iftttwall

If the market’s are not ‘rigged’ by HFT teasers front-running any ‘real’ flow that happens to take its chances on the public stock exchanges, then please – please – someone explain this chart…

 

As Nanex shows, the massive bulk of trades on most of the major US equity markets are 1-share-lots!!! (the spike in the far left of the scale)

Paging Mary White – stil convinced there’s no ‘rigging’ going on here.

 

Source: @NanexLLC

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

A few days ago we finally closed the door on any argument who the marginal buyer in the US luxury housing segment was – the answer: Chinese oligarchs, scrambling to launder their “hot” domestic money abroad (as we predicted first two years ago) and now that Switzerland is no longer a safe offshore venue where one can park cash, they picked US luxury housing as the best money laundering alternative.

This means that far from indicating a recovery, as the recent surge in the high end of the US housing segment had long been touted, all the relentless move higher in ultraluxury properties prices was simply a recycling of China’s hot money, which unlike in the US, never made its way into the Chinese stock market (explaining why the Shanghai Composite has barely budged in years) and merely ended up in US real estate. If anything, this is simply another confirmation of the epic capital misallocation, and the complete lack of “trickle down” resulting from failed global central banking policies.

So now that the “who” has been answered, just one question remained: “how?”

How did millions of Chinese “buyers” manage to get tens of billions of yuan or dollars out of the mainland – a country which as is well-known has strict capital controls when it comes to individual and corporate offshore outflows? Under Chinese law, citizens are allowed take only the equivalent of US$50,000 out of the country each year: hardly enough to buy a storage closet in any of New York City’s Central Park West duplexes.

Today we learn the answer and it has to do with officially sanctioned “money laundering” services by not one but two of China’s largest banks: Bank of China and also Citic.

As Hong Kong’s SCMP reports, A day after Bank of China (BOC) was accused by China’s state broadcaster of breaking foreign exchange rules by helping people take money out of the country, it has emerged a second state bank has also been offering the service.

And the biggest irony is that Citic is ultimately controlled by none other than the “State Council” or China itself. In other words, while China was prohibiting the outflow of hot money with one hand, with the other it was providing the very services it had previously forbidden!.

Industry sources told the South China Morning Post yesterday that China Citic Bank – controlled by the Citic Group, which in turn is directly controlled by the State Council, China’s cabinet – also facilitated the movement of currency overseas, including Hong Knog. “It is definitely not an illegal business,” said one source.

 

“Both BOC and Citic Bank have been able to do this business only after they got approval from the Guangzhou branch of the People’s Bank of China. So the PBOC definitely knows what the business is about,” said the source, who declined to be named as he was not authorised to speak to the media.

 

“If there is any problem, it should not be a problem about whether this business is legal or illegal but more about how exactly the business is done, especially about internal risk controls and customer background checks at those banks.”

 

On Wednesday, CCTV aired footage showing an employee of a BOC branch in Guangdong coaching an undercover journalist on how to channel large sums of money overseas.

 

…

 

CCTV accused the bank of “blatantly offering money laundering services” and fabricating information through its money transfer platform Youhuitong.

 

BOC said the Youhuitong service was part of a legal pilot scheme launched in 2011. It said the CCTV report “deviated from the facts” and had a “biased understanding” of Youhuitong.

What is disturbing is the implication that the PBOC not only was aware of these secretive and law-breaking deals, but was effectively encouraging them:

On the sidelines of the Sino-US Strategic and Economic Dialogue in Beijing yesterday, PBOC Governor Zhou Xiaochuan said the central bank would need more time to investigate the situation.

 

Analysts cast doubt on whether such a scheme that allowed for free currency exchange could exist. “The government is very concerned about hot money flows,” said Teo Weechoon, a forex analyst at Nomura in Singapore. “If there was a pilot programme like this, I don’t think the limit would be much higher than it already is.”

 

Industry sources said BOC and Citic Bank were chosen by the Guangzhou branch of the central bank in late 2011 and late 2012 respectively to join the pioneer programme, which was part of Beijing’s efforts to better manage its huge foreign exchange reserves – the world’s largest at over US$4 trillion.

