finance – Page 18673

Guest Post: The 5 Economic "Big Lies" The Government Is Telling You

Submitted by Michael Snyder of The Economic Collapse blog,

According to a whistleblower that has recently come forward, Census employees have been faking and manipulating U.S. employment numbers for years. In fact, it is being alleged that this manipulation was a significant reason for why the official unemployment rate dipped sharply just before the last presidential election. What you are about to read is incredibly disturbing. The numbers that the American people depend upon to make important decisions are being faked. But should we be surprised by this? After all, Barack Obama has been caught telling dozens of major lies over the past five years. At this point it is incredible that there are any Americans that still trust anything that comes out of his mouth. And of course it is not just Obama that has been lying to us.

Corruption and deception are rampant throughout the entire federal government, and this has been the case for years. Now that some light is being shed on this, hopefully the American people will respond with overwhelming outrage and disgust.

The whistleblower that I mentioned above has been speaking to John Crudele of the New York Post. In his new article entitled "Census ‘faked’ 2012 election jobs report", he says that the huge decline in the unemployment rate in September 2012 was "manipulated"…

In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.

The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.

Two years earlier, the Census had actually caught an employee "fabricating data", but according to this whistleblower the corruption at the Census Bureau goes much deeper than that…

And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.

“He’s not the only one,” said the source, who asked to remain anonymous for now but is willing to talk with the Labor Department and Congress if asked.

The Census employee caught faking the results is Julius Buckmon, according to confidential Census documents obtained by The Post. Buckmon told me in an interview this past weekend that he was told to make up information by higher-ups at Census.

Well, is it really such a big deal that some of the unemployment numbers were faked?

After all, hasn't the unemployment rate been consistently going down anyway?

Unfortunately, as you will see below, that is simply not the case. The following are five massive economic lies that the government has been telling you…

1. "The Unemployment Rate Has Been Steadily Going Down"

According to the official government numbers, the U.S. unemployment rate has fallen all the way down to 7.3 percent.

That sounds really good, and it would seem to imply that a higher percentage of the American people are now working.

Sadly, that is not the truth at all.

Posted below is one of my favorite charts. The employment-population ratio measures the percentage of the working age population that actually has a job. As you can see, this number fell dramatically during the last recession and since the end of 2009 it has remained remarkably flat. In fact, it has stayed between 58 and 59 percent for 50 months in a row…

At the moment, the employment-population ratio is just one-tenth of one percent above the lowest level that it has been throughout this entire crisis.

So are we in an "employment recovery"?

Absolutely not, and anyone that tries to tell you that is lying to you.

So how is the government getting the unemployment rate to go down?

Well, they are accomplishing this by pretending that millions upon millions of unemployed Americans have disappeared from the labor force.

According to the government, the percentage of Americans that want to work is now supposedly at a 35 year low…

If the labor force participation rate was still exactly where it was at when Barack Obama was first elected in 2008, the official unemployment rate would be about 11 percent right now. People would be running around going crazy and wondering when the "economic depression" would finally end.

But when people hear "7.3 percent", that doesn't sound so bad. It makes people feel better.

Of course if you are currently unemployed and looking for a job that doesn't exactly help you. At this point there is intense competition even for minimum wage jobs in America. For example, according to Business Insider you actually have a better statistical chance of getting into Harvard than you do of being hired at a new Wal-Mart that is opening up in the Washington D.C. area…

The store is currently combing through more than 23,000 applications for 600 available positions, reports NBC Washington.

That means that Wal-Mart will be able to hire one person for every 38 applications it receives — i.e., just 2.6% of applicants will walk out with a job.

That's more difficult than getting into Harvard. The Ivy League university accepts 6.1% of applicants.

2. "Inflation Is Low"

This is another lie that government officials love to tell. In particular, the boys and girls over at the Federal Reserve love to try to convince all of us that inflation is super low because it gives them an excuse to recklessly print lots more money.

But anyone that goes to the grocery store or pays bills on a regular basis knows that there is plenty of inflation in the economy. And if we were being given honest numbers, they would show that.

According to John Williams of shadowstats.com, if the U.S. inflation rate was still calculated the exact same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.

But the Federal Reserve certainly doesn't want everyone running around talking about "Jimmy Carter" and "stagflation" because then people would really start pressuring them to end their wild money printing schemes.

And without a doubt, what the Fed is doing is absolutely insane. The chart posted below shows that the M1 money supply has nearly doubled since the beginning of 2008…

3. "Quantitative Easing Is Economic Stimulus"

How many times have you heard the mainstream media tell you something along these lines…

"The Federal Reserve decided today that the economic stimulus must continue."

There is just one thing wrong with that statement.

As I showed in a previous article, it is a total hoax.

In fact, a former Federal Reserve official that helped manage the Federal Reserve's quantitative easing program during 2009 and 2010 is publicly apologizing to the rest of the country for being involved in "the greatest backdoor Wall Street bailout of all time"…

I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

Yes, quantitative easing has most certainly helped Wall Street (at least temporarily).

Meanwhile, median household income in the U.S. has fallen for five years in a row.

Meanwhile, the federal government is now spending nearly a trillion dollars a year on welfare.

Meanwhile, 1.2 million students that attend public schools in America are now homeless. In fact, that number has risen by 72 percent since the start of the last recession.

4. "Obamacare Is Going To Be Good For Middle Class Americans"

There were three giant promises that were used to sell Obamacare to the American people…

#1 We would all be able to keep our current health insurance plans.

#2 Millions more Americans were going to be covered by health insurance.

#3 Most Americans would be paying lower health insurance premiums.

Well, it turns out that all of them were lies.

At this point, approximately 4 million Americans have already had their health insurance plans canceled due to Obamacare, and according to Forbes that number could ultimately reach 93 million.

