Attn, Obama: Three Reasons to Build Keystone XL Pipeline

So a bill to push the Keystone XL Pipeline failed to get enough
support in
the Senate yesterday. It’s likely that when the new,
GOP-controlled Congress takes over in 2015, something similar will
sail through and President Barack Obama will veto or otherwise
quash plans to build the thing.

A year and change ago, Reason TV released “3 Reasons to Build
the Keystone XL Pipeline.” Take a look above and go here for

a full writeup.

Vote or no vote, veto or no veto, this much is pretty clear:
There’s something seriously wrong when the government is able to
stymie the building of a private project. Yes, there are
eminent-domain abuse issues surrounding some aspects of the
pipeline and those should be dealt with. But there’s simply no good
argument for the government holding up things. This isn’t about
jobs (the numbers, real and imagined, in those sorts of scenarios
are always guess work and it’s not the government’s job to create
jobs anyway) and it’s not about the environment (the Canadian
petroleum products are going somewhere, so the idea that this will
to global warming or whatever is simply cant). But given their
willingness to support any sort of taxpayer-funded boondoggle (and
the temp jobs those useless projects generate), the liberal
Democratic opposition to building the pipeline is really
just bald hypocrisy.

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Commodities Are Crumbling – Gold Fixing Or Another Fed Minutes Leak?

Because nothing says unrigged like a collapse across the commodity complex (gold, silver, copper, and crude) as London’s Gold Fixing Company auction takes place… Or did the Fed leak its minutes like it did in 2013?

 

*  *  *

Subtle!!

* * *

There is a 3rd possibility…

SRG SWISS REF poll will be announced unofficially at around 11am EST.

 

It is a private survey so might be out already…

 

The last survey had 17% undecided (with 44% supported “Save our Gold”, 39% were opposed)

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“Helpful” Britain Tweets “How To Spot A Russian Tank In Ukraine”

In case you are wondering through Ukraine and come across a tank, the British embassy in Kiev has issued a handy pocket guide to indentifying whether it is Russian (bad guys) or Ukrainian (good guys)…

 

 

 

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The Aftermath of NATO’s Libya War: ISIS Reportedly Seizes Mediterranean City

Almost exactly three years after NATO’s intervention in Libya
ended with what
we were told was a great victory, ISIS has reportedly taken
control of the Libyan city of Derna:

"Dear Ma. I hear Libya is a mess now. Luckily, I escaped to Hell just in time."The black flag of ISIS flies
over government buildings. Police cars carry the group’s insignia.
The local football stadium is used for public executions. A town in
Syria or Iraq? No. A city on the coast of the Mediterranean, in
Libya.

Fighters loyal to the Islamic State in Iraq and Syria are now in
complete control of the city of Derna, population of about 100,000,
not far from the Egyptian border and just about 200 miles from the
southern shores of the European Union….

The Libyan branch of ISIS now has a tight grip on the city,
controlling the courts, all aspects of administration, education,
and the local radio. “Derna today looks identical to Raqqa, the
ISIS headquarters town in Syria,” [counterterrorist Noman] Benotman
told CNN.

Meanwhile, Marc Lynch, who supported the Libya war, has posted
some
reflections this week on how he got that call wrong. One
interesting point he makes is that NATO helped pave the way not
just for the present chaos in Libya, but for the present chaos in
Syria:

I had placed a great deal of emphasis on the
demonstration effects of an intervention. My hope had been that the
intervention would act to restrain other autocrats from unleashing
deadly force against protesters and encourage wavering activists to
push forward in their demands for change. Unfortunately, this only
partially panned out and had unintended negative effects. U.S.
cooperation with the Gulf Cooperation Council states in Libya
compelled it to turn a blind eye to the simultaneous crushing of
Bahrain’s uprising.

The worst effects were on Syria. The Libya intervention may have
imposed a certain level of caution on Syrian President Bashar
al-Assad, leading him to search for just the right level of
repression to stay beneath the threshold for international action.
But that didn’t last for long and his violence quickly escalated.
Meanwhile, the Libya intervention almost certainly encouraged
Syrian activists and rebels—and their backers in the Gulf and
Turkey—in their hopes for a similar international campaign on their
own behalf. That unintended moral hazard probably contributed to
the escalation of Syria’s civil war.

