Month: July 2017

Trump’s “up and down” relationship with China may be on the precipice of taking a sharp dive into the proverbial abyss.  After frequently threatening to label China a “currency manipulator” on the campaign trail last year, Trump’s relationship with China’s President Xi Jinping took a decided turn for the better after a meeting at Mar-a-Lago in which China vowed to help address the “menace of North Korea” .

I explained to the President of China that a trade deal with the U.S. will be far better for them if they solve the North Korean problem!

— Donald J. Trump (@realDonaldTrump) April 11, 2017

Had a very good call last night with the President of China concerning the menace of North Korea.

— Donald J. Trump (@realDonaldTrump) April 12, 2017

Why would I call China a currency manipulator when they are working with us on the North Korean problem? We will see what happens!

— Donald J. Trump (@realDonaldTrump) April 16, 2017

But apparently those efforts have officially failed:

While I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out. At least I know China tried!

— Donald J. Trump (@realDonaldTrump) June 20, 2017

And, shortly after those efforts were declared dead, the Trump administration signed a $1.3 billion arms deal with Taiwan, a deal which China has “demanded” be cancelled immediately.

Meanwhile, as the Financial Times points out today, in the midst of all the international crises, China has made great strides building out and further militarizing their disputed islands in the South China Sea.

Over the past three months, China has built four new missile shelters on Fiery Cross, boosting the number of installations on the reef to 12, according to satellite images provided to the Financial Times by the Center for Strategic and International Studies.

 

China has also expanded radar facilities on Fiery Cross and two other disputed reefs — Subi and Mischief — in the Spratly Island chain, and started building underground structures that Greg Poling, director of CSIS’s Asia Maritime Transparency Initiative, assesses will be used to store munitions.

 

“We haven’t seen any slowdown in construction, including since the Mar-a-Lago summit,” said Mr Poling. “The islands are built and they are clearly militarised, which means they already got over the hard part. Now every time they put in a new radar or new missile shelter, it is harder for the world to get angry. They are building a gun, they are just not putting the bullets in yet.”

The advances underscore how much progress China has made towards militarizing the man-made islands in ways that significantly enhance its ability to both monitor activity in the South China Sea and to project power in the western Pacific where the US has been the dominant power in the seven decades since the second world war.

Euan Graham, an Asia expert at the Lowy Institute in Sydney, said it was “not quite game over in the South China Sea” but that China had fundamentally altered the status quo over the islands that would be hard to change barring war or natural disasters.

 

“They already exert a strategic effect by projecting China’s presence much further out,” said Mr Graham. “They will not prevent the US Navy from operating in their vicinity, but they will complicate the threat environment for US ships and aircraft — by extending the [Chinese navy’s] surveillance and targeting net, as well as the envelope of power projection.”

Of course, these latest provocations come despite a promise made to Obama in 2015 that “China would not militarize the man-made islands”…a promise which the Obama administration apparently took at face value and proceeded to bury their heads in the sand.

During a visit to Washington, Mr Xi told Barack Obama in 2015 that China would not militarise the man-made islands, but in the intervening 20 months Beijing has stepped up construction, and now has runways that can accommodate Chinese fighter jets.

 

China’s legal claim to the seas around the maritime features is legally controversial since many were dredged out of coral and sand and thus not entitled to status as islands. But Vasily Kashin, an expert on the Chinese military at the Higher School of Economics in Moscow, said the goal was never legal sovereignty but to give China forward bases from which it could patrol and exercise control in their vicinity.

 

“If you have this infrastructure in the Spratlys, it allows China to constantly monitor aircraft and ships in the South China Sea. The point is that no one will be able to do anything in the area without them seeing.”

 

Ely Ratner, an Asia expert who served in the Obama administration, said Washington had failed to craft a strategy to convince China to halt militarisation of the man-made islands. “Until China believes that there will be significant costs . . . I don’t think they have any reason to slow down,” said Mr Ratner. “They have been pushing on an open door and have been surprised at how little resistance they have faced.”

 

Critics say the Obama administration took too cautious an approach to avoid creating tensions that would hurt the ability for co-operation on other issues. Meanwhile, some experts say the Trump team has given China a relatively free pass to maximise the chances it will boost pressure on North Korea to give up its nuclear programme.

Somehow we suspect the Trump administration will end up being slightly less “accommodating” over the long term…

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Illinois, Maine, Connecticut: the end of the old fiscal year and the failure of numerous states to enter the new one with a budget, means that some of America’s most populous states have seen their local governments grind to a halt overnight until some spending agreement is reached. Now we can also add New Jersey to this list.