And sure enough, where two of the largest Chinese banks were involved, many other were sure to follow: “a report by the official Shanghai Securities News yesterday said China Construction Bank offered similar services.” We expect to learn soon that virtually every domestic bank was breaking regulations, with the PBOC’s blessing of course, and allowing residents to quietly transfer their funds from China to the US, London, Zurich and any other venue where Chinese oligarchs wanted to park their cash.

Finally, “why”?

Well, from the individual’s standpoint taking money away from China’s corrupt system and “investing” it in the US housing market certainly seems like far more safe proposition.

But why would the PBOC agree to quietly bless this activity which it has, at least openly, blasted vocally in the past?

Simple – to keep inflation in check.

Recall that China is a country which creates nearly $4 trillion in bank deposits every year. Also recall that back in 2011 China nearly chocked when inflation briefly soared out of control, leading to sporadic “Arab Spring” type riots in various cities. And since China simply can not reduce the pace of its loan creation at the macro level without crushing the economy, what it needs is to find outlets – legal or otherwise – that permit the outflow of funds.

Which is why it is not at all surprising that as SCMP reports, the scheme was launched in 2011, just as China’s scary encounter with soaring inflation was unfolding and Beijing needed a fast way to solve the overabundance of domestic liquidity. Basically at that point the central bank agreed to keep its eyes shut as wealthy oligarchs transferred funds to developed world nations, something the US government and NAR were delighted by as it kept real estate prices (if only at the very top) soaring, dragging the entire housing market higher with them. Furthermore recall: the one thing the Fed has wanted more than anything for the past several years is inflation. And since the US economy is nowhere near strong enough to create the kind of inflation needed, with the bulk of the Fed’s reserves ending up in the capital markets and the latest and greatest credit bubble, the Fed would be more than happy to import some of China’s inflation from it, even if that means a housing market which at the upper end is no longer accessible to anyone but the 0.0001%.

Indeed, this summary explains everyone’s intentions to keep the scheme afloat for as long as possible, at least until CCTV busted it and laid it out for all 1+ billion Chinese, most of whom are not oligarchs and can’t take advantage of the PBOC-sanctioned loophole.

So what happens next? Assuming there is the anticipated resulting backlash and crackdown on Chinese banks, which will finally enforce the $50K/year outflow limitation, this could well be the worst possible news not only for Chinese inflation, which suddenly – no longer having a convenient outlet for the unprecedented liquidity formed in the country every month – is set to soar, but also for the ultra-luxury housing in the US.

Because without the Chinese bid in a market in which the Chinese are the biggest marginal buyer scooping up real estate across the land, sight unseen, and paid for in laundered cash (which the NAR blissfully does not need to know about due to its AML exemptions), watch as suddenly the 4th dead cat bounce in US housing since the Lehman failure rediscovers just how painful gravity really is.

via Zero Hedge http://ift.tt/1w6J48d Tyler Durden

This week was interesting to say the least and it is ending with a bang.  We are covering a number of brief subjects this week.  I hope you enjoy them.

1. Gutting the armed forces
2. Politically correct, but practically incorrect economic suicide.
3. Farmland disaster DEAD ahead
4. Repressed to Death
5. NOT a SMIDGEN of Corruption!
6. France is IMPLODING economically:  Vive la France
7. Bonfire of the Vanities!
8. This will not have a HAPPY ending!

