Category: zerohedge

There has been much discussion in the past year(s) whether the Fed has inflated (the final) bubble. Sadly, most of it has been misguided. To get some “guided” analysis of what is easily the most important market topic of the day, we go to GMO’s Jeremy Grantham and his latest quarterly letter covering just this: “Looking for Bubbles.“

First the background:

What is a bubble? Seventeen years ago in 1997, when GMO was already fighting what was to become the biggest equity bubble in U.S. history, we realized that we needed to define bubbles. By mid-1997 the price earnings ratio on the S&P 500 was drawing level to the peaks of 1929 and 1965 – around 21 times earnings – and we had the difficult task of trying to persuade institutional investors that times were pretty dangerous. We wanted to prove that most bubbles had ended badly. In 1997, the data we had seemed to show that all bubbles, major bubbles anyway, had ended very badly: all 28 major bubbles we identified had eventually retreated all the way back to the original trend that had existed prior to each bubble, a very tough standard indeed.

Then, the bullish case, or in other words, what is the maximum the S&P can stretch further, before it all comes crashing down:

So now, to get to the nub, what about today? Well, statistically, Exhibit 3 reveals that we are far off the pace still on both of the two most reliable indicators of value: Tobin’s Q (price to replacement cost) and Shiller P/E (current price to the last 10 years of inflation-adjusted earnings). Both were only about a 1.4-sigma event at the end of March. (This is admittedly because the hurdle has been increased by the recent remarkable Greenspan bubbles of 2000 and a generally overpriced last 16 years.) To get to 2-sigma in our current congenitally overstimulated world would take a move in the S&P 500 to 2,250. And you can guess the next question we should look at: how likely is such a level this time? And this in turn brings me once again to take a look at the driving force behind the recent clutch of bubbles: the Greenspan Put, perhaps better described these days as the “Greenspan-Bernanke-Yellen Put,” because they have all three rowed the same boat so happily and enthusiastically for so many years.

 

 

… purist value managers may try to block out the siren call because they don’t wish to be tempted, and some may hear it and do nothing because the gains are never certain and the lack of prudence is painfully obvious in the end. Yet long-term value managers are outnumbered by momentum managers – always were and probably always will be – and momentum managers have no such qualms. Why this time, then, would they not play the game with even more enthusiasm, at least enough to drive the market to its 2-sigma level of 2,250 and perhaps a fair bit beyond? And although nothing is certain in the market, this is exactly what I  believe will happen.

But what if we are already well past the point of no return? Enter Hussman:

Out there in the wilds of the internet along with our free quarterly letter, which always feels like a long painful delivery, there is an equally free letter from John Hussman, who turns out to have the same work ethic as Alexey Stakhanov, that hero of the Soviet Union known for his massive and routine production over quota. Hussman, can you believe, produces a long and well-researched quarterly letter each week! Deplorable. Surely (he says enviously), he must be a workaholic and obviously unlike some of us less industrious types can have no life at all. But I will say this: he grinds some good data. He therefore makes a good representative of the analytical group, all value diehards who believe the market’s demise is imminent. And the data is comprehensive enough that I admit it worries me. Clearly he and the others may be right. Exhibit 7 reproduces – with his kind permission – his version of all of the value measures he deems important. They indicate an overpricing for the U.S. markets that ranges from 75% overpriced to 125% at the end of March. All of the measures have a history of being predictive – much more so than, say, Yellen’s reprehensible choice of current price as a multiple of next year’s estimated earnings. (Either she’s painfully ill-informed or, most implausibly, not too smart, in which case sooner or later we’re scr*w*d, or she knows this measure is a third-rate prediction of true value and is cynically using it to tout the market, in which case we’re doubly scr*w*d! But at least that latter reason would be an ideal proof of her buying into her predecessors’ Put, in case we had any doubt.)

