Archive - Mar 10, 2013 - Story

Here we go again! RT @christrobbins: Scanner says NYPD called to an "unusual incident" on LIE near exit 23: "drone flying"

— NYCAviation (@NYCAviation) March 10, 2013

Many fine writers have observed that there exists a de facto Ruling Class in Washington. Once men and women get to Congress, no matter how inept, inane, or diabolical they prove to be, the power of incumbency makes dislodging them akin to prying a Reese's Cup from Michael Moore's pudgy fingers. Until the Woodrow Wilson era, incumbent reelection rates hovered between 70 and 80 percent. Since then, however, massive wealth redistribution programs at the federal level -- the New Deal, the Square Deal, the Fair Deal, Great Society, etc. -- began cementing incumbents in place. Constituents dependent upon federal largesse became permanently addicted to these programs and the incumbents who fueled them. This is why nothing ever changes...

Just a few short months from the CFTC's initial 'enquiries' into Intrade (and the election HFT malarkey), the online 'prediction' site appears to done.

To Our Customers:

 

With sincere regret we must inform you that due to circumstances recently discovered we must immediately cease trading activity on www.intrade.com.

 

These circumstances require immediate further investigation, and may include financial irregularities which in accordance with Irish law oblige the directors to take the following actions...

China has become a key locomotive for global growth, in many ways taking over the role traditionally played by the United States in business cycles. It is now the world’s second largest economy, and has grown much faster than any other major economy over the past couple of decades. China’s role as a key driver of global growth brings with it increased scrutiny by investors and economists: a significant slowdown in China – never mind a collapse - would have significant implications for economies and financial markets around the world. This was most recently seen in 2012, when slower economic growth – fostered in large part by policy tightening to alleviate inflation pressures and structural imbalances – generated fears of a “hard landing” that served as a headwind to financial market performance for much of last year. Barclays' Beyond the Miracle series carefully analyzes the transition that China is undergoing from various perspectives, and also discusses the economic and financial market implications. It argues that China will successfully make the transition from ‘economic miracle’ to normal development in the next decade. But there is an important caveat: China must embark on a multi-pronged set of reforms if the country is to move to a slower, more sustainable growth rate that deemphasizes trade, construction and investment and instead places a greater weight on consumer spending as a source of growth. Everything you wanted (and need) to know about China but were afraid to ask...

Based on the coming 'oil revolution', John Mauldin makes the point that the US can run $300-400 billion deficits and the Fed "can print trillions" and the dollar will surge (since the rest of the world demands it). Peter Schiff begins quietly adding that "we don't have that much oil" then goes on to discuss the 'ifs' in Mauldin's thesis, beginning the wildcard that "we can't suppress interest rates indefinitely" as we await this supposed oil export boom to begin - and that somehow the US is expected to generate a budget surplus when even the perpetually optimistic CBO in its most recent forecast gave up on expecting a surplus in the future of America. Ever. The ensuing 3 minutes or so is worth the price of admission as Dollar bull meets Dollar bear in a nose-dripping, face-ripping trip into the future.

Thirty cities at the center of the nation’s most populous metropolitan areas faced more than $192 billion in unpaid commitments for pensions and other retiree benefits, primarily health care, as of fiscal 2009. Pew notes that these cities had 74 percent of the money needed to fully fund their pension plans but only 7.4 percent of what was necessary to cover their retiree health care liabilities. Cities typically count on investment earnings from their pension funds to cover two-thirds of benefits. During the Great Recession, though, returns were lower than expected, and unfunded pension liabilities grew in nearly all of the cities. Even cities with well-funded systems struggled to keep up their yearly contributions as local tax revenue plummeted during the recession, and while pension assets have largely returned to pre-recession levels, they still must make up for years of lost growth, as liabilities continue to rise. So pressure for reforms is not expected to lessen. New York and Philadelphia may have the largest unfunded liability per household, but it is Chicago and Pittsburgh that have the lowest funding levels for pensions and the lowest retiree health care funding levels - while Washington D.C. tops the list in both. Benefits down, taxes up.

The Reserve Bank of Australia’s computer networks have been repeatedly and successfully hacked in a series of cyber-attacks to infiltrate sensitive internal information. The RBA disclosed to The Australian Financial Review (after their investigation) that multiple computers within the RBA’s network were had been infiltrated by a Chinese-developed malicious software. While no details were given on what information was stolen, a defense department official warned, that "the targeting of high profile events, such as the G20, by state-sponsored adversaries... is a real and persistent threat. Cyber intruders are looking for information on... the government’s intentions." The hack appears related to the 2011 G-20 summit, at which the French government have already confirmed over 150 computers were hacked for months with files "redirected to Chinese sites." Australia’s cyber-spy agency, the Defense Signals Directorate, said “there are many examples of [Australian] entities being targeted due to involvement in high profile events” like the G20. Currency wars meet cyber wars - or is it the other way around?

As we discussed previously, an over-indebted, overcapacity economy cannot generate real expansion. It can only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral. The following clip succinctly links Charles Hugh-Smith's 14 points in the global endgame to the cycle of deflation from the business cycle, credit cycle, and more critically to the emerging version sought by our current slew of Central Bankers.

