Tag: finance

Astronomically high college tuition facilitated by a bottomless ocean of student loans has saddled Americans with a record $1.48 trillion in non-dischargeable debt – an amount which has more than doubled since the 2009 lows.

As we reported in January, nearly 40% of student loans taken out in 2004 are projected to default by 2023 according to the Brookings institute.

While in March we noted that debt-laden millennials were set back an average of $140,000 vs. their parents – a problem compounded by the fact that students aren’t just borrowing money for tuition; their student loans cover rent, food and other bills, leaving them with massive interest payments and in many cases, little prospect of getting ahead – much less saving for retirement. 

Enter the million-dollar-debtors

While millions of Americans are drowning in student loans – 101 people have the ultimate albatross around their necks; student loan balances exceeding $1 million, according to the Wall St. Journal. Five years ago, there were just 14 people with loans that large. 

Utah orthodontist Mike Meru, 37, is one of them. After graduating from Brigham Young University with no debt and a new marriage, Meru borrowed $601,506 debt to attend USC’s orthodontics program – while his new wife Melissa finding work as a USC administrative assistant to save on tuition. After a few years, his student loan had swelled to $1,060,94. 

Mr. Meru said the dental school’s financial-aid director, Sergio Estavillo, estimated that the basic four-year program would require $400,000 to $450,000 in student debt, including interest. Mr. Estavillo said he didn’t recall the conversation but had no reason to doubt its accuracy. –WSJ

And despite Meru’s $225,000 salary in 2017 which leaves him with roughly $13,333 per month after taxes, he makes monthly payments of $1,590 by taking advantage of a government-sponsored debt repayment program. Without the program which still leaves his debt growing at $130 a day, Meru’s monthly payments would be $10,541.91 according to an email from his loan servicer. At this rate, Meru’s loan balance will exceed $2 million in 20 years. 

Since refinancing his debt with the federal government in 2015, lowering the rate to 7.25%, Mr. Meru’s balance has grown by $148,948. It will keep growing through the 25-year life of the repayment plan until it reaches $2 million. -WSJ

All is not lost for Meru and many others like him, however – because thanks to the repayment program, Meru’s $2 million balance will be forgiven after 25 years.

He agreed to monthly payments at 10% of his discretionary income, defined as adjusted gross income minus 150% of the poverty level. Any balance remaining after 25 years is forgiven, effectively covered by taxpayers. The forgiven amount is then taxed as ordinary income. -WSJ

And while crushing Meru’s debt load places him in the upper echelon of those drowning in student loans, he attempted to mitigate the financial pain early on, before rates jumped and the snowball began to gather speed. 

USC charged tuition of $56,757 in Mr. Meru’s first year, American Dental Association records show. To save on expenses, the couple lived with his parents. He drove a Buick inherited from his wife’s grandmother for the hour-plus trip between Newbury Park and USC, located south of downtown Los Angeles. After his first year, and with his wife’s tuition discount, he owed $43,976.

By Mr. Meru’s second year, the interest rate on new student loans jumped to 6.8%, and USC raised its tuition by 6%. By the end of that school year, he had taken out a total of $115,000 in loans, which also covered a summer semester. Interest rates were roughly triple what he had planned for.

Between Mike Meru and the other 100 people with $1 million or more in student loans, US taxpayers will be on the hook for around $200 million – again, just for those 101 individuals. Unfortunately, that’s just the tip of the iceberg. 

While the typical student borrower owes $17,000, the number of those who owe at least $100,000 has risen to around 2.5 million, nearly 6% of the borrowing pool, Education Department data show.

…

More than a third of borrowers from one of the government’s main graduate school lending programs have enrolled in some form of federal loan-forgiveness plan. -WSJ

Outraged at his situation, Meru started a national dental-student movement in order to lobby Congress for lower rates on grad students. The effort, according to the Journal, went nowhere. Some dental school educators, meanwhile, have begun to worry about prohibitively expensive tuition. 

USC’s dental school is one of the costliest higher educations one can attain – at $91,000 per year, and $137,000 when living expenses are factored in.

“I don’t think you’ll find any dental school dean in the country who will not tell you they’re concerned about the cost,” said Dr. Avishai Sadan, dean of USC’s Herman Ostrow School of Dentistry. “But what’s the action?”

Sadan says USC raised tuition “to cover the cost of delivering a top education.” (aka a top-tier dental school can take maximum advantage of the student loan racket). 

“You cannot decide you’re just not raising tuition,” he said. “Everything that drives the operation, from salary raises to any other additional costs, have to come, for the most part, from tuition.”

Bottom line: with so many borrowers set to default on their student loans, those who can’t make ends meet will be able to pay roughly 10% of their income for 25 years. The remainder, such as Mark Meru’s $2 million balance, will be an obligation of the United States taxpayer. 

Lord knows the banks who facilitated this scheme aren’t going to cover it.

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Authored by Chris Martenson via PeakProsperity.com,

Back in January of 2016 we saw what appeared to be, and in my opinion should have been, the end of the Everything Bubble blown by the word’s central banking cartel.