 

 

But back to value and Hussman. Not surprisingly, GMO very much agrees with the spirit of this data, but our preferred measure for our 7-Year Forecast has the market slightly less overvalued at 65%. (Although, interestingly, at 2,250 – our 2-sigma target – it would be about 100% overpriced.) Our estimate allows for a very modest improvement in trend line profitability and an even more modest allowance for a slightly higher P/E as a response to probable lower equilibrium interest rates. Still our estimate of overpricing is pretty close to his.

 

Exhibit 8 shows an equally disturbing Hussman exhibit in which he has collated very bad things that happen to markets. His exhibit suggests that whenever this large collection of troublesome predictions line up like they have recently there has been a very serious and fairly immediate market decline. While I have no quarrel with the eventual outcome and recognize that possibly the bear market’s time may have come, particularly in light of recent market declines (April 13, 2014), I still think it’s less likely than my suggestion of a substantial and quite lengthy last hurrah.

 

Which brings us to the punchline: Grantham’s “Best Guesses for the Next Two Years”:

With the repeated caveat that prudent investors should invest exclusively or nearly exclusively on a multi-year value forecast, my guesses are:

 

1) That this year should continue to be difficult with the February 1 to October 1 period being just as likely to be down as up, perhaps a little more so.

 

2) But after October 1, the market is likely to be strong, especially through April and by then or in the following 18 months up to the next election (or, horrible possibility, even longer) will have rallied past 2,250, perhaps by a decent margin.

 

3) And then around the election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse, depending on what new ammunition the Fed can dig up.

 

Conclusion and Summary

 

The bull market may come to an end any time, indeed as I write it may already have happened. It could be derailed by disappointing global growth, profits sagging as deficits are cut, a Russian miscalculation, or, perhaps most dangerous and likely, an extreme Chinese slowdown. But I believe it probably (i.e., over 50%) will not end for at least a year or two and probably not before it reaches a level in excess of 2,250 on the S&P 500. Prudent long-term value investors will of course treat all of the above as attempted entertainment (although I believe all statistically accurate) and be prepared once again to prove their discipline and man-hoods (people-hoods) by taking it on the chin.

 

I am not saying that this time is different (attention Edward Chancellor). I am sure it will end badly. But given this regime of the Federal Reserve and given the levels of excess at other market peaks, I think it would be different to end this bull market just yet

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Days after acting Defense Minister Mykhailo Koval warned “the Armed Forces are not ready for this,” Ukraine has announced the return of military conscription. After Mr Turchynov admitted his security forces were ‘helpless’ to quash the pro-Moscow insurgency that has tightened its grip on the increasingly chaotic east of the country, Koval believes “if there were conscripts in military units, then the situation might be different.” Of course, this is exactly what the IMF ‘demanded’ as yet more cities in the East fall to pro-Russian separatists. We can only imagine how pro-Russian 20-23 year old men will feel when they get their call-up papers to fight… against themselves.

As NRCU reports,

The Armed Forces of Ukraine could return military conscription, acting Defense Minister Mykhailo Koval has stated. “The army will be professional – this is the future of the Armed Forces. But now the Armed Forces are not ready for this. Therefore we might have to return 21-23-years-old men for a while, and they will serve the state,” he told reporters in Kyiv on April 26.

According to Koval, the reckless policy of transition to contract service showed its negative sides, in particular, in Crimea. “If there were conscripts in military units, then the situation might be different,” the minister said.In addition, the minister said the Armed Forces of Ukraine have not created a good base for training and life-support of contract soldiers.

And then today, The Daily Mail confirms…

Embattled Ukraine today announced it was bringing back conscription as a mob of some 300 pro-Russian militants seized control of the prosecutor’s office in Donetsk after overrunning police.

Coming on the heels of this…

But Mr Turchynov admitted his security forces were ‘helpless’ to quash the pro-Moscow insurgency that has tightened its grip on the increasingly chaotic east of the country.

And the previous details of the conscription plan…

The Ukrainian parliament has adopted a resolution recommending that acting President Oleksandr Turchynov resume mandatory drafting of conscripts into the country’s army.

