“The Cacophony Of Fed Confusion,” David Stockman Warns Will Lead To “Economic Calamity”

"We never should have painted ourselves so deep in this QE corner in the first place," chides David Stockman, "because the whole predicate [of Fed policy] is false." The author of The Great Deformation holds nothing back in this brief 3-minute primer of everything is wrong with the American economic system (and the CNBC anchors definitely did not want to hear). "We are already at peak debt and forcing more into the economy didn't work," and won't work as is merely funds Wall Street's latest carry trade to nowhere and fiscal irresponsibility in Washington. Simply put, "the private credit channel of monetary transmission is busted," so the Fed is exploiting the only channel it has left – "the bubble channel."

"There is a massive bubble inflating on Wall Street"

It's hump-day, grab a wine cooler and listen to 3 minutes of almost uninterrupted truthiness

 

And here is David on The Keynesian Endgame

Even the tepid post-2008 recovery has not been what it was cracked up to be, especially with respect to the Wall Street presumption that the American consumer would once again function as the engine of GDP growth. It goes without saying, in fact, that the precarious plight of the Main Street consumer has been obfuscated by the manner in which the state’s unprecedented fiscal and monetary medications have distorted the incoming data and economic narrative.

These distortions implicate all rungs of the economic ladder, but are especially egregious with respect to the prosperous classes. In fact, a wealth-effects driven mini-boom in upper-end consumption has contributed immensely to the impression that average consumers are clawing their way back to pre-crisis spending habits. This is not remotely true.

Five years after the top of the second Greenspan bubble (2007), inflation-adjusted retail sales were still down by about 2 percent. This fact alone is unprecedented. By comparison, five years after the 1981 cycle top real retail sales (excluding restaurants) had risen by 20 percent. Likewise, by early 1996 real retail sales were 17 percent higher than they had been five years earlier. And with a fair amount of help from the great MEW (measurable economic welfare) raid, constant dollar retail sales in mid-2005 where 13 percent higher than they had been five years earlier at the top of the first Greenspan bubble.

So this cycle is very different, and even then the reported five years’ stagnation in real retail sales does not capture the full story of consumer impairment. The divergent performance of Wal-Mart’s domestic stores over the last five years compared to Whole Foods points to another crucial dimension; namely, that the averages are being materially inflated by the upbeat trends among the prosperous classes.

For all practical purposes Wal-Mart is a proxy for Main Street America, so it is not surprising that its sales have stagnated since the end of the Greenspan bubble. Thus, its domestic sales of $226 billion in fiscal 2007 had risen to an inflation-adjusted level of only $235 billion by fiscal 2012, implying real growth of less than 1 percent annually.

By contrast, Whole Foods most surely reflects the prosperous classes given that its customers have an average household income of $80,000, or more than twice the Wal-Mart average. During the same five years, its inflation-adjusted sales rose from $6.5 billion to $10.5 billion, or at a 10 percent annual real rate. Not surprisingly, Whole Foods’ stock price has doubled since the second Greenspan bubble, contributing to the Wall Street mantra about consumer resilience.

To be sure, the 10-to-1 growth difference between the two companies involves factors such as the healthy food fad, that go beyond where their respective customers reside on the income ladder. Yet this same sharply contrasting pattern is also evident in the official data on retail sales.

* * *

That the consumption party is highly skewed to the top is born out even more dramatically in the sales trends of publicly traded retailers. Their results make it crystal clear that Wall Street’s myopic view of the so-called consumer recovery is based on the Fed’s gifts to the prosperous classes, not any spending resurgence by the Main Street masses.

The latter do their shopping overwhelmingly at the six remaining discounters and mid-market department store chains—Wal-Mart, Target, Sears, J. C. Penney, Kohl’s, and Macy’s. This group posted $405 billion in sales in 2007, but by 2012 inflation-adjusted sales had declined by nearly 3 percent to $392 billion. The abrupt change of direction here is remarkable: during the twenty-five years ending in 2007 most of these chains had grown at double-digit rates year in and year out.

After a brief stumble in late 2008 and early 2009, sales at the luxury and high-end retailers continued to power upward, tracking almost perfectly the Bernanke Fed’s reflation of the stock market and risk assets. Accordingly, sales at Tiffany, Saks, Ralph Lauren, Coach, lululemon, Michael Kors, and Nordstrom grew by 30 percent after inflation during the five-year period.

The evident contrast between the two retailer groups, however, was not just in their merchandise price points. The more important comparison was in their girth: combined real sales of the luxury and high-end retailers in 2012 were just $33 billion, or 8 percent of the $393 billion turnover reported by the discounters and mid-market chains.

This tale of two retailer groups is laden with implications. It not only shows that the so-called recovery is tenuous and highly skewed to a small slice of the population at the top of the economic ladder, but also that statist economic intervention has now become wildly dysfunctional. Largely based on opulence at the top, Wall Street brays that economic recovery is under way even as the Main Street economy flounders. But when this wobbly foundation periodically reveals itself, Wall Street petulantly insists that the state unleash unlimited resources in the form of tax cuts, spending stimulus, and money printing to keep the simulacrum of recovery alive.

Accordingly, the central banking branch of the state remains hostage to Wall Street speculators who threaten a hissy fit sell-off unless they are juiced again and again. Monetary policy has thus become an engine of reverse Robin Hood redistribution; it flails about implementing quasi-Keynesian demand–pumping theories that punish Main Street savers, workers, and businessmen while creating endless opportunities, as shown below, for speculative gain in the Wall Street casino.

At the same time, Keynesian economists of both parties urged prompt fiscal action, and the elected politicians obligingly piled on with budget-busting tax cuts and spending initiatives. The United States thus became fiscally ungovernable. Washington has been afraid to disturb a purported economic recovery that is not real or sustainable, and therefore has continued to borrow and spend to keep the macroeconomic “prints” inching upward. In the long run this will bury the nation in debt, but in the near term it has been sufficient to keep the stock averages rising and the harvest of speculative winnings flowing to the top 1 percent.