And so far only about 100,000 Americans have actually signed up for Obamacare, so that means that the number of Americans with health insurance has dropped by about 3.9 million since the beginning of October.

Good job Obama.

Meanwhile, Americans all over the country are being hit with a massive case of sticker shock as they start to realize what Obamacare is going to do to their wallets.

According to one study, health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.

And if you are a young man, you are going to get hit particularly hard. At this point, it is being projected that health insurance premiums for healthy 30-year-old men will rise by an average of 260 percent.

But you don't have to be young to pay higher premiums. As I mentioned the other day, one couple down in Texas was recently hit with a 539 percent rate increase.

5. "The U.S. National Debt Is Under Control"

The mainstream media would have us believe that the budget deficit is now under control and the U.S. national debt is not a significant problem any longer.

But that is not the truth.

The truth is that we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in all of U.S. history combined.

Every single hour of every single day, our politicians are stealing about $100,000,000 from future generations of Americans. It is a crime so vast that it is hard to put into words, and it is literally destroying the economic future of this country.

Over the last 13 and a half months, the U.S. national debt has increased by more than 1.12 trillion dollars.

If you were alive when Jesus Christ was born and you had spent a million dollars every single day since then, you still would not have spent that much money by now.

And most Americans don't realize this, but the U.S. government must borrow far more than a trillion dollars each year. Trillions more in existing debt must be "rolled over" just to keep the game going.

For example, the U.S. government rolled over more than 7.5 trillion dollars of existing debt in fiscal 2013.

So what is going to happen someday when the rest of the world pulls out and stops lending us trillions of dollars at ridiculously low interest rates that are way below the real rate of inflation?

Our financial system is far more vulnerable than we are being told. We are in the terminal phase of the greatest debt bubble in the history of the planet, and when this bubble bursts it is going to be an absolutely spectacular disaster.

Please don't believe the mainstream media or the politicians when they promise you that everything is going to be okay.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HX7O_6RIPy4/story01.htm Tyler Durden

Guest Post: The 5 Economic “Big Lies” The Government Is Telling You

Submitted by Michael Snyder of The Economic Collapse blog,

In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.

The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.

Two years earlier, the Census had actually caught an employee "fabricating data", but according to this whistleblower the corruption at the Census Bureau goes much deeper than that…

And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.

“He’s not the only one,” said the source, who asked to remain anonymous for now but is willing to talk with the Labor Department and Congress if asked.

The Census employee caught faking the results is Julius Buckmon, according to confidential Census documents obtained by The Post. Buckmon told me in an interview this past weekend that he was told to make up information by higher-ups at Census.

Well, is it really such a big deal that some of the unemployment numbers were faked?

After all, hasn't the unemployment rate been consistently going down anyway?

Unfortunately, as you will see below, that is simply not the case. The following are five massive economic lies that the government has been telling you…

1. "The Unemployment Rate Has Been Steadily Going Down"

According to the official government numbers, the U.S. unemployment rate has fallen all the way down to 7.3 percent.

That sounds really good, and it would seem to imply that a higher percentage of the American people are now working.

Sadly, that is not the truth at all.

At the moment, the employment-population ratio is just one-tenth of one percent above the lowest level that it has been throughout this entire crisis.

So are we in an "employment recovery"?

Absolutely not, and anyone that tries to tell you that is lying to you.

So how is the government getting the unemployment rate to go down?

Well, they are accomplishing this by pretending that millions upon millions of unemployed Americans have disappeared from the labor force.

According to the government, the percentage of Americans that want to work is now supposedly at a 35 year low…

But when people hear "7.3 percent", that doesn't sound so bad. It makes people feel better.

The store is currently combing through more than 23,000 applications for 600 available positions, reports NBC Washington.

That means that Wal-Mart will be able to hire one person for every 38 applications it receives — i.e., just 2.6% of applicants will walk out with a job.

That's more difficult than getting into Harvard. The Ivy League university accepts 6.1% of applicants.

2. "Inflation Is Low"

But anyone that goes to the grocery store or pays bills on a regular basis knows that there is plenty of inflation in the economy. And if we were being given honest numbers, they would show that.

And without a doubt, what the Fed is doing is absolutely insane. The chart posted below shows that the M1 money supply has nearly doubled since the beginning of 2008…

3. "Quantitative Easing Is Economic Stimulus"

How many times have you heard the mainstream media tell you something along these lines…

"The Federal Reserve decided today that the economic stimulus must continue."

There is just one thing wrong with that statement.

As I showed in a previous article, it is a total hoax.

I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

Yes, quantitative easing has most certainly helped Wall Street (at least temporarily).

Meanwhile, median household income in the U.S. has fallen for five years in a row.

Meanwhile, the federal government is now spending nearly a trillion dollars a year on welfare.

Meanwhile, 1.2 million students that attend public schools in America are now homeless. In fact, that number has risen by 72 percent since the start of the last recession.

4. "Obamacare Is Going To Be Good For Middle Class Americans"

There were three giant promises that were used to sell Obamacare to the American people…

#1 We would all be able to keep our current health insurance plans.

#2 Millions more Americans were going to be covered by health insurance.

#3 Most Americans would be paying lower health insurance premiums.

Well, it turns out that all of them were lies.

At this point, approximately 4 million Americans have already had their health insurance plans canceled due to Obamacare, and according to Forbes that number could ultimately reach 93 million.

Good job Obama.

Meanwhile, Americans all over the country are being hit with a massive case of sticker shock as they start to realize what Obamacare is going to do to their wallets.

But you don't have to be young to pay higher premiums. As I mentioned the other day, one couple down in Texas was recently hit with a 539 percent rate increase.

5. "The U.S. National Debt Is Under Control"

The mainstream media would have us believe that the budget deficit is now under control and the U.S. national debt is not a significant problem any longer.

But that is not the truth.

