RIP – The Truman Show of Bubble Finance, 1987-2014

Seth Klarman recently remarked:

"All the Trumans – the economists, fund managers, traders, market pundits –know at some level that the environment in which they operate is not what it seems on the surface…. But the zeitgeist is so damn pleasant, the days so resplendent, the mood so euphoric, the returns so irresistible, that no one wants it to end."

Klarman is here referring to the waning days of this third and greatest financial bubble of this century. But David Stockman's take is that the crack-up boom now nearing its dénouement marks not merely the season finale of still another Fed-induced cycle of financial asset inflation, but, in fact, portends the demise of an entire era of bubble finance.

 

Submitted by David Stockman of Contra Corner blog,

Part 1. Willard M. Romney and The Truman Show of Bubble Finance.

romneycarrey

The above caption was Chapter 27 of my year-ago book entitled The Great Deformation: The Corruption of Capitalism In America”. So I was glad to see this illuminating metaphor given some traction last week by Seth Klarman. The latter is proprietor of the $27 billion Baupost Fund and can fairly be described as one of the greatest hedge fund managers ever. He is also so eminently sensible that he recently returned several billions to his investors—owing to a dearth of reasonable investment opportunities.

Seth pulled no punches explaining why he is not drinking the Cool-Aid:

All the Trumans – the economists, fund managers, traders, market pundits –know at some level that the environment in which they operate is not what it seems on the surface…. But the zeitgeist is so damn pleasant, the days so resplendent, the mood so euphoric, the returns so irresistible, that no one wants it to end.

Klarman is here referring to the waning days of this third and greatest financial bubble of this century. But my take is that the crack-up boom now nearing its dénouement marks not merely the season finale of still another Fed-induced cycle of financial asset inflation, but, in fact, portends the demise of an entire era of bubble finance.

The latter has had a long gestation—arguably reaching back 100 years. The Great War of 1914-1918 did supplant the stern financial discipline of the market-driven international gold standard with the backstops, bailouts and moral hazards of central bank managed money; the 1930s did install activist state management of national economies almost everywhere, with its systemic bias toward ever higher public and private debt ratios against current income; the “guns and butter” fiscal excesses of Lyndon Johnson did unhorse the William McChesney Martin style of sound money rectitude at the Fed and planted a torpedo in the side of the imperfect but serviceable Bretton Woods system of global monetary order; and Richard Nixon did finish it off with his perfidious doings at Camp David in August 1971.

Indeed, the days of honest capital markets were numbered by Tricky Dick’s proclamation that the richest nation on the planet would default on its obligation to pay its international debts in gold. On the surface, this body blow to global financial stability and discipline was done simply for the sake of avoiding a recession before November 1972—even if a decade-long boom of war spending and external borrowing had made a day of economic reckoning unavoidable.

But the real significance was that Nixon’s Camp David perfidy officially installed Milton Friedman’s Folly at the heart of the financial system. The presumption now was that a 12-member monetary politburo in the Eccles building could perfectly manage the money supply and thereby eliminate the business cycle, optimize the growth of GDP, jobs and living standards and enable market capitalism to prosper all the better.

Arthur Burns soon demonstrated that even flinty conservatives could not resist the temptation to “improve” short-run macroeconomic performance by gunning the Fed’s now unshackled printing presses–especially under the duress of ruthless bullies like Richard Nixon. To be sure, the resulting Great Inflation of the 1970s sharply reduced real economic growth, destroyed savings and habits of thrift and unleashed a global tide of inflationary speculation in oil and commodities.

So these untoward developments should have been a flashing red warning sign. Contrary to professor Friedman’s fathomless political naiveté, Washington was not about to populate the Fed’s open market committee with monetary eunuchs who would spend their days playing scrabble and reading books reviews— breaking only occasionally to adjust the monetary dials and thereby keep M1 on the professor’s stipulated eternal path of 3% growth.

Ironically, however, rather than discrediting statist economic management, the opening failures of fiat central banking spurred even more misbegotten projects and interventions. The 1970s bipartisan folly of wage and price controls, the massive Nixon-Ford-Carter boondoggles and regulatory interventions designed to achieve “energy independence” and endless tax and spending schemes to revive economic growth and spur jobs creation were its legacy.

Even Paul Volcker’s resolute and decisive actions to crush double-digit CPI inflation were soon badly misinterpreted by both Washington and Wall Street. Volcker’s heroic stand had been a desperate necessity occasioned by the wholly unnecessary  post-Camp David Fed, but it eventually became a totem to the cult of central banking.

