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(In)Direct Slavery: We’re All Guilty

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As we sit in our comfortable living rooms, loafing back into our sofas, munching on a bar of chocolate and slurping down the coffee whilst checking the smartphone for message most of us have little idea that the chocolate, the coffee and the smartphone were made by resorting to indirect slavery quite probably. Whether we like it or not, we are contributing to the indirect slave trade of the companies that provide those things and many more to us. Whether we like it or not we are directly contributing to slavery because there are slaves employed in our own back yard still today.

Global Slavery Figures

There are 29.8 million slaves in the world.
They mostly work in developing and emerging countries producing goods that are destined for the Western world and our own markets.
Those 29.8 million people account for 1.82% of world population today.
India is the worst country in the world for the total number of slaves.
There are 14 million of them.
China comes in way behind and in second place with 2.9 million of them.
Pakistan has 2.1 million slaves.
Mauritania has the highest ratio of slaves to the population.
The total population stands at 3.4 million and 4.3% are enslaved people.

The top ten countries that make up 76% of all of the enslaved people in the world are:

India
China
Pakistan
Nigeria
Ethiopia
Russia
Thailand
Democratic Republic of Congo
Myanmar
Bangladesh

The USA is 139th on the list out of a total of 162. The UK is 160th.

India is the worst country in the world for slavery today. Perhaps if they were to ratify the Worst Forms of Child Labour Convention, then they might be able to deal with that problem. Bonded labor might have been outlawed as from 1976by the Bonded Labour System (Abolition) Act 1976, but it has rarely been enforced.

But there are slaves working in the Western world too such as the forced laborers that are made to work on the cannabis farms in the UK. For the first time, the Global Slavery Index has been published this year and it is a telling story of the misery not only of the developing world, but of our own countries. It’s a quantitative index of 162 countries which means that it accounts for almost the entire world population. . Until this report was published estimates stood only at roughly 10 million under the 29.8-million estimate of the Global Slavery Index. Previously, the method of calculation did not include forced labor and did not consider that human trafficking was part of slavery. The Index also uses forced servile marriage and debt bondage in the calculation.

The Global Slavery Index estimates that there is a margin of error of between 5% and 10% and they hope that it will be a “wake-up call” to governments around the world. It is however highly unlikely that this will become reality.Governments in the West remain complacently asleep when it comes to slavery in their own back yards and certainly even more so with other countries that are toiling away for us.

Endemic cultural problems have maintained people entrapped in slavery in countries like India due to caste issues (despite that officially having been abolished (at least Article 17 of the Indian Constitution made untouchability and discrimination on that basis illegal).

Maybe some leaves should be taken out of Brazil’s book and we should be doing more of what they do there. There is a list of ‘dirty’ companies that have used slaves in the production of products. Their national plan is to do away with slavery.

Slavery is not just a figment of our imagination, it means jobs that we can’t walk away from, it’s working for nothing and it’s control through violence and pressure as well as being nothing more than the boss’s property.

We’re All Slaves

To some extent we are all slaves in daily life in the societies that have been elaborated for the benefit of those either at the top or even for those at the bottom. There’s rarely something for those that are stuck in the middle. We go to work, we earn a living and we pay that money to someone else in taxation so that it can go to the common good of all in society under the supreme principle of providing for the needy, whoever they are and whatever being needy really does mean.

But, we work like drudges even though the 19th century sweatshops went long ago from our societies; at least, for most of us, although they still exist in some back room of a dingy apartment building somewhere in the rough part of towns of most cities we live in. We created democracy (or we thought we did) and the upper class was reduced (or the wealth just got spread around with fewer people allowed to rake it in). The poorer got richer and the majority got thrown into the middle band of the class that got little or nothing. Democracy created what we have right now. The few rich people get most of the earnings and the poorest get doled out and propped up. The guys in the middle pay for the rest and get their shoulders thrown into the grindstone, regardless of whether they want their money to be handed around to the needy or to fill the cash-fat obese accounts of the super wealthy in Geneva or somewhere else.

We have all a role to play in the slave trade. But, there are some that are worse off than others in countries around the world.

Which is better: being a slave in India or being a middle-class slave that finances the government through taxation? A no-brainer? Or, does it depend on where we’re sitting?

Originally posted: (In)Direct Slavery: We’re All Guilty

Technical Analysis: Bear Expanding Triangle | Bull Expanding Triangle | Bull Falling Wedge | Bear Rising Wedge | High & Tight Flag

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5pQ7QVl8ep4/story01.htm Pivotfarm

Mexico Overtakes US As World’s Fattest Country; Begins Regulating Food Consumption

Mayor Bloomberg’s crusade to micromanage what New Yorkers put in their mouth has so far failed, but that just means the attempt to impose the first “New Normal” nanny state, in which individual calorie consumption is regulated for the greater good by the even greater government, has simply shifted its geographic location. In this case to Mexico, which according to the OECD has surpassed the US as the world’s fattest country and is “notorious for its love of sweets, fried foods and pastries” and where as the WSJ reports, the lower House of Congress passed on Thursday a special tax on junk food that is seen as potentially the broadest of its kind, part of an ambitious Mexican government effort to contain runaway rates of obesity and diabetes.

Mexico’s weight problem in context:

The WSJ reports on what can only be described as Mike Bloomberg’s wet dream:

The House passed the proposed measure to charge a 5% tax on packaged food that contains 275 calories or more per 100 grams, on grounds that such high-calorie items typically contain large amounts of salt and sugar and few essential nutrients.

The tax, which was proposed just this week, is sure to stir controversy among big Mexican and foreign food companies that operate here. It comes on top of another planned levy on sugary soft drinks of 1 peso (8 U.S. cents) per liter that was passed by the same committee, an effort that New York Mayor Michael Bloomberg supported.