The breakdown of sound money has now finally generated a cruel endgame. The fiscal and central banking branches of the state have endlessly bludgeoned the free market, eviscerating its capacity to generate wealth and growth. This growing economic failure, in turn, generates political demands for state action to stimulate recovery and jobs.

But the machinery of the state has been hijacked by the various Keynesian doctrines of demand stimulus, tax cutting, and money printing. These are all variations of buy now and pay later—a dangerous maneuver when the state has run out of balance sheet runway in both its fiscal and monetary branches. Nevertheless, these futile stimulus actions are demanded and promoted by the crony capitalist lobbies which slipstream on whatever dispensations as can be mustered. At the end of the day, the state labors mightily, yet only produces recovery for the 1 percent.


    



via Zero Hedge http://ift.tt/1j5rJLY Tyler Durden

The Problem With Forward P/Es

Submitted by Lance Roberts of STA Wealth Management,

In a recent note by Jeff Saut at Raymond James, he noted that valuations are cheap based on forward earnings estimates.  He is what he says:

"That said, valuations are not particularly onerous with the P/E ratio for the S&P 500 (SPX/1841.13) currently trading around 15.2x this year’s bottom-up estimate of roughly $121 per share. Moreover, if next year’s estimates are anywhere near the mark of $137, the SPX is being valued at a mere 13.4x earnings."

As a reminder, it is important to remember that when discussing valuations, particularly regarding historic over/under valuation, it is ALWAYS based on trailing REPORTED earnings.  This is what is actually sitting on the bottom line of corporate income statements versus operating earnings, which is "what I would have earned if XYZ hadn't happened."  

Beginning in the late 90's, as the Wall Street casino opened its doors to the mass retail public, use of forward operating earning estimates to justify extremely overvalued markets came into vogue.  However, the problem with forward operating earning estimates is that they are historically wrong by an average of 33%.  The chart below, courtesy of Ed Yardeni, shows this clearly.

Yardeni-Forward-Estimates

Let me give you a real time example of what I mean.  At the beginning of the year, the value of the S&P 500 was roughly 1850, which is about where at the end of last week.  In January, forward operating earnings for 2014 was expected to be $121.45 per share.  This gave the S&P 500 a P/FE (forward earnings) ratio of 15.23x.

Already forward operating earnings estimates have been reduced to $120.34 for 2014.  If we use the same price level as in January – the P/FE ratio has already climbed 15.37x.

Let's take this exercise one step further and consider the historical overstatement average of 33%.  However, let's be generous and assume that estimates are only overstated by just 15%.  Currently, S&P is estimating that earnings for the broad market index will be, as stated above, $120.34 per share in 2014 but will rise by 14% in 2015 to $137.36 per share.  If we reduce both of these numbers by just 15% to account for overly optimistic assumptions, then the undervaluation story becomes much less evident.  Assuming that the price of the market remains constant the current P/FE ratios rise to 18.08x for 2014 and 15.84x for 2015.  

Of course, it is all just fun with numbers and, as I stated yesterday, this there are only three types of lies:

"Lies, Damned Lies and Statistics."

With the continued changes to accounting rules, repeal of FASB rule 157, and the ongoing torturing of income statements by corporations over the last 25 years in particular, the truth between real and artificial earnings per share has grown ever wider.  As I stated recently in "50% Profit Growth:"

"The sustainability of corporate profits is dependent on two primary factors; sustained revenue growth and cost controls.  From each dollar of sales is subtracted the operating costs of the business to achieve net profitability.  The chart below shows the percentage change of sales, what happens at the top line of the income statement, as compared to actual earnings (reported and operating) growth."

S&P-500-AccountingMagic-030414

"Since 2000, each dollar of gross sales has been increased into more than $1 in operating and reported profits through financial engineering and cost suppression.  The next chart shows that the surge in corporate profitability in recent years is a result of a consistent reduction of both employment and wage growth.  This has been achieved by increases in productivity, technology and offshoring of labor.  However, it is important to note that benefits from such actions are finite."

This is why trailing reported earnings is the only "honest" way to approach valuing the markets.  Bill Hester recently wrote a very good note in this regard in response to critics of Shiller's CAPE (cyclically-adjusted price/earnings) ratio which smoothes trailing reported earnings.

"More recently the ratio has undergone an attack from some widely-followed analysts, questioning its validity and offering up attempts to adjust the ratio. This may be a reaction to its new-found notoriety, but more likely it’s because the CAPE is suggesting that US stocks are significantly overvalued.  All of the adjustments analysts have made so far imply that stocks are less overvalued than the traditional CAPE would suggest."

We feel no particular obligation defend the CAPE ratio. It has a strong long-term relationship to subsequent 10-year market returns. And it’s only one of numerous valuation indicators that we use in our work – many which are considerably more reliable. All of these valuation indicators – particularly when record-high profit margins are accounted for – are sending the same message: The market is steeply overvalued, leaving investors with the prospect of low, single-digit long-term expected returns. But we decided to come to the aid of the CAPE ratio in this case because a few errors have slipped into the debate, and it’s important for investors who have previously relied on this ratio to understand these errors so they can judge the valuation metric fairly.  Importantly, the primary error that is being made is not even the fault of those making the arguments against the CAPE ratio. The fault lies at the feet of a misleading data series."

Hussman-Cape-031914

If I want to justify selling you an overvalued mutual fund or equity, then I certainly would try to find ways to discount measures which suggest investments made at current levels will likely have low to negative future returns.  However, as a money manager for individuals in retirement, my bigger concern is protecting investment capital first.  (Note: that statement does not mean that I am currently in cash, we are fully invested at the current time.  However, we are not naive about the risks to our holdings.)

The following chart shows Tobin's "Q" ratio and Robert Shillers "Cyclically Adjusted P/E (CAPE)" ratio versus the S&P 500. James Tobin of Yale University, Nobel laureate in economics, hypothesized that the combined market value of all the companies on the stock market should be about equal to their replacement costs. The Q ratio is calculated as the market value of a company divided by the replacement value of the firm's assets.  Currently, the CAPE is at 25.41x, and the Q-ratio is at 1.01.  