In fact, the outbreak of runaway inflation, which saw the CPI rise by 200 percent between 1967 and 1981, had been a shocking departure from all prior peacetime experience. Under the sound money regime of William McChesney Martin prior to that, annual inflation had been corseted in a 1-2 percent annual range, and couldn’t have broken out beyond that under a disciplined monetary regime like Bretton Woods.

So after Volcker, central bankers could take fulsome credit for “taming” CPI inflation when, in fact, they barely returned it to the pre-Camp David status quo ante.  Alan Greenspan was the great pretender on this score.  Under what became celebrated as his Maestro Act, he claimed to be deftly managing a booming stock market, robust economic growth and disinflation all at the same time.

In fact, CPI inflation during Greenspan’s 19-year reign averaged 2.7% annually—a rate of gain that was the worst peacetime record of any Fed Chairman before Camp David and which, in any event, would have destroyed nearly 60% of laboring man’s savings over a 30-year working lifetime.

In truth, even the modest CPI disinflation that did occur on the Greenspan watch was a bastard step-child of relentless, unprecedented monetary inflation. During the 19-years after 1987 the Fed’s balance sheet rose more than three-fold—from $275 billion to nearly $900 billion. Yet after it had been unhinged by Burns and the hapless William Miller and had saturated the domestic banking system with massively excessive reserves, the Fed’s balance sheet need to barely grow at all in order to preserve Volcker’s victories.

By the 1990s, however, the global economy had become populated by exactly the kind of currency-pegging mercantilist exporters that Friedman’s floating money inexorably spawned. The good libertarian professor actually dreamed that the “free market” would determine exchange rates when self-evidently his unanchored money gave rise to ”dirty floats” everywhere and increasingly aggressive statist management and manipulation of national monies—especially among the export economies of East Asia and the hydrocarbon economies of the Persian Gulf.

In short, the Maestro’s profligate outpouring of dollar liabilities did not cause CPI inflation domestically because the American economy is not a closed-system, nor does it conform to the implicit Keynesian model of the GDP as a giant economic bathtub. Instead, the outpouring of Greenspan’s printing press dollars streamed into the global economy where a convoy of currency-pegging EM central banks–led by the Peoples Printing Press of China—bought them up hand-over-fist and sequestered them in their official reserve stashes, thereby flooding their own economies with even more prodigious outpourings of RMB, won, ringgit, rupiah, Taiwan dollars and riyal.

The resulting vast and sustained, albeit artificial, stimulus to domestic demand did cause the rice paddies to be drained of cheap labor; did generate a massive expansion of export factories in east Asia; did fuel stupendous booms in alumina, copper, nickel, iron and coal mining in North China, Australia, Brazil, Russia, much of Africa and even Appalachia; and did ignite a ship-building frenzy—especially in giant dry-bulk carriers—- in the great yards of China and Korea. In all, it was a powerful but unsustainable disinflationary force.

During the quarter century after Greenspan’s panicked bailout of Wall Street in the October 1987 stock market crash, the global monetary and investment boom triggered by the mad money printers in the Eccles Building kept labor inflation flat on its back and price gains for manufactured goods in world trade at virtually zero year-in and year-out. But that did not reflect central banking virtuosity; it was an unprecedented one-time monetary boom that sucked all available under-utilized labor into the world economy and facilitated monumental investment booms from Shanghai to Dubai, Istanbul and Belo Horizonte.

Meanwhile, the inflation of financial assets has proceeded at a staggering pace—-partially reflecting the growth of hothouse economies worldwide and partially the expansion of valuation multiples to historic extremes.  Overall, the Fed’s balance sheet has grown from $300 billion in 1987 to $4.3 trillion at present—a gain of 14X. Likewise, the NASDAQ index is up 11X since the Greenspan era of bubble finance incepted and the S&P is up 8X.

By contrast, Greenspan inherited a nominal GDP of $5 trillion. Despite a 120 percent increase in consumer prices since then, it is only $17 trillion today—a gain of just 3.4X.  More pertinently, real GDP is up just 0.97X despite a substantial increase in the working age population. And today’s real median household income of $51,000 is essentially unchanged since Greenspan swearing-in ceremony—-an occasion when, unlike his first oath-taking as CEA chairman, he was visibly not accompanied by Ayn Rand.

