“What Has Been Will Be Again” – Today’s Fantasies Are Vast & Unremitting

Submitted by M.N.Gordon via EconomicPrism.com,

“What has been will be again, what has been done will be done again; there is nothing new under the sun,” explained Solomon in Ecclesiastes, nearly 3,000 years ago.

Perhaps the advent of negative yielding debt would have been cause for Solomon to reconsider his axiom.  We can only speculate on what his motive would be.  As far as our studies have shown, negative interest rates are a brave new phenomenon.

Still, we’ll concede the present day ain’t all that unique or special.  We continue to look to the night sky with wonder.  When the moon is full we let out a howl with the innate impulse of early man.  So, too, we still put on our pantaloons one leg at a time.

The context, however, and the fantasies, have their differences.  Here we defer to Fred Sheehan, and a brief passage from his December 2006 historical essay, War of the Nerds, for edification from the not too distant past:

Every generation suffers its particular fantasies.  So it was a century ago.  Investors had grown so immune to the consequences of war that bond markets from London to Vienna didn’t flinch after the assassination that provoked World War I.


“Three weeks later, in the summer of 1914, the fear premium amounted to a total of one basis point.  Then, in quick order, European markets ceased to function.  A notable feature of this paralysis is that nothing of substance had changed – war had not been declared by any of the parties, but by now, minds were hyperventilating.”

Danger Ahead

Today’s fantasies are vast and unremitting.  Similar to the fantasies of 100-years ago, in hindsight, they’ll be equally absurd.  One particularly captivating fantasy at the moment is that the more global central banks inflate their balance sheets the more expectations of inflation decline.

Simple logic seems to have been suspended for the near universal disregard of the rules of common sense in the treatment of the money supply of the world.  How long can this possibly persist?  Obviously, at some point, this fantasy will be shattered.

For just because central banks have continuously increased their balance sheets in recent years without igniting runaway price inflation doesn’t mean the danger isn’t there.  Remember, correlation doesn’t imply causation.  But it can imply confusion.

For example, even the short-term acceptance of an inverse relationship between central bank balance sheets and inflation expectations can produce considerable blunders.  In this instance it has compelled millions of transactions to occur in error.

Earlier this year bond markets passed from the extreme to the illogical.  According to Bank of America Merrill Lynch, there is now $13 trillion in bonds globally with negative yields.  Just two years ago there was hardly any negative yielding debt.

More Signs the End is Nigh

The ultimate effect of continued inflation of central bank balance sheets will likely be the complete breakdown of the currency system.  There’s little doubt about this eventual fate.  What’s more, the prospect of helicopter drops will help accelerate this unpleasant outcome.

Unfortunately, at this point there’s no way to reverse course without triggering the breakdown.  Our advice, acquire some physical gold if you haven’t already done so and prepare yourself mentally and spiritually for the final phase of the crack-up boom.  Remarkable things will happen.

One interim scenario is that some stock market investors will believe they’re getting rich.  There’s no telling what sort of mania could be propelled by the dual effect of perpetually low interest rates and perpetually braindead central bankers…or how many points outright debt monetization could add to the DOW.

There’s great potential that the stock market will become a crude barometer of how successful central banks are at destroying the accumulated wealth and capital of the world.  One signal they’re succeeding involves rapidly rising stock prices in the face of a stagnating economy.  Another signal involves rapidly rising stock prices in the face of sluggish earnings.  A third signal involves rapidly rising stock prices in the face of declining currency values.

All of these signals are already visible to the naked eye.  Their further magnification will presage the final bust.

The point is, at this twilight in the rise and fall of our 45-year fiat based currency system, escalating stock prices are not something to be celebrated.  Rather, they’re a signal that the end is nigh.  Remember this in the coming months when you see DOW 20,000 hats circulating on the floor of the NYSE.

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Is Russia Using U.K. and U.S. Domestic Spying Laws as a Model?: New at Reason

PutinIgorDolgovDreamstimeSt. Petersburg, Russia—Did legislation in the United Kingdom and the United States inspire Russian authorities to adopt their country’s new domestic spying laws? Maybe.

On July 7, Russian President Vladimir Putin signed the “Yarovaya Law,” which came into effect earlier this week. The Yarovaya Law—named after Irina Yarovaya, the ultraconservative legislator who pushed for it—is styled as an “anti-terrorism” measure. Among other things, it mandates that telecommunications and internet service providers store all telephone conversations, text messages, videos, and picture messages for six months. In addition, telecom companies must retain for three years customer metadata—that is, data showing with whom, when, for how long, and from where they communicated. The law requires “the organizers of information distribution on the Internet” to do the same thing, except they need only retain the metadata for only one year.