The carnage started in the emerging markets. Highly-leveraged positions and carry trades began to unwind. That’s a fancy way of saying that all the big, sophisticated investors — who were busy borrowing heavily in countries with cheap money (the US, Japan, and Europe) and using that debt to speculate in markets offering higher yields (junk debt, emerging markets, stocks, etc.) — began to reverse their trades.

It quickly devolved into a “Sell everything!” scramble. We saw the dollar spike and stocks fall — with emerging markets taking the full brunt of the carnage as their stock markets rapidly fell into bear territory, their currencies fell, and their bonds were destroyed.

Until…

Very early one morning in February of 2016 everything U-turned and rocketed higher. Suddenly and magically, the panic was over. This wasn’t the invisible hand of the market at work; it was the very-visible hand of central bank intervention. 

With the benefit of hindsight, we now have a clear picture of what happened. The central banks huddled together, a bold (desperate?) plan was hatched, and key printing presses around the world were sent into overdrive.  In the months to follow, the European Central Bank (ECB) and the Bank of Japan (BoJ) went on a record-breaking money printing spree:

(Source)

The red arrows in the charts above mark this moment when the “markets” were saved.

Or, more specifically, when the portfolios the ultra-wealthy were “saved”, as the assets within were boosted higher (yet again) by the central banks printing money from thin air:

(Source)

Addicted To Money Printing

So what caused the weakness in early 2016 that spooked the system so much? The central banks themselves.

After many years of force-feeding stimulus into the global economy to create a “recovery”, the central banks have become increasingly concerned that asset prices have become too dependent on said stimulus. So in late 2015, the banks took their feet off of their monetary gas pedals for a bit to see what might happen.

They were hoping that the markets could be gradually weaned off of their stimulus dependence with few ill effects. They wanted to engineer a “soft landing”, where if priced declined, they’d come down gradually and not too much.

That didn’t happen.

Instead, the cheap-money-addicted markets instantly started expressing massive withdrawal complications.

To re-acquaint you with how quickly things were devolving back then, these are news headlines pulled from an article I wrote back in the middle of January 2016:

• Wal-Mart closing 269 stores, 154 in the US.
• Business inventories to sales at new cycle highs
• U.S. freight volume falls for first time in almost three years
• US retail sales fall 0.1% in December
• Empire State index weakens to recession lows.
• South African rand hits new all-time lows in 2016
• Brazil’s Real Falls Sharply Against Dollar
• Brazil Unemployment Rate Rises to 9%
• Canadian Dollar Hits 13 Year Low Against US Dollar
• U.S. Energy Junk Bond Spreads At Record Width
• Nigeria’s Currency Plummets On Open Market
• Mexico’s Peso Hits New All-Time Low
• Chinese Stocks Enter Bear Market (again)
• European Stocks Enter Bear Market

Sound familiar at all?  It should. These sound exactly like the headlines in the news today, here in May of 2018.

We are still paying the price from 2008, when the central banks committed a massive error by not allowing the markets and their bad debts to actually clear. Yes, it would have been acutely painful; but we would have been through the worst within a year or two and in the process restored the system to a much healthier and sustainable state.

Instead, the bad actors were protected (and rewarded!) and the root fundamental problems were literally ‘papered over’, left to continue to fester unobserved ever since. Similarly in early 2016, the central banks once again committed the same sin by rescuing everything with another wall of fresh, thin-air money.

To drive home how much, below is a chart showing the yearly change in world central bank balance sheets. The relative ‘area under the curve’ of each major period of money printing gives us a sense of the scale.  To help you eyeball it, I’ve placed similar-sized orange rectangles in each area.  Key to note is that central money printing has been increasing — not decreasing — the further out we’ve gotten from the Great Financial Crisis:

(Source)

If we’ve been in “recovery” for years now, as the central banks have been touting, then why has 2016-2108 seen the most stimulus ever injected into the system?

History has taught us that we should trust or leaders’ actions far more than their words. And their actions at this time indicate panic.

What is it that has them so worried?  We should all ponder that question long and hard.  I’m convinced that they know as well as we do that, once the over-inflated ““markets”” created by the central banks can no longer be sustained at their current nose-bleed heights, the damage will be extraordinary and unstoppable.    

The End Of Stimulus? (And The Start Of The Crash?)

The pain of the 2008 crash will seem like a mere flesh wound compared to the devastation the next deflationary wave will wreak. 

Of course, the central banks have no interest in seeing that happen and will, once more, do all they can to “rescue” the markets.  

But will they act in time?  More to the point, given all of their very public commitments to raising rates and reducing their balance sheets, will they allow a market correction to happen in the near term? (presumably, so they can ride to the rescue soon after as “saviors”)

Politically, the prospect of showering even more wealth on the 0.001% is going to be a tough sell. This is especially true in Europe — in Italy, Greece and Spain where the populace is suffering mightily already and is in no mood to further enrich the ultra-wealthy.

So it would seem that the central banks, at least publicly, have to stick to their stated plans to reduce their levels of money printing/balance sheet expansion. 

As of right now, they are on track to end worldwide simulus in early 2019, when their collective net change in assets will dip below $0 for the first time in many years:

(Source)

Given the importance of central bank purchases and market interventions, the above chart is probably the most important one in existence for divining where financial asset prices are headed.

