Study of Virtual Images Suggests Jurors May Not Know Child Porn When They See It

A new study finds that people have “considerable difficulty” distinguishing between photographs and computer-generated images of human faces, a fact the authors suggest will complicate prosecution of child pornography cases. “As computer-generated images quickly become more realistic, it becomes increasingly difficult for untrained human observers to make this distinction between the virtual and the real,” says lead researcher Hany Farid, a professor of computer science at Dartmouth. “This can be problematic when a photograph is introduced into a court of law and the jury has to assess its authenticity.”

Farid and his colleagues showed 250 subjects 60 pictures of men’s and women’s face, some of which were photographs and some of which were computer-generated images. “Observers correctly classified photographic images 92 percent of the time,” Farid et al. report, “but correctly classified computer-generated images only 60 percent of the time.” In a second experiment, subjects who were given tips on how to distinguish between real and virtual images were better at identifying the latter, classifying them correctly 76 percent of the time. But they were somewhat worse than naive subjects at identifying photographs, classifying them correctly 85 of the time, perhaps because the coaching made them second-guess accurate perceptions.

Observers, whether trained or not, did worse than the subjects in a similar study that Farid and his colleagues conducted five years ago—an indication that the quality of virtual images has improved. “We expect that as computer-graphics technology continues to advance, observers will find it increasingly difficult to distinguish computer-generated from photographic images,” Farid says. “While this can be considered a success for the computer-graphics community, it will no doubt lead to complications for the legal and forensic communities. We expect that human observers will be able to continue to perform this task for a few years to come, but eventually we will have to refine existing techniques and develop new computational methods that can detect fine-grained image details that may not be identifiable by the human visual system.”

Congress anticipated this development back in 1996, when it passed the Child Pornography Prevention Act. That law’s definition of child pornography included “any visual depiction” that “appears to be” an image of “a minor engaging in sexually explicit conduct.” Six years later, the Supreme Court overturned that aspect of the law, concluding that it was overbroad, covering constitutionally protected speech such as movie versions of Lolita or Romeo and Juliet. In 2003 Congress tried again with the PROTECT Act, which banned “obscene visual representations of the sexual abuse of children.” Although the main rationale for that prohibition was preventing people caught with actual child pornography from winning acquittal by demanding that the government prove it was not virtual, the proscribed material explicitly includes drawings, cartoons, sculptures, and paintings that no one would mistake for the real thing.

On the face of it, the problem highlighted by Farid et al. should not pose much of a challenge for federal prosecutors. If it becomes increasingly difficult to prove that purported child pornography shows actual children, prosecutors can instead charge defendants with violating the PROTECT Act, which carries the same penalties as the provisions dealing with child pornography, including up to 10 years in prison for possession and a five-year mandatory minimum for “receiving” a prohibited picture, which amounts to the same thing when the image is viewed online. But PROTECT Act prosecutions are more problematic for a couple of reasons. First, prosecutors have to prove the image is obscene, meaning it “appeals to the prurient interest” and “lacks serious literary, artistic, political, or scientific value.” Second, the Supreme Court has said the First Amendment forbids punishing people for mere possession of obscene material, unless it is child pornography. Hence any prosecution for merely possessing material banned by the PROTECT Act is constitutionally questionable.

Then again, when someone is caught looking at pictures that have been transmitted via the Internet (as is typically the case), he can always be charged with receiving them, which triggers the five-year mandatory minimum. The U.S. Court of Appeals for the 4th Circuit upheld such a conviction in a 2008 case involving Dwight Whorley, a Virginia man who was caught looking at “Japanese anime-style cartoons of children engaged in explicit sexual conduct with adults.” The 4th Circuit rejected the argument that “receiving” obscene material via the Internet is essentially the same as possessing it, which the Supreme Court has said is constitutionally protected. Prosecutors also can obtain convictions for possession under the PROTECT Act through guilty pleas coerced by the threat of a receiving charge. That’s what happened in a 2011 case involving cartoon pornography featuring characters from The Simpsons and a 2013 case involving “incest comics.”

The Dartmouth press release discussing Farid et al.’s study says “juries are reluctant to send a defendant to prison for merely possessing computer-generated imagery when no real child was harmed.” That may be true, but jurors generally do not know the penalties a defendant faces, and lawyers are not allowed to tell them. Dwight Whorley, who had previous convictions involving cartoons as well as “digital photographs depicting minors engaging in sexually explicit conduct,” received a 20-year sentence. Even if he had no record, he would have been subject to the five-year mandatory minimum just for looking at cartoons. It is unlikely that the jurors realized that—or that they would have believed it had they been told.

