The US Is Now 50% More Unequal Than Ancient Rome (And That Includes Slaves)

As we previously noted, only the highest income earners have seen any gains in compensation since the crisis began around 2007 to the current 'recovery' tops. It is perhaps not entirely surprising then that, the total income controlled by the Top 1% is drastically above that of the slave-included times of Ancient Rome and as high as the peak in the roaring 20s.

 

Current inequality is almost 50% worse than in Ancient Rome and as large as the end of the roaring 20s…

 

Source: @ConradHackett

 

Which is hardly surprising given that since 2007, incomes have only risen for highest wage-earners…

 

We leave it to the following 139 words by Elliott's Paul Singer to conclude – which in two short paragraphs explains everything one needs to know about America's record class inequality, including precisely who is the man responsible:

Inequality in the U.S. today is near its historical highs, largely because the Federal Reserve’s policies have succeeded in achieving their aim: namely, higher asset prices (especially the prices of stocks, bonds and high-end real estate), which are generally owned by taxpayers in the upper-income brackets. The Fed is doing all the work, because the President’s policies are growth-suppressive. In the absence of the Fed’s moneyprinting and ZIRP, the economy would either be softer or actually in a new recession.

 

The greatest irony is that the President is railing against inequality as one of the most important problems of the day, despite the fact that his policies are squeezing the middle class and causing the Fed – with the President’s encouragement – to engage in the radical monetary policy, which is exacerbating inequality. This simple truth cannot be repeated often enough.




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The Goldman Tapes And Why The Delusion Of Macro-Prudential Regulation Means The Next Crash Is Nigh

Submitted by David Stockman via Contra Corner blog,

There is nothing like the release of secret tape recordings to clarify an inconclusive debate. I recall that happening with Nixon back in the day. Even as a Washington apprentice I could see that he was a ruthless, power hungry abuser of his office, but much of official Washington just denied it. Then came the tapes. Soon there was no doubt. In short order Nixon was gone.

So now comes the Goldman tapes – 46 hours of recordings by an embedded New York Fed regulator at Goldman Sachs who got fired for attempting to, well, regulate. Would that the Carmen Segarra affair generates a Nixonian result – that is, exposure that “regulatory capture” is an endemic, potent and inextricable evil that can’t be remediated in situ.

Never mind that what Ms. Segarra was attempting to regulate–whether Goldman had a conflict of interest policy with respect to its M&A clients—-was actually none of the state’s business in the first place. If in the instant case GS was giving squinty eyed advise to its client, El Paso Corporation, because it owned a $4 billion position in the other party to the transaction, Kinder Morgan, so be it. Either the conflict was harmless or eventually Goldman’s M&A business would have been punished by the marketplace—–even stupid executives and boards wouldn’t pay huge fees to be taken to the cleaners for long.

Actually, what the tapes really show is that the Fed’s latest policy contraption – macro-prudential regulation through a financial stability committee – is just a useless exercise in CYA. Apparently, even the colony of the bubble blind which inhabits the Eccles Building has started to get nervous about financial bubbles and instability in recent months. What with junk bond yields sporting a 5 handle, the Russell 2000 trading at 80X reported profits and the IPO market having gone full-tilt manic with last week’s pricing at 27X sales of a Chinese e-commerce mass merchant that is a pure proxy for the greatest credit fueled house of cards in human history—-it needed to show some gesture of concern.

Now, it might have gone straight to the horse’s mouth. It might have asked about 70 consecutive months of zero money market rates, for instance, and the manner in which that has enabled speculators to mount massive momentum trades everywhere in the financial markets by funding any “risk asset” that generates a yield or a short-run gain with nearly zero cost options or repo. Or it might have inquired about the destruction of the market’s natural internal mechanisms of stability and financial restraint—-that is, short sellers and two way trading—that has resulted from the Greenspan/Bernanke/Yellen Put; or it might have wondered whether its bald-faced doctrine of “wealth effects” and ever rising stock prices does not in itself create a massive bias toward speculative risking taking and a blind buy-the-dips herd mentality in the casino.

