http://www.zerohedge.com/fullrss2.xml en Guest Post: Investors Are "Whistling Past The Graveyard" Over Global Geopolitics http://www.zerohedge.com/news/2014-04-23/guest-post-investors-are-whistling-past-graveyard-over-global-geopolitics <p><em>Submitted by John Browne of <a href="http://www.europac.net/commentaries/investors_ignore_frightful_geopolitics">Euro Pacific Capital</a>,</em></p> <p><strong>When the former Soviet Union collapsed almost 25 years ago, most global strategic forecasters assumed that the U.S. would adapt pragmatically to her new status of sole world superpower. Instead she has pursued a variety of misguided nation-building adventures and has largely shrunk from her primary responsibility of neutralizing the ambitions of petty dictators around the world. </strong>From this perspective, America&#39;s multi-generational expenditures on military personnel and equipment has become more of a stealth economic stimulus program rather than an insurance policy for global stability.&nbsp;</p> <p><strong>The massive failures of U.S. intervention in Vietnam, Iraq and Afghanistan have caused the Western Allies to fear the future deployment of troops.</strong> Instead they have resorted to preserving an impression of strength by pressing their agenda with minor nations like Serbia, Libya and Syria through a combination of endless diplomacy and relatively riskless air power. In doing so, they exposed not just a reduced military capability, but also far worse, a lack of will. This vital fact was not lost on America&#39;s potential enemies.</p> <p><em>Sensing this weakness, President Vladimir Putin of Russia, who is likely the continent&#39;s most aggressive power player since the Second World War, felt free to redraw the map of Europe when political events in Ukraine did not go his way. </em><strong>On the economic front, the crisis has vividly illuminated the differing interests of the European Union (EU) and the U.S.</strong> According to Eurostat, the EU imported 212 billion euros ($293 billion USD) worth of goods from Russia in 2012, while the U.S. imported a mere $29 billion. Furthermore, eight of the EU member nations are in trade surplus with Russia and the adverse trade balances of the remaining nineteen EU nations are relatively small. The difference in relative costs between the U.S. and these European nations that would arise from isolating Russia with major sanctions, let alone military action, are clear.</p> <p><strong>Thus far the Western response to his power grab has been underwhelming in the extreme.</strong> The minor financial sanctions placed on Russian oligarchs tied to Putin&#39;s inner circle, and the few guided missile destroyers that have been deployed to the Black Sea will do little to change the trajectory of the Kremlin. It should then come as no surprise that Russian pressure on Ukraine did not stop with its fast motion annexation of Crimea, but has been steadily increasing in the last few weeks. In early April, cities throughout eastern Ukraine experienced the occupation of government buildings and police stations by &#39;unidentified&#39; protestors, whom many suspect are Russian special forces in plain clothes. By mid-April, speculation was rife that Ukraine might be headed for civil war, providing an excuse for Russian intervention to &#39;keep the peace&#39; and, like Hitler in the late 1930&#39;s, to protect his own countrymen living in a bordering nation.</p> <p><strong>In Iraq and Afghanistan, the U.S. and its NATO Allies squandered large quantities of blood and treasure in fruitless experiments to alter the political and sociological realities of the Muslim world.</strong> However, in the Ukraine, which yearned for western-style democracy, the West offered merely money and rations. In doing so, they eroded drastically the age-old force multiplier of international prestige.</p> <p><strong>President Putin appears set on a clear strategy to re-colonize Russia&#39;s old &#39;empire&#39; by means of so-called salami tactics</strong> in which he takes small slices of territory too minor to spark a conflict. But the slices ultimately pile high enough to provide a satisfying meal. If Putin&#39;s victory in the Crimea is followed by success in the Ukraine, his next targets likely will be the so-called &#39;Baltics&#39; of Estonia, Latvia and Lithuania. All of which are NATO countries possessing the guarantee of mutual defense from other NATO members including the U.S., UK, Canada and Germany. <strong>The potential for Putin to prove false this myth of guaranteed defense could usher the world into a world of much higher uncertainty.&nbsp;</strong></p> <p><strong>On the other side of the globe, China is building its military,</strong> exerting increasing influence and extending its territorial claims in the eastern Pacific. Worse still, China and Russia appear intent on destroying the U.S. dollar&#39;s privileged role as the international Reserve currency. Any major loss of this role could threaten severe declines for the U.S. dollar and spikes in U.S. interest rates. In short, a loss of U.S. dollar&#39;s Reserve status would create a sudden and massive strategic change in a world to which entire populations have grown accustomed since WWII.</p> <p><strong>Despite the considerable risks created by the situation in eastern Europe, most western stock, bond and property markets, fed on massive central bank fiat liquidity, continue to flirt with new highs. (See an explanation of this in our latest report <a href="http://r20.rs6.net/tn.jsp?e=0011mJ8-jev0n0-sx8sSJx0zfVvxGJKvA0fZuCK8XhqB6_SOUHLc02x7fz-R5AWJjPxnb2nTBUTQURxjzBpUj-L4N1tZt2UPyHT0LAu9QsvRhXqrR1IH5galcbf3fxyQtI7" style="color: rgb(0, 0, 255); text-decoration: underline;" target="_blank">Taxed by Debt</a>) This strikes me as an exercise in whistling past the graveyard.</strong> In the short term, investors may continue to profit from risk-taking in financial markets. However, as recessionary forces mount, commodity prices can be expected to drop, even exerting some downward pressure on precious metals. In the longer term however, as realization that serious threats exist, including the possibility of armed conflict in continental Europe, precious metals once again may shine as a safe haven asset.</p> <div><strong>In the larger picture, much of the geopolitical balance of power that has been in place for much of the past 25 years will be tested on the banks of the Black Sea. Investors should take a few minutes from their daily technical chart analysis to consider these major developments.