Frontrunning: April 21

  • World stocks gain along with oil, clock ticks down to ECB (Reuters)
  • Draghi Expected to Defend ECB in Face of German Criticism (WSJ)
  • Trump, Cruz, Kasich seek to win over Republican leaders at party meeting (Reuters)
  • Donald Trump Plans to Adopt More-Traditional Campaign Tactics (WSJ)
  • Japan, Not Germany, Leads World in Negative-Yield Bonds (BBG)
  • Obama starts talks with Gulf leaders aimed at easing strains (Reuters)
  • Soros: China Looks Like the US Before the Crisis (BBG)
  • OPEC Secretary-General Says Cartel May Discuss Oil Freeze at June Meeting (WSJ)
  • Obama’s Brexit Intervention Makes Waves in U.K., Ripples in U.S. (BBG)
  • Public Support For TTIP Plunges in US and Germany (Reuters)
  • Uber Overtakes Rental Cars Among Business Travelers (BBG)
  • VW To Offer To Buy Back Nearly 500,000 US Diesel Cars  (Reuters)
  • Mitsubishi Motors shares slump to record low on mileage cheating scandal (Reuters)
  • China’s ‘Zombie’ Steel Mills Fire Up Furnaces, Worsen Global Glut (Reuters)
  • EU States Grow Wary As Turkey Presses For Action On Visas Pledge (FT)
  • Novartis Profit Falls as Blockbuster Cancer Drug Sales Drop (BBG)
  • Greece ‘Could Leave Eurozone’ On Brexit Vote (Telegraph)
  • Marissa Mayer has only one last job to do at Yahoo (Reuters)
  • China Wants Ships To Use Faster Arctic Route Opened By Global Warming (Reuters)
  • Hungary Threatens Rebellion Against Brussels Over Forced Migration  (Express)
  • The Secret Shame of Middle-Class Americans (Atlantic)

 

Overnight Media Digest

WSJ

– Republican presidential front-runner Donald Trump, after notching a big win in New York, is planning to roll out significant changes in his campaign, including giving a policy speech on foreign affairs, using teleprompters and a speech writer, and doing more outreach to Washington Republican leaders. (http://on.wsj.com/1QoFUpJ)

– U.S. Treasury Secretary Jacob Lew said he would put abolitionist Harriet Tubman on the $20 bill, bowing to public pressure after his initial proposal to put a woman on the $10 bill appeared to misfire. (http://on.wsj.com/1QoFRtX)

– European Union competition authorities unveiled a second set of charges against Google, this time over its Android operating system, contrasting with U.S. regulators who have so far found that Google’s conduct raises no antitrust concerns. (http://on.wsj.com/1QoFOhE)

– Wal Mart Stores Inc is bringing in the next generation of Walton family members to its board, nominating Steuart Walton, grandson of founder Sam Walton. (http://on.wsj.com/1QoFM9w)

 

FT

– A Deutsche Bank AG shareholder has requested a special audit of whether members of the bank’s supervisory board or management board breached obligations in dealing with a few of the bank’s legal entanglements. (http://bit.ly/1U6Sj8l)

– GP practices will be given an additional 2.4 billion pounds ($3.44 billion) a year to cope with older population and to decrease pressure on hospitals. Chief Executive of NHS England Simon Stevens is to announce the extra funding on Thursday. (http://bit.ly/1U6SikW)

– Worldpay Plc is launching a pay-as-you-go service for smaller businesses taking card payments, which is a part of the payment group’s plans to expand in the UK. (http://bit.ly/1U6Shxj)

– Conforama, a Steinhoff International Holdings subsidiary, acquired 19.5 percent of Darty Plc and sweetened its offer for the remaining shares to 138 pence per share. (http://bit.ly/1U6ShgT)

 

NYT

– Google Inc long stressed that Android, its popular mobile software, is open for anyone to use, including its rivals. But the company’s claims are now under threat after Europe’s antitrust authorities on Wednesday charged the company with unfairly using Android to promote its own services – like mobile search – over those of its rivals. (http://nyti.ms/1T0I5Sh)

– In a major victory for the Russian government, a Dutch court on Wednesday overturned an award of more than $50 billion to former shareholders of the defunct oil company Yukos that Moscow was ordered to pay in 2014. (http://nyti.ms/1QoNqRe)

– In the latest scandal to hit the automobile industry, Mitsubishi Motors Corp said on Wednesday that it had cheated on fuel-economy tests for an ultrasmall car it produces in Japan. The company acknowledged that its engineers had intentionally manipulated evaluations. (http://nyti.ms/1SuUccT)

– Credit Suisse Group AG has hired Henrik Aslaksen, a former top banker at Deutsche Bank AG, as the Swiss bank continues to reshape its investment banking business. (http://nyti.ms/1T0Hpw3)

– Barclays Plc announced on Wednesday that a veteran of its Barclaycard business would be the permanent head of its credit card and payment operations. Amer Sajed, who joined Barclays from Citigroup in 2006, becomes chief executive of the Barclaycard business immediately, the British bank said. (http://nyti.ms/20Zjjrr)

 

Canada

THE GLOBE AND MAIL

** The trickle of complaints about Netflix Inc’s renewed effort to stop Canadians from circumventing its geographic content restrictions has turned into a steady stream of outrage as the Californian company’s technological crackdown begins to bite more users globally. (http://bit.ly/1NCPCVD)

** Multilateral talks are ongoing between the British Columbia and Alberta governments centering on a deal that would see one help facilitate the construction of an oil pipeline to the West Coast in exchange for a long-term contract to buy electricity. (http://bit.ly/1NCQgCx)

** The Canadian government abandoned an appeal of a controversial court ruling that let the Catholic Church out of its responsibility to raise millions of dollars for aboriginal healing programs, court documents show. (http://bit.ly/1NCQrOb)

NATIONAL POST

** Health Canada is studying the possibility of forcing companies to make their cigarettes less addictive, a controversial anti-smoking strategy that no other country has implemented. (http://bit.ly/1NCQFF3)

** Some of the Canadian military’s top equipment programs already underway – including projects to buy maritime helicopters and Arctic patrol vessels – will have their funding delayed as the defense department tries to deal with the Liberal government’s first budget. (http://bit.ly/1NCRQnR)

 

Britain

The Times

* Millions of patients will be seen by pharmacists, therapists and medical assistants instead of GPs in an effort to save the NHS from collapse. Simon Stevens, head of NHS England, warns that the health service will fail without a 2.4 billion pounds rescue package for the “fraying” GP system. (http://bit.ly/1VGkfRB)

* The owners of offshore companies holding 170 billion pounds in British property are set to be unmasked in a crackdown on money laundering and tax evasion. David Cameron is expected to announce plans to lift the veil on anonymous shell companies that buy huge swathes of British real estate. http://bit.ly/1T0lVQ6)

The Guardian

* Sir Terry Matthews, the first Welsh billionaire, is backing a proposed management buyout of Tata Steel UK, boosting hopes of a rescue deal for the Port Talbot steelworks and thousands of employees. Matthews is helping to put together a consortium of public and private sector figures from south Wales who can support the buyout. (http://bit.ly/1QnpvBV)

* British Gas is to axe almost 700 jobs and close its West Midlands office in Oldbury, just two months after its residential supply arm reported a 31 percent increase in profits to over 570 million pounds. The 684 staff are employed by British Gas services in call centre and back room office work supporting the company’s engineers who attend call-outs and mend boilers. (http://bit.ly/1pgvEJX)

The Telegraph

* Google has been formally charged with monopoly abuse over an alleged effort to crush rivals to its mobile search service and Android smartphone operating system, in a major escalation of its battle with Brussels. (http://bit.ly/1XIkeL4)

* Greece could crash out of the eurozone as early as this summer if Britons vote to leave the European Union in the upcoming referendum, economists have predicted. The uncertainty following a “yes” vote to Britain leaving the EU would put unsustainable pressure on Greece’s cash-strapped economy at a time when it is also struggling to cope with an influx of migrants escaping turmoil in the Middle East and Africa, according to a report from the Economist Intelligence Unit. (http://bit.ly/20YPNC5)

Sky News

* A group of top city executives has slammed boardroom pay practices as “broken” and “not fit for purpose”, demanding an urgent overhaul to restore public confidence in British business. Sky News has learnt that a panel set up to explore ways of simplifying executive remuneration will publish on Thursday a series of proposals aimed at increasing transparency and directors’ accountability. (http://bit.ly/1STYVBJ)

* Japanese carmaker Mitsubishi Motors Corp has admitted manipulating fuel economy tests on some of its own brand and Nissan cars to make the results more favourable. (http://bit.ly/1WGor3i)

The Independent

* Barack Obama has been urged to use his visit to Saudi Arabia to rule out selling controversial cluster bombs to the kingdom amid mounting evidence they have been used against civilians in Yemen. (http://ind.pn/20YR6kF)

* Shareholders in the collapsed Yukos oil company established by jailed Russian oligarch Mikhail Khodorkovsky have lost a key court battle in their demand for $50 billion compensation from the Russian government. (http://ind.pn/26fP6Z8)

 

via http://ift.tt/1U7cYt8 Tyler Durden

Sweden’s Riksbank Unexpectedly Boosts QE To Weaken Currency; Krona Jumps

In a surprise move, earlier today Sweden’s Riksbank announced that it would expand the country’s QE program by another 45 billion kroner – consensus was for no increase – while keeping its rate at the already record negative -0.50%. “With continued expansionary monetary policy abroad, there is a risk that the krona will appreciate earlier and faster than in the forecast,” the Riksbank said. 

Even more surprising was the currency reaction: instead of weakening the SEK, the currency strengthened and initially traded as much as 0.8 percent higher against the euro, but gains were pared to 0.3 percent as of 11:26 a.m. in Stockholm. The move was another indication of just how inverted cause and effect relationships have become in a world in which traders try to front and in this case back-run central bank announcements.

The extra purchases will add to an existing 200 billion-krona QE program targeting about one-third of Sweden’s nominal government bonds by the end of June. Riksbank Governor Stefan Ingves has resorted to unprecedented stimulus as the bank has failed to reach its 2 percent inflation target for about half a decade. But policy makers are torn over how best to deploy their toolbox as the property market overheats.

This is what the Riksbank said:

The Riksbank’s monetary policy has contributed to stronger economic activity and rising inflation. But although inflation is rising, the upturn is fitful. At the same time, there is still uncertainty over global developments and monetary policy abroad is very expansionary. To safeguard the rising trend in inflation, monetary policy in Sweden needs to continue to be expansionary. The Executive Board has decided to purchase government bonds for a further SEK 45 billion during the second half of 2016. This will reduce the risk of the krona appreciating faster than in the forecast and of a break in the upturn in inflation. The purchases cover both nominal and real government bonds, corresponding to SEK 30 and SEK 15 billion, respectively. The repo rate is at the same time held unchanged at -0.50 per cent. There is still a high level of preparedness to make monetary policy even more expansionary if this is needed to safeguard the inflation target.

Apparently the market did not agree with the Riksbank’s assessment, and as a result of the surprising strengthening in the SEK, The krona remains the strongest performer, besides the yen, of the 10 currencies tracked in Bloomberg Correlation Weighted Indexes over the past year.

As Bloomberg noted, “Sweden’s Riksbank just put its monetary policy cards on the table in the hope that the European Central Bank won’t blow its best intentions to smithereens.

Swedish policy makers delivered a little more stimulus and made a few predictions about the future. But ultimately, all they can do now is hope ECB President Mario Draghi doesn’t upend everything for those outside the euro zone struggling to protect their currencies.

 

What the Riksbank does next “depends to a large extent on the ECB,” said Knut Hallberg, an analyst at Swedbank. “If they breathe a word of being prepared to do more, then the pressure on the Riksbank will rise again.”

Andreas Wallstroem, an economist at Nordea Bank AB, said his “main scenario is that we will see no additional easing measures from the Riksbank in this cycle.” Nordea forecasts the first rate increase will come in the second quarter of next year. “However, as we don’t see that inflation will rise to the 2 percent target within the forecast horizon, further easing measures cannot be ruled out.”

“The pressure could mount already this afternoon should the krona strengthen on the back of the ECB decision,” he said. The Frankfurt-based bank is due to publish its rate decision later today, with economists surveyed by Bloomberg predicting no change.

As Bloomberg adds, Sweden is enjoying an economic boom with growth rates in excess of 4 percent. A number of analysts have questioned what impact more easing will have on an economy steaming ahead at such a pace.

