The American Dream Is Hardest To Achieve In…

While we noted the top-down dismal demise of the American Dream of upward mobility over the weekend, Bloomberg has crunched the numbers and ranks the 50 most populous cities in the US on the difficulty of obtaining upward mobility in a low-wage job. The American dream is hardest to achieve in… Miami.

 

 

METHODOLOGY: Using the fast-food industry as a proxy, four jobs were selected to create the employment-weighted composite fast-food worker pay for each MSA: combined food preparation and serving workers, including fast food; cooks, fast food; counter attendants, cafeteria, food concession, and coffee shop; and food-preparation workers. The “immobility score” was based on three factors that promote upward mobility: housing, a college degree and health-care coverage.

For full methodology, see here.

 

Source: Bloomberg


    



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The Fed Has Failed (And Will Continue to Fail), Part 1

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The Fed's policies have been an unqualified success for financiers and an abject failure for the bottom 99.5% who have to work for a living.

After five long years of politicos and the financial media glorifying the Federal Reserve's policies as god-like in their power and efficacy, let's take a quick look at the results of these vaunted policies: ZIRP (zero interest rates), (QE) quantitative easing, both of which are ways of shoving nearly limitless, nearly-free money (a.k.a. liquidity) into the banking sector, where all this free money is supposed to filter into the global economy, working miracles of prosperity.

Let's start with a chart of the Fed's balance sheet, which reflects just how much money the Fed has created and pumped into the financial system. $4 trillion is larger than the entire GDP of Germany, and roughly 25% of U.S. GDP.

Next, let's look at the effect of the much-glorified Fed policies on full-time employment: If you call a return to the levels of 2005 (despite a 7.5% increase in population) a success, then what would you consider a failure?

Let's recall that the Fed's policies are unprecedented. Keeping interest rates near-zero for five years and pumping $4 trillion into the system are both completely off the scale of central bank policy in the U.S.

Next, let's look at the participation rate–how many people of working age who are actively in the workforce. The trend is ugly; the percentage of the civilian population who are working or actively seeking work is plummeting.

Next: real median household income: this is household income adjusted for inflation.Another ugly chart, as real median household income is back to the levels of 1990. Once again: if you reckon this a success, then what would you consider a failure?

How about the annual change in disposable income? we can assume that "prosperity" and "recovery" mean disposable income are rising at a healthy clip, right? Alas, the rate of disposable income growth is sinking toward zero. The Fed's policies of bailing out "too big to fail" banks and QE/ZIRP have correlated to the most stunning drop in disposable income growth in decades.

How about financial sector profits? Hey, now we're finally getting somewhere– these are through the roof. We finally found something with a positive correlation to Fed policies–financial profits are hitting all-time highs. Yee-haw, we have a winner.

Last but not least, how about the stock market? Here is a chart of the Fed balance sheet and the S&P 500 since 2009. Ding-ding, we have another winner–stocks are also hitting all-time highs.

Source: Zero Hedge

The most charitable assessment we can make of Fed policy is that the "prosperity" it created is at best, ahem, grossly concentrated in the most parasitic and politically powerful sector: finance. Why should we be surprised that the Fed, itself a servant of the banking sector, should devise policies that enrich the bankers and financiers?

Let's be clear about one thing (to quote the president): the Fed's policies have been an unqualified success for financiers and an abject failure for everyone who has to work for a living. The Fed has not just failed to rectify the nation's obscene inequality in wealth and income; it has actively widened it by handing guaranteed returns to the banks and financiers while stripmining what's left of the middle and working classes' non-labor income, i.e. interest on savings.

Just as a refresher:


Tomorrow: how the Fed rewards imprudent parasites and punishes the prudently productive.


