en How Our Aversion To Change Leads Us Into Danger <p><a href=""><em>Submitted by Raul Ilargi Meijer via The Automatic Earth blog,</em></a></p> <p>The deeply embedded, genetically determined aversion -or resistance- to change that we are all born with is an important survival tactic. <strong>Since change equals potential danger, our aversion to it keeps us out of danger. </strong></p> <p><strong>We are &lsquo;programmed&rsquo; to prefer familiar surroundings</strong>, to first look at what we recognize, and to ignore what we do not until we feel comfortable enough about what we do know.</p> <p><u><em><strong>Ironically, though, the aversion to change can also lead us into danger. Because it prevents us from preparing for change, and therefore preparing for danger</strong></em></u>.</p> <p>Yes, people can adapt, they have that ability too, but we don&rsquo;t fully adapt to change until and unless we&rsquo;re forced to. And while it may not be too late then, it certainly tends to make adaptation much more difficult.</p> <p>We prefer to focus on those things that stay the same, or seem to stay the same, ignoring those that don&rsquo;t, even if they change in -comparatively- radical ways, until we no longer can. But by then we have most often missed a significant part of the time and the opportunity to adapt to them. Our resistance to change causes us to miss those changes that happen despite our efforts at keeping things the same.</p> <p><strong>The deeper problem, as every thinking human can recognize, is that things always change, life changes, the world does. Nothing ever stays the same. Change itself is the only constant. Life equals change. Without change, there would be no life.</strong></p> <p>And arguably -since time is perhaps not a constant-, changes come even faster today than they have historically, in the perception of our ancestors, both in human designed systems and in natural systems. And the faster the changes come, the more vulnerable our inborn aversion to change makes us. Which in turn reinforces that aversion all the more.</p> <p>In today&rsquo;s world, plant and animal species go extinct at a far faster pace than ever in human history. The planet warms, sea levels rise. Pollution of multiple kinds increases at an exponential speed.</p> <p>Our initial genetic reaction to all of this is to withdraw deeper into the cocoons we&rsquo;ve built, and ignore, if not deny, that these things are happening. Or we may care up to a point, donate some money or even wave a banner, but always with an eye to returning to the safety of our cocoons.</p> <p><strong>The way it appears to work is that our aversion to change turns against us because, and when, it is amplified by our propensity to lie to ourselves and to each other.</strong></p> <p>That&rsquo;s also the point where we let the sociopaths of the world into the picture, and that&rsquo;s where we allow them to be our leaders. They thrive on our denial of change, of problems, of dangers. They know to tell us just what we want to hear. Recovery, hope, wealth, clean energy, whatever sells on any given day.</p> <p>Politicians eagerly use our resistance to change, because they don&rsquo;t want change either, lest it costs them their positions. The world&rsquo;s wealthiest, too, seize on to our inbuilt drive to hold on to what&rsquo;s familiar, and they use it to get even wealthier.</p> <p><strong>It is nothing new that people&rsquo;s fears can be used to control them. Fear of the unknown, fear of what&rsquo;s different, fear of change. </strong>But also fear of communists, fear of muslims, fear of people who have different skin colors, customs, rituals and cultures. We possess a myriad of -often dormant- fears, and it is very easy to play into them, and get people to support those who promise to protect them. &ldquo;Trust me, I&rsquo;ll keep you comfy, I&rsquo;ll make sure things stay just the same. And better.&rdquo;</p> <p><u><strong>What is true for changes in climate, pollution, extinction rates, is also true for the economy and our perceived wealth status. We try to ignore the biggest changes, and elect people to represent us who feed into that denial.</strong></u></p> <p>Together, politics and big money, through the media they firmly control, today paint a picture of a world in recovery &ndash; a beneficial change, a return to what we are comfortable with-, albeit a recovery that requires job cuts and pay cuts and austerity and other miserable measures for &lsquo;normal people&rsquo;. It&rsquo;s the price you&rsquo;ve got to pay for being allowed to stay in your comfort zone.