…

The taxes—both aimed at curbing consumption—have broad political support and were expected to later be approved by the Senate as part of a sweeping tax overhaul. The snack food levy is part of a bigger tax proposal from President Enrique Peña Nieto which aims to raise the government’s non-oil tax collections.

“This appears to be the most aggressive strategy anywhere in the world in recent years to improve diets via tax disincentives,” said Michael Jacobson, executive director of the Center for Science in the Public Interest in Washington.

Some have already cast the blame: TV zombies and undereducated “fatsos.”

“We’re a country of malnourished fatsos,” José Antonio Álvarez Lima, a former state governor turned newspaper columnist told Mexican political news website Animal Politico. He pegged part of the blame for Mexico’s high consumption of soda and snacks on incessant TV advertisements and poor education.

Mexico’s attempt to centrally-plan what’s for dinner naturally was met with the adoration of not just Mayor Mike, but every government apparatchik desperate to justify their non-value adding exietsnce. Such as this one:

Harold Goldstein, executive director of the California Center for Public Health Advocacy, called Mexico a role model, saying that the measures could protect the health of consumers while also shielding the economy from productivity losses and runaway public health costs.

Of course, if the “measures” fail at doing all those magical things, the government can just swoop in and start regulating the economy and productivity next, just as the Fed has been doing in the US for the past 5 years, with absolutely disastrous results.

Which is not to say Mexicans aren’t fat. As noted above, according to the OECD, the average Mexican is now fatter than the average American. Which means very, very fat.

Seven of 10 adults in Mexico, and a third of children, are either overweight or obese. Mexicans have now surpassed Americans for the title of the fattest country in the OECD, according to the organization.

All that fat has contributed to an alarming rise in chronic illnesses like adult-onset Type 2 diabetes, which afflicts an estimated 15% of Mexicans over the age of 20, the highest rate for any country with more than 100 million inhabitants. Illnesses related to excess weight cost the Mexican public health system more than $3 billion a year, according to the legislation.

On virtually every street corner in Mexico, makeshift stands sell the types of packaged items that will be taxed for the first time: potato chips, cookies, ice cream, fried corn chips, chocolates, candy, puddings and local sweets.

However, while those who revel in the government’s intellectual superiority, despite the vivid example of every centrally-planned economy crashing and burning in due course, some are quick to point out that this latest plan to micromanage consumption is idiocy. First, the big food companies:

Mexican industrial chamber Concamin estimates that processed food companies targeted by the new tax employ thousands of Mexicans and account for 4.1% of GDP. “We can’t allow last-minute taxes,” said Concamin president Francisco Funtanet, suggesting that companies might cut back on personnel and investment to absorb the tax hit.

Raul Picard, a top official at Concamin and owner of a chocolate company, argued that vice taxes could lead to a proliferation in contraband goods of questionable origin, possibly posing a threat to public health.

“There’s no such thing as junk food, just junk diets,” said Felipe Gómez, head of a regional food makers’ group in Jalisco state. Even so-called junk food has carbohydrates and calories that the body needs, Mr. Gómez argued.

But it’s not just the big corporations that are skeptical. So are normal people with some common sense.

Some ordinary Mexicans said a tax was unlikely to change their eating habits much.

Héctor Ortega, a 45-year-old operator of a street stand in downtown Mexico City, predicted that consumers may pull back briefly when prices rise, but then return to their old habits.

“Just like the cigarettes, people will go back to their old habits,” said Mr. Ortega. He said junk food was obviously unhealthy, but it was often the only thing that poorly paid office workers and students can afford. “This is a restaurant zone and the food here is expensive. For some people, these products are the only food available.”

Fernando González, 24, an office worker who frequents Mr. Ortega’s stand, is a big fan of sodas and gum, in particular. When the new prices kick in, he said, he won’t give up on his favorites, but will probably buy less chips and candy.

“It’s a craving, it’s an addiction, it’s something people enjoy,” he said of Mexicans and their treats.

The biggest irony, of course, is that the government “of the people”, in its very finite wisdom, will hurt those it supposedly cares about the most: the poor. Because the rich can afford to eat healthy. It is the poor who will merely have to pay more to satisfy their “food addictions.”

Academics say the move could hurt the poor because they spend a greater percentage of their income on cheap, packaged foods, but added that doing nothing was worse.

Sure. Which is why America no longer has a drug (or gun) problem. Oh wait.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wKEwrWwJ0a4/story01.htm Tyler Durden

Mexico Overtakes US As World's Fattest Country; Begins Regulating Food Consumption

Mexico’s weight problem in context:

The WSJ reports on what can only be described as Mike Bloomberg’s wet dream:

The House passed the proposed measure to charge a 5% tax on packaged food that contains 275 calories or more per 100 grams, on grounds that such high-calorie items typically contain large amounts of salt and sugar and few essential nutrients.

The tax, which was proposed just this week, is sure to stir controversy among big Mexican and foreign food companies that operate here. It comes on top of another planned levy on sugary soft drinks of 1 peso (8 U.S. cents) per liter that was passed by the same committee, an effort that New York Mayor Michael Bloomberg supported.

…

The taxes—both aimed at curbing consumption—have broad political support and were expected to later be approved by the Senate as part of a sweeping tax overhaul. The snack food levy is part of a bigger tax proposal from President Enrique Peña Nieto which aims to raise the government’s non-oil tax collections.

“This appears to be the most aggressive strategy anywhere in the world in recent years to improve diets via tax disincentives,” said Michael Jacobson, executive director of the Center for Science in the Public Interest in Washington.

Some have already cast the blame: TV zombies and undereducated “fatsos.”

