Tag: finance

"Food lines are part of our daily existence," exclaims one member of the Venezuelan public, as people line up for hours outside state-owned supermarkets to buy regulated staple goods, or, as Bloomberg reports, pay three times as much from street hawkers. However, on the other side of the fence in Southern Caracas, President Maduro's "21st Century Socialism" looks a little different as Bloomberg notes 100s of brand new (admittedly Chinese) cars await new owners following the Defense Minister's pledge to purchase 20,000 autos for the armed forces. Simply put, in order to maintain the appearance of utopia, Maduro ensures military personnel don't have to contend with the economic chaos in the rest of the country.

 

As Bloomberg reports,

Fifteen years after Chavez started his revolution in “21st century socialism,” South America’s largest oil producer is running out of money, the economy is contracting and companies and investors are deserting what was Latin America’s richest nation in 1980.

 

Inflation has more than doubled and the bolivar slumped 76 percent against the dollar on the black market since Maduro came to office in April 2013 describing himself as the “son of Chavez.” More importantly to his support, the poverty rate has started to rise, climbing to 32 percent at the end of last year from a record low 25 percent in 2012, according to the National Statistics Institute.

 

Discontent over rising prices, soaring crime and mounting shortages sparked nationwide protests in February that were put down by soldiers and police resulting in 43 deaths, according to the public prosecutor’s office.

So why no riots? Why no violent uprisings? Simple – Military personnel don’t have to contend with the economic chaos in the rest of the country.

Since Maduro came to power 17 months ago, the armed forces have created their own television channel, housing program and bank, the only military-owned one outside Iran and Vietnam.

 

A third of Venezuela’s 28 ministers and half the state governors are now active or retired officers, mostly companions of former paratroop commander and late President Hugo Chavez.

 

“The military remains the only element guaranteeing political stability under Maduro’s weak government,” Diego Moya-Ocampos, an analyst at consulting firm IHS Country Risk, said by phone from London. “As an outsider, Maduro had to give the generals a bigger role in managing the country to keep them on-board. He has militarized politics.”

 

Maduro named a brigadier general as economy vice-president on Sept. 2, the second most important post in the cabinet. He now has eight active or retired officers in the cabinet, up from five in 2012, the year before Chavez died.

And to ensure their continued confidence…

While the Venezuelan people line up for hours outside state-owned supermarkets to buy regulated staple goods, or pay three times as much from street hawkers (with one in four basic goods were unavailable at any given time in January, the last month for which figures are available).

 

Venezuela’s national parade ground at the Fort Tiuna military base presents a scene that local civilians can only dream of — stalls laden with goods and no waiting lines.

 

The 43 trucks and tents at the market in the military base on Aug. 22 were loaded with subsidized milk, cooking oil and detergents — goods that are out of stock in most shops.

 

The market with everything from subsidized meat to baby strollers, along with loans, new cars and apartments,

For some context as to what this means… Cars are particularly prized in Venezuela because they don’t lose value amid the world’s highest inflation as their prices tend to track the dollar… and so…

At Fort Tiuna in southern Caracas, hundreds of new Chinese cars glistened in the parking lots, after former Defense Minister Diego Molero pledged in May of last year to purchase 20,000 autos for the armed forces.

 

That compares with just eight new cars imported into the country of 29 million people in August, according to the Venezuelan Automotive Chamber.

The problem is… the people are starting to get it…

Maduro’s popularity is falling. The president’s approval rating dropped to a record low of 39 percent in August from 60 percent in December, according to Caracas-based polling company Hinterlaces.

 

“We have always supported this government, mobilizing the people in shantytowns, campaigning for them,” said Jacqueline Zuniga, 39, coordinator of the Women’s Movement and member of the ruling United Socialist Party. “They give us nothing in return.”

 

“This is a disgrace, not the socialism Chavez had in mind,” Villalonga, 52, said by telephone from Barquisimeto, Lara. “I feel impotent in front of this rigged system that favors the military.”

 

“There’s a political cost Maduro will pay for prioritizing the soldiers over the poor neighborhoods,” Hugo Perez Hernaiz, sociology professor at Central University of Venezuela in Caracas, said by telephone. “The size of this cost will be seen in the next elections.”

*  *  *
Coming to America soon?

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

Submitted by Adam Taggart via Peak Prosperity,

When America's social security, health care, and entitlement systems were first conceived, the country had a very different age distribution. There were roughly 7 active workers per retiree, and the ability to transfer some of that employee wealth to support older citizens was supportable.

