The World Financial System Is Rife With “Stimulus” Junkies

Submitted by David Stockman via Contra Corner blog,

China’s Services PMI for August veered upwards, but that’s not the news. Noting that China’s massive but fracturing bubble in unused luxury apartments (upwards of 70 million are empty) is a serious headwind, analysts for HSBC were quick to plead for more stimulus:

The economy still faces downside risks to growth in the second half of the year from the property sector slowdown. We think policy makers should use further easing measures to help support the recovery.”

Stunning.

 

Even the comrades in Beijing know that China’s credit tsunami has unleashed a dangerous speculative mania throughout the land that has no parallel in human history. For crying out loud, total credit outstanding (which Beijing’s red capitalists are pleased to call “social financing”) has exploded from $1 trillion at the turn of the century to $25 trillion today.

It goes without saying that there is nothing in the financial world more dangerous than easy credit. But when it multiples by 25X in just 14 years in an economy where there is essentially zero market discipline (because all debts are bailed-out and rolled-over when push comes to shove), you are dealing with a monumental catastrophe in the making. So China’s leaders now hop from one foot to the other, endeavoring to slow down the credit monster one week, while taking steps to goose the macro economy the next.

Beijing’s schizophrenia is at least understandable. If it allows the bubble to splatter, the historical anomaly of a collectivist one-party regime presiding over a wild-west casino would surely suffer a brutal demise at the hands of hundreds of millions of busted gamblers. So it continues to temporize and equivocate, hoping that China’s monstrously inflating bubble will keep on……well, inflating.

But why in the world would presumably financially literate analysts at one of the world’s premier banks egg them on? Why do they not, instead, warn investors to get out of harm’s way while its still possible?

The baleful reality is that the entire global financial system has been corrupted by two decades of central bank fueled credit inflation. At the end of the day, financial players and advisors survive by plying trades which work—at least for the time being. And credit inflation does work during its expansionary phase—funding a robust “bid” for rising financial assets and booming real investments in housing, industry and infrastructure, alike. So the inhabitants of the financial system learn to buy on the dips and pound their pans for more (credit) stimulus whenever short-term dislocations threaten.

The financial market stimulus chorus is now universal—-virtually identical from Hong Kong to London to New York, despite ostensibly deep differences in policy regimes. At the end of the day, however, there is not really a dimes worth of difference between the Bush/Obama/Bernanke model and the economic model employed by the politburo overlords in Beijing. Its all about insensible, contagious, addictive credit expansion, and the phony wealth and temporary prosperity which it breeds.

The tragedy is that when the global bubble finally reaches its breaking point, there will be no warning from the financial market gambling pits by the inside players who ought to know better. They have become trained seals who have no remaining vocabulary except to bark mindlessly for “moar” stimulus.

The zoo at HSBC is proof of the case. Its inhabitants sit up close and personal long side of China’s monumental house of cards, and can not even see it. So the “ort, ort, ort” of their stimulus barking reverberates around the world and through the canyons of Wall Street.

Call Goldman Sachs. They will tell you that China’s red capitalism is the great white hope of global growth and endlessly rising stock prices. All it takes is just another shot of “stimulus”.




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John Stossel on Free-Market Environmentalism

The Environmental
Protection Agency (EPA) has become a monster
 that does
more harm than good. But most people say, “What else we got?” They
assume greedy capitalists will run amok and destroy the Earth
unless stopped by regulation.

Yet, contrary to what environmentalists assume, it’s really
property rights that encourage good stewardship, John Stossel
argues. Property rights and a simple, honest court
system—institutions that can exist without big government—solve
problems that would be fought about for years by politicians,
environmental bureaucrats, and the corporations who lobby
them. 

View this article.

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It’s official: Public opinion of Congress sinks below that of used car salesmen

used car salesman It’s official: Public opinion of Congress sinks below that of used car salesmen

September 3, 2014
Santiago, Chile

Poll after poll confirms what I’m sure you’ve already been feeling.

People are disenchanted with the existing system. They don’t trust the government, they don’t trust the banks, and they don’t trust the media.

You can hear the rumblings of grumblings, and it’s only growing louder and louder.

Lost confidence in government

If you were to ask 10 Americans if they have confidence in Congress, less than one would now say yes.

And it’s not just disgust with the legislature. It’s all of government. Confidence in President Obama is at its lowest level ever.