On Saturday morning, New Jersey Gov. Chris Christie declared a state of emergency in the state, and announced a partial state government shutdown as New Jersey become the latest state to enter the new fiscal year without an approved budget after the Republican governor and the Democrat-led Legislature failed to reach an agreement by the deadline at midnight Friday, CBS New York reports.

WATCH: New Jersey Gov. Chris Christie announces state government shutdown amid budget impasse https://t.co/T5uqoA85rO http://pic.twitter.com/OHkOHXEl5P

— CBS News (@CBSNews) July 1, 2017

In a news conference Saturday morning, Christie blamed Democratic State Assembly Speaker Vincent Prieto for causing the shutdown. And, just like Illinois and Connecticut, Christie and the Democrat-led Legislature are returning to work in hopes of resolving the state’s first government shutdown since 2006 and the first under Christie, before NJ is downgraded further by the rating agencies.

“If there’s not a resolution to this today, everyone will be back tomorrow,” Christie said, calling the shutdown “embarrassing and pointless.” He also repeatedly referred to the government closure as “the speaker’s shutdown.”  Christie later announced that he would address the full legislature later at the statehouse on Saturday.

Prieto remained steadfast in his opposition, reiterating that he won’t consider the plan as part of the budget process but would consider it once a budget is signed.  Referring to the shutdown as “Gov. Christie’s Hostage Crisis Day One,” Prieto said he has made compromises that led to the budget now before the Legislature.

 

“I am also ready to consider reasonable alternatives that protect ratepayers, but others must come to the table ready to be equally reasonable,” Prieto said. “Gov. Christie and the legislators who won’t vote ‘yes’ on the budget are responsible for this unacceptable shutdown. I compromised. I put up a budget bill for a vote. Others now must now do their part and fulfill their responsibilities.”

Politics aside, the diplomaitc failure has immediate consequences for Jersey residents: Christie ordered nonessential services to close beginning Saturday. New Jerseyans were feeling the impact as the shutdown took effect, shuttering state parks and disrupting ferry service to Liberty and Ellis islands. Among those affected were a group of Cub Scouts forced to leave a state park campsite and people trying to obtain or renew documents from the state motor vehicle commission, among the agencies closed by the shutdown.

As funds run out elsewhere, it will only get worse.  Police were turning away vehicles and bicyclists at Island Beach state park in Ocean County.

BREAKING: NJ Park cops turn away dozens at Island Beach State Park in Govt #Shutdown @NBCNewYork @JSHurricaneNews @tedgreenbergNBC http://pic.twitter.com/NplmGahc4l

— Brian Thompson (@brian4NY) July 1, 2017

A sign posted at the park entrance featured a photo of Prieto and the phone number of his district office in Secaucus, along with the caption: “This facility is CLOSED because of this man.”

When asked about the sign, Christie spokesman Jeremy Rosen said the governor wanted to make sure people knew why the site was shuttered.  “Speaker Prieto singlehandedly closed state government,” Rosen said, adding that the governor wanted to make sure families “knew that the facilities were closed and who is responsible.”

Not all things will be affected: remaining open under the shutdown will be New Jersey Transit, state prisons, the state police, state hospitals and treatment centers as well as casinos, race tracks and the lottery. 

A major point of disagreement is the ongoing stalemate between Christie and lawmakers over whether to include legislation affecting the state’s largest health insurer into the state budget.

Christie and Senate President Steve Sweeney agree on legislation to make over Horizon Blue Cross Blue Shield, including allowing the state insurance commissioner to determine a range for the company’s surplus that if exceeded must be put to use benefiting the public and policyholders.  But Prieto opposes the plan, saying that the legislation could lead to rate hikes on the insurer’s 3.8 million subscribers and that the legislation is separate from the budget.  Prieto has said he will leave open a vote on the $34.7 billion budget that remains deadlocked 26-25, with 24 abstentions, until those 24 abstentions change their mind.

