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Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

Former Dallas Federal Reserve Bank President Richard Fisher recently gave a speech identifying the Federal Reserve’s easy money/low interest rate policies as a source of the public anger that propelled Donald Trump into the White House. Mr. Fisher is certainly correct that the Fed’s policies have “skewered” the middle class. However, the problem is not specific Fed policies, but the very system of fiat currency managed by a secretive central bank.

Federal Reserve-generated increases in money supply cause economic inequality. This is because, when the Fed acts to increase the money supply, well-to-do investors and other crony capitalists are the first recipients of the new money. These economic elites enjoy an increase in purchasing power before the Fed’s inflationary policies lead to mass price increases. This gives them a boost in their standard of living.

By the time the increased money supply trickles down to middle- and working-class Americans, the economy is already beset by inflation. So most average Americans see their standard of living decline as a result of Fed-engendered money supply increases.

Some Fed defenders claim that inflation doesn’t negatively affect anyone’s standard of living because price increases are matched by wage increases. This claim ignores the fact that the effects of the Fed’s actions depend on how individuals react to the Fed’s actions.

Historically, an increase in money supply does not just cause a general rise in prices. It also causes money to flow into specific sectors, creating a bubble that provides investors and workers in those areas a (temporary) increase in their incomes. Meanwhile, workers and investors in sectors not affected by the Fed-generated boom will still see a decline in their purchasing power and thus their standard of living.

Adoption of a “rules-based” monetary policy will not eliminate the problem of Fed-created bubbles, booms, and busts, since Congress cannot set a rule dictating how individuals react to Fed policies. The only way to eliminate the boom-and-bust cycle is to remove the Fed’s power to increase the money supply and manipulate interest rates.

Because the Fed’s actions distort the view of economic conditions among investors, businesses, and workers, the booms created by the Fed are unsustainable. Eventually reality sets in, the bubble bursts, and the economy falls into recession.

When the crash occurs the best thing for Congress and the Fed to do is allow the recession to run its course. Recessions are the economy’s way of cleaning out the Fed-created distortions. Of course, Congress and the Fed refuse to do that. Instead, they begin the whole business cycle over again with another round of money creation, increased stimulus spending, and corporate bailouts.

Some progressive economists acknowledge how the Fed causes economic inequality and harms average Americans. These progressives support perpetual low interest rates and money creation. These so-called working class champions ignore how the very act of money creation causes economic inequality. Longer periods of easy money also mean longer, and more painful, recessions.

President-elect Donald Trump has acknowledged that, while his business benefits from lower interest rates, the Fed’s policies hurt most Americans. During the campaign, Mr. Trump also promised to make audit the fed part of his first 100 days agenda. Unfortunately, since the election, President-elect Trump has not made any statements regarding monetary policy or the audit the fed legislation. Those of us who understand that changing monetary policy is the key to making America great again must redouble our efforts to convince Congress and the new president to audit, then end, the Federal Reserve.

*  *  *

Of course, this is likely more Russian propaganda so be careful who you share this with for fear of incrimination…

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The greatest streak of stock market gains in almost 28 years may have some wondering if it is sustainable, but, according to AAII, this objective spike in valuations following Donald Trump's victory has sparked overwhelming bullishness among investors.

15 straight days of gains in Small Caps (only bettered by 1988's streak) has sent AAII bullishness soaring to its highest since January 2015 (following the end of QE3) with the biggest 3-week spike since September 2010.

 

There is no fear…

 

And equity market breadth is certainly not supportive…

 

"Buy High, Buy Higher, Don't Sell"

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Authored by Anatole Kaletsky, originally posted at Project Syndicate,

 For those of us who were wrong about the United States’ presidential election, it is worth suppressing emotional reactions, at least for a month or two, and attempting a dispassionate judgment about what Donald Trump’s administration may mean for the world. So here are ten likely consequences of the Trump presidency, divided equally between the good and the bad.

The good news starts with US growth, which will almost surely accelerate well above the 2.2% average annual rate during President Barack Obama’s second term. This is because the Republican aversion to public spending and debt applies only when a Democrat like Obama occupies the White House. With a Republican president, the party has always been glad to boost public spending and relax debt limits, as it was under Presidents Ronald Reagan and George W. Bush. Thus, Trump will be able to implement the Keynesian fiscal stimulus that Obama often proposed but was unable to deliver. The resulting deficits may be described as “supply-side economics,” rather than Keynesian stimulus, but the effect will be the same: growth and inflation will both increase. As the US economy runs into the limits of full employment, additional growth will push inflation higher, but that bad news can wait until 2018 and beyond.