</p> <p><strong>The reality, however, is that there is no recovery, and there can&rsquo;t and won&rsquo;t be until huge amounts of debt have either been repaid or restructured. </strong>Meanwhile, the rich and their bankers continue to increase their profits and upscale their lifestyles, as everyone else gets squeezed while dreaming of what they once had, or were once dreaming of.</p> <p>This way we have entirely missed out on perhaps the biggest change to our economies in human history. That is, our economies, and therefore our societies, no longer run on what we produce, they run on what we borrow. This is not that recent a development, but what is new is that we have reached a stage where the inevitable shadow side of the arrangement is becoming ever more obvious.</p> <p>The optimum, the sweet spot, for our western economies can be debated, but the range is not that wide: it will be sometime between the late 1960s and the mid-to-late 1970s. That&rsquo;s when our societies -and their private citizens- would have been at their richest, and it&rsquo;s all been downhill from there, something that becomes obvious especially when looking at what debt levels have done since.</p> <p>At first debt went up slowly, but then it started to accelerate faster, in a classical hockey stick model. Around the year 2000, again not a solid date but close, we began to need to issue more debt just to service existing debt. And since then, we&rsquo;ve dug a much deeper debt hole for ourselves.</p> <p>Which we will only be able to climb out of after a painful sequence of deleveraging and deflation. It will be so painful that it&rsquo;s pretty much useless to think about what we&rsquo;re going to do at the other end of it; the world will have changed so profoundly by then we wouldn&rsquo;t recognize it anyway. Talk about change.</p> <p><strong>The process of trying to ignore the changes taking place around us has had many perverse effects, but perhaps none more than our inability to see how a wide range of organizational structures in our world have changed their roles, their goals and their purposes.</strong></p> <p>NATO has always been presented as beneficial to our safety, as well as that of the entire world. It lost that role a long time ago, but we&rsquo;re ignorant of that change. The IMF was supposed to instill balance into the global economy, and provide support to weaker nations, but it&rsquo;s become a tool for the rich to squeeze the poor. The same holds for the World Bank.</p> <p>The US was born as a union of free states, but it&rsquo;s rapidly becoming a force of suppression for both its own citizens and just about all other nations on the planet. The EU was meant to unite European countries in a manner that should prevent yet more wars, but it&lsquo;s become an authoritarian bureaucracy that divides and will, if it is not stopped, provoke fighting among nations once our economic facades start to crumble for real.</p> <p>We used think of our media as independent organizations whose goal it was to provide us with objective information on local as well as world affairs. Today, there is very little left in the media that could be labeled objective even with the best of intentions.</p> <p><strong>There are many more examples of things that have changed profoundly, and where we entirely missed out on the changes.</strong> And as we may start to realize the reason why we didn&rsquo;t see the changes as they happened, i.e. we are genetically pre-disposed not to notice them, we may also come to perceive the role these changes are set to play in our future lives, and the dangers they pose to those lives.</p> <p><u><em><strong>It&rsquo;s a remarkable PR and spin achievement that we have been led to -still- believe our societies need megabanks to survive, and it&rsquo;s just as remarkable that trade deals like NAFTA, TPP and TTiP are sold to us as beneficial to our lives, even as they are concocted in the most flagrant anti-democratic way imaginable. &ldquo;Trust us&rdquo;.</strong></em></u></p> <p>Alas, the moment we finally wake up to what these deals represent, we won&rsquo;t own a single square inch of our own world anymore. The very people who claim to bring freedom to the rest of the world are very busy taking our freedom away at home.</p> <p>The relentless invasions by US/UK/NATO military of a dozen or so Muslim nations, all of which resulted in utter political chaos in formerly largely peaceful societies, in bloodshed among their citizens and even sometimes in the murder of doctors and nurses, all these things find widespread support among western populations thinking &ldquo;we&rdquo; are still on the right side of the equation, or even that God is still on our side.