Gutting the armed forces

No matter where you look you will find the incumbent administration in Washington DC gutting every part of America they can.  It is quite obvious from their ACTIONs (their words are carefully disguised double entendre and pithy slogans used to disguise their betrayals) they despise America, her people, our history, our freedoms, our institutions and culture and are working overtime to KILL IT.  Monday’s Gartman letter contained a deep insight that is being REPORTED nowhere by the main stream media.  The gutting of our military during a time of high and rising global military tensions.  Dennis quotes Bill Crystal (I am no fan of this NEO con):
 
There is one thing President Obama’s Pentagon is resolute about: firing military officers who’ve served the nation. As Brendan McGarry of Military.com reported last week, A U.S. Army captain with more than a dozen years in the service, including multiple tours of duty in combat zones, assumed his job was safe. . . . What’s more, he had just received orders to move to a new duty station. So he and his wife, who’s newly pregnant with their first child, signed a lease and put a deposit on a home at the family’s next location. A few days later, he was called into his post’s commanding general’s office and informed that, effective almost immediately, he would no longer be in the military. This isn’t an isolated case. 
As McGarry goes on to explain, this week the Army began notifying about 1,100 captains and about 500 majors that their active duty careers are over.

The Army, having already shrunk under President Obama from 570,000 soldiers to fewer than 520,000, “is on pace to shrink to 490,000 soldiers by next year.” The Pentagon’s proposed budget for fiscal 2015 calls for further cuts to fewer than 450,000 by 2017. And “if sequestration remains in effect, the number may fall to as low as 420,000 soldiers—tens of thousands less than what the Army’s top officer, Gen. Raymond Odierno, said is needed to adequately respond to conflicts around the world.” But in Obama’s America, who needs an Army large enough “to adequately respond to conflicts around the world”? And in Obama’s America, does the country feel an obligation to these men anyway? In Obama’s America, all compassion is owed to illegal immigrants and every effort is to be made for Bowe Bergdahl. But for the men and women in the military, and for the people of Iraq and Afghanistan, including those who fought side by side with us. . . nothing. Not even a phone call from “the real secretary of defense,” – Chuck Hagel
 
Bill has it right, and foreign intelligence services and our adversaries around the globe see the weakness CLEARLY.  Look for challenges to escalate and for the administration to RETREAT from them.  It is a sad time for America.  The damage done to date and over the next two years will take years if not decades to fix and reverse.  The very idea that the EMERGING NEXT GENERATION of military leaders is being cashiered should send chills up the spines of all around the world that depend on them for protection.  The US, Europe, Asia and the Middle East are ripe for conflicts as our enemies EXPLOIT our WEAKNESS!   Makes you feel SAFE, warm and COMFY doesn’t it?
 
Politically correct, but practically incorrect economic suicide.
 
Very Few things are as upsetting as socialist progressives ignoring history and national security concerns when formulating policies to protect the future of its citizens.  Look no further than the Germans who are committing Hari Kari with domestic energy policy’s.  Mandating Green energy policies which are bankrupting its citizens and its manufacturing sectors as well as destroying competitiveness was just the beginning.  Now the Mandarins in Berlin are outlawing Natural gas energy production for 7 years due to CONCERNS about environment.  Quoting the Wall Street Journal:
 
“‘There will be no fracking for economic purposes in Germany in the near future,’ German Environment Minister Barbara Hendricks announced at a press conference on Friday. Under her proposal, most forms of hydraulic fracking will be prohibited until 2021.”
 
You must understand that Germany get 30% plus of its energy from RUSSIA, but many other countries get up to 100% from the russkys.  How is energy dependence working out for Ukraine? Anyone who knows the history of Gazprom knows they are GOUGERS from hell, require one sided contracts and play the GOTCHA game with regularity.  These GERMAN politicians have put their constituents completely at the mercy of an adversary.  Benjamin Arnolds and traitors to the very people they are sworn to protect.  Germany is on a roll now but the next 7 years should be downhill as they are rendered internationally uncompetitive by public servants with NO VISION or knowledge of HISTORY!  Blind PROGRESSIVE socialist ideologues destroying the future one policy at a time.
 
Farmland disaster DEAD ahead

Three years ago we had one of the worst droughts in DECADES and the politics of ETHANOL drove prices to previously UNSEEN highs.  Those who did harvest had a BONANZA and the scramble for farmland BEGAN.  Combine this with INTEREST rates at Zero and Quantitative easing also known as printing money out of thin air and you had a recipe for MALINVESTMENTS second to none.  Some farmland exploded 200 to 500% in value in short period of time.  Investors chased the markets as they always do and BOUGHT the top, created investments with little or no yield and expected the high prices to continue.  Sounds like stocks and bonds today in a financially repressed world.