The resolution “on additional measures for strengthening Ukraine’s defense capability in connection with Russia’s aggression against Ukraine” was adopted on April 17.

Kyiv announced the last mandatory drafting of conscripts into the Ukrainian Army in October, saying that by the end of 2014 the Ukrainian armed forces would be comprised of professional soldiers only.

Ukraine — which currently has the fifth-largest army in Europe, with 180,000 soldiers — planned to decrease the total to 122,000 soldiers by 2017.

According to the old law, all male citizens between the ages of 18 and 27 must serve for one year in the national army or for 18 months in the Ukrainian Navy.

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File under “Government Health Care”…

Health officials are investigating what may have sickened over 100 people who attended a conference where more than 1,300 food safety experts had gathered.

 

No one at the Food Safety Summit held April 8-10 in Baltimore was hospitalized, according to health officials, and most people reported cases of diarrhea.

 

Alvina K. Chu, who is leading the Maryland Department of Health’s investigation, said Tuesday that officials haven’t yet determined what caused people to get sick. It’s not yet clear if the illness was transmitted by food or from person to person, she said.

 

The Baltimore City Health Department received complaints of nausea and diarrhea from four people one week after the conference. After the illnesses were reported, city health officials inspected the convention center after and its in-house catering company, Centerplate, on April 16, and issued a violation for condensation dripping from an ice machine, according to city health department spokesman Michael Swartzberg.

 

City health officials found no violations during the most recent regularly scheduled inspection of the convention center on Feb. 27.

 

The state health department sent a survey to summit attendees on April 17. About 400 responded, with more than 100 people reporting symptoms. Health officials said there have been no reported hospitalizations or deaths.

 

Rita Foumia, corporate strategy director for BNP Media, which hosts the summit, said nothing like this has happened in the summit’s 16-year history.

Source: AP

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While everyone is by now fully aware just how dependent Europe is on Russia’s energy supplies (and most are aware of the “nonsense” that the US will fill any gap if Russia steps up its actions – which Barroso said wouldn’t happen because “Russia has self-interest not to play the energy card”) but few are truly aware of the scale of contagious debt-driven defaults that could occur if the US (and a reluctant Europe) decide to undertake more aggressive economic sanctions, which, as Germany’s Europe minister stated today, “are on the table.” As the following chart of Europe’s domestic bank exposure to Russia show, Roth’s warning that Russia’s retaliation could mean “anything is possible,” is a major problem for the Germans, Italians, and most of all – The French.

Germany is nervous…

• *ECONOMIC SANCTIONS `ON THE TABLE’; RUSSIA COULD RETALIATE: ROTH
• *GERMANY’S ROTH SAYS `ANYTHING IS POSSIBLE’ IN UKRAINE CRISIS

Because they know what happens if this house of cards falls down…

As The Council for Foreign Relations notes, in the fourth quarter of last year, with tensions rising between Russia and the West over Ukraine, U.S., German, UK, and Swedish banks aggressively dialed down their credit exposures in Russia… but levels remain huge…

But as the graphic above shows, French banks, which have by far the highest exposures to Russia, barely touched theirs.  At $50 billion, this exposure is not far off the $70 billion exposure they had to Greece in 2010.  At that time, they took advantage of the European Central Bank’s generous Securities Market Programme (SMP) to fob off Greek bonds, effectively mutualizing their Greek exposures across the Eurozone.  No such program will be available for Russian debt. 

 

And much of France’s Russia exposure is illiquid, such as Société Générale’s ownership of Rosbank, Russia’s 9th largest bank by net-asset value ($22 billion).

 

With the Obama Administration and the European Union threatening to dial up sanctions on Russia, is it time for U.S. money market funds and others to start worrying about their French bank exposures?

