Month: October 2017

The Government Continues Attempts To Take Down Bitcoin Through Nefarious Means

Authored by Mac Slavo via SHTFplan.com,

The government really dislikes it when people make a living by conducting moral business practices without paying for their permission to do so. 

This is all too evident when examining the most recent arrest of a man for selling Bitcoin.

According to local news media reports, a Michigan man named Bradley Anthony Stetkiw has been charged by local authorities for operating an unlicensed money transmitting business.

The charges have been filed in US District Court. According to an indictment released by Detroit TV news services WD-IV Friday, the 52-year-old ran an exchange through the LocalBitcoins website, conducting transactions at restaurants in the Bloomfield area. 

Stetkiw is alleged to have sold bitcoin without a license (paying for permission from the government) as part of a business venture for approximately two years.

After selling about $150,000 in bitcoin, the feds set up a sting operation to catch Stetkiw. He sold more than $56,000 worth of bitcoin to federal agents through six meetings. Authorities say that that volume of transactions makes him subject to federal anti-money laundering regulations.

The government is not alleging that Stetkiw harmed anyone or took any property. 

He’s in trouble for not paying to register himself as a business. According to the indictment:

Operating under the user name ‘SaltandPepper,’ Stetkiw bought, sold and brokered deals for hundreds of thousands of dollars in bitcoins while failing to comply with the money transmitting business registration requirements set fort in Title 31, United States Code, Section 5330.

Earlier this year, Detroit resident Sal Mansy plead guilty to the charge of operating an unlicensed money services business. He allegedly conducted $2.4 million-worth of transactions over a two-year period ending in July 2015.

Other arrests in Missouri and New York suggest actions against independent U.S. bitcoin sellers are becoming more commonplace.

These arrests also suggest what many have feared for years: the government is attempting to take down bitcoin using nefarious means since they cannot figure out how to regulate the cryptocurrency.

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Dying Malls Increasingly Rely On Taxpayer Handouts For Survival

America’s dying malls have been a frequent topic of discussion of late as these relics of the 80’s have been forced to convert once valuable high-end retail square footage into grocery stores, libraries and doctor offices just to keep the lights on.  Here’s just a small sampling of the recent carnage:

But, as Bloomberg points out today, one other funding source is increasingly emerging as a key financial sponsor in the efforts of commercial REITs to re-purpose their failing assets: taxpayers.

In Brookfield, Wisconsin, for example, the city is using tax-increment financing (TIF), a common tool for municipalities to subsidize development by putting property taxes from new projects into a fund that pays for building cost, to help rebuild the Brookfield Square Mall. Meanwhile, as if that weren’t enough, the city has also agreed to pay for remediation costs related an old Sears auto repair shop and to build a new convention center and hotel where the Sears once stood.

In this depressing landscape, there is at least one player still willing to take the risk: local governments hungry for tax revenues. Developers incorporating additions such as housing and parks in their plans are turning to public partners to help rehabilitate the aging retail meccas that dot the U.S. Public subsidies have been part of retail development for decades, but with landlords pouring billions of dollars into renovation to battle a wave of store closures, public-private partnerships are more urgent, and more fraught, than ever.

 

At the Brookfield Square mall in Wisconsin, the landlord, CBL & Associates Properties Inc., needed a new occupant for a fading Sears. CBL had been tinkering with the mix for the past few years. Earlier, in 2008, it completed a 20,000-square-foot expansion, adding grocery stores and restaurants and renovating the interior.

 

In the end, it found its tenant: the city of Brookfield.

 

The local government plans to step in to build a conference center and hotel. By creating a hub for small and medium-size conventions on 9 of the 29 acres currently occupied by Sears, the city hopes to boost CBL’s efforts to reinvent the property, the largest taxpayer in Waukesha County. The idea is a greater focus on entertainment, recreation and business, according to Daniel Ertl, director of community development for the city of about 38,000.

 

“The Sears store is really a shadow of what it used to be,” Ertl said. “We encourage CBL to continue to reinvent themselves. God knows where retail is going to be in 20 years.”