Tobins-Q-Shiller-PE-031914

Both of these measures are currently at levels that suggest that forward stock market returns are likely to be in the low to single digits over the next decade.  However, it is always at the point of peak valuations where the search for creative justification begins. Unfortunately, it has never "been different this time."

Lastly, with corporate profits at record levels relative to economic growth, it is likely that the current robust expectations for continued double digit margin expansions will likely turn out to be somewhat disappointing. 

Profit-Growth-GNP-ForwardGrowth-030314

As we know repeatedly from history, extrapolated projections rarely happen.  Therefore, when analysts value the market as if current profits are representative of an indefinite future, they have likely insured investors will receive a very rude awakening at some point in the future.

There is mounting evidence, from valuations being paid in M&A deals, junk bond yields, margin debt and price extensions from long term means, "exuberance" is once again returning to the financial markets.  Again, as I stated previously, my firm remains fully invested in the markets at the current time.  I write this article, not from a position of being "bearish" as all such commentary tends to be classified, but from a position of being aware of the "risk" that could potentially damage long term returns to my clients.  It is always interesting that, following two major bear markets, investors have forgotten that it was these very same analysts that had them buying into the market peaks previously.


    



via Zero Hedge http://ift.tt/Oyof7a Tyler Durden

The 16 “Dots” That Sent Stocks Reeling

Much has been said about Yellen’s Freudian slip involving the “6 month” considerable period language, which as we pointed out earlier, is said to have been the catalyst that sent stocks sharply lower just after 3 pm when it was uttered. However, in reality all this statement suggests is a rate hike some time in mid-2015, half a year after when QE is said to have ended, which if one listens to the market experts, is what is supposed to be priced in (of course, what the experts won’t tell you is that the market wants its cake and endless liquidity injections by the Fed too). However, one thing that was far more unexpected and certainly remained unexplained by Yellen, is the curious case of the Fed dots, or the estimations by the individual committee members, of where they see rates at the end of 2016. What was surprising here was the sharp upward jump from 1.75% as of December to 2.25% currently.What is even more inexplicable, is that the Fed hiked its rate forecast even as it lowered its GDP projections for the next two years. Why? Not even Janet Yellen could answer that.

Some further thoughts from SocGen on this latest example of just how clueless the Fed is when it comes to the signals it sends about the future.

Had it not been for the dots, market participants probably would have interpreted today’s FOMC statement and Fed Chair Yellen’s press conference as sufficiently dovish. Yet, seeing the FOMC median rate forecast for the end of 2016 rise from 1.75% to 2.25% singlehandedly rendered all else irrelevant. Are markets justified in placing so much faith in the dots? After all, they are pre-determined ahead of the meeting, reflect the views of both voting and non-voting members and are not subject to a vote. While we question the erratic movement of the dots that seems disconnected from the FOMC’s economic projections, the dots do matter. After all, they reflect an unbiased and current view of what current and future voters see as the appropriate rate setting.

 

The curious drift of the dots

 

The big shocker today was not that the Fed abandoned its 6.5% unemployment rate threshold, but that is moved the dots, and not by an insignificant amount. The FOMC’s median fed funds rate forecast for the end of 2016 increased from 1.75% to 2.25%, with the end-of-2015 target now at 1% (up from 0.75%). The curious aspect was that this revision looks out of synch with the Committee’s economic projections which did not change materially since December. To be precise, participants reduced their average GDP forecast by 0.1% (to 3.1%) for this year and by 0.05% (to 2.75%) for 2016, but revised down their unemployment rate trajectory by about 0.2%. These revisions were accompanied by similar movements in long-term growth and unemployment estimates, suggesting little change in the Fed’s assessment of projected slack. As a result, the Committee’s inflation forecasts were largely unchanged.

 

So why the sudden shift in the dots? Even Yellen herself couldn’t explain it, replying that she can’t speak for “why people write down what they do”. Instead, she tried to downplay the upward drift, saying that it was only modest and underscoring that the FOMC was still projecting a large undershoot relative to the prescribed fed funds rate. For clarification, the dots represent forecasts brought to the meeting by all participants, both voting and non-voting. They are effectively decided ahead of the meeting. As such, Yellen doesn’t have any control of the dots and they are not explicitly decided or coordinated by the Committee. In this context, today’s move looks genuinely unintentional.

 

Despite Yellen’s best efforts to downplay the dots, markets have taken them to heart and repriced 2016 fed funds futures by 25 basis points. Are they right to do so? Probably. While we question the erratic movement of the dots (see chart 1), they do reflect the latest view of all current and future voters about the appropriate level of the fed funds rate. More importantly, the drift was not caused by one or two outliers but rather by a lot of reshuffling in the middle (see chart 2). Therefore it seems to reflect a real change in the underlying view about the appopriate policy setting.

 

 

Forward guidance enters vague territory

 

In what was largely overshadowed by the dots, the FOMC did take a significant step in overhauling its forward guidance. As expected, the Committee abandoned all economic thresholds and replaced them with qualitative guidance. The timing of the liftoff in the fed funds rate will now depend on “measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments”. That’s as vague as it gets. The Committee does provide two additional pieces of information by (1) suggesting that rates will be at zero for “a considerable time after the asset purchase program ends”; and (2) promising that it will keep rates below levels viewed as normal even after employment and inflation are near mandate-consistent levels. In other words, the Fed still promises to undershoot on rates, or overshoot on the amount of stimulus for a long time to come and by a wide margin. This was the message that Yellen tried to push very strongly during the press conference, but convincing the markets may take more effort on her part.