Now it is all BLOWING UP as we had one bumper crop last year and this year’s crops are just about MADE with record yields.  Investments which require $8.00 dollar corn or $17.50 soybeans are completely UNPROFITABLE at $4.00 corn and $13.00 beans.  Most of those who financed their purchases are on the CHOPPING block and those who bought with cash are nursing BIG losses.  These losses are rising by the Day.  Last year’s low prices on crops were a shot across the bows of those who participated in the Madness.  This year’s record crops are a DIRECT hit to them.  Expect a crash in land values and problems in the banks that made loans based upon a boom in prices and a rarity when it comes to crop failures.

Repressed to Death

Yesterday’s Zero hedge had a frightening chart for those who save.  It illustrated how people (financially repressed) who spent a lifetime saving their money are now on the short end of the stick courtesy of the Federal Reserve.  It illustrates how the return on their savings has been transferred to the banking system since 2008:

This is not a new story but it is a TRAGIC one of OFFICIAL moral and fiscal insolvency.  Quite simply the financial system is more fragile now than when the crisis began.  The financial assets are more over valued than at most anytime since the crisis.  The government has almost doubled its debt since 2008.  In real purchasing power terms their paper money has lost about 9% compounded annually since that time (chart courtesy of www.shadowstats.com);

Using the rule of seventy two their purchasing power is CUT IN HALF every 8 years.  Since 6 has transpired their savings have been cut by approximately 38% with the purchasing power proceeds being transferred to the banks in exchange for their toxic mortgage securities and to the US government to service their deficit spending.  Do you think I am exaggerating?  Let’s take a look at another table from www.Zerohedge.com outlining inflation over the since 2000 in the real things you use daily:

The last two lines at the bottom are the official numbers from politically correct but practically incorrect public servants.  This is supposedly the risk free way to store a lifetime of your labor in money designed to ROB you.  Your financial advisors tell you it is risk free.  If you had $2,000,000 dollars saved in 2008 and it buys $1,350,000 of goods and services in 2008 prices would you call it RISK FREE.  In our collective economy the progressives say they owe this money.  Since 2008 nominal incomes are off about 10% roughly ($55,000 to $50,000) and the money they are paid in has lost about 38% of its purchasing power.  It is a clear display of what’s happening to the MIDDLE CLASS; murdered by money printing and deficit spending for the WELFARE STATE.  It is criminality on plain display.

NOT a SMIDGEN of Corruption!

The odds of winning the Florida lottery are 1 in 22,957,480. 
The odds of winning the Powerball are 1 in 175,223,510. 
The odds of winning Mega Millions are 1 in 258,890,850. 

The odds of a disk drive failing in any given month are roughly one in 36. The odds of two different drives failing in the same month are roughly one in 36 squared, or 1 in about 1,300. The odds of three drives failing in the same month are 36 cubed or 1 in 46,656. 

The odds of seven different drives failing in the same month (like what happened at the IRS when they received a letter asking about emails targeting conservative and pro-Israeli groups) is 37 to the 7th power = 1 in 78,664,164,096. (That’s over 78 Billion) In other words, the odds are greater that you will win the Florida Lottery 342 times than having those seven IRS hard drives crashing in the same month.  Unbelievable odds of it being the truth in my opinion.

You decide if you believe the official storyline is the truth…

France is IMPLODING economically: Vive la France.

Over the last several years most Europe’s economies have struggled to grow other than Germany and most recently the UK have provided more robust expansions.  But for France it has been a one way ticket on a down Elevator since Francois Hollande was swept into power shortly after the Global Financial crisis began in 2008.  After the crisis began most European governments changed leadership except for Angela Merkel in Germany and most swung from socialist to conservative leaning.  But France was the exception as Nickolas Sarkozy was replaced by UBER socialist Hollande.

