en It's Time To Retire Gross Domestic Product As A Measure of Prosperity <p><em>Submitted by Charles Hugh-Smith of <a href="">OfTwoMinds blog</a>,</em></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><em>What if we used wellness (Gross Domestic Happiness) as a metric for prosperity rather than GDP? </em> </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>Distilling an economy's success in delivering "prosperity" to a single number has outlived its purpose.</strong> Zachary Karabell describes the birth of GDP in far less complex times in <a href="" target="resource">(Mis)leading Indicators: Why Our Economic Numbers Distort Reality</a> (Foreign Affairs): </span></span></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">A GDP that is growing in sync with expectations can enhance a country’s reputation and thus its strength and power. A GDP that is contracting or failing to meet expectations, on the other hand, can lead to disaster. Yet a hundred years ago, the concept of GDP did not exist; history unfolded without it. The United States, for example, managed to win its independence, fight a civil war, and conquer a continent without any measure of national income. </span></span></span> </p><p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">GDP’s origins lie in the 1930s, when economists and policymakers in the United States and the United Kingdom struggled to understand and respond to the Great Depression. </span></span></span></p> <p>&nbsp;</p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">It is not terribly surprising that economists and policymakers came to favor a statistical technique that helped the United States survive a depression and win a war. But not even the economists who invented this metric imagined that GDP would become so central to every state in the world within a few short decades. </span></span></span></p> </blockquote> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>The problem is this radical reductionism at the heart of any single measure is irrevocably flawed:</strong> </span></span></span></p> <p>&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">Leading indicators were invented to measure the economies of the industrial nation-states of the mid-twentieth century. In their time, they did so brilliantly. The twenty-first century, however, is proving more challenging to measure. Industrial nation-states have given way to developed economies rich in services and to emerging industrial economies exporting goods made by multinational companies. The statistics of the 20th century were not designed for such a reality, and despite the assiduous efforts of statisticians, they cannot keep up. </span></span></span></p></blockquote> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">These shifts have created a temptation to find new formulas, better indicators, and new statistics. But the belief that a few simple numbers or basic averages can capture today’s multifaceted national and global economic systems is a myth that should be abandoned. Rather than seeking new simple numbers to replace old simple numbers, economists need to tap into the power of the information age to figure out which questions need to be answered and to embrace new ways of answering them. </span></span></span></p> </blockquote> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>The limitations of GDP are so severe that the number is at best misleading.</strong> Karabell identifies three intrinsic flaws in any single-number scheme to measure GDP: </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">1. GDP does not include vast swaths of economic output and value </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">2. GDP is useless in measuring real-world trade </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">3. GDP counts digging a hole and filling it but not conservation of energy or resources. </span></span></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">If a steel mill produces pollution that then requires a cleanup, both the initial output (the steel) and the cost of addressing its byproduct (the cleanup) add to GDP. So, too, would the cost of health care for any workers or residents injured or sickened by the pollution. Conversely, if a company replaces its conventional light bulbs with long-lasting LED bulbs and, as a result, spends less on lighting and electricity, the efficiency gains would detract from GDP. Yet few would argue that the pollution example represents a positive development or that the lighting example constitutes a negative one. </span></span></span></p></blockquote> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>The simplistic assignment of "import" and "export" completely misses the reality of modern manufacture and trade,</strong> where parts come from multiple nations. As Karabell explains: </span></span></span></p> <p>&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>If trade numbers more accurately accounted for how products are made, it is possible that the United States would not have any trade deficit at all with China.</strong> The problem, in short, is that trade figures are currently calculated based on the assumption that each product has a single country of origin and that the declared value of that product goes to that country. Thus, every time an iPhone or an iPad rolls off the factory floors of Foxconn (Apple’s main contractor in China) and travels to the port of Long Beach, California, it is counted as an import from China. </span></span></span></p></blockquote> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">A more reasonable standard, of course, would recognize that iPhones and iPads do not have a single country of origin. More than a dozen companies from at least five countries supply parts for them. Infineon Technologies, in Germany, makes the wireless chip; Toshiba, in Japan, manufactures the touchscreen; and Broadcom, in the United States, makes the Bluetooth chips that let the devices connect to wireless headsets or keyboards. </span></span></span></p> <p>&nbsp;</p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">Taking these facts into account would leave China, the supposed country of origin, with a paltry piece of the pie. <strong>Analysts estimate that as little as $10 of the value of every iPhone or iPad actually ends up in the Chinese economy,</strong> in the form of income paid directly to Foxconn or other contractors. </span></span></span></p> </blockquote> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>I have addressed this issue for years, for example:</strong> <a href="" target="resource"> Trade War with China: Who Benefits?</a> (April 11, 2007) </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><a href="" target="resource"> Trade and "Trade War" with China: Who Benefits?</a> (October 5, 2010) </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>No single number, regardless of the inputs, can possibly reflect the real economy.</strong> Karabell concludes: </span></span></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">How entrepreneurs run effective businesses; how individuals buy homes, pay for college, or retire -- none of those decisions should be based on the leading indicators of the last century. Old attachments to those indicators, and to the myth that there is something called “the economy” that affects all people equally, poses a major obstacle to progress. </span></span></span></p></blockquote> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>Karabell also discusses what I call the <em>propaganda value of GDP</em>:</strong> </span></span></span></p> <p>&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">These measurements were not invented to serve as absolute markers of national success or failure or to indicate whether some governments were visionary and others destructive. But the transformation of these numbers from statistics into markers of national success happened so quickly over the course of a few decades that no one quite noticed what was happening. </span></span></span></p></blockquote> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>I tend to think political authorities knew exactly what was happening: they realized that their own credibility could be boosted by a rigged GDP number.</strong> Thus we have the central government of China issuing blatantly bogus claims of 7+% annual GDP, as anything less will severely erode their claim of managerial brilliance. </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">In our own propaganda-dependent state, GDP is almost always positive, much like corporate earnings always beat expectations by a penny. </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>But we should be paying attention to an even deeper critique of GDP:</strong> that prosperity no longer depends of the "growth" of consumption, financialization, etc. but on the Degrowth of narcissistic consumerism and more efficient use of resources and capital. </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>What if we used Bhutan's guiding national policy of <a href="" target="resource">Gross Domestic Happiness</a>, as a metric for prosperity?