Mall

As Bayer Properties CFO, Jami Wadkins, who just secured all sorts of taxpayer-funded handouts to rebuild a failed mall in Alabama, points out, public funding is becoming an “important element of the capital stack of every developer.”

These expansive developments often secure additional public financing through various forms of tax arrangements and incentives, as well as infrastructure spending for things like parking garages. Such funding has become an important element of the capital stack for every developer, according to Jami Wadkins, chief financial officer of Bayer Properties, a real estate company that develops and manages retail real estate.

 

In Birmingham, Alabama, Bayer worked with the city government to transform the site of the Pizitz, a historic department store that closed in 1987. The Pizitz, which Bayer bought as a vacant building in 2000, was in a rundown neighborhood that lagged behind the revival occurring in other areas of downtown.

 

Numerous plans ended up on the scrap heap before federal and state aid was secured to build a mixed-use community, which opened in 2016. The development houses 143 residential units — now 90 percent occupied — a co-working space, a food hall and retailers, including Alabama’s first Warby Parker.

 

The project cost was $70 million, including public and private funds. Bayer was able to obtain a low-interest loan from the U.S. Department of Energy, as well as tax credits from the state. The city paid to refurbish the landscaping in the area, including the sidewalks and street lamps, according to Wadkins.

 

“If you can put a plan together for a city that doesn’t put the city at great risk, then they will invest with you,” Wadkins said. 

To conclude, perhaps no one summarized this lunacy better than Ronald Reagan who succinctly described the Government’s approach to economic affairs as follows:

“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

Malls are clearly now in the “subsidize it” phase of the Government’s economic plan.

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The One Thing About Tax Reform That NO ONE is Talking About

The One Thing About Tax Reform That NO ONE is Talking About

The markets have been gunning higher on the notion that the Trump Administration is about to unveil a huge tax reform plan.

However, the devil is in the details. And thus far the plan is focusing on corporate tax reform, with the notion that an employer will somehow “pass on” their savings to employees via raises.

First off, while the phrase “corporate taxes” is a great political prop, the reality is that nearly 50% of large corporations pay ZERO corporate income tax.

That is not a typo.

In 2012, the Government Accountability Office performed a study in which it discovered that 43% of companies with $10+ million in assets pay ZERO corporate income tax.

It’s not as if the other 57% are picking up the slack either.

It is well known that large corporations go above and beyond to avoid paying the full, required tax rate. As Forbes noted earlier this year, Apple pays a 25% tax rate (the official US corporate rate is supposed to be 35%).  Microsoft pays a 16% tax rate. Alphabet (Google) pays 19%. General Electric and Exxon Mobil appear to have paid no corporate income tax in 2016.

My point is this: pursuing corporate tax reform is a pointless exercise.  Few if any corporations pay anywhere near the official corporate tax rate of 35%.

So what tax reform should we be talking about?

Individual tax reform.

And why aren’t we talking about it?

Because any discussion of individual tax reform eventually leads to the elephant in the room: entitlements.

The US currently spends 65% of it budget on entitlement spending. Nearly half of American households receive some kind of Government assistance/outlay. Those households that DO pay taxes cover only some of this (which is why the US is running $500+ BILLION deficits every year).

The bond bubble is financing the rest of this.

As I outlined in my best-selling book, The Everything Bubble: the Endgame for Central Bank Policy, politicians promise, but bond markets deliver.

Put simply, the bond bubble is what has financed the enormous entitlement spending of Governments around the world.

Take away the bubble in bonds, which permits Governments to issue debt at rates WAY below the historic average, and most major countries are bankrupt in a matter of weeks.

Well guess what? The bond markets are already beginning to revolt. As I write this, the bond yields on FOUR of the largest economies in the world are rising, having broken out of their downtrends of the last few years. The bond markets for US, Japan, Germany and the UK are all in revolt.

And guess what is triggering this?

INFLATION.

Inflation forces bond yields higher as the bond markets adjust to compensate for the fact that future interest payments will be worth less in real terms.

Bond yields higher= bond prices lower. Bond prices lower= the bond bubble is in serious trouble.