The bottom line – it’s all well and good to let the people starve, freeze, or stagnate amid a lack of energy supplies… but start fucking our banking exposure and Russian sanctions just got real

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Everyone has seen them: those “inexplicable” bouts of furious selling in gold and silver, coming out of nowhere with no news or catalyst, which serve no rational price discovery purposes (because no normal seller takes out the bid stack, telegraphs a massive sell order and executes at the worst possible price) but merely are there to reprice the market higher or, as happens in 90% of the cases, lower.

In fact, look no further than what happened first thing this morning, when an unknown seller, smashed all stops in one big sale, and took silver to its lowest price for 2014.

There was no news, so one can’t even blame a rogue algo overreacting to some headline and taking momentum ignition strategies a little far.

In short: this was a premeditated and deliberate selling of silver with one simple purpose: push and reprice silver lower.

But this is nothing new: precious metal traders, especially those who are on the other side of the table of the BIS’ Mikael Charoze or Benoit Gilson, and countless other commercial banks, are all too aware of this behavior and they take it for granted.

No, the real surprise is that suddenly none other than the CME is getting worred that manipulation this blatant is finally chasing regular retail traders away who are tired of being fleeced on a daily basis, leaving central banks and a few “fixing” banks to trade only with each other, which is not acceptable – after all it is the muppets’ money that is fair game, not that of other cartel members.

According to Reuters, the CME, which at present has price fluctuation limits for futures contracts in some energy, agricultural commodities and financial products, but not for its precious and base metals products, is considering introducing daily limits on gold and silver futures.

“We don’t have price limits in gold and silver. That’s something that we are looking into,” Miguel Vias, CME Group’s director of metal products, said in a panel discussion at an industry event, in response to a question about how the exchange protects investors from excessive volatility.

The biggest concern for the exchange is the array of sophisticated trading programs that are capable of significantly pushing the market higher or lower, Vias said.

Oh, so it is the programs? And who programs these… programs? Could it be people? And perhaps one should look into whether actual people are ordering the programs to “significantly push the market higher or lower.”

It gets better. While the clueless hacks which appear on TV speculate about plunging trading volumes, anyone with half a brain knows why most have shunned capital markets – people know the market is one rigged, manipulated casino, and never more so than now. But while until now this mostly impacted the stock and bond market, it is now moving over to gold and silver.

“Unusually big moves and the fears of price “slippage” – the difference between the price at which a market player wants to execute an order and the price at which they are able to do so – have turned some gold and silver futures investors away, he said.  In the first four months of the year, COMEX gold futures volume dropped 10 percent from a year ago…“

But the best part is this:

The possible move reflects growing concern at the largest U.S. exchange of futures and options about big bouts of buying or selling that have caused huge fluctuations in prices without any apparent fundamental reason.

Funny, one could almost call huge fluctuations in price without a reason… manipulation. But better not, because what little confidence in a rigged system exists, may promptly dissolve even further.

Still, while this is merely the latest alleged case when the CME promises to clean up its act, we can be confident nothing will happen: “support for setting limits on price moves does not appear to be universal. “I think the breaks in trading are good, but I wouldn’t support fixing price moves,” said one U.S. trader.”

Could said trader be manning the NY Fed trading desk at Liberty 33?

Ironically, there may be some hope, though not out of the CME. It appears the cannibalization in the PM manipulation industry is so bad, there may no longer be any silver “fixers” left. Also from Reuters, we learn that Deutsche Bank’s exit from the London precious metal fixes will leave just two banks running a century-old system that sets the global silver price, likely stirring the debate about regulation of one of the most volatile commodity markets.

The bank’s decision on Tuesday to resign its seat ends an unsuccessful four-month search for a buyer, as U.S. lawsuits alleging gold price-rigging by the five banks that set the benchmark turned potential suitors cold, sources said.

“You can’t have a silver fixing with just two people, that’s a bit of a nonsense really,” a London-based precious metals trader said, adding just two participants would restrict liquidity and competition.

 

“It would just be two people talking to each other. I think the regulator should be stepping up a little bit here.”