“We’re a country of malnourished fatsos,” José Antonio Álvarez Lima, a former state governor turned newspaper columnist told Mexican political news website Animal Politico. He pegged part of the blame for Mexico’s high consumption of soda and snacks on incessant TV advertisements and poor education.

Harold Goldstein, executive director of the California Center for Public Health Advocacy, called Mexico a role model, saying that the measures could protect the health of consumers while also shielding the economy from productivity losses and runaway public health costs.

Which is not to say Mexicans aren’t fat. As noted above, according to the OECD, the average Mexican is now fatter than the average American. Which means very, very fat.

Seven of 10 adults in Mexico, and a third of children, are either overweight or obese. Mexicans have now surpassed Americans for the title of the fattest country in the OECD, according to the organization.

All that fat has contributed to an alarming rise in chronic illnesses like adult-onset Type 2 diabetes, which afflicts an estimated 15% of Mexicans over the age of 20, the highest rate for any country with more than 100 million inhabitants. Illnesses related to excess weight cost the Mexican public health system more than $3 billion a year, according to the legislation.

On virtually every street corner in Mexico, makeshift stands sell the types of packaged items that will be taxed for the first time: potato chips, cookies, ice cream, fried corn chips, chocolates, candy, puddings and local sweets.

Mexican industrial chamber Concamin estimates that processed food companies targeted by the new tax employ thousands of Mexicans and account for 4.1% of GDP. “We can’t allow last-minute taxes,” said Concamin president Francisco Funtanet, suggesting that companies might cut back on personnel and investment to absorb the tax hit.

Raul Picard, a top official at Concamin and owner of a chocolate company, argued that vice taxes could lead to a proliferation in contraband goods of questionable origin, possibly posing a threat to public health.

“There’s no such thing as junk food, just junk diets,” said Felipe Gómez, head of a regional food makers’ group in Jalisco state. Even so-called junk food has carbohydrates and calories that the body needs, Mr. Gómez argued.

But it’s not just the big corporations that are skeptical. So are normal people with some common sense.

Some ordinary Mexicans said a tax was unlikely to change their eating habits much.

Héctor Ortega, a 45-year-old operator of a street stand in downtown Mexico City, predicted that consumers may pull back briefly when prices rise, but then return to their old habits.

“Just like the cigarettes, people will go back to their old habits,” said Mr. Ortega. He said junk food was obviously unhealthy, but it was often the only thing that poorly paid office workers and students can afford. “This is a restaurant zone and the food here is expensive. For some people, these products are the only food available.”

Fernando González, 24, an office worker who frequents Mr. Ortega’s stand, is a big fan of sodas and gum, in particular. When the new prices kick in, he said, he won’t give up on his favorites, but will probably buy less chips and candy.

“It’s a craving, it’s an addiction, it’s something people enjoy,” he said of Mexicans and their treats.

Academics say the move could hurt the poor because they spend a greater percentage of their income on cheap, packaged foods, but added that doing nothing was worse.

Sure. Which is why America no longer has a drug (or gun) problem. Oh wait.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wKEwrWwJ0a4/story01.htm Tyler Durden

Guest Post: Gold Fails To Obey Script

Submitted by Pater Tenebrarum of Acting Man blog,

Selling Both the Rumor and the News Turns Out Not to Work …

In our interim update on gold a few days ago we wrote:

“It seems possible that news of a budget and/or debt ceiling deal could send gold prices even lower, but the likelihood of that happening is actually not as pronounced as it would have been if prices had risen during the current period of uncertainty.

Usually either the rumor is bought and the news are sold, or vice versa. Cases of 'sell the rumor and then sell the news as well' are generally fairly rare.”

It should be remembered in this context that gold was supposed to follow a certain script in the context of the debt ceiling debate, written by Goldman Sachs analyst Jeffrey Currie and given the placet of analysts at virtually every mainstream bank:

“Once we get past this stalemate in Washington, precious metals are a slam dunk sell at that point,” Currie said. “You have to argue that with significant recovery in the U.S., tapering of QE should put downward pressure on gold prices.”

The markets rarely make things that easy, although one must of course keep in mind that the action over a few trading days cannot yet be called conclusive with regard to the medium term trend. In this particular case, shorts thought they had received an invitation to shoot fish in a barrel, but the market evidently decided otherwise.

Gold, December contract daily – following a false breakdown, the contract shot higher upon the budget deal resolution – click to enlarge.

As the above chart shows, while the especially smart bears who thought they could break gold below short term support by selling over $600 million notional on GLOBEX prior to regular COMEX trading hours had their clock cleaned, the bulls cannot yet claim a decisive victory either. Still, they have won an important battle. Here is a close-up of the action:

December gold, 30 minute chart – click to enlarge.

The biggest positive is in our view the 'false break' highlighted above. Selling thousands of contracts in the 'off hours' has this time not been enough to actually break support. When a market isn't going down when it 'should', it often goes up instead. This is an excellent example for this rule. However, bullish traders require some follow-through buying at this juncture to produce a decisive trend change. There is strong lateral resistance in the 1340-1350 area, and it needs to be overcome to pronounce the trend truly changed.

Interestingly, as can be seen in the chart of 1 month GOFO (gold forward rate) by Societe Generale below, the gold forward rate has once again turned into negative territory in the London market. While this is not quite as significant as some people have asserted in light of extremely low LIBOR rates, it is still remarkable – moreover, negative GOFO rates always tend to provoke rallies in the gold price in the short term. There simply are no exceptions to this rule we know of.

Normally, gold is lent out in order to obtain collateralized dollar loans at a very low interest rate, as the lease rate paid on gold is deducted from LIBOR in these transactions. The situation actually reverses when GOFO is negative, as then whoever is on the other side of the trade actually pays for obtaining the temporary use of gold. Why would anyone want to do that?

