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Submitted by Mike Krieger via Liberty Blitzkrieg blog,

I got this from Naked Capitalism. Before presenting the chart, here are some words to bear in mind from Yves Smith:

Short omits some key elements from his discussion. One is that until recently, a profit share of GDP of 6% was perceived to be a cyclical peak; no less than Warren Buffet deemed a higher level to be unsustainable. And in fact, we see an explosion of profit share from 6% to 10% of GDP in the runup to the crisis, roughly from 2003 to 2007. The “rescue the banks and financial markets” measures succeeded in bringing the profit share back to its pre-crisis levels, at the expense of workers.

 

Notice the inflection point in profit share is 1987, when Greenspan became Fed chairman. Correlation may not be causation, but the timing is almost exact.

The Maestro strikes again!

 

Don’t worry plebs, it’ll get better next year. Just keep calm and slave on.

via Zero Hedge http://ift.tt/1uj064L Tyler Durden

It is often said that a picture paints a thousand words, so here are 3000 words on the state of international diplomacy.

 

Last week’s APEC Summit… Putin between China’s Xi and Brunei’s Hassanal Bolkiah with Obama positioned with the wives…

 

This week’s G-20 Meeting… Obama front-and-center between China’s Xi and Brazil’s Rousseff (just in front of Britain’s Cameron) with Putin almost out of shot

Source: BusinessWeek

Note that there is one constant: China is always in the middle.

*  *  *

And here is an alternative take on the photo, courtesy of @snappedshot

via Zero Hedge http://ift.tt/1uuVha9 Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

A rubber band can remain stretched for some time, but it takes some force to keep it stretched.

The consensus is anticipating a smooth sleigh ride for Santa's traditional stock market rally from November to year-end. But the rubber band of the current rally is looking quite stretched, and there's a distinct possibility the rubber band snaps and Santa's rally hits a rough patch and overturns, distributing lumps of coal rather than additional equity gains.

 

Exhibit 1: The Russell 2000 index (RUT). It's hard not to notice that MACD is about to cross in a bearish signal, and that the stochastic has already crossed and is heading south.

Then there's the open gaps below, which tend to get filled despite endless claims that "this rally is different." Yes, of course it is.

At the previous top, the RUT noodled around in a trading range for a couple of weeks, reaching for a breakout that quickly failed.

The RUT has repeated the pattern rather neatly: two weeks of going nowhere (a.k.a. distribution), and a breakout that quickly reversed.

It's also interesting that the RUT's runs seem to last around 20 days or so. The downturn in October lasted about 22 days, and the current run-up is stretched tight at 24 days.

 

Exhibit 2: the volatility index (VIX). As Zero Hedge has noted, the VIX exhibits a peculiarity at the close of each trading session: it drops precipitously in the waning minutes of trading, and equally magically, stocks pop up to close positive for the day.

Confidence Guaranteed By A 3:58PM VIX-Slam.

That this sudden slam at the close has happened every day this past week must be coincidence–right?

Meanwhile, we see the stochastic has turned up and the MACD is poised to cross as well. The huge gap yawning around 24 is meaningless to complacent kiddies awaiting more equity-gain goodies from Santa. What's the basis of this confidence that volatility has been eradicated? This rally is different. Yes, of course it is.

Mr. VIX keeps getting slammed at day's end, but he still managed to notch an uptrend:

A rubber band can remain stretched for some time, but it takes some force to keep it stretched. In this case, the force is the daily VIX body-slam and the resulting pop up in equities. This has worked to keep RUT and its cousins aloft for several weeks of going nowhere, but the chart suggests all the kiddies who are supremely confident that Santa will deliver more equity gains might find their complacency is not rewarded.

via Zero Hedge http://ift.tt/11gHTtW Tyler Durden

The last thing Obama needed brought up during the just concluded G-20 conference, where world leaders generously agreed to boost global GDP by $2 trillion (let’s all hold our breath while they “just go find a cash machine“) while bashing Putin pretty much non-stop for 48 hours to the point where the Russian leader left early (due to “lack of sleep“), was the whole “Gruber thing”, i.e., the recent revelations that the architect of the “Affordable” Care Act, Jonathan Gruber, relied on the “stupidity of American voters” to pass Obamacare. Sadly for the American president, not even halfway around the world could he get away from the humiliation that has clouded his one and only domestic policy “success” in his 6 year tenure.