The above chart is telling us in very simple terms: the bond market is VERY worried about rising inflation. And if Central Banks don’t move to stop hit now by ending their QE programs and hiking rates, we’re in for a VERY dangerous time in the markets.

Put simply, BIG INFLATION is THE BIG MONEY trend today. And smart investors will use it to generate literal fortunes.

Imagine if you'd prepared your portfolio for a collapse in Tech Stocks in 2000… or a collapse in banks in 2008? Imagine just how much money you could have made with the right investments.

THAT is the kind of potential we have today. And if you're not already taking steps to prepare for this, it's time to get a move on.

We just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay ou as it rips through the financial system in the months ahead

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

http://ift.tt/2knowyr

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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We Live in Revolutionary Times


Pluto takes 248 years to orbit the sun.

The most recent, and perhaps most important, network challenge to hierarchy comes with the advent of virtual currencies and payment systems like Bitcoin. Since ancient times, states have reaped considerable benefits from monopolizing or at least regulating the money created within their borders. It remains to be seen how big a challenge Bitcoin poses to the system of national fiat currencies that has evolved since the 1970s and, in particular, how big a challenge it poses to the “exorbitant privilege” enjoyed by the United States as the issuer of the world’s dominant reserve (and transaction) currency. But it would be unwise to assume, as some do, that it poses no challenge at all.

Clashes between hierarchies and networks are not new in history; on the contrary, there is a sense in which they are history. Indeed, the course of history can be thought of as the net result of human interactions along four axes.

The first of these is time. The arrow of time can move in only one direction, even if we have become increasingly sophisticated in our conceptualization and measurement of its flight. The second is nature: Nature means in this context the material or environmental constraints over which we still have little control, notably the laws of physics, the geography and geology of the planet, its climate and weather, the incidence of disease, our own evolution as a species, our fertility, and the bell curves of our abilities as individuals in a series of normal distributions. The third is networks. Networks are the spontaneously self-organizing, horizontal structures we form, beginning with knowledge and the various “memes” and representations we use to communicate it. These include the patterns of migration and miscegenation that have distributed our species and its DNA across the world’s surface; the markets through which we exchange goods and services; the clubs we form, as well as the myriad cults, movements, and crazes we periodically produce with minimal premeditation and leadership. And the fourth is hierarchies, vertical organizations characterized by centralized and top-down command, control, and communication. These begin with family-based clans and tribes, out of which or against which more complex hierarchical institutions evolved. They include, too, tightly regulated urban polities reliant on commerce or bigger, mostly monarchical, states based on agriculture; the centrally run cults often referred to as churches; the armies and bureaucracies within states; the autonomous corporations that, from the early modern period, sought to exploit economies of scope and scale by internalizing certain market transactions; academic corporations like universities; political parties; and the supersized transnational states that used to be called empires…

Our own time is profoundly different from the mid-20th century. The near-autarkic, commanding and controlling states that emerged from the Depression, World War II, and the early Cold War exist only as pale shadows of their former selves. Today, the combination of technological innovation and international economic integration has created entirely new forms of organization—vast, privately owned networks—that were scarcely dreamt of by Keynes and Kennan. We must ask ourselves: Are these new networks really emancipating us from the tyranny of the hierarchical empire-states? Or will the hierarchies ultimately take over the networks as they did a century ago, in 1914, successfully subordinating them to the priorities of the national security state?

– From the 2014 post, Networks vs. Hierarchies: Which Will Win?

Two hundred and fifty years ago, it was 1767, and the seeds of the American revolution were being spread across the 13 colonies. The Stamp Act became law two years prior, and many of King George’s subjects across the Atlantic had become enraged by this “taxation without representation.” A few years later came the Boston Massacre, followed by the Boston Tea Party. The rest is history.

Two hundred and fifty years prior to that, on October 31, 1517 (exactly 500 years ago today), Martin Luther sent his Ninety-Five Theses on the Power and Efficacy of Indulgences to the Archbishop of Mainz, thus kicking off the Protestant Reformation. The Catholic Church’s extraordinary influence over the religious and political life of Europe up to that point would never be the same again.