But that would have been inconvenient because it would meant an abrupt end to its labor market focused policy of “accommodation” and a violent hissy fit in the casino. So Yellen and here Keynesian compatriots have invented out of whole cloth a method to drive the wildly vibrating Wall Street financial jalopy with both feet to the floor. That is, on the monetary “policy” side they intend to perpetuate ZIRP for at least another 9 months and near-ZIRP as far as the eye can see , while at the same time interposing in today’s frothy financial markets a Stanley Fischer led posse of regulators to keep speculator exuberance within safe boundaries.

At this point it is not clear which part of the Fed’s “macro-pru” initiative is the more preposterous. Why would you think that a system which required only 9 months to fire Carmen Segarra for comparatively trivial meddling in Goldman’s M&A department is capable of bubble prevention when we are talking about trillions of inflated value in the stock, bond, derivatives and real estate markets?  Or that putting a proven serial bubble generator—-that’s essentially what Fischer accomplished during his stint as head of Israel’s central bank—at the head of the financial stability committee would produce, well, financial stability?

It should be evident by now that regulatory capture and the inherent capacity of the marketplace to evade bureaucratic rules, edicts and embedded supervisors mean that “macro-pru” is a crock—an excuse to prolong a dangerous monetary experiment that is inexorably fueling a giant financial bubble and the crash which must inevitably follow.

Take the soaring issuance of sub-prime auto credit, for example, which now accounts for a record 30% of car loans and is putting people in cars at 130% loan-to-value ratios—-borrowers that have no hope of avoiding the repo man a few months down the road. On the margin, nearly all of this explosive growth is being funded in the non-bank market. That is, by freshly minted sub-prime auto lenders who have been given a sliver of equity by LBO houses and a ton of debt by the high yield market.  Who is Stanley Fischer going to crack down upon—–the LBO houses creating these fly-by-night lenders, the Wall Street underwriters lead by Goldman who are distributing the junk or Bill Gross’s yield-parched successors at PIMCO and its mutual fund competitors who are buying the stuff?

OK, Stanley Fischer being from MIT, the IMF, Citibank, the Bank of Israel—and to say nothing of his long ago supervision of Ben Bernanke’s PhD thesis which merely Xeroxed  Milton Friedman’s false claim that the Fed’s failure to engage in massive QE during 1930-1932 caused the Great Depression—-is too sophisticated to say “no auto junk, period”. What his committee will likely do is issue guidance about keeping debt-to-EBITDA ratios “prudent” at some notional leverage of say 6-8X when these newly minted auto junk yards are issuing the same.

But that’s before the underwriters parade in with a host of complications embedded in “adjusted EBITDA” to account for the fact that two fly-by-night subprime lenders, for example, just merged and therefore need a pro forma adjustment for down-the-road synergy savings; or that a newly minted lender is still scaling up its volume and that on a last month’s run-rate basis, its adjusted EBITDA ratio is 7.8X, not the 16X ratio embedded in its actual GAAP results.

And that doesn’t even account for the fact that the loan books of these start-up auto sub-primes are inherently unseasoned. It does take some time for an assistant night shift manager at a McDonald’s to become the subject of a “restructuring” initiative by the local franchisee and to subsequently default on his car loan. Indeed, the Fischer committee would even be up against the inherently vexing math of a rapidly ramping loan book. That is, while the denominator of loans issued is soaring, the numerator of delinquencies is still lagging. So loan loss reserves are invariably understated during the final blow-off stage of a financial bubble, meaning that earnings and EBITDA are over-stated and hidden leverage risk is rampant. The evidence is there in s
pades in the wreckage of the LBO and high yield markets during 20009-2010.