Russia is evidently implementing domestic surveillance that some lawmakers in the United States and the United Kingdom have long advocated in their own countries.

View this article.

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The GOP in the Age of Trump: Part Apocalypse, Part Positive Thinking

When pundits describe this year’s Republican convention, the words “dark” and “apocalyptic” keep cropping up. They aren’t wrong about that: From Monday’s Make America Safe Again theme night through the nominee’s dystopian address on Thursday, the week was filled with the intertwined themes of fear and authority. In 2016, we were told, abominations have massed at the country’s gates and some have started to slip inside; to ward them off, we were urged to give more power to the police, to the Pentagon, and above all to Donald Trump.

But there was another thread to the Cleveland gathering too: At times it felt like the GOP had been taken over by the think-and-grow-rich division of the Church of Positive Thinking. Has there ever been another major-party convention where the voices at the dais included a multi-level marketer, a prosperity-gospel pastor, and a professional motivational speaker? I half-expected Trump’s friend Tony Robbins to pop by for a surprise pep talk about awakening the giant within. (We did have Fran Tarkenton, whose résumé includes a guest appearance on one of Robbins’ old infomercials.) This may reflect the scammy ethos of the man who gave us Trump University, but it also reflects a sincerely held part of the candidate’s worldview. Trump is an earnest devotee of Norman Vincent Peale and his self-help-shelf school of religion, and last year he said he’d love to have Oprah as his running mate. That wasn’t going to happen—among other problems with the pairing, she’s for Hillary—but it reflects something more than just celebrity solidarity. There is a bona fide intersection of outlooks between the TV star who loves The Secret and the TV star who loves The Power of Positive Thinking.

Visions of apocalypse and visions of glory often go hand in hand; I don’t doubt that you’ll be able to find their counterparts at the Democratic convention next week. But the apocalypse and glory onstage in Cleveland this week had a distinct style and worldview to them, as though they’d both been picked out from the same checkout lane at Safeway. And they fit together in ways that journalists who have focused only on the dystopian side of Trumpism might miss. When Trump’s daughter Ivanka introduced the nominee last night, she declared that “all things will be possible again” if her dad takes office. And then he took the stage to warn us of what would be possible if he didn’t.

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Mark Cuban Apologizes To World: “Americans Are Nothing Like Trump”

Outspoken billionaire businessman Mark Cuban apologized to the world last night for the GOP’s nomination of Donald Trump for president

The Mavericks owner has not been shy about commenting during the 2016 election campaign…


Before going on to explain his 7(ish) point plan to ensure Hillary wins the election



One can’t help but feel – given the general explosion of Anti-Trump sentiment on Twitter since his speech – that perhaps, just perhaps, he struck an awkwardly inconvenient truth that the left-er side of the country is finding hard to accept?

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Crude Drops After US Oil Rig Count Jumps Most Since 2009

Having risen for 6 of the last 7 weeks, the US oil rig count extended its run with a 14 rig surge this week – the biggest absolute rise since Dec 2015. Oil rigs have now risen 55 rigs in the last 8 weeks – the biggest percentage rise since Dec 2009. WTI is tumbling to fresh 3-month lows on the news…


The 14 rig surge to 371 is the biggest weekly percentage rise since Nov 2009…


And crude hit fresh 3mo lows…

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What GOP Leaders Think of Trump, Then and Now: New at Reason

After a bruising primary season, leaders in the Grand Old Party know that some of the choice words they reserved for Trump can’t be unsaid.

But as the Republican faithful gathered in Cleveland for their nominating convention, the GOP elite gleefully joined The Donald’s death march to November. So how does their rosy new outlook compare to their prior view of the newly-crowned nominee?

About 1:45 minutes.

Produced by Justin Monticello. Music by Phemale.

Watch the full video above, or click below for downloadable versions. Subscribe to Reason TV for daily content like this.

View this article.

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Multiple Deaths Reported In Shooting At Munich Shopping Center, Major Police Operation Underway

For the second time in a week, Germany is facing another ‘incident’ as The BBC reports “shots fired” in a Munich, Germany shopping center. According to the local police there is now a “major operation” at the Olympia shopping center.

As BBC adds, reports say the area round the shopping centre in the district of Moosach has been sealed off, but details of the incident are sketchy. The security forces have been on alert after a migrant stabbed five people on a train in Bavaria on Monday.

The authorities had warned of the danger of further attacks.

Acciording to unconfirmed reports, up to 15 people are dead after 30 shots were fired.


