More IMF Lies?

Presented with little comment.. Compare this:


To the following chart…


It appears the “big lie” remains well and truly in place… Just keep repeating it…


Oh and as a follow-up, Lipton nails it on Mexico…


and then there’s this…


Chart: Bloomberg


via Zero Hedge Tyler Durden

Lost Interest

Submitted by Chris Andrew and Mustafa Zaidi of Clarmond House

List Interest…

The developed world is not currently in the grip of a major World War, however, the debt burden has increased as if it is. The general population may not be ready to suffer the further sacrifices that this massive deficit increase will lead to, and may unwillingly be becoming the ‘lost interest generation’.


Thus observed Cicero on the dual monopolies of the State, money and warfare. But how does the State amass this limitless largesse? It does so in three simple ways: taxation; debt issuance; and currency debasement.

When there is a war, the State issues debt to fund the conflict; citizens purchase this debt and await a future rise in taxation, a currency devaluation and a significant increase in the national debt. The contract between State and citizen is clear; in times of war, sacrifices are required, not only on battlefields but also in bond yields.

This can be seen time and time again, from the Prestiti, issued by Venice in the 1100’s, to the National Savings Movement in the British Empire for both world wars of the twentieth century. Indeed the slogans such as ‘Lend to Defend’ and ‘War Savings are Warships’ connected the population to the war and the national debt.


Over the last seven years citizens have lived through a wartime-like increase in national debt, but with no war to explain it. The population has been detached from this peacetime debt explosion, the purpose of which has been to maintain consumption, collateral and capital. These three C’s lack the somber seriousness of war. The citizen is justifiably confused, asked as they now are to bear the increased debt burden, paltry interest rates and possibly currency debasement.

Given the rise in global debt burdens, governments now rely upon low interest rates to keep the cost of interest payments to a minimum. Sorry citizens, the State has redefined the contract.

A tax by any other name

The sovereign debt of the developed world has risen from approximately 80% of GDP to 110%, an additional $12 trillion of debt, while interest rates have fallen to nothing. A ‘normal’ short term interest rate is one that is in line with inflation, which has been an average of 2% for the period 2007-2013. Therefore we can roughly calculate that ‘citizen-savers’ of the world have lost $1.75 trillion in unreceived interest. This is nothing short of being an undeclared tax levied by the State.

Modern day example

Has this ever happened before? Yes, in modern day Japan interest rates have been zero for 19 years. However, the important difference is that there has been deflation in Japan during this entire period, so the savers of Japan have kept purchasing power. Rather than trample the savers it was the asset markets that suffered, with the stock market and property prices taking the brunt of zero rates and credit contraction.

As commented on in an earlier piece (‘Golden Calf to Raging Bull’ – May 2013) Central Banks have placed the economic world on an ‘asset-price’ standard. Asset prices have become the collateral upon which credit is issued and therefore must be protected, even if this means sacrificing savers on the altar of zero interest rates. The chances of central banks allowing interest rates to be higher than inflation is remote.

A Forlorn Hope?

As the quantum of debt has increased, a rise in interest rates would bring hefty costs to the State; currently, interest outlay in the USA alone, at 2.5%, is $400 billion  per annum. Any sustained interest rate rise with the continued level of deficit is not manageable without growth being greater than the yields paid. Simply put, interest rates cannot rise without high growth, therefore a ‘lost interest generation’ is unfolding.

The only growth lever left for the State is currency devaluation. As Ben Franklin stated “wars are not paid for in wartime, the bill comes later.” The State’s peacetime but warlike increase in debt awaits its tab.

Bill Please.


via Zero Hedge Tyler Durden

Rutgers Faculty Upset at Condoleezza Rice Invitation to Graduation —Will They Oppose Barack Obama’s Too?

smhThe faculty council at Rutgers University in New
Jersey is upset the school invited former Secretary of State
Condoleezza Rice to deliver the commencement address in May, and to
receive an honorary doctorate, passing a resolution calling on the
university administration to rescind it.
The Star-Ledger reports

[T]he faculty council cited her war record and her
misleading of the public about the Iraq war as reasons for their

“Condoleezza Rice … played a prominent role in (the Bush)
administration’s effort to mislead the American people about the
presence of weapons of mass destruction,” according to the
resolution. And she “at the very least condoned the Bush
administration’s policy of ‘enhanced interrogation techniques’ such
as waterboarding,” it said.

“A Commencement speaker… should embody moral authority and
exemplary citizenship,” it continued, and “an honorary Doctor of
Laws degree should not honor someone who participated in a
political effort to circumvent the law.”

The measure was introduced by a chemistry professor who said
students were also concerned.