The truth is that we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in all of U.S. history combined.

Over the last 13 and a half months, the U.S. national debt has increased by more than 1.12 trillion dollars.

If you were alive when Jesus Christ was born and you had spent a million dollars every single day since then, you still would not have spent that much money by now.

For example, the U.S. government rolled over more than 7.5 trillion dollars of existing debt in fiscal 2013.

So what is going to happen someday when the rest of the world pulls out and stops lending us trillions of dollars at ridiculously low interest rates that are way below the real rate of inflation?

Please don't believe the mainstream media or the politicians when they promise you that everything is going to be okay.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HX7O_6RIPy4/story01.htm Tyler Durden

Americans Are More Skeptical About NSA Spying than Ever … Despite Massive Propaganda Campaign

We’ve previously noted:

The American public doesn’t believe the NSA … and thinks that the government has gone way too far in the name of terrorism

A huge majority of Americans wants the director of intelligence – Clapper – prosecuted for perjury

Only 11% of Americans trust Obama to actually do anything to rein in spying

Snowden is considered to be a hero by the American public

Despite the massive propaganda push by the NSA and its lackeys in Congress, the people still aren’t buying it.

Bill Moyers notes:

A new poll finds that Americans are increasingly concerned about their online privacy — and it’s the result of increased media attention on NSA surveillance. The poll, USA Today’s Byron Acohido writes, is the “latest proof point of what could, at the end of the day, take hold as a tectonic societal shift: the return of privacy as a social norm. Call it the Edward Snowden effect.” The poll, conducted by Harris Interactive and commissioned by software company ESET, found that four out of five Americans have changed their social media security settings, and most of those people have made the changes in the last six months. Acohido writes:

…[T]he steady flow of revelations from the Snowden documents, detailing the pervasive nature of the National Security Agency’s anti-terrorism surveillance activities, has kept privacy top of mind for many consumers.

Of course the NSA can tap into online data to the extent it does largely because commercial companies, led by Google and Facebook, pursue business models that treat consumer privacy as a free profit-making resource.

It took a wild card, in the form of Edward Snowden, to get the masses focused on who is doing online tracking and profiling, and for what agendas.

Huffington Post notes:

A majority of Americans think that current oversight over data the NSA can collect about Americans is inadequate, and almost half think oversight of the data the NSA collects about foreigners is inadequate, according to a new HuffPost/YouGov poll.

According to the new poll, 54 percent of Americans think federal courts and rules put in place by Congress do not provide adequate oversight over the phone and Internet data the NSA can collect about Americans, while only 17 percent said that the oversight is adequate.

And the Washington Post writes:

[A] poll of 1,000 people, conducted by YouGov from Oct. 5 to Oct. 7 … indicated, however, that the National Security Agency had not demonstrated that its phone and Internet data-collection programs were “necessary to combat terrorism” as it tried to deal with recent disclosures based on documents released to journalists by former NSA contractor Edward Snowden.

Postscript: It probably doesn’t help that – instead of coming clean – the NSA and its supporters have been caught lying again and again, or that they are still so tone deaf that they are cheerfully trying to sell singing the glories of a surveillance state.

3 Senators with Top Secret Clearance “Have Reviewed This Surveillance Extensively and Have Seen No Evidence That The Bulk Collection of Americans’ Phone Records Has Provided Any Intelligence of Value That Could Not Have Been Gathered Through Less Intrusive Means”

Mass spying by the NSA has never stopped a single terrorist attack.

Mass surveillance actually interferes with our ability to stop terrorism.

Today, 3 current U.S. Senators (Ron Wyden, Mark Udall and Martin Heinrich) who are all on the Senate Intelligence Committee – with top security clearance and access to classified NSA briefings – filed a “friend of the court” brief pointing out that the NSA’s mass spying hasn’t stopped a single attack:

Now that the government’s bulk call-records program has been exposed, the government has defended it vigorously. Amici [i.e. friends of the court … the 3 Senators, along with numerous security experts] submit this brief to respond to the government’s claim, which it is expected to repeat in this suit, that its collection of bulk call records is necessary to defend the nation against terrorist attacks. Amici make one central point: As members of the committee charged with overseeing the National Security Agency’s surveillance, Amici have reviewed this surveillance extensively and have seen no evidence that the bulk collection of Americans’ phone records has provided any intelligence of value that could not have been gathered through less intrusive means. The government has at its disposal a number of authorities that allow it to obtain the call records of suspected terrorists and those in contact with suspected terrorists. It appears to Amici that these more targeted authorities could have been used to obtain the information that the government has publicly claimed was crucial in a few important counterterrorism cases.

***

As Amici and others have made clear, the evidence shows that the executive branch’s claims about the effectiveness of the bulk phone-records program have been vastly overstated and, in some cases, utterly misleading….

For example, the executive branch has defended the program by claiming that it helped “thwart” or “disrupt” fifty-four specific terrorist plots…. But that claim conflates the bulk-collection program with other foreign-intelligence authorities. In fact, as Amici know from their regular oversight of the intelligence community as members of the SSCI, “it appears that the bulk phone records collection program under section 215 of the USA Patriot Act played little or no role in most of these disruptions.” …. Indeed, of the original fifty- four that the government pointed to, officials have only been able to describe two that involved materially useful information obtained through the bulk call-records program…. Even the two supposed success stories involved information that Amici believe—after repeated requests to the government for evidence to the contrary—could readily have been obtained without a database of all Americans’ call records….

In both public statements and in newly declassified submissions to the SSCI, intelligence officials have significantly exaggerated the phone-records program’s effectiveness. Based on the experience of Amici, the public—and this Court—should view the government’s claims regarding the effectiveness of its surveillance programs with searching skepticism and demand evidence rather than assurances before accepting them.