 

Erratic dot movements + vague guidance = more rate volatility

 

One of the outcomes of today’s shift to qualitative guidance will be increased volatility in rate expectations between FOMC meetings. Market participants clearly base their expectations for the fed funds target on the dots, and forward guidance is supposed to tell them how the dots will change in response to the data. Unfortunately, the new language provides very little information in that regard. And, the erratic and unexplained movement of the dots themselves does not help either. The next set of projections will be published in June, and until then, we are all flying with limited visibility.

In retrospect, perhaps it is a good thing the Fed no longer is providing forward guidance – if anything, it likely would have both bonds and stocks soaring to all time highs at the same time, on two completely contradictory yet parallel indicators about the future state of the economy, in what is becoming a glaring example of just how horrible the Fed is at not only predicting the future, but telegraphing how it plans to get there.


    



via Zero Hedge http://ift.tt/1lQwYww Tyler Durden

Pay Our Pensions Or We’ll Throw You In Jail: The Legalization Of Looting

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Rather than deal forthrightly with the reality that unrealistic promises made to their employees cannot be honored, local government has pursued a strategy of legalizing looting.

The gradual erosion of civil liberties, legal rights and government ethics are connected: our rights don't just vanish into thin air, they are expropriated by government: Federal, state and local. Though much is written about the loss of civil liberties at the Federal level, many of the most blatantly illegal power grabs are occurring in local government.

This expropriation is under the radar of the average citizen because the process slowly chips away the fundamentals of legality and justice: bit by bit, due process and the rights of the individual have been eroded by state and local governments until the fundamental Constitutional protections simply cease to exist.

When local government looting is legalized, the entire system is illegal. Here are three recent examples of blatantly illegal looting by local governments.

First up: privatizing the collection of traffic fines and probation to create a modernized debtor's prison. We turn to The Nation for the story:

The Town That Turned Poverty Into a Prison Sentence Most states shut down their debtors’ prisons more than 100 years ago; in 2005, Harpersville, Alabama, opened one back up.
 

What happened to Ford in the small town of Harpersville was tangled and unconstitutional– but hardly unique. Similar tales have been playing out in more than 1,000 courts across the country, from Georgia to Idaho. In the face of strained budgets and cuts to public services, state and local governments have been stepping up their efforts to ensure that the criminal justice system pays for itself. They have increased fines and court costs, intensified law enforcement efforts, and passed so-called “pay-to-stay” laws that charge offenders daily jail fees. They have also begun contracting with “offender-funded” probation companies like JCS, which offer a particularly attractive solution—collection, at no cost to the court.

Harpersville’s experiment with private probation began nearly ten years ago. In Alabama, people know Harpersville best as a speed trap, the stretch of country highway where the speed limit changes six times in roughly as many miles. Indeed, traffic is by far the biggest business in the town of 1,600, where there is little more than Big Man’s BBQ, the Sudden Impact Collision Center and a dollar store.

In 2005, the court’s revenue was nearly three times the amount that the town received from a sales tax, Harpersville’s second-largest source of income. Fines had become key to Harpersville’s development, but it proved difficult to chase down those who did not pay. So, that year, Harpersville decided to follow in the footsteps of other Alabama cities and hire JCS to help collect.

It was a system of extraction and coercion so flagrant that Alabama Circuit Court Judge Hub Harrington likened it to a modern-day “debtors’ prison.”

Her fines for the three charges added up to $2,922, court papers show. Ward sentenced her–and others who said they couldn’t pay their full fines that day– to probation. Once a means of allowing convicted offenders to stay out of jail on the condition of good behavior, probation had now become a court-sanctioned tool for debt collection.
Burdette reported to the JCS office in nearby Childersburg, where she paid her probation officer $100. Of that, $45 went toward her fine, $10 toward a one-time “start-up fee,” and the last $45 went to JCS as a monthly fee for service.

Next up: illegal search and seizure under the pretext of traffic violations. As if "driving while black" isn't bad enough, now "driving with cash" is pretext enough to be stripped of your rights and your property stolen by local government:

Lawsuits over cash seizures settled in Nevada

Tan Nguyen of Newport, Calif., and Michael Lee of Denver said in lawsuits filed in U.S. District Court in Reno they were stopped last year on U.S. Interstate 80 near Winnemucca about 165 miles east of Reno under the pretext of speeding. They said they were subjected to illegal searches and told they wouldn't be released with their vehicles unless they forfeited their cash.

The lawsuits claimed the cash seizures were part of a pattern of stopping drivers for speeding as a pretext for drug busts in violation of the Constitution.

Nguyen was given a written warning for speeding but wasn't cited. As a condition of release, he signed a "property for safekeeping receipt," which indicated the money was abandoned or seized and not returnable. But the lawsuit says he did so only because Dove threatened to seize his vehicle unless he "got in his car and drove off and forgot this ever happened."

"He wasn't charged with anything. He had no drugs in his car. The pretext for stopping him was he was doing 78 in a 75," John Ohlson told KRNV-TV. "It's like Jesse James or Black Bart," he told AP in an interview last week.

The district attorney's statement said both men were stopped legally and that "every asset that was seized pursuant to those stops was lawfully seized."

Exhibit # 3: guilty until proven innocent: State of California seizes cash from "suspected" tax evaders with no evidence, no court action, no recourse. I have documented in detail how the jackboot of the State of California has pressed on the necks of thousands of law-abiding citizens whose only crime was moving out of California.

The State of California presumes anyone moving out of the state who still has a source of income in California–for example, a few dollars of interest earned on a bank account–owes California income tax on all their presumed income, even if they have filed income tax returns in another state.

If this isn't the acme of illegal seizure and denial of basic rights, i.e. presumed innocent until proven guilty, then what is?

Here is one reader's account of how this legal looting works: I wrote about this inWelcome to the United States of Orwell: Law-Abiding Taxpayers Are Treated as Criminals While the Real Criminals Go Free (March 27, 2012).

