daily basis via Peak Prosperity’s Precious Metals Daily Commentary updates (outstanding authored by user davefairtex), as key developments happened via our premium reports (like this prediction), and via expert interviews such as our recent in-depth discussions with TFMetals and Incrementum’s Ronni Stoeferle.

As we entered 2019, the increasingly dovish/desperate policy retracements of the central banks — which now appear will NEVER normalize their balance sheets — have boosted the bull run.

Lower real interest rates are gold price-positive. And not only are real rates falling right now, there’s already currently $13 trillion in negative *nominal* debt trading worldwide right now:

And based on this week’s further dovish announcements from both the Fed and the ECB, we can expect more $trillions to be added to that pile soon.

On Tuesday, Mario Draghi apparently went rogue on his fellow policymakers and launched into a swan song version of his all-time hit “Whatever it takes”. The next day, Jerome Powell at the Fed confirmed his willingness to ease and let the market know he stands ready to cut rates multiple times over the next year.

That — plus a downed US drone patrolling the Iran border — poured gasoline on gold, which spiked as high as $1,410/oz, finally breaking free of the $1,350 ceiling that had blocked its advance for years.

Technically, if gold can hold above $1,385, it has a lot of room to run from here. As the chart below shows, gold has traced out a reverse head-and-shoulders pattern and has now punched through the neckline — a bullish breakout — currently trading at $1,400/oz at the time of this writing, the highest price it has traded at since 2013.

source: Northman Trader

Short of a raid orchestrated by the central planners to fasten tighter the cap on gold (which remains a real possibility given the historical record), the yellow metal shouldn’t encounter much price resistance until above $1,500/oz.

The metal itself and the miners are now in uptrends across all three timelines of the proprietary forecaster maintained by Peak Prosperity’s Precious Metals analyst davefairtex . We haven’t seen such strong indicators in, well…forever.

Here’s gold, which while registering overbought after its recent $100 spike, remains in a very strong uptrend:

source: Peak Prosperity Gold forecaster 6.20.19

And here are the miners (represented by the XAU index), following gold nicely as would be expected, confirming a breakout:

source: Peak Prosperity’s Gold Miner forecaster 6.20.19

While we may see some price retracement over the immediate term, to be expected after such a monster run-up and as war-with-Iran fears (hopefully) ebb, Dave explains why the current macro situation remains bullish for gold:

The problem is, we have a newly-semi-dovish Fed happening at the same time as renewed interest in a US-China trade deal, a possible impending lockup of China’s banking system (!), the Iranian shoot-down of a US drone (over either Iranian territory – or Iranian waters – or International Airspace, take your pick), while Draghi over in Europe has been accused of lying about the ECB’s renewed dovishness, for which there is apparently no consensus after all. And Draghi is almost out the door himself, so there’s that uncertainty too.  Who will replace him?  Will they still be as print-happy?  Italy may be about to pay its debts using a new currency (the mini-BOT) which may or may not be illegal, and the EU is looking to fine Italy for having a high debt/GDP. This, while Apple has apparently decided to diversify its globalized supply chain outside China. Oh yeah. Boris Johnson appears to be a shoo-in for UK PM.

Enough moving parts?

So what can we expect going forward?

Well if peace breaks out, gold will probably retrace. Silver isn’t quite keeping up with gold, so it will probably retrace also.

This is the problem with safe haven moves. They spike higher, and then they deflate. And that history is why the commercials (I’m guessing here) play the odds and assume the world won’t end this time, and they go short into these big spikes. That, and there is probably some official intervention too.

Ultimately today’s breakout above 1382 is bullish.  Even if we do retrace the safe haven move, the 5-year resistance has been broken.  Although it appears as though it was the “Iran drone shootdown” snowflake that caused today’s gold buying avalanche, in truth it was probably a whole collection of snowflakes that led to an increase in overall uncertainty.  After all, gold has rallied for 4 weeks now.  The drone shootdown just pushed prices over the edge – turning it into a spike higher that even 134 “tons” of paper gold was unable to stop.

On the fundamental side, more and more experts and pundits are waking up to what PP has been saying all along: the central banks have painted themselves into a corner they don’t know how to get out of. So they keep using the one tool they have, hoping for a different outcome (and yes, perhaps pushing all of the wealth into the hands of the 0.1% *is* their desired outcome).

But that strategy is based on perverted logic; it can’t be sustained. You can’t print prosperity. There’s only so far asset prices can rise while real wages remain stagnant. Housing prices can’t long stay above people’s ability to put food on the table, even with <3% mortgages. There’s a point at which more stimulus no longer has any effect.

The smarter minds we talk with agree with us that the unfolding action we’re watching in real time is the total capitulation of the central banks. There’s nothing left after this one except money for Main Street, which we think the banks will hold in store to have *something* left for the arriving global recession (to be cutting rates at this point is absolutely insane).

So it’s quite likely a nasty deflationary downdraft lies in our future. While this may initially cause gold to drop in price, the metal should fare much better than the pantheon of risk-assets falling from their current all-time bubble highs. As we often say in our live presentations: “In a bear market, expect to lose money. The trick is to lose a lot less than everybody else”.

But even if the central banks succeed in preventing such a deflationary rout, then it will soon become confetti time for the word’s fiat currencies.

Do you realize that if you have a cool $1mil of cash on hand, you make only $20k/year if you have it in T-bills, or (much) less than that if kept in your bank account? Less than 5% of Americans have that kind of scratch on hand, and yet it produces an income below the US poverty level. If we stay on the trajectory we’re on, that $1 million won’t be worth diddly soon.