 

Second, sensible tax reforms, such as an amnesty for multinational companies that repatriate foreign profits, will finally become law. The Republicans’ hegemony will enable easy agreement on tax cuts financed mainly by higher public borrowing, rather than by facing down special-interest lobbies’ resistance to the elimination of exemptions and loopholes. These tax reforms will create even bigger budget deficits, which in turn will stimulate more growth and inflation.

 

A third boost to economic growth will come from deregulation. While battles over energy and environmental laws may dominate the headlines, the biggest economic impact will come from reversing bank regulations. As banks are encouraged to loosen lending standards, especially for middle-income households, an upswing in residential construction and debt-financed consumption should add further growth impetus. Excessive deregulation could cause a re-run of the 2007 financial crisis, but that, too, is a risk for 2018 and beyond.

 

Fourth, Trump could be good for geopolitical stability, at least in the short term. Trump’s preference for transactional realpolitik over Obama’s liberal interventionism should stabilize relations with Russia and China as the world is divided into spheres of influence. Trump could give Russia freer rein in Ukraine and Syria in exchange for restraint in Central Europe and the Baltics. China’s inevitable dominance in Asia could be accepted, provided it avoids outright wars with Japan, Taiwan, and other countries whose security is, in theory, guaranteed by treaties with the US. The Middle East is bound to remain a cauldron of geopolitical unrest; but, even here, Trump’s preference for local strongmen over “democracy promotion” could restore a degree of stability (at the cost of human rights).

 

Finally, Trump’s election could force Americans to recognize flaws in their own democracy, even as they abandon global “democracy promotion.” The fact that Trump lost the popular vote by more than two million could re-energize efforts to reform the Electoral College – efforts that already have resulted in the necessary legislation in states representing 61% of the required votes. And the overwhelming opposition to Trump in trend-setting states such as California and New York could encourage their voters to elect legislatures to counteract federal conservatism with progressive state laws on issues ranging from air quality and health care to abortion, treatment of immigrants, and gun control.

Now for the bad news.

For the first time since the 1930s, the US has a president who views trade as a zero-sum game. Trump’s protectionist campaign rhetoric may not have been meant literally, but if he fails to deliver any of the trade curbs that he promised, Republicans will suffer a backlash from what is now their core voter constituency, voters in declining industries and regions. US global leadership is therefore bound to shift away from free trade, globalization, and open markets. Nobody can predict the full effects of the biggest regime change in global economic management since the 1980s; but they will surely be negative for emerging economies and multinational companies, whose development models and business strategies have assumed free trade and open capital flows.

 

A second, more immediate, threat stems from enacting large tax cuts and boosting public spending in an economy already nearing full employment, which implies accelerating inflation, higher interest rates, or probably some combination of the two. Given the likelihood of additional trade protectionism and measures to remove immigrant workers, the increase in inflation and long-term interest rates could be quite dramatic. The impact on financial markets will be disruptive, regardless of whether the Fed aggressively tightens monetary policy to pre-empt rising prices or lets the economy “run hot” for a year or two, allowing inflation to accelerate.

 

With the US economy growing faster than expected and long-term interest rates rising, excessive strengthening of the dollar is a third major risk. Even though the dollar is already overvalued, it could move into a self-reinforcing upward spiral, as it did in the early 1980s and late 1990s, owing to dollar debts accumulated in emerging markets by governments and companies tempted by near-zero interest rates.

 

Fourth, the combination of a dollar squeeze and protectionism spells big trouble for developing countries, with the possible exception of some relatively closed economies such as Brazil, Russia, and India, whose development strategies are less reliant on free trade and foreign financing.

 

Finally, the most dangerous consequence of Trump’s victory may be its contagion effect on Europe. Just as Britain’s referendum proved uncannily predictive of Trump’s win, Trump looks like a leading indicator of populist upheavals in Europe, which could trigger another euro crisis and threaten the breakup of the European Union. The next anti-establishment victories, according to opinion polls, will be in Italy’s constitutional referendum and Austria’s presidential election. Globalists can only hope that the polls again turn out to be wrong – but in the opposite direction.