Both these eras were earth-shattering revolutionary time periods which massively transformed the Western world over the subsequent centuries. Taking on the Catholic Church in the early 16th century and Great Britain in the late 18th would’ve seemed like total suicide to people living at that time. Nevertheless, and against all odds, both Great Britain and the Catholic Church were successfully confronted and exposed as more vulnerable than anyone had imagined.

continue reading

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The Scariest Charts In The World

Authored by Anthony Doyle via BondVigilantes.com,

Investment markets have been remarkably resilient over the course of 2017. Sure, the geopolitical environment has thrown up a few frightening days which saw markets sell-off but on the whole volatility has been muted and most asset classes have generated solid total returns. That said, any horror movie fan will tell you that the scariest part of a horror film happens when things are relatively calm. With that in mind, here are a few charts that shine a light on a number of threats that are lurking just below the surface of the global economy.

1. ECB quantitative easing has propped up government bond markets

The strength of the European economy, and signs of labour market healing across the euro area, has been the surprise story of 2017. It is undeniable that the ECB, and its quantitative easing programme, has played a huge part in the economic success seen to date. Many point to the fall in yields on peripheral area debt as a sign that the euro sovereign debt crisis is well and truly over. The question is, do falling yields signify increasing confidence in the ability of euro area nations to repay their debt, or do they simply reflect the asset purchases that the ECB has conducted since the QE programme started? The above chart, published in the most recent IMF Global Financial Stability Report, shows that official purchases of euro area debt has eclipsed net issuance since May 2015. Indeed, ECB QE is currently 7 times bigger than net issuance. So is it any wonder why yields have fallen, and what happens when the ECB tries to turn off the easy money tap?

2. Debt is a beast that cannot be tamed

In G20 advanced economies, the debt-to-GDP ratio has grown steadily over the past decade and now stands at over 260% of GDP or 135 trillion US dollars. $135,000,000,000,000.00. It’s a big number, and whilst it is true that this debt represents an asset on another balance sheet, it is undeniable that governments, corporates, and households have never lived beyond their means by so much. It is for this reason that advanced economy interest rates are so low, and are unlikely to return back to levels observed before the 2008 financial crisis. For investors, that means you are going to have to take more risk to generate positive real returns.

3. Investors have herded into risky assets

Accommodative central bank policy has encouraged investors to invest in riskier and riskier assets. Whilst this can be described as “portfolio rebalancing” and central banks think that it will help them to generate inflation, it may also pose a significant risk to the global financial system. In the US and Europe, mutual fund holdings of their respective high yield markets have grown considerably. Turning to emerging markets, large-scale monetary accommodation has underpinned a significant portion of portfolio flows to emerging market economies. IMF estimates indicate that around $260bn in portfolio inflows since 2010 can be attributed to the Fed’s QE programme.

A significant issue for the performance of investments in riskier asset classes like high yield and emerging markets would be a spike in investor risk aversion or some form of external shock (like the oil price collapse in 2014). If investors head for the exits, this could trigger sales of riskier and less liquid assets held in open-ended mutual funds, resulting in substantial price declines. The very gradual pace of monetary policy normalisation may be exacerbating these risks, as continued low volatility and low yields encourage investors to further increase credit risk exposure, duration, and financial leverage.

4. Despite low unemployment rates, wages aren’t rising materially and productivity is poor

Low wage growth, despite low unemployment rates, is a sign of labour’s declining pricing power as a factor of production. This is a problem, as labour markets have traditionally been regarded as key for inflation as rising wages generally lead to higher production costs, resulting in higher inflation. For the first time, central bankers like Mario Draghi and Haruhiko Kuroda have been calling on unions to increase wage demands, with Draghi stating wages are the “primary driver of inflation”.

The more workers can strengthen their pricing power, the more likely it is that wage demands will be agreed to by businesses. Unfortunately for low and middle-income workers across the G7 economies, pricing power has fallen since the early 1990s. The decline in rates of union density and coverage, combined with a fall in employment protection, has left workers in a weaker position to press for higher wages. Unless workers can start demanding higher rates of pay, it is likely they will continue to suffer real-wage declines. This has been the case in the UK, with unit labour costs and inflation growing by 16% and 25% respectively since 2008.