Alas, a question about Grubergate is precisely what Obama got when after preaching about “accountability to the people”, a member of the press asked the head of the “most hypocritical transparent administration ever” if Obama “misled Americans” about the taxes and about keeping the plan “in order to get the bill passed?”

Obama’s response:”No, i did not.” This was Obama’s conclusion after he had just gotten “well-briefed before he came out here.” Indeed, nothing escapes the American president who continued: “The fact that some adviser who never worked on our staff expressed an opinion that I completely disagree with in terms of the voters is no reflection on the actual process that was run.”

Obama’s argument in a nutshell: “we had a lengthy argument” in the US about Obamacare. True, one that was rammed down the throats of Americans as a tax courtesy of the Supreme Court: a decision that as we now know relied on the stupidity of the American voters. Apparently, one that also relied on the partisan nature of the Supreme Court. But it’s ok, because the misleading was done not by the architect of Obamacare but, suddenly, just “some advisor who never worked on our staff.”

Unfortunately, because Obama apparently wasn’t briefed quite as well as he would have hoped, let’s just take a look at what Dr. Gruber did do.

From B-320482, Department of Health and Human Services–Use of Appropriated Funds for Technical Assistance and Television Advertisements, October 19, 2010

On March 25, 2009, HHS awarded a contract to Dr. Jonathan Gruber, an economist at the Massachusetts Institute of Technology, to “produce a series of technical memoranda on the estimated changes in health insurance coverage and associated costs and impacts to the government under alternative specifications of health system reform.” [3] HHS Contract No. HHSP233200900181P, at 3. The contract required Dr. Gruber to consult with senior HHS officials “to develop detailed specifications of alternative proposals to increase health insurance coverage” and to use the specifications to “develop estimates of the change in the number of individuals with health insurance coverage . . . and the costs to the government and the private sector associated with these estimated changes in coverage.” Id. This was a firm, fixed-price contract for $95,000. Id., at 1. On June 19, 2009, HHS awarded another firm, fixed-price contract to Dr. Gruber for similar services for $297,600. HHS Contract No. HHSP23320094301EC.

…

Subsequent to the award of the HHS contracts, Dr. Gruber authored opinion pieces on health care policy that were published in national newspapers. E.g., Jonathan Gruber, Reform requires consumer pressure, Boston Globe, Sept. 3, 2009, at 17; Jonathan Gruber, A Loophole Worth Closing, N.Y. Times, July 12, 2009, at WK-10. Several media outlets quoted Dr. Gruber in articles regarding health care policy. E.g., Alec MacGillis, Would Tax on Benefits Rein In Spending?, Washington Post, July 30, 2009, at A1; Lisa Wangsness, Mass. health overhaul offers lessons for US program; Employees not being dumped on public plan, Boston Globe, July 10, 2009, at 2. In 2009, Dr. Gruber twice testified before a Senate committee on health care policy issues. Increasing Health Costs Facing Small Businesses: Hearing before the Senate Committee on Health, Education, Labor, and Pensions, Nov. 3, 2009, video available at http://ift.tt/1EO1oY7; Healthcare Reform: Hearing before the Senate Committee on Health, Education, Labor, and Pensions, June 11, 2009, available at http://ift.tt/1EO1oY7.

…

At issue here is whether HHS violated the prohibition against using appropriations for publicity or propaganda purposes when it awarded the contract for technical assistance and when it used appropriated funds to produce and air the television advertisements. The applicable prohibition states that “[n]o part of any appropriation contained in this or any other Act shall be used directly or indirectly, including by private contractor, for publicity or propaganda purposes within the United States not heretofore authorized by Congress.”[7]

In other words Obama is right that Gruber wasn’t part of the administration. He was nothing short than a well-paid propaganda tool designed to take advantage of, in his own words, American stupidity.

Did we say well paid? We meant very well paid. To wit:

• Michigan: $481,050 (source)
• Minnesota: $329,000 (source)
• Vermont: $400,000 (source)
• Wisconsin: $400,000 (source)
• West Virginia: $121,500 (source)

… and so on, and on, and on.