The Riksbank is “caught between a domestic economy that is booming while uncertainty in the rest of the world and the financial markets will continue to exert pressure on the Swedish krona and inflation,” said Joergen Kennemar, an economist at Swedbank. “In particular, the more expansive stance of the ECB, but also the Fed, could force the Riksbank to reverse its course of a scale-back monetary policy. Thus, if the ECB and the Fed prevail, the pressure will again arise late this year or early next year.”

Then again, perhaps there is a reason for the stronger SEK response: as Danske Bank notes, perhaps the Riksbank has introduced a mini taper:

Finally, here was Goldman’s take:

  • Contrary to our expectations, the Riksbank has extended the QE program by a further SEK45bn during the second half of 2016 (SEK30bn of nominal government bonds and SEK15bn of real government bonds).
  • Given the economic and inflation outlook, we had expected the Riksbank to tolerate a weaker currency (up to EUR/SEK 9.10-9.05) and to refrain from taking any action at this stage. However, the Riksbank’s announcement today shows that the threshold for a faster appreciation of the currency is lower.
  • The initial market reaction has seen the SEK appreciate, contrary to what the Riksbank had hoped to achieve.
  • The only possible explanation for this, beyond positioning, is that the market thinks the central bank is now running out of bullets in its attempt to control the pace of SEK appreciation.
  • The Riksbank has shown that it continues to be worried about the pace of appreciation. As we have written elsewhere, we do not rule out that the central bank could cut rates further or even engage in opportunistic interventions in the currency market. So, at these levels, tactically we do not see much value in going long the currency. That said, the trend is for the SEK to appreciate, and we would therefore see any depreciation as a window of opportunity to take the other side.

The move may be accentuated depending on what the ECB announces in just over half an hour.

via http://ift.tt/1SmitPP Tyler Durden

Futures Crude Unchanged Ahead Of Draghi As Parabolic Move In Steel Iron Ore Continues

One day after stocks were this close from hitting new all time highs on what have been either ok earnings, if looking at non-GAAP data, or atrocious earnings, based on GAAP, and where any oil headline is now immediately translated as bullish by the oil algos, so far futures are relatively flat, while European stocks were at their moments ago in anticipation of the latest ECB announcement due out in just one hour.  However, unlike last month’s “quad-bazooka”, this time the market expects far less from Draghi.

“Having pulled put the monetary bazooka in March, the market is sensibly expecting no further policy measures from the ECB,” said Michael Ingram, a market strategist at BGC Partners in London. “Investors are understandably reticent in making big bets ahead of what is on paper, likely to see policy makers firmly on hold.”

Draghi will come and go, but attention will remain on oil and all other commodities, where the Bloomberg Commodity Index headed for a five-month high, spurred by gains from metals to soy beans, and weighing on government bonds.

Nowhere was the ongoing surge more obvious than in the construction complex, where steel reinforcement bars jumped to a 19-month high in Shanghai, buoyed by an improving Chinese property market, supporting the Australian dollar. As seen on the chart below, both iron ore and steel have gone parabolic this year despite, as reported previously, China’s increase in steel output to record highs. “You’ve got a tight market, you’ve got momentum, and you’ve got this fundamental driver for steel in the government boosting the infrastructure and housing side of things,” Chris Weston, chief market strategist at IG Ltd. in Melbourne told Bloomberg. “The rebar price is really leading the iron ore price at the moment.”

 

Following yesterday’s latest surge in oil which saw WTI overtake the “Gartman doomsday” level of $44, it has since leveled off while Brent fluctuated near $46 a barrel after data showed U.S. production slipped and Iraq said talks to freeze output may occur next month.

Commodity gains boosted the outlook for inflation, sending German bund yields to a four-week high. Sweden’s krona rose after the Riksbank expanded bond buying less than some investors expected. Metal increases boosted European miners, while most industries on the Stoxx Europe 600 Index declined.

“The rally in commodities is making people a bit more positive,” Robin Bhar, an analyst at Societe Generale SA in London, told Bloomberg. “The base metals are gaining on a view that the industrial cycle is strengthening. There’s broad-based buying in commodities, and that suggests that sentiment is starting to turn. This would have drifted across into mining shares and energy stocks.”

Meanwhile in stocks, Europe’s Stoxx 600 slipped 0.5%, after closing at its highest level since January. Miners in the gauge are heading for six-month high. Carmakers rallied, boosted by a 5.1 percent jump in Volkswagen AG after a person familiar with the matter said it agreed to set aside at least $10 billion to resolve civil claims by the U.S. government and lawsuits by American car owners over diesel vehicles rigged to cheat pollution controls.

The MSCI Asia Pacific Index was 1.2 percent higher. Japan’s Topix index climbed 2 percent to a two-month high, buoyed by prospects the Bank of Japan will boost stimulus at a monetary policy review next week. The authority is likely to increase asset purchases, Goldman Sachs Group Inc. analysts wrote in a report published Wednesday. Mitsubishi Motors Corp. tumbled by the 20 percent daily limit in Tokyo after the automaker said it manipulated fuel-economy tests.

S&P 500 index futures were unchanged, indicating U.S. equities will hold a four-month high as investors assess earnings before making a break for fresh all time highs. General Motors Co., Microsoft Corp. and Visa Inc. are among companies announcing quarterly results Thursday.

Where Markets Stand Now

  • S&P 500 futures up less than 0.1% to 2100
  • Stoxx 600 down 0.4% to 350
  • FTSE 100 down 0.5% to 6379
  • DAX up 0.1% to 10434
  • German 10Yr yield up 6bps to 0.21%
  • Italian 10Yr yield up 6bps to 1.46%
  • Spanish 10Yr yield up 7bps to 1.6%
  • S&P GSCI Index up 0.2% to 353.2
  • MSCI Asia Pacific up 1.2% to 134
  • Nikkei 225 up 2.7% to 17364
  • Hang Seng up 1.8% to 21622
  • Shanghai Composite down 0.7% to 2953
  • S&P/ASX 200 up 1.1% to 5273
  • US 10-yr yield up less than 1bp to 1.85%
  • Dollar Index up 0.1% to 94.59
  • WTI Crude futures down 0.2% to $44.07Brent Futures down 0.3% to $45.67
  • Gold spot up 1.1% to $1,258
  • Silver spot up 2.5% to $17.39

Global Top News

  • Draghi Can Argue Glass Is Half Full as ECB Pumps Up Stimulus: unemployment is falling and euro-area growth is continuing
  • Oil Trades Near 5-Month High as U.S. Crude Production Declines: U.S. crude output falls to lowest since Oct. 2014: EIA
  • VW Said to Pay At Least $10 Billion in U.S. Cheating Deal: carmaker’s plan covers lawsuit claims by government, motorists
  • Qualcomm Forecasts Are In Line on Progress in China Dispute: stock falls on concern chipmaker may lose Apple orders
  • AmEx Profit Beats Estimates as Purchases Climb; Shares Rise: revenue advances 1.6% to $8.09b, in line with estimates
  • Yum Brands Profit Tops Estimates as China Unit’s Sales Gain: company raises its annual forecast for operating profit
  • Vale Profit Prospects Bolstered by Record Output in Iron Rally: iron output of 77.5m tons is highest for first quarter
  • Wal-Mart to Cut Board to 12 Directors as Four Members Retire: board to maintain independent majority at 67% of its members
  • BHP Expects Iron Ore Prices to Drop as More Supply Swamps China: co. sees mergers and acquisitions as being unlikely
  • Sony Operating Profit Misses Forecast on Smartphone Slump: co. revises outlook ahead of April 28 earnings announcement
  • Saudi Arabia Mulls Dual Listing, Traded Fund for Aramco IPO: kingdom seeking ways to broaden investor base for huge IPO
  • Companies reporting earnings today include Alphabet, Microsoft, Verizon, Visa, Starbucks, GM

Looking at regional markets, stocks in Asia continued to trade higher as energy continued to drive sentiment following yesterday’s near 4% advance in oil on speculation of a possible producers meeting in May. This saw the energy sector outperform in the ASX 200 (+1.1%) with several firm earnings reports also underpinning sentiment. Nikkei 225 (+2.7%) led the region amid a weaker JPY to climb back above 17000, while Shanghai Comp (-0.7%) is also positive after a larger liquidity injection by the PBoC, although overheating credit concerns capped gains. JGBs saw mixed trade with 10yr JGBs mildly lower amid strength in Japanese stocks, while yields in the super-long end declined with the 30yr yield at fresh record lows. Furthermore, today’s 20yr auction was better received but failed to provide lasting support.

Top Asia News

  • Soros Says China’s Debt-Fueled Economy Resembles U.S. in 2007-08: Surging new credit is warning sign, Soros says
  • The 54% Rally in Steel Prices That Points to China’s Rapid Shift: Iron ore, steel demand getting better, Credit Suisse says
  • Japanese Funds Return to Overseas Bonds After Two Weeks of Sales: Purchases total net 844.7b yen in latest week, MOF says
  • Hony Capital Is Said to Raise $2.7 Billion for Yuan-Dollar Fund: Will be first dual-currency fund raised by large PE firm
  • Hong Kong Stocks Scorn Economic Gloom as Bull Market Approaches: MSCI gauge of city’s shrs has rallied 17% since January low
  • ‘Shameful’ Mitsubishi Fraud Risks Pushing Carmaker to Brink: Data manipulation affects ~625,000 minicars in Japan
  • ‘Black Box’ India States Thwart Modi Moves to Lower Debt Costs: Nomura sees deficits of major states widening to 3.3% of GDP

Equity specific news has taken focus so far in European hours, with macro news relatively light as participants await the ECB rate decision and press conference later today. In terms of European equities, this morning has been mixed in terms of indices, with Euro Stoxx higher by around 0.25%. Earning season appears in full flow, with Ericsson lower by around 10% after announcing a profit warning pre-market, with the likes of Pernod Ricard also among the worst performers after a pre-market earnings update. Separately, Volkswagen are the best performing stock in Europe today after agreeing a deal with the US regarding the emissions scandal.

Bunds have grinded lower throughout the session so far, with a number of analysts attributing the move below 163.00 to technical selling and positioning ahead of the ECB meeting later today. The commodity complex has seen WTI trade in a relatively tight range this morning in the wake of the significant gains seen so far this week, with the US benchmark remaining above the USD 44/bbl level.

European Top News

  • Novartis Profit Falls as Blockbuster Cancer Drug Sales Drop: company reiterates full-year forecast for sales and earnings
  • Ericsson Shares Drop Most in Year After Sales Miss Estimates: competition from Nokia, Huawei putting pressure on margins
  • Billionaire Slim Said to Weigh Stake Sale of Dutch Carrier KPN: sale could attract phone companies, such as Orange
  • SABMiller Sales Advance on Gains in Africa, Latin America: organic beer volumes rise 3% in fourth quarter
  • Pernod Ricard Suffers China Setback as Scotch Demand Ebbs: sales in China unexpectedly dropped 5% on weak New Year orders
  • Anglo’s Refined Platinum Output Drops as All Forecasts Kept: quarterly diamond production fell 10% as De Beers cut supply
  • Fnac Bids $1.1 Billion for Darty, Countering Steinhoff Offer: investors would receive 145 pence in cash or share alternative
  • U.K. Retail Sales Fall More Than Forecast; Budget Target Missed: U.K. retail sales fell for a second month in March
  • Sweden Fights Currency Market With More Monetary Stimulus: Riksbank to increase quantitative easing program by SK45 bln
  • Hapag-Lloyd Said to Be in Merger Talks With Competitor UASC: cos. said to be in talks as they fight increasing competition
  • Italy Bank Fund Approved by Regulator, Reaches Money Target: Atlante fund exceeded goal of raising EU4b

In FX, fresh EUR sales seen ahead of the ECB meeting today, where little change is expected to the current measures in place, but all the focus on the following press conference — from which we saw the huge FX moves in March. Moves lacking any momentum though as yet, and through 1.1300, fresh lows are met with snapbacks to highlight indecision. UK retail sales were the key data release, coming in weaker than expected, but were offset by lower public borrowing requirements. GBP was sold into the release aggressively, but after a reluctant dip under 1.4300, we are back in the mid 1.4300’s. Ongoing consolidation in the commodity linked currencies, with USD/CAD finding some support ahead of 1.2600 and now edging back towards 1.2700. WTI
(Jun) is still trading on a $44.0 handle — just — but near term calm is enough ease CAD strength for now. USD/JPY continues to hold off 110.00, but is equally well bid on modest dips, with positive equities and the BoJ meeting next week lending some support

In commodities, WTI may have met a key resistance level of USD 44/bbl (which is also the 50% retracement from the Apr’15 highs to the Feb’16 lows) after yesterday’s strong rally after OPEC announced they are set to call another meeting to revive output freeze/cut talks. Also of note today sees the release of the EIA natural gas with the previous result at -3 this comes after NatGas futures have slightly retraced after declines in recent months . Gold has been moving higher and has now broken a key resistance level of USD 1257.90/oz, also Silver has been making strong gains breaking through the USD 17.50/oz this morning , this comes amid broad-based strength across commodities which also saw copper and iron ore extend on gains, with Dalian iron ore futures hitting limit-up at a 19-month high alongside Shanghai rebar’s 7% advance, following supply cuts by large industry names.