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The Illegitimacy of Comex Pricing

 

 

 

Hold your real assets outside of the banking system in a private international facility  –>  http://ift.tt/1M1FiG5 


 


The Illegitimacy of Comex Pricing

Posted with permission and written by Craig Hemke, TF Metals Report & Sprott Money correspondent

 

 

We’ve known for years that the Comex derivative pricing scheme was a fraud, where market-making Bullion Banks create unlimited amounts of paper gold in order to soak up speculator demand. Then these same banks shuffle warrants and warehouse receipts back and forth to create the illusion of physical delivery. But now, even the price “discovered” electronically on this exchange has become completely useless.

Look, I recognize that we’ve plowed this ground so many times already that you probably think that we’ve run out of things to write about. Let me assure you that that’s not the case and that there is a serious purpose behind this post. First, though, please be sure to review some of the work we’ve done in the past on the subject of Comex illegitimacy. First, here’s an article on the inherent unfairness of the ability of The Banks to simply create new derivative contracts from thin air whenever speculator demand for paper gold increases:

And we’ve recently spent considerable time documenting the fraud of Comex “delivery”. Here are two links that summarize and detail the problem:

This circular charade of delivery continues in February. Recall that back in December, the proprietary (House) account of JP Morgan stopped or took delivery of 2,021 of the total 2,073 gold contracts that were allegedly settled. The primary issuers of this gold were the House Account of HSBC at 818 contracts and the House Account of Scotia at 699.

And what has taken place so far in February? The House Account of HSBC has stopped or taken delivery of 1,181 contracts while the House Account of JPM has issued 651 back out? Do you see how this works?

So, we’ve established that:

  1. The Comex, by design, is inherently unfair as the market-making Bullion Banks have the unfettered ability to issue as many paper derivative contracts as “the market” desires whenever there is speculator demand.
  2. The Comex can only claim legitimacy in discovering price if there is actual physical delivery made at said “discovered” price. However, there is no physical delivery at Comex. Instead, it’s just a bi-monthly circle jerk where Banks make and take delivery on a rotating basis. Therefore, the only price discovered is the price of a Comex contract, NOT the price of gold.

The object of this post is to draw your attention to the third spoke of Comex illegitimacy…the price itself.

Much has been written over the past three weeks about the “renewed bull market in gold”. Price began the year at $1061 per ounce and it reached an intraday high of $1263 last Thursday. That’s a 19% move in six weeks and certainly something that all of us in the gold community should be excited about. However, since this price has been found in large part through trading on the Comex and other electronic exchanges, is this really the price of gold?

Yes, there are physical exchanges of metal that have been made all over the planet based upon this Comex price. Right now, you can visit any of our site’s sponsors, affiliates and advertisers and they’ll gladly sell you an ounce of gold at the current Comex price plus a small premium. But, again, is the price discovered on Comex really a price of gold, itself? The point of this post is to contend that it’s not.

Here’s just a sample of a few headlines this morning. Gold has fallen back to near $1200 and, as you can see, there’s much hand-wringing regarding what may happen next:

The financial media, financial analysts and brokers will all tell you that the Comex derivative price of goldreally is a proxy for actual, physical gold. The news articles all reference this price and contend, to varying degrees, that this price is influenced by:

  • “Investors” seeking the safe haven of gold
  • Traders sensing the growing momentum of the trade
  • Hedge funds buying or selling based upon technical factors

Media, analysts and brokers all watch the “price” rise and fall and reach conclusions regarding the overall market and where it’s seemingly headed. “Is this a bull market or a bull trap?”, for example.

But what if I could show you that the price discovered on the Comex and other derivative exchanges isn’t influenced by “investors” at all? What if, instead, this “price” was simply determined by the whims of the HFT computers…machines that take their trading cues from signals completely unrelated to the fundamentals of gold, itself? And what is the single most important trading cue for the HFT algos? Changes to the relationship between the U.S. dollar and the Japanese yen, commonly referred to as the trading pair USDJPY.

Well, we’ve written about this before, too. We first noticed this phenomenon back in September of 2014. Here’s just one example of what we wrote back then: http://ift.tt/1EFeYwL

ZeroHedge soon picked up on this, too, and they wrote about it in November of 2014:http://ift.tt/1BcFvFg

Our friend, Paul Mylchreest, noticed the same correlations and he added this terrific piece in December of 2014: http://ift.tt/1SE2iCc

And it is this correlation that has driven the “price” of gold higher in 2016, nothing else. Oh sure, it’s nice to hear anecdotal stories about increased physical demand and “lines around the block”, but those fundamental factors have had little to no effect on “price”. Instead, it’s all about the rapidly increasing value of the yen or, expressed inversely, the rapidly declining value of the USDJPY.