If global monthly stimulus indeed drops to $0, then Watch out below!

Who know if the future will plays out anything like the projections given above? The central banks have proven weak-kneed at every tiny moment of market wobbliness.  To date, they’ve chosen to print and pent and then print some more at every opportunity where the ““markets”” might have corrected.  

But we all know that this charade cannot continue forever.  Sooner or later it has to stop.  Given the blow-ups we’re now seeing in the emerging markets, there’s clearly serious trouble brewing somewhere in the system.

In Part 2: The Breaking Point Is Upon Us we provide plenty of data to support that claim.

The currencies and bonds of five countries are now in the danger zone, and many more teeter on the edge. My analysis is that the central banks will resort to their usual money printing to resolve the issue, but for reasons I explain in Part 2, these efforts will fail at some point in the next year — and spectacularly so.

When today’s Everything Bubble bursts, the effect will be nothing short of catastrophic as 50 years of excessive debt accumulation suddenly deflates.

Given the dangers involved, you should expect the central banks to ‘go nuclear’ in thier deflation-fighting efforts by sending “money to main street” — likely in the form of a universal basic income, or a check from the Treasury refunding your last 3 years of tax payments, or maybe even an electronic deposit directly from the Federal Reserve into your bank account.

That’s when the inevitable fiat currency crisis will begin in earnest. At that time you’ll need to run, not walk, to buy anything with intrinsic value that can’t be inflated away — before your currency becomes worthless.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

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There is a group of bankers for whom “better” means “worse” for everyone else: we are talking, of course, about restructuring bankers who advising companies with massive debt veering toward bankruptcy, or once in it, how to exit from the clutches of Chapter 11, and who – like the IMF, whose chief Christine Lagarde recently said “When The World Goes Downhill, We Thrive” -thrive during financial chaos and mass defaults.

Which is to say that the past decade has not been exactly friendly to the world’s restructuring bankers, who with the exception of two bursts of activity, the oil collapse-driven E&P bust in 2015 and the bursting of the retail “bricks and mortar” bubble in 2017, have been generally far less busy than usual, largely as a result of abnormally low rates which have allowed most companies to survive as “zombies”, thriving on the ultra low interest expense.

However, as Moody’s warned yesterday, and as the IMF cautioned a year ago, this period of artificial peace and stability is ending, as rates rise and as a avalanche of junk bond debt defaults. And judging by their recent public comments, restructuring bankers have rarely been more exited about the future.

Take Ken Moelis, who last month was pressed about his rosy outlook for his firm’s restructuring business, describing “meaningful activity” for the bank’s restructuring group.

“Your comments were surprisingly positive,” said JPMorgan’s Ken Worthington, quoted by Business Insider. “Is this sort of steady state for you in a lousy environment? Can things only get better from here?”

Moelis’ response: “Look, it could get worse. I guess nobody could default. But I think between 1% and 0% defaults and 1% and 5% defaults, I would bet we hit 5% before we hit 0%.”

He is right, because as we showed yesterday in this chart from Credit Suisse, after languishing around 1%-2% for years, default rates have jumped the most in 5 years, and are now “ticking higher”

Moelis wasn’t alone in his pessimism: in March, JPMorgan investment-banking head Daniel Pinto said that a 40% correction, triggered by inflation and rising interest rates, could be looming on the horizon.

These are not isolated cases where a gloomy Cassandra has escaped from the asylum: already the biggest money managers are positioning for a major economic downturn according to recent research from Bank of America. And while nobody can predict the timing of the next collapse, Wall Street’s top restructuring bankers have one message: it’s coming, and it’s not too far off.

However, the most dire warning to date came from Bill Derrough, the former head of restructuring at Jefferies and the current co-head of recap and restructuring at Moelis: “I do think we’re all feeling like where we were back in 2007,” he told Business Insider: “There was sort of a smell in the air; there were some crazy deals getting done. You just knew it was a matter of time.”

What he is referring to is not just the overall level of exuberance, but the lunacy taking place in the bond market, where CLOs are being created at a record pace, where CCC-rated junk bonds can’t be sold fast enough, and where the a yield-starved generation of investors who have never seen a fair and efficient market without Fed backstops, means that the coming bond-driven crash wil be spectacular.

“Even if there is not a recession or credit correction, with the sheer volume of issuance there are going to be defaults that take place,” said Neil Augustine, cohead of the restructuring practice at Greenhill & Co.

The dynamic is familiar: since 2009, the level of global nonfinancial junk-rated companies has soared by 58% representing $3.7 trillion in outstanding debt, the highest ever, with 40%, or $2 trillion, rated B1 or lower. Putting this in contest, since 2009, US corporate debt has increased by 49%, hitting a record total of $8.8 trillion, much of that debt used to fund stock repurchases.  As a percentage of GDP, corporate debt is at a level which on ever prior occasion, a financial crisis has followed.

The recent glut of debt is almost entirely attributable to the artificially low interest-rate environment imposed by the Federal Reserve and its central bank peers following the crisis. Many companies took advantage and refinanced their debt before 2015 when a large swath was set to mature, kicking the can several years down the road. 