But gold? Gold should truly shine in this situation: both by maintaining its purchasing power and increasing in value as $trillions in capital look for safe haven.

Remember that the $7 trillion gold market is a small doorway compared to the $164 trillion held in stocks and bonds. (And the <$1 trillion silver market is ridiculously tiny relatively). If (more likely, “when”) just a few $trillion flee risk assets into the precious metals, the prices of gold and silver will explode.

Of course, our long-standing advice remains the same: Position yourself for this predictable outcome in advance.

Especially since the long awaited breakout above $1,350 has finally taken place. That technical milestone, combined with the last-gasp desperation the Fed and ECB have shown this week, indicate that the really big moves for the precious metals are now cleared to happen. Things could move quite quickly from here.

Specifically, we recommend availing yourself of the following three free resources if you haven’t yet already:

• Get educated on how/where to buy & store gold and silver. Read our free primer here.

• For the rest of your portfolio, talk with an advisor who understands the risks warned of here. If your current professional doesn’t fit the bill, schedule a free consultation & portfolio crash-audit with our endorsed advisor.

• Follow the daily action in the precious metals by reading our excellent Precious Metals Commentary (referenced several times in the article above). You can do so here.

Finally, gold is no longer being ignored.

Someone Cares. Which is why we’re now at the highest levels seen in over half a decade.

Just imagine what the price will be like when Everybody Cares…

via ZeroHedge News http://bit.ly/2Y2d0YU Tyler Durden

It’s the weekend, which means the trade war between the US and China moved to the front page of the local propaganda media (in both the US and China). And while Trump has yet to slam Beijing, focusing this morning on the all time high in the market instead, China has been busy and in an editorial in the state-run People’s Daily, Beijing has warned that China has “the strength and patience to withstand the trade war, and will fight to the end if the U.S. administration persists.”

Echoing what China’s notorious twitter mouthpiece Hu Xijin said yesterday, the editorial said that just days ahead of the much anticipated G-20 summit in Osaka where Trump and Xi are set to meet, “the U.S. must drop all tariffs imposed on China if it wants to negotiate on trade, and only an equal dialogue can resolve the issue and lead to a win-win”, according to Bloomberg.

Chinese side is concerned about the fairness of a trade deal. The most important part is the US side must remove all newly imposed tariffs since the trade war. Until now, what I’ve learned is China won’t accept a deal that the US keeps part of the tariffs.

— Hu Xijin 胡锡进 (@HuXijin_GT) June 21, 2019

The communist party’s official paper also said the US had failed to take into account the interests of its own people, and they are paying higher costs due to the trade dispute. “Wielding a big stick of tariffs” also disregards the condition of the U.S. economy and the international economic order, according to the editorial.

Beijing’s official warning to the US ended as follows: if the U.S. chooses to talk, “then it must show some good faith, take account of key concerns from both sides and cancel all tariffs.”

And just to prove that China isn’t a paper tiger whose threats will be confined to the local newspapers, Reuters reported that overnight China’s controversial telecom giant, Huawei, filed a civil lawsuit against the US Commerce Department over the mishandling of telecommunications equipment seized by American officials, demanding its release.

In an almost absurd reversal, the company whose entire existence can be traced to stealing and reverse-engineering foreign technology and trampling over corporate ethics, the complaint alleges that the US government took possession of hardware, including an ethernet switch and computer server, which was transported from China to an independent laboratory in California for testing and certification back in 2017.

However, the equipment was not shipped back to China. It was “purportedly” seized en route and is currently sitting in Alaska, as US officials wanted to investigate whether the shipment required a special license. Such requests are usually processed within 45 days, but nearly two years have already passed since then.

“The equipment, to the best of HT USA’s knowledge, remains in a bureaucratic limbo in an Alaskan warehouse,” Huawei said in its lawsuit, which was filed on Friday in federal court in Washington.

Huawei contends that the equipment did not require a license because it did not fall into a controlled category and because it was made outside the United States and was being returned to the same country from which it came.

The company is not seeking any financial compensation and is not challenging the seizure itself, but is sending a message to Washington, saying “post-seizure failures to act are unlawful”, in effect charging the Trump admin with doing precisely what it, itself has been accused of. Huawei wants to force the Commerce Department to decide whether an export license is really necessary and, if not, release the withheld equipment.

The lawsuit comes amid a bitter row between two world’s largest economies, and Washington’s crackdown on Huawei. In May, the Trump administration added Huawei to the entity list, barring it from buying needed U.S. parts and components without U.S. government approval. The US alleges that Huawei could be spying for the Chinese government, a claim which the company has repeatedly denied.

Huawei CFO Meng Wanzhou, daughter of the company’s founder, has been detained in Canada since December on a U.S. warrant. She is fighting extradition on charges that she misled global banks about Huawei’s relationship with a company operating in Iran.

Of course, Huawei is not the only Chinese tech company that the White House decided to put on its trade blacklist. On Friday, five Chinese organizations – supercomputer maker Sugon, three its affiliates, and the Wuxi Jiangnan Institute of Computing Technology – were added to entity list on the grounds that their activities are allegedly contrary to US national security and foreign policy interests.

The fresh US blacklisting comes ahead of crucial talks between US President Donald Trump and Chinese President Xi Jinping in Osaka, Japan, which are intended to ease tensions between the two sides. Still, don’t expect a breakthrough: as Goldman’s trade deal odds index found last week…

… the probability of a breakthrough between the two nations is roughly one in five.

via ZeroHedge News http://bit.ly/2xj6IIJ Tyler Durden