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Algos – We Have A Problem

For ‘years’ the US stock market has traded on ‘fun-durr-mentals’ – tracking USDJPY tick for tick day in day out as algos tickle leveraged currency trades to ignote momentum in US equities and guarantee ‘proof’ in the recovery. The correlation, however, between USDJPY and stocks (US and Japanese) has begun to deteriorate rapidly since Kuroda unleased Godzilla QQE… and today it is very clear…

First Japanese algos broke…

 

 

 

And now US…

 

Maybe the divergence between stocks and VIX & HY Credit protection buyers in the last week did mean something after all as traders await some possible inconvenient truths in the fed minutes.




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A. Barton Hinkle on How the Government Steals from Citizens

“Government,” as
Barney Frank and other progressives are fond of saying, “is just
another word for things we choose to do together.” Like rob people
blind. Sometimes the together-doing is highway robbery in the most
literal sense — as when police departments seize cash from
motorists who are never even charged with a crime. The euphemism
for that is civil asset forfeiture, and it’s gotten so out of hand
even hang-’em-high, law-and-order conservatives say it needs to
stop.

But sometimes, writes A. Barton Hinkle, the robbery is committed
not on the highways but for the sake of them — especially here in
Virginia. Just ask James and Janet Ramsey, who live near Oceana
Naval Air Station in Virginia Beach. Five years ago, the Virginia
Department of Transportation took a chunk of their property through
a controversial process known as quick take.

View this article.

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What Do College Undergrads Spend Their Student Loans On: High-School Classes

Over the weekend we closed the chapter on the “mystery” of America’s collapsing labor force and the record 90+ million Americans out of the labor force.

As Pew reported, confirming what we had said all along, it has little to nothing to do with Boomers retiring – simply because under ZIRP they can’t afford to retire – and everything to do with Millennials staying in school because they can’t find the well-paying jobs they had expected, raking up $1.2 trillion (and exponentially rising) in government-funded student debt in the process. To wit:

More and more Americans are outside the labor force entirely. Who are they? According to the October jobs report, more than 92 million Americans — 37% of the civilian population aged 16 and over — are neither employed nor unemployed, but fall in the category of “not in the labor force.” That means they aren’t working now but haven’t looked for work recently enough to be counted as unemployed. While that’s not quite a record — figures have been a bit higher earlier this year — the share of folks not in the labor force remains near all-time highs.

 

You might think legions of retiring Baby Boomers are to blame, or perhaps the swelling ranks of laid-off workers who’ve grown discouraged about their re-employment prospects. While both of those groups doubtless are important (though just how important is debated by labor economists), our analysis of Bureau of Labor Statistics data suggests another key factor: Teens and young adults aren’t as interested in entering the work force as they used to be, a trend that predates the Great Recession.

 

But that’s just the beginning. Because as we have also covered on various occasions in the past, there is a just as important question of just what these “students” spend their money on. Among the items revealed: “A U.S. Middle District Court indictment alleges that Price spent much of the loan money on crack cocaine, cars, motorcycles, jewelry, tattoos and video games.” And iPhones of course, because someone has to indirectly provide US subsidies to the NSA’s favorite company (read “NSA Mocks Apple’s “Zombie” Customers; Asks “Your Target Is Using A BlackBerry? Now What?”).

Now we know one more thing that America’s young adults, of whom some 24% expect that their debt will ultimately be forgiven, are blowing Uncle Sam’s debt on. The answer: high-school level classes.

According to the WSJ, “college students are increasingly spending federal financial aid and taking on debt for high school-level courses that don’t count toward a degree, despite mounting evidence the courses are ineffective and may contribute to higher dropout rates.“

Shocking? Well not really: after all when student debt is easier to procure than subprime loans in 2005, and when nobody in government actually checks if it is used prudently, is there any wonder the same individuals who recklessly will spend money they can never repay on anything but their future, will spend it on the dumbest possible things? Perhaps it is more surprising that they used it for “noble” purposes in the first place.