Indeed, NSA spying is not very focused on terrorism at all. And even if some mass surveillance program were somehow necessary, counter-terror experts say we can keep everyone safe without violating the Constitution … more cheaply and efficiently than the current system.

The NSA’s whole domestic spying program is a sham …

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ToHHCM40zKQ/story01.htm George Washington

Crowdfunding in Southeast Asia

By: Mark Wallace at http://www.capitalistexploits.at/

We just concluded our Meet Up in Singapore, center of the SE Asian financial universe. It’s a vibrant and energetic place where capitalism is thriving.

Over the course of about a week we heard from experts in the banking, legal, brokerage and risk control industries. CEOs of companies we’ve funded, merchant bankers and residency experts were present to address our attendees, answer questions and provide insight into their businesses and the SE Asian markets they operate in.

We also had the privilege of attending a Bitcoin pitch session held by the guys that run Seedcoin. Founders of a half dozen Bitcoin startups presented their companies to our group of about 30 interested and engaged investors from about a dozen countries. We all walked away impressed and convinced that Bitcoin is a force to be reckoned with!

But today we’re going to talk about crowdfunding startups in SE Asia...

Once upon a time small startups relied almost exclusively on bootstrapping, friends and family, or perhaps a handful of angel investors, for startup capital. The recent buzzword however in small-scale fundraising, is Crowdfunding.

In the North Americas, the Crowdfunding trend has gone mainstream. With the Jumpstart Our Business Startups (JOBS) Act back in 2012, unaccredited investors now have a regulatory framework for investing in equity based Crowdfunding in the United States. The implications of the JOBS act promise to be far reaching and entrepreneurs are moving rapidly forward, setting up a variety of platforms aimed at assisting both startups as well as investors looking to participate in exciting growth companies.

We’ve spoken extensively about Crowdfunding on our site.

Growth in the Crowdfunding space on the other side of the Pacific, here in Southeast Asia where we tend to hang our collective hats, is picking up as well despite the language, regulatory and platform barriers.

Figure 1: Selected GDP Growth Rate of Major South East Asian Economies

The majority of South East Asian economies withstood the shocks from the Global Financial Crisis relatively well, and those who fared worse than their counterparts are now rebounding (Figure 1).

Southeast Asia is now home to a rapidly emerging entrepreneurial ecosystem. Recent developments indicate that global investors are taking notice of the colossal growth opportunity offered by startups in the region. When compared to North America a lack of Crowdfunding platforms in the region has meant that only more recently have Crowdfunding opportunities arisen.

The task of screening companies in Southeast Asia is complicated due to the lack of information available on startups from a centralized platform, such as Indiegogo. Additionally language barriers have made it difficult, even for investors from neighbouring countries, to cross-invest. A lack of regulatory support from Governments across the region is also holding back the growth potential of Crowdfunding as general solicitation is still not permitted in most countries. Beside a few exceptions, Crowdfunding growth in Southeast Asia is dependent on local, national level, platforms.

KitaBisa, Indonesia

KitaBisa is an Indonesian version of KickStarter. In Bahasa Indonesia, KitaBisa means, “we can” and the founders have certainly proved they can. Since the soft launch in June 2013, a few projects have successfully raised tens of millions of Indonesian Rupiahs through the platform. Based on the KickStarter’s all or nothing formula, KitaBisa has so far funded interesting projects such as the one to empower out-of-work housewives by teaching them how to build handmade crafts and marketing it to local communities.

SeedAsia, China

Based in Shanghai, SeedAsia is offering accredited investors a platform to find and invest in a range of pre-screened Chinese and South East Asian startup companies in the technology niche. Unlike many donations based platforms in Asia, SeedAsia is an equity based Crowdfunding platform. The company screens potential investors and sets a minimum floor of US$2,000 to ensure only serious investors get the opportunity to fund the next Asian Google.

Crowdbaron, Hong Kong

The Hong Kong based Crowdvesting platform , Crowdbaron recently secured funding from Grow VC Group, and are planning to help investors make substantial investments in real estate. The innovative idea behind Crowdbaron is that, unlike timeshares, you will not actually own the right to occupy the premises. A pool of investors will own a property, which will then be rented out. Investors earn periodic rents based on their percentage of stake and may profit from price appreciation. Crowdbaron hopes that people who either can’t or don’t wish to purchase whole properties will be able to utilize their service to gain from the continued appreciation of Hong Kong’s real estate market.

ToGather.Asia

Unlike the others ToGather.Asia is focused on the entire Southeast Asian regional market. Started in 2012, ToGather.Asia is a Singapore based company targeting a broad range of countries in Southeast Asia. It is slowly gaining traction in terms of project creators and crowd funders. According to Bryan Ong , the founder of ToGather.Asia, the majority of the international Crowdfunding sites feature projects from North American, if not European locations. Due to cultural difference, Asian funders find it difficult to trust projects found on existing international sites. Moreover, Asian project creators often fear that due to rampant copyright infringement in the region their ideas might be stolen if they try to Crowdfund their projects. Rather than becoming disheartened by this, ToGather founders saw this as an opportunity to educate people in Asia about Crowdfunding and to converge local creative types and their potential patrons within the region.

While the majority of the Crowdfunding platforms are mushrooming as a copy of the western model, there are some innovative Crowdfunding hubs to keep an eye on in Southeast Asia.

As we’ve mentioned many times before, we believe these emerging economies will become the leading economies within the next few decades, if not sooner. Investing into startups in the region can prove to be an exceptionally well-timed investment as well as provide a good vehicle for diversification for small investors.

Accredited investors can contact us directly if they wish to receive more information about our private, members-only service dedicated to finding such opportunities.