We believe the answer has to do with the fractionally reserved gold system involving unallocated gold accounts (i.e., irregular gold deposits). According to what must be considered quite credible estimates, the leverage employed can be as high as 100:1 – which is to say that unallocated gold accounts are backed by only a single ounce of gold per 100 ounces deposited.

The remainder of the deposits has been employed by bullion banks for their own business purposes – it is essentially fractional reserve banking, only it is using gold as the underlying currency. So what happens when delivery demands or demands to move gold from unallocated to allocated accounts exceed the amount of physical gold actually at hand? One way to satisfy such delivery demands in the short term is to borrow gold. So we suspect &ndas
h; although we cannot prove it – that this is why GOFO has turned negative.

1 month GOFO turns into negative territory again – click to enlarge.

We also like that Thursday's rally was greeted with incredulity all around. A friend sent us the following smattering of quotes from the mainstream financial press. We especially like the guys who just know that the 'gold bull market is definitely over':

“The markets had anticipated a last-minute compromise of this kind," says a note from German investment bank and bullion dealers Commerzbank. "What is more, this also means that the scaling back of Fed bond purchases will be further postponed. A renewed sell-off of precious metals thus failed to materialize."

Issued before the debt-limit fix, "Resistance lies between 1301 and 1307," said Scotiabank's technical analysis Wednesday night, pointing to gold's 50% retracement of both its 2008-2011 uptrend and this year's June-August rally.

Longer-term, however, "Desire to buy gold as a hedge against the consequences of monetary policy has diminished," reckons Credit Suisse analyst Tom Kendall, who in February announced the "beginning of the end of the era of gold".

"When you've got other asset classes, equities in particular, doing so well, then it's hard to divert investments out of them and into something like gold, which is falling."

A lot of gold," agrees Robin Bhar at Societe Generale, also speaking to Bloomberg today, "has been held for speculative purposes, investment and a store of value, and that's less of a reason going forward.

"If you sell your gold and put your money into equities, other fixed-income assets or real estate, you're going to show a return. The gold bull market is definitely over."

But "although the US has managed to avert a default," counters Nic Brown's commodity team at French investment and bullion bank Natixis, "[it] has clearly lost some credibility" with foreign creditors led by China. Not only did Washington's behavior annoy T-bond holders, says Natixis, "a concrete long term solution has once again failed to emerge."

(emphasis added)

And so it goes – we are going to keep these quotes for reminiscence purposes.

Gold Stocks

Yesterday the HUI gapped up above its 20-day moving average. We have become a bit wary of such gaps, but want to point out that the action so far looks quite similar to what happened in early July. Even today's pullback is reminiscent of the action following the gap up in July.

Whether the similarities will continue we cannot say, but we do like the fact that the index has done what it was expected to do in view of the wedge-like decline that preceded the recent rally.

HUI daily – now we have an MACD buy signal as well, tentative though it may be – click to enlarge.

Also worth noting is that in spite of gold's very strong rally, the HUI-gold ratio continued to improve somewhat:

HUI-gold ratio still improving – and the recent move to new lows is beginning to look like a false breakdown as well – click to enlarge.

So here we have another 'false breakdown' in terms of the ratio of gold stocks to gold and obviously it would be quite encouraging if it manages to hold up.

Conclusion:

As before, we cannot yet say whether a trend change is definitely in the bag. However, considering how absolutely dismal sentiment on gold is, considering the many similarities to the 2008 'retest' that could be observed recently (back then, gold was also declared 'dead' by the mainstream) and given the fact that for a change, the gold market has not acted in the way that was widely expected, it continues to make sense to look for more signs of a trend change to emerge.

Ideally declines should continue to be kept in check by support at $1275, while any rally that manages to exceed the $1350 level on a closing basis and confirmed by the gold stock indexes can probably be interpreted as a sign that the short to medium term trend has finally reversed for good.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/1ovjvUaC6_4/story01.htm Tyler Durden

Free Volling: As VIX Plunges, Someone Bets $6.7 Million On Prompt Rebound

While last week’s relentless panic buying has been extensively commented on, it was last week’s nearly 50% plunge in near-term stock vol that the major news as the world went from risk off mode to risk on. It wasn’t just stocks whose volatility imploded: as the following charts from Bank of America and associated commentary show, it was the implied near-term volatility of all assets classes that was hammered in the last three days.

First equities:

Chart of the week: VXV/VIX ratio says risk rally to continue

While the VIX index has just reached fresh 2m lows, it still has plenty of room to fall; particularly against its curve. Indeed, the VXV/VIX ratio (VXV is the Bloomberg ticker for 3m S&P500 Volatility) continues to trend higher. Until this ratio reaches 1.2 or greater (indicating investor complacency) the US equity rally remains on firm footing.

But also Treasurys:

US Fixed Income volatility breakdown

The MOVE index has broken its yearlong pivot at 73.00 and completed a 3m top in the process. Expect Treasury volatility to decline further in the weeks ahead towards the May lows at 48.87 before greater signs of basing emerge.

FX…

FX volatility descent accelerates

G7 FX volatility remains under pressure. The mid-September completion of a 7m Head and Shoulders Top says that the fall in volatility can extend to the Dec’12 lows at 7.06% before all is said and done.

And Crude:

Oil volatility spills lower

After 6m of a very choppy consolidation, WTI Crude Oil volatility has broken sharply lower to resume its year and a half downtrend. The completed Triangle formation points to further downside in the weeks ahead. The initial target is the Mar-28 low at 17.60, with risk for a move to its long term channel base near 13.53.