</strong></div> http://www.zerohedge.com/news/2014-04-23/guest-post-investors-are-whistling-past-graveyard-over-global-geopolitics#comments Afghanistan Bond China Eastern Europe Estonia European Union Germany Guest Post Iraq Latvia Lithuania Precious Metals Reserve Currency Ukraine United Kingdom Vladimir Putin Wed, 23 Apr 2014 21:20:30 +0000 Tyler Durden 487637 at http://www.zerohedge.com Apple's Total Cash Holdings Decline For The First Time Since Before Lehman http://www.zerohedge.com/news/2014-04-23/apples-total-cash-holdings-decline-first-time-lehman <p>Of all the charts from Apple&#39;s just released earnings&#39; report, in which the company beat handily on both Revenue and EPS, driven exclusively by iPhone sales which came at 43.7 million units compared to 37.7 expected as iPad sales missed wildly at 16.4 million compared to the 19.7 million expected, such as this one showing the quarterly revenue...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20Q1%20Revenue.jpg"><img height="329" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20Q1%20Revenue_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>... the margin breakdown</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20gross%20profit.jpg"><img height="324" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20gross%20profit_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>... and the unit sakes.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20sales%20breakdown.jpg"><img height="340" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20sales%20breakdown_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>Perhaps this one is the most important: Apple&#39;s total cash and cash equivalents, for the simple reason that for the first time since before the Lehman collapse, Apple actually burned through cash, or $8.2 billion to be precise, which brought the company&#39;s cash hoard to just over $150 billion.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/aAPL%20CASH.jpg"><img height="309" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/aAPL%20CASH_0.jpg" width="600" /></a></p> <p>Why? Because of the very generous corporate dividend and buyback program, which is now about to increase by another 50% as AAPL just announced it would increase the amount of stock bought back from $60 billion to $90 billion.</p> <p>And now, watch as Apple has no choice but to issue more and more debt to satisfy its investor dividend and stock buyback demands.</p> <p>+++++++++++++++</p> <p>At a glance:</p> <p>The Earnings Headlines:</p> <ul> <li><strong>*APPLE 2Q SALES $45.65B , EST. $43.53B</strong></li> <li><strong>*APPLE 2Q EPS $11.62 , EST. $10.17</strong></li> <li><strong>*APPLE 2Q GROSS MARGIN 39.3%, EST. 37.7%</strong></li> <li><strong>*APPLE SEES 3Q TAX RATE 26.1%</strong></li> <li><strong>*APPLE SEES 3Q REV. $36B-$38B, EST. $37.88B</strong></li> <li><strong>*APPLE SEES 3Q GROSS MARGIN 37%-38%, EST. 37.3%</strong></li> </ul> <p><u>The Capital Structure Shift:</u></p> <ul> <li><strong>*APPLE SETS 7 FOR 1 STOCK SPLIT, BOOSTS BUYBACK TO $90B</strong></li> <li><strong>*APPLE BOOSTS QUARTERLY DIVIDEND TO $3.29-SHR FROM $3.05</strong></li> <li><strong>*APPLE EXPECTS TO ACCESS PUBLIC DEBT MARKETS DURING 2014</strong></li> <li><strong>*APPLE SEES ACCESSING PUBLIC DEBT MARKETS DOMESTICALLY, INTL</strong></li> <li><strong>*APPLE SEES TERM DEBT SIMILAR TO AMOUNT RAISED IN 2013</strong></li> </ul> <p>We suspect that they will not be pricing this at 2.4% yield like the last one... (unless the ECB promises to provide 0% haircuts on it)...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_AAPL1.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_AAPL1_0.png" /></a></p> <p>&nbsp;</p> <p>The Unit Sales:</p> <ul> <li><strong>*APPLE SOLD 43.7M IPHONES IN 2Q, EST. 37.7M</strong></li> <li><strong>*APPLE 2Q IPHONE ASP $596.2, EST. $610</strong></li> <li><strong>*APPLE SOLD 16.35M IPADS IN 2Q, EST. 19.7M</strong></li> <li><strong>*APPLE 2Q IPAD ASP $465.4, EST. $430</strong></li> <li><strong>*APPLE SOLD 4.1M MACS IN 2Q, EST. 4.03M</strong></li> </ul> <p>&nbsp;</p> <p>Apple stock bounces - for now - just into the green for 2014...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_AAPL.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_AAPL_0.png" style="width: 600px; height: 491px;" /></a></p> <p>&nbsp;</p> http://www.zerohedge.com/news/2014-04-23/apples-total-cash-holdings-decline-first-time-lehman#comments Apple European Central Bank headlines Lehman Wed, 23 Apr 2014 20:53:22 +0000 Tyler Durden 487636 at http://www.zerohedge.com Where Facebook's User Growth And Revenue Generation Is http://www.zerohedge.com/news/2014-04-23/where-facebooks-user-growth-and-revenue-generation <p>In the aftermath of Facebook's "blockbuster" Q1 report, the one thing everyone is talking about is the explosive, 15% growth, in Monthly Active Users to 1.28 billion. There is one problem: where said user growth is taking place. </p> <p>The chart below shows MAU growth broken down by geography...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20MAU%20Q1.JPG"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20MAU%20Q1_0.JPG" width="600" height="396" /></a></p> <p>And this chart shows how much revenue Facebook generates in those specific geographies:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20revenue%20growth.JPG"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20revenue%20growth_0.JPG" width="600" height="393" /></a></p> <p>So yes, just 1 million users added in the US. Still, considering Facebook somehow counts 202 million monthly active users in the US, that is a phenomenal achievement considering there are 137.9 million working people. Oh well, those 62 million users who are unemployed - they will just grow into the labor force eventually and be able to buy all those products whose ads they click on.</p> http://www.zerohedge.com/news/2014-04-23/where-facebooks-user-growth-and-revenue-generation#comments Wed, 23 Apr 2014 20:33:16 +0000 Tyler Durden 487635 at http://www.zerohedge.com Facebook Beats But CFO Leaving http://www.zerohedge.com/news/2014-04-23/facebook-beats-cfo-leaving <p>Moments ago Facebook reported its GAAP <strong>and </strong>non-GAAP results (a very important distinction). Here is the Non-GAAP (i.e., we enjoy keeping our head in the sand) summary:</p> <ul> <li>Q1 revenue $2.5 billion, beats expectations of $2.36 billion</li> <li>Q1 revenue from advertising $2.27 billion</li> <li>Q1 EPS $0.34, beat expectations of $0.24</li> <li>Free cash flow - Free cash flow for the first quarter of 2014 was $922 million.</li> <li>Capital expenditures - Capital expenditures for the first quarter of 2014 were $363 million.</li> <li>Cash and marketable securities - Cash and marketable securities were $12.63 billion at the end of the first quarter of 2014.</li> <li>Monthly active users (MAUs) were 1.28 billion as of March 31, 2014, an increase of 15% year-over-year. Unclear how many of these are bots originating out of Egypt and India.</li> <li>Daily active users (DAUs) were 802 million on average for March 2014, an increase of 21% year-over-year.</li> <li>Mobile DAUs were 609 million on average for March 2014, an increase of 43% year-over-year.