</p> <p>Even if the murder of civilian populations has long been constituted as a war crime, and even if we all intuitively understand that those who volunteer to work in the world&rsquo;s most volatile regions in order to help ordinary people in mortal danger, like the doctors and nurses in Medecins sans Frontiers&rsquo; numerous locations around the world, are arguably the best among us, they get bombed and shot at, and their lifeless remains discarded as collateral damage, and we pretend that somehow that&rsquo;s alright.</p> <p><strong>Russia has been carefully positioned by our governments and media as the new/old baddest enemy we have, but Stalin is long gone and our representatives are unable to provide us with any evidence of the evil deeds Moscow is alleged to be guilty of this time around.</strong></p> <p>Today, with the Russian army stepping in where the west, at least if we may believe its stated goals, has failed -Syria-, NATO cries wolf as loud as it can. And we believe it, because we believe it&rsquo;s protecting us from evil. That it may well be the agent of evil itself is a matter that cannot be discussed, and isn&rsquo;t.</p> <p><u><strong>The persistent claim emanating from Washington that America spreads freedom and democracy around the world has been exposed as ludicrous numerous times and in many parts of the world, but not in the US itself, and that&rsquo;s what counts; most.</strong></u></p> <p>It&rsquo;s easier for us to ignore the changes that the behemoth political, economical and military structures in our own societies have undergone, and that&rsquo;s who they like it. At a certain scale, an organizational structure gets too large too wrap a human mind around, nobody oversees what happens and why, and the organizations therefore attract the wrong people as leaders, the sociopathic types who thrive in exactly such situations.</p> <p><strong>But sociopaths know exactly which buttons to push, or they wouldn&rsquo;t rise to their positions</strong>. And one of those buttons is your aversion to change, and all the fears change can give way to. Through the same methods you are being sold detergent, you are relentlessly pushed to trust a political system and its representatives that once may -may- have acted in your best interest but no longer do.</p> <p>In the same vein, economic growth may once have been a valid goal to strive for, but today has not only become impossible because of the aforementioned debt levels, it must also be seriously questioned in view of massive pollution, mass extinctions and changing climates.</p> <p><u><strong>The notion that we we can grow our way out of the mess that our previous growth spurt has gotten us into, rests at best on very flimsy foundations. To shake off this all-encompassing growth ideal, however, we would need to radically change our &lsquo;model&rsquo; of the world.</strong></u></p> <p>Unfortunately, we are pre-disposed not to like change, let alone the radical kind.</p> <p>The combination of our pre-disposition against change and the accelerating rate of change we ourselves have induced, means we are entering what may be seen as the &lsquo;dark side&rsquo; of that disposition.</p> <p><u><strong>And while we can try and ignore that dark side for a little bit longer, the days of our ignorance are numbered. Our blinders are about to be ripped off our faces, in a violent fashion. We&rsquo;re not going to like it.</strong></u></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="246" height="179" alt="" src="" /> </div> </div> </div> Global Economy None Rate of Change Reality recovery World Bank Fri, 09 Oct 2015 14:23:35 +0000 Tyler Durden 514625 at Europe Reveals How Accounts Will Be Frozen During the Next Crisis <p><span style="font-size: 10pt; line-height: 1.3em;">In the last 24 months, Canada, Cyprus, New Zealand, the US, the UK, and now Germany have all implemented legislation that would allow them to first FREEZE and then SEIZE bank assets during the next crisis.</span></p> <p>&nbsp;</p> <p>These moves will be sold as &ldquo;for the public&rsquo;s good,&rdquo; when they happen. But the reality is that it&rsquo;s all about stopping people from moving their capital into actual physical cash.</p> <p>&nbsp;</p> <p>The whole template for this was set out in Cyprus in 2013. The quick timeline for what happened in Cyprus is as follows:</p> <p>&nbsp;</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; June 25, 2012: Cyprus formally requests a bailout from the EU.