Misleading the American people? Participating in a political
effort to circumvent the law? Condoleezza Rice has a long career in
academia and policy making, and her life stories can certainly
provide some kind of inspiration and even direction for graduating
seniors, the role of a commencement speaker. Iraq was a major
policy blunder, one that cost the U.S., and Iraq, too much blood
and treasure. And the Bush White House, for whom Rice served, is
certainly guilty of a gross expansion of the powers of the
executive branch, including waterboarding and other potential war
crimes. Whether that precludes Rice from speaking to twenty-one
year olds being sent out to the real world after spending four to
six on a piece of paper isn’t necessarily obvious.

Being a hopeless pessimist, what does seem obvious to me is that
the faculty council is being driven not by any moral compass but by
partisan concerns. They can prove me wrong. New Jersey’s
congressional delegation
is lobbying for Barack Obama
to accept Rutgers’
 invitation to speak at the 2016 commencement. Will the
faculty condemn this invitation too? Obama, like Rice, and more so
as the head of the executive branch, is also responsible for Bush
and terror
misleading the American people
, and
attempting to circumvent the law
. Arguments that would support
Obama speaking to graduating seniors but not Rice are highly
unlikely to be intellectually rigorous or anything more than
partisan apologetics.

from Hit & Run

What Inflation? Here Are The Various Components Of The CPI Basket

Earlier today we pointed out a curious divergence: while owner equivalent rent, the measurement of imputed costs of renting, has risen to the highest since the Lehman failure, total non-shelter core CPI continues to decline. What is notable is that OER amounts to 23.9% of the CPI basket – as such it is the single largest determinant of inflation as measured by the BLS. And yet everything else, hedonically adjusted of course, keeps falling. By how much? And do you agree with the BLS’ estimates of inflation? To answer these not so important questions, here is the full CPI basket, broken down by weighings, and by annual change.

At first blush, a lot of the “inflationary” assumptions shown below make little if any sense, but then again who are we to argue with the Arima-X-1 seasonal adjustment juggernaut of a few good Econ PhDs.


via Zero Hedge Tyler Durden

New York Banking Regulator Benjamin Lawsky Thinks Mt. Gox Collapse Could Help Bitcoin

Many people have been speculating all day as to why Bitcoin is up so much. The guesses have ranged from oligarchs worried about governments freezing their global bank accounts, to the UK moving away from a Bitcoin trading tax. While both those things may have played a role, I think the primary driver might be be comments from Benjamin Lawsky, superintendent of New York’s Department of Financial Services, on the sidelines of a banking conference today.

I’m not sure what time these comments were made, but it appears Lawsky wants to make sure New York state ends up being a global center for Bitcoin trading. This seems like a big deal to me.

From the UK’s Telegraph:

The collapse of the bitcoin exchange Mt Gox is part of a struggle for survival that could ultimately strengthen the virtual currency industry, New York’s banking regulator has said.

“It’s on the one hand a setback, on the other hand it will cause further improvements in this industry and some more regulatory involvement,” Benjamin Lawsky, superintendent of New York’s Department of Financial Services, told Reuters.

“It’s part of [a] shaking out,” he said on the sidelines of a banking conference in the US.

continue reading

from A Lightning War for Liberty

Realpolitik In Ukraine

Submitted by Anatole Kaletsky via Evergreen-Gavekal,

Oscar Wilde described marriage as the triumph of imagination over intelligence and second marriage as the triumph of hope over experience. In finance and geopolitics, by contrast, experience must always prevail over hope and realism over wishful thinking. A grim case in point is the Russian incursion into Ukraine. What makes this confrontation so dangerous is that US and EU policy seems to be motivated entirely by hope and wishful thinking. Hope that Vladimir Putin will “see sense,” or at least be deterred by the threat of US and EU sanctions to Russia’s economic interests and the personal wealth of his oligarch friends. Wishful thinking about “democracy and freedom” overcoming dictatorship and military bullying.

Financial markets cannot afford to be so sentimental. While we should always recall at a time like this the famous advice from Nathan Rothschild to “buy at the sound of gunfire,” the drastically risk-off response to weekend events in Ukraine makes perfect sense because Russia’s annexation of Crimea is the most dangerous geopolitical event of the post-Cold War era, and perhaps since the Cuban Missile crisis. It can result in only two possible outcomes, either of which will be damaging to European stability in the long-term. Either Russia will quickly prevail and thereby win the right to redraw borders and exercise veto powers over the governments of its neighbouring countries. Or the Western-backed Ukrainian government will fight back and Europe’s second-largest country by area will descend into a Yugoslav-style civil war that will ultimately draw in Poland, NATO and therefore the US.