Because it suddenly becomes all too clear that Gruber was indeed telling the truth: only a nation full of idiots would pay a lying, self-serving propaganda tool nearly $2 million for nothing but constant lies.

As for the Obama exchange, here it is.

via Zero Hedge http://ift.tt/1EO1n6w Tyler Durden

As the G-20 meeting comes to a ‘successful’ end with back-patting congratulations having agreed to create $2 trillion more GDP out of thin air (or maybe hookers and blow), it appears that someone – or more than one – among these nations was less than diplomatic towards every nations’ best friend – America. As AP reports, The State Department has taken the unprecedented step of shutting down its entire unclassified email system as technicians repair possible damage from a suspected hacker attack. Earlier attacks have been blamed on Russian or Chinese attackers, although their origin has never been publicly confirmed.

 

As AP reports,

The State Department has taken the unprecedented step of shutting down its entire unclassified email system as technicians repair possible damage from a suspected hacker attack.

 

A senior department official said Sunday that “activity of concern” was detected in the system around the same time as a previously reported incident that targeted the White House computer network. That incident was made public in late October, but there was no indication then that the State Department had been affected. Since then, a number of agencies, including the U.S. Postal Service and the National Weather Service, have reported attacks.

 

The official said none of the State Department’s classified systems were affected. However, the official said the department shut down its worldwide email late on Friday as part of a scheduled outage of some of its internet-linked systems to make security improvements to its main unclassified computer network. The official was not authorized to speak about the matter by name and spoke on condition of anonymity.

 

The official said the department expects that all of its systems will be operating as normal in the near future, but would not discuss who might be responsible for the breach. Earlier attacks have been blamed on Russian or Chinese attackers, although their origin has never been publicly confirmed.

 

The State Department is expected to address the shutdown once the security improvements have been completed on Monday or Tuesday.

*  *  *

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

The US Dollar rally is at risk of blowing up a $3 trillion carry trade.

 

When the Fed cut interest rates to zero in 2008, it flooded the system with US Dollars. The US Dollar is the reserve currency of the world. NO matter what country you’re in (with few exceptions) you can borrow in US Dollars.

 

And if you can borrow in US Dollars at 0.25%… and put that money into anything yielding more… you could make a killing.

 

A hedge fund in Hong Kong could borrow $100 million, pay just $250,000 in interest and plow that money into Brazilian Reals which yielded 11%… locking in a $9.75 million return.

 

This was the strictly financial side of things. On the economics side, Governments both sovereign and local borrowed in US Dollars around the globe to fund various infrastructure and municipal projects.

 

Simply put, the US Government was practically giving money away and the world took notice borrowing Dollars at a record pace. Today, the global carry trade (meaning money borrowed in US Dollars and invested in other assets) stands at over $3 TRILLION (larger than the economy of France).

 

This worked while the US Dollar was holding steady. But in the Summer of this year (2014), the US Dollar began to breakout of a multi-year wedge pattern:

 

 

Why does this matter?

 

Because the minute the US Dollar began to rally aggressively, the global US Dollar carry trade began to blow up. It is not coincidental that oil commodities, and emerging market stocks took a dive almost immediately after this process began.

 

 

 

This process is not over, not by a long shot. As anyone who invested during the Peso crisis or Asian crisis can tell you, when carry trades blow up, the volatility can be EXTREME.

 

The market drop in October was just the start. Once the US Dollar rally really begins picking up steam, we could very well see a crash.

 

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

 

You can pick up a FREE copy at:

 

http://ift.tt/1rPiWR3

 

 

Best Regards

 

Graham Summers

 

Phoenix Capital Research

 

via Zero Hedge http://ift.tt/1A3XegH Phoenix Capital Research

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The inevitable result of the centrally planned Asian Miracle Model is credit bubbles and the crippling misallocation of capital in Building Bridges to Nowhere.