The US calendar picks up notably today. We kick off with the Chicago Fed national activity index, Philly Fed manufacturing survey and the latest initial jobless claims data, before there’s more house price data in the form of the FHFA house price index, before concluding this afternoon with the Conference Board’s leading index (where a +0.4% mom gain is expected). The BoE’s Carney is due to speak again this afternoon, while it’s a bumper day for earnings across the pond. 37 S&P 500 companies are scheduled to report including Alphabet, General Motors, Verizon, Microsoft and Schlumberger.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equites trade in a relatively tentative manner ahead of the ECB rate decision and press conference with Bunds slipping below 163.00
  • Ahead of the ECB, FX moves are currently lacking any momentum with fresh lows in EUR/USD met with snapbacks, thus highlighting indecision
  • Focus going forward though will remain on the ECB, although other highlights include Philadelphia Fed business outlook and possible comments from BoE’s Carney
  • Treasuries rise during overnight trading, a continuation of the late afternoon selloff in New York amid rising commodities and equities; ECB policy announcement due at 7:45am ET, followed by press conference at 8:30am.
  • With no new measures expected at Thursday’s meeting, Mario Draghi may use his press conference to point to signs that negative rates, free bank loans and a 1.7 trillion-euro ($1.9 trillion) bond-buying program should be enough to revive euro-area inflation
  • Swedish policy makers delivered a little more stimulus and made a few predictions about the future though all they can do now is hope ECB President Mario Draghi doesn’t upend everything for those outside the euro zone struggling to protect their currencies
  • Bank of Japan Governor Haruhiko Kuroda’s concerns about a rising yen are shared by senior officials at the central bank, according to people familiar with the discussions
  • Gold may advance to as much as $1,400 an ounce over the next 12 months, according to BNP Paribas SA, which cited rising investor concern about the efficacy of central banks’ policies to sustain growth
  • Global investors have cheered the recent signs of economic pickup in China. Andrew Colquhoun is unimpressed. The head of Asia Pacific sovereigns at Fitch Ratings sees the growth spurt, fueled by a resurgence in borrowing, threatening to wreak havoc on the financial system
  • Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession; said China’s March credit-growth figures should be viewed as a warning sign
  • China’s top fixed-income fund manager said she may cut holdings of onshore corporate notes after defaults surged in the world’s third-biggest debt market
  • U.K. retail sales posted their biggest monthly decline in more than two years in March as Britons bought less of everything from food to clothing; Office for National Statistics also revealed that debt as a share of the economy rose
  • Sovereign 10Y bond yields higher; European, Asian equity markets mostly lower; U.S. equity-index futures rise. WTI crude oil, metals mostly higher

US Event Calendar

  • 8:30am: Chicago Fed National Activity Index, March (prior -0.29)
  • 8:30am: Initial Jobless Claims, April 16, est. 265k (prior 253k)
    • Continuing Claims, April 9 (prior 2.171m)
  • 8:30am: Philadelphia Fed Business Outlook, April, est. 8 (prior 12.4)
  • 9:00am: FHFA House Price Index, Feb., est. 0.4% (prior 0.5%)
  • 9:45am: Bloomberg Economic Expectations, April (prior 42); Bloomberg Consumer Comfort, April 17 (prior 43.6)
  • 10:00am: Leading Index, March, est. 0.4% (prior 0.1%)

Central Banks

  • 7:45am: ECB Deposit Facility Rate, est. -0.4% (prior -0.4%)
  • 8:30am: Mario Draghi speaks

 

DB’s Jim Reid concludes the overnight wrap

Welcome to ECB meeting day, 6 weeks on from Draghi’s policy bazooka. In the PDF today we’ve updated our performance review chart to track global assets since this point. Of particular interest to us is where European assets are in the mix. When we last ran this nearly two weeks ago returns for European assets had been relatively weak post-ECB with many of the areas of the market Draghi had tried to help having underperformed. The last 14 days have seen a marked turnaround in sentiment however and now all of the European assets we look at are back in positive territory over the relative time frame. In bond markets Bunds have returned just shy of 1% with Spanish bonds now catching up and matching on a total return basis. BTP’s are just in positive territory (+0.3%) but have underperformed with the Italian banking concerns. Performance for equity markets has been strong with the Stoxx 600 now up +4% which is a marked turnaround from -3% of two weeks ago. Regionally it’s the DAX (+7%) which leads the way (and ahead of the S&P 500 which is up +6%), followed closely by the peripheral bourses of Portugal (+6%), Greece (+6%) and Spain (+5%) with the FTSE MIB (+3%) lagging behind. European banks have staged a huge turnaround of late also and are now positing a +2% gain, which is an +11% or so swing from two weeks ago. It won’t come as much surprise to hear that EUR credit has continued to remain well supported with EUR HY (+4%), EUR IG Non-Fin (+2%) and EUR Fin Sub (+2%) all in low single digit return territory and out-performing bunds. That said it’s interesting to see that EUR credit has generally underperformed its US counterparts by a percent or so, reflecting the lower energy exposure over a period of a large rally in Oil prices (WTI +11%).

Perhaps of most interest to us today will be evidence of any logistical progress on the corporate bond purchasing program (CSPP). Since the announcement date details for the program have been thin with the hope that today will bring greater clarity around the potential size, split between primary and secondary markets and the finer details around bond eligibility. It might still be too early to hear much though. A report from Michal Jezek in my team, which we attach the link below to, shows that ECB eligible eurozone bonds initially outperformed post the ECB CSPP announcement and in the two weeks or so after. However since then they have underperformed non-eurozone bonds almost to the same magnitude. The turnaround has coincided with a higher beta global rally over the last two weeks or so, so that’s certainly helped the performance of the generally wider higher beta non-eurozone issues. We also provide a list of the top and bottom 100 bonds by performance since the ECB announcement.

Outside of the ECB today the main topic for markets continues to be Oil which is clearly the dominant driver for price action at the moment. Last night saw WTI close +3.77% at $42.63/bbl and so eclipsing the highest price for the year. That means Oil is now just over +13.5% up from the post-Doha early Monday morning lows now, or nearly $5. It’s worth noting that we roll onto the June contract today which is currently trading around $44/bbl this morning (and unchanged). Yesterday the early concerns from the announcement of the end of the Kuwait oil strike was quickly forgotten about post the latest EIA data which showed inventory levels coming in lower than expected and which appeared to be enough to fuel the rally. Later on we also saw headlines filter through suggesting that OPEC and other crude producers could meet as soon as next month in Russia in a bid to restart production freeze talks according to Iraq’s deputy oil minister.

With little other news flow, the rally in Oil has seen most markets in Asia this morning get off to a solid start. It’s Japan which is currently leading the way with the Nikkei +2.51%, while elsewhere there are decent gains for the Hang Seng (+1.79%), Kospi (+0.63%) and ASX (+0.91%). Bourses in China are back to flat after initially opening in the red while credit markets in Australia and Asia are generally a couple of basis points tighter.

In fact it was a broadly better day for commodities all round yesterday. The rest of the energy complex rallied in vain, while base metals also bounced (Aluminium +2.21%, Copper +0.91%, Nickel +0.59%). Iron ore also rallied another 3% and has quietly surged over 11% this week alone to the highest level since June last year. A big rise in Chinese steel demand has coincided with the rally, while the supply side of the equation has also been given a boost with production reports from the big mining names this week (BHP, Rio Tinto and Vale) all hinting at lower production guidance this year and next.

As a result of gains in the commodity space, along with another decent day for financials, it ended up being another positive day for risk markets generally yesterday. European equity markets rallied back from a weak open, with the Stoxx 600 closing +0.43% for its third consecutive daily gain. A late dip into the close meant gains were more modest in the US (S&P 500 +0.08%) but the Dow and S&P 500 continue to extend the recent highs. US credit markets were the big outperformer. In the CDS space CDX IG closed nearly 3bps tighter and to the strongest level since August last year, while in the cash market we saw US HY energy spreads finished nearly 30bps tighter and are all of a sudden over 60bps tighter in two days. Earnings reports appeared to be less of a factor driving markets yesterday but we’ve got a number of tech heavyweights reporting today as well as the first hint of earnings in the energy sector when Schlumberger report after the close – it’ll be worth keeping an eye on those numbers.

There wasn’t a whole lot of economic data for us to digest yesterday. The only data we did get in the US was in the form of more housing data, although in contrast to some of the softer reports earlier this week, yesterday’s existing home sales print of +5.1% mom was ahead of expectations (+3.9% expected) with the annualized rate ticking up 5.3m from 5.1m in February. Treasury yields moved higher and the benchmark 10y (which rose 6bps) finished at 1.846% and the highest yield since March. Interestingly, we also noted that the Bloomberg US financial conditions index was up nearly 6bps yesterday, indicative of easing of financial conditions, with the current level suggesting that conditions are now easier than when the Fed moved to hike back in December.

The rest of the economic data of interest yesterday was in the UK with the latest employment readings. The unemployment rate was reported as holding steady at 5.1% in February as expected, while the change in employment growth of 20k in the three months to the end of Feb was less than hoped for (60k expected). Of perhaps most importance was the softer than expected earnings data. Average weekly earnings including bonuses printed at +1.8% yoy, well below expectations (+2.3% expected) and down three-tenths from the prior month. That said there was no change in the earnings data stripping out the effect of bonuses.

Taking a look at the day ahead, the highlight this morning datawise will likely be the March retail sales numbers for the UK, while French confidence indicators are also due out. The aforementioned ECB meeting is due at 12.45pm BST with President Draghi due to speak shortly after, while the Riksbank will also hold their own policy rate decision (no move expected). Over in the US the calendar picks up notably today. We’ll kick off with the Chicago Fed national activity index, Philly Fed manufacturing survey and the latest initial jobless claims data, before there’s more house price data in the form of the FHFA house price index, before concluding this afternoon with the Conference Board’s leading index (where a +0.4% mom gain is expected). The BoE’s Carney is due to speak again this afternoon, while it’s a bumper day for earnings across the pond. 37 S&P 500 companies are scheduled to report including Alphabet, General Motors, Verizon, Microsoft and Schlumberger.

via http://ift.tt/1TkOsSV Tyler Durden

One Commodity Trader Writes: “What Is Happening Has Absolutely No “Reasonable” Explanation”

One commodity trader writes in with some very unique observations. From trader “Peter”

* * *

The insanity has now fully spilled into the commodity markets – a market which I professionally made a transition to after the 2008 crisis from the financial markets, simply because I believed it was a market that would still function according to true fundamentals…

I guess that only lasted so long…

The commodity markets have been prone to excessive speculation for years, but at the end, the thought of specializing in something “tangible” that EVENTUALLY would have to revert back to true supply and demand fundamentals made all the sense in the world.  Specially with the true circus that the financial markets have become since 2008…

* * *

From: XXXXXXXXXX
To: “Peter”
Sent: Wednesday, April 20, 2016 1:35 PM
Subject: volume totals today

774K of soybeans traded today and that would be a record by nearly 160K contracts as yesterday set the record at 615K.

Over 88K Jly/Nov traded today and 97K May/Jly traded.  Unheard of non-roll numbers.

Meal volume was 270K and we have to think that was a record as well but not 100% on that one.

Lots of ideas around to try and explain the move: from commercial short hedgers blowing out, Chinese pricing, product switching from Argentina to the US.

Not really sure if all or any of this is true but it was quite a wild session

* * *

From: “Peter”
Sent: Wednesday, April 20, 2016 2:41 PM
To: XXXXXXXXXX
Subject: RE: Some staggering volume totals today

Man… I would be VERY surprised if this was due to any of the reasons people are mentioning…

    Chinese pricing – I am very positive it does have something to do with it, but for the overnight session – not the daytime.
    Commercial hedgers blowing out – very possibly adding to the mess – but no way commercial volume takes us to these levels of ridiculousness in total volume…
    Product switching from ARG – yep, because we REALLY need to ration our 400+ mb bean stocks… LOL

This is way past insane, ridiculous, etc…

The “fundamental” reasons people are trying to ping to this are simply a nice “window dressing”…

There is nothing else that can explain this other than you know what? 