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Finally, a voice of reason emerges in Wisconsin to combat Jill Stein’s useless recount crusade.  According to the Milwaukee Journal Sentinel, Wisconsin Elections Commission Chairman, Mark Thomsen, who happens to be Democrat, announced earlier that the committee would follow through with Stein’s recount request but denied a request that the recount be conducted by hand.  Thomsen cited a 2011 recount that changed the overall vote margin by 300 votes as evidence that the current recount would overturn Trump’s 22,177 vote lead in the state.

Citing the results of a 2011 statewide recount that changed only 300 votes, Elections Commission chairman Mark Thomsen, a Democrat, said this presidential recount is very unlikely to change Republican Donald Trump’s win in the state.

 

“It may not be 22,177,” said Thomsen, referring to Trump’s win over Democrat Hillary Clinton in the vote count. “But I don’t doubt that the president-elect is going to win that.”

 

Thomsen dismissed Stein’s claims of problems with the vote as unfounded and misleading. But he directed his toughest criticism to Trump’s unsupported allegations that millions of people voted illegally nationwide, calling them “an insult to the people that run our elections.”

Under the plan adopted Monday, the recount would begin Thursday and could cost $1 million.  Of course, we assume that Stein didn’t factor in the incremental costs associated with suing states that call her out for her ridiculous recount efforts.  As such, she may need to raise some more money just as the flow of funds seem to have slowed to a trickle…we suspect Hillary supporters have finally caught on to the scam.

 

Here is the official timeline for the recount per the Wisconsin Election Commission:

Monday, cost estimates and vote tabulation method will be provided by county clerks to the commission by noon. Commission officials will provide estimated statewide costs to the campaigns of both Stein and De La Fuente by the end of the day.

 

Tuesday, the Stein, De La Fuente or both must pay for the recount. Once full payment is received, the commission will issue a recount order to all presidential candidates.

 

Wednesday, commission staff will hold a teleconference in the morning for all county clerks and canvass members to outline the process and rules of a recount. Since a 24-hour public meeting notice is required for the recount, each county must post its notice by Wednesday.

 

Thursday, recount begins in every Wisconsin county.

 

Dec. 12, all county canvass boards must be completed by 8 p.m.

 

Dec. 13, Elections Commission staff will prepare the official recount canvass certification by 3 p.m.

Meanwhile, this may all be a “best case scenario” for Stein who would get to pocket the $6.3mm raised so far if recount efforts are denied and she decides to walk away.

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Earlier this morning Trump blasted the following tweet threatening to “terminate” the US-Cuba deal unless “Cuba is unwilling to make a better deal for the Cuban people.”

If Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate deal.

— Donald J. Trump (@realDonaldTrump) November 28, 2016

 

Of course, this followed Trump’s rather factual reaction to Castro’s death on Saturday.

Fidel Castro is dead!

— Donald J. Trump (@realDonaldTrump) November 26, 2016

 

Meanwhile, between her Romney bashing rants over the weekend, Kellyanne Conway also took the time to criticize Obama’s deal with Cuba saying that “We pretend that we’re actually doing business with the Cuban people now when, really, we’re doing business with the Cuban government and the Cuban military.”

Kellyanne Conway, Trump’s former campaign manager and senior advisor, commented this weekend on Trump’s stance, saying “on the issue of diplomatic relations being re-opened with Cuba, what President-elect Trump says is that he’d be open to that himself, but that we got nothing in return.”

 

“We’re allowing commercial aircraft there. We pretend that we’re actually doing business with the Cuban people now when, really, we’re doing business with the Cuban government and the Cuban military. They still control everything,” she said.

 

All of this comes after Obama’s executive order seeking to “normalize relations” with Cuba back in 2014 and his “historic” visit to the island back in March of this year.

 

As a reminder, here is how Obama characterized the goals of his Cuba executive order:

Re-establish diplomatic relations
Our diplomatic relations with Cuba were severed in January of 1961. The President is immediately reopening discussions with Cuba and working to re-establish an embassy in Havana in the next coming months. The U.S. will work with Cuba on matters of mutual concern that advance U.S. national interests, such as migration, counternarcotics, environmental protection, and trafficking in persons, among other issues.