5. Of course there had to be a Brexit chart

From what has been reported in the UK press on a daily basis, it doesn’t look like negotiations between the UK and Europe are going well. To highlight the scale of the challenge that the UK faces, this chart shows the share of total UK trade by trade agreement. According to Bruegel, approximately 51% of UK trade today is conducted with the EU, 4% with nations that are in the EEA or have a customs union agreement, and 9% under existing EU preferential trade agreements (PTA). A further 21% of trade is conducted with nations that have a PTA under negotiation.

In March 2019, unless some form of deal is agreed, the UK will have to negotiate trade deals with the majority of its current trading partners. This would be a major challenge as complex trade agreements are not easy to negotiate and often take years to agree to. If the UK finds itself outside the European Union Single market and the EU Customs Union, tariff and non-tariff trade barriers (like quotas, embargoes, and levies) are likely to be implemented between the UK and its main European trading partners. Some sectors and companies may face much more restricted access to the European market, and that will prove to be a significant headwind to UK economic growth in the short-term.

 

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What Kentucky’s Retirement Rush Says About The Future of State Pensions

Via The Daily Bell

Just because a Ponzi scheme is run by a government doesn’t mean it won’t collapse.

The situation in Kentucky serves as a dire warning about larger pension systems including Social Security.

What Kentucky is currently facing in like a bank run. When people hear that a bank is failing, they all scramble to get their money out before it goes bust. This snowballs and the bank runs out of cash that much quicker.

Kentuckians are retiring in droves, hoping to get a piece of the pension funds they were promised. Worried that the money might not be there in a few years, they are opting to start collecting now, lest they get nothing. But this is causing a run-on-the-bank effect. The pension system is collapsing that much quicker.

Politicians have long kicked the can down the road. The idea is that there will always be a future generation, unborn children to pay for the promises they make today. There will always be new suckers to pay for their unfunded liabilities.

But the bubble bursts. Unless a population grows exponentially, this cannot work. That is why it is a Ponzi scheme. There’s always a bottom layer that holds up the rest of the pyramid.

Of course, the government of Kentucky has assured potential retirees that they don’t need to panic. The state claims that even if the legislation passes to fix the problem, government employees will have time to retire on the old plans if they choose.

But that hasn’t seemed to ease the high retirement numbers. In past months, between 24-64% more people have retired (depending on the sector) compared to 2016. And with officials floating the idea of raising the retirement age, many have a better safe than sorry attitude.

This also shows that people don’t trust the government assurances. And of course, they shouldn’t. After all, the government also told them not to worry, the pensions they promised were funded. After a history of governments at all levels reneging on their promises, it is better to take the money and run.

And it’s the same old story for how they got into the mess. Spend now, worry about funding it later. There’s never enough money for the government, have you ever noticed that? Companies balance their sheets or go bust. Governments keep chugging along despite breaking promises, overspending, and failing to plan.

PFM mostly blames the approach used to fund the systems, one used by most public pension plans across the country, which based the government’s contributions to the plans on a percentage of a growing payroll. It says that’s like a homeowner basing mortgage payments on a percentage of future income he expects, or hopes, will grow.

Translation: it was a Ponzi scheme. And that same scheme is used by most government retirement plans. The money in these accounts is reinvested. But you don’t control where they are putting the money. Turns out Kentucky made some bad decisions on placing retirement money in certain hedge funds that didn’t do so hot after the 2008 recession.

Also, in the 1990s when the pension plans were fully funded, the General Assembly approved benefit increases without funding them — including an expensive cost of living benefit increase for Kentucky Retirement System members in place between 1996 and 2012.

The bottom line is that you never want to be dependent on the government, or even a private company for your pension. The only way to truly safeguard your retirement is to take it into your own hands.

