iftttwall

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The Fed's policies have been an unqualified success for financiers and an abject failure for the bottom 99.5% who have to work for a living.

After five long years of politicos and the financial media glorifying the Federal Reserve's policies as god-like in their power and efficacy, let's take a quick look at the results of these vaunted policies: ZIRP (zero interest rates), (QE) quantitative easing, both of which are ways of shoving nearly limitless, nearly-free money (a.k.a. liquidity) into the banking sector, where all this free money is supposed to filter into the global economy, working miracles of prosperity.

Let's start with a chart of the Fed's balance sheet, which reflects just how much money the Fed has created and pumped into the financial system. $4 trillion is larger than the entire GDP of Germany, and roughly 25% of U.S. GDP.

Next, let's look at the effect of the much-glorified Fed policies on full-time employment: If you call a return to the levels of 2005 (despite a 7.5% increase in population) a success, then what would you consider a failure?

Let's recall that the Fed's policies are unprecedented. Keeping interest rates near-zero for five years and pumping $4 trillion into the system are both completely off the scale of central bank policy in the U.S.

Next, let's look at the participation rate–how many people of working age who are actively in the workforce. The trend is ugly; the percentage of the civilian population who are working or actively seeking work is plummeting.

Next: real median household income: this is household income adjusted for inflation.Another ugly chart, as real median household income is back to the levels of 1990. Once again: if you reckon this a success, then what would you consider a failure?

How about the annual change in disposable income? we can assume that "prosperity" and "recovery" mean disposable income are rising at a healthy clip, right? Alas, the rate of disposable income growth is sinking toward zero. The Fed's policies of bailing out "too big to fail" banks and QE/ZIRP have correlated to the most stunning drop in disposable income growth in decades.

How about financial sector profits? Hey, now we're finally getting somewhere– these are through the roof. We finally found something with a positive correlation to Fed policies–financial profits are hitting all-time highs. Yee-haw, we have a winner.

Last but not least, how about the stock market? Here is a chart of the Fed balance sheet and the S&P 500 since 2009. Ding-ding, we have another winner–stocks are also hitting all-time highs.

Source: Zero Hedge

The most charitable assessment we can make of Fed policy is that the "prosperity" it created is at best, ahem, grossly concentrated in the most parasitic and politically powerful sector: finance. Why should we be surprised that the Fed, itself a servant of the banking sector, should devise policies that enrich the bankers and financiers?

Let's be clear about one thing (to quote the president): the Fed's policies have been an unqualified success for financiers and an abject failure for everyone who has to work for a living. The Fed has not just failed to rectify the nation's obscene inequality in wealth and income; it has actively widened it by handing guaranteed returns to the banks and financiers while stripmining what's left of the middle and working classes' non-labor income, i.e. interest on savings.

Just as a refresher:

Tomorrow: how the Fed rewards imprudent parasites and punishes the prudently productive.

via Zero Hedge http://ift.tt/NXqSPo Tyler Durden

The tit-for-tat sabre-rattling and rhetoric continues to build ahead of this weekend’s planned referendum in Ukraine’s Crimea region. This morning has seen 3 new threads beginning with Ukraine’s “live-fire” exercises involving T-64B tanks. This was then followed by warnings from Russia of “consequences” of “unconditionally indulging radical elements” in Ukraine calling US financial aid “illegal” which was swiftly responded to by the State Department exclaiming it “unacceptable” that Russian forces take matters into their own hands and “do not create the right environment for diplomacy.” Not positive…

 

Ukraine did its own sabre-rattling:

• *T-64B TANKS INVOLVED IN EXERCISE, LIVE-FIRE TRAINING: MINISTRY

 

The Russians are not happy

Russia says planned US financial aid to Ukraine is illegal

 

Russia’s Foreign Ministry said on Tuesday that planned U.S. financial aid to Ukraine is illegal and outside American legal norms since it would be funding an illegitimate regime.

 

“By all criteria, issuing funding to an illegitimate regime that seized power by force is unlawful and goes beyond the framework of the American legal system,” the ministry said in a statement.

 

The statement echoed assertions made earlier in the day by ousted Ukrainian president Viktor Yanukovich. The ministry also warned Washington about the consequences of “unconditionally indulging radical elements” in Ukraine.