–

– Mark

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No High School Diploma? No Problem: Here Are The Best Paying Jobs For You

While we hope that the attached Bloomberg chart showing the best paying jobs for people without a high-school diploma will be of no use to our readers (for the simple reason that we assume Zero Hedge readers are well-educated in anything but conventional economics – that subset will likely be found at the end of a Krugman column), as more and more Americans finds themselves questioning not only the utility of a university education (and especially the associated loans) but the educational system in general, the reality is that there are many well-paying jobs available regardless of one’s educational level, most of which pay above the median US income. Some notable omissions – any position on Wall Street. Some notable inclusions – tapers. Maybe this is why the Fed never wants to mention the “trimming the pace of asset purchases” by its true name.

Source: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jBRAWTdgnrA/story01.htm Tyler Durden

Did Bill Dudley Just Unveil The Fed's Real Taper "Scapegoat" Plan?

That the Fed has a problem is increasingly well known – despite the blather from the mainstream media that QE monetization can continue ad infinitum. Their problem, of course, is running out of government-provided liabilities to monetize (as deficits shrink and their ownership of the entire Treasury complex surges). They face other problems (as we have noted before) but the admission that they are boxed in would have major ramifications in the market's faith. So, how does the Fed, faced with the knowledge that they have created asset bubbles, broken the bond market, and are boxed in by their own excess still meet the market's undying desire to keep the flow going? Bill Dudley just, perhaps inadvertently, dropped a hint of the next 'market/scapegoat' for monetization – Student loans.

Bear in mind that the "taper" is all about economic cover for a forced move the Fed has to make, because:

1. Deficits are shrinking and the Fed has less and less room for its buying

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly – and we suspect they fear we are close to that tipping point

4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

Simply put, they are cornered and need to Taper; no matter how bad the macro data and we are sure 'trends' and longer-term horizons will come to their rescue in defending the prime dealers' clear agreement that it is time…

So they need a scapegoat!

*DUDLEY SEES `VERY RAPID RISE IN STUDENT LOAN DEBT'

Yes – Mr. Dudley – Very Very Rapid indeed…

As we recently noted, student and car loans are responsible for 99% of all consumer credit created this year.

Thank you Uncle Sam for making yet another generation of indentured servants who are studying geology on the taxpayers' dime, who will never get a job, who are up to their neck in debt, but at least can afford a Chevy Silverado.

And while the Fed itself is responsible for the $1trillion bubble that has grown in easy cheap student loan debt…

as the NY Fed disclosed moments ago, federal student loans officially crossed the $1 trillion level for the first time ever. Notably: the quarterly student loan balance has increased every quarter without fail for the past 10 years!

It would appear Mr. Dudley is getting the joke that a younger generation burdened with debt is a problem…

*DUDLEY: RISE IN STUDENT LOAN DEBT COULD IMPAIR ECONOMIC OUTLOOK

and, as we notd here, the delinquency rate on student loans is soaring and has just hit an all time high of 11.83%, an increase of almost 1% compared to last quarter. Even according to just the government lax definition of delinquency, a whopping $120 billion in student loans will be discharged. Thank you Uncle Sam for your epically lax lending standards in a world in which it is increasingly becoming probably that up to all of the loans will end up in deliquency.

and furthermore, as we noted here, of the 28 million Americans with federal student loans, 60%, or 17 million, don't pay the US government a single cent!

Hopefully this highlights just how acute the severity of the student loan bubble is when stripped of all spin and mitigating rhetoric.

########################

So where does that leave us?

1. The Fed knows it needs to taper at some point – no matter what the rhetoric, unless the Fed admits the US is still in crisis mode, it risks losing its credibilit entirely (and control of the bond market) if it does not taper.

2. Smaller deficits mean the Fed is boxed in with its ability to monetize Treasuries and keep the "flow" flowing…

How to escape that box?

1. Identify a bubble (but it cannot be an asset-bubble because if it were then the collateral chains and rehypothecation would contagiously collapse every other asset class).

2. Scapegoat that 'Bubble' as potentially a headwind for growth that needs to helped by government intervention.

3. "Help" the people by monetizing that bubble (and implicitly keeping the "flow" flowing)

The Answer – as Bill Dudley just opined – is Student Loans.

1. A perfect bubble (forget about who created it) that needs to be popped by a responsible overseer

2. Lots of debt to monetize (keep the "flow" flowing)

3. A perfect excuse to slow Treasury buying (economy stabilizing, jobs stabilizing, stocks doing well)

4. A voter-friendly way of "helping" those in need that does nothing but enable more flow.

How will they monetize Student Loans? No one is sure yet, but Dudley's comments on Human Capital

*DUDLEY: `BUILDING HUMAN CAPITAL' IMPORTANT FOR FUTURE ECONOMY

make one think of the book "The Unincorporated Man"

The Bottom Line – Bill Dudley just floated a strawman that the Fed will taper Treasuries and the scapegoat will be Student Loans – which they will directly monetize to save us all from ourselves (and the problem they created).

(as an addenda – we warn of the unintended consequence of this action – should they do it – that will merely encourage banks to securitize student loans and flip them to the government en masse, creating demand for moar student loans and enabling supply – ths growing the bubble ever larger).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Jn-oxXlboVk/story01.htm Tyler Durden

Did Bill Dudley Just Unveil The Fed’s Real Taper “Scapegoat” Plan?

Bear in mind that the "taper" is all about economic cover for a forced move the Fed has to make, because:

1. Deficits are shrinking and the Fed has less and less room for its buying

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly – and we suspect they fear we are close to that tipping point

4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

So they need a scapegoat!

*DUDLEY SEES `VERY RAPID RISE IN STUDENT LOAN DEBT'

Yes – Mr. Dudley – Very Very Rapid indeed…

As we recently noted, student and car loans are responsible for 99% of all consumer credit created this year.