Real-time view of NJ government shutdown. Green/red indicates votes either way on budget. Yellow lights the culprits, says Assembly speaker http://pic.twitter.com/lRpzAPGcyH

— Bob Jordan (@bobjordanAPP) July 1, 2017

Democratic Assemblyman Vince Mazzeo, of Northfield, was among those abstaining. He reasoned that if the governor did not get the Horizon bill, then nearly $150 million in school funding — $9.6 million of which would go to his district — would be line-item vetoed out of the budget.   And indeed, Christie said Friday during a news conference that he would slash the Democratic spending priorities if he did not get the Horizon bill as part of a package deal on the budget.  “You want me to wave a magic wand to get a budget?” Christie said. “I can’t get a budget to my desk. Only the Senate and Assembly can get the budget to my desk.”

But where things may get nasty quick, is that Christie said public workers should not expect any back pay. “Yeah, don’t count on it.” Christie said of furlough pay. “That was Jon ‘I’ll Fight For a Good Contract For You’ Corzine. I ain’t him.”

Christie says no furlough pay now: “Yeah, don’t count on it. That was Jon ‘I’ll Fight For a Good Contract For You’ Corzine. I ain’t him.”

— Michael Symons (@MichaelSymons_) July 1, 2017

Meanwhile, the fingerpointing has begun, including Democrats pointing at other Democrats.

“It seems like he’s just being stubborn,” Mazzeo said of Prieto. “With all due respect to the speaker, then there should be some type of negotiations.” But Prieto said it’s lawmakers – fellow Democrats – like Mazzeo who are to blame for the shutdown. He said he is willing to discuss the Horizon legislation but after the budget is resolved.

Christie has balked at the proposal because he says lawmakers plan to leave town to campaign for re-election and he will be a lame duck.  According to CBS, all 120 lawmakers face voters this year.

Finally, putting the sheer chaos of it all in context, Christie who is term-limited and is expected to be out of office by January, has his family staying for the holiday weekend in a state-owned house at Island Beach State Park. The park is closed because of the shutdown.

via http://ift.tt/2stJr6O Tyler Durden

Via StockBoardAsset.com,

A new report and video out from NASA about the upcoming ‘solar minimum’ has been published. The report titled ‘Solar Minimum is Coming’ outlines every 11-years, the sun oscillates from a solar minimum to a maximum. Today, the sun is called “solar minimum,” says Dean Pesnell of NASA’s Goddard Space Flight Center in Greenbelt, MD. “And it’s a regular part of the sunspot cycle”. The sun is heading towards a solar minimum where the sunspot count will be relatively low.

The report goes on to say, “while intense activity such as sunspots and solar flares subside during solar minimum, that doesn’t mean the sun becomes dull. Solar activity simply changes form”. During a solar minimum, we can expect more space weather events called coronal holes.

According to the report, coronal holes are vast regions of the sun’s atmosphere where the sun’s magnetic field opens up and allows streams of solar particles to escape the sun as fast solar wind.

Pesnell says “We see these holes throughout the solar cycle, but during solar minimums, they can last for a long time – six months or more”. Solar particles from coronal holes are then ejected towards earth’s magnetic field causing space weather events.

Space weather refers to the environmental conditions in Earth’s magnetosphere, ionosphere and thermosphere due to the Sun and the solar wind that can influence the functioning and reliability of spaceborne and ground-based systems and services or endanger property or human health.

Meanwhile, The White House in October 2016 quietly passed through an Executive Order— “Coordinating Efforts to Prepare the Nation for Space Weather Events”. 

Here is snippet of section 1 of the executive order:   

Space weather events, in the form of solar flares, solar energetic particles, and geomagnetic disturbances, occur regularly, some with measurable effects on critical infrastructure systems and technologies, such as the Global Positioning System (GPS), satellite operations and communication, aviation, and the electrical power grid. Extreme space weather events — those that could significantly degrade critical infrastructure — could disable large portions of the electrical power grid, resulting in cascading failures that would affect key services such as water supply, healthcare, and transportation. Space weather has the potential to simultaneously affect and disrupt health and safety across entire continents. Successfully preparing for space weather events is an all-of-nation endeavor that requires partnerships across governments, emergency managers, academia, the media, the insurance industry, non-profits, and the private sector.

Back in April 2017, we wrote an article titled ‘Yesterday’s Broad Power Outage Likely Caused By Geomagnetic Storm‘. While everyone thought terrorism was to blame, we correctly pointed out that large power failures in major US cities was due to an intense geomagnetic storm registering 8-10 on K-Planetary Index.

Conclusion: Our fragile nation is not adequately prepared for space weather events as highlighted in the recent Exec Order.