</li> <li>Mobile MAUs were 1.01 billion as of March 31, 2014, an increase of 34% year-over-year.&nbsp; </li> </ul> <p>The results in a nutshell:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20Q1_0.JPG" width="600" height="352" /></p> <p>&nbsp;</p> <p>Far more important than FB Non-GAAP results was the announcement that the CFO is leaving:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>CFO Transition - <strong>Facebook today also announced that David Ebersman has informed the company of his intention to step down as chief financial officer after serving in the position for almost five years. </strong>On June 1, 2014, he will be succeeded as CFO by David Wehner, currently Facebook's Vice President, Corporate Finance and Business Planning. Ebersman will remain with the company through September to ensure a seamless transition of his responsibilities.</p> <p>&nbsp;</p> <p><strong>Wehner joined Facebook in November 2012 from Zynga, where he served as CFO. </strong>Earlier, he spent nine years at Allen &amp; Company where he was a managing director. Wehner has a B.S. in Chemistry from Georgetown University, and an M.S. in Applied Physics from Stanford University.</p> <p>&nbsp;</p> <p>"David has been a great partner in building Facebook, and I'm grateful for everything he's done to help make the world more open and connected," said Zuckerberg. "David set us up to operate efficiently and make the long term investments we need, and built an incredibly strong team including Dave Wehner, our next CFO. I look forward to working with Dave in his new role."</p> <p>&nbsp;</p> <p>"<strong>This has been a tough decision because Facebook is such a great company and has such a bright future ahead, but I've decided to move back into healthcare where I spent my career before Facebook</strong>," Ebersman said. "It's been a privilege working at Facebook and being part of such a great team. We have an incredibly talented finance organization, and I have complete confidence in Dave Wehner and his ability to lead the team going forward."</p> </blockquote> <p>One wonders what exactly it is that Ebersman may have "cooked up" to be promptly leaving the world's "greatest" social media stock. We will find out soon. </p> <p>In the meantime, it is also worth pointing out the vast gap, pardon the pun, between Facebook GAAP and non-GAAP results:</p> <ul> <li>GAAP Q1 Net Income: $642MM, Non-GAAP: $885MM</li> <li>GAAP Q1 EPS: $0.34, Non-GAAP: $0.25</li> <li>GAAP Q1 Operating Margin: 43%; Non-GAAP: 55%.</li> </ul> <p>For now, the stock is very much confused what it wants to do on these "blowout" earnings.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_FB.png"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_FB_0.png" width="600" height="371" /></a></p> http://www.zerohedge.com/news/2014-04-23/facebook-beats-cfo-leaving#comments Capital Expenditures Corporate Finance GAAP India Wed, 23 Apr 2014 20:16:30 +0000 Tyler Durden 487634 at http://www.zerohedge.com Nasdaq Winning Streak Snaps As Yield Curve Hits Fresh 5-Year Lows http://www.zerohedge.com/news/2014-04-23/nasdaq-winning-streak-snaps-yield-curve-hits-fresh-5-year-lows <p>It seems yesterday&#39;s decoupling (stocks up, and everything else risk-off) has unwound today as equity markets were broadly weaker. The Dow and S&amp;P traded in a very narrow range on the day closing slightly negative and breaking the 6-day winning streak. Nasdaq and Russell underperformed notably as <strong>&quot;most shorted&quot; stocks appeared to gain some momentum to the downside once again</strong> (ahead of tonight&#39;s AAPL/FB results) as high-beta caught down to low-beta today. Away from the oddly decoupled equity markets, Gold, silver and copper all closed unch to modestly higher as WTI crude prces dropped further (to $101.50). The USD rallied off European open weakness to end unchanged for the week (with notable AUD weakness overnight). <strong>Treasuries rallied with 30Y outperforming once again and the yield curve flattening to fresh 5 year lows</strong>. Credit markets continues to push wider and are not sustaining any of the exuberance remaining in the S&amp;P.</p> <p>&nbsp;</p> <p>High-beta caught down to low-beta on the week</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD6.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD6_0.png" style="width: 600px; height: 429px;" /></a></p> <p>&nbsp;</p> <p>On the day, growth stocks tumbled but remain up nicely on the week - apart from AMZN</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD5.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD5_0.png" style="width: 600px; height: 663px;" /></a></p> <p>&nbsp;</p> <p>As multiple sectors unwind the week&#39;s gains</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD7.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD7_0.png" /></a></p> <p>&nbsp;</p> <p>Treasuries rallied all day with the long-end outperforming...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD2.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD2_0.png" style="width: 600px; height: 317px;" /></a></p> <p>&nbsp;</p> <p>and the yield curve flattening to fresh 5 year lows...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD4.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD4_0.png" style="width: 600px; height: 307px;" /></a></p> <p>&nbsp;</p> <p>Overnight AUD weakness removed it from the carry pair of choice today and lifted the USD back to unchanged on the week...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD3.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD3_0.png" style="width: 600px; height: 321px;" /></a></p> <p>&nbsp;</p> <p>PMs seemed dead...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD1.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD1_0.png" style="width: 600px; height: 322px;" /></a></p> <p>&nbsp;</p> <p>Credit markets continues to slide...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD8.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_EOD8_0.png" style="width: 600px; height: 321px;" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> http://www.zerohedge.com/news/2014-04-23/nasdaq-winning-streak-snaps-yield-curve-hits-fresh-5-year-lows#comments Copper Crude Equity Markets NASDAQ Yield Curve Wed, 23 Apr 2014 20:02:14 +0000 Tyler Durden 487633 at http://www.zerohedge.com Flash Boys Has Been Dethroned At The Top Of The Amazon Bestseller List By This Book http://www.zerohedge.com/news/2014-04-23/flash-boys-has-been-dethroned-top-amazon-bestseller-list-book <p>From a critique of pure capitalist algorithmic frontrunning (which was at the <a href="http://www.zerohedge.com/news/2014-03-31/lewis-top-high-freaks-storm-top-amazons-bestseller-list">top Amazon bestseller spot</a> until a few days ago)...