Maybe some of your retirement goes into a hedge fund, but certainly not all of it. But a better plan is to do the research for what kinds of stocks and investments make sense. Spread the risk across different sectors, and maybe even different country’s stock markets. If you can’t do the research for proper investments, at least do the research to find out who the best person or organization is to inform you.

Your plan may be in part a company pension or retirement plan. But it should not stop there. It is always better to diversify savings (foreign accounts, cash, precious metals) and diversify investments (property, foreign and domestic stocks). Then you can also spend what you can afford to lose on riskier, but potentially high yielding, speculations (cryptocurrency, startups).

But you know the old saying about doing the same thing over and over and expecting different results. With their track record, it’s time to stop putting trust in government to take care of your finances.

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Podesta Fires Back: “I’m The Victim Of A Big Lie”

Earlier this morning we noted a pair of Trump tweets which seemingly called on the Podesta brothers to “Drain the Swamp” by dishing whatever “earth shattering” dirt they have on Democrats to Special Counsel Mueller (see: Trump Calls On Podesta Bros To “Drain The Swamp” By Revealing “Earth Shattering” Dirt On Dems).  

Now, it seems as though one of the embattled Podesta brothers, Hillary’s former campaign chair John Podesta, is more than ready to engage in a twitter war with the President after firing back that he’s the “victim of a big lie campaign by the American President.”

“Not bad enough that I was the victim of a massive cyber crime directed by the Russian President.”

 

“Now I’m the victim of a big lie campaign by the American President “

Of course, Podesta’s tweets come after his brother, Tony Podesta, was forced to resign from a firm that the two founded together in 1988 after it was announced that Special Counsel Mueller had suddenly taken an interest in lobbying efforts undertaken by that firm on behalf of a pro-Russian party in Ukraine.  Per The Hill:

His brother, Tony Podesta, on Monday stepped down from the lobbying firm he has run for three decades after special counsel Robert Mueller charged former Trump campaign chairman Paul Manafort and his top deputy, Rick Gates, with crimes related to his work for a pro-Russia political party in Ukraine.

 

Trump on Tuesday said Tony Podesta’s exit from his firm — and not the indictment of his former campaign chairman — was Monday’s “biggest story.”

 

A report earlier this month said Mueller is investigating Tony Podesta and the Podesta group.

 

The siblings co-founded Podesta Group in 1988.

To summarize the irony in these tweets, here is our loose understanding of how we arrived at this point:

  1. John Podesta lost an election;
  2. He and his party enlisted the support of media partners to launch an all out crusade against the newly elected administration alleging, among other things, treasonous collusion with a foreign government to effectuate a coup in the U.S.;
  3. That crusade, while resulting in no actual evidence of collusion with the newly elected administration, has now engulfed his own party in a collusion investigation of its own.

Oh the tangled webs…

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Goldman: “Short-Term Unemployment Is At Levels Not Seen Outside Of Major Wartime Mobilizations”

When it comes to the US labor market, it’s a tale of two extremes according to a recent report by Goldman Sachs.

At one end, the rate of short-term unemployment, defined as those unemployed fewer than 15 weeks, is lower than at any point since the Korean War and is already 0.4% below the bottom reached in the late 90s boom, with half of the gap likely due to demographic change. According to Goldman economists, “from the perspective of workers transitioning briefly between jobs whose attachment to employment is high, this is already a very tight labor market.”

At the other end, the pool of struggling workers at the margins of the labor market remains larger than in past expansions. In particular, the rate of medium- to long-term unemployment, defined as those unemployed at least 15 weeks, remains 0.75% higher than the low reached in the late 90s boom, and almost none of that gap is attributable to demographic change.

The delta between the two labor markets is shown in the chart below.

Without going to much into the reasons behind this divergence here (we will cover them in a subsequent post), the current state of the labor market presents a difficult trade-off for monetary policymakers, Goldman claims. On one hand, the pool of struggling workers on the margins of the labor force is still noticeably higher than in past expansions, and the possibility of bringing some of them back into employment is not an entirely lost cause. Quantified, this would represent a potential influx of millions of potential workers who have mostly fallen out of labor force for one reason or another. Their return could be catalyzed by a hotter labor market which would likely raise their probability of re-employment a bit further.