Frankly, this should of been done years ago, but it appears that our nation will soon deal with the consequences such as April 2017 power failures in major US-cities. Couple the solar minimum period with The Fourth Turning in the west, and we’re staring at the perfect cocktail for self-destruction of an empire. Perhaps, the downfall of America is not some external threat that the mainstream media makes you believe, but in actuality, it’s an implosion from with-in. It’s happened to the greatest empires that have attempted to rule our planet, why not now? 

Don’t believe me? Here are various minimums verse the rise and fall of Chinese Dynasties

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It has been a trying time for the world’s central bankers, who for decades have been used to the “high finance” community’s adulation, derived from the deliverance of policy wrapped in so much opacity, gibberish and contradictions, that neither the central bankers, nor the markets, had any idea what was going on (see the Greenspan tenure), or dared to admit it was all meaningless drivel, resulting in phases during which the market was on “autopilot” and culminating with a bubble and subsequent crash, “rescued” by an even greater asset bubble and even greater crash, etc.

However, after generations of largely uncontested and unquestioned monetary policy where only the occasional “tinfoil” fringe blog dared to say that central banker emperors are not only naked and clueless but are also the cause of the world’s biggest problems, more and more voices are emerging to both challenge the prevailing monetary religiuous dogma as well as daring to tell the truth.

One example was Bank of America’s chief strategist, Michael Harnett, who on Friday confirmed what we had been saying for years, that  “central banks have exacerbated inequality via Wall St inflation & Main St deflation” and that the Fed failed in its mission to make the poor richer, instead its destructive policies have made the top 1% wealthier beyond its wildest dreams, and have been directly responsible for such political outcomes as “Brexit” and “Trump.”

Then there was the WSJ, which on the front page, led with a headline that would have been anathema for “established” (i.e. sycophantic) financial journalism as recently as a few years ago:

“Are Central Bankers Twisted Geniuses Or Bumbling Ex-Academics” the WSJ blasted on its front page, with James Mackintosh writing the following:

Are central bankers twisted geniuses manipulating the markets in order to meet their inflation goals? Or are they bumbling ex-academics whose ramblings are overinterpreted by investors besotted with their brilliance?

After last week’s “communication” debacle, and as a result of the unprecedented ongoing collapse in the yield curve and plunge in inflation expectations at a time when central banks are coordinatively hawkish resulting in ever more deflationary market outcomes, increasingly more observers have become convinced that “bumbling academics” is the correct answer.

Which brings us to the latest note by Deutsche Bank’s Dominic Konstam, who dares to go so far as to stake his team’s credibility in “fighting the Fed”saying that “If we are right, then [central banks] will be wrong” and adds that “we are biased towards a view that central bankers are not as powerful as they think they are in terms of delivering to their economic ‘targets”. Structural forces are more important.”

And so, the sellside mutiny against the Fed has officially begun, nearly 9 years after we first said that the Fed’s response to the financial crisis was the biggest financial mistake in the Fed’s 100+ years of existence. Of course, DB’s phrasing is somewhat more contained – for now – but the moment has come and gone: the Fed “emperor”, in this case Yellen, has been called out for being naked and this nobody can afford to ignore it any longer.

Below we present some of the key highlights from Konstam’s latest note, “Fumbling in the Dark?” which we are confident will be copied and immitated in the coming days, and may, in retrospect, have the same impact on the prevailing religious dogma involving monetary policy as Martin Luther’s 95 theses.

There is every possibility that global central banks have a good handle on the pulse of the global economy and know what they are doing. There is also every possibility that they don’t. The key will lie in the  adjustment process for risk assets, particularly equities as well as the data. And as we demonstrate below precisely because of the manner in which risk assets have performed since 2013, investors should not be complacent.

 

We think the apparent shift towards a more hawkish policy stance from the likes of Draghi as well as some of the smaller central banks needs to be viewed in terms of the complexity surrounding the Fed’s own normalization process. Inflation has disappointed and curve resteepening from last summer with a rise in inflation expectations has been reversed to various degrees. The fear is that all else equal more may follow. We think this is more about talking up the outlook than having any exceptional insight into the future.