The number of college students taking at least one remedial course rose to 2.7 million in the 2011-2012 academic year from 1.04 million in 1999-2000, federal data show. During the same span, the amount of federal grants spent by undergraduates enrolled in at least one remedial course rose 380%, after inflation, Education Department figures show. There was also a drastic rise in remedial students taking on student debt.

The one social class most “enslaved” by this “not quite free” debt handout? Poor, underprivileged students of course, those who can least afford to graduate with tens of thousands in debt.

The trends reflect a sharp rise over the past decade in enrollment at community colleges, which disproportionately serve low-income, minority and older populations. About 40% of students entering community colleges enroll in at least one remedial course, according to the Education Department; only about 1 in 4 of them will earn a degree or certificate.

 

“You clearly see that a big part of the problem is that students of color, first-generation students in low socioeconomic status are getting stuck” in remedial courses, said Eloy Oakley, president of Long Beach City College in Southern California. “They’re getting placed in these courses and they’re not coming out.”

 

Students are typically placed in remedial courses for English and math and because they score poorly on standardized tests. Federal law permits them to spend financial aid on as much as a year’s worth of remediation.

Ironically, the very classes this debt is spent to finance essentially assure that the student will never even succeed in graduating college:

Academics and senior officials within the Education Department increasingly view the remedial courses themselves as a major barrier to college completion, particularly among minorities. Many students become discouraged and could succeed without remediation, while others could benefit from shorter, more-targeted catch-up sessions, research shows.

 

Multiple studies have concluded that, for most students, remediation either hurts or has no effect on their odds of earning a college degree or certificate. The studies have compared the outcomes of borderline students—those just above and just below the cutoff for getting into college-level courses. In a 2012 National Bureau of Economic Research paper, two Columbia University researchers found that students who appeared to have been misplaced in remediation were 8% more likely to drop out than those who went directly into college courses.

As a result, some schools have finally started analyzing what the IRR of remedial schooling is: Long Beach City College is experimenting with how it assesses students and places them in remedial classes. Before 2012, it placed all students based on how they scored on a standardized test. Since then, the school has launched a program to place students from local high schools based on their grade-point averages, which officials believe are a better predictor of how students will perform in college-level courses.

Within the program, the share of first-year students at LBCC going directly into college-level coursework has tripled, to 39% for English and 32% for math. And the school finds that on average, students who would have been slated for remediation are performing as well as others.

 

 

Leangkheng Ouk, 20 years old, was slated to take remedial English and math at the school because she performed poorly on her standardized test, despite being a B student in high school. Under the new system, she went directly into college-level courses in 2012 and earned a 3.8 GPA before transferring this year. She now attends California State University, Long Beach, where she is on track to earn a bachelor’s degree in business management.

 

“I was glad they placed me in the higher courses actually on my level, so I don’t waste time and can be able to transfer in two years,” said Ms. Ouk, a Cambodian national and U.S. permanent resident who is the first member of her family to go to college. Ms. Ouk has used scholarship money, federal aid and wages earned from a part-time job to cover her education. “If I was placed in a remedial class I would have to stay in LBCC longer. I would have used my financial aid grants.

And now, after years of delays and long after the student loan bubble reached unprecedented proportions, the Government is finally deciding to “take a look”:

Now, the high dropout rate among remedial-education students—along with a sharp rise in student debt—is fueling debate about whether the government should be more stringent in awarding student aid. Critics—ranging from some think-tank academics and conservatives to a trustee of a community-college system in Texas—say aid should be targeted toward students who are better-prepared.

Keep in mind this is the same government that lied to “stupid” Americans to pass Obamacare. Then again, considering what these same Americans spend their unsecured, garnishable debt on, perhaps Dr. Gruber’s real and only crime was getting caught.




