Tag: news

Gun-Maker Stocks Slump After Florida Imposes Age Restriction On Gun Purchases, Bans Bump Stocks

Shares of gunmakers American Outdoor and Sturm Ruger tumbled to session lows as Florida Governor Rick Scott commented that his state will require all gun purchasers to be aged 21 or above, and additionally bans all sales and purchases of bump stocks.

“I know there are some who are advocating a mass takeaway of 2nd amendment rights for all Americans. That is not the answer”

“We will require all individuals purchasing firearms to be 21 or older,” Florida Governor Rick Scott says in press conference (noting that exceptions will be created for active duty and reserve military and spouses, National Guard members and law enforcement).

Scott will work with legislature over next two weeks on plan that will focus on gun laws, school safety, and mental health.

“I want to make it virtually impossible for anyone who has mental issues to use a gun”

 

“We can’t trust the federal process, which is why we have to make these changes here in Florida,”

“We will completely ban the purchase or sale of bump stocks,”

Furthermore, Scott noted that the state would invest $500m in school safety plan after shooting, and calls for law enforcement officers in public schools.

Florida to establish funding to require access to dedicated mental health counselors at every school.

“The goal of this plan of action is to make massive changes in protecting our schools, provide significantly more resources for mental health, and do everything we can to keep guns out of the hands of those dealing with mental problems or threatening harm to themselves or others.“

RGR and AOBC are down around 4% today…

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6 Points to Consider in the Debate About Homelessness: New at Reason

Policymakers need to focus more on harsh realities if they want real solutions for homelessness.

Steven Greenhut writes:

It’s amazing what a civil rights lawsuit and some federal judicial muscle have done to force officials in California to address the vexing homelessness problem in Orange County, especially in the dreary encampments along the Santa Ana River trail. Judge David Carter excoriated county and city officials during an unorthodox court proceeding on Tuesday that produced in hours an agreement that had been elusive during weeks of wrangling.

The deal lets local governments clear out the sprawling camps in exchange for providing 30-day emergency vouchers for people to stay at motels. The Orange County Board of Supervisors also announced that it will soon provide more than 300 additional beds or tents for the homeless at facilities around the county.

Homelessness isn’t just an Orange County problem, of course. It’s a growing mess throughout California and the nation. I’ve seen communities of all sizes and political dispositions wrestle unsuccessfully with it for decades. Cities such as San Francisco that throw money at the problem become magnets for homelessness, with sections of the city resembling an outdoor sewer.

View this article.

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Inequality Is “Natural” – Get Over It

Authored by Nicholas Colas via DataTrekResearch.com,

Perusing one of our favorite information sources – the “Most read” articles on the website for the Proceedings of the National Academy of Sciences (PNAS) – we found the following tidbits:

  • Women live longer than men, even during periods of severe famines and epidemics. Moreover, their competitive advantage starts young. Baby girls are much tougher than baby boys.

  • You can’t necessarily feel it, but your eardrums actually move when your eyes move. This allows you to identify the sources of sounds more quickly.

  • We’ve included links to both papers at the end of this note.

The paper that really caught my eye, and what we want to review briefly today, is called “Inequality in Nature and Society”. Income and wealth inequality are large and growing topics at the moment, and it is spreading into discussions related to a raft of capital markets issues. In the past week I have spent more time talking to press and financial television anchors about wealth inequality than volatility or valuation. This is a conversation that will not go away, so it is worth getting smarter about it.

The most appealing thing about the paper is its simple message: “Inequality” happens across nature in the same way we see it in national Gini coefficients and the yacht harbor in Monaco. The relative wealth of the world’s billionaires closely resembles the distribution of tree types in the Amazon. Put another way, a few people have a lot of wealth, and a few types of trees dominate the South American rain forest. Also, a few species of animal and plant life tend to dominate natural communities around the globe, just as a small number of the world’s citizens make incomes far higher than the median.

Now, humans aren’t trees or plants, so when wealth inequality becomes too great societies tend to self-correct. War and revolution are history’s favorite ways to readjust things. More recently, social movements like trade unions and government programs also perform some of the re-adjustment.