In short, even assuming that the obsequious culture of accommodation at the New York Fed so evident in the Goldman tapes could be uprooted, macro-pru is inherently impotent because of information asymmetry. What the Austrian thinkers 100 years ago said about socialism in general is true in spades with respect to the gambling casinos created by the Keynesian money printers. Without honest market prices in the trading pits and at loan desks and underwriting syndicates, financial booms and busts are inevitable, and the state’s regulators and supervisors are hopelessly at sea because they cannot hope to gather and process enough information to stymie the army of speculators chasing false prices with cheap credit.

Or to take another example, what is the Fischer committee going to do about leveraged stock buybacks? Not only is this fueling the speculative rise in the stock averages and the illusion that earnings are growing, when in fact it is only the share count which is shrinking, but it is also adding to the dangerous build-up of corporate debt that will become hugely problematic when interest rates are finally allowed to normalize.

But imagine the utter hissy fit that would instantly arise on Wall Street if the Fischer committee was even rumored to be addressing the issue of leveraged stock buybacks. It would generate a violent sell-off of the likes not seen since the House Republicans voted down TARP the first time around.

And then would come the information miasma. Wall Street would trot out the cash on the sidelines canard, arguing there is no problem here because not withstanding the current $700 billion annualized run-rate of buybacks for the S&P 500 alone, there is plenty of cash cushion available to corporate chieftains who wish to invest in their own company’s future— albeit with shareholder money, not theirs.

In truth, of course, the business sector did not delever one wit after the financial crisis.  Since the fourth quarter of 2007, business debt in the US has risen from $11 to $14 trillion. That $3 trillion gain dwarfs the $500 billion pick up in business cash balances. In fact, the rise in cash was never a sign of returning financial health in the fist place: it was only a telltale sign that by causing debt to be drastically mis-priced, the Fed was encouraging companies to artificially balloon both sides of their balance sheets.

Yet it would take the Fischer committee months to sort-out the truth and refute the sell-side propaganda—even if it had the will. Meanwhile, the bubble would continue to expand.

So here’s the thing. Our monetary politburo has its ass backwards. Macro-pru is an impossible delusion that should not be taken seriously be sensible adults. It is not, as Janet Yellen insists, a supplementary tool to contain and remediate the unintended consequence – that is, excessive financial speculation – of the Fed’s primary drive to achieve full employment and fill the GDP bathtub to the very brim of its potential.

Instead,  rampant speculation, excessive leverage, phony liquidity and massive financial instability are the only real result of current Fed policy. We are at peak debt in the household and business sectors of the private economy. Accordingly, the credit channel of monetary transmission is broken and done. Indeed, the modest pick-up in leverage in the household sector  has been exclusively among utterly marginal borrowers. That is, among students who are just treading water until the eventual day of default and sub-prime auto borrowers who are actually underwater they day they take out their loans.

No, the central bankers’ one time parlor trick has been played and leverage was ratcheted-up until it reached a peak in 2007-2008.  Now the central bankers are pushing on a string.

Household Leverage Ratio - Click to enlarge

But even as their liquidity tsunami never escapes the canyons of Wall Street, and, as an empirical matter, circulates right back to excess reserves at the New York Fed, it does have an immense untoward effect during its circular journey. Namely, it causes the most important price in all of capitalism—that is, the cost of overnight money and the speculators’ “carry” on his asset positions—to be drastically mispriced. It turns the central bank into a serial bubble machine.

Not 10,000 Carmen Segarra’s could stop the boom and bust cycle thus manufactured by the money printers ensconced in the Eccles Building. Stanley Fischer’s financial stability committee, therefore, is not merely a pointless farce. Its evidence that the next financial crash is nigh.




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PIMCO Liquidations Begin; And So Does The Retaliation: All Bill Gross Tweets Deleted

The last few days have been hectic for PIMCO executives. As we already noted, expectations of outflows persist and today's open in CDS markets suggested major concerns among market participants that PIMCO redemptions would force selling through an illiquid market. Sure enough, Bloomberg reports that PIMCO's Total Return Fund ETF was behind the auction of more than $170m of Fannie Mae CMBS on Friday (and more BWICs were seen today). As one trader noted, "you're going to sell your most liquid stuff first." Additionally, PIMCO has seen fit to delete all Bill Gross' tweets… so here are the last six months for the record.