I received a letter last year that we owed the state of California's Franchise Tax Board $90,000 for taxes in the year 2008.We replied to the Franchise Tax board in a similar manner as RT stating that:

— Did not reside in California in 2008
— Did not file a State income tax return in California in 2008
— Did not have any outstanding tax issues with California in 2008
— Did no business in California in 2008
— Owned no property in California in 2008

 

The CA Franchise Tax board responded by putting a lien on us in the state – fortunately, our banks and assets have no business in CA or I am certain our accounts would have been robbed as well.

 

After a great deal of uncertainty and angst, I found an accountant in CA who advised us that we needed to file a complete CA tax return for 2008 even though we did not owe any tax. We filed the return and received a response that we owed the state $625 to cover the State's collection fees. We paid the fee and within two weeks received a "refund" check for the $625.

On reflection, we felt as if we had been "held up" by some powerful gangsters and if it had not been for an honest tax accountant we would have suffered much financial damage.

In other words, honest taxpayers are reduced to begging the predatory state of California to return their own money. Meanwhile, the bagmen for the local government thieves, Wells Fargo and Bank of America, among others, get to keep the $100 fee they charged the taxpayer for stealing their money. If this isn't Orwellian, then what do you call it? "Legal"? If this is legal, legality has lost all meaning.

For more on the blatantly illegal seizures of cash from people who aren't even residents of California and who filed income tax returns in another state, please read:

Welcome to the Predatory State of California–Even If You Don't Live There (March 20, 2012)

The Predatory State of California, Part 2 (March 21, 2012)

Just as pernicious as outright looting is the growing dependence of local government on fines and related rip-offs. Correspondent Joel M. recently submitted this article which features New York City officials whining that the recent snow storm deprived them of sorely needed revenues from parking fines.
Costs Have Piled Up Along With the Snow of a Difficult Winter (NYT.com)

"If the winter was costly for individuals, it was even more so for municipalities. The snow triggered repeated suspensions of New York City’s alternate-side-of-the-street parking rules, delighting car owners but costing the city an average of $270,000 a day in potential fines, officials said. That added up to $4.3 million during a three-week stretch in February alone, money that would have gone to help pay for city services, including the fire and police forces, city officials said."

Everyone who believes local government is "here to fill potholes and help disadvantaged people" needs to wake up and ask what kind of government we have when due process has been replaced with "legal" looting. Is local government focused on serving citizens or on funding public employee pensions and healthcare benefits?

The erosion of ethics of those in government service is as pernicious as the rise of legal looting. Let's be honest, shall we? Those in local government tasked with collecting all these forms of legal looting are "just doing my job," but how many protest the process? How many public employee unions are outraged by the legal looting that fills the coffers of their pension funds?

For context, government employees constitute about 15% of the employed workforce in the U.S.: 22 million out of 142 million. Unlike the other 85%, their employer can legalize looting on their behalf.

Local government spending has soared for decades.

So has local government debt.

Promises were made to local government employees by craven, bought-and-paid-for politicos that cannot possibly be honored in a stagnating economy with widening wealth inequality. But rather than deal forthrightly with that reality, local government has pursued a strategy of legalizing looting.

From the point of view of the hapless tax donkeys and debt-serfs being looted, this strategy boils down to a stark threat: Pay Our Pensions Or We'll Throw You in Jail.

Here's the deal: government is supposed to serve the people, not the insiders. Please read the above news stories; can anyone claim that legalized looting is OK because the "ends" (public services) justify the "means" (legalized looting)? How many public employees care about where the money that funds their paycheck, pension and healthcare benefits comes from?

Maybe public employees should start caring about where the money is coming from, because taxation approved by elected officials or direct voter approval is one thing, and legalized looting is another. If you don't care that your pay/pension/benefits may be partly funded by legalized looting, perhaps you should start caring.

Remember that we (the general public) can't pull you over and "legally" steal your cash, nor can we order Wells Fargo to go into your bank account and "legally" steal your money without court review, evidence of wrongdoing or recourse. We can't award private collection agencies the powers reserved for representative government and rig the probation system into a cash cow that benefits us.

Please don't trot out the "good German" excuse: I only take orders. You're the ones who are pulling the levers of the legalized looting machine; us tax donkeys and debt-serfs are on the receiving end. Given that special interests own the state legislatures, the tax donkeys and debt-serfs have only three choices: opt out, move out or stop paying, and fill your modern debtors' prisons to the brim.


    



via Zero Hedge http://ift.tt/1hDev3A Tyler Durden

Ukraine Announces Joint US Military Exercises As Obama Rules Out “Military Incursion” – Recap Of The Day’s Events

With the story of the day undoubtedly Yellen’s first (bungled) press conference, it was easy to forget that the second coming of the Cold War is raging in the Ukraine. For those curious what they may have missed, here is a summary of the major events that took place in the troubled country this afternoon. Highlights from AP, Reuters, WSJ, Bloomberg, RIA and Interfax.

Obama rules out ‘military excursion’ in Ukraine

President Barack Obama ruled out U.S. military involvement in Ukraine on Wednesday, emphasizing diplomacy in the U.S. standoff with Russia over Crimea.

 

“We are not going to be getting into a military excursion in Ukraine,” Obama told KNSD, San Diego’s NBC affiliate, in an interview. “There is a better path, but I think even the Ukrainians would acknowledge that for us to engage Russia militarily would not be appropriate and would not be good for Ukraine either,” Obama said.

Ukraine to hold military exercises with US, UK

Russian forces seized military installations across the disputed Crimean Peninsula on Wednesday, prompting Ukraine’s security chief to announce that his country will hold joint military exercises with the United States and Britain.

 

U.S. Vice President Joe Biden was in Lithuania, trying to reassure nations along Russia’s borders who were terrified by the sight of an expansion-minded Moscow.

 

“We’re in this with you, together,” Biden said.

Ukraine Readies Plan to Evacuate Troops From Crimea

Ukraine’s government is preparing to evacuate its remaining military personnel and their families from the breakaway region of Crimea now that Russia has moved to annex the territory.

 

Andriy Parubiy, the secretary of Ukraine’s National Security and Defense Council, didn’t provide details on the mechanisms or timing of the plan, however.