Finally, while everyone is fascinated by the rapid VIX down move, it is what someone did on Friday by betting that VIX will double by February in a 24/29 VIX Call Spread, that was of note. The amount wagered: $6.7 million. Whether or not this was an outright trade, or a hedge (and if one listens to Jamie Dimon perjuring himself to Congress, any trade is a hedges, adding further to the confusion) is unknown, but it is not pocket change betting that the plunge in vol will be merely transitory. From Bloomberg:

An investor paid $6.7 million for a trade that will pay off if the Chicago Board Options Exchange Volatility Index more than doubles by February.

The trader today bought 160,000 bullish contracts on the VIX expiring in February with a strike price of 24, while selling the same number of February 29 calls in a strategy known as a call spread, according to New York-based Trade Alert LLC. The trade profits if the volatility gauge rises above 24.42 from the current level around 13, data compiled by Bloomberg show. It has a maximum payoff if the VIX jumps 115 percent to 29.

“This is probably an investor with a portfolio of stocks who is using the VIX to hedge against an increase in market volatility,” Frederic Ruffy, a Chicago-based senior options strategist at Trade Alert, said in a phone interview. “The focus is on the February options, so it expresses concern over what will happen during the next three months, which coincides with the next deadlines on the government budget.”

Congress resolved a deadlock on funding the U.S. government and avoiding a default this week, driving the VIX down from a three-month high of 20.34 on Oct. 8. The agreement funds the federal government through mid-January and lifts the nation’s debt ceiling until Feb. 7.

The VIX, which hasn’t closed above 29 since the end of 2011, slumped 3.3 percent to 13.04 today, a one-month low.

The purchased February 24 calls cost 90 cents per contract, while the February 29 calls were sold at 48 cents. The total cost of the trade was 42 cents per contract, or $6.7 million, according to data compiled by Bloomberg.

So with the latest can-kicking set to expire in less than three months, and at least one investor already putting in millions in a wager that Vol, currently plunging, will once again double as the Congressional dysfunction returns, one wonders: Will Mr. Chairman, who runs the world’s biggest hedge fund, get to work as usual, and make sure any and all risk hedges expire worthless?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4kCvqsHSv_A/story01.htm Tyler Durden

Obamacare’s Unintended Consequences: It’s Not Just A Technology Problem

Submitted by F.F. Wiley of Cyniconomics

Obamacare’s Unintended Consequences: It’s Not Just A Technology Problem

Ron Suskind’s Pulitzer Prize-winning account of Barack Obama’s first two years in office, Confidence Men, tells the inside story of the wheeling and dealing that culminated in the Affordable Care Act (ACA). According to Suskind:

By the time it passed, almost no one could feel great about it. The process had been so ugly – and the end product so convoluted – that even its fiercest apologists would acknowledge that it was a bill that was only a start.

We’re now getting a good look at exactly what Suskind’s “start” means, most recently with the launch of the insurance exchanges. Based on the latest reports, it appears to mean:

Crony capitalism – see this report from the Sunlight Foundation (h/t Arnold Kling).
Government secrecy – see this Wall Street Journal editorial.
Prioritization of election politics over policies – see this report in the National Review.
Inefficiencies and incompetence – see this article by Megan McArdle.
Alternative realities – see Jon Stewart’s interview with Health and Human Services Secretary Kathleen Sebelius on The Daily Show (more on this below).

Unfortunately, these aren’t the worst of our problems. The HHS’s amateur hour created quite a stir, but it will eventually pass. Whether in three months or three years, programmers will iron out the new system’s “glitches.” We’ll then be left with more threatening and far-reaching challenges, such as hiring disincentives and fiscal risks.

If you agree with this perspective, you may also agree that two of last week’s most relevant blog posts weren’t related to break-downs in the insurance exchanges. These are:

Tyler Durden parsed the Fed’s October 16^th Beige Book release and found no less than eight references to the ACA’s effects on business activity. Here’s a typical observation reported by the Fed: “Many contacts also commented on reluctance to expand due to uncertainty surrounding the Affordable Care Act; some employers cut hours or employees.”
Durden also shared a table reported by J.P. Morgan’s Michael Cembalest comparing estimated and actual costs for five Medicare programs, one Medicaid program and the Massachusetts state health reform of 2006. The data shows actual costs exceeding estimates by 107%, 129%, 150%, 644%, 817%, 1600% and 20%, respectively. And yet, we’re expected to believe the administration’s highly politicized projections that the ACA will be deficit neutral.

We recommend checking out both posts. They suggest the most important question we should be asking is not the one that Stewart repeated several times while grilling Sebelius: “Businesses were given a delay of a year, but individuals were not given that option, why is that?”

The bigger question is: “If the administration messed up so badly on the seemingly mundane task of building a website, how much will Obamacare damage the broader economy and the nation’s long-term fiscal health?”

The Stewart-Sebelius interview drew attention to the second question only briefly, when Stewart mentioned that employers were converting full-time workers to part-time due to the ACA. But he failed to challenge Sebelius’ weak response that “economists – not the anecdotal folks – but economists say there’s absolutely no evidence that part-time work is going up.”

This is exactly where an informed and unbiased interviewer would have dug further to expose the truth.

Contrary to the administration narrative that Sebelius was parroting, we showed in “’Anecdote This,’ Dr. Furman” that the evidence of an ACA part-time worker effect is conclusive. Not only are reports from so-called “anecdotal folks” too pervasive to be credibly dismissed, but the claim that part-time work hasn’t “gone up” is just plain wrong. Even though most employers are unlikely to finalize policy changes this far ahead of the ACA’s postponed employer mandate, government data shows that part-time jobs jumped sharply in the quarter before the postponement, while full-time jobs stagnated.

