Month: February 2016

Submitted by Paul-Martin Foss via The Mises Institute,

The insidious nature of the war on cash derives not just from the hurdles governments place in the way of those who use cash, but also from the aura of suspicion that has begun to pervade private cash transactions. In a normal market economy, businesses would welcome taking cash. After all, what business would willingly turn down customers? But in the war on cash that has developed in the thirty years since money laundering was declared a federal crime, businesses have had to walk a fine line between serving customers and serving the government. And since only one of those two parties has the power to shut down a business and throw business owners and employees into prison, guess whose wishes the business owner is going to follow more often?

The assumption on the part of government today is that possession of large amounts of cash is indicative of involvement in illegal activity. If you’re traveling with thousands of dollars in cash and get pulled over by the police, don’t be surprised when your money gets seized as “suspicious.” And if you want your money back, prepare to get into a long, drawn-out court case requiring you to prove that you came by that money legitimately, just because the courts have decided that carrying or using large amounts of cash is reasonable suspicion that you are engaging in illegal activity. Because of that risk of confiscation, businesses want to have less and less to do with cash, as even their legitimately-earned cash is subject to seizure by the government.

Restrictions on the use of cash are just some of the many laws that pervert the actions of a market economy. Rather than serving consumers, businesses are forced to serve the government first and consumers last. Businesses act as unpaid tax agents, collecting sales taxes for state governments and paying excise taxes to the federal government, the costs of which they pass on to their customers. Businesses act as enforcers of vice laws, refusing tobacco sales to those under eighteen or alcohol to those under twenty-one. Financial institutions, which includes coin dealers, jewelers, and casinos, are required to report cash transactions above $10,000 as well as any activity the government might deem “suspicious.” Cash becomes such a hassle that it is almost radioactive, and many businesses would rather not deal with the burden. Using cash to buy a house is becoming impossible and it is probably only a matter of time before purchasing a car with cash will become incredibly difficult also.

Centuries-old legal protections have been turned on their head in the war on cash.

Guilt is assumed, while the victims of the government’s depredations have to prove their innocence. Governments having far more time and money to devote to asset forfeiture cases than the citizenry, most victims of cash seizures decide to capitulate rather than attempt a Pyrrhic victory. Those fortunate enough to keep their cash away from the prying hands of government officials find it increasingly difficult to use for both business and personal purposes, as wads of cash always arouse suspicion of drug dealing or other black market activity. And so cash continues to be marginalized and pushed to the fringes. Stemming the anti-cash tide will require a societal attitudinal adjustment that views cash not as something associated with crime, but as a bastion of consumer freedom and a bulwark against overzealous governments.

via Zero Hedge http://ift.tt/1P7P908 Tyler Durden

Iraq probably didn’t need to become any more fractious.

The country is deeply divided along sectarian lines with the Shiite government effectively making up for lost time spent under Saddam by marginalizing Iraq’s Sunni minority in the wake of the US invasion that ousted the Ba’athists.

Complicating matters is the presence of Islamic State (which in its early days recruited from the ranks of Saddam’s conquered security apparatus), who still control the country’s second-largest city as well as several oil fields.

And then there are the Kurds, whose semi-autonomous status has gotten less “semi” the more chaotic the country becomes.

As we recounted in detail back in November, a key point of contention between Erbil and Baghdad is oil revenue. SOMO wants the KDP to transfer some 500,000 b/d of oil production to SOMO and in return, the Kurds are supposed to get 17% of Iraqi oil proceeds.

Without delving too far into the specifics, just know that the two sides have never really been able to come to a comfortable and/or lasting consensus and so, the Kurds have moved to export their oil independent of SOMO to the tune of some 630,000 b/d. The revenue from those sales is Erbil’s lifeblood and the money also pays the salaries of the Peshmerga – the Kurdish fighters who have proven to be particularly effective at battling ISIS and who are allied closely with the American boots on the ground in the country.

Now, in a move that’s sure to irk Baghdad, Kurdistan President Massoud Barzani has declared that “the time has come and the situation is now suitable for the Kurdish people to make a decision through a referendum on their fate.”

In other words, Barzani wants to see what his people think about the prospect of declaring statehood.

“The chaos created by Islamic State’s occupation of swathes of Iraq and Syria has given Kurds a chance to further their long-held dream of independence,” Reuters writes, adding that “the region is currently struggling to avert an economic collapse.”

Barzani was careful to say that the referendum wouldn’t necessarily lead to a formal declaration.

“That referendum does not mean proclaiming statehood, but rather to know the will and opinion of the Kurdish people about independence and for the Kurdish political leadership to execute the will of the people at the appropriate time and conditions.”

Right. It’s not entirely clear what’s “appropriate”, but one has to think that if ever there were a “time” that was not “appropriate,” it would be now. 