But going forward “there’s going to be refinancing at significantly higher rates,” said Steve Zelin, head of the restructuring in the Americas at PJT Partners.

And as the IMF first warned last April, refinancing at higher rates will further shrink the margin of error for troubled companies, as they’ll have to dedicate additional cash flow to cover more expensive interest payments.

“When you have highly leveraged companies and even a modest rise in interest rates, that can result in an increase in restructuring activity,” said Irwin Gold, executive chairman at Houlihan Lokey and cofounder of the firm’s restructuring group.

So with a perfect debt storm coming our way, many restructuring firms have been quietly hiring new employees to be ready when, not if, the economy takes a turn for the worse.

“The restructuring business is a good business during normal times and an excellent business during a recessionary environment,” Augustine said. “Ultimately, when a recession or credit correction does happen, there will be a massive amount of work to do on the restructuring side.” Here are some additional details on recent banker moves from Business Insider:

Greenhill hired Augustine from Rothschild in March to cohead its restructuring practice. The firm also hired George Mack from Barclays last summer to cohead restructuring. The duo, along with Greenhill vet and fellow cohead Eric Mendelsohn, are building out the firm’s team from a six-person operation to 25 bankers.

Evercore Partners in May hired Gregory Berube, formerly the head of Americas restructuring at Goldman Sachs, as a senior managing director. The firm also poached Roopesh Shah, formerly the chief of Goldman Sachs’ restructuring business, to join its restructuring business in early 2017.

“It feels awfully toppy, so people are looking around and saying, ‘If I need to build a business, we need to go out and hire some talent,'” one headhunter with restructuring expertise told Business Insider.

“In our world, people are just anticipating that it’s coming. People are trying to position their teams to be ready for it,” Derrough said. “That was the lesson from last cycle: Better to invest early and have a cohesive team that can do the work right away and maybe be a little bit overstaffed early, so that you can execute for your clients when the music ultimately stops.”

Of course, if the IMF is right (for once), Derrough and his peers will soon see a windfall unlike anything before: last April, the International Monetary Fund predicted that some 20%, or $3.9 trillion, of the total global corporate debt is in danger of defaulting once rates rise.

Although if and when that day comes, perhaps a better question is whether companies will be doing debt-for-equity swaps, or fast forward straight to debt-for-lead-gold-and canned food…

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North Korea’s president Kim Jong Un held a surprise two-hour meeting with South Korean President Moon Jae-in at the truce village of Panmunjom on Saturday afternoon to pave way for a summit between North Korea and the United States.

The South Korean presidential office said the two leaders met at the DPRK side of the border village of Panmunjom from 3:00 pm to 5:00 pm local time on Saturday, where they “candidly discussed the potential Trump-Kim summit”, and exchanged their opinions on implementing the April 27 Panmunjom Declaration.

Moon will release the result of the summit at 10:00 a.m. local time on Sunday, South Korea’s Blue House said, without elaborating further.

The two leaders previously met on the South Korean side of Panmunjom on April 27, reaching a historic agreement on the complete denuclearization of the Korean Peninsula and the change of the current armistice agreement into a peace treaty.

Their second summit came after U.S. President Donald Trump said on Friday that the United States will possibly reinstate the meeting with Kim. Late on Friday Trump said that “we are having very productive talks with North Korea about reinstating the Summit which, if it does happen, will likely remain in Singapore on the same date, June 12th., and, if necessary, will be extended beyond that date.”

We are having very productive talks with North Korea about reinstating the Summit which, if it does happen, will likely remain in Singapore on the same date, June 12th., and, if necessary, will be extended beyond that date.

— Donald J. Trump (@realDonaldTrump) May 26, 2018

Trump on Thursday surprised the world when he sent a letter to the DPRK leader, saying that their originally planned meeting in Singapore on June 12 will not happen. DPRK’s First Vice Foreign Minister Kim Kye Gwan responded then that his country is ready to sit down with the United States anytime in any manner for talks to solve the problems existing between them.

China also chimed in on China, when it said that it hoped the DPRK and the U.S. would cherish the recent progress and continue to address mutual concerns via dialogue and push for the denuclearization of the Korean Peninsula.

The South Korean government also said Friday that Seoul planned to continue diplomatic efforts to maintain a dialogue momentum between the DPRK and the United States. According to the Blue House, at a National Security Council (NSC) meeting held on Friday, the NSC members shared a view that efforts to improve inter-Korean relations will contribute to enhance relations between Pyongyang and Washington and complete denuclearization of the Korean Peninsula.

 

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Norwegian salmon spot prices just tagged a historical high as faltering supply combines with increasing global demand. This has unleashed a perfect storm sending prices above a multi-year neckline of NOK 70 (€7.48/$8.66), and tagged fresh highs around NOK 80 (€8.40/$9.90) — however, this price surge is not sustainable and unlikely to last for long, a seafood analyst told IntraFish.

Norwegian salmon prices are going wild. (Source: Bloomberg) 

Christian Olsen Nordby, a seafood analyst at Kepler Chevreux, describes the current price environment as “not sustainable at all and are way too high.”