Supposedly those in political office are there to act on behalf of the people. That’s what a republic is all about, right?

However, after one conspicuous bailout of a big business after the next, it’s become clear who’s really manning their puppet strings.

What little respect there was for politicians is disappearing fast.

According to Gallup, public opinion of the integrity of members of Congress has recently sunk to its lowest levels as well, even below that of used car salesmen. And that’s not even a joke.

Lost confidence in banks

We’re told for our entire lives to put our money into banks rather than hiding it away under their mattresses or some such nonsense.

Only in banks will it be safe and earn interest.

What a joke that has become. Today if you hold money in a bank, you are guaranteed to lose money.

Citibank, for example, is offering an ‘interest-bearing’ savings account that pays 0.01%. That’s one hundredth of one percent… or $1 per year in interest on every $10,000.

What’s even more hilarious is that you have to pay TAX on that amount. Presuming a 20% tax rate, you’re left with an after-tax yield of 0.008%.

Now… even if you believe the government’s numbers, they claim the rate of inflation is 2.1% based on the June 2014 CPI numbers published by the Department of Labor.

So on a tax-adjusted, inflation-adjusted basis, you’re LOSING 2.092% each year that you hold money in a bank account.

Meanwhile, banks are recording record profits and enjoy the full backing and support of the Federal government.

It’s a disgusting system. And it’s no wonder why (again, according to Gallup), confidence in banks is hovering near its record low, and less than half the level it was at ten years ago.

Lost confidence in media

Then there’s traditional media in the US, which is nothing more than destructive entertainment masquerading as news.

Gallup polls show a long-term, growing distrust in major news outlets, including newspapers, TV news channels, and major news websites.

Distrust for mass media hit an all-time high in September 2012 and has remained near that level ever since.

Meanwhile, the Land of the Free with its Constitutionally-enshrined freedom of the press plunged to number 46 in the most recent World Press Freedom Index.

This is sandwiched between Romania and Haiti, and trailing countries such as Papua New Guinea.

Distrust of government. Distrust of banks. Distrust of news sources. So much for hope and change.

All of this data is clearly indicative of something that I suspect tens of millions of people feel viscerally in the gut: this is not the country I grew up in. Things have changed. And not for the better.

The sad part is that most people feel trapped… powerless to stop the obvious trend that’s encroaching on their way of life. So they ignore it and hope that it goes away.

This trend isn’t going anywhere.

And the people in power are only making things worse. Every law, every regulation, every policy, no matter how well-intended, only marches closer towards the inevitable.

It doesn’t have to be this way.

While governments and institutions can only make things worse, individuals have an entire universe of solutions at their fingertips.

If you mistrust the banking system (and all the evidence suggests this is a valid conclusion), WHY hold your money there?

It’s 2014. Money doesn’t get moved around by stagecoach anymore. You are under no obligation to hold the preponderance of your life’s savings in a system you don’t trust.

There are a multitude of options around the world to hold your savings in and actually generate a solid rate of return.

Further, if you mistrust your government, WHY have, literally, 100% of your life and livelihood tied up there?

There are hundreds of options and solutions to ensure your government has as little influence and control over you as possible.

It doesn’t have to be gloom and despair. No one has to be a lamb waiting around for the slaughter.

There are ways to fix this… for yourself, your family, and your loved ones.

This isn’t anything radical. It’s common sense.

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Mary Landrieu and the Problem With Washington

Since 1997, Mary Landrieu has served as a Democratic Senator
from Louisiana. That means she works in Washington, D.C., and
maintains a home in the nation’s capitol as well. That’s now a
potential liability. As a new ad targeting Landrieu unsubtly notes,
she seems to have made Capitol Hill her primary residence.

American Crossroads:
Landrieu for Washington
from American Crossroads on Vimeo.

It’s a brutal little spot, and if you’re the sort of person who
believes that clever TV ads can swing a tight race, then this is an
ad that probably whispers “game-changer!” in your ear.

But what’s the argument here? As Paul Waldman
writes
in The American Prospect, there’s something a
little bit strange about this attack, which implies that voters
should reject Landrieu because she lives where they have repeatedly
sent her to work. (She maintains joint ownership of a family home
in New Orleans as well.) 

Now, maybe there’s a case to be made that someone who has made a
life elsewhere for the better part of two decades is not in tune
with the interests of her potential constituents. But that’s not
really what the ad says. It just makes Landrieu out to be, well, a
pretty good neighbor on Capitol Hill.