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Senate Votes to Maintain the National Security Surveillance State

Uncle Sam SpyLast night the U.S. Senate could not muster the
60 votes that would have allowed debate and a vote on the USA
FREEDOM Act to proceed. For most privacy and liberty advocates, the
USA FREEDOM Act was a first step toward reining in the National
Security Agency’s (NSA) pervasive spying on innocent American
citizens. While this
version of the bill was far from perfect, it would …

…rein in the dragnet collection of data by the National
Security Agency (NSA), increase the transparency of Foreign
Intelligence Surveillance Court (FISA Court) decision – making,
provide businesses the ability to release information regarding
FISA requests, create an independent advocate to argue cases before
the FISA Court,and impose new and shorter sunsets on controversial
surveillance authorities.

The future Senate majority leader Sen. Mitch McConnell (R-Ky.)
strenuously opposed the bill declaring that passing it would amount
to “tying
our hands behind our back.” McConnell was able to keep 42
Republicans in line so that debate on the bill could not go
forward. Among those voting against debate, was Sen. Rand Paul
(R-Ky.). Politico
reported:

Opposition was led by Senate GOP Leader Mitch McConnell and
colleague Sen. Rand Paul, who both voted down the legislation,
though for different reasons. McConnell, like many Republicans,
voted it down because he believed the reforms went too far, while
Paul voted against the bill because it did not go far enough.

Paul said immediately after the vote that he “felt bad” about
his vote against the motion.

“They probably needed my vote,” he said, opposing Leahy’s bill
because it would extend the sunset provisions for the laws
authorizing surveillance. “It’s hard for me to vote for something I
object to so much.”

Although his single vote would not have been enough to open up
debate, Paul should nevertheless have heeded
the insight of the developer of radar Robert Alexander
Watson-Watt who explained, “Give them the third best to go on with;
the second best comes too late, the best never comes.” I am no
parliamentarian, but it appears that under
Senate rules because Paul voted with the prevailing side, he
could move to have the Senate reconsider the bill, although it
seems unlikely that he will do so.

Paul and the rest of his fellow citizens may well come to rue
the day that he allowed the perfect to get in the way of the merely
better.

See below Reason TV’s interview with NSA whistleblower William
Binney.

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Bank Of Japan Warns Abe Over “Fiscal Responsibility” While Monetizing All Its Debt

If one were to look up the definition of hypocrisy, the image of BoJ head Kuroda should be front-and-center. Having tripled-down on his money-printing and ETF-buying largesse just last week, he came out swinging last night at the government’s fiscal irresponsibility blasting Abe’s policies by saying Japan’s fiscal health “is the responsibility of parliament and the government, not an issue for the central bank to be held responsible for.” Aside from the fact that he is directly monetizing all JGB issuance – thus enabling Abe’s arrogant fiscal stimulus plan (by issuing 30Y and 40Y debt), Bloomberg notes that “Kuroda is making it crystal clear the government has to tackle the debt problem and if fiscal trust is lost that’s not going to be on the BOJ.” The world has truly gone mad.

 

Seemingly paying the same lip-service as Bernanke and Yellen in the US and Draghi in Europe, BoJ’s Haruhiko Kuroda is carefully positioning the blame for lack of growth and economic chaos on the government’s lack of growth-oriented policies… and not the central bank’s enabling experiments… (via Bloomberg)

Bank of Japan chief Haruhiko Kuroda emphasized the onus is on the government to strengthen its finances after Prime Minister Shinzo Abe postponed a sales-tax hike and outlined plans to boost fiscal stimulus.

 

“It’s the responsibility of parliament and the government, not an issue for the central bank to be held responsible for,” Kuroda said when asked about risks to Japan’s fiscal health. The BOJ’s job is to achieve its inflation target, he said at a press conference in Tokyo.

 

Kuroda’s repeated comments at a press conference today on the importance of fiscal discipline indicate the governor is unhappy and may signal a change in strategy, said Credit Suisse Group AG economist Hiromichi Shirakawa.

 

…

 

“Kuroda is making it crystal clear the government has to tackle the debt problem and if fiscal trust is lost that’s not going to be on the BOJ,” said Shirakawa, a former BOJ official. “This is true, but he used to highlight that the BOJ and the government were working together. Abe might have created an enemy by postponing the sales-tax hike.”