</strong> </span></span></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">A second-generation GNH concept, treating happiness as a socioeconomic development metric, was proposed in 2006 by Med Jones, the President of International Institute of Management. The metric measures socioeconomic development by tracking seven development areas including the nation's mental and emotional health.GNH value is proposed to be an index function of the total average per capita of the following measures: </span></span></span></p></blockquote> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">1. Economic Wellness: Indicated via direct survey and statistical measurement of economic metrics such as consumer debt, average income to consumer price index ratio and income distribution </span></span></span></p> <p>&nbsp;</p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">2. Environmental Wellness: Indicated via direct survey and statistical measurement of environmental metrics such as pollution, noise and traffic </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">3. Physical Wellness: Indicated via statistical measurement of physical health metrics such as severe illnesses </span></span></span></p> <p>&nbsp;</p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">4. Mental Wellness: Indicated via direct survey and statistical measurement of mental health metrics such as usage of antidepressants and rise or decline of psychotherapy patients </span></span></span></p> <p>&nbsp;</p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">5. Workplace Wellness: Indicated via direct survey and statistical measurement of labor metrics such as jobless claims, job change, workplace complaints and lawsuits </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">6. Social Wellness: Indicated via direct survey and statistical measurement of social metrics such as discrimination, safety, divorce rates, complaints of domestic conflicts and family lawsuits, public lawsuits, crime rates </span></span></span></p> <p>&nbsp;</p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">7. Political Wellness: Indicated via direct survey and statistical measurement of political metrics such as the quality of local democracy, individual freedom, and foreign conflicts. </span></span></span></p> </blockquote> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>Here in the U.S., we give lip-service to all these values, but ask yourself: where do we spend most of our time?</strong> Serving our masters in the State/crony-cartel economy, creating GDP. </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;"><strong>Yes, we all still need to earn a livelihood, but imagine a society constructed around generating Gross Domestic Happiness instead of GDP.</strong> The power structure would collapse because none of these activities generate enough profits or taxes to keep the Machine operational. </span></span></span></p> <p><span style="color: #404040;"><span style="font-size: x-small;"><span style="font-size: x-small;">It is a sad statement that we often only awaken to real value and meaning when we've run out of time to change the way we "invest" our time. </span></span></span></p> China ETC Germany Great Depression Gross Domestic Product Japan None Port Of Long Beach Reality Trade Deficit Trade War United Kingdom Sat, 19 Apr 2014 22:34:57 +0000 Tyler Durden 487488 at US, And Global, Military Spending Summed Up In One Chart <p>While <a href="">we previously noted the relative stability (but absolute surge) in US military spending over the past few decades</a>, the scale of what the world's peace-keeping, red-line enforcing, hypocrisy-packed nation spends in context to the rest of the world...</p> <p>&nbsp;</p> <p><a href=""><img src="" width="599" height="542" /></a></p> <p><em>Source: AFP</em></p> <p>We previously put the <a href="">US military budget in context over time</a>...</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="319" /></a></p> <p>&nbsp;</p> <div> <p class="NoSpace">And unless we get some serious military conflict to blame a reflation on, and <a href="">if U.S. military spending were to revert to its 2000 level over the next five years, as President Obama had proposed</a>, and the rest of the world were to continue spending the same portion of its GDP on the military, U.S. military spending as a share of the global total would decline sharply, to just under 30 percent.</p> <p class="NoSpace"><img src="" alt="U.S. Military Spending Share of Global Total" width="595" height="467" /></p> </div> Gross Domestic Product President Obama Sat, 19 Apr 2014 21:36:04 +0000 Tyler Durden 487487 at Everything We Are Told About Deflation Is A Lie <p><em>Submitted by Tim Price via <a href="">The Cobden Center blog</a>,</em></p> <div class="post-bodycopy clearfix"> <blockquote> <div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“The European Central Bank has given its strongest signal yet that it is prepared to embrace quantitative easing to prevent the euro zone from sliding into deflation or even a prolonged period of low inflation.”<br />- ‘Draghi strengthens QE signal’, Financial Times, April 4, 2014.</p> </blockquote> <p>Yes, heaven protect Europe’s embattled citizens and savers from a prolonged period of low inflation. How could they possibly survive it ?</p> <p>If history is any guide, probably quite well. As Chris Casey points out in his essay ‘Deflating the deflation myth’, the American economy during the 19th Century twice experienced deflationary periods of roughly 50 percent:</p> <p><a href=""><img src="" /></a></p> <p><em>Source: McCusker, John J. “How Much Is That in Real Money?: A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States.” Proceedings of the American Antiquarian Society, Volume 101, Part 2, October 1991, pp. 297-373.</em></p> <p>This during a period of “sustained and significant economic growth”. But just think of all those poor consumers, having to make the best of constantly falling everyday low prices.</p> <p>In their research article ‘Deflation and Depression: Is There an Empirical Link?’ of January 2004, <strong>Federal Reserve economists Andrew Atkeson and Patrick Kehoe found that “..the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-1934).</strong> We find virtually no evidence of such a link in any other period.. What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.”</p> <p>In his 2008 essay ‘Deflation and Liberty’, Jörg Guido Hülsmann writes as follows:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“In the present crisis, the citizens of the United States [he could have added: and of the UK, and Europe] have to make an important choice. They can support a policy designed to perpetuate our current fiat money system and the sorry state of banking and of financial markets that it logically entails. Or they can support a policy designed to reintroduce a free market in money and finance. This latter policy requires the government to keep its hands off. It should not produce money, nor should it appoint a special agency to produce money. It should not force the citizens to use fiat money by imposing legal tender laws. It should not regulate banking and should not regulate the financial markets. It should not try to fix the interest rate, the prices of financial titles, or commodity prices.</p> <p>&nbsp;</p> <p>“Clearly, these measures are radical by present-day standards, and they are not likely to find sufficient support. But they lack support out of ignorance and fear.</p> <p>“We are told by virtually all the experts on money and finance – the central bankers and most university professors – that the crisis hit us despite the best efforts of the Fed [..and the Bank of England, and the ECB..]; that money, banking and financial markets are not meant to be free, because they end up in disarray despite the massive presence of the government as a financial agent, as a regulator, and as money producer; that our monetary system provides us with great benefits that we would be foolish not to preserve. Those same experts therefore urge us to give the government an even greater presence in the financial markets, to increase its regulatory powers, and to encourage even more money production to be used for bailouts.”</p> </blockquote> <p><strong>But as Hülsmann goes on to argue, all of these contentions are wrong, </strong>and have been proven to be wrong since the times of Adam Smith and David Ricardo. A paper money system is not beneficial “from an overall point of view”. (Nor has any unbacked paper money system ever lasted.) A paper money system does not create real resources on which our welfare depends. “It merely distributes the existing resources in a different manner; some people gain, others lose. It is a system that that makes banks and financial markets vulnerable, because it induces them to economize on the essential safety valves of business: cash and equity.”</p> <p><span style="text-decoration: underline;"><strong>The conventional view of deflation is that if it sets in, “the banking industry, the financial markets, and much of the rest of the economy will be wiped out in a bottomless deflationary spiral.” But as Hülsmann goes on to argue, such a spiral would not prove fatal to the lives and welfare of the general population. Rather, it would destroy “essentially those companies and industries that live a parasitical existence at the expense of the rest of the economy, and which owe their existence to our present money system.”