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/03/book%20bestsellers.JPG"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/03/book%20bestsellers_0.JPG" width="600" height="465" /></a></p> <p>&nbsp;</p> <p>... we go to a <a href="http://www.amazon.com/best-sellers-books-Amazon/zgbs/books/ref=zg_bs_nav_0">critique of pure capitalism</a>.</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Piketty%20book_0.jpg" width="600" height="479" /></p> <p>&nbsp;</p> <p>Which of course, is merely a rehash of a critique of <em>all </em>capitalism as expounded some 150 years ago by this book.</p> <p>&nbsp;</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/Das%20Kapital.jpg" width="384" height="384" /></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>And to think all it took was 147 years of 'capitalism' for the circle to be complete from <em><strong>Das Kapital's</strong></em> labor-vs-capital Marxist manifesto to Thomas Piketty's <em><strong>Capital </strong></em>"exposing capitalism's fatal flaw" topping the Amazon book charts. One wonders who finds the time to read the 696 page tome whose core thesis is&nbsp; well-known for socialists the world over: <em>under capitalism the rich, or hoarders of capital, get steadily richer in relation to everyone else; inequality gets worse and worse and it's all unavoidable,</em> between #Selfies, The Voice semi-finals, and Dance Moms finales.</p> <p>One thing is certain: the financial asset tax we warned about back in 2011 is <a href="http://www.zerohedge.com/news/muddle-through-has-failed-bcg-says-there-may-be-only-painful-ways-out-crisis">coming with a bang</a>.</p> <p>So, communism's heyday is coming again, right? Maybe. One thing is certain: liberals couldn't be more delighted about mandatory equality. But as <a href="http://www.zerohedge.com/news/2014-04-22/guest-post-pikettys-gold">we discussed yesterday, there is one thing that no one seems to want to discuss about Piketty's findings... gold...</a></p> <p><strong>Well, feature the chart that Professor Piketty publishes showing inequality in America.</strong> This appears in the book at figure 9.8; a similar version, shown alongside here, is offered on his Web site. It’s an illuminating chart. It shows the share of national income of the top decile of the population. It started the century at a bit above 40% and edged above 45% in the Roaring Twenties. It plunged during the Great Depression and edged down in World War II, and then steadied out, until we get to the 1970s. Something happened then that caused income inequality to start soaring. The top decile's share of income went from something like 33% in 1971 to above 47% by 2010.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140422_piketty.png"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140422_piketty_0.png" style="width: 600px; height: 450px;" /></a></p> <p>Hmmm. What could account for that? Could it be the last broadcast of the “Lawrence Welk Show?” Or the blast off of the Apollo 14 mission to the Moon? Or could it have something to do with the mysterious D.B. Cooper, who bailed out of the plane he hijacked, never to be seen again? A timeline of 1971 offers so many possibilities. But, say, what about the possibility that it was in the middle of 1971, in August, that America closed the gold window at which it was supposed to redeem in specie dollars presented by foreign central banks. That was the default that ended the era of the Bretton Woods monetary system.</p> <p><span style="text-decoration: underline;">That’s the default that opened the age of fiat money.</span> Or the era that President Nixon supposedly summed up in with Milton Friedman’s immortal words, “We’re all Keynesians now.” This is an age that has seen a sharp change in unemployment patterns. Before this date, unemployment was, by today’s standards, low. This was a pattern that held in Europe (these columns wrote about it in “George Soros’ Two Cents”) and in America (“Yellen’s Missing Jobs”). From 1947 to 1971, unemployment in America ran at the average rate of 4.7%; since 1971 the average unemployment rate has averaged 6.4%. Could this have been a factor in the soaring income inequality that also emerged in the age of fiat money?</p> <p>This is the question the liberals don’t want to discuss, even acknowledge.</p> <p><em>h/t @Not_Jim_Cramer</em></p> http://www.zerohedge.com/news/2014-04-23/flash-boys-has-been-dethroned-top-amazon-bestseller-list-book#comments Central Banks default Foreign Central Banks Great Depression Jim Cramer Unemployment Wed, 23 Apr 2014 19:28:53 +0000 Tyler Durden 487632 at http://www.zerohedge.com James Clapper Begins Propaganda Tour After Students Identify Edward Snowden As "Personal Hero" http://www.zerohedge.com/news/2014-04-23/james-clapper-begins-propaganda-tour-after-students-identify-edward-snowden-personal <p><em>Submitted by Mike Krieger of <a href="http://libertyblitzkrieg.com/2014/04/23/james-clapper-embarks-on-propaganda-college-speaking-tour-after-droves-of-students-name-snowden-personal-hero/">Liberty Blitzkrieg blog</a>,</em></p> <p>Kevin Gosztola over at <a href="http://firedoglake.com">Firedoglake</a> does some excellent work, and his latest story about the recent activities of perjuring Director of National Intelligence for the U.S., James Clapper, is no exception. To provide a little context, the Washington Post <a href="http://www.washingtonpost.com/local/education/inside-the-admissions-process-at-george-washington-university/2014/03/22/f86b85fa-aee6-11e3-a49e-76adc9210f19_story.html">recently reported </a>that:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Freitag skimmed the extracurriculars, read the first essay, rated it good. <strong><span style="text-decoration: underline;">GW also asks students to list a role model and two words to describe themselves. </span></strong>As for herself, Freitag said, she would list &ldquo;Martha Stewart/Tina Fey&rdquo; and &ldquo;sassy/classy.&rdquo;<strong><span style="text-decoration: underline;">This year, she&rsquo;s seeing a lot of Edward Snowden citations.</span></strong></em></p> </blockquote> <p>Freitag is an admissions officer at&nbsp;George Washington University, and apparently this trend of college students accurately identifying Edward Snowden as a hero has given James Clapper a panic attack. So much so, that he is taking time away from protecting us from &ldquo;terrorists&rdquo; (a term that now apparently includes folks at the Bundy Ranch <a href="http://www.washingtonpost.com/opinions/sen-harry-reids-baseless-domestic-terror-accusations/2014/04/21/9ee485fa-c952-11e3-93eb-6c0037dde2ad_story.html">according to Harry Reid</a>) to embark upon a propaganda speaking tour of U.S. college campuses to demonstrate to those silly young kids that Snowden is no hero, but actually a traitorous villain.