In short, the Fed has become a serial bubble machine leading a convoy of global central banks engaged in the same untoward craft. Self-evidently, 25 years of this have fully corrupted money markets and capital markets; there is no longer anything that passes for honest price discovery–only an endless high velocity churning of financial assets in response to the word clouds and liquidity injections emanating from the central bank.

And the chart pattern is now also abundantly clear: with each new bubble cycle, the Wall Street gamblers buy the dips relentlessly, indefatigably  and insouciantly until the inflation becomes so extreme that a random event or black swan finally unnerves the last bid in the casino. Then the house of cards comes crashing down. Yet the gamblers on the Truman Show never seem to see it coming because as Seth Klarman observes life in the bubble is too resplendent and the mood too euphoric.

But there is also a larger factor at work. There is no policy debate or challenge to the bubble machine in the Eccles Building because both party’s have embraced the doctrines of bubble finance. For the GOP this is especially convenient because it enables Republican politicians to bloviate endlessly against an abstraction called Big Government, while embracing the rank statism of massive monetary inflation and endless bailouts and puts for the Wall Street gamblers who fund their continuing grasp on political power in the beltway.

In the case of progressive Democrats, the betrayal is even more insidious. Hooked on the non-sensical Keynesian doctrine that borrowing is good and saving is bad, the so-called progressives have been a sucker for the Fed’s regime of lower interest rates, forever longer. That this regime leads to financial repression and preposterously low  “cap rates” throughout financial markets seems to escape their grasp entirely; and that rock-bottom cap rates cause drastic over-valuation of financial assets and massive windfalls to the capital owning speculative classes—does not even remotely register.

By the 2012 election this bipartisan farce had reached an extreme. Obama ran against the 1% even though the Fed, now packed with money printers he had appointed, showered the upper strata with the greatest unearned windfall in recorded history. Worse still, his opponent was a certified member of the 1%—yet didn’t have a clue as to how he got there.

While Klarman is correct that there are many Trumans in the great show of bubble finance now nearing its apotheosis, Mitt Romney was surely Jim Carrey himself. He claimed that a lifetime of LBO gambling had taught him the secrets of economic growth and endowed him the wherewithal to be a “job creator”.

Worse still, his leading economic advisor had claimed that the Fed’s disastrous housing bubble had been a splendid exercise in prosperity management and that Bernanke had done a virtuoso job bailing out the Wall Street gamblers after their toxic waste factories collapsed in the dying days of the housing disaster.

In my chapter on the Truman Show, I had further developed the notion that Romney’s candidacy marked the final defeat for any traditional notions of sound money and financial rectitude. Below is some excerpts from the Great Deformation that demonstrate that it is not only Klarman’s economists, fund managers, traders and market pundits who are in the Truman Show of bubble finance, but the entirety of the political system, too.

Had the Gipper been asked in 2012 about stopping the reign of the mad money printers, he might have replied:  if not us, whom? If not now, when?  As shown below, Romney did not even understand the question.

Excerpts from chapter 27 of the Great Deformation: The Corruption of Capitalism in America here


    



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More Hypocrisy from Warren Buffett as He Structures Deal to Avoid $400 Million in Taxes

Warren Buffett epitomizes everything that is wrong with the global economy, and the U.S. economy specifically. He is the consummate crony capitalist, a brilliant yet conniving oligarch who intentionally plays on the gullibility of the masses to portray himself as one thing, when in reality he is something else entirely.

He publicly talks about how rich people need to pay more in taxes, then turns around and pioneers new ways for his company Berkshire Hathaway to avoid hundreds of millions in taxes. He thinks that by going on television stuffing ice cream cones and hamburgers in his mouth and acting all grandfatherly that no one will notice who he is really is and the incredible hypocrisy of his actions.

I’ve pointed out “Uncle” Warren’s hypocrisy previously on these pages, most recently in my post from last March titled: Crony Capitalist “Uncle” Warren Buffett Drives Company Profits Using Derivatives.

While that was pretty blatant hypocrisy, Buffett’s latest elaborate scheme to avoid $400 million in capital gains taxes from the disposition of a large chunk of Berkshire Hataway’s Washington Post stake (which was acquired in the 1970s for $11 million) absolutely takes the cake.

The Street published an excellent article on the topic. Their conclusion at the end of the piece says it all:

Bottom Line: Warren Buffett is pioneering new ways to avoid capital gains tax, even as he is President Obama’s richest spokesperson for progressive income tax policy. 