Below is a chart of the past two months of trading action. In candles, you see the value of the yen versus the dollar. In bars, you have the “price of gold”:

But let’s zero in a little bit and look even closer…

Last Thursday, gold shot higher by over 5% in a move that left many analysts claiming that “the paper markets were breaking” and that “a new paradigm for gold was beginning”. But was this the case or was the “price of gold” simply reacting to an historic, 10% move in the USDJPY that culminated with an early Thursday plunge all the way to 111, down from 121 just two weeks ago? Below is a chart of the five days Tuesday the 9th through yesterday, Tuesday the 16th. Again, the yen is in candles and gold is in bars:

So, did the “price of gold” move based upon fundamentals, physical demand and the emergence of a new bull market?

OR

Did the “price of gold” simply adjust based upon the whims of High Frequency Trading computers, which “saw” the rapid rise in the relative value of the yen and bought “gold” according to their pre-programmed algorithms?

Obviously, the answer is the latter and it is extremely important that you understand this significance of this. Why? Because the dollar-based “price of gold” has been largely determined by this sole factor for nearly 3.5 years now. See the next chart, again with yen in candles and gold in bars:

The chart above explains the charts below. Why has gold moved counter-intuitively since the onset of QE3 in October of 2012? How was the long-standing relationship between US debt, the Fed balance sheet and the price of gold severed? The answer lies in the total market domination of High Frequency Trading as well as the willing participation of The Bullion Banks to cap all rallies in order to maintain downward momentum.



In the end, what does all this mean? Simply put, the “price” discovered via electronic trading on the Comex and the Globex is NOT a reflection of the price of gold at all. Instead, it’s primarily just a reaction of HFT computers to changes in the USDJPY. There’s no new “bull market” based upon “investors seeking the safety and certainty of physical gold”. Instead, any new bull market in the paper derivative price will simply be a reflection of the continued rally in the value of the yen versus the dollar. That’s it and that is all.

What’s fun is that the Bullion Banks have unwittingly sewn the seeds of their demise through their participation in this scheme. This uneconomically discovered price is being used by the Chinese, the Russian, the Indians and wise investors globally to drain The System of its remaining physical gold. Soon, the stockpiles of The West will be liquidated and, once no more physical gold remains, this entire fractional reserve pricing scheme will collapse under its own weight. When might this happen? It’s impossible to say however, as this great article from Koos Jansen points out, the West’s finite supplies are indeed dwindling:http://ift.tt/240W9nm

So, what do you do with this information? Well, first of all, you don’t get caught up in the hype. Now that you know what really affects “price”, you should be able to control your emotions both on upticks and downswings. Additionally, here at TFMR, we do quite well at recognizing inflection points and trends in gold and the USDJPY. Forewarned is forearmed, they say, and subscribers to The Vault use this knowledge to their advantage. But most importantly, recognize this:

The “price of gold” as reported by the media and repeated by analysts and pundits everywhere is no more proxy for the actual intrinsic value of gold than is virtual reality a proxy for real life. You’re told that it’s real and it may look real but it’s not. Not by a longshot. In the end, your best strategy is to mimic the Chinese, Russians and Indians. Recognize the value inherent in the fraudulently-determined “price” and act accordingly by continually converting your paper currency reserves into sound money…while you still can.

 

 

 

Please email with any questions about this article or precious metals HERE

 

 

 

 

The Illegitimacy of Comex Pricing

Posted with permission and written by Craig Hemke, TF Metals Report & Sprott Money correspondent


 

 

 

 

Our Ask The Expert interviewer Craig Hemke – aka Turd Ferguson, began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.


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Brickbat: No Sex, Please

"Bob & Carol & Ted & Alice"Melissa Warren and Eric Adams did everything by the book. That’s what officials in West Chester Township, Ohio, said when they issued the two of them a zoning permit and license to operate a swingers club. But after getting complaints about the club, officials tossed the book out, rescinding the license and permit and banning such businesses so the two can’t reapply.

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Donald Trump Says He Always Opposed the Iraq War. That’s a Lie.

TrumpDonald Trump is caught in an enormous lie—if that even matters anymore.

 In recent interviews and debates, Trump has steadfastly maintained that he opposed the Iraq War from the beginning—that he knew something his more neoconservative Republican rivals did not. It would be to his credit, if it were true. But it’s not.

In an interview with Howard Stern on September 11, 2002, Trump said that he supported a U.S.-led invasion of Iraq, according to BuzzFeed News:

… Stern asked Trump directly if he was for invading Iraq.

“Yeah I guess so,” Trump responded. “I wish the first time it was done correctly.”

That Trump would lie about this should come as no surprise. But it’s also unsurprising that he is not quite the anti-interventionist he claims to be. While Trump may indeed be the least hawkish of the remaining GOP candidates, his occasionally sane foreign policy pronouncements don’t come from a place of principled opposition to reckless foreign entanglements. Trump doesn’t oppose wars: he opposes badly managed wars, where badly managed is synonymous with managed by someone other than Trump himself.