The decline in the share of prime-age individuals who report being discouraged, disabled, or uninterested in working has boosted the overall participation rate by 0.5pp over the last two years. A very hot job market could plausibly provide a boost of another few tenths in coming years, though it is less clear whether this boost would prove sustainable beyond the current cycle. This would cause the participation rate to fall more slowly than implied by population aging effects (as our standing forecast already anticipates) rather than to rise outright, and it means that for a given level of job creation, the unemployment rate would fall about 0.5pp less than without the participation boost.

Goldman then makes this fascinating observations: the consequence of letting the labor market tighten further is that the short-term unemployment rate, already at levels never seen outside of major wartime mobilizations, will fall further still.

As Exhibit 2 makes clear, the short-term unemployment rate is unlikely to simply move sideways while the long-term rate catches up. Why does this matter? One reason is that because of their greater attachment to employment, the short-term unemployed probably do matter more for overall labor market tightness. While popular predictions several years ago that wage growth would accelerate sharply because of the low short-term unemployment rate have not fared well, an exceptionally low rate of short-term unemployment probably does heighten the risk of overheating eventually.

What are the monetary implications?

This trade-off offered by a high-pressure economy did not appeal to Fed officials last year, and despite the still-restrained rates of wage growth and inflation, we doubt that they find it much more appealing today. We expect that preventing the labor market from moving into almost unprecedented territory will continue to provide a very strong motivation for a steady pace of tightening in coming years.

In other words, in its ongoing attempt to reflate, the Fed has recreated a functional war economy – at least in terms of labor metrics – and if only for the subsegment of the labor force that is not disabled, discouraged or doesn’t want a job (or is on drugs). For everyone else, this remains a recession. The good news, according to Goldman, is that the Fed won’t push even more…. unless Goldman is wrong of course, in which case those millions who remain locked out of a job will become increasingly frustrated, disenchanted, and more vocal, at which point their only possible means to re-enter the labor market would be with a non-hypothetical, and all too real war, to take “advantage” of the millions of low-skilled, rusty and/or otherwise “damaged” former-workers whom nobody would hire otherwise.

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All Local Politics Are Stupid (in Part Because They’re National)

Shop window of a residential real estate business in Brooklyn. ||| Matt WelchWhen I first started covering politics three decades ago, one of the go-to campaign slogans you’d see on protest banners and bumper stickers was “Think Global, Act Local.” It was an environmental pitch, to be sure, but there was a Serenity Prayer-style division-of-labor insight encoded as well: You might be motivated by your desire to combat apartheid/forestall nuclear war/stick it to Ronnie Ray-Gun, but you’ll have a much greater likelihood of impacting current events on the board of the Isla Vista Recreation & Parks District.

If we were to update that graying motto in 2017, it might read “Think National, Act Stupid”—at least judging by the New York General Election Voter Guide, which plopped into my mailbox late last week like a sack of wet cardboard. The nonpartisan pamphlet, presented as a cheerful paean to civic involvement, is instead a festival of bad policy ideas frequently untethered to the job descriptions or even jurisdictions of the offices under competition.

“We’ve got to do more to make sure working families can afford to live in New York—and that means focusing on housing costs and the quality of our public schools, and creating more good-paying jobs,” writes New York City’s incumbent, uh, comptroller. (To the surprise of no one, Democrat/Working Families candidate Scott Stringer believes that the best way to create those good-paying jobs is to adopt a $15 minimum wage, a policy that has produced opposite results elsewhere.)

Stringer’s Green Party opponent Julia Willebrand has an even more cognitively dissonant plan:

The Libertarian Party candidate, Alex Merced, is actually running on comptrollery-sounding promises like auditing spending, improving the city’s credit rating, and safeguarding pension funds. He’ll probably lose by 70 percentage points.