 

More effectively empower the Cuban people by adjusting regulations
The President is taking steps to improve travel and remittance policies that will further increase people-to-people contact, support civil society in Cuba, and enhance the free flow of information to, from, and among the Cuban people.

 

Facilitate an expansion of travel to Cuba
The U.S. is restoring up to 110 direct, commercial roundtrip flights a day. With expanded travel, Americans will be able to help support the growth of civil society in Cuba more easily, and provide business training for private Cuban businesses and small farmers. Americans will also be able to provide other support for the growth of Cuba’s nascent private sector.

 

Grant general licenses for authorized travelers

 

Authorize expanded sales and exports of certain goods and services from the U.S. to Cuba
The expansion will seek to empower the nascent Cuban private sector and make it easier for Cuban citizens to have access to certain lower-priced goods to improve their living standards and gain greater economic independence from the state.

 

Authorize American citizens to import additional goods from Cuba
Licensed U.S. travelers to Cuba will be authorized to import $400 worth of goods from Cuba, of which no more than $100 can consist of tobacco products and alcohol combined.

 

Initiate new efforts to increase Cubans’ access to communications and their ability to communicate freely
Cuba has an Internet penetration of about five percent – one of the lowest rates in the world. The cost of telecommunications in Cuba is exorbitantly high, while the services offered are extremely limited. Now, telecommunications providers will be allowed to establish the necessary mechanisms, including infrastructure, in Cuba to provide commercial telecommunications and internet services.

Of course, since Obama’s Cuba policy was implemented via executive order, rather than an act of Congress, Trump could just as easily undo it all with a swipe of a pen….one more component of the “Obama legacy” down the drain?

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Authored by Mark St.Cyr,

If you’ve ever read any of Nassim Nicholas Taleb’s work (which should be a requisite for anyone in business) you’ll know one of his often used analogies to explain the psychology of many prior to a Black Swan event is the turkey, and its view of the world up and until Thanksgiving.

A brief description goes something like this: All the time prior the turkey believes life is grand and will continue forever, and the farmer has nothing but his best interest at heart, caring for him with plenty of food, water, and shelter. To convince him otherwise is a fools-errand. Then – Thursday happens.

A similar event may also be on the horizon, but this time – it doesn’t involve turkeys. No, this time it involves a creature once considered so far above and beyond reproach, to even question its business model, metrics, or valuation was seen as blasphemy. And for those that did? Let’s just say – the long knives came for you.

With that said, a lot has changed over the last year. And by “a lot” I mean just that. For if you’ll recall in 2015, everyone within not only the tech world, but the financial/business media at-large were all touting 2016 was going to be “The rebirth of the IPO!”

Everyone that is, except yours truly.

I’m on record stating precisely the opposite. So much so that earlier in the year as to answer, or respond to the critics (aka “Valley aficionados”) I dared openly ask in an article “Did Apple’s Didi Investment Just Kill All The Unicorns?” the following. To wit:

“Didi is Uber’s™ business nemesis and competition in China. Whether or not this is a “good investment” for ride-sharing dominance in China from my perspective is irrelevant. What should be the focus here is what such a move brings to the entire Silicon Valley narrative. And, in particular; the entire “unicorn” mythical valuation story. For it just might be that Apple single-handedly opened the seal on the unicorn apocalypse.

 

One thing in business never changes: Cash burn is a death sentence only kept at bay by either generating net profits, or, raising additional funding via loans and/or investors. Without the former, the latter is a never-ending begging and pleading process that ultimately ends in disaster because focusing on “investors” as the customer, rather, than actual customers with the ability and willingness to pay is no longer paramount. Only funding.

 

But “funding” has the ultimate “Achilles’s heel”: Perception. And once perception changes? Like I stated earlier – everything changes along with it. And I do mean – everything.”

Have you seen a “unicorn” IPO filing and launch in 2016 or since? I know, trick question. For it really can be yes and no. And for those of you who did scramble to “get-in-early” on the whole Twilio™ offering? You have my condolences, once again.