</strong></span></p> <p>Let us be more explicit. <span style="text-decoration: underline;"><strong>Severe deflation threatens at an existential level bankrupt banks and the bankrupt governments that perpetuate their existence. Deflation is a mortal enemy to the heavily indebted state and its embedded parasites, but it is a friend to the saver and to anyone with a positive net worth. Because it is so dangerous to the debtor, (unelected) central bankers clearly feel they have no option but to incinerate savers at the altar of perpetuating an unsustainably indebted banking and political elite.</strong></span></p> <p>So it would seem that the euro zone, under Mario Draghi, is on the verge of outright quantitative easing, and that the ECB is also committed to using “unconventional instruments” in an increasingly desperate attempt to revive the corpse through explicit inflationism, not least by actually buying sovereign debt of dubious underlying value, rather than merely pledging to. The financial markets certainly appear to think so: the yields on Spanish 5-year government paper fell below those of their US equivalents last week. Spanish bonds yielded more than 7% above US paper as recently as 2012. And as Bloomberg pointed out, the yields on Spanish and Italian five year paper, and the yield on 10 year Irish government debt, all fell to record lows last Friday.</p> <p>Whether in terms of goosed bond markets or inflated stock markets, inflated higher not necessarily by any improvement in corporate prospects but primarily by expectations of more ex nihilo money courtesy of the world’s major central banks, these are false markets. They cannot entirely be trusted – assuming that markets ever can. Fund manager Seth Klarman has written well on the artificiality of today’s markets:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“The Fed and the Treasury openly discuss the aims of their policies: to manipulate financial markets higher and to generate reported economic “growth” and a “wealth effect”. Inside the giant Plexiglas dome of modern capital markets, just about everyone is happy, the few doubters are mocked and jeered, bad news is increasingly ignored… The artificiality of today’s markets is pure Truman Show. According to the Wall Street Journal, the Federal Reserve purchased about 90% of all the eligible mortgage bonds issued in November.”</p> </blockquote> <p>John Phelan of the Cobden Centre writes well that “the Federal Reserve has become an enabler of the financial havoc it was designed (a century ago) to prevent.”</p> <p><strong>Messrs Yellen, Draghi <em>et al</em> should be careful what they wish for. Inflation targeting is hardly a precise science. </strong>Achieving an entirely arbitrary 2% inflation level is bad enough for savers on fixed incomes when deposit rates are close enough to zero as to make no difference, but markets have a tendency to overshoot. Most government bond markets are clearly overbought – but in a QE world given fresh impetus by the looming arrival of the ECB, overbought markets can become even more overbought. When we don’t claim to understand the underlying dynamics (political) or the final destination (though we have our own fears), it’s much better simply not to play. From an asset allocation perspective, classic, benchmark-unconstrained Benjamin Graham-style ‘deep value’ equity is, we now believe, pretty much the only game in town – and that is where we now focus our attention, almost exclusively.</p> <p><strong>Meanwhile, we watch in disbelief as market distortions become even more untenable.</strong></p> </div> Bank of England Bond Capital Markets Central Banks European Central Bank Federal Reserve fixed Great Depression Quantitative Easing Seth Klarman Sovereign Debt United Kingdom Wall Street Journal Sat, 19 Apr 2014 20:18:24 +0000 Tyler Durden 487486 at How Americans Die <p>America is growing older.</p> <p>Nowhere is this more obvious than in the conversion of America's age pyramid into a rectangle from 1960 to 2050, as was shown in a recent post highlighting America's <a href="">two 'slow-motion' social dramas</a>. As the Pew Institute summarized "<strong>we'll have almost as many Americans over age 85 as under age 5</strong>. This is the result of longer life spans and lower birthrates. It’s uncharted territory, not just for us, but for all of humanity. And while it’s certainly good news over the long haul for the sustainability of the earth’s resources, it will create political and economic stress in the shorter term, as smaller cohorts of working age adults will be hard-pressed to finance the retirements of larger cohorts of older ones."</p> <p><a href=""><img src="" width="499" height="897" /></a></p> <p>&nbsp;</p> <p>And as society comes to grips with the realization that the average age of America will hit new record highs with every passing day for the indefinite future, a new, and far less pleasant topic is sure to gain prominence. Namely:&nbsp;<strong>how Americans Die</strong>.</p> <p>This should be intuitive: since older people die sooner than the young, even despite the generally declining mortality by age cohort, the sheer record number of aged Americans will soon drown out the incremental improvements in life expectancy.</p> <p>But it is not only age that is a key issue: one surprising finding (in addition to a curious tangent of a brief spike in AIDS-related deaths in the late 80s and early 90s for the 25-44 year old cohort), is that over the past decade, motor vehicle accidents has lost its top spot as the primary cause of violent deaths across the population, handing over the title to both drug-induced deaths and suicides.&nbsp;</p> <p>Incidentally, in 2010, the number of suicide deaths was nearly four times greater than the number of Americas murdered by firearm. Perhaps it is time to ban suicides.</p> <p>All these and many other curious observations surrounding this fascinating topic are revealed in the following interactive visual data compendium by <a href="">Bloomberg's Matthew Klein</a>.</p> <p>So without further ado, here is a detailed look into <em>How Americans Die.</em></p> <p>First, it should be obvious that courtesy of numerous, life-extending advances over the past several decades, the morality rate has tumbled. Yet in recent years, it has been mostly males who have benefited. Overall progress stopped in the mid-1990s.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>However the lack of improvement can be attributed to a simple factor: the aging of Americans, and specifially those aged 55 and over have risen as a total portion of the population from a little over a fifth of total in the year 2000 to a quarter currently.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>Another obvious observation: old people die sooner than the young</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>Instead of breaking down the population into genders, looking at age cohorts over time shows a plunge in mortality across all age groups, with the biggest beneficiaries being Americans 25 and under.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>However, something curious appears in the 25-44 age group sometime in the late 1980s...</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>That something was AIDS...</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>The AIDS epidemic was so bad for about a decade, the disease became the single largest killer of Americans in their prime, surpassing cancer, heart disease, and all other causes of death.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>Of all races, however, the AIDS epidemic targeted mostly black men between 25 and 44.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>Another curious observation: there has been no progress in mortality for the 45-54 year olds since the late 1990s.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>This quandary is further compounded by the reduced mortality of cancer and heart disease - the biggest traditional killers of this age group - over the past several decades.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>So what is the offset? Simple - a surge in deaths from two new killers - suicide and drug deaths.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>As noted earlier, while until the mid-1990s, gun deaths outnumbered drug deaths, since then the number of gun murders has actually declined, while drug deaths have exploded. As have suicides. Actually perhaps it is time to ba suicides <em><strong>and </strong></em>drugs. Oh wait, somehow the pharma lobby wouldn't be too happy with that.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>As for cars, no need to ban those: motor-related deathes have plunged to a record low, even with seemingy everyone texting and driving.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>Safer roads, however, have been more than offset by an explosion in suicides, with representatives of the 25-44 age group most likely to take their lives.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>Still, despite all of the noted curious patern shifts, the reality remains that most Americans are living longer and dying of natural causes.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>If there is any bad news here, it is that as Americans get older they increasingly succumb to such debilitating, age-related diseases as dementia and Alzheimer's. Indeed, while there has been substantial progress in heart disease-related deaths, the total number of deaths in the 75 and older category has remained flat, precisely due to the increasing prevalence of such age-degenrative conditions.