Nordby said there are several reasons for the historical price shift. First, the market is being squeezed from the supply-side with cold sea temperatures restricting salmon growth, along with, the holiday season in Norway hitting the harvest. Meanwhile, there is strong demand from major markets in the Eurozone on contract prices, Nordby explained to IntraFish.

“Retail prices, which lag behind by about 10 weeks are still relatively low – which is triggering demand – but these are starting to pick up too,” he said. “Retail prices will pick up, typically resulting in lower demand.”

The seafood analyst believes that prices could be peaking in the near term, as more harvest is expected to hit the open market, as well as, Norway’s holiday season is now over. He said the industry is waiting for more supply to hit the market via the 2017 generation salmon stock.

“There is expected to be more supply in the 2017 generation as it has about 10 percent bigger biomass than the 2016 generation,” Nordby said.

“The price should slide down over the next few months, and I’m quite excited to see what will happen next week and the week after now we are done with the holidays,” Nordby explained.

Nordby could be right about his top call in the salmon market because overlaid with 2017 contracts spot prices — there appears to be weakening in price action into the second half of the year.

Fish Pool ASA is established as an international, regulated marketplace for buying and selling of financial salmon contracts. Contracts are either forwards or options. Clearing services are operated by our cooperative partner, Nasdaq OMX. All contracts are settled against the monthly Fish Pool Index (above). Compare your prices to FPI™ here and investigate Fish Pool Trading Calendar here. (Source: Fish Pool).

Nordby concluded the conversation with IntraFish by forecasting a substantial decline in prices by July/August. He estimates that price could drop to NOK 50 (€5.30/$6.20), or about -37 percent correction from current levels. Bear market ahead?

Kjetil Lye, a commercial fishing analyst at Handelsbanken Markets, also told IntraFish, he was expecting lower prices in the second half of the year.

“I think most people do including Fishpool’s forward prices,” he said. “We certainly expect them to come down from these extraordinary levels,” he added.

Lye’s reasoning behind extraordinarily high salmon prices is similar to Nordby’s thesis of a supply-side shock, coupled with heightened demand in Europe.

“For the short term, they are not sustainable in general for the industry and will have to come down. But with limited supply-side growth, the longer-term outlook for prices is excellent, although levels are too high at the moment,” Lye said.

As salmon prices probe new record highs – all thanks to supply-side shocks in Norway, this could be more bad news for the heavily indebted American consumer who for the first time, might not be able to afford Norweign salmon this summer during barbecue season. However, if the seafood analysts are correct, and a bear market does form in prices, then Americans could certainly put the Norweign salmon on their credit cards.

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Authored by Raúl Ilargi Meijer via The Automatic Earth blog,

The Spanish government is about to fall after the Ciudadanos party decided to join PSOE (socialist) and Podemos in a non-confidence vote against PM Rajoy. Hmm, what would that mean for the Catalan politicians Rajoy is persecuting? The Spanish political crisis is inextricably linked to the Italian one, not even because they are so much alike, but because both combine to create huge financial uncertainty in the eurozone.

Sometimes it takes a little uproar to reveal the reality behind the curtain.

Both countries, Italy perhaps some more than Spain, would long since have seen collapse if not for the ECB. In essence, Mario Draghi is buying up trillions in sovereign bonds to disguise the fact that the present construction of the euro makes it inevitable that the poorer south of Europe will lose against the north.

Club Med needs a mechanism to devalue their currencies from time to time to keep up. Signing up for the euro meant they lost that mechanism, and the currency itself doesn’t provide an alternative. The euro has become a cage, a prison for the poorer brethren, but if you look a bit further, it’s also a prison for Germany, which will be forced to either bail out Italy or crush it the way Greece was crushed.

Italy and Spain are much larger economies than Greece is, and therefore much larger problems. Problems that are about to become infinitely more painful then they would have been had the countries been able to devalue their currencies.

If you want to define the main fault of the euro, it is that: it creates problems that would not have existed if the common currency itself didn’t. This was inevitable from the get-go. The fatal flaw was baked into the cake.

And if you think about it, today the need for a common currency has largely vanished anyway already. Anno 2018, people wouldn’t have to go to banks to exchange their deutschmarks or guilders or francs, they would either pay in plastic or get some local currency out of an ATM. All this could be done at automatically adjusting exchange rates without the use of all sorts of middlemen that existed when the euro was introduced.

Americans and British visiting Europe already use this exact same system. Governments can make strong deals that make it impossible for banks and credit card companies to charge more than, say, 1% or 0.5%, on exchange rate transactions. This would be good for all cross-border trade as well, it could be seamless.

Technology has eradicated the reason why the euro was introduced in the first place, and made it completely unnecessary. But the euro is here, and it is going to cause a lot more pain and mayhem. Any country that even thinks about leaving the system will be punished hard, even if that’s the by far more logical thing to do.

Europe is not ready to call for the end of the experiment. Because so much reputation and ego has been invested in it, and because the richer nations and their banks still benefit -hugely- from the problems the poorer face. The one country that got it right was Britain, when it decided to stay out of the eurozone.

But then they screwed up the next decision. And found themselves with the most incompetent ever group of ‘chosen few’ to handle the outcome. Still, anyone want to take out a bet on who’s going to be worse off when the euro whip comes down, Britain or for instance Italy or France? Not me. Close call is the best I can come up with.