More from The Street:

NEW YORK (TheStreet) – Berkshire Hathaway may have avoided about $400 million in taxes by exiting its long-time stake in Graham Holdings – formerly known as The Washington Post Company – through an asset swap with the company that will add Miami-based TV station WPLG and hundreds of millions in cash to Berkshire’s coffers. Wednesday’s transaction also may also break new ground in how large investors structure deals to avoid taxes on their investment gains.

Berkshire’s deal with Graham Holdings is structured in a way that may allow the Warren Buffett-run conglomerate to exit a multi-decade investment in Graham Holdings without paying any capital gains tax, Robert Willens, an independent tax expert, said in a Friday telephone interview.

The cost-basis for Berkshire’s 1,727,765 million shares was $11 million, Warren Buffett said in Berkshire’s 2000 annual letter to shareholders. Now, Berkshire is seeking to exit Graham Holdings at a value in excess of $1.1 billion.

Applying a 38 percent tax rate (federal plus state and local taxes) would bring Berkshire to about $400 million in tax liability, Willens said. The swap orchestrated between Berkshire and Graham Holdings, however, is likely to reduce Berkshire’s tax liability to $0.

continue reading

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The Global Death Cross Just Got “Deathier”

“X” continues to mark the spot of the death of global investor rationality…

 

Well that didn’t take long… note the brief hope-fueled bump in world GDP that has now crumbled back to record lows for hopes in 2014…

 

Still it appears stocks believe that 2015 or 2016 or 2017 will be awesome…

 

h/t @Not_Jim_Cramer


    



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Reason Nominated for 12 Maggie Awards!

I’m happy to announce that Reason scooped up a whopping 12
nominations for Maggie awards from the Western Publishing
Association this year

In addition to
being nominated for the best in our print category, Politics
& Social Issues (where we are up against Mother
Jones
Pacific Standard,
and Sierra), we also grabbed finalist slots
for Best Blog, Best Video Channel,
and Best Use of Social Media.

We picked up specific nominations for:

Jacob Sullum’s “Pot Goes Legit” cover
story from November
.

Our “Be
Paranoid” cover package in October
, including Brian Doherty,
Ronald Bailey, and Scott Shackford on “what we should have known
about government spying before Edward Snowden’s leak, why even
innocent people have plenty to fear, and what you can do about
it” in “Be Very
Afraid
,” Shane Harris on “Drones
Away
,” and the rest of the issue.

Matt Welch’s Editor’s
Note
in that same issue also won a finalist spot.

July’s cover interview with Shereen El Feki, “Sex
in the Arab World
.”

Two videos were selected:

Amateur Beats Gov’t at Digitizing Newspapers: Tom Tryniski’s
Weird, Wonderful Website

 

LA County Sheriffs Hassle Photographer, Trample Constitution,
Get Lauded by Bosses

Our “Three Reasons” feature also got a nod,
specifically: 

Three Reasons Not to Go To War with Syria

And Three Reasons All Kids Should be FORCED To Watch South
Park!

Winners will be announced on May 2.

Here are a few things you could do to celebrate:

1) Subscribe to
the print magazine
, for less than $15 a year!
2) Subscribe to just
about any e-version of the mag
 you can imagine!
3) Donate money to the
Reason Foundation
, the 501(c)3 nonprofit that makes all this
journalism (and much, much more) possible!

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Putin Strikes Back: Russia’s Sanctions List Said To Include US Senators, High Ranking Administration Officials

Ever since the theatrical announcement of asset freezes and other related sanctions of various Putin aides and Russian military leaders earlier today by both the US president and the EU, the nagging question was when and how would Vladimir Putin retaliate, with tomorrow’s Putin address to the joint session of Parliament seeming as a probable time and place. It now appears that Putin’s personal retaliation has been leaked in advance, and according to the Daily Beast’s Josh Rogin, it will involve an in kind response where various US senators and highly placed officials will be banned from visiting Russia, and likely also see their particular assets – if any- in Russian custody promptly frozen.

From the Beast:

U.S. senators, congressmen and top Obama administration officials are sure to be on Vladimir Putin’s sanctions list; a response to the Obama Administration’s announcement on Monday that 7 Russian officials and 4 Ukrainian officials would be barred from holding assets or traveling to the United States.

