Tag: news

Authored by Charles Hugh Smith via OfTwoMinds blog,

Crypto-blockchain technologies are leveraging the potential of computers and the web for direct political-social innovation.

We’re accustomed to three basic templates for system-wide solutions or improvements:

1. an individual “builds a better mousetrap” and starts a company to exploit this competitive advantage;

2. a company invents something that spawns a new industry (the photocopier, the web browser, for example) and/or disrupts existing business models;

3. the central government decrees a strategy or investment, i.e. makes something happen (the Interstate Highway system in the 1950s, the space race to the moon in the 1960s, for example).

I don’t think any of these templates really captures the eventual impact of cryptocurrencies and blockchains, which I define broadly as any decentralized, distributed ledger.

As for the better mousetrap– the creators of bitcoin explicitly designed a form of money that they reckoned was superior to centrally controlled fiat currency. A decentralized form of money that isn’t borrowed into existence like fiat currencies is certainly revolutionary, but that is only one aspect of the crypto-blockchain technology.

Since bitcoin and the blockchain technology behind it aren’t owned by a corporation, the template of a company benefiting from disrupting existing business models (for example, Apple’s iPod, iTunes and iPhone) doesn’t fit.

It’s certainly true that cryptos and blockchain are spawning a new industry, much like micro-processors and digital memory launched the computer revolution and the world wide web and its protocols launched the Internet revolution.

There are between 1,600 and 1,900 cryptocurrencies and tokens based on them, and hundreds of enterprises are developing applications for blockchain and related technologies.

The difference between these old templates and the crypto-blockchain technologies is these have explicit social and political applications and ramifications–consequences that cannot be mapped onto consumer product innovation or process innovations such as increasing computational power.

These technologies have the potential to re-order the structure and processes of governance and of social relations. In this way, crypto-blockchain technologies are leveraging the potential of computers and the web for direct political-social innovation.

Here’s an example (described in an email to me from Decred’s lead developer, Jake Yocom-Piatt) of a software platform that is not connected to a cryptocurrency that could be applied to the kinds of decentralized governance, community development, guaranteed paid work and markets that I describe in my CLIME system (community labor integrated money economy):

“The big idea with Politeia was to create a time-anchored filesystem with a minimal on-chain footprint, so you can be certain that the information in the filesystem existed on or before a particular date. Additionally, it includes identity data, so that person/entity X can attest to data Y at time Z in a way that cannot be altered after-the-fact. I felt that having a plain old website for our governance system wasn’t sufficiently censorship resistant.

As I expect you can see, Politeia is an incredibly generic tool, and you can make use of it without holding any Decred.”

This sort of distributed ledger–stripped of the computational weight of the blockchain– could power community democracy, the distribution of a labor-backed currency (as I describe in my book A Radically Beneficial World) and render market transactions transparent to all participants.

These applications don’t enrich a corporation–they re-order the power structure of the economy and society.

I don’t think there are any historical templates that fully capture the potential for such a direct (i.e. not a byproduct or second-order effect) re-ordering of political and financial power.

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At least two Congressional Democrats are calling for Trump’s interpreter to testify about the private one-on-one meeting held between the US President and Russian President Vladimir Putin.

Both Rep. Joe Kennedy III (D-MA) and Rep. Jeanne Shaheen (D-NH) made similar requests this week.

Kennedy tweeted on Monday: “@realDonaldTrump’s translator should come before Congress and testify as to what was said privately immediately.”

And that was only what we saw on live TV. @realDonaldTrump’s translator should come before Congress and testify as to what was said privately immediately. If Republicans are as outraged as they claim, then issue the subpoena today. 2/2

— Rep. Joe Kennedy III (@RepJoeKennedy) July 16, 2018

And Rep. Shaheen tweeted on Tuesday: “I’m calling for a hearing with the U.S. interpreter who was present during President Trump’s meeting with Putin to uncover what they discussed privately.”

I’m calling for a hearing with the U.S. interpreter who was present during President Trump’s meeting with Putin to uncover what they discussed privately. This interpreter can help determine what @POTUS shared/promised Putin on our behalf.

— Sen. Jeanne Shaheen (@SenatorShaheen) July 17, 2018

Neither Democratic reps addressed whether such testimony would violate the translator’s professional code of ethics or government rules. 

Trump has drawn rebuke over his warm tone towards Putin during last weekend’s summit in Helsinki, Finland – along with what the President says was a mis-statement on his opinion over Russian hacking. 