He immediately expanded the welfare state, increased entitlements, hiked taxes to confiscatory levels (75%) on the private sector and expanded regulations (sounds like the chosen one in Washington DC doesn’t it?).  In France the private sector is the property of the socialists in power and its citizens who are all on the dole in one way or another.  Look no further than the recent GE purchase of Alstom where the Government demanded a 20% government stake in the new company”:

“It’s a prerequisite that France takes 20pc of the capital,” … “If that’s not realized, GE’s bid will be blocked.”   – French industry minister Arnaud Montebourg

This deal was blocked until GE caved in and Jeffrey Immelt the consummate crony capitalist worked his magic as he so regularly does in Washington DC.  This deal was as Mr. Montebourg put it:

“A political success for the return in force of the state in the economy.”

A pyrrhic victory indeed for the state as since 2007 when the crisis began foreign direct investment has COLLAPSED 94% from $84 billion in 2007 to 5 Billion annually today!  Talk about a collapse in confidence.  This has been accompanied by a stampede out of the country by its most productive citizens as over 400,000 of them have voted with their feet to avoid becoming slaves to the WELFARE STATE since Hollande ascended to power.  Do you know how much 400,000 top producers represent in leadership, investment, earning power past, present and future?  He has CUT the head off those that must build the recovery.  They won’t be returning soon.

Unemployment is at all-time highs at about 12% and Youth unemployment is at 25%.  Its banks are loaded to the gills with dubious lending to the Ukraine and Russia to name a few.  Although as Chuck Prince once said, they “are still dancing”.

Other than a few months earlier this year the PMI surveys have been under the all-important 50 line (above 50 means growth, below 50 means contraction) for years. 

Anyone remotely familiar with FRENCH regulation of the employment market is Orwellian to say the least, firing a worker for economic reasons or poor performance is virtually BANNED and if you want to hire someone the employment contract must be submitted to the government for approval before any hiring can take place.

Government CONSUMES 57% of GDP, suffocating the private sector and its budget deficit is stuck above 4%, and economic growth is virtually NON EXISTENT.  It’s called a debt spiral.  Its debt on the books is 94% of GDP and projected to rise to 103% in 2016 by the IMF and its GAAP adjusted deficit is several times that.  France is TRULY one of the SICK MEN of Europe and like the UNITED STATES it is saddled with incompetent socialists at the helm for SEVERAL MORE YEARS before policies can be expected to CHANGE.  So ECONOMICALLY and SOCIALLY the downward spirals can be expected to CONTINUE.  Gasoline in France is $11 dollars+ a gallon.  Ouch.  A bowl of soup in Paris… 15 to 20 euros. 

France is Europe’s second largest economy, so its health is CENTRAL to the EU project.   Its POOR economy, aggressive banks, and governance more closely resemble ITALY and Greece. When this country finally IMPLODES it will be a shot heard round the world.  To rescue this morally and fiscally insolvent behemoth will REQUIRE TRILLIONS of Euros to be rescued.  They no longer have a domestic money printing capability, which now resides at the ECB.  So the domestic banks must take up their patriotic duties and load up with government debt as a quasi-printing press, further loading themselves with ultimately TOXIC sovereign debt on their balance sheets.  Its debt and economic death spirals are FIRMLY UNDERWAY!  When will the world WAKE UP?

---

Author’s Note:  In my opinion the greatest manmade disaster and OPPORTUNITY in history is unfolding in every corner of the world.  Are you diversified or operating with EYES WIDE SHUT?  Are you prepared to turn it into opportunity by properly diversifying your portfolio?  Adding absolute return investments which are designed with the potential to thrive (up and down markets) regardless of what unfolds economically or politically?  This is what I do for investors; help them diversify into investments which are created to potentially thrive in the storm.  For a personal consultation with me CLICK HERE!

---

Bonfire of the Vanities!