Getting back to Suskind’s observation that the ACA was only a “start,” it appears to be a rocky start based on the exchanges fiasco. We should be even more concerned about the part-time worker effect, broader effects shown in the Beige Book, and the history of health program costs. These are a few of the many reasons to expect an even rockier road ahead.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MpRVr60I_Z4/story01.htm Tyler Durden

Investment Climate in Six Points

1. Long-term interest rates may have bottomed several months ago, but rate will remain low for several more months. It is becoming clearer to many that the Federal Reserve is most likely not going to reduce the $85 bln of long-term securities it is purchasing every month. The BOJ remains committed to buying the equivalent of $75 bln of assets a month. The ECB continues to provide full allotment at its fixed rate repo operations, even if strong banks have repaid their long-term repo borrowings. The Bank of England’s economist Dale tweeted at the end of last week that UK rates are unlikely to rise next year.

The Bank of Canada, as it will likely reaffirm at this week’s meeting, retains a tightening bias, but it is of little consequence as it keeps pushing out in time when it anticipates removing some monetary accommodation. Unlike the Fed and BOE that have included macro-economic thresholds in their forward guidance, there has been continuity in BOC’s forward guidance from Carney to Poloz in that its forward guidance has been date oriented not data. The Reserve Bank of Australia is at the tail end of its easing cycle. Many think it is done. However, we continue to see scope for another rate cut, especially if, as we suspect, this week’s Q3 CPI report is tame. In addition, the strengthening of the Australian dollar also tilts the odds in favor of a cut.

Investment implication: This favors carry trade strategies, risk assets, including emerging markets, commodities and equities.

2. For good reason, many observers and investors are concerned that the dysfunctional political system in the US will renew the default threat again early next year. Yet given the failure of such tactics, in terms of results and in the court of public opinion, that does not seem to be the most likely scenario.

The Congressional Budget Office projects the deficit in the fiscal year that just began will be near 3.4% and FY2015, the shortfall is projected to be 2.1%. There is not immediate deficit problem. The real fiscal challenge is still some years away. Essentially the cost of what are often called entitlements, which is a pejorative way to talk about the basket of goods one gets as a citizen and member of nearly every other high income country, is projected to require a larger part of GDP than has ever been raised in federal taxes. Neither party has it in their interest to let this be settled before next year’s election. Perhaps that is what the 2016 presidential race will be about. The most likely outcome therefore is some soft of compromise that includes some reforms of Medicare and Medicaid, and slowing the rise in Social Security payments, without really addressing the structural issue.

In the traditional media and blogosphere there was much hand wringing and chin wagging about how the US fiscal melodrama was going to undermine confidence in the role of Treasuries at the center of the global financial system, including reserves. To the contrary, the Federal Reserve’s custodial holdings for foreign central banks rose $28.6 bln in the week through last Wednesday, while the government was still closed and the threat of default hung in the air. This was the third largest rise in three years. This is not to say one week makes a trend. After falling in June and July, the Fed’s custody holdings rose in Aug, Sept and the first half of October. They are now about $7 bln from the record high set in May.

While US government data will begin being reported, with the highlight being Tuesday release of September’s employment data, it is unlikely to be a significant market mover. The data has been superseded by events. Surveys suggest the market consensus for Fed tapering is shifting to March and a modest $10 bln reduction. Near-term data is not going to change this view.

Investment implication: The role of Treasuries and the dollar are unlikely to be impacted by the domestic brinkmanship over fiscal policy.

3. The flash euro area PMIs, due Thursday, stand out as the most market sensitive economic data from the euro area. Although the sentiment has been running ahead of real sector data, slight positive growth has replaced the recent contraction. Next Wednesday, the ECB is expected to unveil the broad details of the Asset Quality Review (AQR). This is not a stress test. It is a preliminary review of the books of the banks that it will soon have supervisory responsibilities. Definitions of risk-weighted assets various in the euro area and some uniformity is a necessary condition of a banking union. New stress tests will be conducted next year.

Separately, news broke (MNI) over the weekend that ECB President Draghi argued for precautionary state recapitalization funds (for solvent institutions) instead of forcing a bailing-in of share holders and subordinated creditors. While his argument that it could renew the financial crisis, it is also yet another way to put tax payers money ahead of those who made in the investment decisions.

While the existential part of the euro crisis appears to have passed, the political fallout continues to be seen. This is true not just in countries that have suffered greatly, like Greece, but also may those that have come out relatively unscathed, like Austria. The declining support for the French Socialists and the internal divisions of the UMP has created an opportunity for the national socialism for the Len Pen variety.

Investment implication: The euro may enjoy additional near-term gains, it will serve to aggravate the tightening of financial conditions (lending, money supply growth). We see euro area challenges once again rising in importance to investors.

4. There are two major events for the UK in the week ahead. First, the minutes from this month’s MPC meeting will be released. It would be a surprise is there was any dissent. Recent comments, however, do suggest there are in fact disagreements below the surface. Under the terms of one person-one vote demands for consensus seems to be a recipe for group think. Of interest may be the MPC’s assessment of price pressures. Perhaps Dale’s tipped the BOE’s hand when he suggested that the increase in sterling could dampen import prices and help boost real incomes.

Second, on Friday the UK will be the first of the G7 to report Q3 GDP figures. The Bloomberg consensus calls for 0.8% increase, which would be the third increases sequentially and lift the year-over-year rate to 1.5% from 1.3% in Q2 and 0.2% in Q1. Despite the economic improvement, we note that he recent Ipsos/Mori polls shows Labour has pulled into a tie with the Tories, while the Lib-Dems have slipped into fourth place behind the UKIP.

Investment implication: Strong data and a BOE that finds virtue in sterling’s strength is likely to underpin the currency in the period ahead.