And while the Fed itself is responsible for the $1trillion bubble that has grown in easy cheap student loan debt…

It would appear Mr. Dudley is getting the joke that a younger generation burdened with debt is a problem…

*DUDLEY: RISE IN STUDENT LOAN DEBT COULD IMPAIR ECONOMIC OUTLOOK

and furthermore, as we noted here, of the 28 million Americans with federal student loans, 60%, or 17 million, don't pay the US government a single cent!

Hopefully this highlights just how acute the severity of the student loan bubble is when stripped of all spin and mitigating rhetoric.

########################

So where does that leave us?

2. Smaller deficits mean the Fed is boxed in with its ability to monetize Treasuries and keep the "flow" flowing…

How to escape that box?

1. Identify a bubble (but it cannot be an asset-bubble because if it were then the collateral chains and rehypothecation would contagiously collapse every other asset class).

2. Scapegoat that 'Bubble' as potentially a headwind for growth that needs to helped by government intervention.

3. "Help" the people by monetizing that bubble (and implicitly keeping the "flow" flowing)

The Answer – as Bill Dudley just opined – is Student Loans.

1. A perfect bubble (forget about who created it) that needs to be popped by a responsible overseer

2. Lots of debt to monetize (keep the "flow" flowing)

3. A perfect excuse to slow Treasury buying (economy stabilizing, jobs stabilizing, stocks doing well)

4. A voter-friendly way of "helping" those in need that does nothing but enable more flow.

How will they monetize Student Loans? No one is sure yet, but Dudley's comments on Human Capital

*DUDLEY: `BUILDING HUMAN CAPITAL' IMPORTANT FOR FUTURE ECONOMY

make one think of the book "The Unincorporated Man"

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Jn-oxXlboVk/story01.htm Tyler Durden

Here Come The Even Higher Insurance Premiums

Remember when Obama apologized about lying for years that “you can keep your old plan” even though he knew you can’t? It seems many more apologies are forthcoming, now that it is about to become clear that the Affordable Care Act had an epic, if very unfortunate, typo in the first word.

From CBS’ White House correspondent Mark Knoller:

After meeting today with Pres Obama, National Assn of Insurance Commissioners warns of possibility of higher premiums for consumers.

— Mark Knoller (@markknoller) November 20, 2013

In a statement, the State insurance regulators caution that ‘different rules for different policies’ could result in higher premiums.

— Mark Knoller (@markknoller) November 20, 2013

It’s ok though. Obama is sorry.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ACH5t8umGg4/story01.htm Tyler Durden

When E.F. Hutton Talks

Authored by Epsilontheory.com

If you like your health plan, you can keep your health plan.

– Barack Obama

Of course, one objective of both traditional and nontraditional policy during recoveries is to promote a return to productive risk-taking.

– Ben Bernanke

Most people are other people. Their thoughts are someone else’s opinion, their lives a mimicry, their passions a quotation.

– Oscar Wilde (“De Profundis”)

Don’t piss down my back and tell me it’s raining.

– Fletcher (“The Outlaw Josey Wales”)

????????=????????????(????(????+????)^????/????)

– Paul Samuelson, Nobel Prize winner, author of all-time best-selling economics textbook

Through his research, teaching, and writing Paul Samuelson had more impact on the economic life of this country and the world than any government economic official and many presidents.

– Larry Summers, former Treasury Secretary (and Paul Samuelson’s nephew)

????????=????????????(???? ???????????? (????+????)^????)

– Edward Thorp, hedge fund manager, author of all-time best-selling gambling textbook

Edward O. Thorp and the Kelly criterion have been a lighthouse for risk management for me and PIMCO for over 45 years. First at the blackjack tables, and then in portfolio management, the Kelly system has helped to minimize risk and maximize return for thousands of PIMCO clients.

– Bill Gross, Co-CIO PIMCO

When E.F. Hutton Talks

The concept of utility is the most fundamental concept in economics. It gets wrapped up in impressive sounding terms like “exogenous preference functions”, and written in all sorts of arcane runes and formulas, but all utility means is that you like something more than something else. The assumptions that economic theory makes about utility are really pretty simple and mostly about consistency – if you like vanilla ice cream more than chocolate ice cream, and chocolate more than strawberry, then economic theory assumes you also like vanilla more than strawberry – and continuity – if you like one scoop of vanilla ice cream, then you like two scoops even more. But as far as what you like, what your tastes or preferences are in ice cream or music … or health insurance plans … economic theory is intentionally silent. Economics is all about making rational decisions given some set of likes and dislikes. It doesn’t presume to tell you what you should like or dislike, and it assumes that you do in fact know what you like or dislike.

Or at least that’s what economic theory used to proclaim. Today economic theory is used as the intellectual foundation for a political stratagem that goes something like this: you do not know what you truly like, and in particular you do not know your economic self-interest, but luckily for you we are here to fix that. This is the common strand between QE and Obamacare. The former says that you are wrong to prefer safety to risk in your investments, and so we will fix that misconception of yours by making it extremely painful for you not to take greater investment risks than you would otherwise prefer. The latter says that you are wrong to prefer no health insurance or a certain type of health insurance to another type of health insurance, and so we will make it illegal for you to do anything but purchase a policy that we are certain you would prefer if only you were thinking more clearly about all this.

Anyone who believes that this political maneuver is inherently a phenomenon of the Left is kidding himself. The Right – in the form of sectarian or secular authoritarianism that imposes behavioral politics on the justification that this is how to get into heaven or demonstrate true patriotism – is no stranger to exactly this sort of political aggrandizement. Nor am I arguing that it’s smart to put your money under a mattress or that it’s wise to use the local emergency clinic as your primary care provider. What I’m saying is that the notion that we know your interests better than you know your interests is inherently an anti-liberal position, whether it comes from the Left or the Right. That’s liberalism with a small-l, the liberalism of Adam Smith and John Stuart Mill, not Walter Mondale … a political philosophy that argues for your right to be as stupid as you want to be in your personal economic decisions.