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p>&nbsp;</p> <p>Which means one thing is certain: the amount of spending on Alzheimer's and other age-related diseases is set to soar.</p> <p><a href=""><img src="" width="600" height="342" /></a></p> <p><em>Source: <a href="">Bloomberg</a></em><a href=""></a></p> Reality Sat, 19 Apr 2014 19:35:48 +0000 Tyler Durden 487485 at "Timestamp Fraud": A Rigged Market Explained In One Simple Animation <p>The topic of High-Frequency-Trading quickly dissolves into a smorgasbord of mnemonics and 'inside-baseball' technical terms - just complicated enough to lose everyone that matters or should care about its implications. Despite the fair-and-balanced defense from the mainstream media business channels (sponsored by the belief in the status quo fair markets that 'America the free' is known for), the <strong>fact</strong> is that HFT does front-run (perfectly legal under the umbrella protection of Reg NMS) order flow, but there may be one more wrinkle - one which would cement the Michael Lewis (accurate) allegation that the market is rigged. </p> <p>Because if<a href=""> as Nanex shows below</a>, there is <em><strong>in addition to everything else the element of timestamp fraud </strong></em>involved in the distribution of NMS "compliant" trading data for <em>Direct Feed-to-SIP </em>matching purposes, this means that not only is the market rigged, but its rigging goes from the very top all the way to the lowliest algo. </p> <p>What's worse, the rigged system is so embedded there is nothing anyone can do about it, until it just collapses under its own weight: think May 2010 HFT-created flash crash, only without the mirror-image bounce.&nbsp; </p> <p><em><a href="">Via Nanex</a>,</em></p> <p><strong>Direct vs SIP Data Feed</strong></p> <p>The animation below shows how a trade or quote sent on an exchange makes its way to the SIP (Securities Information Processor) and a Direct Feed used by High Frequency Traders (HFT). Reg NMS requires that an exchange (A) send data to the SIP (C) as fast or faster than it sends that data to direct feed subscribers (B). Here's the relavent text from <a href=""> Regulation NMS</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Rule 603(a)(2) requires that any SRO, broker, or dealer that distributes market information must do so on terms that are not unreasonably discriminatory. These requirements prohibit, for example, a market from making its "core data" (i.e., data that it is required to provide to a Network processor) available to vendors on a more timely basis than it makes available the core data to a Network processor.</p></blockquote> <p>This is the same rule that NYSE broke and was <a href=""> fined $5M by the SEC in September 2012</a>. We have a <a href=""> nice write up</a> summarizing this fine as it applies to the SIP. Unfortunately, this practice continues at other exchanges. In the animation below, note that the information sent to the SIP has to travel significantly farther distances (40 miles vs 1000 feet), on a slower network (1 GBps vs 40 GBps) with a protocol that adds more latency (TCP vs UDP) than the same information sent to the direct feed. Sometimes this latency on the input side of the SIP shows up in SIP data as fantaseconds (a term we coined to describe trades printing before quotes). See this <a href=""> well documented example</a>.</p> <h3>Timestamp Fraud</h3> <p>The animation also shows something that many aren't aware of: the original timestamp gets stripped, and replaced with a fresh timestamp when the SIP transmits it to a subscriber! Watch the timestamp in the box get stripped when it enters, and replaced when it leaves, the circle labeled "SIP Tape A". Keeping original timestamps is crucial for constructing audit trails, or for detecting system delays, which is why it's integral to <a href=""> this solution</a> which allows HFT and non-HFT to coexist.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><img src="" border="0" /></p></blockquote> <h3>Understanding the Animation</h3> <p>Reg NMS requires that exchanges provide core data (trades and quotes) to the SIP as fast or faster than direct feeds. In the animation above, that means a trade or quote originating at an exchange (labeled A) must arrive at the SIP (C) no later than it arrives on a direct feed (B).</p> <p>The animation starts with a trade (or quote) in the symbol "F", timestamped by the exchange at exactly 9:45. One network sends it to direct feed recipients (B) which are all 1000 feet away, and the other network sends it to the SIP (C) which is about 40 miles away. When the trade arrives at the SIP, the timestamp is removed and aggregated with trades from other exchanges (<a href=",%20Direct%20Feeds,%20and%20Ultra%20Direct%20Feeds.png">not shown</a>). Finally, at the point where the SIP transmits the trade to a SIP subscriber (blue circle) it gets a new timestamp based on the SIP clock (which could be ahead or behind the original exchange's clock).</p> <p>This new timestamp, in effect, will hide any delays between the exchange (A) and the blue circle from SIP users. During the flash crash, <a href=""> delays of over 30 seconds</a> occurred in many stocks and were impossible to detect, because of the altered timestamps. Had the original timestamps from the exchange remained, everyone, not just High Frequency Traders, would have been aware they were trading on stale data.</p> <p>Sending data faster to HFT is against regulations. Period. Changing timestamps is just plain wrong, and one could argue that SIP subscribers are being denied the true timestamp that HFT enjoy. Keep in mind that nearly all brokerage reports on trade execution quality use the SIP and therefore, an altered timestamp.</p> <p>Nearly 40% of trades are priced based on the SIP - this include practically all retail trades and most dark pools. Even Goldman Sach's Dark Pool is executes based on SIP prices. When SIP prices lock or cross (due to slow input from one of 13 exchanges or <a href=""> even FINRA</a>), it causes internalizers (retail trades) to stop trading until the condition is resolved: a <a href="">phenomenon made clear during the flash crash</a>.</p> <p><strong>Furthermore, speed differences between the direct feed and the SIP can lead to other undesirable market behaviors, such as momentum ignition, which have become <a href=""> quite common</a> (we detailed one market-wide momentum ignition event <a href=""> here</a>).</strong> Simply put, when prices suddenly move, those who can act earlier (HFT using direct feeds), will profit at the expense of those who cannot, such as internalizers and Dark Pool that are based on the SIP. With nearly 40% of trading based on the SIP, the profitability of this manipulative strategy can be great enough that the cost of inducing price shifts (momentum ignition) is worth the economic and regulatory risk.</p> <h3>Additional Reading</h3> <ul> <li><a href="">Is the National Best Bid or Offer (NBBO) being Ignored?</a> A great primer on the NBBO and direct feeds.</li> <li><a href="">Reg NMS Has Been Rescinded!</a> A rubber-stamped proposal from Nasdaq effectively negates Reg NMS.</li> <li><a href="">HFT Breaks Speed-of-Light Barrier, Sets Trading Speed World Record.</a> Proof of delays on the input side of the SIP.</li> <li><a href="">Coexisting without Colocating</a>. A proposal for improving the market for everyone.</li> <li><a href="">Refuting HFT Claims</a>. Do they really provide liquidity, narrow spreads and lower costs?</li> <li><a href="">Direct Feed Prices</a> - NYSE's filing with the SEC</li> </ul> Dark Pools dark pools FINRA HFT Michael Lewis NASDAQ New York Stock Exchange Reg NMS Stop Trading Sat, 19 Apr 2014 18:18:39 +0000 Tyler Durden 487484 at David Stockman On 'The QE Follies': Bernanke's Swell Gift To The Big Four Banks <p><em>Submitted by David Stockman via <a href="">Contra Corner blog</a>,</em></p> <p>I recently pointed out that <strong>the Fed’s 5-year campaign to drive the 30-year mortgage rate from 6.5% to 3.3% had accomplished nothing except to touch off another of those pointless “refi” booms </strong>which enable homeowners to swap an existing mortgage for a new one carrying a significantly lower interest rate and monthly service cost. Such debt churning exercises have been sponsored repeatedly by the Fed since the S&amp;L debacle of the late 1980s.</p> <p>I further noted that this time the Fed had really outdone itself:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>During some periods upwards of 80% of new originations were not money purchase mortgages to finance a new home, the declared purpose of interest rate repression, but just refis of existing debt. By resorting to&nbsp;this&nbsp;maneuver to leave more money in the pocket of&nbsp;borrowers each month, our monetary central planners undoubtedly hoped that America’s flagging consumers&nbsp;would buy another flat screen TV, dinner at Red Lobster or new pair of shoes.</p> </blockquote> <p><strong>The choice of a flat screen TV or mortgage payment ought to be up to the&nbsp; American people, not the monetary politburo in the Eccles Building. </strong>But even within its own terms, the Fed’s massive refi party made no sense. That’s because unless the Fed&nbsp;intended to peg the mortgage rate at artificial, sub-economic levels for all time to come,&nbsp;its refi maneuver could only shift consumer choices and their mix of spending&nbsp;between&nbsp;quarterly GDP reports; it could not generate permanent gains in national output and real wealth.