As Bloomberg reports, the PIMCO liquidations have begun…

Pimco Total Return ETF behind auction of more than $170m of Fannie Mae CMBS on Friday, according to person with knowledge of the matter, who asked not to be named because the seller wasn’t disclosed.

 

List included most of ETF’s largest holdings in sector, according to Empirasign and Bloomberg data

 

Dealers also circulating ~$77m Fannie CMBS BWIC today with bonds in sizes similar to at least most of $3.6b ETF’s other holdings of the DUS securities, the data show

 

“You’re going to sell your most liquid stuff first. You don’t want to be a forced seller of anything. I would think these lists are going to be absorbed pretty well,” Brean Capital strategist Scott Buchta said in telephone interview

 

Other auction lists containing bonds in similar sizes to Pimco ETF’s holdings include: ~$59m of agency CMOs on Friday, ~$62m of subprime-mortgage securities today, ~$25m of senior CMBS today

h/t @SMulholland_

 

And then… PIMCO removed all of Bill Gross' tweets from the @PIMCO account…

Click image for large legible version of Bloomberg feed of the last 6 months of Bill Gross Tweets via @PIMCO

 

One wonders just what it is that PIMCO is so afraid of… are they about to take a 100% diametric market view to the 'Bond King' and need no evidence left of the entire company's top-down market thesis? Or is it just standard practice?




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Poll Predicts Libertarian Spoiler in North Carolina Senate Race

||| Rachel Mills A new survey
of likely voters in North Carolina
 raises the
prospect of yet another libertarian “spoiler” candidate.

The CNN/ORC International poll has Sen. Kay Hagan (D-N.C.)
pulling 46 percent of votes and Republican challenger Thom Tillis
43 percent, with a 4 percent margin of error. However, the poll
also has Libertarian candidate Sean Haugh polling at 7 percent of
the vote. If this proves to be an accurate prediction of election
results, it will undoubtedly lead to Sean Haugh being labelled a
“spoiler” by whichever side ends election night with a concession
speech.

Haugh credits his strong poll numbers to an increased awareness
of the libertarian brand, a significant change from when he ran for
Senate in 2002. “‘Libertarian’ is a household word now,” he told
The Washington Post. “Everybody knows what it means.”

So who
is Sean Haugh
? According to the Post’s July
profile, Haugh is a 53-year-old pizza deliveryman who “comes across
as both folksy and erudite, funny and earnest”.

Aside from candid explanations of
his views
, Haugh is also known to engage in extremely open
dialogue on Facebook. This recently lead to a confrontation with
one of his critics, who he described as an “ignorant moron”.
From The
Daily Caller
:

After getting into an argument over whether his presence in the
race just helps Hagan, Haugh said to the voter: “Well, obviously
our realities are quite detached. I prefer my reality over yours
because logic, reason and evidence exist in mine. I pity ignorant
morons such as yourself and wish you would stop voting.”

Haugh also said: “I have learned that there is no value in
explaining to an idiot why they are being an idiot, because,
y’know, they’re too stupid to understand anything.”

Haugh told the Post he was motivated to run against
Hagan and Tillis because he “couldn’t stand the idea of walking
into the voting booth and just seeing the Democrat and the
Republican on the ballot.” 

This gets at something political partisans like Ann Coulter fail
to understand when they complain about voters straying from the
Republican/Democrat duopoly: Election victory at all costs holds
little appeal to people who oppose the policies of both main
parties. It is also the height of arrogance for any side of
politics to claim ownership over a particular set of votes, which
is clearly implied when third-party candidates are said to have
“taken” votes away from Republicans or Democrats. If these
politicians want libertarians to vote for them, then they should be
less hostile to libertarian values.   