Trump says Presidents Bush and Obama were bad at their jobs—and he’s right—but his smug confidence in his own ability to win all conflicts should give libertarians serious pause about his foreign policy. I suspect that Trump likes wars, after all—he just doesn’t like losing them.

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Chinese Money-Market Rates Are Spiking As Post-New-Year Liquidity Hangover Hits

It would appear the Chinese central bank currency squeeze is back as money-market rates are exploding higher once again. With the outpuring of liquidity heading into the new-year holiday, the post-celebration hangover was always likely unless PBOC just kept pumping but judging by the 500bps spike in overnight Yuan interbank rates to 9.3%, more than a few banks are desperate for some liquidity. We note that the last six times that Chinese banks have suffered liquidity constraints, US equities have tumbled…

While not at the extremes of mid December or mid-January’s catastrophes, O/N Yuan depo rates are soaring…

 

As it seems PBOC is not quite as liberal with its liquidty post-new-year…

 

and that bodes ill for US equities as the global liquidity problems this signals send ripples through every conduit (and their corresponding risk asset)…

 

Still 9.3% overnight deposit rates are probably nothing, right?


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The “Hillary Vs Bernie” Pitch: Fix ‘Cultural Bigots’ Or ‘Corrupt Billionaires’

Authored by Eric Zuesse,

Whereas Bernie Sanders claims to represent the bottom 99%, Hillary Clinton claims to represent a coalition of groups who are victimized by bigots (racists, sexists, etc.: she aims at women, homosexuals, Blacks, etc.). Whereas Bernie seeks to mobilize the bottom economic 99% against the top 1% who have scooped up almost all of the economic benefits that Americans have gained since 1993, Hillary seeks to mobilize all bigotry-victims against all of the many types of bigots. These pitches are fundamentally different from one-another. In fact, they’re diametrically opposite diagnoses of the biggest ailment threatening the U.S. future: our perilous economy.

At the close of the Wisconsin Democratic debate on February 11th, Hillary Clinton made an appeal to members of labor unions, and then said:

"I think that a lot of what we have to overcome to break down the barriers that are holding people back, whether it's poison in the water of the children of Flint, or whether it's the poor miners who are being left out and left behind in coal country, or whether it is any other American today who feels somehow put down and oppressed by racism, by sexism, by discrimination against the LGBT community, against the kind of efforts that need to be made to root out all of these barriers, that's what I want to take on. … Yes, does Wall Street and big financial interests, along with drug companies, insurance companies, big oil, all of it, have too much influence? You're right. But if we were to stop that tomorrow, we would still have the indifference, the negligence that we saw in Flint. We would still have racism holding people back. We would still have sexism preventing women from getting equal pay. We would still have LGBT people who get married on Saturday and get fired on Monday.”

Bernie Sanders closed instead with:

“This campaign is not only about electing someone who has the most progressive agenda, it is about bringing tens of millions of people together to demand that we have a government that represents all of us and not just the 1 percent, who today have so much economic and political power.”

Hillary Clinton is saying that what’s “holding people back” is bigotry.

Bernie Sanders is saying that what’s holding people back is concentration of too much power in too few people – not meaning a concentration of too much power in a freely and democratically elected government (which Republicans constantly attack as having too much power), but instead meaning a concentration of too much power in the richest 1% who buy  the government, and who use it to make American workers compete against  the workers in Haiti, Honduras, Vietnam, etc., so as to benefit the global stockholders of international corporations by lowering wages, instead of to benefit American workers by increasing wages. He’s attacking a system that benefits global stockholders by lowering wages everywhere to some lowest common denominator, so as to increase profits and stock-values and executive compensation everywhere. Workers don’t receive the benefits of that; the stockholders and executives in international corporations do. That’s the “1%”, though actually it’s even more concentrated in the top 0.1%.

Hillary Clinton is saying that the main problem in America is America’s bigots — it’s no economic motivation, by billionaires who essentially buy the government, nor by anyone else. This political view, in which there are essentially no economic classes, but only bigots and their victims, is fundamentally different from Sanders’s view. It’s so different that in some other countries they would constitute two different political parties.

Sanders is saying that the main problem in America is actually America’s corruption — a system that he says has been very successfully gamed by “the billionaire class.”

That’s what the Democrats’ Presidential choice comes down to.

This choice is a stark one. Democratic voters are being asked which is the primary issue for government to overcome: countervailing excessive greed by the super-rich, or countervailing all bigotry by anyone? Both greed and bigotry are bad, but which is more the main function of government to countervail? That’s the question.