</p> <p>In fact,&nbsp;the <strong>Fed’s&nbsp;interest rate pegging&nbsp;policies amount to an arbitrary transfer of wealth from mortgage investors to mortgage borrowers—and even that is&nbsp;ultimately temporary</strong>. Capital markets do eventually, and often violently, reject central bank imposed financial repression—- as they did during the Great Inflation of the 1970s when bond prices plummeted.</p> <p>So it was<strong> evident all along that even the mighty Fed would have to eventually&nbsp;take its thumb off the scales in the treasury market, thereby permitting benchmark interest rates to “normalize”.</strong> In that event, mortgage rates would rise and new homebuyers would find themselves spending more on their mortgage and less at the Red Lobster. And on the margin, a higher so-called “cap rate” for residential real estate would mean that housing prices would tend to weaken, not rise. <em><strong>The whole exercise was ultimately a circular delusion.</strong></em></p> <p>Even&nbsp;though this&nbsp;cash flow shuffle is&nbsp;perfectly&nbsp;silly, it has been stubbornly pursued by our paint-by-the-numbers Keynesian&nbsp;central bankers because they refuse to acknowledge the reality of “peak debt”—especially in the household sector. Yet only a <em><strong>permanent gain in leverage</strong> </em>can cause consumer spending to remain elevated in response to monetary stimulus.</p> <p><strong>The overwhelming evidence, however, is that America’s shop-till-they-drop consumers have finally dropped.</strong> After a forty-year cycle of soaring household leverage ratios, “peak debt”&nbsp;ratios were finally&nbsp;encountered in&nbsp;2007-2008— and now retrenchment has set in. Accordingly, consumer spending will now have to come <em><strong>solely out of income</strong></em>, not income plus incremental credit drawdowns which fueled the spending party for decades.</p> <p><a href=""><img src="" alt="Household Leverage Ratio - Click to enlarge" width="480" height="284" /></a></p> <p>Household Leverage Ratio – Click to enlarge</p> <p>But while peak debt means that the Fed’s entire 5-year money printing spree was destined to fail, it nevertheless has produced massive impacts—–all of them bad or stupid. One of the most crucial is that it generated&nbsp;an artificial refi windfall to the Big Banks which now dominate the home mortgage business.&nbsp;And&nbsp;the profit windfall&nbsp;was a doozy.</p> <p>Now that financial&nbsp;results for Q1 2014 have been posted, the impact on Big Four financial results&nbsp;can actually be quantified. <em><strong>The four charts below on mortgage originations per quarter&nbsp;during the course of the Fed’s balance sheet expansion binge are the smoking gun.</strong></em></p> <p>They show that&nbsp;during the most recent quarter the four banks only originated about&nbsp;$67 billion in new mortgages on a combined basis. That&nbsp;figure is a reasonable proxy for the steady-state condition that would have existed had the Fed not been engaged in a monetary cattle drive to get mortgage rates to the bottom of the valley. That is, had mortgage rates remained at their not unreasonable 2008 levels or&nbsp;oscillated randomly owing to the interaction of supply and demand&nbsp;for mortgage funds on the free market, there would have been no&nbsp;thundering stampede by American&nbsp;homeowners to refi their housing debts.</p> <p>Accordingly, activity rates in the&nbsp;mortgage operations of the Big Four would have reflected&nbsp;mainly purchase money borrowing by households who were buying a new or existing home. So the difference between&nbsp;the peak mortgage origination rates shown in the graphs and Q1 results roughly&nbsp;measures Bernanke’s gift to the big banks.</p> <p>On a combined basis, the Big Four originated mortgages at a peak rate of nearly $300 billion per quarter—or $1.2 trillion annually during the period between 2010 and early 2013. So the refi maneuver resulted in up to a 5X gain in the rate of mortgage originations—a process that gave rise to a triple dip of profits, as previously described:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>As&nbsp;summarized in the Fortune article below, the mortgage originators were booking up to $3,300 of up front profit per refi.</p> <p>And that&nbsp;was&nbsp;just the fee on the transaction—before booking the embedded “gain-on-sale” (often thousands more)&nbsp;when most of this booming mortgage volume was subsequently shuffled off to Freddie and Fannie to be&nbsp;packaged and resold as an MBS.&nbsp;Yes, and at that point,&nbsp;such newly minted “mortgage bonds” did flow back to Wall Street where they were&nbsp;doubtless churned many times over by the dealer side of the banking&nbsp;houses in their endless and remunerative chore of supplying “liquidity” to the homeowners of America….So&nbsp;the banking side of the Fed’s refi churn did well too—–enjoying a triple profit dip along the way.</p> </blockquote> <p><strong>As can be seen in the graphs, the windfall in some quarters was even more stupendous. </strong>The peak rate for Bank of America was 10X its Q1 2014 rate and for Citi it was 9X.</p> <p>Yet the real story is in the Wells Fargo (WFC)&nbsp;data. During the third quarter of 2012 it originated $<em><strong>100 billion more in mortgages than it did in Q1</strong> </em>this year after the Fed’s refi cattle drive had ended. Stated differently,&nbsp;the geniuses who run Warren Buffet’s favorite bank were handed a&nbsp; giant book of totally artificial businesses by the Fed— and the consequent opportunity to triple dip from&nbsp;mortgage volumes that amounted to nearly one-half trillion at an annualized rate. WFC had indeed learned at the knee of the nation’s master crony capitalist.</p> <p><em><strong>&nbsp;</strong></em></p> <p><a href="" style="font: 13.33px/17.33px 'Lucida Grande', Verdana, sans-serif; color: #666666; text-transform: none; text-indent: 0px; letter-spacing: normal; text-decoration: none; word-spacing: 0px; white-space: normal; font-size-adjust: none; font-stretch: normal; background-color: #ffffff;"><img src="" width="600" height="397" style="border: 0px currentColor; height: auto; max-width: 100%;" /></a></p> <p><strong><em>&nbsp;</em></strong></p> <p><a href=""><img src="" width="600" height="384" /></a></p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="385" /></a></p> <p>&nbsp;</p> <p><a href="" style="font: 13.33px/17.33px 'Lucida Grande', Verdana, sans-serif; color: #666666; text-transform: none; text-indent: 0px; letter-spacing: normal; text-decoration: none; word-spacing: 0px; white-space: normal; font-size-adjust: none; font-stretch: normal; background-color: #ffffff;"><img src="" width="600" height="402" style="border: 0px currentColor; height: auto; max-width: 100%;" /></a>&nbsp;</p> <p>It should not take more than a moments reflection to grasp the hidden&nbsp;function of the massive mortgage churning shown in the left side of these graphs compared to the meager (and more market neutral)&nbsp;levels shown for Q1.Triple-dipping through their massive mortgage churn, the Big Four banks were able to book net income of $20-25 billion per quarter from originations, gain-on-sale and mortgage trading&nbsp;during much of this period.</p> <p>That means that thanks to Bubbles Ben’s largesse they could pretend that their balance sheets were being repaired. Accordingly,&nbsp;raiding their equity accounts in order to fund dividends and stock buybacks was now&nbsp;fully copasetic.</p> <p>So&nbsp;Uncle Warren along with&nbsp;his fast money trend followers got their reward in a munificent flow of cash out of bank vaults that had been wards of the state only a few months earlier—as did long suffering executives who’s stock options rose 5X in value owing to all the dividends and buybacks.</p> <p>Indeed, during fiscal years 2009-2013 Wells Fargo disgorged $59 billion in cash to fund dividends and share repurchases and JPMorgan paid out $65 billion during the same 5-year period. Needless to say, $110 billion of cash flowing&nbsp;toward the bank stocks&nbsp;post&nbsp;at the Wall Street casino had the hedge fund speculators who continuously cycle in and out of these names delirious with excitement.</p> <p>Likewise,&nbsp;their echo boxes in the financial press were quick to pronounce the all clear. The economy is fixed, the banks are back, and their stocks are soaring—surely proof that all is well.&nbsp;Compared to post-crisis lows, WFC’s stock price&nbsp;was recently&nbsp;at 6X (i.e. $60 per share vs. $10), JPM and BAC were at 3X and even the zombie known as Citi was at 2X.</p> <p>Yes, some of the banks also raised new capital—especially in the early years after the crisis. But that was mainly a smokescreen to give false credibility to the phony “stress tests” concocted by Turbo Tim and Bubbles Ben. But even giving credit to new equity issued—the net&nbsp;cash distribution by WFC and JPM over the five-year period was just short of $80 billion. Adding in BAC, the Big Three distribution of cash for share repurchases and dividends amounted to nearly $35 billion during 2013 alone.