 

“We’re working on a plan to quickly and effectively move not only the military personnel, but first of all their family members, to continental Ukraine,” Mr. Parubiy told a media briefing in Kiev. He added that 25,000 places had been reserved for such transfers altogether.

 

A Ukrainian Defense Ministry spokesman in Crimea, however, said Wednesday evening that he had received no word yet of any order to evacuate.

 

Early in the day, pro-Russian forces in Crimea had stormed Ukraine’s naval headquarters and allegedly detained the base’s commander, sparking an ultimatum from Ukraine’s acting president that the country would take “appropriate measures” if he and others weren’t released.

… The ultimatum deadline has come and gone, and so far nobody has been released to the best of our knowledge.

Russia will respond in kind to U.S. sanctions – deputy foreign minister

Moscow will respond in kind to U.S. sanctions imposed on Russian officials over the Crimea dispute and is considering other steps if Washington escalates tensions, Deputy Foreign Minister Sergei Ryabkov said on Wednesday.

 

On Monday, the United States and the EU announced sanctions on a handful of officials from Russia and Ukraine accused of involvement in Moscow’s seizure of Ukraine’s Crimea region, most of whose 2 million residents are ethnic Russians.

 

Washington has threatened further sanctions while Russian lawmakers raced to ratify a treaty making Crimea part of Russia by the end of the week.

 

“We are looking at a broad range of responsive measures. They can be identical measures regarding certain lists of American officials – not necessarily representatives of the administration … who have influenced American policies,” Ryabkov was quoted as saying by Interfax.

 

“There is also the possibility of passing asymmetrical measures, that means steps which, let’s say … won’t go unnoticed in Washington,” he said.

Russia Sounds Alarm on Economy as West Starts With Sanctions

Russia’s economy is showing signs of a crisis, the government in Moscow said as the U.S. and the European Union announced sanctions over its plan to annex the Crimea region from Ukraine.

 

“The situation in the economy bears clear signs of a crisis,” Deputy Economy Minister Sergei Belyakov said in Moscow yesterday. The cabinet needs to refrain from raising the fiscal burden on companies, which would be the “wrong approach,” he said. “Taking money from companies and asking them afterward to modernize production is illogical and strange.”

 

Even before the standoff with the West, the worst since the Cold War, Russia’s economy was facing the weakest growth since a 2009 recession as consumer demand failed to make up for sagging investment. President Vladimir Putin signed a treaty today on Crimea joining Russia, signaling his defiance of Western sanctions. Russia won’t seek to further split Ukraine, he said in the Kremlin.

 

The Ukrainian crisis is putting a strain on Russia’s $2 trillion economy, which expanded 1.3 percent in 2013 after 3.4 percent the previous year. Last year’s

growth was “insufficient” and the current outlook and government forecasts “can’t satisfy us,” Putin said March 12.

Russia to cover Crimea’s $1.5 billion budget deficit with state funds

Russia will cover Crimea’s estimated 55 billion rouble ($1.53 billion) budget deficit with funds from the federal budget, Russian Finance Minister Anton Siluanov said on Channel 1 state television on Tuesday.

 

“The volume of the (budget) deficit of Crimea and Sevastopol is about 55 billion roubles,” Siluanov said in an interview televised by Channel 1.

 

“The whole sum will definitely be covered with federal budget.”

Switzerland Halts Trade Talks With Russia, Former Soviet Republics

Switzerland has frozen negotiations on a free trade deal with Russia, the head of the country’s economic affairs department said Wednesday, a decision he linked to Moscow’s annexation of part of Ukraine’s Crimea region.

 

In an interview with Swiss broadcaster SRF Radio, Johann Schneider-Ammann said the talks with Russia, as well as the former Soviet republics of Belarus and Kazakhstan, had been halted. Mr. Schneider-Ammann, who is a member of Switzerland’s seven-person cabinet, blamed the increasing crisis in Ukraine and the annexation of Crimea after a Sunday referendum for the halt.

 

“In this uncertain situation we cannot pretend as if nothing has happened,” Mr. Schneider-Ammann said in the interview. He called the freeze the “first formal sign” of Switzerland’s concern over the situation in Ukraine, saying the Alpine country wanted a trade deal with Russia “but not at any price.”

 

The halt of the talks also applies to Switzerland’s partners in the European Free Trade Association, which includes Norway, Iceland and Liechtenstein, which were also due to take part in the next round of negotiations in April, a spokesman for the Swiss Economics Dept. said.

Germany says Rheinmetall can’t deliver combat simulator to Russia

The German government said on Wednesday that defence contractor Rheinmetall’s plan to deliver combat simulation kit to Russia was unacceptable in light of the diplomatic showdown with Moscow over its military occupation of Crimea.

 

The economy ministry, asked by Reuters about Rheinmetall’s intention to honour contractual obligations to deliver about 100 million euros ($139 million) worth of technology to a Russian combat training centre, said it was in contact with the firm.

 

“The German government considers the export of the combat simulation centre to Russia unacceptable in the current circumstances,” the ministry said in a statement to Reuters.

 

“The government is in contact with the company. At the moment no such export is foreseen,” said the ministry.

 

Rheinmetall had said earlier on Wednesday that it intended to complete the delivery of the equipment, which was ordered about two years ago. The company said it had no further orders outstanding from Russia or Ukraine.

Russia poised to react to Kiev’s new visa regime

Moscow will decide whether to introduce visas for Ukrainians visiting Russia after it is officially informed of Kiev’s new visa regime for Russians, Russian state news agency RIA reported a source at Russia’s Foreign Ministry as saying on Wednesday.

 

Ukrainian security chief Andriy Parubiy said earlier in the day that Ukraine’s Foreign Ministry had been given instructions to introduce visas for Russians visiting Ukraine, as tensions rise between the two neighbours

European leaders seek ways to curb dependence on Russian gas

European leaders will seek ways to cut their multi-billion-dollar dependence on Russian gas at talks in Brussels on Thursday and Friday, while stopping short of severing energy ties with Moscow for now.