The euro was devised and introduced, ostensibly, to solve problems. Problems with cross border trade between European nations, with exchange rates. But instead it has created a whole new set of problems that turn out to be much worse than the ones it was supposed to solve. That’s how and why M5S and the League got to form Italy’s government.

In Spain, if an election is called, and it looks that way, you will either get a left wing coalition or more of the Rajoy-style same. Left wing means problems with the EU, more of the same means domestic problems; the non-confidence vote comes on the heels of yet another corruption scandal for Rajoy’s party.

And let’s not forget that all economic numbers are being greatly embellished all over the continent. If you can claim with a straight face that the Greek economy is growing, anything goes. Same with Italy. It’s only been getting worse. And yeah, there’s a lot of corruption left in these countries, and yeah, Europe could have helped them solve that. Only, it hasn’t, that is not what Brussels focuses on.

Italy for now is the big Kahuna. The EU can’t save it if the new coalition is serious about its government program. But it also can’t NOT save it, because that would mean Italy leaving the euro. And perhaps the EU.

If Italian bonds are sufficiently downgraded by the markets, Mario Draghi’s ECB will no longer be permitted to purchase them.

And access to other support programs would depend on doing the very opposite of what the M5S/League program spells out, which is to stimulate the domestic economy. Is that a bad idea? Hell no, it’s just that the eurozone rules forbid it.

The euro has entirely outlived its purpose, and then some. But it exists, and it will be incredibly painful to unravel. The new game for the north will be to unload as much of that pain as possible on the south.

Europe would have been much better off of it had never had the euro. But it does. The politicians and bankers will make sure they’re fine. But the people won’t be.

The euro will disappear because the reasons for it not to exist are much more pressing than for it to do. At least that bit is simple. The unwind will not be.

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Authored by James George Jatras via The Strategic Culture Foundation,

In the aftermath of US President Donald Trump’s cancellation of his scheduled June 12 summit with North Korea’s Kim Jong-un, the gathering clouds of global conflict are getting thicker and darker:

Korea: The cancellation is a triumph for Trump’s national security team, most if not all of whom were horrified at the prospect of his meeting personally with Kim. (There was no telling what the Big Man might agree to if he met Little Rocket Man face to face. What if Korea actually were denuclearized? There would be no more excuse for keeping American troops on the peninsula! Disaster!)  From the team’s perspective, scuttling the meeting altogether would be the best outcome, but derailing the date and cranking the nasty rhetoric back up will do for now. Talk of a Libyan model, even more than inclusion of B-52s in exercises with South Korea (which Trump reversed), got the job done. Now it’s imperative for the national security establishment to load Trump up with nonnegotiable demands (maybe patterned on Pompeo’s Iran provocation; see below) that Kim would have no choice but to refuse on the chance the summit gets rescheduled through the frantic efforts of South Korea’s Moon Jae-in – and maybe of Trump himself, if he still wants a shot at that Nobel Peace Prize. Pyongyang’s continued willingness to talk will register in Washington as desperation and an invitation for renewed pressure.

Iran: Secretary of State Mike Pompeo has delivered to Tehran what only can be deemed an ultimatum. It makes Austria’s 1914 demands on Serbia look mild in comparison. Ultimata are designed to be rejected, “justifying” whatever action the threatening power has already decided upon. Tehran is being told to dismantle its entire regional security presence – or else. The “or else” means initially a campaign of destabilization (assassinations, fomenting domestic unrest, and insurrections by disgruntled ethnic and religious communities; see Syria 2011) or, if that fails, direct military action (see Libya 2011 and Iraq 2003). To trigger the latter look for a false flag or contrived “Iranian attack,” such as a naval incident in the Persian Gulf (see Gulf of Tonkin 1964). Also targeted by the ultimatum are the European countries aghast at US withdrawal from the Iran nuclear deal. In addition to smacking secondary sanctions on our satellites (officially, “allies” and “partners”), the harshness of Pompeo’s terms is designed to spook the Europeans into the vain hope they can restrain a reckless US bent on war by meeting Washington halfway (or three-quarters of the way, or nine-tenths of the way…) in helping to corner Tehran. Watch to see who will crack first: London, Paris, or Berlin?

Syria: Despite Trump’s repeated assertion that he wants to get Americans out of Syria, there is reason to think we are digging in further. This has nothing to do with defeating ISIS. Rather, along with a planned buildup of Saudi and other foreign Sunni troops in the US- and Kurd-controlled zone, the principal target is Iran (see above). US policy in Syria is driven by Israeli and Saudi hostility to Iran, and Pompeo’s list of nonnegotiable demands includes withdrawal of Iranian (and Hezbollah) forces from that country. It is a mystery how the US, whose troop presence in Syria violates international law and probably American domestic law as well, has the right to demand the departure of forces present legally by invitation of the internationally recognized government. Punctuating US determination to confront Iran were new strikes this week against Syrian government forces, while Israel flaunted its first-ever combat use of the US F-35.