    



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Russia Warns US Against “Illegal” Ukraine Bailout; Ukraine Commences Live-Fire “Drill” With Tanks

The tit-for-tat sabre-rattling and rhetoric continues to build ahead of this weekend’s planned referendum in Ukraine’s Crimea region. This morning has seen 3 new threads beginning with Ukraine’s “live-fire” exercises involving T-64B tanks. This was then followed by warnings from Russia of “consequences” of “unconditionally indulging radical elements” in Ukraine calling US financial aid “illegal” which was swiftly responded to by the State Department exclaiming it “unacceptable” that Russian forces take matters into their own hands and “do not create the right environment for diplomacy.” Not positive…

 

Ukraine did its own sabre-rattling:

  • *T-64B TANKS INVOLVED IN EXERCISE, LIVE-FIRE TRAINING: MINISTRY

 

The Russians are not happy

Russia says planned US financial aid to Ukraine is illegal

 

Russia’s Foreign Ministry said on Tuesday that planned U.S. financial aid to Ukraine is illegal and outside American legal norms since it would be funding an illegitimate regime.

 

By all criteria, issuing funding to an illegitimate regime that seized power by force is unlawful and goes beyond the framework of the American legal system,” the ministry said in a statement.

 

The statement echoed assertions made earlier in the day by ousted Ukrainian president Viktor Yanukovich. The ministry also warned Washington about the consequences of “unconditionally indulging radical elements” in Ukraine.

And Kerry has his own perspective:

U.S. STATE DEPARTMENT SAYS RUSSIAN RESPONSES TO U.S. QUESTIONS ON UKRAINE DO NOT CREATE RIGHT ENVIRONMENT FOR DIPLOMACY

 

Kerry told Lavrov it is unacceptable that Russian forces and irregulars continue to take matters into their own hands in Ukraine

Of course, this remains a constant distraction from the fact that Russian boots are on the ground in Crimea and the US (and the West) are stuck with how to “off-ramp” the escalating Russian threats without sanctions that would blow-back on to their own economies.

And then Merkel chipped in…

  • *MERKEL SAYS RUSSIA IS ANNEXING CRIMEA, PARTY OFFICIAL SAYS


    



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Meet The 2 Iranians At The Center Of The “Stolen Passport” Plot

“The more information we get, the more we’re inclined to conclude that it was not a terrorist incident,” says the Interpol Secretary General Ronald Noble according to CNN, as details of the 2 Iranians at the center of the “stolen passport” uncertainty are identified. As CNN reports, Noble gave their names and ages as Pouri Nourmohammadi, 18, and Delavar Syed Mohammad Reza, 29 and added “they are not likely to be members of a terrorist group.” Of course, the more dismal unknown is that of the entire plane and its passengers and crew which remain missing without a trace.

 

 

Via CNN,

The two passengers in question entered Malaysia using valid Iranian passports, Noble said at a news conference. But they used stolen Austrian and Italian passports to board the missing Malaysian plane, he said.

 

 

Noble gave their names and ages as Pouri Nourmohammadi, 18, and Delavar Syed Mohammad Reza, 29.

 

 

Further, there’s no evidence to suggest either was connected to any terrorist organizations, according to Malaysian investigators.

 

 

“We have been checking his background. We have also checked him with other police organizations of his profile, and we believe that he is not likely to be a member of any terrorist group,” Khalid said.

 

CNN obtained an iReport photo of the two men with two of their friends, believed to have been taken Saturday before the plane disappeared. In it, they are posing with the two others, whose faces CNN has blurred to protect their identities.

Of course the biggest factor is now what happened to Flight 370? CNN sees 4 scenarios:

1. Scenario: Mechanical failure?

Fact: The absence of a debris field suggests the possibility that pilots were forced to ditch the plane and it landed on water without breaking up, finally sinking to the ocean floor.

Analysis: But if that were the case, then why no emergency signal? These planes are able to perform a “miracle on the Hudson” maneuver. They have the ability to glide more than 100 miles and belly land on the water with both engines out, says former 777 pilot Keith Wolzinger, now a civil aviation consultant with The Spectrum Group. During the time it would take for a plane to glide 100 miles, it seems likely that pilots would be able able to send an SOS.

Fact: The missing plane had suffered a clipped wing tip in the past, but Boeing repaired it, and the jet was safe to fly, said Malaysia Airlines CEO Ahmad Jauhari Yahya on Sunday.