The authors also note that inequality tends to grow – and society’s ability to combat it lessens – during periods of “Societal upscaling”. The relevant example here is the growing power of technology to connect people in the 21st century. Prior, but analogous, case studies would be the opening of the West in America, or the revolutions brought by railroads, and media such as print (1800s) radio (1920s) and television (1950s). In all cases, the benefits of growth went to a relatively small number of people.

These periods of “upscaling” tend to increase inequality because returns on intellectual or physical capital both skyrocket and compound for long periods. A few people, by luck or skill (or both) see their investments grow by +1000% or more for 5-10 years. Most do not. The authors of the paper note that Western Europe has seen this phenomenon repeat itself for 1,000 years. It is not new to 2018.

The authors outline 2 ways inequality diminishes: suppressing the dominant players, or pulling up the broad lower end of the distribution. In nature, the former is common. Humans tend to prefer the latter.

In the end, the most important point I took away from the paper was this: we are likely living in the greatest age of “societal upscaling” the world has ever known, so it is no surprise that inequality is a major topic of interest.It may be small comfort that all this is “natural”. But it is important to remember that it is. The next recession or stock market crash won’t really change it. Natural forces are hard to shift once momentum builds.

*  *  *

Inequality in Nature and Society: http://www.pnas.org/content/114/50/13154

Women live longer than men: http://www.pnas.org/content/115/4/E832

Ears and eyes: http://www.pnas.org/content/115/6/E1309

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Powell Warns Of “Rising Leverage & Elevated Valuations”; Dudley, Rosengren: QE (Or More) Will Be Back

Ahead of Fed Chair Powell’s first semi-annual monetary policy report to Congress next week (brought forward to 2/27), The Fed has released his prepared remarks warning that “valuations are still elevated across a range of asset classes” and fears “signs of rising non-financial leverage.”

But before Powell’s remarks were dropped, both Dudley and Rosengren are on the tape this morning talking super dovish about QE as “useful to have in the toolkit for those times when the short-term interest rate tool may not be available,” adding that The Fed is “quite likely” to require large-scale asset purchases again because real rates will remain low due to slow productivity and labor-force growth.

And adding that “if LSAPs are indeed not effective, then the Fed may need to take other measures.”

So ‘whatever it takes’?

Furthermore, they attempted to calm market fears by claiming that balance-sheet normalization “has been non-disruptive” unlike the 2013 bond market taper tantrum.

The U.S. labor market is near or beyond full employment, while some pockets of finance are showing signs of rising leverage and high valuations, according to a Federal Reserve report.

“The labor market in early 2018 appears to be near or a little beyond full employment,” the Fed said in the February 2018 Monetary Policy Report published in Washington on Friday. “The unemployment rate is now somewhat below most estimates of its natural rate.”

The 55-page report, released days before Chairman Jerome Powell delivers his first semi-annual testimony before House and Senate committees, reprised recent economic data and the Fed’s policy actions. Powell will preside over his first meeting of the Federal Open Market Committee as chairman on March 20-21.

Overall financial vulnerabilities “remain moderate on balance,” according to the report. “Valuation pressures continue to be elevated across a range of asset classes.”

There are signs that “nonbank financial leverage has been increasing in some areas,” the report said, such as credit to stock investors such as hedge funds.

Full Prepared Remarks:

 

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It’s “Time To Tune-Out The Cheerleaders” – Textbook Progression To A Bear Market

Via Global Macro Monitor,

OK.  Not a bear market quite yet.

The official level of the S&P500 for the current sell-off to morph into a bear market (down 20 percent from local high) is 2298.30, down 14.92 percent from today’s close.  The official correction level, 2585.58, was hit and broken on February 8th.

We believe there will be a stock bear market in 2018 but less confident on its depth and length, however.   We will turn that page, if, and when, we get there.

Key Data and Levels

The following table is updated with some key economic indicators and S&P target levels.

 

Table_Feb21

Recall in our earlier posts (see here and here), there have been three other massive volatility shocks since 1950,  similar to the one the S&P500 just experienced.