Japan’s extraordinary rise from the ashes of World War II created an “Asian Miracle” template that other Asian nations have followed, and continue to follow.The outlines of the model are straightforward.

via Zero Hedge http://ift.tt/1A3Xe0n Tyler Durden

In what the pro-Russian separatists call "an act of genocide," Ukraine's President Poroshenko signed a decree Friday that will explicitly withdraw state support for the regions within a month. While appearing to implicitly recognize the regions of Donetsk and Luhansk as autonomous, the decree means that the central bank will no longer service bank accounts, prisoners will be transferred (inmates with minor offences will be released), and perhaps most troubling as the cold winter begins, the order covers all public services, including crucial ones, such as schools, hospitals, and emergency services; and local heating and power plants will be subject to new laws that could involve cutting energy supplies altogether to the plants that don’t pay. Luhansk's leader exclaimed, "the total socio-economic blockade of Donbass is de facto an act on genocide and devastation of our people," and as the images below show, bank runs have already begun across the region with long lines forming at ATMs.

As The BBC reports,

Ukraine's president has ordered the withdrawal of all state services, including funding for hospitals and schools, from rebel-held areas.

 

 

Petro Poroshenko issued a decree that also asks parliament to revoke a law granting self-rule to the Donetsk and Luhansk regions.

*  *  *

As RT reports,

Kiev has suspended the protection of human rights and ordered the withdrawal of its institutions from areas controlled by local militia in the nation's east. Rebels have branded the decree, which hits the population on winter’s eve, an ‘act of genocide.'

 

The move was prepared by the Ukrainian National Security and Defense Council last week and enacted by a presidential decree signed on Friday. It has yet to be ratified by the newly-elected parliament, but the decree explicitly says that this procedure must be expedited – so there is little doubt that the new governing coalition will adopt it next week.

 

Arguably the most controversial part of the decree is the suspension of the European Convention on Human Rights in rebel-held areas. The convention, which guarantees basic human rights and fundamental freedoms in Europe, has a provision which allows some of its articles to be derogated by a signatory “in time of war or other public emergency threatening the life of the nation.”

 

Kiev has been insisting that the military campaign it launched against the dissenting provinces is not a war, but an “anti-terrorist operation.” Apparently the operation threatens the life of Ukraine, which will now observe only those provisions of the convention, which cannot be derogated under any circumstances. In particular, they are the right to life, the prohibition of torture and slavery, and the right not to be subjected to unlawful punishment.

 

In practical terms, the decree orders that many social and economic ties with the self-proclaimed Donetsk and Lugansk People’s Republics be severed. Kiev will withdraw all its officials and evacuate its offices in rebel-held areas. The order covers all public services, including crucial ones, such as schools, hospitals, and emergency services.

 

…

 

Local heating and power plants will be subjected to a “special procedure for accounting supplies of fuel” to ensure that their debt will not grow. This potentially could involve cutting supplies altogether to the plants that don’t pay.

 

“Poroshenko’s decree on the total socio-economic blockade of Donbass is de facto an act on genocide and devastation of our people,” Igor Plotnitskiy, leader of the Lugansk People’s Republic, said.

*  *  *

And as Sputnik News explains,

Ukraine's President Petro Poroshenko has ordered a halt in serving bank accounts of enterprises and residents in southeastern Ukraine within a month, said a decree published on the president's official website Saturday.

 

"National bank of Ukraine [shall] adopt measures within one month to stop serving bank accounts, including card accounts, that belong to economic entities… and residents in the territories of anti-terror operation in Donetsk and Luhansk regions," the decree said.

 

…

 

The Ukrainian central bank has been ordered to stop servicing all banks operating in the rebel-held areas. The accounts of individuals living there and companies located there have been frozen. This will stifle the local economy, as businesses will have to conduct transactions in cash or use a bartering system.

At the same time, the rules of taxation and budget transfers between Kiev and local governments in the Donetsk and Lugansk regions will be altered under the decree.

*  *  *

As AFP reports, the bank runs have begun…

People line up to withdraw money from the cash machine at a bank in the eastern city of Donetsk.

 

 

The Ukrainian president plans to shut state offices and banks in the region.

*  *  *

What is perhaps even more surprising is that following plans by authorities of self-proclaimed Donetsk People’s Republic plan to open new banks tomorrow to replace the existing branches of one of Ukrainian lenders, Poroshenko has stomped on that idea too..