Analysis: “Anytime there’s been previous damage to an airplane, even though it’s been repaired, and repaired within standards … it kind of sends a warning flag,” says Wolzinger. Experts agree the Boeing 777 is one of the world’s most reliable aircraft. During its development it was subject to some of the most rigorous testing in commercial aviation history. “I’ve been talking with colleagues,” Wolzinger says. “We’re all baffled by this.” The 777 boasts some of the most powerful and well-tested engines in the world, he says. “The reliability of airliner engines in general is impeccable these days,” he says. “This is a safe plane.”

2. Scenario: Pilot error

Fact: So far, there are no known indications that pilot error contributed to the aircraft going missing.

Analysis: Some aviation experts have compared Flight 370 to the crash of Air France Flight 447 in 2009. All 228 passengers and crew died when the plane went down in a storm in the Atlantic en route from Brazil to Paris. After an expensive, nearly two-year search across the deep ocean floor, the twin-engine Airbus A330’s wreckage was finally found and the voice and data recorders recovered. A French investigation blamed flight crew for failing to understand “they were in a stall situation and therefore never undertook any recovery maneuvers.” But unlike Flight 447, weather was reported as good along Flight 370’s scheduled route and didn’t appear to present a threat.

Asiana Airlines Flight 217 — a Boeing 777 — fell short during a runway approach last July at San Francisco International Airport. Three people were killed and more than 180 others hurt. National Transportation Safety Board investigators have focused on pilot reliance on automated flight systems as a possible contributor to the crash, but a final report has not yet been released.

3. Scenario: Bomb? Or ‘dry run’?

Fact: Two stolen passports have been linked to people who held tickets for the flight.

Analysis: This points to the possibility that someone on a terrorism watch list may have boarded the plane and blown it up. However, the stolen passports don’t necessarily mean the plane was an actual target. It’s possible, says former U.S. Department of Transportation Inspector General Mary Schiavo, that terrorists may have been performing a “dry run” for a future attack. Or, Schiavo said, “it could be just criminal business as usual,” because “there are lots of stolen passports” used by travelers around the world.

Fact: So far, no debris field of plane wreckage has been linked to the 777, which would indicate a bomb blast.

Analysis: When Robert Francis, former vice chairman of the U.S. National Transportation Safety Board, heard about the missing plane, his immediate thought was: “For some reason the aircraft blew up and there was no signal, there was nothing.” The fact that the plane disappeared from radar without warning indicated to Francis “there was something unprecedented that hasn’t happened before.”

What about satellite technology? Is it possible that data from orbiting satellites might show a flash or infrared heat signature from an explosion? Very unlikely, says satellite expert Brian Weeden, who spent years tracking space junk in orbit for the U.S. Air Force. Dozens of government and private satellites orbit the earth, looking down from distances from 300 kilometers to 1,500 kilometers (185 to 930 miles). It’s a long shot that one of them coincidentally floated over at the exact right time and location to capture a flash from an explosion.

However, there’s an “off chance,” Weeden says, that a super secret U.S. government satellite orbiting 22,000 miles in space might have grabbed evidence. These satellites are in geosynchronous orbit. As a group, they can observe virtually the entire globe. “We know that their mission is to detect ballistic missile launches via heat,” says Weeden, now a technical adviser for Secure World Foundation. “We don’t know if they’re sensitive enough to track something like a bomb blast, even if that’s what happened.”

Then there’s another unanswerable question: Would the government hesitate to release such an image for fear of revealing the satellite system’s ultraclassified capability?

4. Scenario: Hijacking?

Fact: Before it disappeared, radar data indicated the plane may have turned around to head back to Kuala Lumpur. Is that a clue that a hijacker had ordered the plane to change course?

Analysis: So far, there have been no reports that the flight crew sent any signals that a hijacking had occurred.