5. Japan reports the Sept trade balance first thing Monday. The deficit is expected to widen sharply on seasonally adjusted terms (JPY1.12 trillion from JPY791 bln), but improve slightly on an unadjusted basis. It is the fifteenth consecutive monthly deficit. The deficit is not a result of exports drying up. Indeed, exports are growing heady clip: 14.6% year-over-year in August and in September may have accelerated to 15.6%. The problem is that imports are going up even quicker. The 16% pace seen in August is expect to have risen to almost 20%.

The week
concludes with the latest inflation report. The national headline Sept CPI is expected to remain steady at 0.9%. However, this inflation is due solely to food and energy prices. However, excluding these items, CPI would be zero and not negative for the first time since the end of 2008. However, the Tokyo Oct reading warns that deflation may not yet have been defeated. Excluding food and energy, the Tokyo CPI is expected to remain at -0.3%.

Investment implication: The yen is vulnerable in the risk-on environment, but the its weakness is proving counter-productive for the trade balance. The next big challenge is the economy’s resilience in the face of the capital gains tax hike at the start of the new calendar year and the retail sales tax increase the first of the new fiscal year.

6. Norway and Sweden’s central banks meet Thursday. Neither is expected to cut interest rates. That said, over the medium term, we suspect Sweden is more likely cut rates that Norway, especially if house prices can ease further, in the coming months. In both countries, the PMI survey data has run well ahead of actually output.

Investment implication: The Norwegian krone and the Swedish krona have been the two weakest currencies over the month, losing 1.4% and 0.75% respectively against the dollar. In a risk-on environment they can play catch-up, with Norway the stronger of the pair.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/8F6gz0fPv5Y/story01.htm Marc To Market

Israel Central Bank Follows Fed With First Woman Chairman Appointment After Larry Summers’ Rejection

Ten days ago, when we reported on the latest rumors surrounding the fiasco that the Israeli central bank governor selection process has become (nearly as farcical as the bungled choice of Yellen in the US), we joking wondered:

LAPID SAYS BANK OF ISRAEL GOVERNOR ANNOUNCEMENT SEEN NEXT WEEK. Summers?

— zerohedge (@zerohedge) October 10, 2013

Overnight, we once again learned that in the New Normal the thin line between reality and rhetorical absurdity is perhaps too thin, following a report in The Hill that, as we joking suggested, it was indeed Larry Summers who the Bank of Israel had turned to in its quest for governor. From The Hill:

Former Treasury Secretary Larry Summers, who was in the running to succeed Ben Bernanke as chairman of the Federal Reserve, reportedly turned down an offer to lead the Bank of Israel.

Israel’s Channel 2 reported on Friday that the former Harvard president was one of multiple non-Israelis approached by Prime Minister Benjamin Netanyahu to succeed Stanley Fischer, who left the post in June after a term that began in 2005.

As a reminder, the Bank of Israel governor selection process has become an even greater fiasco than the choice of Mr. Mrs. Yellen as head of the Fed, after it was none other than JPMorgan Chase International Chairman Jacob Frenkel who was slated to become the new governor when his candidacy went up in a puff of kosher smoke following the release of details involving Frenkel and a shoplifting scandal at a Hong Kong airport duty free store. Guess JPM doesn’t pay that well after all.

But back to Larry Summers and the Bank of Israel, which moments ago announced that it has concluded its 112-day process in which it had gone without a central bank chief, and had appointed Karnit Flug as its new governor. In taking a page from the Fed’s own selection process, Flug is also the first woman to be appointed as head of the Bank of Israel. From Reuters:

Israel on Sunday named Karnit Flug as the new governor of its central bank, the first woman to be appointed to the office, after a rocky selection process that dragged on for months.

Flug, 58, served as deputy to previous governor Stanley Fischer, who stepped down in June after eight years on the job, and has been the Bank of Israel’s acting chief since he left.

Accepting the post, Flug said in a statement the central bank and Israel’s economy faced significant challenges.

Announcement of Flug’s appointment followed a meeting between Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid, who had been unable since Fischer resigned to fill the post.

Ironically, just as Yellen was nowhere near Obama’s top choice for the new Fed chairman, Flug was not Prime Minister’s Netanyahu primary choice.

Fischer had recommended Flug to replace him, but Netanyahu, officials said, had preferred candidates with a stronger international standing.

Netanyahu and Lapid initially chose Jacob Frenkel, central bank governor in the 1990s and currently chairman of JPMorgan Chase International, to succeed Fischer, but he pulled out following reports he had been arrested on suspicion of shoplifting at Hong Kong’s airport in 2006. Frenkel denied any wrongdoing, and authorities in Hong Kong decided not to pursue the case.

A second candidate, Bank Hapoalim Chief Economist Leo Leiderman, also dropped his bid two days after his nomination, citing personal reasons.

Netanyahu and Lapid said in a statement: “We were impressed by Dr. Flug’s performance over the past months as head of the Bank of Israel and we are confident she will continue to help us lead Israel’s economy to further achievements in the face of the world economic upheaval.”

Below is Flug’s full background from the BOI website:

Dr. Karnit Flug has been the Deputy Governor of the Bank of Israel since July 2011. She was appointed as Deputy Governor by the Israeli Government, in accordance with the Bank of Israel Law, 5770-2010 and with the recommendation of the Governor of the Bank of Israel.

Dr. Flug completed her M.A (cum laude) at the Hebrew University in 1980 and her Ph.D. in Economics at Columbia University in 1985.

In 1984, Dr. Flug joined the IMF as an economist. In 1988, she returned to Israel and joined the Research Department of the Bank of Israel, where she worked and published papers on topics related to the labor market, balance of payments and macroeconomic policies.

In 1994-1996, while on leave from the BOI, Dr. Flug worked at the Inter-American Development Bank as a senior research economist. In 1997, upon return to the BOI she was appointed Assistant Director of the Research Department and in June 2001 she was appointed Director of the Research Department and a member of the BOI’s senior management.