 

 

We have been arguing the Fed (but also some other central banks) have bemoaned the flattening and shifting lower of the Phillips curve but remain hopeful that it will reverse. The “explanation” partly lies in the hope that there are non linearities in the relationship and wage inflation can suddenly kick up and/ or NAIRU may be being mis-estimated and so once we find NAIRU, the Phillips curve will “recover”. Equally important is a central bank self-justification that inflation targeting reinforces the Phillips curve. As the ECB has recently argued the existence of the Phillips curve relationship makes central bank policy easier in that it allows for a closer control of inflation outcomes implying less output gap sacrifices. Inflation expectations can be rapidly brought under control, when inflation is rising too much; and on the downside, falling inflation expectations can be pre-emptively stabilized allowing for more effective monetary policy through avoiding the classic liquidity trap (real rates are allowed to fall). The  fact that the central banks have had a poor record in reaching their inflation target is therefore of great concern in that it maybe undermining the Phillips curve. Therefore emphasizing that inflation is alive and well, perhaps even threatening to raise the inflation target as the IMF has suggested is a rationale reaction to the evidence to date.

While the Fed’s grand, and hopefully final Phillips curve experiment will soon be over (spoiler alert: it will be an epic disaster), the market is far more interested by a different offshoot of Fed policy: the Fed’s support and levitation of risk assets, and what happens now that all central bankers are seemingly warning investors to take profits as equities are “overvalued.” Here is Konstam:

The Fed also continues to be wary around the solid performance of risk assets which, in part thanks to the dollar, allowed for easier monetary conditions overall (FCI). Monetary tightening is supposed to tighten financial conditions and if it doesn’t, presumably there is a case for either more tightening or something to dampen FCI with the view that otherwise imbalances might develop that could threaten the longer term growth and inflation outlook. Easier FCI therefore is a foil to being more alert to inflation risk as and when (or if and when?) the Phillips curve kicks in.

 

* * * 

 

Whether or not the Fed needs to tighten financial conditions is the key question. Someone like Dudley clearly thinks it’s a good idea and Yellen while not explicitly targeting financial conditions, implicitly may have sympathy. And very obviously in late December 2015, when the Fed started to hike, only to call a year’s time out after the China mini crisis, that was all about financial conditions tightening too much .

 

We think there is a perfectly reasonable equilibrium where the Fed ignores financial conditions and tolerates further positive performance in equities in particular, with the weaker dollar, that ultimately allows for a better balanced recovery via stronger productivity. This would materialize in terms of our empirical models via a higher Tobin’s Q (ratio of equity market value to replacement cost value) that raises the investment rate and real investment growth which in turn raises the capital labor ratio and therefore productivity growth. It is the richness of equities that will encourage corporates to invest rather than  buyback their own stock or even others’. The buyback machine is a natural equity response to QE in that it is an “equity QE” side effect as equities look too cheap versus rates.

From a practical standpoint, Konstam focuses, as he traditionally has, on how future economic events will impact (reflexively) the term premium, inflation breakevens and the equity – and thus the Fed’s – response, a topic which BofA expanded on last week in “The Paint May Be Drying, But The Wall Is About To Crumble”: BofA Explains What The Market Is Missing.” Here he finds something interesting: the fate of stock prices may be far more closely tied to the BOJ than the ECB, or Fed:

[our model] highlights the relative importance of BoJ purchases to Fed and ECB. For a 100 bn in annualized purchases of each, the BoJ has been associated with a 15 bps decline in term premium, almost twice the impact of either the Fed or the ECB. While the market is rightly concerned about the extent and timing of ECB taper, the BoJ is potentially much more important to the rate outlook as it was in the middle of last year.

We, for one, can’t wait for the S&P to tremble and soar with every hiccup by Kuroda. And while DB does not reach a specific conclusion, suffice to predict that the Fed is now on a wrong path, it does highlight just how schizophrenic the central bankers have become in a time when they are forced to one thing, and then its opposite in hopes of achieving the same outcome:

Deutsche also points out the schizophrenic nature of the Fed’s “reaction function” if such a thing can even be said to exist any more, and why policy error is now virtually assured:

Ironically, in other times, central banks might have been expected to talk about more accommodation not less in the face of flatter yield curves and lower inflation expectations. In talking up inflation and talking down accommodation we think they hope to achieve the same result. It is a very different script which is understandable but not necessarily proven to succeed. It falls into the same category of thought that higher rates stimulate growth not lower rates and reflects complex models around the role of forward guidance and the formation of (inflation) expectations. It is understandable also why many investors lament an impending “policy error” as a result.

It is understandable. What isn’t understandable, however, is why the S&P remains just a few points away from its all time highs now that one bank after another has started to point out that the emperor has been naked all along.