</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is &euro;17.5 billion).</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; February 25, 2013: Democratic Rally candidate Nicos Anastasiades wins Cypriot election defeating his opponent, an anti-austerity Communist.</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under &euro;100,000 and 9.9% for accounts larger than &euro;100,000&hellip; a bank holiday is announced.</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March 18 2013: Bank holiday extended until March 21 2013.</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March 19 2013: Cyprus parliament rejects bail-in bill.</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March 20 2013: Bank holiday extended until March 26 2013.</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March 24 2013: Cash limits of &euro;100 in withdrawals begin for largest banks in Cyprus.</p> <p style="margin-left:1.0in;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March 25 2013: Bail-in deal agreed upon. Those depositors with over &euro;100,000 either lose 40% of their money (Bank of Cyprus) or lose 60% (Laiki).</p> <p>&nbsp;</p> <p>The most important thing I want you to focus on is how lies and propaganda were spread for months leading up to the collapse. Then in the space of a single weekend, the whole mess came unhinged and accounts were frozen.</p> <p>&nbsp;</p> <p>One weekend. The process was not gradual. It was sudden and it was total: once it began in earnest, the banks were closed and you couldn&rsquo;t get your money out (more on this in a moment).</p> <p>&nbsp;</p> <p>There were no warnings that this was coming because everyone at the top of the financial food chain are highly incentivized to keep quiet about this. Central Banks, Bank CEOs, politicians&hellip; all of these people are focused primarily on maintaining CONFIDENCE in the system, NOT on fixing the system&rsquo;s problems. Indeed, they cannot even openly discuss the system&rsquo;s problems because it would quickly reveal that they are a primary cause of them.</p> <p>&nbsp;</p> <p>For that reason, you will never and I repeat NEVER see a Central banker, Bank CEO, or politician admit openly what is happening in the financial system. Even middle managers and lower level employees won&rsquo;t talk about it because A) they don&rsquo;t know the truth concerning their institutions or B) they could be fired for warning others.</p> <p>&nbsp;</p> <p>Please take a few minutes to digest what I&rsquo;m telling you here. You <em>will not</em> be warned of the risks to your wealth by anyone in a position of power in the political financial hierarchy (with the exception of folks like Ron Paul who are usually marginalized by the media).</p> <p>&nbsp;</p> <p>Moreover, when the Crisis <em>DOES</em> hit, <strong><u>it will be much much harder to get your money out.</u></strong></p> <p>&nbsp;</p> <p>Consider the recent regulations implemented by SEC to <strong>stop</strong> withdrawals from happening should another crisis occur.</p> <p>&nbsp;</p> <p>The regulation is called<em> <strong>Rules Provide Structural and Operational Reform to Address Run Risks in Money Market Funds</strong></em><strong>. </strong>It sounds relatively innocuous until you get to the below quote:</p> <p>&nbsp;</p> <p style="margin-left:.5in;"><em>Redemption Gates &ndash; Under the rules, if a money market fund&rsquo;s level of weekly liquid assets falls below 30 percent, a money market fund&rsquo;s board could in its discretion temporarily suspend redemptions (gate).&nbsp; To impose a gate, the board of directors would find that imposing a gate is in the money market fund&rsquo;s best interests.&nbsp; <strong><u>A money market fund that imposes a gate would be required to lift that gate within 10 business days, although the board of directors could determine to lift the gate earlier.&nbsp; Money market funds would not be able to impose a gate for more than 10 business days in any 90-day period&hellip;</u></strong></em></p> <p>&nbsp;</p> <p>Also see&hellip;</p> <p style="margin-left:.5in;">&nbsp;</p> <p style="margin-left:.5in;"><em>Government Money Market Funds</em> &ndash; Government money market funds would not be subject to the new fees and gates provisions.&nbsp; <strong><u>However, under the proposed rules, these funds could voluntarily opt into them, if previously disclosed to investors.</u></strong></p> <p style="margin-left:.5in;">&nbsp;</p> <p><a href="" title=""></a></p> <p>&nbsp;</p> <p>In simple terms, if the system is ever under duress again, <strong>Money market funds can lock in capital (meaning you can&rsquo;t get your money out) for up to 10 days. </strong>If the financial system was healthy and stable, there is no reason the regulators would be implementing this kind of reform.