“Both the referendum on independence — which Iraq’s federal government opposes — and the issue of which areas it covers will raise tensions between the autonomous Kurdish region and Baghdad, potentially complicating anti-IS efforts,” AFP writes. “The region officially includes three provinces, but Kurdish forces now hold parts of four more over which the federal government wants to maintain control.”

Specifically, Baghdad won’t be keen on giving up Kirkuk, the oil-rich province in the north currently held by the Peshmerga.

It’s also unclear if Barzani could count on Recep Erdogan to support independence. As AFP correctly notes, “Turkey fears that having a Kurdish state on its southern border, or even moving toward one, could increase calls for similar action within its own territory.” In other words, it could embolden the PKK and the HDP whose politicians have called for Kurdish autonomy in Turkey.

Additionally, the harsh economic realities that accompany sub-$30 crude would make an independence push even more difficult. “There is no on-the-ground justification for a referendum now,” Kirk Sowell, a Jordan-based political risk analyst who spoke to AFP said. “You don’t form a state when you are in the middle of an economic collapse.” 

Some have suggested that Barzani is simply attempting to foment a bit of expedient nationalism to rally the people. As Reuters goes on to point out, “Barzani’s mandate as president expired last year, but he remains in office.” In short, he could be out to create a distraction.

“The same way that Scotland, Catalonia and Quebec and other places have the right to express their opinions about their destiny, Kurdistan too has the right, and it’s non-negotiable,” Barzani declared.

We imagine Baghdad begs to differ.

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

We previously covered the recently burst mega-Ponzi scheme fraud, Ezubao, the biggest in Chinese history which conned more than 900,000 investors out of $7.6 billion in less than two years under the guise of being a P2P lending platform, in this is what happens when “Chinese Investors Find Out They Got Fleeced By A $7 Billion Ponzi Scheme” and in “We Need To Rise Up”: Bilked Chinese Investors Call For Nationwide Uprising After Massive Ponzi Uncovered.” 

Of course this being China, even the Ponzi schemes are next level: as we noted before, police had to use two excavators and dug for 20 hours to unearth 80 bags of evidence that Ezubo executives had buried six meters underground on the outskirts of Hefei, a city in the eastern province of Anhui.

Then overnight, Reuters added some more juicy details to this epic fraud: executives at Ezubao’s parent company, Yucheng Group, now say it was “a complete Ponzi scheme”, which used investor funds to support a lavish lifestyle, the official Xinhua News Agency reported this week.

Among gifts that Yucheng Chairman Ding Ning gave his president, Zhang Min, were a $20 million Singapore villa, a $1.8 million pink diamond ring, luxury limousines and watches and more than $83 million in cash, Xinhua stated.

Amazing, but the real question is just how many other Ezubao are lurking. The short answer: many.

China’s P2P and the online finance industry also serve as a critical channel for the emerging small business and consumer market, which is often ignored by banks and mainstream financial institutions. iResearch predicts China’s unsecured consumer finance market alone will triple in size by 2019, reaching outstanding loans of over $1.7 trillion.

 

By November, there were over 3,600 P2P platforms as the industry raised more than 400 billion yuan, according to the China Banking Regulatory Commission (CBRC). More than 1,000 of those were problematic, it said.

 

The consequences when these schemes fail can be devastating, said Yang Dong, vice-dean at Renmin Law School and an expert on finance and securities law. “The harm is obvious. It’s going to damage financial reforms, cause social unrest and destabilize the regime to some extent,” he told Reuters.

400 billion yuan means as much as $60 billion in investor funds may have been Corzined from millions of soon to be very angry Chinese investors: we eagerly wait to discover their reaction when they learn the news.

But how could China’s regulators be so asleep at the wheel? How could they allow such massive Ponzi schemes, which all guaranteed double digit returns and promised investors they would “get rich quick” at a time when the economy is foundering, to proliferate so easily for so long?

The answer brings us to the punchline of this post.

According to Reuters, it all has to do with the utter disdain that China’s ruling echelon has for its upwardly mobile middle class, and specifically those tens of million of Chinese retail investors who have now been burned so badly in just the span of one year participating in a market which everyone warned for months is an epic bubble waiting to burst and which, well, burst and has been crashing ever since last summer.

Here it is:

A report on China’s stock market crash authored last year by former senior officials, including former central bank vice governor Wu Xiaoling, said Chinese retail investors are short-sighted, have a weak investment philosophy and a herd mentality.

And there it is: central bankers who abuse the naive stupidity and herding of those who are “short-sighted” enough, to put trust in the system.