    



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Florida Moves to Make “Bullying” and “Cyber-Bullying” a Crime Punishable by a Year in Prison

Apparently, having only 5% of the world’s population but 25% of the world’s prisoners isn’t a high enough incarceration rate for America. As such, some states are looking for ways to imprison more of its citizens for non-violent offenses. In this case, I refer to a bill advancing in Florida’s state Senate that would make “bullying” a crime, including “cyber-bullying” online. The bill is a reaction to the tragic suicide of 12-year old Rebecca Sedwick, who took her own life after suffering harassment from her peers.

As tragic as Rebecca’s death is, who hasn’t suffered the harassment of offensive and insensitive people in their lives? No one. This is particularly bad amongst juveniles, but even in the adult world you are bound to cross paths with some raging sociopath at one point or another. Unfortunately, this is simply a fact of life and a sad reflection of our state of consciousness. It is not something that can ever be legislated away with the stroke of a pen.

The only thing this will do is further increase an already bloated and absurd domestic prison population (in 2012 police made an arrest every 2 seconds), as well as provide the context to stifle free speech. After all, defining what constitutes criminal “bullying” or “cyber-bullying” will be extraordinarily difficult and will open the doors to criminalizing all sorts of free speech. While the intention may be noble, this sounds like an absolutely horrible idea.

From Think Progress:

A Florida bill advanced in the Senate this week to make bullying a crime, including cyber-bullying online. The new offenses criminalize a range of “harassing” behavior, both in-person and on the Internet. And a second conviction would send perpetrators to jail for a year, criminalizing what is primarily a problem among youths.

The bill comes in response to concerns of escalating bullying, especially cyberbulling, and is named for 12-year-old Rebecca Sedwick, who committed suicide in September 2013, after two teen peers allegedly harassed her over her dating of a particular boy. While Rebecca’s case did not involve LGBT harassment, bullying has been a particular concern among LGBT youth.

The bill establishes that someone who “willfully, maliciously, and repeatedly harasses or cyberbullies another person commits the offense of bullying” — a misdemeanor — and that those who engage in such harassment accompanied by a threat are guilty of a third-degree felony.

A felony for bullying? Seems way overboard…

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“Magic” Collateral: A Frank Look At The Sheer Credit Horror About To Be Unleashed In China

While the world is terrified about what China – where corporate bond defaults are now permitted – may be about to unleash on the world, most are all too happy to remain in a state of delightful ignorance. We decided to take a peek behind the scenes.

Recall that as we have repeatedly shown in the calendar of coming Chinese bond default, on March 31, a borrower named “Magic” (no comment) is set to default on a CNY196 million Trust.

The default may or may not happen, as there is always a high likelihood it will simply be bailed out as has happened frequently in the past, but regardless of the final outcome, here is what is really going on behind the scenes. From Bank of America:

31 Mar 2014, Rmb196mn borrowed by Magic Property & arranged by CITIC Trust

 

Details: invested in an office building in Chongqing. The Chongqing developer ran into financial problems in mid-2013. CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.

 

Potential outcome: The developer and the trust company may share the repayment.

 

Reasons: 1) When CITIC Trust sold the product, it did not specify the underlying investment project. 2) The local government has intervened, fearing social unrest. A local buyer of a unit in the office building committed suicide as he/she could not obtain the title to the property due to the title dispute between the trust and the developer.

Please re-read that first part again:

CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.

So, “Magic” not only sold the collateral… but also mortgaged it to a few other lenders: lenders who count its as a perfectly performing asset when in reality they have zero claims to it. Did they steal that straight from the MF Global instruction manual?

Now add this:

“The local government has intervened, fearing social unrest. A local buyer of a unit in the office building committed suicide as he/she could not obtain the title to the property due to the title dispute between the trust and the developer.”

… and multiply by a few thousand since precisely this kind of gross abuse of underlying collateral is the main reason why China can magically create trillions in debt out of thin air with zero collateral constraints, each and every year, no questions asked.

Well, the time to ask a question or two has finally arrived.