</p> <p>It goes without saying that this all&nbsp;amounted to a lot of “shareholder friendly” action—even if it did constitute horrid public policy. And Washington’s policy of allowing the same big banks—who allegedly brought the financial system to the brink of Armageddon just 66 months ago— out of supervisory lock-up is indeed horrible.</p> <p><strong>Every dime of big bank profits—honest earnings and windfall gains like these from the refi contraption alike—should have been sequestered on their balance sheets for years and years to come. Or at least until&nbsp;one of two conditions pertained.</strong></p> <p>One option would have been&nbsp;for&nbsp;some of them&nbsp;to grow up and become real free enterprises. But that would require&nbsp; giving up the Fed’s discount window privilege, deposit insurance and undertaking&nbsp;an irrevocable renunciation of any future bailout claims on any agency of the state.</p> <p>In the alternative, their balance sheets could have stayed in sequester during the entire five years since the crisis. This would have&nbsp;permitted retained earnings and&nbsp;capital to pile-up so deep that even the&nbsp;weak-kneed pettifoggers of the beltway would not be panicked into throwing the banks&nbsp;a life line next time they blow themselves up.</p> <p>Neither option was chosen, obviously. Instead,&nbsp;while the&nbsp;Fed’s entire mortgage refi gambit did nothing for Main Street–except to confer&nbsp;cash flow windfalls on&nbsp;the less than 15% of&nbsp; households that&nbsp; actually did the refi— it did&nbsp;accomplish wonders on the Wall Street side.</p> <p>Not only did it confer massive capital gains on speculators like Warren Buffet and the bank management&nbsp;teams who brought us the&nbsp;financial crisis, but it&nbsp;also&nbsp;amounted to a regulatory get out of jail free card.</p> <p><strong>Yet what was the all-fired hurry in Washington to open the flood gates to bank dividends and stock buybacks. Supposedly, that was to pepper the market for bank stock—so that they would raise new capital on their own.</strong></p> <p><strong>Really? In our financialized economy and crony capitalist policy regime there is apparently&nbsp;no need for more bank capital. As was well demonstrated in 2008-2009, when push comes to shove the state treasury will be raided.</strong></p> <p>In the interim, its all about the secondary market. That is, goosing the price of existing stock certificates held by gamblers who scooped them up at the bottom and management teams who got themselves issued more options&nbsp;after Bubbles Ben pronounced the all clear.</p> BAC Bank of America Bank of America Ben Bernanke Bond Capital Markets Discount Window Fail fixed Gross Domestic Product Housing Prices Real estate Reality Wells Fargo Sat, 19 Apr 2014 17:04:57 +0000 Tyler Durden 487483 at The One Thing Most Desired By Chinese Consumers Is... <p>Hint: it's not designer clothes, shoes, bags or watches.</p> <p><a href=""><img src="" width="600" height="315" /></a></p> <p>&nbsp;</p> <p><em>And some additional explanation from the World Gold Council:</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The Chinese traditionally regard gold as a form of money. Indeed, the character for gold in Mandarin (jin) is also a synonym for money. This is an important fact when it comes to the motivations behind the purchase of jewellery. Asian buyers of plain, 22 or 24 carat jewellery have no doubt in their mind that they are buying gold as well as an object of beauty that can be worn. The perception of value is very important in markets such as India and China where plain, very high carat or ‘pure gold’ articles bought on low-mark-ups comprise the majority of gold jewellery consumption. As such, the level and direction of local gold prices usually have an important bearing on jewellery consumption. This was very clear in 2013 when in April of that year the sudden slump in prices triggered an extraordinary wave of buying in China. Consumers perceived this as a unique opportunity to exchange renminbi for gold at a very favourable rate. It was also of course a chance to bring forward planned purchases for gifts or weddings, especially as the consensus was that prices were bound, eventually, to move a good deal higher.</p> <p>&nbsp;</p> <p>World Gold Council consumer research indicates that consumers remain very positively disposed towards ‘pure gold’ jewellery.<strong> It might be thought that the disappointing price trend in the second half of 2013 had undermined this optimism as well as the public’s desire to purchase ‘pure gold’ jewellery. <span style="text-decoration: underline;">This does not seem to be the case</span></strong>. An extensive consumer survey conducted towards the end of 2013 on behalf of the World Gold Council illustrates how China’s population continues to view ‘pure gold’ jewellery as a form of money, with little indication that this traditional attitude will change any time soon. Asked whether they agreed with the statement that 24 carat gold jewellery " as much an investment as it is a fashion item” no less than 80% of the sample agreed, while only 4% disagreed (16% held no view either way). Agreement levels were strong across all respondents. Moreover, support for future demand is strong: in a separate survey of over 10,000 Chinese consumers, 76% of those aged between 18 and 27 also affirmed ‘pure gold’ jewellery’s investment status. And the majority of respondents planned to maintain or increase their spending on 24 carat gold jewellery over the next 12 months (44% and 35% respectively.</p> </blockquote> <p><em>h/t @RudyHavenstein</em></p> China India Mandarin Renminbi World Gold Council Sat, 19 Apr 2014 15:20:46 +0000 Tyler Durden 487482 at The Next Shoe Just Dropped: Court Denies Attorney-Client Privilege <p><em>Submitted by Simon Black via Sovereign Man blog,</em></p> <p><strong>In the Land of the Free, people grow up hearing a lot of things about their freedom.</strong></p> <p>You&#39;re told that you live in the freest country on the planet. You&#39;re told that other nations &#39;hate you&#39; for your freedom.</p> <p>And you&#39;re told that you have the most open and fair justice system in the world.</p> <p>This justice system is supposedly founded on bedrock principles-- things like a defendant being presumed innocent until proven guilty. The right to due process and an impartial hearing. The right to counsel and attorney-client privilege.</p> <p>Yet each of these core pillars has been systematically dismantled over the years:</p> <p><u><strong>1. So that it can operate with impunity outside of the law, the federal government has set up its own secret FISA courts to rubber stamp NSA surveillance.</strong></u></p> <p>According to data obtained by the Electronic Privacy Information Center, of the nearly <a href=";id=fbcb5f6f8f&amp;e=16aead2520">34,000 surveillance requests made to FISA courts in the last 35-years</a>, only ELEVEN have been rejected.</p> <p>Unsurprising given that FISA courts only hear the case from the government&#39;s perspective. It is literally a one-sided argument in FISA courts. Hardly an impartial hearing, no?</p> <p><u><strong>2. The concept of &#39;innocent until proven guilty&#39; may officially exist in courts, but administratively it was thrown out long ago.</strong></u></p> <p>These days there are hundreds of local, state, and federal agencies that can confiscate your assets, levy your bank account, and freeze you out of your life&#39;s savings. None of this requires a court order.</p> <p>By the time a case goes to court, you have been deprived of the resources you need to defend yourself. You might technically be presumed innocent, but you have been treated and punished like a criminal from day one.</p> <p><u><strong>3. Attorney-Client privilege is a long-standing legal concept which ensures that communication between an attorney and his/her client is completely private.</strong></u></p> <p>In Upjohn vs. the United States, the Supreme Court itself upheld attorney-client privilege as necessary &quot;to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law. . .&quot;</p> <p>It doesn&#39;t matter what you&#39;re accused of-- theft. treason. triple homicide. With very limited exceptions, an attorney cannot be compelled to testify against a client, nor can their communications be subpoenaed for evidence.</p> <p>Yet in a <a href=";id=5d739031f7&amp;e=16aead2520">United States Tax Court decision announced on Wednesday</a>, the court dismissed attorney client privilege, stating that:</p> <p>&quot;When a person puts into issue his subjective intent in deciding how to comply with the law, he may forfeit the privilege afforded attorney-client communications.&quot;</p> <p>In other words, if a person works with legal counsel within the confines of the tax code to legitimately minimize the amount of taxes owed, that communication is no longer protected by attorney-client privilege.</p> <p>Furthermore, the ruling states that if the individuals do not submit attorney-client documentation as required, then the court would prohibit them from introducing any evidence to demonstrate their innocence.</p> <p><u><strong>Unbelievable.</strong></u></p> <p>While it&#39;s true that attorney-client privilege has long been assailed in numerous court cases (especially with regards to tax matters), this decision sets the most dangerous precedent yet.</p> <p>With this ruling, government now has carte blanche to set aside long-standing legal protections and even deny a human being even the chance to defend himself.