So to define and all be on the same page: when we think of “unicorns,” what we’re really talking about here are what “the Valley” likes to now call “Decacorns.” You know, because when it comes to “The Valley;” stating you’re only worth $1Billion is considered “low rent.” You now need to state you’re worth $10’s of Billions otherwise – you may not get invited to the best of parties. And, after all, that’s the only true metric that matters, right?

So, now with that said. Who is it to dare take on the IPO world making rumblings? It seems it’s non-other than the once deemed “When these guy’s file it’ll be a the signal everyone in the IPO world is waiting to hear!” Sounds great! But there seems to be a problem with that once held viewpoint. The problem?

It seems they didn’t want anyone to hear about it until they were sure it didn’t fall on deaf ears.

For Snapchat™ did so file, but “confidentially.” You know, because the markets at record high levels one can only assume they didn’t want to announce too much good news, right? Oh yeah, and it’s for 2017 not ’16. So, that throws (like I argued in 2015) that “In 2016 IPO’s are back!” argument out the window.

So what is it that I’m implying with “Next Week” you may be asking. Well, it’s this:

Next week the E.U. is set to hear whether Uber will, or will not, be subject to the laws that govern other businesses when it comes to employees, and expenses. If Uber loses this battle, I believe, things don’t just change, rather, the meme “It’s different this time” may portend far more onerous revelations going forward.

Here is where the entire “unicorn” meme, and stated metrics when comes to valuation, growth projections, and more may suddenly find much like many a turkey found its neck on Thursday morning. i.e., about to be cleaved. And, it’s hard to weigh which way this decision may go. Presidential pardons excluded.

On the one side you have many of the top-tier E.U. politicians wrangling for some form of a delay in the case (such as the E.U. Commission) in reasoning a ruling favoring Uber might cause some form of populist backlash. One could infer this signals that maybe people such as Mr. Juncker may have derived some form of “insider” insight and concluded the decision will rule in Uber’s favor. It’s very possible. However, we all know how well E.U. politicians have been at reading “tea leaves” of late. e.g., Brexit.

On the other hand, there’s the recent decision lost via a London tribunal as it pertains to drivers. From this point of argument one could make the case where politicians/judges may now be more inclined to protecting the-devil-they-know as opposed to one they don’t. i.e., Current cabbies, the companies that employ them, the taxes they generate, and the votes they represent.

Surely after Brexit, and now with the U.S. election as an additional “lens” to peer through, anything including the word “populist”   where a legal challenge and decry is called for might now have different weighing in the minds of any one in the “political arena.” If it didn’t: Why is the term and idea of “worry” being used by E.U. politicians to describe it?

Yet, the real one’s to worry in my view are the entirety of unicorns. And I mean just that – all.

I say this because if you take a step back you have to remember there are a few very important points that many need to be reminded of. First: Unicorns (and that means all) are stated to be worth their valuations because, in a nut shell, the companies believe that’s what they are worth, based on metrics they decide. And that metric (i.e., worth $Billions upon $Billions) can only be interpreted as “priced for perfection.” Remember, most are currently only still cash burn machines. Net profits are “in the future.”

Uber, along with AirBnB™ are by far the most prominent and bellwether unicorns being followed by not only “the Valley,” but financial institutions, V.C.’s, sovereign wealth funds, traders, and more everywhere. If these unicorns show anything revealing weakness or potential harm to their valuation metrics? i.e., Legal challenges showing everything they claimed for the future may have doubts based on court rulings. As I iterated before “It’s different this time” takes on a meaning never thought possible, much like a turkey’s revelation this past Thursday.

So far AirBnB has not fared as well as it once thought was its birth right. i.e., The San Francisco and N.Y.C. outcomes. And they are facing ever more, both here in the U.S. as well as globally. Uber has since lost China (as you read at the beginning) and now is facing a very tumultuous decision if it goes against them in Europe.

That’s quite a change in market “domination” and “pricing valuation” for the future if it goes against them, no?

And if it does? Do you think that will reflect not only the eagerness, but rather, who buys into the next “funding round?” Funding rounds which are the life’s blood of both valuation metrics, as well as life support for cash burning entities.

Remember, without funding rounds – cash burn is the only metric that matters. Because it is finite, it reflects upon the entire unicorn meme, complex, as well as “the valley” in total.

And I would presume this newest “reflection” about to show its face in Europe will be watched more closely, and with so much scrutiny – it would make a Kardashian blush.

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