Hillary Clinton is saying that what American workers are pitted against is, essentially, bigots, individuals who are bigoted — bigoted against gays, against women, against Blacks, against Hispanics, etc.; they’re not  pitted against the controlling stockholders who are collectively represented by their corporation’s management and who want higher profits from paying lower wages. Hillary Clinton focuses on the cultural divide, the  various types of inter-ethnic conflicts, as being “what we have to overcome to break down the barriers that are holding people back.”

Bernie Sanders is saying that the big problem American workers are up against isn’t bigots — rich and poor — as much as it’s the unlimited greed of the controlling stockholders who are represented by management (even if they’re not  bigots). His diagnosis is that not only should workers have the collective-bargaining right against the corporation’s owners, just like those corporate owners themselves already possess the collective-bargaining right via managers they hire, but that workers should also be more the focus of government’s concern and sympathy than stockholders are, because there are far more workers than owners, and because a one-person-one-vote democracy is far better than a one-dollar-one-vote ‘democracy’ (the latter of which is otherwise called an “oligarchy” or an “aristocracy”), the latter of which is what Sanders campaigns to put a stop  to.

Hillary Clinton is saying that there is no common and shared enemy that oppressed employees have:  instead, the main problem is racist bigots in the case of Blacks; it’s homophobic bigots in the case of homosexuals; it’s misogynist bigots in the case of females, etcetera; and, if a Black happens also to be a homophobe, or a homosexual happens to be also an anti-Black racist, then each one of those victim-groups will be fighting against the bigoted members of the other  victim-groups. The chief job of the government, led by the U.S. President, is then somehow to punish all types of bigots equally, regardless of their particular  group, so as to minimize the complaints about bigotry from, and by, all Americans. That’s a balancing of groups against groups — a balancing of ethnicities. This is Clinton’s diagnosis and cure for America’s economic problems.

Hillary’s diagnosis isn’t economic or systemic, but instead cultural and individual — it’s actually individual against individual, instead of stockholders against employees. And, just as a particular victim of bigotry can also be a bigot (for example, a Black can be homophobic, sexist, or etc.), a particular employee can also be a stockholder; some individuals stand on both sides at once, there too; but those are all individual matters, not  systemic matters, and so they’re not really authentic issues of governmental policy. Hillary Clinton says that they are themain  issues of governmental policy — that people’s problems are mainly individual  problems, against bigots; not  systemic problems, against stealers-of-the-public’s-government — and she says that the government should focus on individuals’ problems, not on systemic problems. That’s her view, which she expresses on almost every occasion, though she doesn’t put it in quite this way — a systematic way.

Bernie Sanders, in contrast to Hillary Clinton, is saying that the oppressed do  have a common and shared (a systemic) enemy. Here is how he expressed this in a speech to the Democratic National Committee on 28 August 2015:  “We need a political movement which is prepared to take on the billionaire class and create a government which represents all Americans, and not just corporate America and wealthy campaign donors.” He was saying this to individuals — specifically, to the Democratic Party’s chief political agents — most of whose own career success has largely depended upon  that “billionaire class,” but Sanders was up-front to them about it. He even calls this “movement” a “revolution.” He’s not trying to hide his opposition to the staus-quo.

The Democratic Party’s Presidential contest isn’t really a contest between ‘idealism’ versus ‘pragmatism,’ such as some propagandists claim. To characterize either candidate as ‘the idealist’ versus ‘the pragmatist’ is false. That characterization of this contest is actually deeply deceptive, because it focuses on vague abstractions, whereas the real issue in the Democratic Party primaries now is totally nitty-gritty, and it concerns two alternative diagnoses of what has been going wrong with America’s economy in recent decades.

In Bernie’s view, American democracy is now in the emergency room; in Hillary’s view, complainers (against anything other than  bigots) are like mere hypochondriacs who simply don’t understand the experts who say that things aren’t so bad, and that therefore no “revolution” is needed.

Is America’s basic governmental problem bigotry (i.e., certain cultural and ‘values’ problems), as Hillary says;

 

or is it instead corruption (i.e., certain economic and governmental problems), as Bernie says?

These are two very different conceptions of what the U.S. Presidency is about.

And that’s the central choice in the Democratic Presidential primaries. More than anything else, that’s what the choice between Clinton and Sanders comes down to.

*  *  *

Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.


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Visualizing The World’s Stock Exchanges

There are 60 major stock exchanges throughout the world, and their range of sizes is quite surprising.

As Visual Capitalist's Jeff Desjardin notes, at the high end of the spectrum is the mighty NYSE, representing $18.5 trillion in market capitalization, or about 27% of the total market for global equities.

At the lower end? Stock exchanges on the tiny islands of Malta, Cyprus, and Bermuda all range from just $1 billion to $4 billion in value. Even added together, these three exchanges make up just 0.01% of total market capitalization.