Which is why the bigger problem, I think, is that there’s not a
lot of substance to the ad. That’s not to say there aren’t reasons
to disagree with Landrieu’s policy positions: She supports
reauthorization
of the Ex-Im bank. She opposes efforts to end
energy subsidies.
She voted for Obamacare, despite its unpopularity in her state, and
offered minimalist, gimmicky “fixes” when it crashed last year. Now
she calls it
“a solid law that needs improvement.”

These are issues, and it’s possible to craft ads that
touch
on some of them. Landrieu’s town home on Capitol Hill,
where she works, and her relationship to the neighborhood, seems
like less of one.

That said, I wouldn’t go as far as Waldman does in rejecting the
entire genre of populist anti-Washington attacks. There is
a problem with Washington. It’s just that the problem isn’t that
longtime legislators live there, or own homes near their offices,
or don’t own a sufficient amount of property in their
districts.

The problem is that Washington isn’t, or at least shouldn’t be,
the core of what makes America great or important or interesting.
It’s a city of administrators and bureaucrats and rulemakers. Some
are necessary. Many are not. But the making of the bureaucratic
particulars shouldn’t be confused with the country’s purpose.
Washington should be as central to American life as filing cabinets
and basement storage systems are to one’s home.

It’s not that the various mechanisms and organizational schemes
aren’t important—they are, and often require considerable time and
thought and effort to implement and maintain well—but ultimately
they should exist to free people up to do other things, rather than
live strictly in service of themselves.

But that’s a broader problem with a culture and sensibility more
than with any particular candidate, and it’s harder to run ads
against. 

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Study: People Faster to Shoot White Suspects than Black Suspects

Gun A new study in the Journal of Experimental
Criminology
finds in an experiment measuring the reactions of
participants to various threatening situations that people tended
to pull the trigger faster when confronted by armed white suspects.
This sounds counterintuitive to most people (including me). A 2001
Bureau of Justice Statistics report (latest
available) analyzed justifiable homicides and noted:

Felons justifiably killed by police represent a tiny fraction of
the total population. Of the 183 million whites in 1998, police
killed 225; of the 27 million blacks, police killed 127. While the
rate (per million population) at which blacks were killed by police
in 1998 was about 4 times that of whites, the difference used to be
much wider: the black rate in 1978 was 8 times the white rate.

The BJS study also found that black suspects were also as likely
to shoot at police as be shot at.

In the deadly force experiments participants (85 percent white)
face a life-sized HD video screen on which the stance, clothing,
hand motions, objects being held, and race of suspects can all be
modified. The subjects are hooked up to brain wave measuring
devices and can respond using a laser gun. The
press materials
from Washington State University detailing the
results report:

Participants in an innovative Washington State University study
of deadly force were more likely to feel threatened in scenarios
involving black people. But when it came time to shoot,
participants were biased in favor of black suspects, taking longer
to pull the trigger against them than against armed white or
Hispanic suspects…

[WSU researcher Lois] James’ study is a follow-up to one in
which she found active police officers, military personnel and the
general public took longer to shoot black suspects than white or
Hispanic suspects. Participants were also more likely to shoot
unarmed white suspects than black or Hispanic ones and more likely
to fail to fire at armed black suspects.

“In other words,” wrote James and her co-authors, “there was
significant bias favoring blacks where decisions to shoot were
concerned.”

When confronted by an armed white person, participants took an
average of 1.37 seconds to fire back. Confronted by an armed black
person, they took 1.61 seconds to fire and were less likely to fire
in error. The 24-millisecond difference may seem small, but it’s
enough to be fatal in a shooting.

This hesitation occurred even though the electroencephalograph
generally identified brain wave patterns indicating significantly
greater threat responses against black suspects than white or
Hispanic suspects. So then why the difference?

James and her team speculate:

This behavioral ‘counter-bias’ might be rooted in people’s
concerns about the social and legal consequences of shooting a
member of a historically oppressed racial or ethnic group.

Sometimes a social science study turns up something
interesting.

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Black Americans Failed by Good Intentions: Q/A with Jason Riley

“Black Americans Failed by Good Intentions: Q&A with Jason
Riley” is the latest video from Reason TV.

Watch above or click on the link below for downloadable video,
full transcript of interview, supporting links, and more Reason
TV.

View this article.