Here comes my Very-REAL Conspiracy Theory: the stupid FED and other Central Bankers around the world acting in unison to artificially raise inflation so that they can hopefully get out of the F’ing mess they got themselves into with this low/negative rate BS.  Call me crazy, and I am not a “conspiracy theorist” – but what is happening has absolutely no “reasonable” explanation.  So I have to think outside the box…

The FED and other Central Banks have already destroyed the equity and other macro-financial markets… it is now turn for the commodities markets…

I am serious … I really am… I wish I was just being sarcastic… but pause for a moment and think about what is written above…

What explains the move in Crude? Ok, I could try and put some sort of “rationality” on the initial move from $26 – $40 (as crazy as it was), but the action in the oil market since Sunday’s “about face” in Doha?  No way anything other than pure, simple and outright manipulation can explain these last 3 days of action in the crude oil market… nothing…

How about the fact that the main drag on the inflation figures has been what? What? FOOD & ENERGY…

So is it so crazy to think that Central Bankers all got together in early 2016 and came up with the following equation???

ARTIFICIALLY RAISE COMMODITY VALUATIONS = HIGHER ARTIFICIAL INFLATION = CLAMORING FOR RATES TO BE RAISED = CENTRAL BANKS HAVING A “SUCCESSFUL” END TO THE CLUSTERFCK THEY GOT THEMSELVES AND THE REST OF ALL OF US INTO WITH THEIR “ZIRP” AND “NIRP” EXPERIMENTS…

Who or what has the power to produce such volume in such short amount of time?????? Not the powerful Chinese, not the commercials, not even the “regular” hedge fund crowd… This is much bigger than that Chris… much bigger…

When you pause and think about what I just wrote – it will not sound that crazy after all…

I truly wish I was joking…

I also wish I could let go of my natural makeup of focusing on “fundamentals” and just go long everything… but I don’t believe I can… and I am frankly and idiot for it…

Don’t write this off as some crazy conspiracy… Think about it… it is almost scary how much sense it makes…
At the end of the day… it is what it is…

Peter
 

via http://ift.tt/1WfdO7j Tyler Durden

The Lie That Corporations Have Rights

 

 

 

The Lie That Corporations Have “Rights”

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

 

 

The Lie That Corporations Have “Rights” - Jeff Nielson

 

 

 

People have rights – at least we used to have them, until the mythological “War on Terror” was rammed down our throats as a pretext for stripping us of many rights. Corporations cannot have rights, which should be evident to all citizens in our pseudo-democracies.

However, thanks to the endemic brainwashing of the corporate media, this important distinction of law/logic is no longer obvious to many. Indeed, in the United States, corporations have been elevated to a legal status at least equal to that of its citizens – if not above the status of the people.

Precipitating this discussion, we offer a particularly odious piece of propaganda from the mainstream media, where a purported law professor attempts to advance the specious argument that corporations (in the United States) have “free speech rights.”

The scope of the First Amendment [free speech] lies at the heart of my thought experiment. We live in an era when criticisms of corporate speech can become overwrought. Many activists deny that corporations have any free speech rights at all.

Not even the four dissenters [judges] in Citizens United v. Federal Elections Commission took that position. They conceded that corporations possess First Amendment rights . They simply argued that the government, with sufficiently strong reason, can limit some avenues for the expression of those rights as long as it leaves other avenues open.

This is wrong, in every respect. It is “bad law” in every respect. It reflects a refusal of the corrupt U.S. judiciary system to acknowledge the limits of our governments’ authority. It is nothing less than a complete betrayal of the oath these judges take to uphold the law.

Here, the perversion of reality descends to the level of cultural insanity. In the United States, a corporation is “a person.” This is an outrageous distortion of law and reality, particularly once we place this legal perversion into its proper context. In the United States, a fetus is not “a person.”

Irrespective of one’s views on the highly emotionally-charged subject of abortion, one fact is clear. If a human fetus is not legally deemed to be “a person,” then obviously an inanimate corporation could never be deemed as such. As a matter of basic biology and elementary logic, the claim of a fetus to the status of “a person” must be above any claims by mere corporations.

Because of our brainwashing, this point still may not be obvious to some readers, thus a further definition of terms is necessary. We will begin with defining the word “right.” Since our context for examining rights is a legal one, our definition must be legally rather than linguistically oriented.

This is an important point, as the word “right” is used both very loosely and colloquially in our societies. Dictionary definitions are of little help here. Consult a half dozen different dictionaries, and one will see the word “right” defined in six different ways.

To define the word in a legal context requires first answering a preliminary question: from where do our rights originate? Primarily, our rights are derived from the Constitutions of our nations. To a lesser extent, they are also derived from the United Nation’s “Universal Declaration of Human Rights.” However, as this document has (at best) only quasi-official status within our various nations, our rights are primarily derived from the former source.

Our Constitutions exist above the level of our governments. We know this to be true, because we require that any amendments to our Constitution only be enacted via some sort of Super Majority. This is to demonstrate to the people that the proposed change(s) reflects the will of the people, and it is only under such circumstances that we allow our governments to modify our Constitution.

Our rights come from our Constitutions, and our Constitutions have a legal status above that of our governments. Thus our rights exist, legally, above the level of our governments. Why is this point of such great importance? Because it sheds light on the true definition of “a right.”

Because our rights exist above the legal level of our governments, our governments do not (and cannot) bestow rights. Rather, our human rights are intrinsic and inalienable. This conclusion simply mirrors the language of the U.N.’s Universal Declaration:

Whereas recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world.

As a proposition of both law and logic, this makes much of our anti-terrorism laws legally null and void, since they seek to infringe upon, if not eliminate, rights which exist above the authority of our governments.

Governments cannot grant rights. Equally, they cannot take them away, except via Constitutional amendment. Here it is very important that we distinguish the word “right” from a somewhat similar word/concept: “privilege.”

Privileges resemble rights except for one crucial distinction of law/logic. Privileges are revocable. Our governments do have the legal authority to grant privileges, and thus to revoke privileges – something for which they lack the legal authority with respect to rights.

This brings us to another extremely important definition: “corporation.” A corporation is an inanimate, paper entity. More specifically, it is a front for wealth. These paper shells have been created in order to facilitate the deployment of wealth, and thus facilitate commerce. Of equal importance, corporations are a creation of government.

Why are these basic traits of corporations of such great legal relevance to this discussion?

      1) Corporations have a legal status created by our governments, and thus a legal status equal to our governments, but well below the status of our human rights.

      2) In our world of mega-corporations, corporations have become primarily the paper fronts for the ultra-wealthy.

Dealing with the second point first, it should become immediately apparent why – as an issue of justice and equity – a corporation could never have rights. As individuals, the ultra-wealthy already have rights equal to and commensurate with the rights of all other citizens. This is all they could ever be entitled to. If we grant rights to the mega-corporations owned by the ultra-wealthy, we are granting this one class of individuals a second set of rights – in addition to their intrinsic, human rights.

This is obviously unjust and inequitable. When we then examine the first point (above), we see how supposedly granting rights to corporations is clearly illegal.

We have already established that our legal rights exist above the level of our governments. They cannot create or bestow rights, nor can they take them away. Obviously, if they cannot bestow rights to the people, they cannot bestow rights upon inanimate corporations – entities with a legal status equal to that of our governments. They lack the authority.

Similarly, if a government cannot legally bestow rights upon corporations, they cannot elevate corporations to a status equal to that of the people, i.e. by defining a corporation as “a person.” This is simply an indirect means of doing what we have already established is illegal. If we allow our governments to define any entity it chooses as “a person,” we would be giving these governments the back-door power to bestow rights, something which is unequivocally beyond their legal authority.

One does not have to be a judge, or even a law professor in order to understand these elementary points of law, logic, and justice. How could someone who (supposedly) possesses the legal expertise of a law professor have constructed the fallacious and ludicrous argument that “corporations have rights”?

He did so by deliberately refusing to define the terms he was using. It is much easier to lie to people, and to pretend that corporations have rights if you scrupulously avoid any precise definition of what a “right” actually is.

A definition of terms is the foundation of all valid analysis. Refusing to define the terms that one uses in constructing their arguments is the methodology of the propagandist. Most lies and propaganda are couched in semantics, and engaging in semantic deception is impossible if one first precisely (and correctly) defines their terminology.

People have rights. People have a legal status well above that of mere corporations. Corporations can never have rights. Corporations exist at a legal level equal to that of our own governments (another form of paper entity), and well below the level of a person.

A corporation can, at best, have privileges bestowed upon it – privileges which can be taken away by any legislative act. Perhaps the greatest outrage and tragedy of this issue is that it even requires an explanation.

At one time, the citizens of our nations understood that the government serves the people, not the other way around. At one time, the citizens of our nations understood that their own legal status (and the status of their rights) exists above the authority level of our governments.

Instead, we are now mere serfs in the most illegitimate of hierarchies. Corrupt governments regularly pass pseudo-laws, which grossly exceed the level of their legal authority, and are thus null and void. Corrupt judiciaries have abdicated their own legal duty, and now simply rubber-stamp an endless stream of these null-and-void laws.

 

 

 

The people of our nations need to know their rights. But first, they have to understand them.

 

 

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

 

 

 

The Lie That Corporations Have “Rights”

Written by Jeff Nielson (CLICK FOR ORIGINAL)


via http://ift.tt/1SvmC6o Sprott Money

Oil Market Hype And Crisis Signal Greater Troubles Ahead

Submitted by Brandon Smith via Alt-Market.com,

Most people are not avid followers of economic news, and I don’t blame them. Financial analysis is for the most part boring and tedious and you would have to be some kind of crazy to commit a large slice of your life to it.

However, those of us who are that crazy do what we do (and do it independently) because underneath all the data and the charts and the overnight news feeds we see keys to future events. And if we are observant enough, we might even be able to warn people who don’t have the same proclivities but still deserve to know the reality of the world around them.

Most Americans and much of the rest of the planet probably was not aware of the recent oil producer’s meeting in Doha, Qatar this past Sunday, nor would they have cared. A bunch of rich guys in white dresses talking about oil production levels does not exactly spark the imagination. What the masses missed, though, was an event that could affect them deeply and economically for many months to come.

A little background highly summarized…

After the derivatives and credit crisis launched in 2007/2008 the Federal Reserve responded to disastrous levels of deflation with a fiat money printing bonanza. Everyone knows this. The problem was the central bankers never had any intention of actually using all that “cash” to support Main Street or the fundamentals of the economy.

Instead, they used their printing press and digital loan transfers to artificially re-inflate the coffers of banks and major corporations. It was a blood transfusion for vampires, if you will.

Through the use of TARP (Troubled Asset Relief Program), quantitative easing, artificially low interest rates, and probably a host of secret actions we’ll never hear about, a steady stream of capital (or debt, to be more precise) was pumped through corporate conduits. The goal? To keep the U.S. from immediate bankruptcy through treasury bond purchases, to boost bank credit, and to allow companies to institute an unprecedented program of stock buybacks (a method by which a corporation buys back its own shares to reduce the amount on the market, thereby manipulating the value of the remaining shares to higher prices).

As the former head of the Federal Reserve Dallas branch, Richard Fisher admitted in an interview with CNBC:

“What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

 

It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.”

Why would the Fed want to engineer a hollow rally in stocks? As I have said in the past, they did this because they know that the average American watches about 15 minutes of television news a day and gauges the health of the economy only on whether the Dow is green or red. From 2009 to 2015, the Fed felt it needed to support markets through fiat and keep the public placated and apathetic.

Stocks and bonds were not the only assets being propped up by the Fed, though. In tandem, oil markets were artificially inflated.

Oil suffered a historic spike in 2008, then collapsed to near $40 (WTI). Starting in 2009 and the initiation of major stimulus measures by the Fed, oil prices came back with a vengeance; almost as if the spike in 2008 was merely a measure to psychologically prepare the public for what was to come. In 2010 prices climbed near the $90 mark, then in 2011 they peaked at around $115 a barrel.

Then, something magical happened – in December, 2013, the Fed announced the Taper of QE3, something very few people predicted would actually happen (you can read this article breaking down why I predicted it would happen).

The taper involved slowly cycling out Fed purchases a month at a time. By mid-2014 the taper was nearing completion. Suddenly, oil markets began to tank. By October, 2014 the Fed finished the taper and oil collapsed, from $95 a barrel to a low of under $30 a barrel at the beginning of 2016. The correlation between the Fed taper and the overwhelming drop in oil prices is undeniable. Clearly, high oil prices were primarily dependent on Fed QE.