While there are hundreds of examples of anti-liberal policies in the annals of Western history, QE and Obamacare stand out in two important respects.

First, they’re big. Really big. Either policy on its own would be the largest instantiation in human history of what the French call dirigisme, at least on an absolute scale. I suppose you could argue that the US Social Security system has evolved into something even larger, but that took 70+ years to match what QE and Obamacare have accomplished in a few dozen months. I’ve written at length about the manner in which emergency policy responses to national traumas like wars and depressions are transformed into permanent government programs, so I won’t repeat that here. Suffice it to say that it’s not a coincidence that Social Security is a child of the Great Depression in the same way that both QE and Obamacare are children of the Great Recession. The institutionalization and expansion of centralized economic policy is what always happens after an economic crisis, but the scale and scope of QE and Obamacare, particularly when considered together as two sides of the same illiberal coin, are unprecedented in US history.

Second, and this is what really distinguishes the dirigiste policies of today from those of the past, the political and bureaucratic advocates of QE and Obamacare have co-opted the Narrative of Science to promote these policies to the public. If you look at the financial media’s representation of monetary policy during, say, the Volcker years, you see a curious thing. These articles almost never mention academic papers or Fed research. Today you can’t go a week without tripping over a prominent WSJ or FT article trumpeting this Fed publication or that IMF working paper as the reason behind a monetary policy rhyme. The author
ity vested in the Volcker Fed was based on a Narrative of Experience, an argument for trust based on a representation of personal leadership and experiential wisdom. Today, the argument for trusting the Fed places zero weight on the real-world experience or personal wisdom of the Fed Chair. Instead, both Bernanke and Yellen are presented as Wizards who channel the transcendent magic of economic theory. For better or worse, a popular faith in Economic Science is the source of their authority.

As for healthcare policy … the entire edifice of Obamacare has been presented as a self-consciously scientific, enlightened economic argument. This allows its political adversaries to be painted as bizarrely opposed to an objectively correct scientific position, as either know-nothing rubes who probably don’t even believe in evolution or as greedy stooges of the criminally rapacious insurance industry. Contrast this to the media presentation of healthcare policy initiatives in the 1960’s, particularly the establishment of Medicare as part of Johnson’s Great Society. As the phrase “Great Society” implies, arguments for Medicare had nothing to do with macroeconomic theories of efficiency and everything to do with political theories of justice. All of Johnson’s political initiatives, from Medicare to the Civil Rights Act, were based on a Narrative of Social Justice, an explicitly political argument that made little pretense of marshaling social science to prove the point. Seems like a more honest mode of politics to me, one that recognizes and embraces the hot-blooded nature of politics for what it is rather than hiding it within a cool armor of Science, and maybe that’s why Johnson’s policies have stood the test of time.

Why has the Narrative of Science been co-opted in this way? Because it works. Because Science is the dominant religion, i.e. belief system in transcendent forces, in the West today. Because politicians have always sought to direct or tap into these belief systems for their own ends. In exactly the same way that French kings in the 13th century used ecclesiastical arguments and Papal bulls to justify their conquest of what we now know as southern France in the Albigensian Crusades, so do American Presidents in the 21st century use macroeconomic arguments and Nobel prize winner op-eds to justify their expansionist aims. Economists play the same role in the court of George W. Bush or Barack Obama as clerics played in the court of Louis VIII or Louis IX. They intentionally write and speak in a “higher” language that lay people do not understand, they are assigned to senior positions in every bureaucratic institution of importance, and they are treated as the conduits of a received Truth that is – at least in terms of its relationship to politics – purely a social construction. I’m not trying to be flippant about this, but when you read the history of the Middle Ages I find it impossible not to be struck by the similarity in social meaning between clerics then and economists today.

So why does this bug me so much? What’s the big deal about wrapping a political argument in the mantle of Economics in the same way that it used to be wrapped in the mantle of Catholicism? Isn’t this what powerful political and commercial interests have done since the dawn of time, drawing on some outside source of social authority to support their cause?

Part of the answer is that as a limited government, small-l liberal I’m on the losing side of this particular political argument. I believe that it’s crucial to allow everyone to be as stupid as they want to be in their personal economic decisions because a) economic vitality and growth in the aggregate requires plenty of individual mistakes and losers along the way (sorry, but it does), and b) the alternative – allowing or requiring government to make these decisions on our behalf – inevitably creates a terribly fragile system where a single poor decision can lead to permanent ruin. Is it difficult and at times inefficient to maintain limited government in a mass society? Absolutely. Should we make small exceptions to these liberal principles to grease the wheels of effective governance in ordinary times, and big exceptions to these principles in a national emergency? Without a doubt. I think Lincoln saved the United States in 1861 when he suspended habeas corpus and imposed martial law in wide swaths of the country. I think Bernanke saved the world in 2009 when he implemented QE 1. But like the Roman dictator Cincinnatus, a great leader goes back to the farm after he saves the Republic. It’s the hardest thing to do in politics … to voluntarily relinquish emergency powers used wisely for the common good, to maintain a personal humility and trust in the system in the aftermath of great success. George Washington did it, and that’s why he’s the greatest President this country ever had. I understand that it’s not terribly likely we’ll ever see Washington’s like again … different times, different world, etc., etc. … but hope springs eternal.

The other part of the answer is that using Science for political ends subverts its usefulness (as does using Religion for political ends … just ask Martin Luther). We lose something very important when we associate a particular social scientific hypothesis with a winning policy outcome or a losing policy outcome, and that’s the recognition that social science – particularly economic science – is never True or False, but only more or less useful depending on whatever it is in life that you value … your utility function. Both as individuals and as collectives, we can achieve much greater levels of utility – we can be happier – if we maintain this agnostic view of Truth when it comes to social science. Politicians want to sell us on the notion that they have The Answer, that they can deliver the good life if only we keep them in power. Social scientists – or at least honest ones – recognize that there are no Answers in the patterns and relationships they identify, even if those patterns can be written in the highly precise language of mathematics. There is More Useful and Less Useful in social science … that’s all … and claims to the contrary detract from the very real benefits and advances that social science can provide.