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Ukraine PM Pours More Cold Water On Latest “Ceasefire”

While the ‘market’ has rallied to record highs this morning, “proving” to some talking-heads that this cease-fire is real this time, it appears Ukraine’s Prime Minister Arseniy Yatsenyuk isn’t buying it…

  • *YATSENYUK SAYS NO ‘TRUST’ IN PUTIN’S PEACE PLAN FOR UKRAINE
  • *RUSSIA VIOLATED OR IGNORED ALL PRIOR AGREEMENTS, YATSENYUK SAYS
  • *PUTIN SEEKING TO RUIN UKRAINE, RESTORE SOVIET UNION: YATSENYUK

So that would be the opposite of what the ‘market’ is pricing in? Of course, what does Ukraine’s PM know… the market is efficient after all, right?

Yatsenyuk goes on to note:

  • *PUTIN PEACE PLAN AIMS TO FREEZE CONFLICT IN UKRAINE: YATSENYUK
  • *UKRAINE AWAITS EU, NATO DECISION TO STOP ‘AGGRESSOR’: YATSENYUK

*  *  *

So “stopping the aggressor” and “seeking to ruin” Ukraine do not seem like de-escalation-y talk to us?




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How China Prepares For Domestic Terrorism

Just in case ISIS, or any of the various weaponized local groups of discontents get any ideas and decide to bring their “terrorism” to China’s megacities, here is how the local authorities prepare for just such occasions. The photos below show the Beijing police conducting the appropriately named “One-minute handling” anti-terror drill taking place in one of the city’s commercial centers.

While in itself it is hardly surprising that the world’s most populous country is preparing for Plan B, one does wonder just what the local Politburo may be seeing especially in the aftermath of the images from May which captured the riot police training for a “working class insurrection” making one wonder: just what is considered terrorism in China?

Source: Global Times

 




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These Clues Can Help Identify Innocent People to Hassle, Confine, and Forcibly Treat

“These Clues Help Identify a Mentally Ill ‘Lone
Gunman’ Before Tragedy Strikes,” says the headline over a
Huffington Post essay
by Canadian psychologist Romeo Vitelli. Nine hundred words later,
Vitelli has arrived at the end of his post, and he still has not
revealed any of those clues. His bait and switch illustrates the

false promise
that paying more attention to “warning signs” can
prevent mass shootings and other acts of violence by unhinged
malcontents.

“In one recent study comparing lone right-wing offenders
to right-wing offenders belonging to larger organizations,” Vitelli
writes, “the rate of mental illness was significantly higher among
the lone offenders.” I thought we were looking for factors that
distinguish people who commit acts of violence from people who
don’t, not factors that distinguish one kind of violent criminal
from another. Even assuming that “the rate of mental illness” is
higher among unafilliated terrorists than among the general
population (as seems likely), how useful is that
information?

“Among the diagnoses linked to potential violence are
schizophrenia and mood disorders (usually depression),” Vitelli
writes. But he concedes that “most people with these disorders
are not a violent risk.” Furthermore, “t
hough some
lone offenders may have a previous history of minor offending, most
have no previous history of violence,” and they “act normally to
avoid suspicion until the offense happens.”

You’d think that last observation would be enough to
discourage Vitelli, but you’d be wrong. Although he cautions that
lone offenders “can vary widely in terms of what may have driven
them to violence,” he mentions divorced parents, “major life
change,” “acute stress,” a recent experience with “prejudice,” and
“recent financial problems” as other possible markers of homicidal
impulses. The problem with “clues” like these is that they identify
a very large population of suspects, almost none of whom will turn
out to be guilty.

The same is true of people who say weird or disturbing
things online. Yet Vitelli thinks the British government is onto
something with its Fixated Threat Assessment Centre, which aims to
protect members of the royal family and other public figures by
“monitoring social media for ‘manifestos’ being published or other
suggestions that some sort of violent incident is about to happen.”
Apparently if someone’s comments about Prince Charles are deemed
excessively vituperative, he can expect a visit from the
authorities. Not that posting a manifesto is necessarily a crime;
it may merely be a symptom of treatable mental illness.
Along with identifying potential threats,” Vitelli
cheerily informs us, “FTAC also provides psychiatric services to
defuse the threat where possible.” 