    



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Bank Of England Restructures After FX Probe But Not Responsible “For Hunting For Rigging Of Markets”

“We can’t come out of this with a shadow of doubt about the integrity of the Bank of England,” Governor Mark Carney told MPs this morning on the heels of the report, as we noted here, that found no collusion by the bank to manipulate FX rates. A senior BoE employee was told of “attempts to move the market” but “did not convey to [Monetary Policy Committee member Paul Fisher] that markets were being rigged,” and therefore was suspended. While many have called this “as bad as Libor” the BoE remains adamant of its lack of involvement but is still restructuring itself – adding that “it isn’t our job to go out hunting for rigging of markets.” Nope, just to ignore it, we presume. MPs were not impressed.

 

Via The BBC,

The Bank of England will restructure following claims that some of its officials knew about alleged foreign exchange rate fixing.

 

Governor Mark Carney told MPs on the Treasury Committee that it would create a new deputy governor position with responsibility for markets and banking.

 

 

But he said it had no warning of the alleged manipulation before October.

 

The Bank currently has three deputy governors, with responsibility for monetary policy, financial stability and prudential regulation.

 

The Treasury Committee hearing was aimed at finding out what Bank officials knew of the alleged foreign exchange rate fixing claims.

 

 

Mr Carney said it had no information that anyone from the Bank condoned, facilitated or took part in market manipulation.

 

“We can’t come out of this with a shadow of doubt about the integrity of the Bank of England,” he added.

 

 

The bank said there was no evidence its staff had colluded to rig the market.

 

 

The minutes of meetings from 2006 were published last Wednesday following a Freedom of Information request.

 

They show that a senior member of the Bank of England’s staff was told of “attempts to move the market” at a meeting with senior foreign exchange dealers from some of the world’s largest banks.

 

Traders are alleged to have communicated with each other to agree the rate of exchange for foreign currency deals.

 

It is thought some traders may have used online chat rooms to set a benchmark for currency trades.

 

Andrea Leadsom said that the minutes should have set off alarm bells.

 

However, Monetary Policy Committee member Paul Fisher, also appearing in front of the committee, said those minutes “did not convey to me that markets were being rigged”.

 

“It isn’t our job to go out hunting for rigging of markets,” he adds.

But, as Bloomberg notes, this is far from over…

Uk Treasury Committee Chairman Tyrie Says Early Signs From Boe Response To Fx Rigging Allegations Are Not Encouraging


    



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Bitcoin Exchange ‘Faced 150,000 Hack Attacks Every Second’ Showing ‘Technology Risk’

DAILY PRICE REPORT
Today’s AM fix was USD 1,348.00, EUR 973.57 and GBP 810.44 per ounce.
Yesterday’s AM fix was USD 1,334.25, EUR 961.55 and GBP 800.87 per ounce.

Gold rose $0.7 or 0.05% yesterday, to $1,339.90/oz. Silver dropped $0.08 or 0.38% to $20.81/oz.

Gold in US Dollars – 1 Year (Bloomberg)

Gold rose in all currencies again today and headed towards a four month high in dollar terms as the standoff between Russia and Ukraine led to demand for gold as a haven. Silver surged 1.4%, platinum added 0.3% to $1,481.60/oz and palladium rose 0.3% to $777.80/oz.

Resistance is between $1,350 and $1,360 and above that at and $1,435 per ounce.

The U.S. and Europe are continuing to threaten Russia, the world’s biggest energy producer and miner of palladium, with economic sanctions for sending troops into Ukraine’s Crimea region. Ukraine’s new prime minister prepared to meet President Obama and western nations threatened further repercussions if Russia failed to defuse tensions.

In South Africa, more than 70,000 members of the Association of Mineworkers and Construction Union have been on strike since January. South Africa is the largest producer of platinum and second biggest for palladium after Russia.

Speculation that terrorism may have contributed to the missing plane in Malaysia may also be leading to a safe haven bid. Fingers are being pointed at Iran which could lead to renewed geopolitical tension between Iran and some western nations.

Bitcoin Exchange ‘Faced 150,000 Hack Attacks Every Second’
Mt. Gox’s lawyers confirmed yesterday that 750,000 Bitcoins belonging to the firm’s customers had gone “missing”, along with around 100,000 units that the company owned.