Ukraine: The level of fighting on the Donbas line of control has intensified. Meanwhile Kiev forces show off tests of the Javelin antitank missiles they received from the Trump administration, which the Obama administration had earlier declined to provide. Ostensibly intended to deter a Russian attack – in which case they would make little difference – the Javelins could be used in an offensive against Donbas forces (perhaps in concert with an attack on the Kerch bridge connecting mainland Russia to Crimea) followed by a call for insertion of international peacekeepers. Russia considers the FIFA World Cup from June 14 to July 15 a prime time window for such an assault. A Dutch report assigning blame to – surprise! – Russia for downing MH17 comes at an opportune moment.

Balkans: Prestigious think tanks call for “action” to intensify the same policies that have made a wreck of the Balkans for a quarter of a century. Why? To counter Russian influence, of course! The only shortcoming in US and European policy is that we haven’t been aggressive enough.      

Sitting at the geographic and political junction of these seemingly disparate theaters of active or potential conflict is the US establishment’s entrenched hostility to Russia. Despite the accelerating unraveling of the anti-constitutional plot to dump Trump by elements of the US Deep State (in the CIA, FBI, Department of Justice, and elsewhere) together with their British counterparts (MI6 and GCHQ), the effort’s primary policy objective was achieved: President Trump has been blocked from his oft-stated desire to improve ties with Moscow. Addressing the regional issues above – any one of which could reach dangerous crisis proportion at any moment – would be far more feasible with Washington and Moscow working in cooperation instead of at cross-purposes or daggers drawn. But instead, we have a new cold war care of James Clapper, John Brennan, Christopher Steele, Peter Strzok, Stefan Halper, and their ilk – possibly even including Barack Obama.

In some ways this second Cold War is even more dangerous than the first one. The instincts of restraint and prudence that had been built up over decades of confrontation have atrophied. While both the US and Russia still maintain massive nuclear arsenals, new military technology has continued to make rapid progress in such areas as hypersonic weapons and cyber-warfare. Also, while during the first Cold War American and Soviet planners consciously sought to avoid direct contact between their forces in Third World proxy wars, today American and Russian forces come into perilous proximity to one another. Given Washington’s relentless determination to press Moscow to the brink in every theater, the consequences of even an unintended clash are not given the gravity they demand.

It is impossible to know from outside of Trump’s own mind to what extent he has abandoned his pledge to improve relations with Russia (or never meant it in the first place), or whether he might simply be biding his time to make his move. But it is clear what that move must be if there is any possibility of cutting the Gordian knot that binds shut the gate to rapprochement: Trump and Russian President Vladimir Putin should meet in a formal and substantive summit at the earliest possible date. A productive understanding between the United States and Russia must start at the top, on the personal level or it will not happen at all.

To that end, recently this analyst joined other activists in posting the following petition on the official White House website:

President Donald Trump should hold early summit with Russian President Vladimir Putin

Created by J.J. on May 21, 2018

‘Ronald Reagan famously said: “A nuclear war cannot be won and must never be fought. The only value in our two nations possessing nuclear weapons is to make sure they will never be used.” Unfortunately, today a new Cold War between the US and Russia again poses an existential threat to the people of both nations and to the whole world. Therefore, we urge President Trump to follow in the steps of Ronald Reagan and to start a direct dialogue with President Putin in search of solid and verified security arrangements. As President Trump said repeatedly “only haters and fools” do not understand that good US- Russia relations are also good for America. By all indications President Putin feels the same way for his country. A summit should be arranged as soon as possible.’

The petition is open for signature until June 20. When signing, use of Gmail is recommended to facilitate registration of your vote.

No one should imagine a White House petition can by itself change the direction of American policy. However, if there are elements on Trump’s team who are not entirely against the idea of a summit, a show of public support may serve to strengthen their case against those opposed.

Most important is a constituency of one: Mr. Trump himself. If Trump was at all willing to hold a summit with Kim because of his handful of nukes, he can certainly do so with the leader of the one country on the planet with enough nuclear weapons to destroy the US.

Obama got his Peace Prize presented to him on a platter simply for getting elected while being black. By contrast, if Trump wants his Peace Prize he’s going to have to work for it. With Kim off his dance card, he’s got plenty of time to take a spin with Putin. 

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Every year, the Lawrence Livermore National Laboratory, a federal research facility funded by the Department of Energy and UC Berkeley, puts out a fascinating Sankey diagram that shows the fate of all energy that gets generated and consumed in the United States in a given year.

Today’s visualization is the summary of energy consumption for 2017, but you can see previous years going all the way back to 2010 on their website.

Courtesy of: Visual Capitalist

DEALING IN QUADS

As Visual Capitalist’s Jeff Desjardins explains, the first thing you’ll notice about this Sankey is that it uses an unfamiliar unit of measurement: the quad.

Each quad is equal to a quadrillion BTUs, and it’s roughly comparable to the following:

• 8,007,000,000 gallons (US) of gasoline

• 293,071,000,000 kilowatt-hours (kWh)

• 36,000,000 tonnes of coal

• 970,434,000,000 cubic feet of natural gas

• 25,200,000 tonnes of oil

• 252,000,000 tonnes of TNT

• 13.3 tonnes of uranium-235

Put another way, a quad is a massive unit that only is useful in measuring something like national energy consumption – and in this case, the total amount of energy used by the country was 97.7 quadrillion BTUs.