1) 1955: Ike’s heart attack; 

2) 1962:  the “Kennedy slide” or JFK bear market; and

3) 1987:  the “crash” bear market, which lasted only 38 days.

We threw out Ike’s heart attack as it was not a prelude to a bear market.  The S&P500 recovered shortly after the sharp Monday sell-off after President Eisenhower had a heart attack on the 8th hole at Cherry Hills Country Club the prior Saturday afternoon.

Bear Markets Do Not Happen Without Recession?

To that, we say, poppycock!  Time to tune out the cheerleaders.

The data are clear.  The U.S. economy thrived during the 1962 bear market, growing at more than 6 percent, on average.  The economy grew at 3 ½  percent in 1987.   No recession, not even close, in those two bears.

The Great Moderation

Before the early 1980’s, the U.S. economy experienced much higher short-term volatility. The FRED table illustrates the dampening of volatility over the past 30 years, though at much lower growth rates.  Economists refer to this recent period as The Great Moderation.

Debt Concerns

The current U.S. government debt-to-GDP ratio is more than double what is was in both the 1987 and 1962 bear markets.  It is the crux of the current sell-off, in our opinion.

We sense that the global markets are growing increasingly concerned about high debt levels in a rising interest rate environment.   Couple that with Washington’s fiscal promiscuity and extreme valuations and overbought conditions, and the ingredients of a bear market are baked in.  It is also probably why the dollar is so weak.

We can make a very bearish case with debt doom loops and all kinds of macro instability, but won’t go there until price discovery takes us there.

Nevertheless,  keep these words on your radar:  fette Schwänze, colas gordas,  grosses queues, or in simple English,  Fat Tails.   As volatility spikes,  girth increases.

Recent Price Action

Notice how the market traded today.  Up big then reversed as the 10-year yield spiked through 2.95 percent.

Interest Rates

Interest rates were not a concern in 1962 as the data show the 10-year yield declined 30 basis points during the bear market.  Not the case in 1987,  however, where  rising interest rates and a weak dollar culminated in the October 19th global stock market crash.

Some possible reasons for the stock market crash of 1987 and for the rapid psychological shift of the market participants:

  • rapidly increasing short term US interest rates (the annualized yield of 3M US Treasury Bills increased from 5.30% on 20.01.1987 to the high print of the year: 7.19% on 14.10.1987 – an increase of 189 basis points)
  • rapidly increasing long term US interest rates (the yield of 30Y US Treasury Bonds increased from the low print of the year: 7.29% on 09.01.1987 to the high print of the year: 10.25% on 19.10.1987 – an increase of 296 basis points)
  • weakening US dollar (=falling against most major foreign currencies)
  • deteriorating US current account deficit
  • escalating US government debt
  • very high price-earnings-ratios (P/E)
  • very low dividend yields
  • very bullish investor sentiment figures (= too much optimism by investors)
  • deteriorating “market breadth” (e.g.: weak Advance-Decline-Line)

Source:  www.sniper.at

Wow,  sounds eerily familiar, no?

Market Recovery Falters

The S&P could not hold the key 61.8 percent Fibo level at 2742.92 nor 2728.08, its 50-day moving average.

Moreover, the index closed today just below the 50 percent Fibonacci retracement level.

Normal Path To A Bear Market

At Friday’s intraday high,  the index had retraced 65.18 percent of its first leg down, very close to the 1962 (76.42 percent) and 1987 (69.49 percent)  retracements (see table).

In other words, last week’s recovery was a normal bounce off the initial lows on the path to a bear market.

Levels To Watch

The next critical levels on the downside for the S&P is the 38.2 percent Fibo at 2662.64 and 2653.31, the 100-day moving average.

On the upside,  2702.78, the 50 percent Fibo.   Then some clustering in a range of 2730-2755:  the 50-day at 2728..08; the 20-day at 2737.92; the 61.8 percent Fib at 2742.92; and, most important, Friday’s high at 2754.42, the new marker.

Also watch the bearish cross as the 20-day moving average trades through the 50-day, which is not far off.

A 1962-1987 Hybrid Bear Market?