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Authored by Alice Salles via TheAntiMedia.org,

One of the few elected Democratic lawmakers with an extensive anti-war record, Rep. Tulsi Gabbard (D-Hawaii), has combined forces with Sen. Rand Paul (R-Kentucky) to push legislation through both the House and the Senate that would bar federal agencies from using taxpayer-backed funds to provide weapons, training, intelligence, or any other type of support to terrorist cells such as al-Qaeda, ISIS, or any other group that is associated with them in any way.

The Stop Arming Terrorists Act is so unique that it’s also the only bill of its kind that would also bar the government from funneling money and weapons through other countries that support (directly or indirectly) terrorists such as Saudi Arabia.

To our surprise — or should we say shame? — only 13 other lawmakers out of hundreds have co-sponsored Gabbard’s House bill. Paul’s Senate version of the bill, on the other hand, has zero cosponsors.

While both pieces of legislation were introduced in early 2017, no real action has been taken as of yet. This proves that Washington refuses to support bills that would actually provoke positive chain reactions not only abroad but also at home. Why? Well, let’s look at the groups that would lose a great deal in case this bill is signed into law.

Military & Homeland Security Companies, Lobbyists, And Lawmakers All Profit From War

With trillions of tax dollars flowing to companies such as Boeing, Lockheed Martin, and even IBM, among others, companies that invest heavily in weapons, cyber security systems, and other technologies that are widely used in times of war would stand to lose a lot — if not everything — if all of a sudden, the United States chose to become a nation that stands for peace and free market principles.

For one, these companies have a heavy lobbying presence, ensuring that lawmakers sympathetic to their plight are elected every two years. When the possibility of a new conflict appears on the horizon, these companies are the first to lobby heavily for action.

But this dynamic isn’t a secret. We all know that the crony capitalist system that thrives in Washington, D.C., is the very bread and butter of politics in America. After all, President Dwight D. Eisenhower warned the nation in his farewell address in 1961 that “an immense military establishment and a large arms industry” were becoming the great powers behind U.S. politics, and that if we weren’t weary of this influence, we would risk living in a perpetual state of war.

Still, we allowed it to take over. And there isn’t one industry powerful enough to counter this destructive authority.

With the support of an army of well-established and connected millionaire lobbyists, the war machine operating in Washington is so powerful that anything can be turned into an existential threat.

Any conflict abroad that has absolutely no importance or that poses literally no threat to the common American is inflated to become a threat to the American way of life. They hate us “for our freedom.” Therefore, we must show them what democracy looks like.

Without the same kind of powerful and wealthy team behind the cause for sanity and peace, this army of big money and big lobbyists has single-handedly put us and many generations to come in debt over Iraq, Afghanistan, Pakistan, Libya, Yemen, and now Syria. And as the marketing machine behind this kind of lobbying effort taps into the social justice trend that has infiltrated every aspect of our culture in recent years, these organizations have learned that they will get even broader support from the public if they add feminist, anti-poverty, and pro-equality messages to their pro-war efforts.

Take the #BringBackOurGirls campaign, for instance, which, as NBC has reported, originated with “Obiageli Ezekwesili, a former vice president of the World Bank for the Africa region and a senior advisor on Africa Economic Development Policy for the Open Society Foundations”  —  a George Soros-backed foundation. In no time, the social media “effort” had become the most effective lobbying force behind the expansion of the never-ending war on terror. And whether it was meant to promote this outcome or not, it helped the United States easily invest more tax dollars into an unwinnable war.

As you can see, even if Gabbard and Paul managed to use all of their time to force the Stop Arming Terrorists Act through Congress so it could get to President Donald Trump’s desk, the powers at play in Washington would do their best to sweep this effort under the rug. Not because individuals involved in pro-war lobbying are, perhaps, thirsty for war per se, but because the system under which they operate allows for bad incentives to produce a great deal of wealth and influence, tilting the balance toward evil.

Without a state that can be bribed, companies would be left to fend for themselves and stay afloat by making customers… happy. And you can’t make customers happy if all you have to offer is war.

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Amid knock-down, drag-out fights, scorpions, snakes, and ever-decreasing service standards, one airline just turned the amplifier of cost-cutting escapades up to '11'…

The Independent reports that budget airline VivaColombia is considering plans to remove all seats from its planes and make passengers stand. They hope the move will drive down fares by allowing them to squeeze more passengers into each flight, opening up air travel to working class Colombians and budget holidaymakers.

VivaColombia’s founder and CEO William Shaw told the Miami Herald the airline was looking into vertical travel options. He said:

“There are people out there right now researching whether you can fly standing up – we’re very interested in anything that makes travel less expensive.”