And Kerry has his own perspective:

U.S. STATE DEPARTMENT SAYS RUSSIAN RESPONSES TO U.S. QUESTIONS ON UKRAINE DO NOT CREATE RIGHT ENVIRONMENT FOR DIPLOMACY

 

Kerry told Lavrov it is unacceptable that Russian forces and irregulars continue to take matters into their own hands in Ukraine

Of course, this remains a constant distraction from the fact that Russian boots are on the ground in Crimea and the US (and the West) are stuck with how to “off-ramp” the escalating Russian threats without sanctions that would blow-back on to their own economies.

And then Merkel chipped in…

• *MERKEL SAYS RUSSIA IS ANNEXING CRIMEA, PARTY OFFICIAL SAYS

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

“The more information we get, the more we’re inclined to conclude that it was not a terrorist incident,” says the Interpol Secretary General Ronald Noble according to CNN, as details of the 2 Iranians at the center of the “stolen passport” uncertainty are identified. As CNN reports, Noble gave their names and ages as Pouri Nourmohammadi, 18, and Delavar Syed Mohammad Reza, 29 and added “they are not likely to be members of a terrorist group.” Of course, the more dismal unknown is that of the entire plane and its passengers and crew which remain missing without a trace.

 

 

Via CNN,

The two passengers in question entered Malaysia using valid Iranian passports, Noble said at a news conference. But they used stolen Austrian and Italian passports to board the missing Malaysian plane, he said.

 

…

 

Noble gave their names and ages as Pouri Nourmohammadi, 18, and Delavar Syed Mohammad Reza, 29.

 

…

 

Further, there’s no evidence to suggest either was connected to any terrorist organizations, according to Malaysian investigators.

 

…

 

“We have been checking his background. We have also checked him with other police organizations of his profile, and we believe that he is not likely to be a member of any terrorist group,” Khalid said.

 

CNN obtained an iReport photo of the two men with two of their friends, believed to have been taken Saturday before the plane disappeared. In it, they are posing with the two others, whose faces CNN has blurred to protect their identities.

Of course the biggest factor is now what happened to Flight 370? CNN sees 4 scenarios:

1. Scenario: Mechanical failure?

Fact: The absence of a debris field suggests the possibility that pilots were forced to ditch the plane and it landed on water without breaking up, finally sinking to the ocean floor.

Analysis: But if that were the case, then why no emergency signal? These planes are able to perform a “miracle on the Hudson” maneuver. They have the ability to glide more than 100 miles and belly land on the water with both engines out, says former 777 pilot Keith Wolzinger, now a civil aviation consultant with The Spectrum Group. During the time it would take for a plane to glide 100 miles, it seems likely that pilots would be able able to send an SOS.

Fact: The missing plane had suffered a clipped wing tip in the past, but Boeing repaired it, and the jet was safe to fly, said Malaysia Airlines CEO Ahmad Jauhari Yahya on Sunday.

Analysis: “Anytime there’s been previous damage to an airplane, even though it’s been repaired, and repaired within standards … it kind of sends a warning flag,” says Wolzinger. Experts agree the Boeing 777 is one of the world’s most reliable aircraft. During its development it was subject to some of the most rigorous testing in commercial aviation history. “I’ve been talking with colleagues,” Wolzinger says. “We’re all baffled by this.” The 777 boasts some of the most powerful and well-tested engines in the world, he says. “The reliability of airliner engines in general is impeccable these days,” he says. “This is a safe plane.”

2. Scenario: Pilot error

Fact: So far, there are no known indications that pilot error contributed to the aircraft going missing.

Analysis: Some aviation experts have compared Flight 370 to the crash of Air France Flight 447 in 2009. All 228 passengers and crew died when the plane went down in a storm in the Atlantic en route from Brazil to Paris. After an expensive, nearly two-year search across the deep ocean floor, the twin-engine Airbus A330’s wreckage was finally found and the voice and data recorders recovered. A French investigation blamed flight crew for failing to understand “they were in a stall situation and therefore never undertook any recovery maneuvers.” But unlike Flight 447, weather was reported as good along Flight 370’s scheduled route and didn’t appear to present a threat.