In the mean time, it appears Ann Coulter will be spending a lot
of time tracking
down libertarian voters
in North Carolina—after she
drowns Reason’s Ron Bailey
 first, that is.

 

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Ferguson Charges Thousands for Access to Public Records

Ferguson, Missouri, isn’t just 
shaking down its residents
for cash. The Associated
Press

reports
that, in an attempt to
stymie
 investigations, the city
has also been charging journalists exorbitant fees for access to
public records:

Bureaucrats in Ferguson, Missouri, responding to requests…to
turn over government files about the fatal shooting of 18-year-old
Michael Brown, are charging nearly 10 times the cost of some of
their own employees’ salaries before they will agree to release any
records.

Under Missouri open records law, government records can be
released for free—provided the government has “determined the
material was in the public’s interest to see.” Otherwise, a
“reasonable” fee can be levied.

The ever-nebulous public interest is in the eye of the
bureaucratic beholder, however. The AP asked for a fee waiver for
its records request of the Brown shooting and the aftermath, citing
the public’s interest. The city politely declined and demanded a
fee for its services:

Ferguson told the AP it wanted nearly $2,000 to pay a consulting
firm for up to 16 hours of work to retrieve messages on its own
email system.

Definitions of “public interest” aside, that’s a lot of money
for a little copying and pasting.

The AP is not the only news organization slapped with what the
city has deemed to be “reasonable” fees:

Organizations like the website Buzzfeed were told they’d have to
pay unspecified thousands of dollars for emails and memos about
Ferguson’s traffic-citation policies and changes to local
elections. The Washington Post said Ferguson wanted no less than
$200 for its requests.

As the AP notes, jacking up costs is a favorite government
tactic to discourage inquisitive journalists—while allowing the
government to maintain a superficial commitment to
transparency.

But reticent government gatekeepers are not the only offenders
of raising the costs of compliance:
Regulators
and
busybodies
of all stripes routinely hike charges in order to
curb undesirable activities without going
the unpopular or illegal route
of prohibiting these activities
outright.

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Presenting ISIS-Beating “Mad Max” Battle Tanks And Buses

When it comes to fighting the barbaric beheaders formerly known as ISIS, Kurdish fighters appear to have gone to the 1979 movie "Mad Max" for inspiration. As The Daily Mail notes, while significantly outgunned by Islamic State, the Kurds have created a fleet of well-armored, elaborately-designed, ominous-looking battle-buses by converting tractors and trucks into tanks…

 

Spot The Difference…

1979 Movie Mad Max…

 

And 2014 Kurdish Fighters…

 

Source: The Daily Mail

*  *  *

So to sum up – ISIS (the enemy) is using the latest and greatest US military equipment that it either stole from (or was given) Iraqi military and the Kurdish Peshmurga (our allies) are using tractors and trucks cobbled together with steel plates, duct tape, and surreal images.

Ok…




via Zero Hedge http://ift.tt/1vqn3Uy Tyler Durden

Presenting ISIS-Beating "Mad Max" Battle Tanks And Buses

When it comes to fighting the barbaric beheaders formerly known as ISIS, Kurdish fighters appear to have gone to the 1979 movie "Mad Max" for inspiration. As The Daily Mail notes, while significantly outgunned by Islamic State, the Kurds have created a fleet of well-armored, elaborately-designed, ominous-looking battle-buses by converting tractors and trucks into tanks…

 

Spot The Difference…

1979 Movie Mad Max…

 

And 2014 Kurdish Fighters…

 

Source: The Daily Mail

*  *  *

So to sum up – ISIS (the enemy) is using the latest and greatest US military equipment that it either stole from (or was given) Iraqi military and the Kurdish Peshmurga (our allies) are using tractors and trucks cobbled together with steel plates, duct tape, and surreal images.