No other outcome is possible because it is literally inconceivable that Putin will ever withdraw from Crimea. To give up Crimea now would mean the end of Putin’s presidency, since the Russian public, not to mention the military and security apparatus, believe almost unanimously that Crimea still belongs to Russia, since it was only administratively transferred to Ukraine, almost by accident, in 1954. In fact, many Russians believe, rightly or wrongly, that most of Ukraine “belongs” to them. (The very name of the country in Russian means “at the border” and certainly not “beyond the border”). Under these circumstances, the idea that Putin would respond to Western diplomatic or economic sanctions, no matter how stringent, by giving up his newly gained territory is pure wishful thinking.

Putin’s decision to back himself into this corner has been derided by the Western media as a strategic blunder but it is actually a textbook example of realpolitik. Putin has created a situation where the West’s only alternative to acquiescing in the Russian takeover of Crimea is all-out war. And since a NATO military attack on Russian forces is even more inconceivable than Putin’s withdrawal, it seems that Russia has won this round of the confrontation. The only question now is whether the new Ukrainian government will accept the loss of Crimea quietly or try to retaliate against Russian speakers in Ukraine—offering Putin a pretext for invasion, and thereby precipitating an all-out civil war.

That is the key question investors must consider in deciding whether the Ukraine crisis is a Rothschild-style buying opportunity, or a last chance to bail out of risk-assets before it is too late. The balance of probabilities in such situations is usually tilted towards a peaceful solution—in this case, Western acquiescence in the Russian annexation of Crimea and the creation of a new national unity government in Kiev acceptable to Putin. The trouble is that the alternative of a full-scale war, while far less probable, would have much greater impact—on the European and global economies, on energy prices and on the prices of equities and other riskassets that are already quite highly valued. At present, therefore, it makes sense to stand back and prepare for either outcome by maintaining balanced portfolios of the kind recommended by Charles, with equal weightings of equities and very long-duration US bonds.

Looking back through history at comparable episodes of severe geopolitical confrontation, investors have usually done well to wait for the confrontation to reach some kind of climax before putting on more risk.

In the 1962 Cuban Missile Crisis, the S&P 500 fell -6.5% between October 16, when the confrontation started, and October 23, the worst day of the crisis, when President Kennedy issued his nuclear ultimatum to Nikita Khrushchev. The market steadied then, but did not rebound in earnest until four days later, when it became clear that Khrushchev would back down; it went on to gain 30% in the next six months.

Similarly in the 1991 Gulf War, it was not until the bombing of Baghdad actually started and a quick US victory looked certain, that equities bounced back, gaining 25% by the summer. Thus investors did well to buy at the sound of gunfire, but lost nothing by waiting six months after Saddam Hussein’s initial invasion of Kuwait in August, 1990.

Even in the worst-case scenario to which the invasion of Crimea has been compared over the weekend—the German annexation of Sudetenland in June 1938—Wall Street only rebounded in earnest, gaining 24% within one month, on September 29, 1938. That was the day before Neville Chamberlain returned from Munich, brandishing his infamous note from Hitler and declaring “peace in our time.” The ultimate triumph of hope over experience.


via Zero Hedge Tyler Durden

Europe Can’t Even Agree On Russian Trade Sanctions

The (ironically named) United Kingdom is the first to openly raise concerns over trade sanctions against Russia. As The Telegraph reports,

Britain is preparing to rule out trade sanctions against Russia amid fears that the Ukraine crisis could derail the global economic recovery

Perhaps it is the fear of a massive liquidity suck out from London’s real estate market (or its banking system) that has the Brits on edge. We suspect Germany will be close behind as they eye exploding gas and oil prices and their dependence on Russia’s marginal production.

It would appear, just as in the case of Syria, that Obama may find himself alone among his allies…


via Zero Hedge Tyler Durden

Monday Humor: World On The Verge? “Get Some Peace Of Mind”

The Cold War being back with a bang and somehow the world again finding itself on the verge of World War got you down? Don’t worry, there an insurance policy for that. Because life is unpredictable…



via Zero Hedge Tyler Durden

Rand Paul is Not an Isolationist

Last Friday, Sen. Rand Paul (R-Ky.) released a statement on
the situation in Ukraine:

We live in an interconnected world and the United States has a
vital role in the stability of that world. The United States should
make it abundantly clear to Russia that we expect them to honor the
December 1994 Budapest Memorandum, in which the U.S., Russia, and
the United Kingdom reaffirmed their commitment ‘to respect the
independence and sovereignty and the existing borders of Ukraine.’
Russia should also be reminded that stability and territorial
integrity go hand in hand with prosperity. Economic incentives
align against Russian military involvement in Ukraine. Russia,
which has begun to experience the benefits of expanded trade with
World Trade Organization accession, should think long and hard
about honoring their treaty obligations and fostering the stability
that creates prosperity for its citizens. Most importantly, Russian
intervention in Ukraine would be dangerous for both nations, and
for the rest of the world,” Sen. Paul said.