It should, but like the CME, it most likely won’t:

Shortly before news of Deutsche’s withdrawal on Tuesday, Britain’s financial watchdog, the Financial Conduct Authority (FCA), said it could intervene if there were too few participants in commodity benchmarks such as gold and silver.

 

“If there is a risk of dislocation because people are withdrawing and we think that breaches or is a risk to our objectives, then we would set that as one of our activities but it is not entirely straightforward,” head of enforcement and financial crime Tracey McDermott said on Tuesday.

And who can possibly forget the CFTC’s own “quest” (or Bart “rotating door” Chilton‘s haircut for that matter) to root out evil silver manipulators (most of which just happen to be its superiors), which found nothing wrong.

In a five-year probe, the U.S. Commodity Futures Trading Commission investigated allegations that some of the world’s biggest bullion banks including JPMorgan Chase & Co distorted silver futures prices.

 

After 7,000 staff hours of investigation, the U.S. commodity regulator found no evidence of wrongdoing and dropped the probe last September.

 

The banks faced similar accusations in a long-running class action antitrust lawsuit that was dismissed at the end of last month by a federal appeals court.

No, investors – at least those who are not close to the reserve money system – are on their own.

Whatever the outcome of the latest scrutiny, some users, including mining companies, which hedge production against the benchmark, may have little choice for now but to rely on it even with just two members.

 

“Whether it is good or bad or if it is down to two members, we have to use it,” said Ounesh Reebye, vice president of metal sales at mining company Silver Wheaton, which is expected to produce 36 million ounces of silver this year.

Perhaps it would be best to just have one gold and silver “price fixer” left, the Federal Reserve. That way at least some integrity to an otherwise broken and manipulated market will be restored. Until then, watch as trading volumes slowly but surely trickle down to zero as everyone finally realizes what we have been saying since 2009 – in a market so manipulated, so rigged, so artificial, a far better and enjoyable option for investors around the world is just to take their money to Las Vegas.

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Rube Goldberg, eat your heart out…

Source: Investors.com

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Submitted by Simon Black via Sovereign Man blog,

It was a scene just like out of the Wild West.

 

18-year-old David Moreyra had stolen a purse. And an angry mob gathered in broad daylight in Rosario, Argentina to lynch him.

 

It turns out that ‘mob justice’ is on the rise in Argentina, and Mr. Moreyra’s death was just one of more than a dozen recent instances.

Hundreds of years ago during the Age of Enlightenment, liberty-minded philosophers argued that governments could only derive their authority to govern by receiving consent of the governed.

And that the people would have to voluntarily surrender some of their freedoms to government in exchange for certain services (and protection of their other freedoms).

This idea has become twisted and mutated over time.

These days, the prevailing model is that [some] people pay taxes, and in exchange the government maintains a monopoly over a number of public services.

Security is one obvious example since, for most people, the local police force maintains a monopoly over citizen security.

Any high school economics student can tell you that most monopolies are terribly inefficient.

Yet this is what people have been indoctrinated to believe—that they need the government to protect them. And they’re willing to pay ever-increasing taxes to ensure the government can provide it.

In many cities and countries across the world, they’re even willing to give up their right to bear arms… to give up some personal freedom… in exchange for the government providing a generally inefficient service.

All of this is part of the modern social contract. And when nations go broke, this social contract breaks down.

Many of the public services that government has promised get curtailed, or cut entirely.

The people have held up their end of the bargain. They’ve traded in their freedoms and their income in exchange for services. But the government hasn’t held up theirs.

And because the government has a monopoly on many of these services, suddenly people find themselves without something they have come to depend on.

This is precisely what has happened in Argentina. As the economy continues to struggle from an absurd level of money printing, unemployment and inflation are both painfully high.

Many Argentines are desperate. Crime rates have soared. But the police are utterly worthless.

Once peaceful citizens have been driven to desperation as a result. They’re afraid… and they’re taking matters into their own hands, roaming the streets in lynch gangs.