</p> <p>This whole thing is eerily similar to Banana Ben Bernanke&rsquo;s college <a href="http://www.federalreserve.gov/newsevents/lectures/about.htm">propaganda tour back in 2012</a>, which demonstrates that the status quo simply has one playbook that it sticks to aggressively. The only question I have is how long before Clapper realizes he can earn $250,000 a speech once he leaves his current role, as <strong><a href="http://libertyblitzkrieg.com/2014/03/04/bernankes-not-wasting-any-time-he-will-earn-250000-for-a-speech-in-abu-dhabi/">Benny Bernanke is currently raking in.</a></strong></p> <p>From <em>Firedoglake</em>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><div> <p><strong><span style="text-decoration: underline;"><em>Director of National Intelligence James Clapper is touring universities and colleges in the United States in an attempt to persuade students that they should not consider former NSA contractor Edward Snowden a whistleblower or a hero.</em></span></strong></p> <p>&nbsp;</p> <p><em>Speaking at the GEOINT conference in Tampa, Florida, on April 15, Clapper&nbsp;<a href="http://www.dni.gov/index.php/newsroom/speeches-and-interviews/202-speeches-interviews-2014/1048-dni-clapper-keynote-address-from-geoint-2013">addressed</a>&nbsp;attendees and told university students at Georgetown University and the University of Georgia about a recent article in The Washington Post on college admissions.</em></p> <p>&nbsp;</p> <p><em>&ldquo;An admissions officer from George Washington University told The Post that for the admissions&rsquo; essay question, &lsquo;Who&rsquo;s your personal hero?&rsquo; the admissions officer observed that she was seeing a lot more of Edward Snowden citations. And the idea that young people see Edward Snowden as a hero really bothers me. <strong><span style="text-decoration: underline;">So I thought I needed to talk about Snowden at Georgetown and Georgia and I am going to do the same elsewhere at colleges and universities.&rdquo;</span></strong></em></p> </div> </blockquote> <p>Seems like a great way to spend your time and taxpayer dollars.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>The interior situation in Iraq, which is deteriorating, a &ldquo;very assertive Russia&rdquo; (&ldquo;brings back memories&rdquo;), &ldquo;a competitive China,&rdquo; a challenging Iran, &ldquo;a dangerous unpredictable North Korea&rdquo; and &ldquo;global demands for resources&rdquo; complicated by climate change were all mentioned as bugaboos for Clapper and the intelligence community. <strong><span style="text-decoration: underline;">And Snowden&rsquo;s leaks were accused of &ldquo;complicating everything.&rdquo;</span></strong></em></p> </blockquote> <p>No Clapper, the unconstitutional behavior of the intelligence agencies is what is &ldquo;complicating everything.&rdquo; Don&rsquo;t try to deflect blame from where it belongs because a patriot decides to tell the public the truth about government criminality.</p> <p>This is what statists never comprehend. The strength of a nation or culture does not come from government&rsquo;s ability to do whatever it wants without having to adhere to the law, respect civil liberties or inform the public. The strength of a nation or culture comes from the rule of law, from freedom, from accountability, from enterprise and from faith in the institutions that define that nation or culture. Americans have been losing faith in all of the things that define America and for good reason. Snowden was just another nail in the coffin. Without genuine freedom in all aspects of life, politics, economics, communities, a culture will collapse and lose out to others. That is why the U.S. is in decline, not because Snowden revealed the cancer at the heart of U.S. intelligence and corporate America. He is just putting a mirror in front of us and forcing ourselves to look at the ugly reflection.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>A good portion of Clapper&rsquo;s speech was then spent addressing what he called the &ldquo;myth of Edward Snowden.&rdquo; He said he told students that &ldquo;despite being a geezer&rdquo; he got it.&rdquo;</em></p> <p>&nbsp;</p> <p><em>&ldquo;I understand that a lot of young people see Snowden as a courageous whistleblower standing up to authority. <strong><span style="text-decoration: underline;">I personally believe that whistleblowing in its highest form takes an incredible amount of courage and integrity. But Snowden isn&rsquo;t a whistleblower,&rdquo; Clapper declared.</span></strong></em></p> </blockquote> <p>Oh, ok Clapper. If you say so. You disingenuous <strong><a href="http://libertyblitzkrieg.com/2013/10/11/patriot-act-author-prepares-strong-bill-to-reign-in-nsa-abuses-calls-for-prosecution-of-james-clapper/">perjuring creep.</a></strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&ldquo;There&rsquo;s an inspector general for NSA and another one for the entire intelligence community. My office has a civil liberties and privacy protection officer. Snowden could also have gone to the Justice Department or the Congress. And as we&rsquo;ve seen Snowden is superb at finding information so I think he could have tracked those people down had he given it a little thought,&rdquo; Clapper stated.</em></p> <p>&nbsp;</p> <p><strong><span style="text-decoration: underline;"><em>Actually, if he had gone to the NSA&rsquo;s inspector general, George Ellard,&nbsp;<a href="http://dissenter.firedoglake.com/2014/02/25/nsa-inspector-general-speaks-on-snowden-for-first-time-says-he-was-manic-in-his-thievery/">according to Ellard himself</a>, he would have said something like, &ldquo;Hey, listen, fifteen federal judges have certified this program is okay.&rdquo; He also would have tried to address Snowden&rsquo;s &ldquo;misperceptions&rdquo; and his &ldquo;lack of understanding what we do.&rdquo;</em></span></strong></p> <p>&nbsp;</p> <p>So that&rsquo;s what would have happened to Snowden if he tried to go through traditional channels. Absolutely nothing.</p> <p>&nbsp;</p> <p><em><strong><span style="text-decoration: underline;">Perhaps, the biggest question might be how much will this tour of colleges and universities by Clapper cost.</span></strong> He spent a part of his speech bemoaning the budget cuts the intelligence community has managed to survive. Somehow they have come up with the money to fund traveling to talk to students about the &ldquo;myth of Edward Snowden&rdquo;?</em></p> <p>&nbsp;</p> <p><em>Why should taxpayers be funding this propaganda? And doesn&rsquo;t Clapper have a job to do as Director of National Intelligence?</em></p> </blockquote> <p>Don&rsquo;t worry taxpayers, pretty soon he will join Ben Bernanke on his magical mystery keynesian/statist bus tour&nbsp;and earn several hundred thousand dollars a speech.</p> <p>USA! USA!</p> <p>Keep chanting serfs.</p> <p>Full article <a href="http://dissenter.firedoglake.com/2014/04/18/clapper-goes-on-tour-to-persuade-university-students-snowden-is-no-whistleblower-not-a-hero/">here</a>.