Silver and gold are ROCKETING higher this morning as Portugal’s second largest bank (Banco Espirito Santo) has MISSED a debt payment, and banks are gapping down as much as 3 to 4%  in today’s market action across the world.  Regular readers of this missive know that the DEVELOPED world Banking problems HAVE NOT been addressed.  Creating a rush to the safety of gold and silver pushing them through key technical levels overnight.  Looking at the unfolding new BATTLEFRONT illustrates the escalation of the conflict there and its expansion:

 

World War III has now opened up new battle lines (now Syria, Iraq, and Israel and Palestine, more to follow) between Israel and Hamas and the end of the TAPER is fully in view.  Most metal analysts believe the money printing ending ends the SECULAR BULL market to an end. 

 

No, it marks the beginning of the next leg higher, the money has already been printed and we are just waiting for it to seek shelter.  The smart money commercials are as heavily short as they have been in almost 2 years in both the gold and silver markets:

GOLD

 

 

SILVER

Hedge funds are LONG and commercial SHORTS have been caught with their PANTS DOWN on the news.  SPARKS should fly and a war on the floor is happening.  An explosive SHORT COVERING rally could be at HAND?

This will not have a HAPPY ending! 

A number of issues called FIAT currency and credit paper printed out of thin air are piling up around the WORLD.  Today we will outline a few.  They are the tip of the iceberg of the coming crack up boom!  Look at what’s sitting in central banks around the world:

WOWEE.  Those reserves are SURGING and are up almost 500% in 11 short years.  IOU’s denominated in IOU’s.

“Asia isn’t happy to buy foreign-exchange reserves;” …”They’re forced into this. The distorting factor in all of this is the Fed’s QE.” – Frederic Neumann, co-head of Asian economic research at HSBC Holdings

What happens if they want to repatriate their money or sell their treasuries someday?  When this tide turns the mayhem will really begin, you can count on it.  The national debt has gone BALLISTIC as the welfare STATE runs out of other people’s money and borrows the rest from our children’s futures and the crony capitalist regulatory state destroys future prospects for growth.

If that doesn’t frighten you, nothing will.  And where is this pile of paper sitting?  In institutions, pensions, IRAs, money market funds etc.  Most people don’t realize that no provisions have been made to pay back one penny.  Since 1960 federal debt has gone down in ONE YEAR ONLY.  A one way trip to bankruptcy for the federal government and those who believe in the full faith and credit of morally and fiscally bankrupt central government known as Washington DC (district of corruption).    Hint: don’t worry they will print the money.

In closing: Frankly, there has been too much to cover.  I left out an important vignette about Germany changing its banking laws which will allow it to Cypress depositors.  The cost of the president wants to address the immigrant disaster on the southern border of the US has now climbed to $70,000 dollars per child (might as well send them home in first class).  Globally tensions are high and rising and maybe the highest in my lifetime.  China is pushing to see what the limits are to its expansionism.  The continuing MASSIVE buildup of gold reserves in Asia and Russia.  To Name just a few.  This Weekly Wrap is posted as Daily Exercises on the Tedbits Blog (www.Tedbits.com) and available through Twitter and on Facebook.  The Tedbits Newsletter and Weekly Wrap can also be delivered into your inbox and subscriptions are FREE – CLICK HERE. 

See you next week and may God Bless you ALL…  Ty

via Zero Hedge http://ift.tt/1mkgJu8 tedbits

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Those who own the resources and influence the political control of those resources are the New Nobility in a pernicious Neofeudalism enforced by the very government that claims to serve the debt-serfs and tax donkeys.

Let's tease apart several strands of Neofeudalism, my preferred term (along with Neocolonialism) for the Status Quo.

The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)

It is increasingly clear that a new form of feudalism has subverted democracy, and that the New Feudalism is powered by concentrations of private wealth and centralized state control: what I call the New Nobility.

Recall my Neofeudalism Corollary #1:

If the citizenry cannot replace a dysfunctional government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.

The essence of Neofeudalism is: those with access to the low-interest unlimited credit spigot of the Federal Reserve become more equal than others–the perfect Orwellian description of a Neofeudal arrangement in which financial leverage buys not just rentier assets but political power and control.