While equities fluctuated heavily after the end of QE3, they were still supported by the Fed’s other pillar – near zero interest rates. NIRP allowed the Fed to continue funneling cheap or free money to banks and corporations so they could keep stock buybacks rolling, but oil was done for.

Now, until recently, oil markets have NOT reflected the true state of the global economy. All other fundamental indicators have been in decline since the crash of 2008, including global exports, imports, the Baltic Dry Index, manufacturing, wages, real employment numbers, etc. Oil consumption in the U.S., according to the World Economic Forum, has sunk to lows not seen since 1997. Current levels of oil consumption are FAR below projections made in 2003 by the Energy Information Administration. By most tangible measurements, we never left the crisis of 2008.

Oil demand continued to fall but prices remained high because of Fed intervention. My theory: As with stocks, the Fed at that time needed to pump up the only other indicator the mainstream might notice as a sign of dangerous deflation – energy prices.  Dwindling demand is the real problem being hidden in chaos surrounding arguments over production.  The establishment prefers we focus completely on supply while ignoring the warnings of falling demand.

QE was the first pillar to be pulled from the false recovery, and oil markets plunged. At the end of 2015, the Fed removed the second pillar of NIRP and raised interest rates. OPEC members met to discuss a possible production freeze agreement but the conference failed to produce anything legitimate. This resulted in stocks crashing in extreme volatility to meet up with oil.

Then something magical happened once again. In mid-February, OPEC members and non-members arranged yet another meeting, this time with much fanfare and steady rumors hinting at a guaranteed production freeze deal. Oil began to climb back from the brink, and stocks rallied over the course of six more weeks.  All eyes were on Doha, Qatar and the oil agreement that would “save markets”.

I bring up the recent history of oil markets because I want to give some perspective to those people who suffer from a disease I call “ticker tracking”.  This disease causes extreme short attention span issues and loss of long term memory.  The dopamine addiction of ticker tracking makes people forget about long term trends and their relation to the events of today, to the point that they ignore all fundamentals in the name of watching little red and green lines day in and day out.

For example, the fact that the Doha meeting failed but did not result in an immediate and massive slide in oil and stocks sent ticker trackers crowing that the market “will never be allowed to fall”.  Their affliction keeps them from realizing that the effects of Doha, like any other major financial event in the past, take TIME to set in.  Not to mention, they seem oblivious to the implications of oil struggling to move comfortably beyond $40 a barrel.

Remember, oil was around $60 (WTI) six months ago, and had held over $100 (WTI) for years before then.  The crash in oil markets has ALREADY happened, folks.  What we are witnessing today is the last vestiges of that crash playing out in extreme volatility.  Now we wait for equities to fall and meet oil, as they did at the beginning of 2016, and as they eventually will again.

Are stocks tracking oil prices? It may not be an absolute correlation, and they do tend to decouple at times, but the overall trend has been consistent; when oil falls, stocks loosely follow.

The Doha meeting was always a farce; that much was obvious before it even took place. Bloomberg along with other media outlets were planting rumors of backroom deals between Russia and Saudi Arabia before the Doha event which would solidify a production freeze. Numerous mainstream “experts” claimed an agreement was essentially a sure thing. Even some skeptics within the liberty movement were doubtless that a deal was certain because “the internationalists would never allow oil prices to continue to drag on the public perception of the economy.”

First, I am not a believer in the idea that global economic decisions are really made at these meetings. Any nation that has a central bank that is tied to the Bank of International Settlements and the International Monetary Fund is a CONTROLLED nation. Period. Economic arrangements are handed down from on high, not debated spontaneously in open forums. Read Harper’s 1983 article on the BIS titled “Ruling The World Of Money” for more information on how globalists control the economic policies of nations.

Second, even if a person believes that such vital economic decisions as a global oil production freeze are decided in closed meetings while the press waits just outside, why would anyone buy into the Doha event?

I am not quite sure why some people were gullible enough to think that after 15 YEARS of oil producers refusing to come together on any form of meaningful agreement they would suddenly shake hands this year. The only hope markets had was the possibility that the Doha meeting would result in an empty deal that they could spin in the mainstream news as a legitimate “production freeze.” Apparently they won’t even be getting that.

The Doha talks ended in failure. All the signs said this would happen. As I wrote in my article “Lost Faith In Central Banks And The Economic End Game”:

For anyone who was betting on oil markets to continue their rally past the $40 per barrel mark, there was a lot of bad news. Saudi Arabia crushed optimism by announcing that it would not be entertaining a “production freeze” proposal unless ALL other oil producing nations, including Iran, also agreed to it.

 

Iran then doubly crushed optimism by announcing an increase in production rather than committing to a freeze.

 

Russia then administered the final blow by releasing data showing that their oil output had risen to historic levels, indicating that they will not be entering into any agreement on a production freeze.

 

Besides a recent overly optimistic (and rather suspicious inventory draw) which has caused a short term rebound, all indicators show that oil will be headed back to the lows seen at the beginning of this year.

The effects of the Doha failure were delayed by a convenient labor strike in Kuwait, which caused algo trading computers to buy en masse despite the negative news.  As I pointed out on Monday, though, the Kuwait situation would be very short lived.  Now, it is time to watch and wait for Saudi Arabia and Iran to begin battling over market share and increasing production even more.  These things take a little time to develop.

Currently oil has dropped back below $40(WTI) and markets are extremely volatile. I do not believe the failure of the Doha meeting alone will translate to a fantastic drop in stocks. But, I do believe that it is a very heavy straw added to the camel’s back, and there is a negative trend developing before our very eyes that will become apparent in the next couple of months.

As I have said in the past, a market entirely supported by rumors and hearsay can rally quickly, but also lose all gains at the drop of a hat. What the Doha debacle represents is a signal that the establishment is incrementally abandoning support for market systems.  This is translating to a loss of faith in central banks and major financial institutions.

On top of this, look at the incredible amount of misinformation and misdirection that went into Doha, now completely exposed. The truth is crystal; the MSM lied and obfuscated helping the establishment to drive up oil prices and stocks, all for a mere six to eight weeks of market security.  As soon as these lies were revealed, volatility began to return.

If the oil market bubble can implode (as it already has) in such a way due to the striking of fundamentals, then stocks can also be destabilized as well. It will happen, and I believe 2016 is the year it will happen.

There are those out there that miscalled how the Doha meeting would end because they were blinded by a particularly dangerous bias; they have assumed that central banks and internationalists want or need to continue propping up markets indefinitely. This is not necessarily true. In fact, I have outlined time and again evidence showing that they are planning the opposite. That is to say, they are planning to deliberately bring down markets in a controlled manner.

Oil was the most recent system to be undermined, and stocks will likely follow before the year is out. The fall in oil and the circus at Doha signals a change in strategy by the globalists. It signals a shift towards the controlled demolition of our economy and the centralization of fiscal power into a single global administrative entity. Order out of chaos.

There is a steady stream of events in the next few months that can be used as a steam valve for sinking global markets. Watch the April Fed meeting carefully. The Fed recently held two “emergency meetings” along with a third surprise meeting between President Barack Obama and Fed Chair Janet Yellen. The last time such a meeting occurred the Fed hiked rates less than a month later. I expect that the Fed will raise rates once again either this month or in June.

Also, watch for the Brexit (the British exit from the EU) referendum in June. Such a development would greatly shock an already unsteady Europe as well as the rest of the West.

And, of course, watch for trends in oil and stocks, but do not get caught up in the day-to-day mindlessness of ticker tracking. It is pointless and will not help you to understand what is happening economically. In any economic crisis, stocks are the LAST indicator to turn negative and daily analysis by itself is in no way a crystal ball.

The next couple of months should be very interesting. Stay vigilant.

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George Soros Warns “China Resembles US In 2008” Hard Landing “Practically Unavoidable”

China’s credit growth in March (and $1 trillion surge in total social financing in Q1) is a “warning sign” according to billionaire George Soros, “because it shows how much work is needed to stop the slowdown.” Speaking at an event in new York this evening, Soros commented on “troubling developments” in China, the anti-corruption drive’s impact on capital outflows and the real-estate bubble “feeding on itself.” His conclusion, rather ominously, was that despite all the naysayers and fiction-peddlers, China “resembles US in 2007-8,” before credit markets seized up and spurred a global recession.

As Bloomberg reports, Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession.

China’s March credit growth figures should be viewed as a warning sign, Soros said at an Asia Society event in New York on Wednesday. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362 billion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signaling the government is prioritizing growth over reining in debt.

 

[ZH – f one adds up the Total Social Financing injected in the first quarter, one gets a stunning $1 trillion dollars in new credit, or $1,001,000,000,000 to be precise, shoved down China’s economic throat. As shown on the chart below, this was an all time high in dollar terms, and puts to rest any naive suggestion that China may be pursuing “debt reform.” Quite the contrary, China has once again resorted to the old “growth” model where GDP is to be saved at any cost, even if it means flooding the economy with record amount of debt.

 

With China’s debt/GDP already estimate at 350%, how much longer can China sustain this stunning debt (and by definition, deposit) growth continue?]

 

Soros, who built a $24 billion fortune through savvy wagers on markets, has recently been involved in a war of words with the Chinese government. He said at the World Economic Forum in Davos that he’s been betting against Asian currencies because a hard landing in China is “practically unavoidable.” China’s state-run Xinhua news agency rebutted his assertion in an editorial, saying that he has made the same prediction several times in the past.

Soros then went on to note that China’s capital outflow is a growing phenomenon driven by the nation’s anti-corruption campaign, which makes people nervous and spurs them to pull money out, and added that…

China’s decoupling of the yuan from the U.S. dollar can help rebalance the currency.

 

The linking to a basket of currencies is a “very positive, healthy” development for world.

Finally in an ironic twist for a man who has all too often used the press for his own ends…

China’s lack of a free press is “troubling development”.

Of course one should bear in mind that Soros is among those who are betting heavily on the eventual devaluation of The Yuan against the USD, and as we noted previously, the cracks are starting to show… As the Chinese corporate bond market begins to break…

 

At least 64 Chinese firms have postponed or scrapped planned note sales this month, six times more than the same period a year earlier.

And as BofA’s David Cui explains, if poorly handled, they may cause significant financial instability…

Since 2015, eight SOE bond issuers have run into repayment problems; four since February. We believe that the sharply accelerating pace and the growing chance of genuine defaults are largely behind the recent widening of credit spreads (Bond yield rising, credit spread widening & impact on stocks, Apr 15). In our view, any major SOE bond default would be difficult for the financial system to handle – as it is unexpected, it could lead to panic selling/a credit crunch (2016 Year-Ahead: what may trigger financial instability, Jan 3). At this stage, we expect that most problematic SOE bonds, if not all, will get largely bailed out. But this is a key risk that we need to monitor for the equity market outlook.

Chart 1 shows the dates when the potential defaults were first reported vs. the credit spread of 5Y AA-rated enterprise bonds (more details on the bonds, Table 1). Among the eight, Tianwei, Erzhong, Sinosteel, China Coal Huayun and China Railway Materials are central SOEs; Guangxi Nonferrous, Yun Feng and Dongbei Special Steel are local ones. The media reported that some of these SOEs actively sought defaults in order to lessen their debt burdens – a few even reshuffled their assets in preparation (Caixin, Apr 18). This clearly raises the chance of genuine defaults in the bond market’s mind, in our view.

 

Based on our assessment, the dynamics among the key stakeholders are as follows: some SOEs want to default; many local governments may lack the financial resources to save their SOEs from defaulting; the central government has the resources (after all, it can print), but needs to balance short-term financial stability with moral hazard concerns; the bond underwriters, many of them banks that lend to the same SOEs, need to balance financial interests against the risk of reputation damage and potential lawsuits; bond holders may go on a buying strike to force bail-outs.

At this stage, we expect the central government and the bond underwriters to largely come up with the money to prevent any significant default of SOE bonds. It appears to us that, leading up to the 19th Party’s Congress in late 2017 (when a new group of leaders will be officially announced), a top priority of the central government is to prevent a financial crisis. For banks, the cost of bail-outs could be hidden for quite some time, so the incentive for them to suppress defaults is strong, in our view. Actually, there was at least one case in which a listed bank used its WMP under management to cover a defaulting bond ((Shadow banking default, pace accelerated sharply since mid-2015, Apr 7).

If our expectation is right, the bond market could calm down as soon as it sees signs that bail-outs are the likely scenario. This would kick the can down the road, using liquidity to paper over a solvency issue.