</p> http://www.zerohedge.com/news/2014-04-23/james-clapper-begins-propaganda-tour-after-students-identify-edward-snowden-personal#comments Ben Bernanke Ben Bernanke China Corporate America Florida Iran Iraq national intelligence North Korea Wed, 23 Apr 2014 18:57:42 +0000 Tyler Durden 487631 at http://www.zerohedge.com Russia May Halt Oil Supplies On Ukraine Theft http://www.zerohedge.com/news/2014-04-23/russia-may-halt-oil-supplies-ukraine-theft <p>First it was concerns over whether Ukraine would 'steal' gas supplies bound for Europe as it passed through pipelines in the country and now, as bills remain unpaid, a <strong>Transneft unit is threatening to halt Ukraine oil products supply due to pipeline theft</strong>. </p> <ul> <li><strong>*TRANSNEFT COMMENTS ON OIL PRODUCTS PIPELINE IN UKRAINE</strong></li> <li><strong>*TRANSNEFT MAY STOP WORK OF PRIKARPATZAPADTRANS PIPELINE SYSTEM</strong></li> <li><strong>*TRANSNEFT: $62.7M IN OIL STOLEN FROM UKRAINE PIPE OVER 5 YRS</strong></li> </ul> <p>As Bloomberg reports, </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>57.9k tons of oil products have been lost from theft in Ukraine and "Transneft expresses hope that the <strong>Ukrainian authorities can evaluate the risks of the current situation and not allow a negative scenario to develop</strong>."</p> </blockquote> <p>More boomerangs?</p> http://www.zerohedge.com/news/2014-04-23/russia-may-halt-oil-supplies-ukraine-theft#comments Ukraine Wed, 23 Apr 2014 18:37:52 +0000 Tyler Durden 487630 at http://www.zerohedge.com This Is How Empires Collapse http://www.zerohedge.com/news/2014-04-23/how-empires-collapse <p><em>Submitted by Charles Hugh-Smith of <a href="http://charleshughsmith.blogspot.com/2014/04/this-is-how-empires-collapse.html">OfTwoMinds blog</a>,</em></p> <p><span style="margin: 0px; padding: 0px; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: white; color: rgb(64, 64, 64); font-family: Verdana, sans-serif; line-height: normal; text-align: -webkit-left;"><i style="margin: 0px; padding: 0px;">This is how empires collapse: one complicit participant at a time.</i></span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">Before an empire collapses, it first erodes from within.</b>&nbsp;The collapse may appear sudden, but the processes of internal rot hollowed out the resilience, resolve, purpose and vitality of the empire long before its final implosion.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">What are these processes of internal rot?</b>&nbsp;Here are a few of the most pervasive and destructive forces of internal corrosion:</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">1. Each institution within the system loses sight of its original purpose of serving the populace and becomes self-serving.</b>&nbsp;This erosion of common purpose serving the common good is so gradual that participants forget there was a time when the focus wasn&#39;t on gaming the system to avoid work and accountability but serving the common good.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">2. The corrupt Status Quo corrupts every individual who works within the system.</b>Once an institution loses its original purpose and becomes self-serving, everyone within either seeks to maximize their own personal share of the swag and minimize their accountability, or they are forced out as a potentially dangerous uncorrupted insider.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">The justification is always the same: everybody else is getting away with it, why shouldn&#39;t I?&nbsp;<b style="margin: 0px; padding: 0px;">Empires decline one corruptible individual at a time.</b></span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">3. Self-serving institutions select sociopathic leaders whose skills are not competency or leadership but conning others</b>&nbsp;into believing the institution is functioning optimally when in reality it is faltering/failing.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">The late Roman Empire offers a fine example: entire Army legions in the hinterlands were listed as full-strength on the official rolls in Rome and payroll was issued accordingly, but the legions only existed on paper: corrupt officials pocketed the payroll for phantom legions.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">Self-serving institutions reward con-artists in leadership roles because only con-artists can mask the internal rot with happy-story PR and get away with it.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">4. The institutional memory rewards conserving the existing Status Quo and punishes innovation.</b>&nbsp;Innovation necessarily entails risk, and those busy feathering their own nests (i.e. accepting money for phantom work, phantom legions, etc.) have no desire to place their share of the swag at risk just to improve sagging output and accountability.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">So reforms and innovations that might salvage the institution are shelved or buried.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">5. As the&nbsp;<i style="margin: 0px; padding: 0px;">sunk costs</i>&nbsp;of the subsystems increase, the institutional resistance to new technologies and processes increases accordingly.</b>&nbsp;Those manufacturing steam locomotives in the early 20th century had an enormous amount of capital and institutional knowledge sunk in their factories. Tossing all of that out to invest in building diesel-electric locomotives that were much more efficient than the old-tech steam locomotives made little sense to those looking at sunk costs.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">As a result, the steam locomotive manufacturers clung to the old ways and went out of business.&nbsp;<b style="margin: 0px; padding: 0px;">The sunk costs of empire are enormous, as is the internal resistance to change.</b></span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">6. Institutional memory and knowledge support &quot;doing more of what worked in the past&quot; even when it is clearly failing.</b>&nbsp;I refer to this institutional risk-avoidance and lack of imagination as&nbsp;<i style="margin: 0px; padding: 0px;">doing more of what has failed spectacularly.</i></span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">Inept leadership keeps doing more of what once worked, even when it is clearly failing, in effect ignoring real-world feedback in favor of magical-thinking. The Federal Reserve is an excellent example.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">7. These dynamics of eroding accountability, effectiveness and purpose lead to systemic&nbsp;<i style="margin: 0px; padding: 0px;">diminishing returns.