 

Courtesy of: The Money Project

 

The Trillion Dollar Club

There are 16 exchanges that are a part of the “$1 Trillion Dollar Club” with more than $1 trillion in market capitalization. This elite group, with familiar names such as the NYSE, Nasdaq, LSE, Deutsche Borse, TMX Group, and Japan Exchange Group, comprise 87% of the world’s total value of equities.

Added together, the 44 names outside of this aforementioned group combine for just $9 trillion, or 13%, of the world’s total market capitalization.

Northern Dominance

From a geographical perspective, it is the Northern Hemisphere that is dominant. North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets, and the vast majority of Asia’s 33.3% lies north of the equator in places like Shenzhen, Hong Kong, Tokyo, and Shanghai.

Notable exchanges that are south of the equator include the Australian Securities Exchange, the Indonesia Stock Exchange, the Johannesburg Stock Exchange and the Brazilian BM&F Bovespa.


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A “Baffled” Bank Of Japan Is Shocked By Its “Message Of Despair”

One look at Japan’s bond yields, which moments ago hit a fresh record low for the 20Y maturity as the curve slowly but surely inverts…

 

…. and one would think Haruhiko Kuroda would be delighted.

After all, when he launched NIRP three weeks ago, a world in which negative rates are now a reality, it should have been clear to everyone even children, that yields would collapse as the scramble for any positive yield was unleashed.

The only problem is that Kuroda did not care about yields – positive or negative: what he wanted was to crush the currency and to send the Nikkei soaring – the only two actual “arrows” of Abenomics. Sadly for the BOJ, this time it failed as precisely the opposite of what was expected happened.

 

But, as the WSJ wrote earlier today in an article explaining why the BOJ is baffled (at least before a call from the BOJ forced it to change the title to the far more politically correct “Bank of Japan Faces a New Opponent on Negative Rates: Main Street“)…

 

… Kuroda’s confusion has nothing to do with the market’s reaction; it has everything to do with the reaction by the public.

An appropriately very negative reaction.

Just yesterday, shortly after the BOJ’s shocking announcement, Kuroda found himself dodging a concerted attack in Parliament from lawmakers who charged the policy was “victimizing consumers and sending a message of despair“, the WSJ writes. 

Even a ruling-party member, Masahiro Ishida, called the policy hard to grasp. “It could have the opposite effect of confusing the market,” he said.

It already has. But the problem is not that the market is confused; it is that the market’s reaction to the BOJ’s NIRP, which as we explained previously was largely due to central banker “peer pressure” during this year’s Davos meeting, has led to a global revulsion against negative rates in general, thus validating the BOJ’s error.

The criticism has come as a surprise to central-bank officials who thought their efforts to spark lending and faster economic growth would gain more public support. “Those who understand this policy are criticizing us, and those who do not are also criticizing us,” said one official this week.

Here the WSJ adds something that is patenly wrong: “It is a symptom of a global problem. The more central banks move into unconventional policies, the harder it becomes to get their message across. That is a particular problem when the policies are supposed to work in part by inspiring confidence.”

Dead wrong: central bank policies are supposed to work by boosting the market; the narrative follows from there. It goes without sayinng that had Japan’s NIRP somehow sent stocks soaring and the Yen crashing, the avalanche of praise would have been constant and Kuroda would be deemed a hero in parliament. Alas for the BOJ – which failed at the simple task of manipulating the market higher in the initial kneejerk reaction – that did not happen, and now Kuroda is suddenly fighting for his professional life.

And since the BOJ’s market domination had finally cracked, a new narrative emerged: one which demonstrated the BOJ as being a bunch of “clueless losers”, with no understand of what they are doing.

Although negative interest rates have existed for some time in Europe, the idea was unfamiliar to most Japanese when it burst onto the front pages late last month. Initial accounts focused on what could happen to bank deposit rates. That is a sensitive issue in a society where wages have barely risen since the 1990s and where one in three citizens receives pension income.

 

“Deposit one million yen and earn annual interest of ¥10,” said the headline of an online article Tuesday by Japan’s biggest daily newspaper, the Yomiuri Shimbun, telling savers with nearly $10,000 in the bank that they could expect less than a dime in interest

But nothing demonstrates Kuroda’s bafflement quite as much as the outright hostile reception he got during his speech before parliament on Thursday:

In Parliament on Thursday, opposition lawmaker Shinkun Haku squared off with the Bank of Japan’s Gov. Kuroda on whether commercial banks would effectively introduce negative rates by hitting consumers with fees in excess of the tiny amount of interest paid. “Can you deny that banks will put an additional burden on average depositors?” Mr. Haku said. “If you can’t deny it, don’t. It’s a yes or no.”