</p> <p>Naturally, you won&#39;t hear a word about this in the mainstream media.</p> <p>But it certainly begs the question, what&#39;s the point of even having a trial? Or a constitution?</p> <p><strong>When every right and protection you have can be disregarded in their sole discretion, one really has to wonder how anyone can call it a &#39;free country&#39; any more.</strong></p> None Sat, 19 Apr 2014 14:14:53 +0000 Tyler Durden 487481 at Massive "Meteor-Like" Explosion Lights Up North Russian Night Sky <p>A little over a year ago, in February 2013, a meteor <a href="">traveling at 19 miles per second above Chelyabinsk </a>in the Russian Urals exploded in the morning sky, recorded by countless dashcams, with the resulting shock wave shattering windows hundreds of miles away. Fast forward to this night, when residents of Russia's northern Murmansk region witnessed the fall of a celestial body similar to the famous Chelyabinsk meteorite on Saturday night. It flashed at 02:10 am local time and was clearly seen in the sky. However, no sound of explosions was heard. </p> <p>Officials say that the nature of the celestial body is unknown, however since there were no warnings of any ICBM tests overnight, the meteor theory is the most valid one. Then again, the major Russian base of <a href="">Severomorsk</a>, and the administrative center of the Russia northern fleet, is located precisely in this area, so one can see why some of the already percolating theories suggest this may have been nothing but a military test.</p> <p><iframe src="//" width="560" height="315" frameborder="0"></iframe></p> Sat, 19 Apr 2014 13:22:47 +0000 Tyler Durden 487480 at Bankers are Behind the Wars <div style="text-align: center;"><img alt="" class="shrinkToFit decoded aligncenter" height="732" src="" width="513" /></div> <div style="text-align: center;"><span style="font-size:8px;"><em>Image by <a href="" target="_blank" title="Terry Robinson">Terry Robinson</a></em></span></div> <p style="text-align: left;">Former managing director of Goldman Sachs &ndash; and head of the international analytics group at Bear Stearns in London (Nomi Prins) -&nbsp; <a href="" target="_blank" title="notes">notes</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Throughout the century that I examined, which began with the Panic of 1907 &hellip; what I found by accessing the archives of each president is that <strong>through many events and periods, particular bankers were in constant communication [with the White House]</strong> &mdash; not just about financial and economic policy, and by extension trade policy, but also <strong>about aspects of World War I, or World War II, or the Cold War</strong>, in terms of the expansion that America was undergoing as a superpower in the world, politically, buoyed by the financial expansion of the banking community.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>In the beginning of World War I, Woodrow Wilson had adopted initially a policy of neutrality. But the <strong>Morgan Bank</strong>, which was the most powerful bank at the time, and <strong>which wound up funding over 75 percent of the financing for the allied forces during World War I &hellip; pushed Wilson out of neutrality</strong> sooner than he might have done, <strong>because of their desire to be involved on one side of the war</strong>.</p> <p>&nbsp;</p> <p>Now, on the other side of that war, for example, was the <strong>National City Bank, which, though they worked with Morgan in financing the French and the British, they also didn&rsquo;t have a problem working with financing some things on the German side, as did Chase</strong> &hellip;</p> <p>&nbsp;</p> <p>When Eisenhower became president &hellip; the U.S. was undergoing this expansion by providing, under his doctrine, military aid and support to countries [under] the so-called threat of being taken over by communism &hellip; <strong>What bankers did was they opened up hubs, in areas such as Cuba, in areas such as Beirut and Lebanon, where the U.S. also wanted to gain a stronghold in their Cold War fight against the Soviet Union. And so the juxtaposition of finance and foreign policy were very much aligned</strong>.</p> <p>&nbsp;</p> <p>So in the &lsquo;70s, it became less aligned, because though America was pursuing foreign policy initiatives in terms of expansion,<strong> the bankers found oil, and they made an extreme effort to activate relationships in the Middle East, that then the U.S. government <span style="text-decoration: underline;">followed</span>. </strong>For example, in Saudi Arabia and so forth, they get access to oil money, and then recycle it into Latin American debt and other forms of lending throughout the globe. So<strong> that situation <span style="text-decoration: underline;">led</span> the U.S. government</strong>.</p> </blockquote> <p>Indeed, JP Morgan also <a href="" target="_blank" title="purchased control over America’s leading 25 newspapers">purchased control over America&rsquo;s leading 25 newspapers</a> in order to propagandize US public opinion in favor of US entry into World War 1.</p> <p>And many big banks <em>did</em>, in fact, fund the Nazis.</p> <p>The BBC <a href="" target="_blank" title="reported">reported</a> in 1998:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Barclays</strong> Bank has agreed to pay $3.6m to Jews whose assets were seized from French branches of the British-based bank during World War II.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p><strong>Chase Manhattan</strong> Bank, which has acknowledged seizing about 100 accounts held by Jews in its Paris branch during World War II &hellip;.&rdquo;Recently unclassified reports from the US Treasury about the activities of Chase in Paris in the 1940s indicate that the local branch worked &ldquo;in close collaboration with the German authorities&rdquo; in freezing Jewish assets.</p> </blockquote> <p>The New York Daily News <a href="" target="_blank" title="noted">noted</a> the same year:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The relationship between Chase and the Nazis apparently was so cozy that Carlos Niedermann, the Chase branch chief in Paris, wrote his supervisor in Manhattan that <strong>the bank enjoyed &ldquo;very special esteem&rdquo; with top German officials and &ldquo;a rapid expansion of deposits</strong>,&rdquo; according to Newsweek.</p> <p>&nbsp;</p> <p>Niedermann&rsquo;s letter was written in May 1942 five months after the Japanese bombed Pearl Harbor and the U.S. also went to war with Germany.</p> </blockquote> <p>The BBC <a href="" target="_blank" title="reported">reported</a> in 1999:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>A French government commission, investigating the seizure of Jewish bank accounts during the Second World War, says five American banks <strong>Chase Manhattan, J.P Morgan, Guaranty Trust Co. of New York, Bank of the City of New York</strong> and American Express had taken part.</p> <p>&nbsp;</p> <p>It says their Paris branches handed over to the Nazi occupiers about one-hundred such accounts.</p> </blockquote> <p>One of Britain&rsquo;s main newspapers &ndash; the Guardian &ndash; <a href="" target="_blank" title="reported">reported</a> in 2004:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>George Bush&rsquo;s grandfather [and George H.W. Bush&#39;s father], the late US senator Prescott Bush, was a director and shareholder of companies that profited from their involvement with the financial backers of Nazi Germany.</p> <p>&nbsp;</p> <p>The Guardian has obtained confirmation from newly discovered files in the US National Archives that a firm of which <strong>Prescott Bush was a director was involved with the financial architects of Nazism</strong>.</p> <p>&nbsp;</p> <p>His business dealings &hellip; continued until his company&rsquo;s assets were seized in 1942 under the Trading with the Enemy Act</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>The documents reveal that the firm he worked for, <strong>Brown Brothers Harriman</strong> (BBH), acted as a US base for the German industrialist, Fritz Thyssen, who helped finance Hitler in the 1930s before falling out with him at the end of the decade. The Guardian has seen evidence that shows Bush was the director of the New York-based <strong>Union Banking Corporation</strong> (UBC) that represented Thyssen&rsquo;s US interests and he continued to work for the bank after America entered the war.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>Bush was a founding member of the bank [UBC] &hellip; The bank was set up by Harriman and Bush&rsquo;s father-in-law to provide a US bank for the Thyssens, Germany&rsquo;s most powerful industrial family.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>By the late 1930s, Brown Brothers Harriman, which claimed to be the world&rsquo;s largest private investment bank, and UBC had bought and shipped millions of dollars of gold, fuel, steel, coal and US treasury bonds to Germany, both feeding and financing Hitler&rsquo;s build-up to war.</p> <p>&nbsp;</p> <p>Between 1931 and 1933 UBC bought more than $8m worth of gold, of which $3m was shipped abroad. According to documents seen by the Guardian, after UBC was set up it transferred $2m to BBH accounts and between 1924 and 1940 the assets of UBC hovered around $3m, dropping to $1m only on a few occasions.