But with the arrival on the scene of the Baby Boom as well as advances in longetivity, the math changed dramatically. By 2005, there were only 5 workers per retiree. And by 2030, just 15 short years away, there will be less than 3.

Our national demographic architecture no longer can afford the entitlement system we have. And that's even assuming entitlements were currently sufficiently funded. But as the last chapter showed, the existing programs are underfunded to the tune of $100-200 Trillion. 

America's demographic situation is a ticking time bomb. The older generation is already competing more fiercely than ever with younger ones in the job market, as many seniors can't afford to retire. Youth also has to contend with trends like automation, outsourcing, and high unemployment/underemployment, which further handicap their ability to build capital and, importantly, to afford all the assets (stocks, houses, etc) that the Boomers are counting on selling to them.

 

For the best viewing experience, watch the above video in hi-definition (HD) and in expanded screen mode

Coming next Friday: Chapter 16: A National Failure To Save & Invest

The full suite of chapters in this new Crash Course series can be found at http://ift.tt/VLldvm

via Zero Hedge http://ift.tt/1os79Dh Tyler Durden

Submitted by Adam Taggart via Peak Prosperity,

When America's social security, health care, and entitlement systems were first conceived, the country had a very different age distribution. There were roughly 7 active workers per retiree, and the ability to transfer some of that employee wealth to support older citizens was supportable.

But with the arrival on the scene of the Baby Boom as well as advances in longetivity, the math changed dramatically. By 2005, there were only 5 workers per retiree. And by 2030, just 15 short years away, there will be less than 3.

Our national demographic architecture no longer can afford the entitlement system we have. And that's even assuming entitlements were currently sufficiently funded. But as the last chapter showed, the existing programs are underfunded to the tune of $100-200 Trillion. 

America's demographic situation is a ticking time bomb. The older generation is already competing more fiercely than ever with younger ones in the job market, as many seniors can't afford to retire. Youth also has to contend with trends like automation, outsourcing, and high unemployment/underemployment, which further handicap their ability to build capital and, importantly, to afford all the assets (stocks, houses, etc) that the Boomers are counting on selling to them.

 

For the best viewing experience, watch the above video in hi-definition (HD) and in expanded screen mode

Coming next Friday: Chapter 16: A National Failure To Save & Invest

The full suite of chapters in this new Crash Course series can be found at http://ift.tt/VLldvm

via Zero Hedge http://ift.tt/1os79Dh Tyler Durden

Presented with no comment…

 

 

h/t Cagle via Sunday Funnies

via Zero Hedge http://ift.tt/1os79Dc Tyler Durden

Presented with no comment…

 

 

h/t Cagle via Sunday Funnies

via Zero Hedge http://ift.tt/1os79Dc Tyler Durden

via Zero Hedge http://ift.tt/1vqvfSZ williambanzai7

Submitted by Simon Black via Sovereign Man blog,

“The proletarians have nothing to lose but their chains. They have a world to win. Workers of the world, unite!”

Most people remember Karl Marx’s most potent points and phrases, and the mountain of corpses his disciples left behind, especially in the 20th century.

However, most forget or don’t even know the specific policies that Marx advocated.

Within his 1848 Communist Manifesto, Marx outlined a list of ten short-term demands. These, he thought, would be the precursor to the ideal stateless, classless communist society.

Ironically in today’s world, Marx’s demands look pretty much mainstream.

That is because nearly every single item on the list has been implemented to varying degrees in the United States.

Think that couldn’t be possible in the Land of the Free? Just take a look.

1. Topping Marx’s list is the abolition of private property.

True, private property exists, but only until the state wants to take it. With its powers of eminent domain, the government can and does confiscate people’s property when it wants for public use.

Your property isn’t unconditionally yours. Just think of property taxes, for example.

If it’s actually YOUR private property, then why would you need to pay tax on it? And why do they have the authority to take it from you if you don’t pay?

2. Likewise, while we haven’t seen the complete abolition of inheritance (another Marx demand), the government can take up to 40% of your estate when you die.

So ultimately your estate is not your own. You don’t get to control what happens to your wealth and possessions when you die. It’s just a matter of proportion.

3. and 4. Marx also demanded the centralization of transportation and communication. Check, and check.

Try broadcasting over the airwaves in the Land of the Free without a license and special permission.

Practically the entire electromagnetic spectrum is tightly controlled by the state, centralized by a handful of government agencies.