But the real problem is that this is not just a Chinese issue: this is prevalent across the entire world, in both Emerging and Developing countries, as a result of the hubris, the arrogance and the megalomania of the tenured economist class and its sycophant media enablers, who as a result of centrally-planning the world for the past 7 years, are convinced they can treat those whose money they desperately need to preserve the status quo as cattle.

In China, they are in for a very rude awakening. And soon, once the hypnotic spell of central banker omnipotence finally wears off, the outcome will be the same around the globe, an outcome which anyone who lived through even a few years of Soviet central planning, knows how it ends.

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

 

 

 

By EconMatters

A weak U.S. Dollar and Production Cuts News mitigated a bad EIA Inventory Report today in the oil market.

 

 

 

 

 

 

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Via AetherCzar,

The 2016 Presidential election features a wide range of Republican contenders. How do they compare to John Charles Fremont, who in 1856 became the very first Republican candidate for President? Adventurer, explorer, military officer, businessman, and U.S. Senator, the current contenders must pool their experience to match Fremont’s remarkable resume.

• Like Jeb Bush, Chris Christie, Mike Huckabee, and John Kasich, Fremont was a governor. Only he became the military governor of northern California by right of military conquest, not election.
• Like Ted Cruz, Marco Rubio, Rand Paul, and Rick Santorum, Fremont was a U.S. Senator – one of the first two U.S. Senators selected by the new state of California to represent the state in Washington.
• Like Donald Trump and Carly Fiorina, Fremont was a businessperson. His $10M California gold country holdings were worth the equivalent of perhaps a half billion dollars today, making Fremont, like Trump, one of the wealthiest candidates for president in U.S. history.

Fremont’s resume included additional accomplishments without parallel among the current contenders. His distinguished career of exploration helped open the West to settlement and popularized the region to countless emigrants who used his reports as their guidebooks: Mormon settlers in Utah, California’s Forty-Niners, and emigrants to Oregon. His unorthodox campaign to conquer California ultimately succeeded, but left him court-martialed and disgraced.

Fremont’s colorful life and career made him vulnerable to allegations of scandal. As a 27-year-old officer, he wooed Jessie Benton, the 15-year-old daughter of Senator Thomas Hart Benton. Despite the senator’s best efforts to keep the pair apart, they wed in secret when she was 17. Her father reconciled himself to the inevitable, and Jessie Benton Fremont ultimately played a crucial role in helping her husband compile and write the popular reports of his expeditions.

Fremont’s campaign was dogged by claims of illegitimate birth, secret Catholicism, and even cannibalism. Some of these claims were true.

And Fremont was hindered by his principled and steadfast opposition to the further spread of slavery – the issue that in four short years would propel the nation into a bloody Civil War.

via Zero Hedge http://ift.tt/1PB6Oij Tyler Durden

Last week we identified a “bargain” in Canadian real estate.

As you might recall, the Canadian economy is in a bit of a tailspin, and that goes double for the country’s dying oil patch. Indeed, we’ve documented Alberta’s painful experience with slumping crude exhaustively, noting that the steep decline in oil prices has triggered job losses (which hit their highest level in 34 years in 2015), depression, suicides, soaring food bank usage, and a marked uptick in property crime.

Through it all, parts of the real estate market in Canada remain red hot. In stark contrast to the millions of square feet of office space sitting vacant in beleaguered Calgary, Toronto and Vancouver are on fire.

Housing sales in the Toronto area rose 8.2% last month from a year earlier. The average selling price: $631,092.

In Vancouver, the numbers are simply astonishing. Residential property sales in Greater Vancouver rose 31.7% in January. That’s 46% above the 10-year sales average for the first month of the year and the second highest January ever, the Greater Vancouver Real Estate Board notes. The benchmark price for a detached home in Vancouver: $1,293,700. The benchmark price for an apartment: $456,600.

But it gets still crazier. The “benchmark” price represents what the Real Estate Board says a “typical” home would go for on the market. If we simply take the arithmetic mean (i.e. the average), the numbers are even more astounding. As CTV news reports, the average selling price of detached homes was much higher last month – at an astronomical $1.82 million.

“Home buyer demand is at near record heights and home seller supply is as low as we’ve seen in many years,” REBGV President Darcy McLeod said.

So a seller’s market. Got it. 

In fact, it’s such a seller’s market that as we showed last week, prices on “fixer uppers” have gone through the roof. Here’s what you can get for $2.4 million in Point Grey:

As CTV news also reports, the house shown above is actually in one of Vancouver’s most desirable neighborhoods that’s home to “A-list neighbours include Lululemon founder Chip Wilson and celebrity environmentalist David Suzuki.”

So “location, location” we suppose. 