Ok…




via Zero Hedge http://ift.tt/1vqn3Uy Tyler Durden

Teen Jailed for Zero Tolerance Offense, Starved for 36 Hours

Mosin nagantI previously wrote about
Alexander Chier
, a Pewaukee, Wisconsin, 17-year-old who was
disciplined by his high school for smoking a cigarette. This caused
the police to search his vehicle, where they found his hunting
rifle. Since the weapon was technically on school grounds, he was
suspended and arrested.

Chier spoke with me via e-mail to relate his side of the story.
There are no key details in dispute; even so, it’s hard not to
sympathize with the teenager, who was jailed for a night and denied
food for 36 hours, according to his account.

“I had to spend a night in jail after the interrogation, and
didn’t receive food that I could eat for 36 hours,” Chier
told Reason. “You see I have life threatening food
allergies to the point where legally I have a disability
(Anaphylaxis to peanuts, nuts, milk and eggs). 1/8 of a peanut
would have me dead in 10 minutes or less. I had 2 different
physicians and my allergist call the Waukesha County Jail to convey
this and I was still denied editable food.”

Other pieces of new information: Chier was caught smoking an
e-cigarette, not a regular cigarette, at school; the weapon found
in his car was a “bolt action mosin-nagant from 1937,” which he
uses to hunt coyotes; and he voluntary granted the cops access to
all his text messages and social media activity.

According to Chier, he turned himself over to the police,
subsequently enduring a four-hour interrogation and a famishing
night in jail.

Police agree that Chier was not planning to hurt anyone.

“We have no information at all that would have led us in that
direction,” a spokesperson for the Village of Pewaukee Police
Department told Reason.

The good news is that Chier expects the charges to be
dropped.

“Basically as long as I show up to my next court date and commit
no crimes I’m a clear man,” he said.

He is still suspended, however, and could be expelled. He’s not
happy about that, obviously.

“The fact that I’m facing expulsion in so extreme in every way,”
he said. “They will punishing a hunter who made a mistake, had no
ill intent, harmed no one, and never planned to do so; and if the
Pewaukee Police Department and the State of Wisconsin both gave
determined I am no threat to anyone I should be allowed to go back
to school!”

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Ira Stoll on the Left’s Populist Tax Agenda

Copying the right’s success, the left
is taking its tax agenda directly to the people. This November,
voters will again have the chance to decide on taxes. But as Ira
Stoll reports, in a number of cases, the questions they will be
voting on are not aimed at limiting taxes or at cutting them, but,
instead, at increasing them.

View this article.

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10k Troops Will Stay in Afghanistan After Official Pullout, White House Supports Hong Kong Protests, Judge Says Detroit Water Shutoffs to Continue: P.M. Links

  • Nearly
    10,000 American troops
    will remain in Afghanistan after 2014,
    promises the country’s newly elected president Ashraf Ghani
    Ahmadzai. The U.S. will also likely keep its
    secret prisoners
    when the war “ends.”
  • State Department spokeswoman Jen Psaki says that when
    President Barack Obama said his administration “underestimated” the
    threat of ISIS he
    didn’t really mean it
    . We’ve “long been tracking this,” she
    insists. So, we knew what was happening and just dropped the
    ball?
  • Grab your popcorn: The White House gave
    a thumbs up
    to the pro-democracy protests in Hong Kong, which
    are
    still growing
    in spite of tear gas and officials’ demands.
  • The bankruptcy judge overseeing Detroit’s woes said that

    shutting off water to non-paying customers can continue
    ,
    because he has no jurisdiction to act otherwise.
  • Elizabeth Warren wants a
    congressional investigation
    of the New York Federal Reserve
    after recently secret recordings suggest some foul play by the
    financial authority.
  • American consumer spending rose 0.5 percent last month. The

    housing sector
    remained an exception, and not in a good
    way. 
  • Top Obama adviser Valarie Jarrett apparently isn’t busy. She
    made her debut on a television drama this weekend, and it
    was pretty
    ugly
    .

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Twitter, and like us on Facebook. You
can also get the top stories mailed to you—sign up
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