The more popular play among candidates is to transfer your anger about national politics to whatever position you may be running for. Conservative Party Public Advocate candidate Michael O’Reilly, for example, has a notably ambitious agenda:

In an even grander gesture, Green Party mayoral candidate Akeem Browder lists as his third most important issue, “Children, how we view them.” Though Browder does get some creativity points, on capitalization grounds if nothing else, for the first sentence of his platform: “Every problem in New York has an inherent problem and that problem is New York’s stance on allowing the Department of Justice to have a hand in Our every aspect of living.”

Browder’s Reform Party counterpart, Sal Albanese, is a bit more down to earth: “As Mayor, I promise to ride mass transit, at least sometimes, so that I can personally experience what’s happening.” Since there are so many colorful-sounding New York political parties and ballot lines (Smart Cities, Stop de Blasio, Dump the Mayor, etc.), I hereby call dibs on the At Least Sometimes slate.

In one-party fiefdoms such as New York, the marginalized competition can sometimes feel pretty marginal. And by that I do mean the Republicans:

It mostly does not get better. Brian-Christopher Cunningham, the Reform Party’s man for City Council District 40, lists his current occupation as “N/A,” and certainly did not waste any campaign money on editing help: “I am running for the New York City Council because in the last ten years I have seen first hand the residence in my district see over development and an 80 increasing in the cost of their rents,” is the first sentence of Cunningham’s platform.

But perhaps most drearily of all, even the most professional of local pols know where the votes are in 2017, and that’s in baiting the sitting U.S. president. My own City Councilman, Democrat/Working Families candidate Brad Lander (District 39), begins his voter-guide entry like so: “NYC must lead the way in standing up to Trump Administration bigotry, injustice & corruption.” Sure, there are real-world policy responses to Trump’s attempted crackdown on sanctuary cities, for example, but I suspect the more meaningful data point here is the number 86: That’s how many percentage points Hillary Clinton beat Donald Trump by in Lander’s district.

Lander, who is running unopposed (I intend to write in area resident Jim Epstein), is actually a diligent sort on local issues, if a bit on the Elizabeth Warren side of things, and he always performs admirably at little community ceremonies and so forth. But his post-election pivot to the #Resistance veers too often into a mirror image of Trumpian divisiveness for my taste:

The depressing thing about all this is that Lander is responding logically to the incentives around him. I’ve chatted about the anti-Trumpification of local politics with two senior New York Democrats in various green rooms, and their responses were the same: Hey, that’s what you’ve gotta do these days.

Brownstones for sale, but only if you vote right. ||| Matt WelchWhile there will always be a sliver of the population passionate about such important local issues as zoning along the rehabilitating Gowanus canal, most politics as publicly expressed these past 11 months have been about the hated orange man in the White House. That picture to your right was in the shop window of a residential real estate company on the busiest commercial thouroughfare in my neighborhood. (Here’s another lovely one.) This is the type of neighborhood where you can take anti-Trump yoga classes, and see fliers in dyotr windows at toddler level with messages like this:

Kids,

Ask your parents if they like Trump or support him in any way. Then, if they say they do, remind them that it’s not right to lie, cheat, mislead and be a racist and that if they continue thinking that way they cannot ask you to not lie, cheat, mislead [or] be racist either.

The more we fetishize politics and power at the presidential level, the more our local communities become not refuges away from the Beltway din, but comfort zones of voter blocs aligned either for or against the faraway emperor. It’s not a healthy trend.

Oh well, at least I have a couple of candidates I’ll vote for enthusiastically next week. Borough President Ben Kissel, come on down!

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Stocks, USDJPY Jump On Trump Tax ‘Phasedown’ Comments

It appears the algos have their ‘tax’ sensitivity turned all the way to 11…

A brief Bloomberg headline stating no new news at all – confirming that Trump’s policy framework did not include a ‘phase-in’ period for corporate tax cuts – has sent USDJPY spiking and thus stocks rallying…

*TRUMP SAYS `NOT LOOKING’ AT PHASEDOWN OF CORPORATE TAX RATE

When asked during a brief press hit, if corporate tax cut will be phased in, Trump replied, “hopefully not.”

Buy mortimer…

 

As we said yesterday – this market wants its corporate tax cut and it wants it now!

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