ENERGY WASTED

On the diagram, one thing that is immediately noticeable is that a whopping 68% of all energy is actually rejected energy, or energy that gets wasted through various inefficiencies.

It’s quite eye-opening to look at this data sorted by sector:

source: Visual Capitalist

The transportation sector used 28.1 quads of energy in 2017, about 28.8% of the total consumption. However, it wasted 22.2 quads of that energy with its poor efficiency rate, which made for more rejected energy than the other three sectors combined.

This wastage and inefficiency in the transportation sector provides an interesting lens from which to view the green energy revolution, and it also helps explain the vision that Elon Musk has for the future of Tesla.

A WAYS TO GO

The last time we posted a version of this visualization was for the 2015 edition of the diagram, and we noted that renewables had a ways to go as a factor in the whole energy mix.

Here are how things have changed over the last two years:

source: Visual Capitalist

As you can see, solar and wind consumption are jumping considerably – but in absolute terms, our note from two years ago still remains true.

To make the desired impact, renewable energy still has a ways to go.

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Authored by Mac Slavo via SHTFplan.com,

Mysterious booms and strange lights in have been reported all over the country and have recently sparked fears that the United States government is building tunnels underground in preparation for a potential nuclear third world war. Residents are convinced that they are hearing sounds and seeing the odd lights, and they are not isolated events.

One man in the Cincinnati area caught the lights on his camera and was even able to capture his son’s reaction.

Kimberly Kempke, a concerned resident from Anderson Township in Cincinnati, Ohio, is convinced the sounds she heard earlier this week were more than fireworks. 

“The sounds were like true booms. They sounded like a powerful explosion,” said Kempke.

“It’s unlike anything I’ve ever seen or felt before and I’ve been very up close with fireworks many times.”

According to The Daily Star, YouTube channel secureteam10, run by Tyler Glockner, claims that the unexplainable sounds are coming from underground.

He also revealed that just days ago a seismograph recorded something moving from the east to the west coast of the US in just 19 seconds.  And since he has uploaded it, viewers have been quick to speculate that something is secretly going on below the surface.

Only last month, mystery “trumpet” sounds in New York left residents convinced a secret tunneling program had commenced.  And before that, we saw similar scenes in Ohio.  The odd booms have been heard in Pennsylvania too, and even triggered an FBI investigation.  Read more here.

The booms seem to be returning en masse.  Most sound metallic in nature; almost as if a giant machine is doing something or a large piece of sheet metal is being hammered. Listen to them all yourself and see what you think.  Is the government building secret shelters underground to protect the elites in preparation for World War 3? Could it be something else?

In the video below, the narrator speculates that it could be a massive earthquake of apocalyptic proportions coming:

All we really know is that no government agency is clarifying what could possibly be causing these lights and booms to pop up and be heard across the country. All we have is speculation at this point. But you can prepare yourself.  Besides, if the government is really building underground bunkers and tunnels to protect themselves from an apocalyptic situation, shouldn’t you be prepared too?

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For all the talk of the escalating confrontation between the US and China, Bank of America’s Mike Hartnett writes that the “trade war” of 2018 should be recognized for what it really is: the first stage of a new arms race between the US & China to reach national superiority in technology over the longer-term via Quantum Computing, Artificial  Intelligence, Hypersonic Warplanes, Electronic Vehicles, Robotics, and Cyber-Security.

This is hardly a secret, as the China strategy is laid out in its “Made in China 2025” blueprint: It aims to transform “China’s industrial base” into a “smart manufacturing” powerhouse via increase competitiveness and eroding of tech leadership of industrial trading  rivals, e.g. Germany, USA, South Korea; this is precisely what Peter Navarro has been raging against and hoping to intercept China’s ascent early on when it’s still feasible.

At the forefront of China ambitious growth plan, Beijing’s investments in “advanced internet and communication technologies, embedded systems and intelligent machines” aim to ensure that 40% of China’s mobile phone chips, 70% of industrial robots, 75% of basic core components and 80% of renewable energy equipment are “Made in China” by 2025.

Meanwhile, the China First strategy will be met head-on by an America First strategy.  Hence the “arms race” in tech spending which in both countries is intimately linked with defense spending. Note military spending by the US and China is forecast by the IMF to rise substantially in coming decades, but the stunner is that by 2050, China is set to overtake the US, spending $4tn on its military while the US is $1 trillion less, or $3tn.

This means that some time around 2038, roughly two decades from now, China will surpass the US in military spending, and become the world’s dominant superpower not only in population and economic growth – China is set to overtake the US economy by no later than 2032  – but in military strength and global influence as well.

And, as Thucydides Trap clearly lays out, that kind of unprecedented superpower transition – one in which the world’s reserve currency moves from state A to state B – always takes place in the context of a war.

Which explains BofA’s long-term strategic recommendation: “We believe investors should thus own global defense, tech & cybersecurity stocks, particularly companies seen as “national security champions” over the next 10-years.”

And here’s the reason why:

Because one might as well make some money before the next world war breaks out…

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