 

Putin is expected to release his retaliation list as early as Tuesday and while the final list is still being crafted, it will include top Obama administration officials and high profile U.S. senators, in an effort to roughly mirror the U.S. sanctions against Russian officials and lawmakers, according to diplomatic sources. At the top of the list in Congress is Senate Majority Whip Dick Durbin, who recently co-authored a resolution criticizing Russia’s invasion of Crimea.

 

Durbin’s inclusion on Putin’s list would mirror Obama’s naming of Valentina Matvienko, the head of the upper chamber of the Russian Duma. Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell are not expected to be on the Russian sanctions list.

Another person who will most certainly appears on the list is perpetual war hawk, and the person who responded to Putin’s own Syrian near-war Op-Ed, John McCain.

“You think I’m not going to be on it?” McCain said. “I would be honored to be on that list.” McCain said he would not be impacted financially by being subject to a visa ban and asset freeze in the Russian Federation. “I guess I’m going to have to try to withdraw my money from my secret account in St. Petersburg,” he joked.

His sentiment mirrors that of Putin aide Surkov who earlier claimed to “being proud to be on U.S. black list” according to Interfax. Paradoxically, it is rapidly becoming a badge of honor to be named on the opposing nation’s sanctions list, which instead of hurting those politicians – and as McCain said he hardly has a St. Petersburg account – it will raise their status in the eyes of the general public.

Of course, if and when the sanctions expand to include various oligarchs and/or mega corporations on either side of the border, the fallout would be far more dramatic should Russian billionaire owners of New York City penthouses or Los Angeles mansions be forced to liquidate their holdings, or if E&P companies in Russia suddenly find their assets partially nationalized. It certainly wouldn’t be the first time.

Who else.

Other names that could be on the Russian sanctions list, although not confirmed, include Sens. Robert Menendez (D-NJ) and Bob Corker (R-TN), the leaders of the Senate Foreign Relations Committee who are leading the sanctions drive in the Senate, and Victoria Nuland, the Assistant Secretary of State for Europe, who has been heavily involved in working with the Ukrainian opposition that ousted the Yanokovich government.

Where it gets far more surreal is that the Beast reports that “one U.S. official who can rest easy is White House Press Secretary Jay Carney, who will not be on Putin’s sanctions list. It’s been an ongoing rumor in administration circles that Carney is quietly lobbying to replace former Ambassador Mike McFaul as the next U.S. Ambassador to Moscow, who will also not be on the list.” Well if the US really wants to accelerate WWIII, it would indeed be best served by sending Carney to Bolshoy Deviatinsky Pereulok No. 8.

To be sure, the initial round of escalations achieves nothing besides merely antagonizing the two sides further. In this case the Beast is correct when it says that “the tit for tat sanctions are not likely to convince either side to back down from their position over the Russian invasion of Crimea, McCain said.“If we acquiesced to that, that would be a green light for him to go for Moldova, where there are also Russian troops,” said McCain. “That’s the problem with this appeasement policy.”

So what could next steps look like?

McCain is advocating for a series of more serious steps, which include the immediate arming of the Ukrainian military, which the administration has rejected for now, promising to help the Ukrainian military develop over the long term, rethinking U.S. approaches to Putin, and restarting U.S. missile defense projects in Eastern Europe.

 

There are signs that Putin is preparing a scenario ahead of a possible invasion of Eastern Ukraine, including sending Russian intelligence agents inside Ukraine to stir up unrest as a pretext for a possible expansion of the invasion.

 

“I’m not sure about Eastern Ukraine, but Putin has put everything in place for a de facto partition of Eastern Ukraine,” he said. “Will he do it? I don’t know. But I don’t think he can be discouraged from that by these limited actions by the United States… We must commit to the ultimate return of Crimea to Ukraine, just as we promised to the so called captive that they would eventually be free of Soviet domination.”

Short of the nuclear option, literally, which would be to plant more anti-ballistic missiles in NATO countries bordering the former USSR states, there is one almost as serious alternative:

“Our actions today demonstrate our firm commitment to holding those responsible accountable for undermining the sovereignty and territorial integrity of Ukraine,” Treasury Secretary Jack Lew said in a statement. “We are thoroughly prepared to take increasing and responsive steps that would impose further political and economic costs.  At the same time, we want to be clear that a path of de-escalation remains available to the Russians, should they choose to use it.”

And just as likely is Russia willing to take steps which would result in the complete liquidation of its $130 or so billion in US Treasurys and announcing it would transact in all currencies but the dollar going forward. Up to and including gold of course.