Same with the network of roads and highways. Because, after all, without government, who would build the roads…

5. Another point of Marx is state-guided agricultural production and combination of agriculture and manufacturing.

And the Land of the Free does not disappoint. Though its activities may not be as prominent in the news, the US Department of Agriculture is easily one of the busiest government departments.

With a budget of $146 billion a year, and much more for subsidies, USDA tirelessly works to dictate every major and miniscule activity in the sector.

6. Next on the list, is equal liability of all to labor. If you have at any point wondered, as I have, why politicians are always pushing jobs for the sake of jobs, rather than value and wealth creation—now you know why.

Between minimum wage laws and the constant stream of legislation that promises jobs for all, it is clear that politicians have wholly internalized this Marxian ideal.

Now, you might think that this is just a fluke, just a coincidence that some US policies resemble what’s on Marx’s list of demands.

But then you see these demands, which have not only been fully implemented in the US already, but are thoroughly entrenched in the national psyche:

7. First, there’s free education for all children, to enable the uniformity of thought. Check.

8. Then there’s a heavy progressive income tax. Yep, I’m pretty sure you’re familiar with this one, which has actually become so mainstream, that to have any system other than this would be considered revolutionary. Check.

9. Third, is the confiscation of the property of emigrants (expatriates) and rebels.

Between the IRS bullying of political opposition groups and the imposition of exit taxes for those that renounce their citizenship, the United States is firmly set up to discourage dissent and escape. Check.

10. And last but not least, the centralization of credit in the hands of the state, by means of a national bank. Check.

Remember, Karl Marx thought central banking was a great idea—the same guy who thought that individual success and private property were evil.

Think about that the next time the Federal Reserve comes up with a plan to help businesses and fix the economy.

So now you know, America isn’t communist. It’s only about 70% communist. No reason to worry.

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

Submitted by Simon Black via Sovereign Man blog,

“The proletarians have nothing to lose but their chains. They have a world to win. Workers of the world, unite!”

Most people remember Karl Marx’s most potent points and phrases, and the mountain of corpses his disciples left behind, especially in the 20th century.

However, most forget or don’t even know the specific policies that Marx advocated.

Within his 1848 Communist Manifesto, Marx outlined a list of ten short-term demands. These, he thought, would be the precursor to the ideal stateless, classless communist society.

Ironically in today’s world, Marx’s demands look pretty much mainstream.

That is because nearly every single item on the list has been implemented to varying degrees in the United States.

Think that couldn’t be possible in the Land of the Free? Just take a look.

1. Topping Marx’s list is the abolition of private property.

True, private property exists, but only until the state wants to take it. With its powers of eminent domain, the government can and does confiscate people’s property when it wants for public use.

Your property isn’t unconditionally yours. Just think of property taxes, for example.

If it’s actually YOUR private property, then why would you need to pay tax on it? And why do they have the authority to take it from you if you don’t pay?

2. Likewise, while we haven’t seen the complete abolition of inheritance (another Marx demand), the government can take up to 40% of your estate when you die.

So ultimately your estate is not your own. You don’t get to control what happens to your wealth and possessions when you die. It’s just a matter of proportion.

3. and 4. Marx also demanded the centralization of transportation and communication. Check, and check.

Try broadcasting over the airwaves in the Land of the Free without a license and special permission.

Practically the entire electromagnetic spectrum is tightly controlled by the state, centralized by a handful of government agencies.

Same with the network of roads and highways. Because, after all, without government, who would build the roads…

5. Another point of Marx is state-guided agricultural production and combination of agriculture and manufacturing.

And the Land of the Free does not disappoint. Though its activities may not be as prominent in the news, the US Department of Agriculture is easily one of the busiest government departments.

With a budget of $146 billion a year, and much more for subsidies, USDA tirelessly works to dictate every major and miniscule activity in the sector.

6. Next on the list, is equal liability of all to labor. If you have at any point wondered, as I have, why politicians are always pushing jobs for the sake of jobs, rather than value and wealth creation—now you know why.

Between minimum wage laws and the constant stream of legislation that promises jobs for all, it is clear that politicians have wholly internalized this Marxian ideal.

Now, you might think that this is just a fluke, just a coincidence that some US policies resemble what’s on Marx’s list of demands.