 

Mr. Kuroda said he didn’t want to speculate about fees, but “there’s no chance that deposit interest rates will turn negative.”

Which is a lie – not only will deposit rates ultimately turn negative, the only questions are when and by how much. 

He said negative interest rates had helped spur lending in Europe with few harmful effects. “Europe has much larger minus interest than the Bank of Japan, and I haven’t heard of minus interest rates being applied to individual depositors there,” he said.

Someone please inform the Credit Suisse or Deutsche Bank stock about the “few harmful effects”, or the fact that Europe’s economy is once again slowly relapsing into a recession, only this time with some 1.5 million Syrian refugees to partake in the festivities.

It didn’t stop there:

“Mr. Kuroda’s responses merely inspired further attacks from the opposition, which has been looking with little success for an issue with which to dent Prime Minister Shinzo Abe’s popularity…. a Communist Party lawmaker, Akira Koike, said negative interest rates were bad public relations. “You have sent a message to the people that they had better watch out because Japan’s economy is in trouble,” Mr. Koike said.

Which in itself is a stunning of just how stupid communists, or anyone else for that matter, still are and are utterly incapable of grasping the most simple equality of the post-crisis era, namely that any central banks intervening = the economy is in trouble.

And of course Japan’s economy is in trouble: it has had 6 recessions in the past 6 years as it rushes toward a demographic singularity in which there is simply no longer a Japanese population. Japan’s economy is in so much trouble, the only question is when does it disintegrate into a Venezuela-style supernova.

But we can see where the confusion comes from. As the WSJ conveniently notes, central banks “policies are supposed to work in part by inspiring confidence” and instead “lawmakers charged the policy was victimizing consumers and sending a message of despair.

No: the message is one of reality, because the can kicking for Japan, having gone on for 40 years, is almost over. The good news about a central bank-free future is that it will hurt – a lot – for a while, and then normal growth can resume, but not before trillions in fake paper wealth are wiped out and quadrillions (in Yen terms) in debt is swept away.

As for Kuroda, we will fondly remember him forever as Peter Panic. There was also this pearl in the WSJ piece: “opposition lawmaker Motoyuki Odachi accused Mr. Kuroda of sounding like a World War II propaganda broadcast.

Dear Motoyuki, all central bankers sound like a World War II propaganda broadcast, one on which the time has long ago come to pull the plug.


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

Fed Skeptics Seek Gold Safe-Haven As Bullion Bears Capitulate

Gold is having one of its best starts to a year in history as investors start to lose faith in central bankers’ ability to deal with economic challenges. Fed skeptics as well as capitulating bullion bears are being drawn to the precious metals as Bloomberg reports,

“The safe-haven demand appears to be where people are focused on, and that is on a loss of faith in central banks being able to manage through this period,” said Klein, executive chairman of Australia’s second-biggest producer.

 

Bullion is “certainly getting more attention from people who have generally been bears over the past few years,” Klein said in a phone interview.

Even with the weakness of the last few days, Gold is still up 15% YTD – the best in at least a decade…

Prices have gained as investors scaled back expectations for tighter policy from the Fed…

“There seems to be general skepticism now, both from the Fed’s language and from market participants, as to whether that’s going to be possible,” said Klein, who’s been a gold-industry executive for about 20 years.

 

“All the financial markets, and all the asset classes, seem to be highly sensitive to central-bank policy.”

Gold's standout year is also driving some long-term bears to capitulate… (as Bloomberg details)

For years, ABN AMRO Group NV’s Georgette Boele has been a staunch bear on gold as prices tumbled. Now with gold on the brink of a bull market, she’s changed her tune.

 

Boele changed her year-end forecast to $1,300 an ounce from $900, according to report released Tuesday.

 

 

ABN Amro is becoming more pessimistic about the global economy, especially in the U.S., emerging markets and countries with exposure to oil. Boele no longer expects the Federal Reserve to raise interest rates this year.

 

“Having been long-standing bears we have now turned bullish on precious metal prices,” Boele wrote. “Our new scenario sees a longer period of weaker global growth.”

As Klein concludes, "it does seem like there’s a general review of gold as an investment sector by people who haven’t been interested in it for years." And yet Goldman will still do its best to tell you to sell your gold (to them).


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Why The Chinese Yuan Will Lose 30% Of Its Value

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The stark truth is nobody wants yuan any more.

The U.S. dollar (USD) has gained over 35% against major currencies since 2011.

China's government has pegged its currency, the yuan (renminbi) to the USD for many years. Until mid-2005, the yuan was pegged at about 8.3 to the dollar. After numerous complaints that the yuan was being kept artificially low to boost Chinese exports to the U.S., the Chinese monetary authorities let the yuan appreciate from 8.3 to about 6.8 to the dollar in 2008.