This isn’t some neighborhood watch or citizen justice program.

They form these gangs out of desperation, signalling that Argentina’s social contract has completely disintegrated.

It’s a rather unfortunate regression for a society. Civilized people don’t form angry mobs to act as judge, jury, and executioner.

As I’ve long-written, there are consequences to destructive economic policy.

Central bankers cannot conjure infinite quantities of currency out of thin air, nor can politicians borrow more money just to pay interest on what they’ve already borrowed, all without consequence.

This is one of those consequences—a complete breakdown of the social contract, giving rise to something so Medieval as lynch gangs and mob justice.

Can it happen where you live? Maybe. No nation is immune to the social effects of economic decay (think Detroit, or even New Orleans after Hurricane Katrina…).

When every shred of data suggests that major western economies are decaying rapidly under the weight of excessive debt and paper currency, it’s foolish to presume that ‘it can’t happen here’.

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It was not a Tuesday, and it was not a Fed day – so stocks closed red. Volume was dismal. The Russell 2000 tested its 200DMA once again (and bounced) but was unable to sustain that strength, ending notably weak today. Once again the biggest news was the continued collapse in Treasury yields as a combination of massive spec positioning short "because rates have to go up" and the ugly reality of macro weakness combined to send rates to 2014 lows (and 11-month lows for 30Y yields). The Dow's weakness meant it lost its gains for 2014. Despite ongoing USD weakness (driven by GBP and EUR strength), commodities traded lower with silver worst today (red for 2014), copper weak, and gold and oil flat to modestly lower. VIX was pummeled down to almost 13 midday (which makes perfect sense ahead of NFP – why would anyone hedge that?) but leaked higher as bond market reality set in during the afternoon. The ubiquitous very-late-day VIX slam pulled stocks higher in a buying panic but failed to get the S&P, Dow, or Russell green on the day.

Before we start on the day's action… take a moment to call the world's largest capital market "wrong"…

And a close up this week…

Stocks and AUDJPY were largely in sync today…

And VIX was pressured and then slammed into the close to ramp stocks to unch…

Look at the lower pane for a sense of participation in this rally… lower lower lower volume as we creep higher…

Stocks were mixed on the day… with Russell 2000 testing its 200dma and bouncing with a late-day buying panic…

High-Yield bond yields did not agree with stocks late day ramp…

But Treasuries weren't – all lower yields all day long…

Commodities all slid lower on the day – with Silver's big dump early being retraced…

Just look at this idiocy in Silver futures today…

Charts: Bloomberg

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We could yarn on for hundreds of words discussing the ins and outs of falling volumes and record-er highs in US equity markets as Treasury bond yields collapse, macro- and micro-fundamental data slumps, and the total nonsense with regard to ‘cash on the balance sheets’ when it is all levered to the max. But when it comes to showing just who is buying the hope… and who is selling the hype, the following chart from BofAML sums it all up… institutional clients sold the most since January and the 4th most on record in the last week as retail clients continued their buying streak.

Institutional clients are dumping equities off to retail clients… thank you very much…

Last week, during which the S&P 500 was down 0.1%, BofAML clients were net sellers of $1.5bn of US stocks following a week of net buying.

Net sales were chiefly due to institutional clients, who have now sold stocks for the last five consecutive weeks and are the biggest net sellers year-to-date. Net sales by this group last week were their largest since January and the fourth-largest in our data history (since 2008).

Hedge funds were net buyers for the fourth consecutive week, and private clients also continued their net buying streak.

Source: BofAML

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Submitted by Martin Armstrong via Armstrong Economics,

Fascism has been a term applied to the manner of organizing a society in which a government ruled by a dictator/bureaucracy that is unelected or a republic with pretend “lifetime” politicians,  controls the lives of the people and in which people are not allowed to disagree with the government. Such systems have always placed the “good” of the state before the worth of an individual. The right to property is subject to constant search and seizure and courts only rule in favor of the state.