There are couple of rather obvious questions that come to mind when assessing all of the above. First, what happens if Canada’s recession deepens amid a protracted slump in oil prices? You certainly don’t want to be in a position wherein you’ve paid $1.9 million for a home just prior to getting laid off. After all, the debt service burden is already quite high in Canada:

Also, who in the banking sector is most exposed to this lunacy? This quite clearly isn’t sustainable, especially given the outlook for the Canadian economy, so who on Bay Street is on the hook? 

Finally, we wonder if there are exogenous factors at play here. That is, is this all domestic demand or could it be that “Mr. Chen” is effectively arbing the inexorable CAD decline versus USD on the way to funneling Chinese money into Canadian real estate thus driving up prices? We close with a simple flow chart.

 

Incidentally, British Columbia is now studying the level of foreign investment in the real-estate market. “I think with more data, we’ll be able to get a grasp on how to address it better because affordability, especially in the city of Vancouver, less so in the suburbs but certainly there as well, is a real issue and we have to find ways to address it,” Premier Christy Clark said Monday.

via Zero Hedge http://ift.tt/1QGTlV2 Tyler Durden

Submitted by Simon Black via SovereignMan.com,

Even before his coronation in 1626, King Charles I of England was almost bankrupt.

His predecessors King James and Queen Elizabeth had run the royal treasury down to almost nothing.

Costly war and military folly had taken its toll. The crown had simply wasted far too much money, and brought in too little.

To make matters worse, King Charles was constantly at odds with parliament.

The English government was completely dysfunctional, with constant bickering, personal attacks, and very little sound decision-making.

Parliament refused to pass the taxes that Charles needed to make ends meet. But at the same time, the King was legally unable to levy his own taxes without parliamentary approval.

So, faced with financial desperation, he began to look for alternative ways to raise revenue.

One way was relying on practically ancient, obscure laws to penalize his subjects.

The Distraint of Knighthood, for example, was based on an act from 1278, roughly three and a half centuries before Charles’ coronation.

The Act gave him the legal authority to fine all men with a minimum level of income who did not present themselves in person at his coronation.

Charles also commandeered vast amounts of land, restoring the boundaries of the royal forests to where they had been during the time of King Edward I in the 13th century.

He then fined anyone who encroached on the land, and resold much of it to industries that were supportive of his reign.

King Charles even resorted to begging; in July 1626, he requested that his subjects “lovingly, freely, and voluntarily” give him money.

When that didn’t work, the King levied a Forced Loan, effectively confiscating people’s funds under the guise of ‘borrowing’ it.

He raised about £250,000, the equivalent of about $7.5 billion today.

Emboldened by his success, Charles eventually seized assets directly, including all the gold on deposit being held at the Royal Mint– money that belonged to the merchants and goldsmiths of England.

At one point Charles even forced the East India Company to ‘loan’ him their pepper and spice inventory. He subsequently sold the products at a steep loss.

If any of this sounds familiar, it should.

Today there is no shortage of nations facing fiscal desperation. Most of Europe. Japan. The United States.

In the Land of the Free, the government has spent years… decades… engaged in the most wasteful folly, from multi-trillion dollar wars to a multi-billion dollar website.

US debt just hit $19 trillion a few days ago. And it’s only going higher.

We can already see the government’s financial desperation.

Over the years, the government has effectively levied a ‘forced loan’ totaling more than $2.6 trillion on the Social Security Trust Fund, whose ultimate beneficiaries are the taxpayers of the United States.

Bottom line, they’re ‘borrowing’ YOUR money.

Last year the government stole more from Americans through ‘Civil Asset Forfeiture’ than all the thieves in the United States combined.

In December, the US government confiscated $19.3 billion from the Federal Reserve, which, by the way, was already very thinly capitalized.

Even if you want to believe the propaganda, it’s clear that these are not the actions of a healthy, solvent government that embraces liberty.

In fact, the government published over 80,000 pages of laws, bills, regulations, and executive orders last year. Just this morning they published another 308 pages.

It’s impossible for anyone to keep up with all of these rules. And yet each can carry civil and criminal penalties, including a fine now for not having health insurance.

As Mark Twain used to say, history may not repeat, but it certainly rhymes.

Financially insolvent governments of major superpowers do not simply go gentle into that good night.

They don’t suddenly turn over a new leaf and start embracing economic freedom.

Instead, they get worse. More desperate. More destructive.

Should we honestly believe that they can continue racking up more debt than has ever existed in the history of the world without any consequences?

This is madness. At some point, fiscal reality always catches up. Maybe not at $19 trillion. Maybe not even at $20 trillion.

Maybe it takes 3 months. Or 3 years. But somewhere out there is a straw that can break the camel’s back. And that has serious consequences.

Never forget that if something is predictable, then it’s also preventable.

And facing such obvious trends, it makes all the sense in the world to take some simple, rational steps to put together your own Plan B.

via Zero Hedge http://ift.tt/1NQS21g Tyler Durden