Though the S&P500 has the same theme, set-up, and backdrop as the JFK post-election rally and bear market in 1961-62,  the fundamentals drivers of the current correction are very similar to those of the 1987 rout (see above).

JFK_Trump_Feb21

As of today’s close,  the Trump and JFK S&P500 sit right on top of each other,  0.68 percent apart, 323 trading days after election day.

Recovery

Though the 1987 bear market bottomed the day after the crash, the S&P500 did not recover its August 25, 1987, high until July 21, 1989.   It could be sometime before the index makes a new high.  Or maybe not.

Stay tuned.

Appendix:

Economy_Feb21

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Gates To Plead Guilty In Mueller Probe

Speculation has been mounting for weeks that former Paul Manafort lieutenant (and now indicted co-conspirator) Rick Gates might be preparing to cooperate with Special Counsel Robert Mueller.

Now, the New York Times is reporting that Mueller could announce a Gates guilty plea as soon as Friday afternoon, less than a day after Gates fired his lawyers following the unsealing of a superseding indictment that also slapped Manafort and Gates with bank and tax fraud charges.

Gates, a longtime political consultant who met Manafort when he interned at one of Manafort’s companies, is expected to strike a plea deal, which could be a significant development in the investigation  as Gates presumably can offer a significant amount of incriminating information about Manafort and his activities relating to former Ukrainian President Viktor Yanukovich.

Gates

Gates’ primary concern has been protecting his family, both emotionally and financially, since wealthy Republican donors who were supposed to foot the bill for his defense have reportedly welched on the funding. He’s also hoping to spare his family the embarrassment of a drawn-out trial. Gates rolling over would also increase pressure on Manafort to roll over – presumably providing ‘damning’ evidence against President Trump.

Mueller’s team has traced more than $75 million that passed through offshore accounts, and has accused Manafort of laundering more than $30 million to pay for real estate and luxury goods in the US.

Gates transferred more than $3 million from the offshore accounts to his own accounts. Gates took over Eastern Europe duties at Manafort’s old lobbying firm, Manafort & Davis, back in 2008.

Mueller has already secured guilty pleas from former National Security Adviser Mike Flynn and former adviser George Papadopoulos.

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Curling Is the Closest the Olympics Ever Get to Anarchy

Until the American men made a shocking run to the gold medal final, one of the biggest surprises of the Olympic curling tournament was a tiff between the Canadian and Danish women’s teams that was over so fast non-curlers might have missed it entirely.

That brief moment summed up one of the best things about the game that, once every four years, captures Americans’ attentions for two short weeks. And maybe it offers a lesson for American politics too.

Curling is a game where teams of four players slide 42-pound granite stones along a 150-foot sheet of ice, aiming for the center of a large target painted on the ice. Players use brooms to sweep in front of sliding stones to make the rocks travel farther. After all 16 rocks have been thrown, the one that’s closest to the center of the target scores. That’s one “end.” After 10 ends, the team with the most points wins.

The Canada-Denmark controversy occurred in the fifth end of their match last week. Danish “skip” (captain) Madeleine Dupont was sweeping one of her own team’s rocks as it slid to a stop inside the house (target). At the very end of the shot, her broom contacted the rock—a fact that she immediately admitted to her Canadian counterpart, Rachel Homan.

In the parlance of the game, this is called “burning” a rock. When a rock is burned, the skip of the other team—in this case, Homan—has three options. She could choose to leave all the rocks exactly where they are, like declining a penalty in football. She could choose to remove the burned rock from play. Or she could choose to move the burned rock (and any rocks it might have hit after it was burned) to where she, and the opposing skip, mutually agree it would have ended up without having been touched.

On this particular shot, the burned rock had nearly stopped before it was touched. The touch likely made only the smallest of changes in the outcome of the shot. In those circumstances, traditionally, the skips will either leave the shot where it stopped or make small adjustments to the rocks and continuing playing. Taking the rock off the sheet, while legal, is frowned upon as bad sportsmanship (and bad strategy, since everyone burns rocks once in a while, and all skips want the benefit of the doubt when it happens to them).