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>UBC was caught red-handed operating a American shell company for the Thyssen family eight months after America had entered the war and that this was the bank that had partly financed Hitler&rsquo;s rise to power.</p> </blockquote> <p>Indeed, banks often finance <a href=";ie=utf-8&amp;oe=utf-8&amp;aq=t&amp;rls=org.mozilla:en-US:official&amp;client=firefox-a" target="_blank" title="fund and sell arms to both sides of wars">both sides of wars</a>:</p> <p><center><iframe frameborder="0" height="533" src="" width="710"></iframe></center> </p><p>&nbsp;</p> <p>(The San Francisco Chronicle also documents that leading financiers <a href="" target="_blank" title="Rockefeller, Carnegie and Harriman also funded Nazi eugenics programs">Rockefeller, Carnegie and Harriman also funded Nazi eugenics programs</a> &hellip; but that&rsquo;s a story for another day.)</p> <p>After all, <a data-mce-="" href="">wars are the <em>fastest</em> way for banks to <em>create more debt</em> ... and therefore to <em>make more profit</em></a>.&nbsp; No wonder they love war.</p> <p>The Federal Reserve and other central banks also <a href="" title="the Federal Reserve helps to start wars by financing them">help to start wars by financing them</a>.&nbsp; Thomas Jefferson and the father of free market capitalism, Adam Smith, both noted that the financing wars by banks led to <a href="" title="more – and longer – wars.">more &ndash; and longer &ndash; wars.</a></p> <p>And America apparently considers <a href="" title="threatening war against any nation which becomes an economic rival">economic rivalry to be a basis for war</a>, and is&nbsp;<a href="" title="using the military to contain China’s growing economic influence">using the military to contain China&rsquo;s growing economic influence</a>.</p> <p>Multi-billionaire investor Hugo Salinas Price <a href="" target="_blank" title="told">says</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>What happened to [Libya&#39;s] Mr. Gaddafi, <strong>many speculate the real reason he was ousted was that he was planning an all-African currency for conducting trade</strong>. <strong>The same thing happened to him that happened to Saddam because the US doesn&rsquo;t want any solid competing currency out there vs the dollar</strong>. You know Gaddafi was talking about a <a href="" id="_GPLITA_2" title="Click to Continue &gt; by Text-Enhance">gold</a> dinar.</p> </blockquote> <p>Senior CNBC editor John Carney <a href="" target="_blank" title="noted">noted</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power? It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.</p> <p>&nbsp;</p> <p>Robert Wenzel of <a data-nodeid="4387582" href="" target="_blank" title="Economic Policy Journal thinks">Economic Policy Journal thinks</a> the central <a href="" id="_GPLITA_1" target="_blank" title="Click to Continue &gt; by Text-Enhance">banking</a> initiative reveals that foreign powers may have a strong influence over the rebels.</p> <p>&nbsp;</p> <p>This suggests we have a bit more than a ragtag bunch of rebels running around and that there are some pretty sophisticated influences. &ldquo;I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising,&rdquo; Wenzel writes.</p> </blockquote> <p>Indeed, <a href="" target="_blank" title="some say">many claim</a> that recent wars have really been about bringing all countries <a href="" target="_blank" title="into the fold of Western central banking">into the fold of Western central banking</a>, and that the wars against Middle Eastern countries are really about <a href="" title="forcing them into the dollar and private central banking">forcing them into the dollar and private central banking</a>.</p> <p>The most decorated American military man in history said that <a href="" title="war is a racket">war is a racket</a>, and <a href="" target="_blank" title="noted">noted</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Let us not forget the bankers who financed the great war. If anyone had the cream of the profits it was the bankers.</p> </blockquote> <p>The big banks have also been <a href=",0,3041182.story" target="_blank" title="Laundering money for terrorists">laundering money for terrorists</a>. The big bank employee <a href="" target="_blank" title="who blew the whistle">who blew the whistle</a> on the banks&rsquo; money laundering for terrorists and drug cartels says that the giant bank is still aiding terrorists, <a href="" target="_blank" title="saying">saying</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The public needs to know that money is still being funneled through HSBC to directly buy guns and bullets to kill our soldiers &hellip;. Banks financing &hellip; terrorists affects every single American.</p> </blockquote> <p>He also <a href="" target="_blank" title="said">said</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>It is disgusting that our banks are STILL financing terror on 9/11 2013.</p> </blockquote> <p>And <a href=";" target="_blank" title="see this">see this</a>.</p> <p>According to the BBC and other sources, Prescott Bush, JP Morgan and other leading financiers also funded a coup against President Franklin Roosevelt in an attempt &ndash; basically &ndash; to implement fascism in the U.S. See <a href="" target="_blank" title="this">this</a>, <a href="" target="_blank" title="this">this</a>, <a href="" target="_blank" title="this">this</a> and <a href="" target="_blank" title="this">this</a>.</p> <p>Kevin Zeese <a href="" target="_blank" title="writes">writes</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Americans are recognizing the link between the military-industrial complex and the Wall Street oligarchs&mdash;a connection that goes back to the beginning of the modern U.S. empire. <a href="" rel="nofollow" target="_blank" title="Banks have always profited from war">Banks have always profited from war</a> because the debt created by banks results in ongoing war profit for big finance; and because wars have been used to open countries to U.S. corporate and banking interests. Secretary of State, William Jennings Bryan wrote: &ldquo;the large banking interests were deeply interested in the world war because of the wide opportunities for large profits.&rdquo;</p> <p>&nbsp;</p> <p>Many historians now recognize that a hidden history for U.S. entry into World War I was to protect U.S. investors. <a href="" rel="nofollow" target="_blank" title="U.S. commercial interests had invested heavily in European allies">U.S. commercial interests had invested heavily in European allies</a> before the war: &ldquo;By 1915, American neutrality was being criticized as bankers and merchants began to loan money and offer credits to the warring parties, although the Central Powers received far less. Between 1915 and April 1917, the Allies received 85 times the amount loaned to Germany.&rdquo; The total dollars loaned to all Allied borrowers during this period was $2,581,300,000. The bankers saw that if Germany won, their loans to European allies would not be repaid. The leading U.S. banker of the era, <a href="" rel="nofollow" target="_blank" title="J.P. Morgan and his associates did everything they could to push the United States into the war">J.P. Morgan and his associates did everything they could to push the United States into the war</a> on the side of England and France. Morgan said: &ldquo;We agreed that we should do all that was lawfully in our power to help the Allies win the war as soon as possible.&rdquo; President Woodrow Wilson, who campaigned saying he would keep the United States out of war, seems to have entered the war to protect U.S. banks&rsquo; investments in Europe.</p> <p>&nbsp;</p> <p>The most decorated Marine in history, <a href="" rel="nofollow" target="_blank" title="Smedley Butler">Smedley Butler</a>, described fighting for U.S. banks in many of the wars he fought in. He said: &ldquo;I spent 33 years and four months in active military service and during that period I spent most of my time as a high-class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.&rdquo;</p> <p>&nbsp;</p> <p>In <em>Confessions of an Economic Hit Man</em>, John Perkins describes how World Bank and IMF loans are used to generate profits for U.S. business and saddle countries with huge debts that allow the United States to control them. It is not surprising that former civilian military leaders like Robert McNamara and Paul Wolfowitz went on to head the World Bank. These nations&rsquo; debt to international banks ensures they are controlled by the United States, which pressures them into joining the &ldquo;coalition of the willing&rdquo; that helped invade Iraq or allowing U.S. military bases on their land. If countries refuse to &ldquo;honor&rdquo; their debts, the CIA or Department of Defense enforces U.S. political will through coups or military action.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>More and more people are indeed seeing the connection between corporate banksterism and militarism &hellip;.</p> </blockquote> <p>Indeed, <a href="" target="_blank" title="all wars are bankers’ wars.">all wars are bankers&rsquo; wars.</a></p> American Express Barclays BBH Bear Stearns Central Banks China Federal Reserve France Germany Goldman Sachs goldman sachs International Monetary Fund Iraq Mexico Middle East Saudi Arabia White House World Bank Sat, 19 Apr 2014 12:00:00 +0000 George Washington 487478 at