 

He added: “Who cares if you don’t have an inflight entertainment system for a one-hour flight? Who cares that there aren’t marble floors… or that you don’t get free peanuts?”

The concept is not new and airlines have been toying with the idea of standing sections on flights for years. In 2003 Airbus came up with an idea of allowing passengers to be braced in a vertical “seat”.

Ryanair also proposed standing areas on its fleet in 2010. At the time boss Michael O’Leary described the standing seats as “bar stools with seatbelts” and expressed doubts that seatbelts were even necessary.

 

“A plane is “just a b—– bus with wings”, he said, “If there ever was a crash on an aircraft, God forbid, a seatbelt won’t save you. You don't need a seatbelt on the London Underground. You don't need a seatbelt on trains which are travelling at 120mph.”

Civil Aviation Authorities disagree however, and vertical seats have not been approved by regulators in any country so far.

Civil Aviation Director Alfredo Bocanegra told RCN radio that he does not approve.

 

“People have to travel like human beings,” he said. “Anyone who had ridden on public mass transport knows that it’s not the best when you’re standing.”

We are sure this will all end well, and besides, there's always external 'seating' for the really poor.

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Authored by John Mauldin via MauldinEconomics.com,

Switzerland is a small country of just 8 million people, but they make an outsized impact on economics and finance and money.

Because Switzerland is considered a safe haven and a well-run country, many people would like to hold large amounts of their assets in the Swiss franc. This makes the Swiss franc intolerably strong for Swiss businesses and citizens.

So the Swiss National Bank (SNB) has to print a great deal of money and use nonconventional means to hold down the value of their currency. Their overnight repo rate is -0.75%.

That’s right, they charge you a little less than 1% a year just for the pleasure of letting your cash sit in a Swiss bank deposit.

Switzerland Is Buying US Stocks on an Enormous Scale

And the SNB is buying massive quantities of dollars and euros, paid for by printing hundreds of billions in Swiss francs.

The SNB owns about $80 billion in US stocks today (June, 2017) and a guesstimated $20 billion or so in European stocks (this guess comes from my friend Grant Williams, so I will go with it).

They have bought roughly $17 billion worth of US stocks so far this year. And they have no formula; they are just trying to manage their currency.

Think about this for a moment: They have about $10,000 in US stocks on their books for every man, woman, and child in Switzerland, not to mention who knows how much in other assorted assets, all in the effort to keep a lid on what is still one of the most expensive currencies in the world.

Switzerland is now the eighth-largest public holder of US stocks. It has got to be one of the largest holders of Apple.

What Happens When There Is a Bear Market?

Who bears the losses?

Print just more money to make up the difference on the balance sheet? Do we even care what the Swiss National Bank balance sheet looks like? More importantly, do they really care?

We all remember European Central Bank President Mario Draghi’s famous remark, that he would do “whatever it takes” to defend the euro. We could hear the Swiss singing from the same hymnbook soon.

Central Banks and Governments Exacerbate the Bubble

The point is that central banks and governments are flooding the market with liquidity all over the world.

That’s showing up in the private asset markets, in stock and housing and real estate and bond prices. It creates an unquenchable desire for what appear to be cheap but are actually overvalued assets—which is what creates a Minsky moment.

Now, remember what Minsky said: When an economy reaches the Ponzi-financing stage, it becomes extremely sensitive to asset prices. Any downturn or even an extended flat period can trigger a crisis.

While we have many domestic issues that could act as that trigger, I see a high likelihood that the next Minsky moment will propagate from China or Europe. All the necessary excesses and transmission channels are in place.

The Great Reset Is Close

The hard part, of course, is the timing. The Happy Daze can linger far longer than any of us anticipate. Then again, some seemingly insignificant event in Europe or China—an Austrian Archduke’s being assassinated, or what have you—can cause the world to unravel.

It’s a funny world.

Our central banks and governments exhibit unmistakable herd behavior and continue to do the same foolish things over and over. They never really intend to have the crisis that ensues.

Remember Farrell’s Rule 3: There are no new eras. The world changes, but danger remains. Gravity always wins eventually. It will win this time, too. And when it does, we will begin to undergo the Great Reset.

via http://ift.tt/2twg833 Tyler Durden

Content originally published at iBankCoin.com

If you thought Trump was going to chill out after the Morning Joe drama, you were wrong. He’s after Joe and Mika again, in addition to rubbing salt in the wounds of fake news media outlet, CNN.