But that’s exactly what Homan did. She yanked the burned rock off the sheet, and lined up her team’s next shot while Dupont gave a disapproving look and slight shake of the head. That’s all.

Well, not all. Commentators noticed what had happened. “I think that was a rash move to take it off,” said Joan McCusker, an Olympic gold medalist who was calling the game for the Canadian Broadcasting Company. “They should have left it in play. It doesn’t look good on you.” Homan’s unsportsmanlike move rankled curling fans from Alberta to Winnipeg, and older curlers dutifully stepped up to blame the younger generation for ruining the spirit of the sport.

Still, maybe the most notable thing about the entire incident is what didn’t happen. There were no referees blowing whistles, no instant replay reviews from six different angles. There was no appeal to authority of any kind, not even by the Danish skip who felt, well, burned by what had happened (though Denmark rallied to win the game, 9-8).

Curling is a sport that, more so than almost any other, is played in a state of anarchy.

That’s not to say that curling doesn’t have rules, of course. The length of the sheet, the size and weight of the rocks, and the method for scoring are standardized. Players aren’t allowed to touch the rocks with their brooms. Sliding past the “hog line” before releasing a shot is forbidden.

But it is a game with very little in the way of law enforcement, even in games played at the highest competitive levels. This makes curling quite an outlier at the Olympics, where every sport has judges determining winners and losers based on a scoring rubric that no one really understand, or referees calling fouls and penalties, or officials making sure everyone completes the same course without going out of bounds.

Curling officials are relegated almost entirely to an appellate role. If the two teams really cannot agree on which stone might score in a given end, for example, officials can be called upon to conduct a measurement. This is a relatively rare event. Otherwise, scoring is entirely the responsibility of the two “vice-skips” (the second-in-command on each team), and any other disagreements—like where a burned rock should be placed—are settled between the skips.

The lack of referees and judges requires that, above all else, curlers must be good sports. The first page of the official rulebook doesn’t describe the size of the rocks or the length of the sheet or the method of scoring. It talks about “the spirit of curling.” That might sound a little hokey in our cynical age, but it’s actually one of the things that makes the game so much damn fun. A “call your own fouls” mentally is not unexpected in pick-up basketball game or rec center softball leagues, but it is pretty unusual to see at the Olympics.

At the risk of straining the analogy too far, the culture of curling offers a few lessons for an American political culture that has become toxic in so many ways.

Like curling, politics is a sport that requires players to call their own fouls and meet out the proper repercussions for them. Before that, though, both require good sportsmanship, and a mutual expectation that both sides will respect the unwritten rules of the game.

That doesn’t require agreement or cooperation, of course. Opposing skips in a curling match are not working towards a common goal. They won’t help sweep each others’ stones (or whatever the curling equivalent of empty cheers for bipartisanship would be). They are both trying to win the game, but competition doesn’t require tossing sportsmanship or civility out the window. This idea of civilized rivalries—of ambition counteracting ambition, without any need for a higher authority to restrain it—is a fundamental element of the American political system.

Like curling’s somewhat nuanced rules about what to do with a burned rock, political discourse is not a black-and-white affair. Too often, I think, we behave like Homan did last week. If our opponents make a minor mistake, we want to pounce on the opportunity to gain a temporary advantage by yanking their stone out of play (or making a mockery of them on social media). The short-term gain is offset by a decline in respect and an increased likelihood of reprisals. Winning matters, but how you win matters too.

Maybe we flock to curling every four years not because of the hypnotic motion of the stones across the ice or the excitement of a perfectly executed hit-and-roll, but because the game is a reminder that even diametrically opposed teams can disagree and get along without having to be told what to do.

Maybe that’s all a bunch of nonsense and I’m still high from watching the U.S. team upset Canada to reach the final round.

Still, the most important part of the “culture of curling” is the expectation that a winning team will buy a round of drinks for the losing team (yes, even at the Olympics!)—a good reminder that no dispute is so big it can’t be settled over a beer.