But then you see these demands, which have not only been fully implemented in the US already, but are thoroughly entrenched in the national psyche:

7. First, there’s free education for all children, to enable the uniformity of thought. Check.

8. Then there’s a heavy progressive income tax. Yep, I’m pretty sure you’re familiar with this one, which has actually become so mainstream, that to have any system other than this would be considered revolutionary. Check.

9. Third, is the confiscation of the property of emigrants (expatriates) and rebels.

Between the IRS bullying of political opposition groups and the imposition of exit taxes for those that renounce their citizenship, the United States is firmly set up to discourage dissent and escape. Check.

10. And last but not least, the centralization of credit in the hands of the state, by means of a national bank. Check.

Remember, Karl Marx thought central banking was a great idea—the same guy who thought that individual success and private property were evil.

Think about that the next time the Federal Reserve comes up with a plan to help businesses and fix the economy.

So now you know, America isn’t communist. It’s only about 70% communist. No reason to worry.

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

Greetings from Palo Alto. Over three years (and thousands of posts……) ago, I wrote Color and the Mania in This Valley. The thrust of my post was:

+ Color.com had received $41 million to develop an app;
+ The app sucked out loud;
+ The company deserved to fail.

Well, fail it did (as I announced in the 4th post I did about the stupid place), and in those three+ years, the bubble has just continued to inflate. 2014 makes 2011 seem downright sensible.

Which brings us to Clinkle, which is a firm founded by a 22 year old with no business successes behind him (which at least Color.com’s founder could claim, as he sold his firm to Apple for a fortune). Clinkle initially received $25 million (fun fact: the same amount used to fund Google, which went on to bigger successes than building a single app) and has been ostensibly hard at work on this thing for years. Here is the mature and world-changing lad after he landed the funding:

Well, as Clinkle continued to produce nothing, they continued to garner funding, reported to be upwards of $40  million now (a number strangely coincident with Color’s). Recently, at long, long last, they launched their app. Here’s how they try to explain it:

So let me get this straight……..I download an app……..and then I sign up……….and they send me a Prepaid Visa Card (which I don’t need), and then I can put money on the card. The wrinkle to this, apparently, is that if my friends also use Clinkle, I can transmit cash to them if I want.

Allow me to express my reaction with three letters: B, F, and D. So this is what $40 million and a crack team of engineers was able to create? (Although the money wasn’t entirely wasted – – you can go to this page and check out the team member photos which, as you mouse over them, turn into zany poses – – hilarious! My goodness gracious.)

Perhaps I’m just a cranky blogger who likes to pee on the parade of this youngster who has been endowed with so much start-up cash, and in fact Clinkle is an awesome app. Let’s check out the reviews on the App Store, shall we?

 So from what I saw, there were 19 reviews posted: 18 of them were 1-star (the lowest possible), and one of them was 5-star (which, I would wager, was posted by the man-child above clutching the dollar bills).

Clinkle has also added an elitist wrinkle to their little product by making it available only at certain colleges (as if the demand for this thing would otherwise overwhelm them). Perhaps they figure since Facebook started that way in 2004 (Harvard, Stanford, etc.) then surely that must be the pathway to billions.

What a bunch of feckless douchenozzles. I can’t wait for this damned bubble to finally pop, because I’m not sure how much more we can all endure this without becoming irreversibly nauseous. It’s not enough for Color.com…………or, soon, Clinkle…………..to collapse into a pile of worthless ashes. All this overfunded silliness has really got to end, because it’s an unsustainable distortion of reality.

via Zero Hedge http://ift.tt/1vqvhKL Tim Knight from Slope of Hope

With the USD experiencing its longest stretch of weekly gains since Bretton Woods, it appears, as SocGen notes, that recent currency movements have triggered nostalgia of the pre-crisis world when dollar strength was synonymous with a prosperous global economy. However, given the extreme positioning and potential for policy-maker complacency, SocGen warns the paradox is thus that a strong dollar tantrum could be a more worrying scenario than a Fed tightening tantrum.

 

The Long USD Trade…

 

If you are a trend follower, the trend is your friend.

If you are a contrarian, you might want to go short the USD …

h/t Investir.ch
 

But as SocGen's Michala Marcussen warns, beware the strong dollar paradox….

Recent currency movements have triggered nostalgia of the pre-crisis world when dollar strength was synonymous with a prosperous global economy. Hope today is that a strong dollar will cap US inflation, delay Fed tightening and boost exports to the US. To make an impact on US inflation significant enough to slow the Fed, we estimate, however, that EUR/USD would drop to 1.10, USD/JPY to 120 and USD/CNY to 6.50 to significantly shift Fed expectations. To our minds, moreover, such a scenario would only materialise if the growth gap between the US and the other major economies were to widen further.