If, against our current expectation, the government/underwriters keep in mind:

Implicit guarantee & contagion risk: SOEs default on loans all the time, but banks don’t “panic” unless there is a deposit run. However, the same stability cannot be maintained as easily in the shadow-banking sector. The shadow-banking sector is largely a market where greed, fear and herd mentality reign supreme. For years, bond buyers believed that bonds issued by any government-related entity, including SOEs and LGFVs, were bullet-proof. If this perceived “implicit” guarantee is broken, at a minimum, credit spreads would widen sharply and, at the worst, panic selling could develop, generating a negative spiral. Moreover, contagion risk could be high: if this “promise” is broken, will the market still believe in perceived government guarantees elsewhere, including those on RMB, the A-share market or housing prices?

 

Expensive valuation: before the latest widening, credit spreads for AAA and AA+ rated LGFV bonds and enterprise bonds (largely SOEs’) were very narrow, at between 50-100pbs. As a result, the risk of holding on to these bonds is asymmetrical, unless one believes that the government will lower the risk-free rate significantly going forward (Bond yield rising, credit spread widening & impact on stocks, April 18). As a result, the market is biased toward selling at the moment, by our assessment.

 

Leverage: the more transparent part of bond leverage is via repos and structured funds, which appear manageable at this stage (Bond market: leverage & potential defaults, 23 Oct 2015). However, a risk is that there could be significant amount of hidden leverage. Anecdotally, some banks provide loans to WMPs under their management to buy bonds, so the WMPs can achieve the “promised” returns to WMP buyers (currently, around 4% p.a.)

 

A lack of transparency: the most important buyers of bonds in China include WMPs managed by banks, brokers and fund subsidiaries, banks themselves, money market funds and bond mutual funds, and insurers. While risk responsibility is clear-cut for most bond buyers, it is not so for the WMPs. Legally speaking, WMP buyers own the downside risk. However, the way that WMPs are sold in China has led many buyers to believe that these products are essentially term deposits. As a result, if financial institutions decide to pass on some of the default losses to these buyers, they may stop buying en masse, essentially generating a “bank” run in the shadow-banking sector (Risk of bank-run WMPs is rising, Feb 28). By the way, if the financial institutions, including banks, allow some SOE bonds to default, they will most likely pass on at least some of the losses. If they have to bear the losses themselves, they’d be much better off bailing out the bonds in stealth before the defaults, both financially and politically.

Even without a panic, if the bond market becomes more cautious as a result of SOE bond defaults, there could be negative implications on credit flow, credit cost, economic growth, commodity demand, the RMB and the stock market.

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Meet Trump 2.0: “Be Afraid Anti-Trump Forces Be Very Afraid”

Authored by Chris Cillizza, originally posted at The Washington Post,

Gone was “Lyin’ Ted.”  In its place was “Senator Cruz.” Gone was the long-winded speech that went nowhere. In its place was a succinct recitation of states and delegates won. Gone was the two-day vacation as a reward for winning. In its place was an early morning trip to Indiana followed by another planned stop in Maryland.

Donald Trump 2.0 made his official debut Tuesday night following his sweeping victory in New York, a win that looks to net him 90 delegates and reestablishes him as the man to beat in the Republican presidential race.

That version of Trump was markedly more disciplined, gentler and more appealing than the version of Trump we’ve seen for much of the last year. And, that fact should scare the hell out of establishment Republicans who believed that their efforts to keep Trump from the 1,237 delegates he needs to formally capture the GOP nomination was beginning to catch on.

Why? Because it’s clear, at least for now, that Trump is listening to his new political advisers — chief among them convention manager Paul Manafort and national field director Rick Wiley. Trump’s change in tone on Tuesday night was absolutely unmistakeable to anyone who has paid even passing attention to his campaign to date.  The man who had built his frontrunning campaign on a willingness to always and without fail take the race to its lowest common denominator — was suddenly full of respect for the men he beat and full of facts about the state of the race.

“We have won millions of more votes than Senator Cruz, millions and millions of more votes than Governor Kasich,” Trump said. “We’ve won, and now especially after tonight, close to 300 delegates more than Senator Cruz.”

The change in tone is absolutely necessary if Trump wants to not only find a way to 1,237 delegates but also unite the party behind him in any meaningful way heading into the general election campaign this fall. The truth is that Trump has to play an outsider and an insider game from here on out. The outsider game is to keep winning primaries by convincing margins like he did in New York. The insider game is to show unbound delegates as well as party leaders and influencers that he can be magnanimous, that he can be a uniting force within the party.

Calling Cruz “Lyin’ Ted” is a great laugh line at a Trump rally but accusing the Texas senator of holding up the Bible and then putting it down and lying isn’t exactly the sort of rhetoric you need or want from a candidate who needs to bring the party together behind a common enemy in Hillary Clinton. It’s the difference between being voted “class clown” and being elected student body president. The former delights in taking the low road for cheap laughs. (I speak from experience.) The latter takes the high road even if it’s against his or her own natural instincts.

Can Trump keep it up?  Discipline on a single night or even a single week is one thing. Discipline over several months amid what will be continued attacks from both Cruz and the “stop Trump” movement is something else. And, listening to your new advisers when they are, well, new is easier than listening to them when it’s been a few months of biting your tongue and fighting back some of your natural attack instincts.

But, Trump has shown — both on Tuesday night and over the past week or so — an ability to reign himself in that suggests he understands that this new and improved version of himself is the one that can actually win the Republican presidential nomination

Be scared, anti-Trump forces. Be very scared.

*  *  *

And as Reuters reports, the message appears to be getting through as U.S. Republican officials began meeting on Wednesday, a day after Donald Trump’s crushing victory in a New York presidential nominating contest, and said he has been winning growing acceptance within their ranks – but they want to see the billionaire do more to mend fences with the party establishment.

Trump was the focus for the party’s spring meeting of 168 Republican National Committee (RNC) members in Hollywood, Florida. The three-day conclave at an oceanside resort will take stock of the race for the White House and prepare for a possible contested convention in July in Cleveland.

 

The New York real estate mogul’s win Tuesday in his home state over rivals Ted Cruz and John Kasich was an important milestone for RNC members, who said it could put him on a pathway to acquire the 1,237 delegates needed to win the nomination outright without a contested convention.

 

“There are a fair number of RNC members who were discounting his chances of success when we met in January and now see that he’s building a substantial lead and may in fact get to 1,237 before we get to the convention,” said Steve Duprey, an RNC member from New Hampshire.

 

“The New York results were such an overwhelming win,” Duprey said. “It’s impressive. That’s what I’ve heard people talking about.”

Trump, Cruz and Kasich all sent envoys to the meeting to explain their pathways to the nomination.

South Carolina Republican Party Chairman Matt Moore said Trump’s recent hiring of Rick Wiley, a Republican veteran who was former presidential candidate Scott Walker’s campaign manager, was a good sign.

 

“It’s a positive signal despite a lack of general outreach over the past year, and I think the Trump campaign, for all the bluster, recognizes that the RNC will be an integral partner if he is the nominee and it’ll be almost impossible to win the presidency without the RNC as a partner,” Moore said.

In a good sign for Trump, there appeared to be no significant move by the Republican leadership, at least at this meeting, to change the rules governing the convention. There has been talk of rewriting the rules in a way that could benefit an establishment-backed candidate like Kasich.

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Does Saudi Arabia Have $750 Billion In Assets To Sell?

As we reported over the weekend, based on NYT info, the Saudi finance minister said the kingdom would sell up to $750 billion in Treasury securities and other assets if Congress passed a bill that would allow the Saudi government to be held responsible for any role in the September 11, 2001 terror attacks. Senators Chuck Schumer of New York and John Cornyn of Texas introduced the “Justice Against Sponsors of Terrorism Act (JASTA) last fall, but the legislation seemed to gain some new traction after a related segment on 60 Minutes earlier this month.

The punchline, of course, was that Saudi officials indicated they would sell its dollar-denominated assets if the law passed to avoid having those assets frozen by American courts.

But does Saudi Arabia even have $750 billion of assets to sell?

For the answer we go to Stone McCarthy who note that while they can’t answer that question definitively – recall that the exact amount of Saudi Treasury holdings remains a mystery as it is not broken out separately – here’s what they do know from the Treasury International Capital (TIC) data.

First, the Treasury doesn’t specifically report Saudi Arabia’s holdings of U.S. securities. Instead, Saudi Arabia’s holdings are combined with the holdings of the following countries into a category called Asian exporters: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar and United Arab Emirates.

 

At the end of January, Asian oil exporters held $563.6 billion of U.S. securities, with Treasuries and U.S. equities accounting for 92.2% of the total. Treasury holdings totaled $268.2 billion.

 

 

These figures reflect holdings that Treasury can directly attribute to the Asian oil exporting countries. Regular readers of our updates on the TIC data know that foreign investors often hold securities at custodial institutions in other countries. For example, in February, the five major custodial centers held $1.1 trillion of Treasury securities. It’s possible that Saudi Arabia has holdings of securities parked in custodial accounts, but there’s no way to know that for sure from the TIC data.

 

Also keep in mind that as we have previously reported, the Saudis were said to have been one of the most aggressive sellers of US-denominated assets in late 2015 and early 2016 to fund the country’s budget deficit as Petrodollar revenues collapsed.

So, in short, the answer is nobody knows for sure, but if the Saudis did have $750 billion several months ago, they probably have far less as of this moment.

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The 2016 “Rage Fear & Anger” Election: Ron Paul’s Deep Dive Into The Real Issues

Ron Paul offers his detailed assessment of the 2016 presidential campaign this far. This is no candidate play-by-play, but a look at the strong undercurrents in society that are driving the debate. The people are very angry. But why? And what should be done about it?

 

Full Speech (via RonPaulLibertyReport.com), [yes it’s long but grab a glass of wine – or bottle of scotch – and comprehend what America faces]

THE MIDDLE-CLASS RAGE, FEAR AND ANGER

The middle class, which as defined by politicians now includes almost everyone, is angry, fearful, and filled with rage. When politicians address this group it’s frequently defined as “populism,” of which there are many varieties. Whether liberals, conservatives, libertarians, socialists, or authoritarians, when the people become restless and angry, demanding change, the politicians pay attention. This reflects a need to appeal to the masses, and a populist message is well received. But there is never real agreement on the analysis and suggested solutions to the problems. Instead, scapegoats are easily found. Economic understanding is not of high priority, and demagoguery is a useful tool for politically mobilizing the “victims.” Since there are real reasons given for the conditions that exist, competition arises among those who want to take charge of the crisis and benefit politically. This only increases the anxiety and anger of the people, who see themselves as victims of an unfair system.

Until the political economic crisis became readily apparent, most politicians were unaware of the rapidly increasing distortions in wealth distribution. The dangers are conveniently ignored because most people live for the short term. If one is doing well financially, even though the system is financed with the whole country living beyond its means, worrying about preparing for a rainy day seems like wasted energy. However the payment is now coming due, and because few plan or understand it, any threat to benefits – both earned and unearned – creates great anxiety. Fear of being squeezed out of a share of the benefits that come with government intervention becomes the driving force for the whole country. The one group that seems the least worried about current conditions is the “one percent” who are financially secure by living off the special interest financial system. This does not include the wealthy who are financially rewarded for providing products and services that consumers choose to buy.

But even the one percent who benefit from government programs and the monetary system are concerned that the current uprising will interfere with their privileged position.

The size, determination, and anger of the current populist uprising is signaling that huge changes are coming both politically and economically. This generates a competitive blame-game when politicians get involved and try to benefit from the chaos. Republicans blame the Democrats and the Democrats blame the Republicans for the problems. It’s never an issue of philosophy but rather partisanship, personalities, or simply blaming poor management. False perceptions are commonplace as a consequence of government-controlled education that steers people away from the sad realities of economic planning that the people have blindly accepted for many decades.

The fear and anger are only increased by the combination of a failed but never-questioned economic policy, and the demagogues, either ignorant or malicious, who provide magical promises to erase the injustices that are clearly visible.

Though the nature of the breakdown is an economic issue caused by excessive government, those suffering – and the politicians who claim they can restore prosperity – demand more government intervention in our lives and in the economy.

The entitlement mentality is now seen as a fundamental right even though it depends on government use of force to transfer wealth from one group to another. The liberal mantra has always been that the use of force backed up by guns is legitimate and moral. This is accepted as being morally superior to voluntarism for helping the poor. The irony is that it’s precisely this philosophy that impoverishes the middle class, increases the poverty of the poor, and provides the unearned benefits of the crony capitalists who were the recipients of the great bailout in 2009.

We are witnessing the end of an era, but since denial and ignorance prevails few are aware of it. The current special interest entitlement system is on its last legs, but the recipients and the political power brokers believe a change in leadership is all that is needed. It’s not the system that’s at fault, they argue, it’s only better management that is required. It is readily apparent that the failure of this approach is leading to more fear and anger. 