Crazy Joe Scarborough and dumb as a rock Mika are not bad people, but their low rated show is dominated by their NBC bosses. Too bad!

— Donald J. Trump (@realDonaldTrump) July 1, 2017

I am extremely pleased to see that @CNN has finally been exposed as #FakeNews and garbage journalism. It’s about time!

— Donald J. Trump (@realDonaldTrump) July 1, 2017

Foreseeing the Russian scandal going nowhere, democrats are now preparing a new angle to remove the President, which entails invoking the 25th amendment, claiming the President is mentally unfit to rule.

The 25th amendment has never been tested and doesn’t apply to eccentric people. It was meant to be used for a truly mentally disabled sitting President, not one as lucid as Trump. Nevertheless, that isn’t stopping democrats, led by Rep. Raskin.

Rep. Raskin

The way it would work is simple. A council would be formed between democrats and republicans, both choose their favorite psychiatrists to evaluate The Donald, led by a former statesmen — like President Obama or Clinton. The group would then select another person to chair the council and the President would be thoroughly evaluated to determine if he could lead the American people in his mental state.

The only hitch: it needs the approval and blessing of the Vice President. Without Pence setting this carnivale in motion, it’d be very hard to start the process.

via http://ift.tt/2twyAsy The_Real_Fly

We’ve spent a lot of time of late writing about the pending collapse of the U.S. auto bubble.  When it comes, that collapse will, at least in part, be due to the fact that over the past 6 years, new leases, as a percent of overall car sales, have soared courtesy of, among other things, low interest rates, stable/rising used car prices and a nation of rental-crazed citizens for whom monthly payment is the only metric used to evaluate a “good deal”…even though leasing a new vehicle is pretty much the worst ‘deal’ you can possibly find for a rapidly depreciating brand new asset like a car…but we digress.

Of course, what goes up must eventually come down.  And all those leases signed on millions of brand new cars over the past several years are about to come off lease and flood the market with cheap, low-mileage used inventory. 

By the end of 2019, an estimated 12 million low-mileage vehicles are coming off leases inked during a 2014-2016 spurt in new auto sales, according to estimates by Atlanta-based auto auction firm Manheim and Reuters.

And, of course, that kind of supply increase will take it’s toll on used car prices…with Morgan Stanley recently noting that used car prices could drop by up to 50% over the next 5 years.

But apparently America’s “rental society” is rubbing off on Europeans and it has some auto ABS investors across the pond a bit worried about what it might mean for used car prices.  Here’s more from Bloomberg:

“If there’s a steeper decline in car values, then borrowers will be incentivized to return their vehicles and it will be bondholders who bear any losses,” said Aaron Baker, a London-based credit analyst at Banco Bilbao Vizcaya Argentaria SA. “This exposure to used-car prices could be catastrophic.”

 

While residual values have been securitized in the U.S. since at least the 1990s, Europe is now catching up. The number of transactions backed by residual values in the region rose to 14 in 2016 from just one in 2009, according to UniCredit SpA.

 

Almost 80 percent of the 6.2 billion euros ($7.1 billion) of auto-debt securitizations sold in Europe this year included cash flows from residual car values, up from 47 percent in 2012, according to data compiled by JPMorgan Chase & Co. In the U.K., deal exposure last year rose to as much as 55 percent from less than 20 percent in 2015, UniCredit data show.

But it’s not just leasing that’s taking hold…it seems that Europeans have generally embraced the creation of their own consumer credit bubble with 85% of cars now being financed versus only 50% back in 2009.

The trend toward securitizing residual car values is also being fueled by a rapid expansion of consumer credit. More than 85 percent of new cars in the U.K. are now financed, up from just over half in 2009, according to data from the FLA trade group. Most of that debt consists of so-called personal contract purchase agreements, which are similar to short-term leases and encourage buyers to return cars at the end of the contract.

 

That’s putting downward pressure on second-hand car prices, according to Moody’s Investors Service. It’s also increasing household borrowing, making automakers and consumers more vulnerable to any increase in interest rates.

 

“There’s no guarantee that actual residual value cash flows will match the expectation,” Moody’s warned in its rating of a Volkswagen AG deal in March.

Of course, we all know how this movie ends.  So, to our European friends, enjoy the centrally planned credit bubble while it lasts because when it all comes crashing down it is slightly less than pleasant.

via http://ift.tt/2ublRsC Tyler Durden