Before a meeting with GOP lawmakers on Tuesday, Trump told reporters that he misspoke in Helsinki and that when he said he saw no reason why it “would” be Russia that interfered, he meant to say he saw no reason why it “wouldn’t.”

Trump added that he has “full faith and support for America’s great intelligence agencies.”

“I accept our intelligence community’s conclusion that Russia’s meddling in the 2016 election took place,” Trump said, but then, calling into question the extent of his acceptance, he added that it “could be other people also, there are a lot of people out there.” –NPR

Considering that both House and Senate investigative panels are controlled by Republicans, calls to have Trump’s translator testify will fall flat unless there is GOP support. 

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Authored by James Altucher via Laissez Faire blog,

I’m often accused of being too much of an optimist.

When someone tells me, “Global warming will destroy the Earth,” I think, Good thing people are working on alt-energy solutions.

When someone tells me, “Automation will crush jobs,” I think, Well, look at what happened when ATMs supposedly were going to replace bank tellers. Nothing. The cost savings created a bank on every corner.

If someone says, “What about American debt rising so much?” I go through the basic math:

• The U.S. is $21 trillion in debt

• But the U.S. just has to pay $300 billion a year to service that debt. That’s only 7% of GDP, down from 17% in the mid-’90s. So we’re actually financially healthier than we were 20 years ago

• If you subtract out what the U.S. owes the U.S. (yes, we owe money to ourselves), then the national debt is just $13 trillion and our debt obligations go down to about 3% or 4%.

If your salary was $100,000 and you had to pay just $4,000 a year to service all of your debt, you would say, “No problem.”

Let’s take on more debt.

And yet… I think America is DOOMED. And I think there’s no solution for the country.

There are only so many flowers you can plant over s**t. Eventually the whole thing smells like s**t.

If you’re going to survive with your finances intact, you need to know just how doomed we are.

The Disastrous Government Backing of Student Loans

Trouble started with the Higher Education Act of 1965.

It has a seemingly fine and generous idea: Let’s help the less fortunate get a higher education so they can be more competitive.

I love this idea. The intention is sound.

But unfortunately it failed due to corruption, lousy economics and lack of understanding of basic finance.

Price of Tuition

Since 1965, the price of tuition has gone up HIGHER THAN INFLATION every single year (EVERY. SINGLE. YEAR.) by an average of 9%.

By comparison, medical care costs have gone up faster than inflation by an average of 5% every year.

Since the government is backing the loans, college presidents are simply charging more without thinking about the future consequences of the country OR OF THE STUDENTS who take on these loans.

Student Loan Debt Is Now $1.5 Trillion

In 2003, student loan debt was $250 billion. But that debt has grown and compounded every year and now sits at $1.5 trillion.

Here’s the problem: Everyone is brainwashed into thinking they need college 1) to have a satisfying social experience from the ages of 18–22 and 2) because they won’t get jobs if they don’t go to college.

If an 18-year-old, whose brain is more inclined toward taking risks, is being offered $250,000 in loans, of course they’re going to accept.

Meanwhile, they are not even allowed to drink a glass of beer.

The Middle Class Is the Victim

The rich can afford to send their kids to college.

The lower class gets financial aid and has to take on less debt.

The middle class can only afford higher education by taking out hundreds of thousands of dollars in student loans. Average student loan debt is about $50,000, but my guess is the middle class — which doesn’t benefit from financial aid — has a debt figure much higher.

Anecdotally, when I survey my younger friends, debt ranged from $100,000 to half a million dollars. The latter was with a doctor, but sadly, he hates being a doctor and is now trapped.

If the middle class is the victim, that means eventually the middle class dies out.

Student Loan Debt Is Debt You Can’t Get Rid of in Bankruptcy

Why did the government do this? Because 18-year-olds are not qualified to make financial decisions about their lives.

You can get rid of mortgage debt, credit card debt or almost any other debt with bankruptcy. But not the student loan debt you owe the government.

The government will follow you forever, garnishing your wages, until you pay them back when you are 90 years old, keeping you in near-poverty your entire life.

So much for the government trying to help kids get a higher education.

Income Inequality Will Be Greater Than Ever

The upper classes will continue to pay for their kids to go to Harvard. Where they will marry other Harvard grads and go on to have Harvard kids.