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School Resource Officer Who Failed to Confront Mass Shooter Previously Defended Cops Living at School Rent-Free

ParklandScot Peterson, the 54-year-old Marjory Stoneman Douglas school resource officer who resigned after security footage revealed he made no effort to engage alleged mass killer Nikolas Cruz during the rampage last week, previously lobbied Broward County school officials to continue funding a program that allowed cops to live in mobile homes on school property rent-free.

Not only did Peterson fail to confront Cruz—he also failed to assist a previous investigation, undertaken by state authorities, to determine whether Cruz was a threat to himself or others. His mistakes compound the errors made by other law enforcement entities, including the FBI and Broward County PD.

The housing program was in effect at 32 different Broward County schools. Officials reasoned that cops living at the schools would mean 24-hour security. But a 2015 audit determined that the program was a waste of money.

The auditor said, “Frankly, I’m embarrassed,” and “I would shut it down immediately,” according to the Sun Sentinel. Officials could find no evidence that the live-in cops were deterring crime.

Officer Peterson took a different view.

About a dozen officers from the program attended the meeting. They called the report skewed and lauded the advantage of keeping law enforcement on school grounds.

“These colleagues work hard. We are crime prevention, an audit report will never show how much we prevent,” said Scot Peterson, an officer who has lived at Atlantic Technical College in Coconut Creek since 2000. He said he’s arrested several juveniles for breaking into school property.

Yet according to the audit, one of the officers had even made the decision to sublet his on-campus mobile home to two people who weren’t police officers. Most of the officers did not turn in monthly reports detailing their activities, and failed to respond to 73 percent of security alarm triggers. But ending the program would be unfair, said Peterson. “You are talking about the livelihood of some of these people,” he said at the time.

The housing program for school resource officers wasn’t really about safety. It was welfare for state employees. Seen through this lens, Peterson’s utter failure to confront the shooter isn’t particularly surprising.

The New York Times has more information on Peterson:

In February 2016, the sheriff’s office received what it described as “thirdhand information” that Mr. Cruz “planned to shoot up the school” and had posted a picture on Instagram of a “juvenile with guns.” A deputy determined that Mr. Cruz had knives and a BB gun and forwarded the information to the school resource officer at Stoneman Douglas High. That was Deputy Peterson.

The Times also notes that the Florida Department of Children and Families—the state’s child protective services agency—investigated Cruz in 2016 but determined that he was not at risk of harming himself or others.

According to the agency, its Adult Protective Investigator (API) attempted to talk to Stoneman Douglas’s SRO (Peterson, presumably) about Cruz, but:

The school resource officer was contacted and refused to provide specific information to the investigator. Florida law does not give APS the authority to compel law enforcement to provide additional information during an investigation.

We can add this oversight to the lengthy and ever-growing list of catastrophic law enforcement failures at play in the Parkland shooting. Don’t let anyone say putting even more cops in schools is a reasonable response.

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Fed Chair Powell “Doesn’t Stand A Chance”

Authored by MN Gordon via EconomicPrism.com,

Jerome Powell, the new Chairman of the Federal Reserve, just completed his third week on the job.  He’s hardly had enough time to learn how to operate the office coffee maker, let alone the all-in-one printer.  He still doesn’t know what roach coach menu items induce a heinous gut bomb.

Yet across the planet, folks high and low are already telling him exactly how he should do his job.  What’s more, they’re passing advanced judgement on things that may or may not happen.  For example, the South China Morning Post recently offered the following opinion:

“President Donald Trump may have done Janet Yellen a favour by not giving her a second term as Chairwoman of the Federal Reserve.  Her successor, Jerome Powell, may have inherited a poisoned chalice.  The Fed will have to up the pace of U.S. rate hikes or risk accusations of being behind the curve as markets react to signs of rising inflation.”

When Powell showed up to work on February 5, for his first day on the job, the general consensus was that the Fed would raise the federal funds rate three times this year, at 25 basis points – or 0.25 percent – per increase.  But now that consumer prices are rising at an annual rate of 2.1 percent, average hourly earnings are increasing at an annual rate of 2.9 percent, and Congress has passed a massive two year budget deal, twitchy economists are questioning if three rate hikes will be enough to keep inflation in check.