Live periscope Feed:


A major police operation is underway according to german media…


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Erdogan Formally Requests Gulen Extradition From US, As Power At Incirlik Airbase Restored

One week after the Turkish coup, U.S. officials reported that electric power has been finally restored to the Incirlik air base in southern Turkey.

The base had been operating on a backup generator since July 16, when power was shut off at all military bases in Turkey following a failed military coup. Turkish authorities have alleged that planes involved in the coup attempt were refueled by Turkish planes housed at the base.

The U.S. military’s European Command said Friday there is a steady flow of hot food, water, and fuel to support U.S. service members and civilians in Turkey. EUCOM said it is working with the Turkish military to make sure the base is prepared to carry out its missions. It is used by U.S.-led coalition jets fighting the Islamic State group in Syria and Iraq.

That’s the quid, to what we expected last week would be a bargaining chip in Turkey’s negotiation with the US on extraditing the cleric Fethullah Gulen, who has been blamed for masterminding the coup, and who lives in the US. 

Some have speculated that the airbase may be held “hostage” by Ankara as a bargaining chip ahead of demands for the extradition of Erdogan’s arch enemy, Fethullah Gulen, currently a resident of the state of Pennsylvania.

The base is no longer hostage, if only for the time being.

What is the quo? We found out moments ago, when Turkey’s ablassador to the US, Kilic, formally requested the extradition of Gulen:

We have formally submitted the necessary documents” for extradition of Fethullah Gulen, Ambassador Serdar Kilic told reporters in Washington.

WaPo adds that Turkey’s top diplomat urged the United States on Friday to quickly hand over a self-exiled cleric whom Turkish leaders have linked to last week’s coup attempt — an issue that risks causing serious tension between the two allies. Foreign Minister Mevlut Cavusoglu told the state-run broadcaster TRT that Turkey was ready to take part in a commission proposed by Washington to discuss the extradition of Fethullah Gulen. But Cavusoglu insisted there was no need for it to take a long time. “If you want to draw out the Gulen extradition issue, it can take years, but if you are decisive, it can be completed in a short period,” he said, according to the Reuters news agency.

And now the ball is in Obama’s court: does he yield to a person who has clearly made a mockery of the democratic process and hand over a frail 77-year-old man who hardly was the evil mastermind that managed to somehow plan and coordinate with the 60,000+ people detained, arrested or charged in Turkey. Or does he deny, and risk Erdogan’s ira, which could potentially spillover by forcing Turkey to gravitate closer to Moscow’s sphere of influence and maybe even open the European gates for some 2 million Syrian refugees currently held inside Turkey’s borders.

We doubt Obama will rush to resolve this issue and will most likely punt it to Hillary Clinton, who takes over in just 4 months. As America knows, the Secretary of State has an admirable record of resolving foreign diplomatic crises.

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“That’s A Scary Graph” Former Fed Economist Warns

The problem, warns 33-year St.Louis Fed veteran Daniel Thornton, is that "the financial cycle is way ahead of the economic cycle." As Bloomberg notes, that's a worry given that the past two downturns were driven by asset-price deflation.

Americans are about as wealthy as they've ever been – and that's a worry?


Yup, say veteran economists Daniel Thornton and Joe Carson. They're concerned that the swelling of wealth could prove unsustainable because it's far outstripped the growth of the economy since the recession's end in 2009.


Thornton, who spent 33 years at the Federal Reserve Bank of St. Louis before retiring in 2014, says in effect that we've seen this picture before. Household net worth ballooned in the late 1990's and the early 2000's; in the first instance pumped up by rising stock prices, in the second by expanding home values.

Both cases ended badly, with the economy falling into recession after the bubbles burst.

Chart: Bloomberg

Just as occurred in the previous two episodes, the latest expansion of wealth  has been driven more by rising prices of assets -in this case both shares and homes – than by improved economic fundamentals

Since 2009, households have seen their holdings of stock and mutual funds nearly double, to $20.6 trillion.


Only 6 percent of that gain can be ascribed to new flows of money into the funds or share purchases, according to calculations by Carson, director of global economic research at AllianceBernstein LP in New York. The rest is due to price appreciation.

As the veteran economists sum up…

The problem, he said, is that "the financial cycle is way ahead of the economic cycle.'' That's a worry given that the past two downturns were driven by asset-price deflation.


"Nobody knows what's going to happen," Thornton said. "But there's plenty of reason to think that’s a scary graph."

Still, why worry, with stock valuations at 12 year highs (amid decling earnings) and median home prices well above the prior peak, what could go wrong?

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