This sort of position is not good enough for neoconservatives,
some of whom are repeating familiar and inaccurate rhetoric
relating to Paul’s foreign policy positions.

Over at Commentary, Jonathan Tobin today referred to
 Tobin has previously associated Paul
“a growing chorus of isolationists.”
In a column for
The Washington Post published today,

Jennifer Rubin
refers to “the isolationist right,” and writes
that “no one has looked less able to lead America in dangerous
times than Sen. Rand Paul (R-Ky.).” Rubin previously referred to
“isolationist vision”
in a column about intervention in Syria.
In a post for the American Enterprise Institute published in
October last year, Phillip Lohaus referred to Paul’s
“isolationist tendencies.”

Of course, Paul is not an isolationist. Wanting trade and
diplomatic relations with countries while opposing being overly
involved in their affairs does not make you an isolationist. Taken
to its extreme, an isolationist foreign policy results in a country
that looks much closer to North Korea than a country like
Switzerland, which in economically engaged with the world but is
known for being wary of military intervention. 

That Paul is not an isolationist has been point out before by
the Cato Institute’s
Justin Logan

Rand Paul, Rep. Justin Amash, and other skeptics of reckless
foreign wars and secret government spying on Americans aren’t
isolationists. They’re prudent conservatives who take the
Constitution seriously and rose to power amid the wreckage of the
George W. Bush administration, which destroyed the GOP advantage on
national security and provided a good example of how not to conduct
foreign policy.

There are some on the right who do understand the difference
between isolationism and non-interventionism.
National Review
correspondent Kevin Williamson writes
that those who advocate for non-military solutions to foreign
affairs justifiably protest against the use of the term

Paul has outlined his position on foreign policy before in a
speech at The Heritage Foundation last year. Watch below:

from Hit & Run

Washington State Wants to Eliminate Medical Marijuana Co-Ops, Bring Patients Under Tighter Control

Two bills in the Washington state legislature aim
to “reconcile”
the state’s medical and recreational marijuana
The Associated Press reports. An
attempt to cut back on bureaucracy or make a patchwork of competing
regulations easier to follow? Not so much. The measures would put
tighter restrictions on medical marijuana patients and
dispensaries, which currently operate as cooperatives. Small
business owners like Loaded Soda’s Dave Kois think the moves amount
to little more than a money grab by the state. 

“They see medical as a threat to their tax money on the
recreational side,” said Kois, who grows marijuana high in the

antioxidant and anti-inflammatory cannabis compound cannabidiol

and low in THC (the compound that gets you stoned). He told
AP that medical and recreational marijuana are “two
separate systems and they should stay that way.”

Staying that way would mean operating under a bifurcated
regulatory scheme that considers medical marijuana dispensaries
“collective gardens,” wherein patients pool resources to grow and
distribute medical weed. These medical pot collectives are freer
from state regulation than folks dealing in recreational marijuana,
who must be licensed by the state. 

The measures (House Bill 2149 and Senate Bill 5887) under
consideration by Washington legislators would eliminate these
collective gardens, naturally. To stay in existence, current
medical marijuana co-ops and dispensaries would have to get
licensed by the state or shut down. The bills—one of which has
passed the House and is awaiting a Senate hearing; the other
awaiting a vote in the state Senate Ways & Means
Committee—would also place further restrictions on medical

Both bills look to reduce the amount of marijuana and number of
plants patients can possess, and would do away with collective
gardens by the middle of next year. They would also establish a
patient registry that would provide medical marijuana patients with
an authorization card that would grant them a sales tax break on
medical marijuana purchased at authorized stores. Both allow stores
to have a medical endorsement to sell medical along with
recreational marijuana and also allow an option for endorsed retail
stores to solely serve medical marijuana patients. Rivers’ bill
requires the Liquor Control Board, which is overseeing
implementation of I-502, to consider the needs of patients in
determining the number of retail licenses issued. Currently, the
board has limited recreational retail licenses to 334 across the
state, for which there are currently more than 2,000

Medical marijuana patients have, quite understandably, been
decrying the potential changes. Some fear that buying in the
recreational weed market will be more expensive and lead to a low
supply of low-THC strains of marijuana. The bills would also
severely curtail the amount of marijuana patients can possess, from
24 ounces to 3 ounces, and the number of plants they can grow, from
15 to six (though both would allow health care professionals to
authorize more if deemed necessary). Washington lawmakers claim
these measures are necessary in order to keep the federal
government from stepping in.

from Hit & Run