Too often the anger is thought to be a partisan issue. The claim is either that it’s all President Obama’s fault or George W. Bush’s fault – yet both parties have followed the same false philosophy of interventionism in both domestic Keynesianism and international empire-building, putting them both at fault.

The people searching for answers conclude the government constantly lies to them. It’s easy to see the system rewarding those who control political power. Concern and understanding the inequities in wealth distribution are not authentic. Ignorance prevails even for the well-intentioned, which results in a deadly erosion of middle class wealth. Debt and deficits are not a serious concern, and both parties continue the endless wasteful spending that only aggravates the pervasive economic inequities that drive the people’s fears.

Most Americans, now more than ever, have become aware of the terrible conditions the Federal Reserve has caused by its policies that result in ever more distortions in the transfer of wealth to the very wealthy at the expense of the middle class. Many people remain apathetic as to the details of Federal Reserve policy, but others recognize that the Fed is the financier of the welfare state and the endless wars that consume wealth. Our ability to issue the reserve currency of the world gives us a free ride for unlimited spending, debt, and borrowing. 

Middle class anger results because the evidence is now available that the system is failing and the politicians offer only vague platitudes and rash promises that few citizens believe. The factions that compete for government benefits become more competitive and angry as they see the financial pie shrinking and the ability of government to deliver on their promises failing.

When benefits, seen as entitlements, shrink, the recipients become fearful and angry and demand political action. This means more handouts, whether it’s for the rich or poor, without any understanding as to why the system is failing. The demagogues, who are aware of the problem, are quick to use this discord to gain greater political power while ignoring the true nature of the problem and the changes needed.

It’s easy for presidential candidates to respond to legitimate concerns that have prompted the anger and fear. But if there is little understanding of the true nature of the problem and the proposed solutions, this won’t help to quiet the disgruntled electorate. The groups that claim they are being mistreated more than others will continue to be varied and increasing in numbers.

Slogans and clichés, though they have been helpful to the politicians in the past, will not be believed and will only increase the anger. This leads the candidates to compete to be the most authoritarian in their promises to take care of everybody’s demands.

The problems have been developing for almost 100 years. Progressivism, which was accepted in the early part of the 20th century, cannot be reversed by any single election. Vague political promises to patch up the system currently being used will no longer suffice.

Real wages and the standard of living of the average American family have dropped in the 21st century and are almost where they were back in 1971 – the year we completely abandoned the gold standard. The ongoing crisis is deeply structural and not a management problem. Those who still spout the idea that stopping waste, fraud, and abuse in order to finance the perpetual demands of the people without a major overhaul of our political and economic system have no credibility and the people know it. Too many remain convinced that debt is not a problem and more debt and more monetary inflation is what is needed to restore economic growth. The masses have been taught and conditioned to believe that unlimited government spending and debt is the solution and not a cause of the crisis.

But, it is a problem. As long as our politicians and the American people remain in denial, the problems will get much worse, the anger will accelerate, and violence in our cities will increase.

The current ongoing destruction of the middle class and the anger it causes are the big issues we face. Economic conditions are the overriding issue, but the least understood. Most Americans are aware that the politicians are in over their heads and are not providing any sensible answers to the dilemma. Believing that a left or right wing noisy demagogue will save us is wishful thinking.

Ignorance of economics has allowed years of excessive spending, but that is coming to an end. The entitlement mentality claims it’s a strictly moral issue for the government to take care of people in need. A combination of bad economic policy and confused morality has created the conditions that are threatening us today – not only in the US but worldwide as well.

We must wake up and realize that much of the wealth the average American has enjoyed for decades has been an illusion, built on debt and a bizarre form of money. But the payment is now coming due and no one wants to accept the obvious: we are unable to pay for our extravagant spending on domestic welfare to both the rich and poor, while maintaining an unaffordable world empire. The result has only been anger. There is no understanding that market forces are now required and that the debt must be liquidated in order to restore economic growth to the system.

The question of who must pay is a major political and economic one. Currently the middle class is aware of a major problem, but doesn’t have the foggiest understanding as to the causes or the solutions. So far the penalty has fallen on the shoulders of the middle class with a loss of good jobs, inflation, and a lot lower standard of living – something the government is unwilling to acknowledge. The fact that there’s a lack of understanding of economic policy contributes to the growing socio-economic crisis and the fear and anger that continue to worsen.

The politicians are scurrying around searching for those they can blame for the crisis. Actual answers from the candidates are secondary to who achieves the political power to distribute a shrinking economic pie.

WHO’S TO BLAME?

Who gets blamed depends solely on the political persuasion of the accuser. If it comes from a leftist politician it’s always free markets, profits, not enough government transfer payments to the poor, not enough government spending, and of course, greed – regardless of how one’s money was earned. The solution is always to raise taxes.

If it comes from a right or populist politicians, it’s immigrants, China’s unfair trade and currency policies, threats of terrorism, Mexico border policies, and an urgent need to sacrifice liberty for safety, xenophobia, or not enough militarism. Too often the blame is couched only in partisan terms – it’s the Democrats fault; it’s the Republicans fault; or it’s all Obama’s fault or George W. Bush’s fault. Philosophic views are not important, only effective demagoguery is.

Too often it leads to a desire for a tyrannical type of government, coming from both the far left and the far right, that makes rash promises as to the ease with which the problems will be solved. We’re constantly being told that what we need is a new tougher boss who will get things done, without knowing exactly what policies will be pursued.

It’s easy to find scapegoats – either racially motivated or based on faulty economic thinking. Little blame is placed at the door of the Federal Reserve’s ridiculous monetary policy, which has been so destructive. Negative interest rates are not topics in the presidential debates or the campaigns. Simply, one side blames economic downturn on the free market and another side blames the lack of tariffs and too much labor competition. Political changes are much easier to bring about by placing blame than by getting people to understand the true cause of our economic problems. The sad part is, it’s the economic explanation of poverty and the unfair distribution of wealth that is the issue that drives all political rhetoric while searching for scapegoats. The answers are out there, but we have a long way to go to convince the citizens and the leadership in this country who claim that more government is the solution.

The fear of ISIS is used to justify the dangerous foreign policy we follow – a policy that has significantly contributed to the economic crisis, with trillions of dollars spent in recent decades on unwise militarism. Blaming foreign terrorism for our economic and debt crisis may have been a goal of Osama bin Laden, but only we can take the responsibility for the spending excesses for which we are now being forced to pay.

There’s been little disagreement among the candidates that sacrificing personal liberty under today’s circumstances is required to provide security. It’s easy for the politicians to blame too much liberty – both economic and civil – as the problem. There should be little doubt that our crisis does not come from too much freedom, yet this issue is of no concern for the candidates.

Some blame the crisis on inefficiency in government management and claim that ridding the system of waste, fraud, and abuse will be enough to solve our fiscal problems and control the deficits. Therefore nothing needs to be cut, or so they say. There’s no recognition that government by its very nature is based on theft, threat of violence, and control by the privileged few.

Blaming various social groups instead of flawed policies is a frequent exercise. Racial distinctions are convenient for gaining a special benefit and are the source of social and economic friction. There’s no incentive to objectively see cause-and-effect in the problems that generate fear and anger. This makes it very difficult to unemotionally solve the injustices that our system of government planning has generated.

Equal justice under the law is constantly being abused. It’s easy to blame racism for all the problems while ignoring the war on drugs and true causes of poverty, which are the major contributing factors to our dilemma.

The authoritarians cannot resist blaming free markets and sound money for our economic ills and they never make an effort to distinguish between free markets and crony capitalism in their accusations. Ignorance and a desire to increase the role of government in our everyday life provide a convenient argument for a bigger and more intrusive government. Today even declared socialists are well received with their promises of unlimited “free stuff.”

The defenders of central economic planning, a powerful central bank, sacrificing liberty for security, and foreign interventionism to maintain an empire will never blame themselves for their contributions to the crisis. Therefore, expect anger and fear to accelerate. Do not expect the 2016 election to enlighten the people or the politicians.

Big government enthusiasts are always looking outward and for others to blame. But without some introspection it is guaranteed that the social friction now building will get worse. False blame creates bad solutions.

Terrorism is a real threat. The consensus of both Republicans and Democrats is that the only cause is “radical Islam.” Any other suggestion elicits charges of un-Americanism and a willingness to ignore danger. It is suggested that any support for those who seek a peaceful resolution to international problems are unpatriotic and endangering our country. Claiming our foreign policy of occupation and preemptive war significantly contributes to the danger of terrorism is unthinkable, but suggesting that we carpet bomb countries in the Middle East draws loud cheers. This is hardly a setting for making our country safe from terrorism. Blaming others for our failed policy of maintaining a world empire while never looking at our own shortcomings is acceptable to most Republicans and Democrats.

Not only do the demagogues blame others for our foreign policy failings, they also blame others for our weak economy. The threat of terrorism, that we helped to create, is also used to justify our government’s attack on civil liberties here at home. The politicians never assume responsibility for our out-of-control budgets since neither party truly believes that deficits are a serious problem. In fact, both sides cooperate in spending and ignoring the deficits because both sides want to increase spending. Sometimes it’s for domestic welfare and other times the spending is for “rebuilding” the military; most of the time they want both.

The most significant economic problems we face today – the $210 trillion of unfunded liabilities, the $19 trillion national debt, along with our overblown foreign debt – are dealt with by ignoring them as the platitudes and excuses flow.

The financial markets will eventually make it clear that the debt has become the most significant issue. It’s crucial that proper blame is placed on the spenders and Keynesian apologists who argue it’s not a problem. Without proper blame, understanding how to achieve economic growth is impossible. The people are justified in being fearful and angry because the magnitude of the crisis is becoming more evident every day, and they no longer believe what the leaders of the country have been telling them. Wishful thinking for a political savior to rise up and rescue us is just that: wishful thinking.

Lack of knowledge and understanding of the crisis has ignited hatred between the factions seeking to take charge, escape blame, and satisfy the demands of the current victims. As the truth of the seriousness of our crisis becomes more apparent, only a few are reassured that there is a politician who has an answer. It has been suggested that the description of what we’re facing is that one party is a party of “know nothings” and the other is a party that knows all the “wrong things.”

REAL ISSUES IGNORED

Since there has been a lot of blame and no understanding, no serious solutions have been offered. The big problem is that in spite of different rhetoric coming from the two parties, there’s little difference in fundamental political and economic beliefs. With the dramatic personal charges being made by the candidates, the important issues are avoided. This must be on purpose. Since no one has answers, it’s best not to draw attention to their ignorance and to the total failure of both political parties to solve the problems.

The issues avoided are numerous, including especially the debt and the $210 trillion of unfunded liabilities. And even as our as our economy steadily weakens, no serious debate occurs. When the subject comes up it’s for narrow political reasons and no solutions are offered. It’s abundantly clear that to both sides, debt is not of enough concern to actually lead them to entertain the idea that spending should be reduced. That would be bad politics. Both sides support “rebuilding the military” by increasing military spending. Though there is no real threat, we continue to spend about as much as everyone else put together. Domestic welfare spending is treated the same way. Some will continue to claim that cutting waste, fraud, and abuse will provide the funds necessary to continue our spendthrift ways. That’s been talked about for decades to appease the people, without success. There are far too many “debt danger deniers” in Washington to expect spending limitations to emerge.

The US can still borrow from foreign sources since we are the issuer of the world’s reserve currency. Reality declares that this will come to an end – and soon if we yield to the temptation of placing exorbitant tariffs on our trading partners and starting a trade war.

For us to continue our spendthrift ways, it will require the Federal Reserve to monetize the debt at an accelerating rate without loss of confidence in the dollar. In the campaign there’s no talk of getting rid of our central bank, as Andrew Jackson did in 1833. Today the authoritarian big spenders on both sides are totally dependent on the Fed in the short run to constantly create massive amounts of new money out of thin air. Yet it’s the middle class that suffers the most from this policy. No one is talking about how the Fed created the crisis, nor do they realize what lies ahead for us as a consequence.

The ignorance regarding monetary policy makes it impossible to understand the problems of recessions, depressions, inflation, huge debt, massive mal-investments, unfair distribution of wealth between rich and poor, and how the cost of excessive government gets dumped on the middle class and increases the poverty rate. A lack of desire to help is not the problem. The problem is the politicians’ ignorance of the business cycle and their obsession with resisting corrections of the mistakes that are a natural consequence of interest rate manipulation by the Fed. One can only imagine the mistakes that will evolve from negative interest rates! The only saving grace will be that market forces will eventually overwhelm and the needed correction will come, but unfortunately with a lot more pain and suffering.