That was the closing days of Rome. It was also the Soviet Union and especially the East Germany with respect to organization. I went behind the Berlin Wall before it fell. You could not speak freely on the street but had to wait until you were alone.The Soviet Union was a Communist/Fascist State where you could not disagree with the government and they owned everything.

Government corruption may be at an all time high in history. I can find few periods where the state has hunted down its own people other than during the collapse of Rome. I have written about Maximinus who was declared Emperor by the troops and just consider them as government workers. Maximinus simply declared ALL PRIVATE wealth in the nation belonged to the state to pay the troops (government workers) so that government could retain its power. This was the first attempt at a Communist-Fascist State hybrid.

In Italy, the famous Fashion designers Domenico Dolce and Stefano Gabbana were sentenced to 18 months in prison this week for keeping hundreds of millions of euros from Italian tax authorities offshore. When I say there is a worldwide hunt for capital that is destroying the world economy – this is NO JOKE! Politicians have spent whatever they like and then imprison citizens for not handing over whatever they demand. This is not democracy – it is totalitarianism. The have NO right to take money from people and criminalize refusing to pay unreasonable sums. People come together to form societies because a synergy emerges that creates an economy from the Invisible Hand that is larger than the sum of the parts. It has historically be VOLUNTARY. Government has abused its power and looks upon the people as a herd of unwashed wild animals for them to drive in whatever direction they desire for their own self-interest. They retain that power by preaching to the ignorant that they are NEVER the problem, it is always the “rich” who refuse to turnover everything they own so politicians can live high and mighty.

This is WHY Thomas Jefferson, Madison, Adams. Washington, and Franklin, just to mention a few, forbid DIRECT taxation. They experienced that the power to DIRECTLY TAX the people destroys the liberty of the people for once a direct tax is imposed, you must account for whatever you do, earn, and have. The future of the present and younger generations is being systemically wiped out and therein we will discover the seeds of revolution. Justice Samuel Chase wrote in Hylton v. United States – 3 U.S. 171 (1796):

The great object of the Constitution was, to give Congress a power to lay taxes, adequate to the exigencies of government; but they were to observe two rules in imposing them, namely, the rule of uniformity, when they laid duties, imposts, or excises; and the rule of apportionment, according to the census, when they laid any direct tax.

If there are any other species of taxes that are not direct, and not included within the words duties, imposts, or excises, they may be laid by the rule of uniformity, or not; as Congress shall think proper and reasonable. If the framers of the Constitution did not contemplate other taxes than direct taxes, and duties, imposts, and excises, there is great inaccuracy in their language.

Clearly, taxes had to be fair to the states being uniform and apportioned by population. Only Socialists argued that taxes should be higher on a percentage basis the more you earn. They see any uniformity as an inequitable requirement. Let we claim women should have equal pay to men and there should be no discrimination with respect to race of creed. So where does this “social justice” come from other than coveting your neighbor’s possessions simply because they has things you do not.

The early Supreme Court solved the dilemma, when key Founders were still
Justices sitting on the Court, by interpreting “direct tax” strategically so that no tax was direct if apportionment was unreasonable. That solution was doctrine for one hundred
years, and courts need to return to it. Clearly, taxes that were not uniform or disproportionate had no constitutional weight. So much for Obama, IMF and Piketty.

The Founders knew best. Any sort of direct taxation against an individual necessitates a loss of liberty, freedom, and rights. In the USA, you cannot be imprisoned for NOT paying your taxes. They imprison you for not telling them you owe taxes. This is the lawyer-politicians again and how they circumvent the fundamental principles of the constitution all the time. This is no different from locking-up people who protest by claiming they lacked a permit or walked on the grass. In Russia, they just lock you up and don’t bother to pretend you have rights. There is no real difference.

This hunt for taxation on a global scale is simply outrageous. They track $3,000 now, not billions.

A reader sent this in:

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