</i></b>&nbsp;Each failing institution now needs more money to sustain its operations, as inefficiencies, corruption and incompetence reduce output while dramatically raising costs (phantom legions still get paid).</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">8. Incompetence is rewarded and competence punished.</b>&nbsp;The classic example of this was &quot;Good job, Brownie:&quot; cronies and con-artists are elevated to leadership roles to reward loyalty and the ability to mask the rot with good PR. Serving the common good is set aside as sychophancy (obedient flattery) to incompetent leaders is rewarded and real competence is punished as a threat to the self-serving leadership.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">9. As returns diminish and costs rise, systemic fragility increases.</b>&nbsp;This can be illustrated as a rising wedge: as output declines and costs rise, the break-even point keeps edging higher, until even a modest reduction of input (revenue, energy, etc.) causes the system to break down:</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><img align="middle" border="0" src="http://www.oftwominds.com/photos2012/rising-wedge.gif" style="margin: 5px; padding: 5px; background-color: rgb(255, 255, 255); border: 1px solid rgb(238, 238, 238); background-position: initial initial; background-repeat: initial initial;" /></span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">A modern-day example is oil-exporting states that have bought the complicity of their citizenry with generous welfare benefits and subsidies. As their populations and welfare benefits keep rising, the revenues they need to keep the system going require an ever-higher price of oil. Should the price of oil decline, these regimes will be unable to fund their welfare. With the social contract broken, there is nothing left to stem the tide of revolt.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">10. Economies of scale no longer generate returns.</b>&nbsp;In the good old days, stretching out supply lines to reach lower-cost suppliers and digitizing management reaped huge gains in productivity. Now that the scale of enterprise is global, the gains from economies of scale have faltered and the high overhead costs of maintaining this vast managerial infrastructure have become a drain.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">11. Redundancy is sacrificed to preserve a corrupt and failing core.</b>&nbsp;Rather than demand sacrifices of the Roman Elites and the entertainment-addicted bread-and-circus masses to maintain the forces protecting the Imperial borders, late-Roman Empire leaders eliminated defense-in-depth (redundancy). This left the borders thinly defended. With no legions in reserve, an invasion could no longer be stopped without mobilizing the entire border defense, in effect leaving huge swaths of the border undefended to push back the invaders.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">Phantom legions line the pockets of insiders and cronies while creating a useful illusion of stability and strength.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">12. The feedback from those tasked with doing the real work of the Empire is ignored as Elites and vested interests dominate decision-making.</b>&nbsp;As I noted yesterday in&nbsp;<a href="http://www.oftwominds.com/blogapr14/vested-poison4-14.html" style="margin: 0px; padding: 0px; color: rgb(0, 67, 135); text-decoration: underline;" target="resource">The Political Poison of Vested Interests</a>, when this bottoms-up feedback is tossed out, ignored or marginalized,&nbsp;<i style="margin: 0px; padding: 0px;">all decisions are necessarily unwise because they are no longer grounded in the consequences experienced by the 95% doing the real work.</i></span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">This lack of feedback from the bottom 95% is captured by the expression &quot;Let them eat cake.&quot; (Though attributed to Marie Antoinette, there is no evidence that she actually said&nbsp;<a href="http://en.wikipedia.org/wiki/Let_them_eat_cake" style="margin: 0px; padding: 0px; color: rgb(0, 67, 135); text-decoration: underline;" target="resource"><i style="margin: 0px; padding: 0px;">Qu&#39;ils mangent de la brioche</i></a>.)</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;">The point is that decisions made with no feedback from the real-world of the bottom 95%, that is, decisions made solely in response to the demands of cronies, vested interests and various elites, are intrinsically unsound and doomed to fail catastrophically.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">How does an Empire end up with phantom legions? The same way the U.S. ended up with ObamaCare/Affordable Care Act.</b>&nbsp;The payroll is being paid but there is no real-world feedback, no accountability, no purpose other than private profit/gain and no common good being served.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">That&#39;s how empires collapse:</b>&nbsp;one corrupted, self-serving individual at a time, gaming one corrupted, self-serving institution or another; it no longer matters which one because they&#39;re all equally compromised. It&#39;s not just the border legions that are phantom; the entire stability and strength of the empire is phantom. The uncorruptible and competent are banished or punished, and the corrupt, self-serving and inept are lavished with treasure.</span><br style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-family: Georgia, Times, serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);" /><br style="margin: 0px; padding: 0px;" /><span style="margin: 0px; padding: 0px; color: rgb(0, 0, 0); font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20.992000579833984px; orphans: auto; text-align: justify; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255); font-family: Verdana, sans-serif;"><b style="margin: 0px; padding: 0px;">This is how empires collapse:</b>&nbsp;one complicit participant at a time.