Here’s a concrete example of what I mean …

Let’s say that you’re interested in wealth maximization, that this is the utility function you are most concerned with as an investor, and you want to know what percentage of your wealth you should allocate to the different investment opportunities you can choose from. Paul Samuelson, the most influential economist of the post-World War II era and the first American winner of the Nobel prize in Economics has an answer for you: ????????=????????????(????(????+????)????/????). Translation: the more confident you are in the expected return of the investment choice, the more you should allocate to that choice, but in a more or less linearly proportional manner. On the other hand, Edward Thorp, author of “Beat the Dealer” and evangelist of the Kelly Criterion – an algorithm designed by mathematician John Kelly at Bell Labs in the 1950’s and used by investors like Warren Buffett, Bill Gross, and Jim Simons (if you’ve never read “Fortune’s Formula”, by William Poundstone, you should) – has a different answer for you: ????????=????????????(???? ???????????? (????+????)????). Translation, the more confident you are in the expected return of the investment choice, the more you should allocate to that choice, but in a logarithmically proportional manner.

The difference between investing on the basis of linear proportionality and logarithmic proportionality is vast and incommensurable. With the Kelly criterion, even a small expected advantage in the investment odds – say a 52% chance of doubling your investment and a 48% chance of losing it all – requires you to invest a significant portion of your overall wealth, in this case about 2%. With a larger expecte
d advantage in the investment odds, the recommended allocation gets very large, very fast. If the odds are 60/40 on doubling up/losing the entire investment, Kelly says invest 20% of your total wealth; if the odds are 80/20, Kelly says invest 60% of your total wealth in this single bet! Definitely not for the faint of heart, and definitely a far riskier strategy at any given point in time than the straightforward Samuelson expected utility approach. But you never lose ALL of your money with the Kelly criterion, and over a long enough period of time (maybe a very long period of time) with infinitely divisible bet amounts and correct assessment of the investment odds, the Kelly criterion will, by definition, maximize the growth rate of your wealth.

These are two VERY different answers to the wealth maximization question by two world-class geniuses, each with a legion of world-class genius supporters. Samuelson is a lot more famous and received far more public accolades; Thorp made a lot more money from investing (Kelly died of a stroke at age 41 in 1965 and never made a dime from his theory). But they can’t BOTH be right, the politician would say. What’s The Answer to the wealth maximization question so we can institute the right policy? Well … they ARE both right, there is no Answer, and the correct choice between the two depends entirely on your individual utility function. In fact, choosing either wealth maximization algorithm and imposing it on everyone is guaranteed to make everyone worse off in the aggregate.

How’s that? Let’s say I’m investing my life savings, and I’ve only got one shot to get this right. Not one investment, but one shot at implementing a coherent investment strategy for this, the only life’s savings I will ever have. If that’s my personal situation, then I would be nuts to choose the Kelly criterion to drive that strategy. It’s just too risky, and if I’m unlucky I’ll be down so much that I’ll hate myself. Maybe in the long run it maximizes my wealth growth rate, but in the long run I’m also dead. On the other hand, let’s say I’m investing a small bonus. It’s not the only bonus I’ll ever receive, and in and of itself it’s not life changing money. If that’s my personal situation, then I would be nuts NOT to choose the Kelly criterion because it has the very real possibility of transforming the small bonus into life changing money.

No one’s utility function for money is linear – $20 has more than 20 times the utility to me than $1 – and no two people have the same utility function for money – I’m sure there are people out there who care as little about $20 as I do about $1. Everyone’s utility function for money changes over time, and most are contextually dependent. It is impossible to design a one-size-fits-all wealth maximization formula, which is why human financial advisors have such an important job. It’s also why government efforts to force us to converge on a utility function for investment choices, healthcare choices, or any other sort of personal economic choice result in such a widespread gnashing of teeth and popular dissatisfaction. At best, it’s a myopic conception of how to generate more economic utility. At worst, it’s an intentional subversion of useful social science to cloak politics as usual. In either event, it’s something that deserves to be called out, and that’s what I’ll keep doing with Epsilon Theory.

Postscript

Two quick points on portfolio management, utility functions, and the Kelly criterion that I’ll present without elaboration and will probably only be of interest to professional investors who are immersed in this sort of thing.

1) In several important respects, risk parity investment allocations are to 60/40 stock/bond allocations what the Kelly criterion is to Samuelson expected utility.

2) The allocation of capital by an investment manager who wants to establish multiple independent Kelly criterion strategies across traders or sub-investment managers, each of whose individual utility functions favors a fractional Kelly or Samuelson expected utility function, is a solvable game.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TnyNHEW7PY0/story01.htm Tyler Durden

Maduro’s First Socialist “Decree” – $250 Samsung Trinkets For Every Venezuelan

Days after being granted omnipotent "decree" powers, and a week after the Venezuelan president wielded his mighty Marxist sword and jailed 100s of "bourgeois, barbaric, capitalist parasites"; Maduro has unveiled his latest "keep the masses happy" trick…

*VENEZUELA TO SPEND $100M ON SAMSUNG IMPORTS: RAMIREZ
*VENEZUELA TO IMPORT 400,000 SAMSUNG PRODUCTS, RAMIREZ SAYS

Why didn't AAPL get the nod? As Maduro explained yesterday, 15-30% margins are "enough"… Of course, the US is disappointed in the decision to grant Maduro "decree power" – perhaps as they didn't think of it sooner (though they do have the Obamaphone?).