With the growing popularity and perhaps relevance of a globally decentralized currency system in a world adrift in fiat devaluation death-matches, it is perhaps interesting to understand just who these Bitcoin'ers are? The ongoing survey of Bitcoin users (here) has some intriguing results already: The 'average Bitcoin user' is male (96%), 32.7 years old, libertarian / anarcho-capitalist (37%), non-religious (61%), with a full time job (43%), and is in a relationship (56%). The biggest motivation for new users are curiosity, profit, and politics; and 39% of users do not drink, smoke, gamble, or take drugs. Just over half of users have mined bitcoins and the greatest community fear for Bitcoin is “regulatory/legal intervention” followed by ”reputation problems”. Overall more people seem to find Bitcoin intellectually rewarding (70% have learned more about cryptography) than socially rewarding (22% have made friends).

The Dow is at a record high and so are corporate profits - so why does it feel like most of the country is deeply suffering right now?  Real household income is the lowest that it has been in a decade, poverty is absolutely soaring, 47 million Americans are on food stamps and the middle class is being systematically destroyed.  How can big corporations be doing so well while most American families are having such a hard time?  Isn't their wealth supposed to "trickle down" to the rest of us?  Unfortunately, that is not how the real world works. But now we have replaced capitalism with something that we like to call "corporatism".  In many ways, it shares a lot of characteristics with communism, and that is why nations such as communist China have embraced it so readily. Today, most big corporations are trying to minimize the number of "expensive" American workers on their payrolls as much as they can. Right now, the system is designed to continually funnel more money and more power to the very top of the pyramid.  The global elite are becoming more dominant with each passing day. The idea of a very tiny elite completely dominating all the rest of us goes against everything that America is supposed to stand for.  In the end, it will result in absolute tyranny if it is not stopped.

In recent days, FX desk chatter has been of rising concerns over "Germany’s New Anti-Euro Party." 'The Alternative for Germany' party is set to run in the upcoming parliamentary elections in September with a clear goal: "the dissolution of the EUR in favor of national currencies or smaller currency unions." It also demands an end to ESM payments. As evidenced by the recent vote in Italy, voting intentions in Europe are not just ultra-left or ultra-right wing anti-European, but increasingly mainstream. "Democracy is eroding. The will of the people regarding (decisions relating to the EUR) is never queried and is not represented in parliament. The government is depriving voters of a voice through disinformation..." Ultimately, as Der Spiegel notes, however, the party's success will likely have more to do with the state of the common currency as the election approaches. Should the crisis flare up, so too could anti-euro sentiment. That sentiment in Germany now has a political home.

Much virtual ink has been spilled over the decline of the mainstream media, measured by circulation, advertising revenue, or a general sense of irrelevance. Furthermore, news consumers increasingly recognize that the mainstream media outlets are basically public relations services for government agencies, large companies, and other influential organizations. Journalists do very little actual journalism — independent investigation, analysis, reporting. A news outlet that deviates from the Narrative by doing its own investigation or offering its own interpretation risks being cut off from the flow of anonymous briefings which means a loss of prestige and a lower status. In exchange for sticking to the Narrative, they get access to official sources. Give up one, you lose the other. Readers are beginning to recognize this, and they don’t want to pay. Nowhere is this situation more apparent than the mainstream reporting on budget sequestration.

If you really want to know why Beppe Grillo is causing Central Planners throughout the European continent to wet themselves, this video will show you.  There’s a real revolution happening in Italy.  This guy is the real deal and he understands the heart of the whole issue plaguing the world.

It is not Keynes or Kuznets to whom should be looking, much less the ineffable Krugman, but the shining example of Sir John Cowperthwaite whose enlightened strategy of what he called ‘positive non-interventionism’ in 1960s Hong Kong— coupled with a near blanket ban on the collation of official statistics for fear their provision would tempt men into meddling (“If I let them compute those statistics, they’ll want to use them for planning.’’)—allowed the entrepôt to more than quadruple its GDP per capita (it really is a hard habit to break, isn’t it?) in comparison with its colonial masters in Britain, in the space of single generation. A man who eschewed tariffs in an era of protection; who abstained from government borrowing at a time when his peers were fast becoming ’all Keynesians now’; who capped income taxes at a modest 15% in an age when the rich were being ‘squeezed until their pips squeaked’; and who refused all acts of corporate welfare, Cowperthwaite’s assessment of his own role was characteristically modest, once declaring that, as regards his contribution to Hong Kong’s success, "I did very little. All I did was to try to prevent some of the things that might undo it."

Sequesters; continuing resolutions; "spending brakes"; government shutdowns; fiscal restraint..... austerity.  For all the ceaseless talk about the "prudent", "responsible" action out of Congress, even if it is a result of the president-proposed, and Congress endorsed automatic spending cuts enacted as a result of the August 2011 debt ceiling fiasco, we have a minor problem identifying just where this so-called spending restraint is manifesting itself. Perhaps that is because we look at the facts, not the propaganda, or the empty rhetoric. Here as the facts: in the year to date period of the past four fiscal years, starting October 1 and going through the current day in March, the current year has seen the issuance of exactly $635 billion in Federal Debt, which as of Friday crossed the "psychological barrier" of $16.7 trillion. This is the second highest cumulative debt issuance in one fiscal year, surpassing both 2010 and 2011, and lower only compared to the $726.7 billion raked up in Fiscal 2012... just after President and Congress swore to cut back on spending following the US downgrade by S&P.