 

Russia’s seizure of Ukraine’s Crimea region has revived doubts about whether the European Union should continue to rely on Russia for nearly a third of its gas, providing Gazprom with an average of $5 billion per month in revenue. Some 40 percent of that gas is shipped via Ukraine.

 

EU powerhouse Germany is among those with particularly close energy links to Russia and has echoed comments from Gazprom, Russia’s top natural gas producer, that Russia has been a reliable supplier for decades.

 

EU officials said the current Ukraine crisis, however, had convinced many in Europe that Russia was no longer reliable and the political will to end its supply dominance had never been greater. “Everyone recognises a major change of pace is needed on the part of the European Union,” one EU official said on condition of anonymity.

 

“At the back of people’s minds, there will always be the doubt that if the relationship goes sour, Russia has that weapon and it’s not something it should have,” another official said, referring to Russia’s option of severing supplies.

As alternatives to imported gas, the Brussels talks will debate the EU’s “indigenous supplies”, which include renewable energy and shale gas.

Russia shares “fears” about Ukraine humanitarian situation with UNHCR

Russia has “shared [its] fears” about the humanitarian situation in Ukraine with the UN High Commissioner for Refugees, the head of the Russian Federal Migration Service said on Wednesday.

 

“I won’t keep it secret that we have shared our fears with the Office of the United Nations High Commissioner for Refugees. Our fears were understood to a certain extent, and a certain form of interaction with that organization has begun,” Konstantin Romodanovsky told reporters in Moscow.

 

“I think that by combined efforts we will minimize the problems that the unstable situation in Ukraine may cause us,” he said.

And that’s a wrap.


    



via Zero Hedge http://ift.tt/1j8a6qB Tyler Durden

Ron Paul On The “Illusion” Economy And “Why Socialism Always Fails”

"If we look only at the stock market, then we're in denial," warns Ron Paul in this brief 'uncomfortable-for-the-anchor' CNBC interview, adding that "it's an illusion." While the stock market has performed well, Paul explains that the economy-at-large continues to struggle noting that it's due to the Fed: "I don't think any one individual knows how to plan the economy by manipulating interest rates' [they] are so important that if you give this power to one small group – there will be distortion." That's why socialism fails, slams the Fed critic, "it's the invisible hand that we lack, not the wisdom of a few people. Few people can't be wise enough to dictate the market," and the Fed's history shows their track "record is pretty bad."

"So sometimes you have housing bubbles and sometimes you have housing busts, then you have housing bubbles and bond bubbles that's all [the] result of the manipulation of interest rates, which is my real objection to it."

 

"So one half of our economy is socialized, because it's the control of the money supply, the control of the interest rates,"

 

"We don't believe they're capable of doing it and I think history shows that the record is pretty bad."

 

"The economy on the surface looks good, but if you look at hardcore unemployment and standard of living of the middle class, there's still a lot of problems out there… So if we look only at the stock market, then we're in denial."

 

Furthermore, Ron Paul went to note that "low interest rates are not a panacea – though they won't admit this," adding that the reason for a lack of recovery and hiring is all aboyt "confidence" and that can't be manufactured by stock markets… "we are bankrupt and have been encouraged to take on more debt" – simply put, he adds "the financial system is deeply flawed"…

 

 


    



via Zero Hedge http://ift.tt/1qWksiL Tyler Durden

Janet Yellen’s Full Press Conference Transcript

Much has been said about Yellen’s less than stellar first press conference so we will let her own words do most of the talking. First, from the transcript of her prepared remarks and the following Q&A, here are some highlights.

First, the word count:

  • Market(s): 35
  • Economy: 25
  • Weather: 7
  • Inflation: 58
  • Deflation: 1

The word cloud:

Goldman’s take of the press conference (as opposed to the statement which we summarized earlier):

BOTTOM LINE: Chair Yellen’s first post-meeting press conference came across as slightly more hawkish than expected.

 

MAIN POINTS:

 

1. When asked how to interpret the new guidance that the fed funds rate would remain in the current 0 to 25 basis point range for a “considerable time after the asset purchase program ends,” Chair Yellen stated that “the language in the statement … probably means something on the order of six months.” Assuming tapering continues at a pace of $10bn per meeting, this suggests rate hikes could begin as early as mid-2015.

 

2. Asked how to explain the hawkish shift in the “dots,” Yellen stated that “the labor market more broadly I think has improved a little more than we might have expected,” but went on to say that “I think that one should not look to the dot plot so to speak as the primary way in which the committee wants to or is speaking about policy to the public at large.”

 

3. Explaining the statement that the fed funds rate may remain at a below-normal level even as employment and inflation approach “mandate-consistent levels,” Yellen mainly appealed to persistent headwinds from the financial crisis, and did not explicitly mention optimal control considerations as she has in the past.

 

4. Regarding distortions from the weather, she stated that “it’s an important factor. It’s not the only factor,” in explaining the weaker data. She showed a refreshing amount of candor by noting that “we probably overdid the optimism in January, so in some sense our views have moved around here a little bit.”

 

5. Asked about wage inflation, she said that 3-4% annual gains in wages would be more normal, in her view, consistent with the average rate of wage increase seen in the last business cycle expansion. She described current wage inflation as “running at 2%.”

 

6. She was somewhat dismissive of recent arguments that the short-term unemployment rate is a more important measure of slack for wage and price inflation than the headline unemployment rate. Specifically, she said that “I think it would be tremendously premature to adopt any notion that says that that is an accurate read, on either how inflation is determined or what constitutes slack in the labor market.”

And while the punchline was already noted, namely the “6 month” statement:

So, the language that we use in this statement is considerable, period. So, I — I, you know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing. But, you know, it depends — what the statement is saying is it depends what conditions are like.

… which incidentally said nothing that the statement didn’t already note, namley that if the tapering ends in the fall the first hike would be in mid-2015, or precisely as the “dots” suggested it would, she did have several other notable observations, some of which are highlighted below.