The middle class, which is moving toward the lower class, will be forced to send their kids to lower-ranked and cheaper schools (while they continue to pay down their own debt), increasing the disparity between the classes as the middle class quietly shuts their doors.

The Bottom Line

The corruption of the college tuition system has ruined the country.

This generation of kids will not be able to be entrepreneurs or innovators, which has been the driving force of U.S. growth throughout its history.

This will lead to the death of the middle class, further income inequality and eventual recession, depression and violence.

So… the best way is for people to find opportunities right now before the s**t hits the fan (even though it’s already starting to hit the fan).

There are still opportunities. And yeah, I’m still an optimist.

I want to be in love, have more kids, take care of myself and die a peaceful death with high quality of life until old age.

I want to choose my future.

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One month ago, before the recent collapse in China’s stock market and the plunge in emerging market currencies, the head of the Reserve Bank of India, Urjit Patel wrote an FT op-ed in which he issued a stark warning: “given the rapid rise in the size of the US deficit, the Fed must respond by slowing plans to shrink its balance sheet. If it does not, Treasuries will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.”

Putting these two parallel processes – which threaten to materially impair dollar funding markets – in context, on one hand there is the so called “Quantitative Tightening”, or the gradual decline in the Fed’s balance sheet which currently sees the Fed’s balance sheet shrink by $40BN/month and is set to peak at a rate of $50BN/month by Q4, while at the same time US net Treasury issuance is set to jump to $1.2 trillion in 2018 and 2019 to cover the forecasted budget deficit of $804BN and $981BN in 2018 and 2019, respectively.

Then, one week ago, Morgan Stanley doubled down, and predicted that the Fed’s balance sheet may not shrink as much as most people expect: “We believe that the Fed will halt the normalization of its balance sheet by September 2019 and start growing it again in 2020 to ensure that the effective fed funds rate remains within the range the Fed targets.”

We expect the Fed’s System Open Market Account (SOMA) portfolio to be just above US$3.8 trillion at the end of 2020. In contrast, primary dealers and market participants polled by the New York Fed place a 68% and 60% probability, respectively that the SOMA portfolio will be smaller than US$3.5 trillion at the end of 2020.

Now, a third strategist has joined the chorus: according to Viktor Shvets, head of Asia strategy at Macquarie Commodities and Global Markets, who spoke to Bloomberg TV on Wednesday, “financial markets are flashing a warning to the Federal Reserve that the global economy cannot withstand its monetary tightening, and will in coming months force a halt to the campaign.”

“The problem is the Federal Reserve right now is destroying money, destroying roughly $50BN ” as its bond holdings mature without replacement as part of QT, Shvets said. “They will be forced at some point in time over the next three to six months to stop reducing the size of their balance sheet.”

Adding this two cents on the stock vs flow debate, Shvets said that while the Fed has been focusing on the appropriate size of its balance sheet as it continues to shrink its asset holdings, investors are far more concerned by the incremental change in monetary flows: “It is clear, from the market, flow is far more significant than the size of overall accommodation.”

Ultimately, Shvets’s core thesis is that without loan growth, the system will grind to a halt as borrowing has become such an inherent part of the global economy that markets and growth cannot withstand higher borrowing costs. And by shrinking the monetary base of the dollar, the Fed is imposing a global tightening.

The risk of excessive tightening and a jump in rates not only affects global markets, but also domestic: as we showed last week, Interest Payments on the Federal Debt, have recently jumped to an all time high of $558 billion, a number which will grow, first slowly then fast, as rates keep going higher.

“The world and financial markets will force them to: a) stop trying to increase the cost of capital; and b) stop reducing the balance sheet at the same pace,” said Shvets, who previously worked at banks including Deutsche Bank AG and Donaldson Lufkin & Jenrette.

Which ultimately leads us to the dystopia envisioned by Shvets: a world of pervasive NIRP and QE as central banks do everything in their power to prevent the zombie system, which now only exists thanks to incremental debt, from collapsing.

“All cost of capital globally, eventually, will have to go negative” because of the “degree of leverage and financialization that we have globally.”

Watch the interview below:

 

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Moments ago, Trump held another meeting with members of his cabinet, amid the fallout of the Putin summit. A live feed is available below:

HAPPENING NOW: Pres. Trump holds Cabinet meeting amid continued fallout over Putin summit. https://t.co/H4R3BPvma1

— ABC News (@ABC) July 18, 2018

 

Unlike yesterday’s “damage control” press conference, today Trump was focusing on the economy, saying he will focus on workforce training and will make an announcement on job training tomorrow.