One thing is certain: while the Crimea referendum’s outcome was priced in well in advance, we are now in completely uncharted waters, and the only question is which side will push the other just that extra inch too far, forcing disproportionate retaliation. Because if one thing has been made clear by now, it is that a crash in foreigner-owned Russian stocks, and not to mention the S&P, will hurt Obama far more than his Russian opponent.


    



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Lessons For US Citizens From The Deposit Confiscation In Cyprus

Submitted by Simon Black of Sovereign Man blog,

It was almost exactly one year ago to the day that an entire nation was frozen out of its savings… overnight.

Cypriots went to bed on Friday thinking everything was fine. By the next morning, they had no way to pay bills or buy food.

It’s certainly a chilling reminder of how quickly things can change. And why.

The entire crisis sprang from a mountain of debt. The government had accumulated too much debt. The banking system had accumulated too much debt.

And banks had lost a lot of their customers’ money making risky, stupid bets on things like Greek government bonds.

By March 2013, Cypriot banks were almost entirely devoid of cash.

Sure, customers could log on to a website and check their bank balances.

But there’s a huge difference between a number displayed on a screen, and a well-capitalized bank that actually holds abundant cash.

The government was too insolvent to bail anyone out. And as a member of the eurozone, Cyprus didn’t have the ability to print its own money.

So they did the only thing they could think of– confiscate customer deposits.

And they imposed capital controls on top of that to make sure that people couldn’t withdraw their remaining funds out of the banks as soon as the freeze was lifted.

It was a truly despicable act. But again, even though it all unfolded overnight, the warning signs were building for at least a year. Especially the debt.

When countries, central banks, and commercial banks accumulate too much debt, and specifically too much debt relative to assets, you can be certain there is trouble ahead in the system.

Think about it like your own personal finances. If you have a million dollars in debt, that seems like a lot. But if you own a home worth $5 million, you are still in good shape financially.

If, on the other hand, you have a million dollar mortgage for a home that’s worth $250,000, you’re in deep trouble.

The US government’s official, ‘on the books’ debt now exceeds $17.5 trillion. This is an enormous figure.

If the Uncle Sam just happened to have $20 trillion or so laying around, however, this debt load wouldn’t be a big deal. But that’s not the case.

By the US government’s own admission, their own financial statements show net equity (assets minus liabilities) of MINUS $16.9 trillion.

That’s including ALL the assets: Every tank. Every bullet. Every body scanner. Every highway.

Then you have to look at the Central Bank, which is itself teetering on insolvency.

The Federal Reserve’s balance sheet has exploded since 2008, and right now the Fed’s net equity (assets minus liabilities) is about $56 billion.

That’s a razor-thin 1.34% of its $4 trillion in assets (it was 4.5% before the crisis).

Here’s the thing: in its own annual report, the Fed just admitted that it had accumulated ‘unrealized losses’ totaling $53 billion. This is almost the Fed’s ENTIRE EQUITY.

So in the Land of the Free, you now have an insolvent government and insolvent central bank underpinning a commercial banking system that is incentivized to make risky, stupid bets with their customers’ money.

To be fair, I’m not suggesting that bank accounts in the US are going to be frozen tomorrow morning.

But a rational person should recognize that the warning signs are very similar to what they were in Cyprus last year.

And if there is one thing we can learn from the Cyprus bail-in, it’s that it behooves any rational person to have a plan B, even if you think the future holds nothing but sunshine and smiley faces.

Having a plan B can mean a lot of different things depending on your situation– moving some funds abroad, securing a second source of income, having an escape hatch overseas, owning physical gold, holding extra cash, etc.

You’re not going to be worse off for having a plan B based on the possibility that there -could- be some problems down the road.

But if those consequences are ever realized,and Plan B becomes Plan A, it might just turn out to be the smartest move you’ve ever made.

If you think this makes sense then I encourage you to sign up for our free Notes From the Field if you haven’t already done so, and you can also share this article with your friends below so they’re not without a plan B if things do take a turn for the worse.


    



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HHS Approves Marijuana Study for Veterans With PTSD

In a surprising move, the feds have
approved a University of Arizona study of medical marijuana
for
treating veterans with posttraumatic stress disorder (PTSD). Since
marijuana is still federally classified as a Schedule I controlled
substance—a “dangerous drug” with “no accepted medical use”—medical
research on marijuana in America is generally illegal.