This peg held steady until mid-2010, at which point the yuan slowly strengthened to 6 in early 2014. From that high point, the yuan has depreciated moderately to around 6.5 to the USD.

Interestingly, this is about the same level the yuan reached in 2011, when the USD struck its multiyear low. Since 2011, the USD has gained (depending on which index or weighting you choose) between 25% and 35%. I think the chart above (trade-weighted USD against major currencies) is more accurate than the conventional DXY index.

Due to the USD peg, the yuan has appreciated in lockstep with the U.S. dollar against other currencies. On the face of it, the yuan would need to devalue by 35% just to return to its pre-USD-strength level in 2011. This would imply an eventual return to the yuan's old peg around 8.3–or perhaps as high as 8.7.

Longtime correspondent Mark G. submitted this article China's Subprime Crisis Is Here:

The dynamic is clear. A splurge of new lending can help to dilute existing bad loans, but only at a cost. This is a game that can't continue forever, particularly if credit is being foisted on to an already over-leveraged and slowing economy. At some point, the music will stop and there will have to be a reckoning. The longer China postpones that, the harder it will be.

Mark also submitted the following commentary:

It seems the best way to assess the likely effects and outcomes is to look at what the Chinese government can control, and at what it can't control. And we should observe at the start that the yuan is not a global reserve currency.

 

1. Beijing can control the amount of yuan in existence. It can therefore easily pay off all these bad internal debts, at least in a strict book keeping sense. And it can also recapitalize its bankrupt banks to any degree necessary, at least in yuan. The process of doing so involves assigning winners and losers. The latter group will comprise anyone earning a subsistence working wage in yuan and anyone whose assets primarily consist of savings in yuan.

 

2. Undertaking #1 will lead to a large increase in the amount of yuan in existence. Here Beijing will be acutely sensitive to any increase in food prices since this can swiftly lead to mass food riots and the concomitant rapid and bloody end of the regime. Therefore food prices have to be insulated somehow from this huge internal devaluation.

 

3. Beijing cannot permanently control the yuan-dollar exchange rate or any other FOREX rate involving yuan. It can do so in the short term but only to the limit of its usable foreign exchange reserves. This total is minus the FOREX working capital China needs to pay for imported raw materials and fuels. And also food: China’s Growing Demand for Agricultural Imports (USDA)

 

It appears that one certain outcome will be a huge depreciation in the value of yuan. Bailout of the bad bank debt is reason #1 to print yuan. The decline of yuan will lead to lower prices and a temporary relief of U.S.-based automation pressure on export market share. This begins to become a Reason #2.

How this will be received outside China is the immediate question. Probably not too favorably.

One way to paper over impaired loans is to issue a flood of new credit: this dilutes the problem and enables defaulted loans to be "paid down" with new loans that are doomed to default once the ink is dry: China Created A Record Half A Trillion Dollars Of Debt In January (Zero Hedge)

Here's the larger context of China's debt/currency implosion. From roughly 1989 to 2014–25 years–the "sure bet" in the global economy was to invest in China by moving production to China.

This flood of capital into China only gained momentum as the yuan appreciated in value against the USD once Chinese authorities loosened the peg from 8.3 to 6.6 and then all the way down to 6 to the dollar.

Every dollar transferred to China and converted to yuan gained as much as 25% over the years of yuan appreciation. Those hefty returns on cash sitting in yuan sparked a veritable tsunami of capital into China.

Now that the tide of capital has reversed, nobody wants yuan: not foreign firms, not FX punters and not the Chinese holding massive quantities of depreciating yuan.

This is why "housewives" from China are buying homes in Vancouver B.C. for $3 million. That $3 million could fall to $2 million as the yuan devalues to the old peg around 8.3 to the USD.

Who's left who believes the easy money is to be made in China? Nobody. Anyone seeking high quality overseas production is moving factories to the U.S. for its appreciating dollar and cheap energy, or to Vietnam or other locales with low labor costs and depreciated currencies.

For years, China bulls insisted China could crush the U.S. simply by selling a chunk of its $4 trillion foreign exchange reserves hoard of U.S. Treasuries. Now that China has dumped over $700 billion of its reserves in a matter of months, this assertion has been revealed as false: the demand for USD is strong enough to absorb all of China's selling and still push the USD higher.

The stark truth is nobody wants yuan any more. Why buy something that is sure to lose value? the only question is how much value? The basic facts suggest a 30% loss and a return to the old peg of 8.3 is baked in.

But that doesn't mean the devaluation of the yuan has to stop at 8.3: just as the dollar's recent strength is simply Stage One of a multi-stage liftoff, the yuan's devaluation to 8 to the USD is only the first stage of a multi-year devaluation.

 


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