Trump also said he may do a separate trade deal with Mexico, and later on, with Canada, adding that the US is “getting closer” in trade negotiations with Mexico, pushing the Mexican Peso higher.

He then said that autos will be the focus of trade talks with the EU on July 25.

Trump also addressed the recent decision by Pfizer not to hike some drug prices, saying “Pfizer responded appropriately to the White House call.”

Finally, Trump touched on Russia, saying “there’s been no president ever as tough as I have been on Russia.”

“There’s been no president ever as tough as I have been on Russia.”

MOMENTS AGO: @POTUS makes remarks on his summit with Vladimir Putin. pic.twitter.com/y7YdqEyx7C

— Fox News (@FoxNews) July 18, 2018

And, in another statement that will surely draw confusion and ire among many, Trump said that “Russia is no longer targeting the US.” One wonders how long before Trump is forced to talk that back too.

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Authored by Alt-Market’s Brandon Smith, originally published at Birch Gold Group,

A few weeks ago we reported the Fed was getting hawkish despite what they were calling “low inflation.”

In that article, we showed rates possibly being raised more than 4 times in 2019. But more importantly, we warned that anyone investing in the market should start preparing to expect the unexpected.

And right now, it looks like the Fed’s bizarre moves are continuing.

This time it involves the yield curve. The yield curve represents the difference in interest rate paid on short-term Treasury notes and long-term Treasury notes in the bond market.

A common signal of economic health from the bond market involves looking at the difference between the 2-year and 10-year rates (also called the “spread”).

Over the last three decades, when 2-year yields are lower than the 10-year bond yields, it signaled a healthy economic outlook.

But when that “spread” shrinks, the yield curve is said to be flattening. If it “reverses” entirely, the yield curve is inverted (or negative).

Since 1980, an inverted yield curve preceded an economic recession with reliable accuracy.

So the yield curve is a fairly reliable signal for imminent recession. And notice the downward trend of the yield curve on the right side of the graph. That indicates a flattening yield curve heading towards inversion.

And when we zoom in, the picture looks even more dire.

As of July 18th, 2018 the Treasury reported the difference between the 2-year and 10-year bonds to be 24 basis points (or 0.24% – see green line in the chart below).

This is the lowest spread since the 2008 Great Recession, and already much lower than the historical graph above.

There is no doubt the yield curve is flattening, and at an alarming pace.

Taking the historical data into account, if this trend continues and it does invert, that would be a signal of an imminent recession.

And one more Fed rate hike could invert it, according to Investing.com.

But strangely, it looks like the Fed wants to sweep the yield curve signal under the rug.

Fed: “When the Yield Curve Creates Doubt, Throw it Out”

So as the curve flattens, and gets ready to signal a recession, at a recent FOMC presentation the Fed examined the prospect of replacing it.

Wolf Richter commented on this presentation, and explained what the “new” indicator examined:

This new indicator – rather than looking at the spread between longer-term yields of two years and 10 years – is looking at the spread between short-term yields. It’s “based on the spread between the current level of the federal funds rate and the expected federal funds rate several quarters ahead derived from futures market prices.”

There was no indication in this meeting that the FOMC members had any doubts about the reliability of the original yield curve signal.

But unusually, the “staff” did hint that the change-of-indicator may be made because they don’t like what the flattening yield curve points to.

From the June 12-13 FOMC meeting minutes:

The staff noted that this measure may be less affected by many of the factors that have contributed to the flattening of the yield curve, such as depressed term premiums at longer horizons.

So the Fed doesn’t favor an indicator that points out the distortions it is creating. Then it replaces that indicator with another one that doesn’t do that?

[ZH: But The Fed now has a bigger problem as their ‘new’ yield curve has inverted too…]

And the divergence between the market and the Fed is extreme…

Seems awful fishy, like one of those shell games where you try to guess which shell the ball is under (but the ball isn’t there).

Don’t Let the Fed’s “Shell Game” Damage Your Retirement

Gold is historically consistent during uncertain market conditions like these. In fact, central banks have remained buyers and demand all over the world is heating up.

So hedge your bets against the Fed “shell game” while there’s still time.

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[ZH: And then there was Larry Kudlow, selling America on paying attention to the 3mo-10Y spread, not the 2Y-10Y spread this morning]

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