And the full transcript (pdf)


    



via Zero Hedge http://ift.tt/1fIgCRo Tyler Durden

Serfs Up – Average Healthcare Premiums Have Soared 39%-56% Post Obamacare

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

It’s been a couple months since I last updated readers on the epic disaster that is Obamacare. In case you need a refresher, here is the last article I published on the law: Computer Security Expert Claims he Hacked the ObamaCare Website in 4 Minutes.

Moving along, we now have some details on the average premium increase for non-Obamacare health plans following the implementation of the law, and the results are not pretty. According to a cost report from eHealthInsurance, premiums have increased by between 39%-56%.

More from The Washington Examiner:

Americans buying health insurance outside the new Obamacare exchanges are being forced to swallow premiums up to 56 percent higher than before the health law took effect because insurers have jumped the cost to cover all the added features of the new Affordable Care Act.

 

According to a cost report from eHealthInsurance, a nationwide online private insurance exchange, families are paying an average of $663 a month and singles $274 a month, far more than before Obamacare kicked in. What’s more, to save money, most buyers are choosing the lowest level of coverage, the so-called “bronze” plans.

 

In California, for example, some families are paying a high of $2,604 a month and in New York, $1,845.

 

His firm’s price index also gives an average age for singles buying plans, and the results are worrying for insurers and the Obama administration. That’s because the average age is 36, older than the administration had hoped for.

The demographic issue is a huge ticking time bomb, something I previously highlighted in my piece: Humana Warns of “‘Adverse ObamaCare Enrollment Mix.”

Moving along, while we are well aware of the financial disaster Obamacare represents for those not participating, what about those who are in (or at least think they are in) the program?

Let’s look at the story of one Las Vegas man who paid his Obamacare premiums since November yet remains uncovered and now has a $407,000 hospital bill nobody is covering.

From the Review Journal:

The hospital bills are hitting Larry Basich’s mailbox.

 

That would be OK if Basich had health insurance. But he doesn’t.

 

Thing is, he should be covered. Basich, 62, bought a plan through the state’s Nevada Health Link insurance exchange in the fall. He’s been paying monthly premiums since November.

 

Yet the Las Vegan is stranded in a no-man’s-land where no carrier claims him, and his tab is mounting: Basich owes $407,000 for care received in January and February, when his policy was supposed to be in effect. Instead, he’s covered only for March and beyond.

 

Basich has begged for weeks for help from the exchange and its contractor, Xerox. But Basich’s insurance broker said Xerox seems more interested in lawyering up and covering its hide than in working out Basich’s problems. Nor is Basich the only client facing plan-selection errors through the exchange, she added.

 

Weeks ticked by, but Basich received nothing to confirm he had insurance. Nevada Health Link kept telling him he was enrolled, but UnitedHealthcare said he wasn’t in their system.

 

Basich’s predicament went critical on Dec. 31, when he had a heart attack. His treatment, which included a triple bypass on Jan. 3, resulted in $407,000 in medical bills in January and February that no insurer is covering.

 

Though Basich’s problem is exceptional for its dollar value, his situation is not unusual, Burch said. She estimates that of nearly 200 Branch Benefits Consultants client sign ups via Nevada Health Link, only 5 percent have gone through problem-free. More than 20 customers have the same plan-selection issue as Basich. One gave up trying to fix it and is sticking with the plan the exchange put her in.

Serfs up suckers!


    



via Zero Hedge http://ift.tt/1j4N6wU Tyler Durden

BUSTED – U.S. Tech Giants Knew of NSA Spying Says Agency’s Senior Lawyer

This is why I’ve been so confused and frustrated by the repeated reports of the behavior of the US government. When our engineers work tirelessly to improve security, we imagine we’re protecting you against criminals, not our own government.

The US government should be the champion for the internet, not a threat. They need to be much more transparent about what they’re doing, or otherwise people will believe the worst.

I’ve called President Obama to express my frustration over the damage the government is creating for all of our future. Unfortunately, it seems like it will take a very long time for true full reform.

So it’s up to us — all of us — to build the internet we want. Together, we can build a space that is greater and a more important part of the world than anything we have today, but is also safe and secure. I‘m committed to seeing this happen, and you can count on Facebook to do our part.

– Facebook CEO, Mark Zuckerberg in a post last week

Last week, Mark Zuckerberg made headlines by posting about how he called President Barack Obama to express outrage and shock about the government’s spying activities. Of course, anyone familiar with Facebook and what is going on generally between private tech behemoths and U.S. intelligence agencies knew right away that his statement was one gigantic heap of stinking bullshit. Well now we have the proof.

Earlier today, the senior lawyer for the NSA made it completely clear that U.S. tech companies were fully aware of all the spying going on, including the PRISM program (on that note read my recent post: The Most Evil and Disturbing NSA Spy Practices To-Date Have Just Been Revealed).

So stop the acting all of you Silicon Valley CEOs. We know you are fully on board with extraordinary violations of your fellow citizens’ civil liberties. We know full well that you have been too cowardly to stand up for the values this country was founded on. We know you and your companies are compromised. Stop pretending, stop bullshitting. You’ve done enough harm.

From The Guardian:

The senior lawyer for the National Security Agency stated unequivocally on Wednesday that US technology companies were fully aware of the surveillance agency’s widespread collection of data, contradicting month of angry denials from the firms.

Rajesh De, the NSA general counsel, said all communications content and associated metadata harvested by the NSA under a 2008 surveillance law occurred with the knowledge of the companies – both for the internet collection program known as Prism and for the so-called “upstream” collection of communications moving across the internet.

Asked during at a Wednesday hearing of the US government’s institutional privacy watchdog if collection under the law, known as Section 702 or the Fisa Amendments Act, occurred with the “full knowledge and assistance of any company from which information is obtained,” De replied: “Yes.”

continue reading

from A Lightning War for Liberty http://ift.tt/1hCJJI6
via IFTTT