So far the only solutions that are offered are more of the same policies that have created this current crisis – a crisis that has generated anger and class warfare, more spending, more debt, more taxes, more regulations, and more warfare. This will lead to a lot less freedom for everyone. Without understanding the problem, anger will continue to build and will result in greater violent confrontations.

The systematic attack on our privacy, private property rights, and other civil liberties is not an issue getting any significant attention in the 2016 election. The politicians don’t talk about it because they have chosen to ignore it. It’s just not a serious problem from their perspective. Too many people have come to accept the principle that safety and security are far more important than worrying about personal liberty. The 9/11 attacks and a hyped-up fear of ISIS have pushed this false idea that sacrificing liberty for security is necessary. The American people for a long time have been accepting this principle and have come to believe that it’s a fair trade-off. 

The sad consequence of our foreign policy of interventionism, which has been supported by both Democrat and Republican politicians, has drawn no significant debate in 2016. The only argument has been over management style. No one makes the case for rejecting the notion that we have a moral duty to be the policeman of the world. Our military presence in over 130 countries is of little concern to the candidates. The burden of a $1 trillion per year military budget has elicited no warning that this spending is excessive and a tremendous economic burden to our economy.

The contest unfortunately is to see who can sound the toughest and most jingoistic regarding dealing with the al-Qaeda and ISIS. This has led to the xenophobic targeting of Islam and refusing to even consider that our bipartisan foreign policy of preemptive war, occupation, and sanctions is a contributing factor in stirring the hatred that indeed makes us all less safe.

Logic should tell us that continuing the same policy that has stirred up hate and retaliation, that serves as a recruiting tool for the radical jihadists, will only put us in greater danger. The financial burden, the attacks by our own government on our civil liberties, and the greater threat to our national security are all related to our radical interventionist foreign policy, which has been endorsed by both Republican and Democrats for decades.

There’s been no concern expressed about the collapse of the current Keynesian economic system. This huge financial and social event will significantly increase the fear and anger the American people are already experiencing. Therefore there is no reason to expect any positive changes as a consequence of this year’s election, regardless of who wins the presidency. Unrealistic promises and blaming various scapegoats for our problems will only result in more anger and violence. A better understanding of the problems we face is vital if we expect to preserve both liberty and prosperity.

Failing to recognize the significance of a major era ending is compounded by the lack of concern and ignorance regarding the “deep state” or the shadow government. This is the unidentifiable special interest groups and individuals who are actually in control of our government – regardless of whether the Republicans or Democrats are nominally in charge. If the American people understood this, they would realize that elections mean little more than pacifying the electorate with the false belief that the people actually have a say in the affairs of state.

Great concerns about the threat of al-Qaeda and ISIS help direct attention away from the real crimes committed within our borders, like the ill-conceived war on drugs and a justice system out of control. Asset forfeiture is ignored as a serious problem and is strongly supported by law enforcement agencies.

The original Constitution listed essentially six federal crimes. Today there are 4500 federal crimes on the books and over 400,000 regulations – most written illegally by the executive branch – and we hear nothing about this horrendous legal problem. Our courts do not provide equal justice, which justly infuriates the victims of this system of injustice. Militarization of the police and police brutality are out-of-control, yet the recipients of stolen goods known as “government benefits” have no compunction in demanding the use of violence to get what they have been taught they have a right to have. The result is that inner city violence is not going to be reduced with this election. 

As the economic crisis worsens and the cities explode, with different factions competing for the handouts, there will be calls for military force and initiating martial law. This is a non-issue in the current political debate and without understanding the significance of this problem will not be recognized. It will only get worse. Most of the candidates have indicated that they would use whatever military force is needed to quell domestic unrest regardless of the Constitution. 

If there’s a discussion of danger within the United States, the demagogues will say the threat comes from ISIS and is the reason they demand an increase in military spending. They remain in denial that our presence in the Middle East is precisely why there’s a threat here. Unfortunately the worse the conditions get here at home, the greater will be the demand for a more authoritarian leader to take charge and solve the problems they don’t understand. The campaign of 2016 will not bring about any significant improvement in the problems that precipitated the anger and generated our political and financial crisis that they have ignored.

THE ANSWER

A philosophic revolution is required. The American electorate is very angry and is demanding changes. Though the anger is justified, the exact cause and correction for it is poorly understood. Economic conditions are a driving force but are not recognized as such. There is no realization that the cataclysmic events that will be associated with an end to the current era require revolutionary changes in our economic and political thinking.

Since the problems are poorly understood it was guaranteed that a blame game by all concerned – the politicians, the voters, the victims, and the political parties – would result. Scapegoats are found and blamed – guilty or not. All this prompts a variety of answers with wild promises made by socialists and crony capitalists. Demagogues with magic solutions are everywhere to be found.

Ignorance, along with a struggle for power by those who claim they have the answers, ignores the actual causes of the social divide that are not readily apparent in the current election.  Some are pleased with this lack of discussion since it could identify those responsible for the mess and the failed ideas that need to be rejected.

A serious discussion about the role of government is needed in order to redirect the failed course upon which we find ourselves. Different types of governments reflect the degree to which the people choose to live in a free society. The form of government that was proposed by the Founders is no longer recognizable. This fact explains the conditions that have generated the anger and fear that is prevalent today. Nobody likes to hear it, but the answers are not available to us unless we change the people’s attitudes about the role the government should play in our lives, the economy, and in the world.

The only real answer to a failed interventionist/authoritarian system is to replace it with a system of nonintervention and voluntarism. It has to be based on the moral principle of liberty and non-aggression permitting all things peaceful. The false moral principle of government-directed “humanitarianism” must be intellectually refuted as a false God.

Utilitarianism and pragmatism are code words for avoiding all viewpoints held by those who love liberty and only want to be left alone. Unregulated non-violent voluntarism is rejected as not being beneficial to the “common good.” It is argued that government-mandated equality is superior to any desire for individualism and self-reliance.

Utilitarianism, pragmatism, and economic planning go together, which always leads to dependency and corruption of economic and political power. Sadly the result is that only the powerful and wealthy special interests thrive. A society that condones even a small amount of authoritarianism is compromised by rejecting the basic tenants of liberty. The system then grows like a cancer until that society is destroyed, which we are now in the process of doing to ourselves.

When virtue becomes a government mandate, it makes it impossible for individuals to achieve it, which further destroys the social and economic order. Instead the result is: taxes to force people to be charitable; torture to protect the state; drug wars to improve behavior; elimination of privacy to protect government secrecy; thousands of laws and regulations to monitor our every action, all of which are performed in a non-virtuous manner. Only when efforts to improve oneself and others are done in a voluntary and nonviolent manner does it represent virtue. Government efforts, whether it’s to improve one’s personal behavior, legislate economic fairness, or direct the affairs of other countries only serves to inhibit virtue. This leads to society’s collapse, along with war and poverty. For liberty to work society must have a virtuous people who reject the use of all aggressive force, especially when it’s used by government in the name of humanitarianism.

Even the 400,000 federal regulations and the 4500 federal laws cannot save a system of mandates that violates the moral standards that are vital to a moral society. Free markets are superior to government economic planning. Government rules on personal behavior cannot instill moral standards. Bombs, sanctions, and occupations of other countries cannot make the world safe or more prosperous.

All these efforts result in the loss of liberty. Under these conditions a republic cannot exist. The system will always fail and the people will suffer. The solution will then have to be in the form of a revolution, hopefully peaceful, and with the insistence on recognizing the natural right to life and liberty.

The worse the conditions get the louder the demagogues’ promises become. Competition between demagogues produces sharp rebuttals, and supporters of different candidates become overtly competitive and violence is threatened. With no understanding of the cause of the problems, arguments over solutions will vary. Since real evaluations and authentic solutions are absent it only incites more anger.

Since the 2016 election distracts from the real issues, the correct solutions will not be believable. The system is broken and not fixable. Attempts to do so only lead to frustration that further divides the people. Under these conditions the guilty don’t want to hear the truth and deny it if they do.

Whistleblowers like Edward Snowden and John Kariakou are despised for telling the truth and are more likely to be punished than those who were criminally negligent.

H.L. Mencken had it right: “The most dangerous man to any government is the man who is able to think things out for himself,” and come to recognize that, “the government he lives under is dishonest, insane, and intolerable.” But will the campaign of 2016 answer these concerns?  Remember that while living in an empire of lies, pursuing truth is considered treasonous.

Simple anger is not equivalent to understanding the predictable evil of authoritarian government. It’s the fear of losing the immoral benefits along with corrupt government that stirs their anger. The failure of the current system reveals the lies, the senseless wars, and the disdain for the people’s rights to life liberty, and property that generates the anger now being expressed by the masses.

If the people continue to deny that government by its very nature throughout the ages has been notoriously inept, immoral, and corrupt, a solution is not possible. The only result will be a new government based on the same immoral principles. Nothing positive will occur. Basic moral principles of liberty, self-reliance, and strict limits on government power, are required if progress for peace and prosperity is to be achieved.

This type of government cannot exist without a philosophical revolution regarding the proper role of government in a moral society. The election of 2016 will not guide us in that direction. It doesn’t even deal with the crucial issues of our time, and certainly not with the moral principles underpinning a free society. The conflict between candidates and parties is superficial and personal – without substance. The 2016 election will change nothing. It’s a great distraction from the policies that have delivered the current crisis to us. This is done on purpose since there is general agreement in both parties on the major issues and it’s not to their advantage for the people to understand this.

The major issues that both parties and their candidates agree upon include: the central bank’s monetary policy; welfarism; federal government involvement in education and medicine; the drug war; privacy abuse; preemptive war; foreign interventionism; and the US as the policeman of the world with increased spending for the military.

The 2016 election won’t make any difference in any of these areas. The American people continue to be deceived into believing elections are serious affairs that affect our future. The Deep State will remain in charge regardless of the outcome and few will even be aware of the invisible fist that rules over us.

The whole process is a charade and no policy of substance is debated. The election will turn out like all the rest. The momentum toward bigger and more intrusive government will continue. The process distracts from what is really going on; sometimes out of ignorance and sometimes just out of wishful thinking; sometimes on purpose. The process has everyone looking in all the wrong places for the answers. The answers can only be found in an intellectual revolution that refutes the authoritarians who sanction government-directed aggression in all areas of society. What we need is to define and endorse the proper role of government in a free society. There is no serious talk in the campaign of the crucial issues that need corrected if we expect to escape from the mess we’re in.

Following are a few of those concerns that should be addressed. 

There is:

  • No talk of liberty and its moral foundation;
  • No talk of how conservatives and liberal authoritarians are equally harmful;
  • No challenge to the entitlement mentality;
  • No challenge to the bipartisan support for empire;
  • No challenge to the unsustainable debt accumulation;
  • No challenge to government secrecy and the government’s violation of the people’s privacy;
  • No concern for the violation of private property rights;
  • No understanding of how our foreign policy endangers our security;
  • No understanding of how free markets regulate economic activity for the purpose of serving the consumers;
  • No concern for government aggression in controlling habits, people’s bodies, thoughts, economic choices, prices, or wages;
  • No condemnation of the current doctrine of preemptive war;
  • No concern for our participation in worldwide organizations that cede political power to the elites at the expense of national sovereignty;
  • No mention of why sanctions are a prelude to war;
  • No demands that the insane war on drugs be ended;
  • No understanding that personality clashes and name-calling is a substitute for dealing with the issues;
  • No awareness of the need for a philosophic answer to our crisis.

When it’s discovered that excessive government interference in voluntary and peaceful activities is the culprit, it will become clear that the solution can only come by successfully presenting the case for liberty. It will follow that reining in the government will be a necessity – not an option.

The awakening will arrive when we face a total societal breakdown – once it’s realized that the accumulation of massive debt is unsustainable and the dollar suffers the consequences, which will negatively affect all Americans and many throughout the world. But it also provides an opportunity to open the door to a free society. Without the cost of war and welfare in a new system that accepts the moral principle of free markets, sound money, private property, and voluntary contracts, prosperity and peace will break out.

The limited role for government in a republic is to provide equal justice for all, including the protection of life, liberty, and property. It becomes destructive when governments overreach and instead become the greatest threat to liberty and justice – something from which we are suffering today.

Sadly these issues will not cross the minds of the leaders of either major political party at this time in our history. But they will when an upcoming generation of young people, enthusiastic about the cause of liberty and with a growing awareness of the problems, concludes that:

?LIBERTY IS THE ANSWER!

via http://ift.tt/1XJupid Tyler Durden