Imagine how many such services could be provided if FTAC
were transplanted to the U.S. and expanded to protect not just
celebrities but the whole population. In case you are wondering how
those services feel to people on the receiving end, consider the
experience of Brandon Raub, a Virginia man who was locked in a
psychiatric institution and
forcibly evaluated
because of political opinions he expressed
on Facebook. Judging from his
lawsuit
, Raub did not appreciate those services.

Vitelli laments that “police and security agencies are
usually not able to act until an actual criminal offense occurs.”
He does not seem to consider the possibility that there are sound
civil lbertarian reasons for that inability. 
But
don’t worry: “research…can help these agencies make more informed
decisions about how to intervene before it is too late.” After all,
“whether or not they are able to act in time can often spell the
difference between life and death.”

If Vitelli had provided even a single example of a mass
murder prevented by the sort of intervention he has in mind, his
argument would be stronger. But it still would not account for all
the innocent people caught in the psychiatric dragnet he is
proposing.

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Saxo Bank Warns Swiss Franc Tail Risk Is Concerning

Submitted by Saxobank's Steen Jakobsen via TradingFloor.com,

In a nutshell: The chance of EURCHF breaking the peg at 1.2000 have increased from 10% to 25-30% based on European Central Bank monetary policy, geopolitical risk and a lack of policy choices for the Swiss National Bank. This means that the weighted risk is now 9 figures – significantly up from 2 figures when I did a similar calculation back in 2011/12. ((1.2000-.9000= 30 figures) x 30% = 9 figures of risk) .This means that being long EURCHF no longer is a safe bet and although the 70% chance of the floor being both defended and protected is still high, the tail-risk involved is becoming to concerning.

Swiss Franc feels the love

It’s been a while but now the Swiss franc is yet again the world’s currency of choice. Back in September 2011 Swiss National Bank, SNB, introduced a floor at 1.2000 to the euro. Ever since, EURCHF has traded in a narrow range of plus or minus 2-3% but while geopolitical risk and desperate central banks have been ignored in energy, volatility and risk trading the Swiss Franc has once again become mighty.

There is a big difference from 2011/12 to now. Back then, the SNB reacted to a currency strengthening from 1.5000 to the euro to 1.2000 and then down to 1.0000. The import lines were massive and deflation was a real risk for a central bank known for its inflation targeting.

Today Switzerland runs a 10% current account surplus with CHF 453 billion in reserves and excess liquidity of CHF 317 bn in the banking system. Dutch and pan-European banks are moving money out of the ECB at minus 0.1% to a Swiss bank still paying a positive rate. The liquidity richness creates a massive bubble in housing and any other traded Swiss asset.

Meanwhile the ECB is indicating that it will engage full quantitative easing and even conduct a debasing of the euro. At least that is if you listen to Francoise Hollande and sometimes Mario Draghi.

To make things worse, the SNB has put itself in a corner. It’s hard not to say impossible to pursue: free capital movement, a pegged currency rate and trying to run an independent monetary policy at the same time.

You can run one or maybe even two, but not three. Just ask China, England before 1992 or any pegged currency central bank.

Three choices

1. Let the floor go…

 

2. Adjust the rate down slowly if capital inflow and revaluation continues

 

3. Accept further bubble like housing and equity markets.

To let the floor go directly without a fight is not going to happen. SNB President Thomas Jordan underlined the commitment in NZZ am Sonntag: ‘the peg is absolutely central to ensure adequate monetary policy in Switzerland – economic outlook having deteriorated. "
 
From a historical perspective, few pegs work. Just ask the Bank of England – I am old enough to remember the unpegging of GBPDEM – mind you – we all wanted to sell GBP, not buy it!

When you fix anything in an economic system you reduce your amount of freedom. Ironically the SNB has limited its own freedom voluntarily by pegging its currency. Now the anchor currency, the euro, desperately needs to weaken due to its own limitation. One euro for a vastly different Europe. It’s from this inability to move both in Switzerland and in Europe, that the bigger risk stems for EURCHF traders.

The timing of course is everything – the pressure is building week by week, but personally I doubt anything happens before the AQR – the asset quality review of European banks. I know for a fact that privately, SNB officials are concerned about the results and in particular for the German banking sector, so a strong CHF was expected, but not this early.

SNB is no longer alone in deciding whether the EURCHF pegs stays, it depends on ECB, Draghi, Vladimir Putin, and a number of other factors outside its jurisdiction. That’s the real difference and the real risk in EURCHF.

There is nothing more beautiful than love except when it’s unwanted.




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