Neofeudalism depends on the cultural supremacy of Neoliberalism, the belief that the social order is defined and created by markets: if markets are free, participants, society and the political order are also free.

This conceptual framework is the perfect enabler for the dominance of credit-based, leveraged capital, i.e. Neofeudalism. In a "free market," those with access to nearly-free money can outbid everyone who must rely on savings from earned income to finance borrowing. In a "free market" where those with access to leverage and unlimited credit are more equal than everyone else, the ability of wage earners to acquire rentier assets such as rental housing, farmland and timberland is intrinsically limited by the financial system that makes credit and leverage scarce for the many and abundant for the few.

Those with access to the low-interest unlimited credit spigot of the Federal Reserve are free to snap up tens of thousands of houses and tens of thousands of acres of productive land–the classic rentier assets that reliably produce unearned income because people need shelter and food–along with other rentier assets such as parking lots and meters, fossil fuels in the ground, and of course the engines of credit creation, the banks.

In The Neofeudal-Neoliberal Arrangement: Since We Own What You Need, We Own You(June 13, 2014) correspondent Bart D. discusses the many barriers to middle-income households buying and holding productive assets. (Recall that owning a home is a form of consumption; a rental housing unit, an orchard, shares in an oil well, etc., are productive assets in that they generate an income stream.)

Correspondent Kevin K. (among others) has described the many barriers being raised by local government (at the behest of those who have bought influence over local government policy and regulations) to home businesses and small businesses that might offer competition to cartels and monopolies. Should a legitimate (as opposed to black market/cash business) small business manage to open its doors, it faces a blizzard of junk fees, permits and taxes that make its survival a dubious prospect. No wonder self-employment and small business are in structural decline:

The primary role of small business owners and homeowners in the Status Quo is to labor for the government's Upper Caste as uncomplaining tax donkeys. (I coined the term tax donkeys on July 7, 2010 and have found no earlier useage.)

Cash-strapped cities, counties and states are increasingly turning to property taxes and parcel fees to raise millions of dollars to pay their employees' salaries, benefits and pensions, and if there are no "Prop 13" type limits on how high property taxes/fees can be jacked up without voter approval, homeowners are a captive tax base which is ripe for exploitation: homeowners are reduced to tax donkeys, loaded up with ever higher taxes and fees and expected to suffer the whip without complaint.

Opting out of the Status Quo becomes next to impossible as property taxes skyrocket. We have friends in California whose property tax is $16,000 a year–and this is not at all unusual for those who bought homes in high-demand areas of the state in the past eight years. Add in utilities, sales taxes and the unavoidable host of other junk fees, and even the most frugal homeowner has to generate $2,000 a month in net income just to keep the lights on and keep the county from auctioning his house off to pay the confiscatory property taxes.

Add in the bubble-level prices for productive assets generated by competition from buyers with unlimited free money courtesy of the Federal Reserve, and it makes little financial sense for the merely middle class to overpay for an asset and then have to pay local government $160,000 a decade for the privilege of being a tax donkey in their jurisdiction.

That's $320,000 for 20 years of "ownership" and $480,000 for 30 years. Fail to pay your property taxes and your claim of "ownership" vanishes.

High taxes, bubble valuations and multiple regulatory barriers and fees all serve to reduce the opportunities for the bottom 99% to own any essential resources as those resources become increasingly scarce. Those few who scrape up the cash and are willing to mortgage their future to compete against private equity financiers and global corporations (and thieves from overseas seeking to park ill-gotten booty skimmed from peasants) face impoverishment as the cost of "ownership" is crushing for those with stagnating earned income and no access to the Fed's near-zero interest free money.

Those who own the resources and influence the political control of those resources are the New Nobility in a pernicious Neofeudalism enforced by the very government that claims to serve the debt-serfs and tax donkeys.

Control the regulatory and taxation machinery of governance and the essential resources, and you control everything of any value, leaving the debt-serfs and tax donkeys with nothing. If that's not Neofeudal, then what is it?

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