Asiana Airlines Flight 217 — a Boeing 777 — fell short during a runway approach last July at San Francisco International Airport. Three people were killed and more than 180 others hurt. National Transportation Safety Board investigators have focused on pilot reliance on automated flight systems as a possible contributor to the crash, but a final report has not yet been released.

3. Scenario: Bomb? Or ‘dry run’?

Fact: Two stolen passports have been linked to people who held tickets for the flight.

Analysis: This points to the possibility that someone on a terrorism watch list may have boarded the plane and blown it up. However, the stolen passports don’t necessarily mean the plane was an actual target. It’s possible, says former U.S. Department of Transportation Inspector General Mary Schiavo, that terrorists may have been performing a “dry run” for a future attack. Or, Schiavo said, “it could be just criminal business as usual,” because “there are lots of stolen passports” used by travelers around the world.

Fact: So far, no debris field of plane wreckage has been linked to the 777, which would indicate a bomb blast.

Analysis: When Robert Francis, former vice chairman of the U.S. National Transportation Safety Board, heard about the missing plane, his immediate thought was: “For some reason the aircraft blew up and there was no signal, there was nothing.” The fact that the plane disappeared from radar without warning indicated to Francis “there was something unprecedented that hasn’t happened before.”

What about satellite technology? Is it possible that data from orbiting satellites might show a flash or infrared heat signature from an explosion? Very unlikely, says satellite expert Brian Weeden, who spent years tracking space junk in orbit for the U.S. Air Force. Dozens of government and private satellites orbit the earth, looking down from distances from 300 kilometers to 1,500 kilometers (185 to 930 miles). It’s a long shot that one of them coincidentally floated over at the exact right time and location to capture a flash from an explosion.

However, there’s an “off chance,” Weeden says, that a super secret U.S. government satellite orbiting 22,000 miles in space might have grabbed evidence. These satellites are in geosynchronous orbit. As a group, they can observe virtually the entire globe. “We know that their mission is to detect ballistic missile launches via heat,” says Weeden, now a technical adviser for Secure World Foundation. “We don’t know if they’re sensitive enough to track something like a bomb blast, even if that’s what happened.”

Then there’s another unanswerable question: Would the government hesitate to release such an image for fear of revealing the satellite system’s ultraclassified capability?

4. Scenario: Hijacking?

Fact: Before it disappeared, radar data indicated the plane may have turned around to head back to Kuala Lumpur. Is that a clue that a hijacker had ordered the plane to change course?

Analysis: So far, there have been no reports that the flight crew sent any signals that a hijacking had occurred.

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

While the world is terrified about what China – where corporate bond defaults are now permitted – may be about to unleash on the world, most are all too happy to remain in a state of delightful ignorance. We decided to take a peek behind the scenes.

Recall that as we have repeatedly shown in the calendar of coming Chinese bond default, on March 31, a borrower named “Magic” (no comment) is set to default on a CNY196 million Trust.

The default may or may not happen, as there is always a high likelihood it will simply be bailed out as has happened frequently in the past, but regardless of the final outcome, here is what is really going on behind the scenes. From Bank of America:

31 Mar 2014, Rmb196mn borrowed by Magic Property & arranged by CITIC Trust

 

Details: invested in an office building in Chongqing. The Chongqing developer ran into financial problems in mid-2013. CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.

 

Potential outcome: The developer and the trust company may share the repayment.

 

Reasons: 1) When CITIC Trust sold the product, it did not specify the underlying investment project. 2) The local government has intervened, fearing social unrest. A local buyer of a unit in the office building committed suicide as he/she could not obtain the title to the property due to the title dispute between the trust and the developer.

Please re-read that first part again:

CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.

So, “Magic” not only sold the collateral… but also mortgaged it to a few other lenders: lenders who count its as a perfectly performing asset when in reality they have zero claims to it. Did they steal that straight from the MF Global instruction manual?

Now add this:

“The local government has intervened, fearing social unrest. A local buyer of a unit in the office building committed suicide as he/she could not obtain the title to the property due to the title dispute between the trust and the developer.”

… and multiply by a few thousand since precisely this kind of gross abuse of underlying collateral is the main reason why China can magically create trillions in debt out of thin air with zero collateral constraints, each and every year, no questions asked.

Well, the time to ask a question or two has finally arrived.

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