*  *  *

So when Japan finally goes entirely tits-up, we now know, it was all Abe’s fault… and nothing to do with reckless money-printing and leveraged buying of the nation’s stocks by a maniacal central banker…

Is this not the same as a price-cutting drug dealer blaming the drug-addicted customer for not being able to afford better drugs?




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Why Living In A Post-Bubble World Is No Fun

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

What do we do when the bubble economy cannot be reflated?

It is generally conceded that we are living in an era of Peak Everything: peak central bank omnipotence, peak powerless of the non-elites, peak wealth inequality, peak media-induced delusion, peak market-rigging, peak bogus official statistics, peak propaganda, peak bread and circuses, peak deception, peak distraction, peak sociopathology, peak central statism, peak debt, peak leverage, peak derealization–need I go on?

Peaks generate bubbles. Bubbles reach extremes and then they pop. There is nothing mysterious about this causal chain: peaks generate extremes that manifest as bubbles, which eventually implode as extremes revert to the mean and mass delusions are shattered by the unwelcome reality that extremes are not sustainable.
 
The status quo solution to the devastation of a popped bubble is to inflate another even bigger bubble. If debt reached extremes that imploded, the solution is to expand debt far beyond the levels that caused the implosion.
 
If fudging the numbers triggered a loss of confidence, the solution is to fudge the numbers even more, so they no longer reflect reality at all.
 
If gaming the system crashed the system, the solution is to game the system even harder.
 
If the masses protest their powerlessness, the solution is to push them further from the centers of power.
 
And so on.
 
This blowing new bubbles to replace the ones that popped works for a while, but at the expense of systemic stability. Each new bubble requires pushing the system to new extremes that increase the risk of instability and collapse.
 
In other words, the stability of the new bubble is temporary and thus illusory.
 
The processes used to inflate the new bubble suffer from diminishing returns. The nature of stimulus-response is that overuse of the stimulus leads to diminishing responses. This is a structural feature that cannot be massaged away.
 
Goosing public confidence in the status quo with phony statistics and rigged markets works splendidly the first time, less so the second time, and barely at all the third time. Why is this so? The distance between reality and the bubble construct is now so great that the disconnection from reality is self-evident to anyone not marveling at the finery of the Emperor's non-existent clothing.
 
The system habituates to the higher stimulus. If the drug/debt has lost its effectiveness, a higher dose is needed. This is the progression of serial bubbles. Then the system habituates to the higher dose/debt, and the next expansion of debt must be even greater.
 
This dynamic can be visualized as The Rising Wedge Model of Breakdown, which builds on the well-known Ratchet Effect: the system enables easy expansion of debt, leverage, employees, etc., but it has no mechanism to allow contraction. Any contraction triggers systemic collapse.
 
When the system's ability to inflate another bubble breaks down, it's no longer fun. It's no longer fun to be a consumer when credit is no longer free, it's no longer fun to be a politco when the money spigot is no longer wide open, it's no longer fun to be a market rigger when the markets have imploded, and so on.
 
It is generally conceded that the global economy is currently experiencing a third bubble. The first expanded in the 1990s and popped in 2000, the second one expanded in 2002 and burst in 2008, and the third one inflated in 2009 and has yet to implode.
 
We can anticipate the popping of this third bubble, and this opens a line of inquiry few have taken: what if the popping of this third bubble breaks the bubble inflation machinery? In other words, what if there can be no fourth bubble to bail out the status quo, due to the systemic limitations of bubble-blowing as a solution to previous bubbles popping?
 
Given that we're still in Peak Central Bank Omnipotence, it is widely believed central banks can continue inflating bubbles of confidence, assets, debt and consumption at will, essentially forever.
 
But what if the fourth bubble can't reach the heights of the third bubble? What if the debt and leverage required to inflate the fourth bubble breaks down before the fourth bubble can even reach the heights needed to make everyone who bet the farm on the status quo whole?
 

Few dare ask these questions as they raise a terrifying follow-on question: what do we do when the bubble economy cannot be reflated?




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