Dr. Flug has served on a number of public committees, including the committee on a multi-year defense budget (the “Brodet” committee); the committee aimed at ensuring the long term financial stability of the National Insurance Institute; the committee aimed at enhancing competition within the Israeli markets; the committee for social and economic change (the “Trajtenberg” committee), and several others.

Her response to learning that, just like Yellen, not quite top choice is still “good enough”:

Dr. Karnit Flug thanks the Prime Minister and the Minister of Finance on her expected appointment as Governor of the Bank of Israel.

Dr. Flug adds that the Bank of Israel and the Israeli economy face significant challenges, and that she looks forward to working in full cooperation with the professional and dedicated staff of the Bank of Israel, as well as with government officials, in order to meet these challenges.

We too were shocked to find no mention of the phrase “Goldman Sachs” in the bio above. As for Larry Summers, we can only imagine to what depths of misogynistic hell his ego must have tumbled after women ended up overtaking him as heads of not one but the two central banks he was slated to head within a month.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/JKCzoYIgkAs/story01.htm Tyler Durden

Israel Central Bank Follows Fed With First Woman Chairman Appointment After Larry Summers' Rejection

LAPID SAYS BANK OF ISRAEL GOVERNOR ANNOUNCEMENT SEEN NEXT WEEK. Summers?

— zerohedge (@zerohedge) October 10, 2013

Former Treasury Secretary Larry Summers, who was in the running to succeed Ben Bernanke as chairman of the Federal Reserve, reportedly turned down an offer to lead the Bank of Israel.

Israel’s Channel 2 reported on Friday that the former Harvard president was one of multiple non-Israelis approached by Prime Minister Benjamin Netanyahu to succeed Stanley Fischer, who left the post in June after a term that began in 2005.

Israel on Sunday named Karnit Flug as the new governor of its central bank, the first woman to be appointed to the office, after a rocky selection process that dragged on for months.

Flug, 58, served as deputy to previous governor Stanley Fischer, who stepped down in June after eight years on the job, and has been the Bank of Israel’s acting chief since he left.

Accepting the post, Flug said in a statement the central bank and Israel’s economy faced significant challenges.

Announcement of Flug’s appointment followed a meeting between Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid, who had been unable since Fischer resigned to fill the post.

Ironically, just as Yellen was nowhere near Obama’s top choice for the new Fed chairman, Flug was not Prime Minister’s Netanyahu primary choice.

Fischer had recommended Flug to replace him, but Netanyahu, officials said, had preferred candidates with a stronger international standing.

Netanyahu and Lapid initially chose Jacob Frenkel, central bank governor in the 1990s and currently chairman of JPMorgan Chase International, to succeed Fischer, but he pulled out following reports he had been arrested on suspicion of shoplifting at Hong Kong’s airport in 2006. Frenkel denied any wrongdoing, and authorities in Hong Kong decided not to pursue the case.

A second candidate, Bank Hapoalim Chief Economist Leo Leiderman, also dropped his bid two days after his nomination, citing personal reasons.

Netanyahu and Lapid said in a statement: “We were impressed by Dr. Flug’s performance over the past months as head of the Bank of Israel and we are confident she will continue to help us lead Israel’s economy to further achievements in the face of the world economic upheaval.”

Below is Flug’s full background from the BOI website:

Dr. Karnit Flug has been the Deputy Governor of the Bank of Israel since July 2011. She was appointed as Deputy Governor by the Israeli Government, in accordance with the Bank of Israel Law, 5770-2010 and with the recommendation of the Governor of the Bank of Israel.

Dr. Flug completed her M.A (cum laude) at the Hebrew University in 1980 and her Ph.D. in Economics at Columbia University in 1985.

In 1984, Dr. Flug joined the IMF as an economist. In 1988, she returned to Israel and joined the Research Department of the Bank of Israel, where she worked and published papers on topics related to the labor market, balance of payments and macroeconomic policies.

In 1994-1996, while on leave from the BOI, Dr. Flug worked at the Inter-American Development Bank as a senior research economist. In 1997, upon return to the BOI she was appointed Assistant Director of the Research Department and in June 2001 she was appointed Director of the Research Department and a member of the BOI’s senior management.

Dr. Flug has served on a number of public committees, including the committee on a multi-year defense budget (the “Brodet” committee); the committee aimed at ensuring the long term financial stability of the National Insurance Institute; the committee aimed at enhancing competition within the Israeli markets; the committee for social and economic change (the “Trajtenberg” committee), and several others.

Her response to learning that, just like Yellen, not quite top choice is still “good enough”:

Dr. Karnit Flug thanks the Prime Minister and the Minister of Finance on her expected appointment as Governor of the Bank of Israel.

Dr. Flug adds that the Bank of Israel and the Israeli economy face significant challenges, and that she looks forward to working in full cooperation with the professional and dedicated staff of the Bank of Israel, as well as with government officials, in order to meet these challenges.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/JKCzoYIgkAs/story01.htm Tyler Durden

JaMMiN’ WiTH BaNKSY(s)…

It’s the time of year again for Banksy to do some mildly radical things under the guise of his super-secret super-hype guerilla mystique in order to be ultra-relevant again. Taking the bait, we are once again eating his shit up, perpetuating his self-fulfilling prophecy of being famous by acting like he doesn’t want to be famous.

Alice Wang

“But there’s no way round it — commercial success is a mark of failure for a graffiti artist. We’re not supposed to be embraced that way. When you look at how society rewards so many of the wrong people, it’s hard not to view financial reimbursement as a badge of self-serving mediocrity.”

Banksy

Have a Big Gulp of relevance…not to difficult to find in the Emirate of Bloomfukistan.

WB7