Bitcoin exchange Mt. Gox faced massive hacker offensives last month. It is alleged that it came under some 150,000 DDoS attacks per second for several days ahead of its spectacular failure.

The Tokyo based exchange, which filed for bankruptcy protection at the end of February, admitted that it has lost half a billion dollars in the digital currency. It has come under serious cyber attacks in particular since around February 7, the Yomiuri Shimbun reported.

While Mt. Gox faced hacker attempts to steal Bitcoins, the exchange also confronted massive distributed denial of service (DDoS) attacks, crippling its technology and systems, the Japanese newspaper said without naming its sources.

Under DDoS attacks, hackers hijack multiple computers to send a flood of data to the target, crippling computer systems. The attacks on Mt. Gox lasted for several days, the newspaper said.

Unlike physical gold bullion, Bitcoin is generated by complex chains of interactions among a huge network of computers around the planet. This creates advantages and disadvantages.

Bitcoin has huge dependency on systems and technology. In this, there is a resemblance with the modern digital banking system as the world is pushed towards a cashless society. Were hack attacks launched on banks, investment providers or exchanges, many of whom are now wholly dependent on website technology and user interfaces, and investors would be exposed and could incur losses.

Technological risk and systemic risk are another important reason to own physical gold coins and bars in segregated and allocated accounts. Having the ability to pick up a phone, fax or email and take delivery of bullion is also important.

Mark Karpeles, chief executive of Mt. Gox, apologised for the collapse at a news conference earlier this month, blaming a “weakness in our system”, but predicted that the market will grow.

Our modern financial system and its dependence on technology is far more vulnerable than is realised.

The 7 Key Bullion Storage Must Haves
A diversification into precious metals remains prudent and will again protect investors, both retail and institutional, pensions owners and savers, over the medium and long term. However, this is only the case if bullion owned is physical bullion coins and bars.

Download your copy of ‘7 Key Allocated Gold Storage Must Haves’ here.


    



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Yen Breaks 103, Sends Stocks Reeling

It’s all about the fun-durr-mentals… but, just in case you don’t believe that, this morning’s angst over copper financing and China credit concerns has sparked notable carry unwinds (USDJPY below 103 and AUDJPY 93) and therefore US equities are tumbling (tick for tick). This morning’s volatility in stocks was considerable around the open suggesting a lot of uncertainty and nervousness.

 

Charts: Bloomberg


    



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The Hiringless Non-Recovery In Full Farce

The latest JOLTS numbers are out, and while most economists look at the simple headline Job Openings number, which printed at a disappointing 3.974MM, below the expected 4.015MM, and a drop from the unrevised 3.990MM last month (conveniently revised lower to 3.914MM to make the sequential change appear as an increase), as well as down from the 4.126MM in November, far more interesting data can be found in the Hires and Separations data series. As we have shown before, when it comes to the “recovery” in the job market, there is no greater myth than “employers are finally looking to hire at past economic peak levels.” Because while the monthly job increase may have stabilized in the mid-100k range, the actual hiring is nowhere near close to where it should be based on historic patterns.

The chart below shows that while there has traditionally been near 100% correlation between the 1 year cumulative change in payrolls, and the monthly amount of job hires, in the New Normal this is anything but true.

The simple explanation: the only reason why it “seems” things have gotten back to normal, is not because there is hiring, but because companies have put a freeze on terminations, and with quality jobs few and far between, workers still refuse to leave existing jobs voluntarily, further confirmed by the Quits print which just dropped to 2.375MM, the lowest since October as confidence in finding a better paying job has rapidly evaporated. Perhaps the snow is to blame for that too?

Finally, confirming just how bad the job situation has gotten recently, here is the JOLTS chart of net turnover, i.e., hires less separations which is the functional equivalent of the NFP’s monthly job gains print, which according to JOLTS in January printed at the lowest level since August 2012.

Wait for it… wait for it… “Snow.”


    



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