This is one of just two times the federal government has
approved clinical trials involving medical marijuana in the past
decade. A March 12, 2014, letter from
the Department of Health and Human Services (HHS) cleared the
study’s funder, the Multidisciplinary Association for Psychedelic
Studies (MAPS), to buy medical marijuana from the one
federally-sanctioned research farm in the U.S. 

“MAPS has been working for over 22 years to start marijuana drug
development research, and this is the first time we’ve been granted
permission to purchase marijuana from NIDA,” the group said in a

statement
. The study must still be approved by the Drug
Enforcement Administration (DEA), but MAPS says its “optimistic”
the DEA will approve the study in a timely
manner. 

The HHS decision “surprised marijuana advocates who have
struggled for decades to secure federal approval for research into
the drug’s medical uses,” Associated Press reports.
Researchers, advocates, and general folks for sensible drug policy
hope it’s a signal that federal attitudes toward drug research are
starting to shift.

So far, it’s been a good month all around for drug research. In
early March, The Journal of Nervous and Mental
Disease
 published results from
the first study in four decades to examine LSD’s
therapeutic potential
in humans. 

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Gary Johnson on Why the LP Is Better Than GOP-Lite; Ralph Peters and Stephen Hayes on Why Libertarians Are ‘Naive’ About Foreign Policy

On Friday night’s special “What’s
the Matter With Libertarians
” episode of The
Independents
, 2012 Libertarian Party presidential nominee
Gary Johnson made the case that Libertarians, not libertarian
Republicans, are where the best action is at in American
politics:

Also on the show to beat up on libertarian foreign policy
pronouncements were former Lt. Col. Ralph Peters and The Weekly
Standard’
s Stephen Hayes:

More Independents video at this
link
. The live show returns tonight at 9 p.m. ET, 6 p.m.
PT.

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Tennessee’s Gay Marriage Recognition Ruling Narrow But Important

The market for gay wedding stock photos is really taking off.Another federal judge has
gotten involved in a state’s same-sex marriage recognition ban.
This time, in Tennessee, U.S. District Court Judge Aleta A. Trauger
very narrowly ruled Friday that the state
cannot apply its ban to three gay couples
who were legally
married in other states.

Similar to a recent decision in
Kentucky
, the ruling
(PDF) does not require Tennessee to hand out licenses to gay
couples and start marrying them off. Rather, the judge is requiring
the state to recognize three gay marriages legally performed
elsewhere.

Or, rather, the judge has granted a preliminary injunction
forbidding Tennessee from applying its ban on recognition to the
three couples named in a lawsuit against the state. Court rulings,
huh? The judge ruled that the lawsuit is likely to win its
challenge to the state’s law moving forward, and so she is
implementing the injunction to prevent any harms that may occur to
the couples in the lawsuit due to Tennessee’s ban. A woman in one
of the couples is pregnant. If something happens to her, would the
state be able to acknowledge her partner as the child’s other
mother? That’s one of the reasons Trauger gives for her
injunction.

Trauger invoked last year’s United States v. Windsor
Supreme Court ruling, where the majority determined that the
federal government cannot refuse to recognize same-sex marriages
from states where it’s legal. The judge wrote it’s likely the same
rule would apply to Tennessee as well. In her summary, Trauger
concluded: “At some point in the future, likely with the benefit of
additional precedent from circuit courts and, perhaps, the Supreme
Court, the court will be asked to make a final ruling on the
plaintiffs’ claims. At this point, all signs indicate that, in the
eyes of the United States Constitution, the plaintiffs’ marriages
will be placed on an equal footing with those of heterosexual
couples and that proscriptions against same-sex marriage will soon
become a footnote in the annals of American history.”

I’m not entirely sure another Supreme Court ruling may be
necessary on gay marriage with the way things are moving, though I
still expect one to come within five years. I’m not sure the
Supreme Court actually has to rule that same-sex marriage must be
legally recognized in all 50 states. All it has to do is rule that
United States v. Windsor applies to the states as well.
That means states have to recognize other states’ legal marriages.
At that point, it would be silly for any state to continue to
refuse to hand out its own wedding licenses to gay couples. If it
were legally required to recognize and offer the same benefits to
gay couples who were wed in other states, it would be kind of
pointless not to just allow it themselves. Of course, it wouldn’t
be out of the realm of possibility for any state, out of pettiness,
to cling to such a rule and require its residents to trek to other
states to get legally wed.

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