Over the last two weeks their chants for four rate hikes in 2018 have grown louder.  Goldman Sachs has even floated the five rate hike scenario.

Alas, this is the sort of ridiculous minutia that policy makers and analysts must navel-gaze over in a planned economy.  The truth is, Powell can’t win regardless of what he does. 

Whether he raises rates three times or four times – or ten times – he’ll get it wrong.  Here’s why…

Chronic Shortages

The economy is a complex living organism that’s continuously evolving and always subject to change.  One relationship at one moment can be completely different at another moment.  Supply and demand are incessantly adjusting and readjusting to meet the conditions of the market.

These continuous interactions provide a natural and efficient response to supply shortages and gluts.  Even in a moderately free market economy, bakeries do not run out of bread when there’s a wheat crop shortage due to a late season frost.  The shelves never go empty.  Rather, the price of bread rises and consumers adjust their spending accordingly.

Centrally planned economies, on the other hand, are inclined to frequent, intensive and chronic shortages.  Bureaucrats, armed with spiral bound planning reports and pie graphs, are incapable of fixing the proper prices for gumballs and gasoline by diktat.  There’s simply too much going on and too many moving parts for them to consider.

With the best of intentions, the noble planner makes their best guess of the appropriate price control.  Then things invariably go haywire.

In practice, the supply of certain goods or commodities may be more than adequate.  But when a price administrator enforces an artificially low price, consumers are prone to wasteful behavior.  They’re compelled to demand a greater amount than is supplied.  Hence, the store shelves remain perpetually empty.

Certainly, uniform standards work well for units and measurements.  They’re critical to building consistency and standardization of hardware and parts.  They’re even necessary to effective communication and computer programming.  For certain things, however, uniform standards come up short…

Haunted by Ghosts of the Old Eastern Bloc

When it comes to the pricing of goods, commodities and services, commanding fixed prices by a central authority is an utter failure.  This was effectively proven by the experiences of the centrally planned economies of the old communist Eastern Bloc countries during the second half of the 20th century.

Regrettably, price controls don’t stop with just goods, commodities, and services.  The United States, Europe, and Japan have been doing their darnedest during the early years of the 21st century to show that these ghosts of the old Eastern Bloc also haunt credit.

Remember, credit, like a commodity or good, has a price attached to it.  The price of credit is the rate of interest a lender charges to a borrower.  Like fixing the price of a commodity or good by a central planning authority, fixing the price of credit by a central bank – such as the Federal Reserve, European Central Bank, or Bank of Japan – is presently being shown to also be an utter failure.

Someone with even a dim perception of the world around them can peer out and discern many strange and grotesque occurrences: Housing prices that far outpace incomes.  Total household debt at $13.5 trillion.  And an entire generation of Millennials that went $1.4 trillion in student loan debt for college degrees that have been debased in stature to what a high school diploma represented for prior generations.

These represent gross misallocations of capital.  What’s more, they would’ve never come into existence or ballooned out to this magnitude without the Fed’s credit market price controls.

Fed Chairman Powell doesn’t stand a chance.  Bernanke and Yellen before him oversupplied the economy with cheap credit.  Now Powell must mop it up with higher interest rates.  Yet because the U.S. economy’s been pushed to the brink with record debt levels it simply can’t afford higher interest rates.

Without question, Powell will find the break point.  Moreover, when the next great liquidity crisis hits it won’t be a failing of free market capitalism.  It’ll be the failing of the central planners and the system they wrought.

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Two People Shot Dead Outside UBS Bank In Zurich

Two people have been shot dead outside a branch of the UBS bank in the otherwise boring and peaceful Swiss city of Zurich, the local police said according to BBC.

Images in the Swiss media showed two bodies lying motionless, close together on a pavement, with eyewitnesses reporting four or five shots being fired.

The media images showed what appeared to be a pistol close to the hand of one of the bodies on the pavement.

There is a large police presence at the scene in the Europaallee area. Zurich police said the situation was now under control and that there was no danger to the public.

Authorities told local media they were responding to an incident in downtown Zurich, near the Swiss financial hub’s main train station.

The reasons behind the shooting remain unclear.

Developing…

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