• Ukraine Denounces as Illegal Plan by Insurgents to Set Up Bank

Almost seems like someone is spoliing for a fight again and is annoyed at the lack of headlines (and cash) his country is getting since the ceasefire began.

via Zero Hedge http://ift.tt/1sVaeh7 Tyler Durden

Submitted by Simon Black via Sovereign Man blog,

Years ago, an elderly, frail Japanese martial arts master once boasted a 200-0 record against his opponents.

He claimed to have a unique power that allowed him to inflict serious injury on people without actually laying a finger on them.

Was it Chi? Magic? None of the above. It was a total scam. But that didn’t matter.

You see, the legend of the master’s powers turned out to be far more powerful than reality.

His core following of students believed in the master so much that they would fling themselves across the dojo whenever he raised his pinky finger.

And anyone who saw the display would become transfixed by the perception of the mater’s extraordinary abilities. It was an incredible case of mass delusion.

Everyone believed it, including the master himself. He was so confident in his skills that he put up a $5,000 challenge that he could beat any fighter in the world.

A mixed martial arts champion accepted the wager, and the result wasn’t pretty.

As you can see in the video, the master is quickly knocked to the ground with a broken nose and a pool of blood. Observers scramble to find a doctor to come to his aid.

You can almost hear the sound of reality quickly taking hold from the gasps of his students. No one could bring themselves to believe that the master had been so quickly beaten.

To an outsider, it seems so obvious that this guy is a phony (just watch the video). But mass delusion is an incredibly powerful force.

We see the same effects in the West today—mass delusions everywhere.

People seem to believe their governments are almighty beings capable of performing magic—water into wine, debt into wealth.

Here are some of the biggest myths we see in the system today:

1. The dollar will continue to be the dominant currency.

This is a total farce. Grumblings grow louder around the world to establish a new non-dollar financial system, and China has taken the lead to make this a reality.

2. The US is still the dominant military power in the world.

If you measure by the quality of trained personnel, this is true. But what good is all of that military power if you can’t afford to do anything with it?

3. The police exist to protect the people.

Wrong again. With so much civil asset forfeiture taking place at the point of a gun (federally funded assault rifles), it’s clear they’re far more concerned about protecting those that maintain the status quo than protecting you.

4. Elections make a difference

Completely false. Most Western governments borrow money to pay interest on the money they’ve already borrowed.

In the US, they spend so much on mandatory entitlements and interest they could eliminate almost the entire government and still not run a balanced budget.

At that level of desperation, it matters not who’s in power.

5. Your bank is safe

Your bank might HAVE a safe. But if you look at objective data, many banks in the West have incredibly thin levels of capital and liquidity—the exact opposite of what a safe bank is supposed to have.

Oh yeah, they’re backed by poorly capitalized deposit insurance funds, which are guaranteed by insolvent governments.

And bear in mind that even if your bank is reasonably capitalized, you are still guaranteed to lose money on a tax adjusted, inflation adjusted basis if you you’re holding your savings there.

6. You have to go to college in order to get ahead

Quite the opposite—going to college in many cases can get you behind; just ask any 36-year old still paying down that $100,000 student loan debt.

The world is a big place full of opportunity. Skills and experience matter more than pieces of paper.

Here’s a better option, especially for young people: head overseas, and become an apprentice to a successful, knowledgeable individual that you respect.

Any young person who thinks that going to college is a good idea should just ask any of their unemployed friends saddled with $100,000 of debt if it was worth it.

7. I saw it on TV so it must be true.

Ufff. The mainstream media exist to paint a distorted version of reality so that people are kept placated, docile and largely clueless about what really goes on in the world.

8. Debt doesn’t matter because we owe it to ourselves

Whoever first said this must have a lot of whips and chains in his closet because he seems to enjoy pain.

If we owe the debt to ‘ourselves,’ that means that we will need to default on ourselves.

This means no more Social Security, Medicare, etc. It means causing the US Federal Reserve to become insolvent and spark a currency crisis. It means causing the collapse of every bank in the country.

Sure, no biggie.

9. The United States is the Land of the Free

Draconian surveillance efforts on its citizens. Punitive taxes, fines and regulation. Rising police state. Telling people what they can or can’t put in their bodies, how to grow their food, who to adore, who to hate. Preventing them to collect their own rainwater and live off the grid.

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