Should recent dollar appreciation, moreover, breed complacency amongst policymakers elsewhere, this risk scenario could become a very painful reality. The paradox is thus that a strong dollar tantrum could be a more worrying scenario than a Fed tightening tantrum.

1. Dollar not yet strong enough to delay the Fed

Dollar close to long run average: Recent dollar movements have been sharper-than-expected and several crosses (including EUR/USD, USD/JPY and USD/GBP) are now at levels that we had initially only expected to see early next year. For all the speed of movement, however, the dollar does not yet qualify as “strong”. Trade-weighted, the dollar is still just below the long run average. Moreover, on the type of horizons that matter for economics, dollar appreciation remains modest; the trade weighted dollar is up just 2% year-to-date over the 2013 average. Looking ahead, we expect further dollar gains and by mid-2015, we look for a gain of just over 6% on a full year basis.

US growing well above trend potential: The US economy is on course 3%+ growth rates over the coming quarters, well above the 2.2% at which we estimate trend potential. This week’s numerous data releases, including the key September employment report (we look for +260K on non-farm payrolls) should confirm firm US growth. With each batch of robust data taking the Fed a step closer to the exit, the debate now is just how much dollar appreciation it would take to delay the Fed.

The CNY has appreciated (!) against the US dollar: As a rule of thumb, using the OECD growth model, a 10% appreciation of the trade-weighted dollar cuts 0.5pp from GDP growth and 0.3pp from CPI inflation in the first year after the shock. Two points merit note, however. Firstly, by country, we find that China has tended to exert the most significant influence on US import prices. Since this latest dollar rally began in the early summer, the CNY has been one of the rare currencies to appreciate (!) against the dollar, albeit by a modest 1%. Secondly, we note that the narrowing energy deficit, as the result of the shale revolution, suggests reduced elasticities over time.

Taking account of these points, we find that to significantly delay Fed rate hikes, we would need to see an additional 10% appreciation of the trade weighted dollar relative to our baseline. That would entail EUR/USD at 1.10, USD/JPY at 120 and USD/CNY at 6.50 (and would require other major currencies such as the CAD and MXP to also depreciate significantly). Such a scenario, however, is most likely if growth disappoints materially in the other major economies relative to our baseline scenario. A significantly weaker outlook for the main trading partners of the US would it itself be a cause for the Fed to delay.

2. A worrying trend on growth gaps … and capital flows

Several EM economies set to growth at a slower pace than the US: While the consensus growth outlook for the US has improved further in recent months, the opposite has been true for several other major economies, including the euro area, Japan and China. Moreover, our own forecasts remain generally below consensus with the exception of the US, where we are above. This view underpins our expectation of further dollar appreciation. Today, moreover, several EM economies are growing at a slower pace than the US. This is a notable difference from the pre-crisis era and has several implications. First, this lower global growth configuration is one reason why we believe that elasticities linking currency depreciation to growth may now be lower. The correlation between commodity prices and the dollar has also shifted. Finally, we note that capital flows are now moving in a very different pattern.

Dollar and commodities: The link between the dollar and commodity prices has seen several shifts over time. Already prior to the latest moves in currency markets, commodity prices were trending lower in parallel with Chinese growth forecasts. More recently, it seems that dollar depreciation may have been an additional factor driving prices lower. For commodity importers, this is helpful; for exporters, this marks yet a headwind.

Fed tightening may be a better scenario than a very strong dollar: Pre-crisis, in a simplified summary, the strong dollar can be described as having been driven by a global savings glut (mainly from the official sector in emerging economies) seeking a home in US Treasuries and, at the same time, US investors seeking risky capital abroad to profit from strong EM growth. It is also worth recalling that QE1 drove the dollar stronger and supported risky US assets as Treasuries rallied. QE2, on the other hand, saw dollar depreciation as US investors sought return in higher yielding asset abroad, and notably in emerging economies. As discussed above, we believe that a significant appreciation of the dollar relative to our baseline would be consistent with much weaker growth elsewhere.

In such a scenario, dollar would equate to further capital outflows, placing further pressure on already vulnerable economies. Indeed, a “dollar tantrum” scenario could well prove more painful than a “Fed tightening tantrum”, assuming the later comes with better growth in the rest of the world.

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