</span></p> http://www.zerohedge.com/news/2014-04-23/how-empires-collapse#comments Corruption ETC Fail Federal Reserve Obamacare Reality Roman Empire Swag Wed, 23 Apr 2014 18:10:27 +0000 Tyler Durden 487629 at http://www.zerohedge.com The Chinese Housing Ponzi Exposed: "As We Sell Our First Apartments, We’ll Have Cash Flow To Build The Next Stage" http://www.zerohedge.com/news/2014-04-23/chinese-housing-ponzi-exposedd-we-sell-our-first-apartments-we%E2%80%99ll-have-cash-flow-bui <p>Much has been said here and elsewhere about not only China's ghost cities - that final resting place where trillions in Chinese GDP "fixed investment" goes to quietly die but no before contributing to over half of China's GPD - over the past five years, but also about the bursting of the Chinese housing bubble in the past several months now that the Beijing Politburo has drastically slowed down the pace of loan creation and the country has shocked its bond investors by admitting failure is an all too real possibility. This post will therefore hardly reveal anything new, however it will provide some perspective on how from one of the most important industries for China's suddenly cooling economy, <strong>housing has becoming nothing more (or less) than one giant Ponzi scheme. </strong></p> <p>Here are some of the soundbites of a recent Bloomberg piece showing how "<a href="http://www.bloomberg.com/news/2014-04-21/china-s-forgotten-cities-miss-boom-as-xi-s-credit-squeeze-bites.html">Xi’s Squeeze Leaves China’s Heartland Missing Boom</a>" covering such exciting topics as: </p> <p>... Bubbles:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“<strong>Cities in China are facing some serious real estate bubbles, and the bubbles in third-, fourth-tier cities have the risks of total collapse,</strong>” said Tao Ran, director of the China Center for Public Economics and Governance at Renmin University in Beijing, in a phone interview on March 31. “The central government and banks tightened credit in the property market because they realized the risks.” </p> </blockquote> <p>... Collateral</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>That makes it harder for Zhu Houlun, 43, who took over as Laohekou party secretary in August 2012 with plans to merge with neighboring Gucheng by building a new urban center on 70 square kilometers (27 square miles) of farming communities between the two. The project would create a city of 700,000 by 2020, more than double Laohekou’s existing urban population, according to a Xiangyang government report.</p> <p>&nbsp;</p> <p>Zhu must rely on private developers like Liu Pingfeng, from neighboring Hunan province, who is building a 5 billion yuan project north of Laohekou called the Red River Valley Eco-Tourism Resort that includes apartments, a five-star hotel, a theme park and a polo club.</p> <p>&nbsp;</p> <p>“<strong>Raising funds is very difficult</strong>,” said Liu, 47, who has been building in Hunan for a decade. “I used to use land as collateral -- as long as I got the land certificate I could get the loan. Now it’s almost impossible.” </p> </blockquote> <p>... Musical fountains:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>In Red River’s muddy construction site by the river, there are clusters of concrete skeletons that Liu says are due to open in October as shops, cafes, bars and a fitness center. Nearby is a hole in the ground the size of a football field that <strong>will be a musical fountain</strong>. </p> </blockquote> <p>... KFCs:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Downtown Laohekou shows how far the city has lagged behind development in the east. Rows of weather-stained four- and five-story buildings line the streets, with shopfronts selling liquor, cheap household goods and clothes. <strong>There’s no department store, no passenger railway station, no KFC </strong>-- the Yum! Brands Inc. (YUM) chain found in 900 other Chinese cities and townships. The nearest civilian airport is an hour’s drive away. </p> </blockquote> <p>... Social problems:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“Local government officials are still very fixated on economic growth,” said Lynette Ong, an associate professor at the University of Toronto who wrote the 2012 book “Prosper or Perish: The Political Economy of Credit and Fiscal Systems in Rural China.” “<strong>Without growth, a lot of social problems like unemployment will surface.” </strong></p> </blockquote> <p>... from ashes to ashes, from ghost town to ghost town:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The expansion on the coast was largely fed by immigrants from provinces like Hubei that are now struggling to lure them back. On a February morning in Laohekou’s cavernous and unheated labor exchange, a single jobseeker scans the vacancies posted on the back wall, while five female staff clutch thermoses of hot drinks to keep warm. </p> <p>&nbsp;</p> <p>“It’s hard to hire people here,” said Zhang Hongju, one of the staff. “<strong>The young people have all gone to Guangdong and those who haven’t need to stay home to take care of elderly family or kids.”</strong></p> <p>&nbsp;</p> <p>In Chen Genxin’s village, slated to be demolished to make way for China Dreamland, he says everyone is over 50. His sons left during the boom to get jobs in other cities. <strong>“If the country wants us to tear it down, we’ll tear it down</strong>,” said Chen, 71, as he harvests spinach from his small plot with his wife in the afternoon sun. “The earth will bury me wherever I go.” </p> </blockquote> <p>... and, of course, the fact that it is all one massive Ponzi scheme:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>In Red River’s muddy construction site by the river, there are clusters of concrete skeletons that Liu says are due to open in October as shops, cafes, bars and a fitness center. Nearby is a hole in the ground the size of a football field that will be a musical fountain.</p> <p>&nbsp;</p> <p>The soaring cost of loans means Liu will build and sell Red River in stages. “<strong>As we sell our first batch of apartments, we’ll have cash flow to build the next stage,</strong>” he said in an interview in February in Laohekou. </p> </blockquote> <p>Finally, some pictures:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/ghost%201_0.jpg" width="500" height="334" /></p> <p><em>A construction-site hoarding displays an artist's impression of a development containing Tiffany and Louis Vuitton shops in Luying village on the outskirts of Laohekou, Hubei Province, China</em></p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/ghost%202_0.jpg" width="500" height="333" /></p> <p><em>Chen Genxin, farmer, and his wife stand for a photograph at their plot of land which is going to be requisitioned to make way for the China Dreamland residential and tourism project by Sichuan Hengxinyuanda Investment Group on the outskirts of Laohekou, Hubei Province, China</em></p> <p>&nbsp;</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/ghost%203_0.jpg" width="500" height="334" /></p> <p><em>The new Laohekou Number 1 Middle School stands under construction on the outskirts of Laohekou, Hubei Province, China, on Thursday, Feb. 20, 2014. </em></p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/ghost%204_0.jpg" width="500" height="334" /></p> <p><em>China Dreamland residential and tourism project by Sichuan Hengxinyuanda Investment Group stands under construction on the outskirts of Laohekou, </em></p> http://www.zerohedge.com/news/2014-04-23/chinese-housing-ponzi-exposedd-we-sell-our-first-apartments-we%E2%80%99ll-have-cash-flow-bui#comments Bond China fixed Gross Domestic Product Housing Bubble Real estate Unemployment Yuan Wed, 23 Apr 2014 18:05:09 +0000 Tyler Durden 487622 at http://www.zerohedge.com