</p> <p>&nbsp;</p> <p>This is just the start of a much larger strategy of declaring War on Cash.</p> <p>&nbsp;</p> <p>Indeed, we&#39;ve uncovered a secret document outlining how the Fed plans to incinerate savings to force investors away from cash and into riskier assets.</p> <p>&nbsp;</p> <p>We detail this paper and outline t<strong><u>hree investment strategies </u></strong>you can implement</p> <p>right now to protect your capital from the Fed&#39;s sinister plan in our Special Report</p> <p><strong><em>Survive the Fed&#39;s War on Cash.</em></strong></p> <p>&nbsp;</p> <p>We are making <u>1,000</u> copies available for FREE the general public.</p> <p>&nbsp;</p> <p>To pick up yours, swing by&hellip;.</p> <p><a href=""></a></p> <p>&nbsp;</p> <p>Best Regards</p> <p>Phoenix Capital Research</p> <p>&nbsp;</p> <p>&nbsp;</p> B+ Central Banks Germany New Zealand Reality Ron Paul Fri, 09 Oct 2015 14:09:19 +0000 Phoenix Capital Research 514624 at Wholesale Inventories Rise And Sales Tumble Sending Ratio To "Recession Imminent" Cycle Highs <p>Wholesale Inventories rose 0.1% MoM (more than expected and the most in 7 months) and Sales dropped 1.0% MoM (notably less than expected and weakest in 7 months) sending the<strong> inventory-to-sales ratio to 1.31x - new cycle highs - and flashing the brightest recession warning yet</strong>. With inventories up 4.2% YoY and Sales down 4.5% YoY, the stunning reality is the <strong>absolute dollar spread between inventories and sales has never been bigger</strong>.</p> <p>Inventories keep rising more than expected and sales keep missing...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 628px;" /></a></p> <p>&nbsp;</p> <p>Sending the Inventories-to-Sales Ratio is firmly in recession territory...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 309px;" /></a></p> <p>&nbsp;</p> <p>The annual change in these two critical time series screams one thing: inventory liquidation or at least remarking far lower:</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 365px;" /></a></p> <p>&nbsp;</p> <p>In absolute terms the dollar difference between wholesale inventories and sales has never been bigger.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 409px;" /></a></p> <p>&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="961" height="495" alt="" src="" /> </div> </div> </div> Reality Recession Wholesale Inventories Fri, 09 Oct 2015 14:07:05 +0000 Tyler Durden 514623 at Bank Of England Tells British Banks To Reveal Their Full Exposure To Glencore And Other Commodity Traders <p>Moments ago Glencore stock was halted after it tripped a circuit breaker to the upside, soaring 12% and more than doubling from its recent record lows...</p> <p><img src="" width="600" height="314" /></p> <p>... on overnight news the commodity trading giant would cut its zinc production by a third as well as lay off some 1,600 workers in Australia, in the process also sparking the biggest ever rally in the price of zinc.</p> <p>Annual zinc output will fall by about 500,000 metric tons as Glencore suspends production at its Lady Loretta mine in Australia and at Iscaycruz in Peruit said Friday in a statement. It will also reduce output at McArthur River and the George Fisher mines, both also in Australia and some operations in Kazakhstan. The cuts are expected to result in about 1,600 job losses. Global zinc production was 13.3 million tons in 2014, according to the U.S. Geological Survey, <strong>making the reduction equivalent to almost 4 percent of world output.</strong></p> <p><a href="">Bloomberg notes </a>that "as one of the world’s biggest suppliers of base metals such as copper, nickel and zinc, Glencore’s metals and minerals businesses delivered about 30 percent of its revenue last year. The shares jumped as much as 11 percent in London."</p> <p>Analysts promptly cheered the move:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"Glencore is showing industry discipline by cutting unprofitable tons and saying it is worth more value to leave the tons in the ground,” Heath Jansen, a Citigroup Inc. analyst, wrote in a report Friday. “We expect assets to remain out of production until zinc prices improve materially and stay higher.</p> <p>This cut is likely to be positive for the zinc market and should be supportive for the zinc price, and net-net likely to be positive for earnings through higher price rather than volume."</p> <p>&nbsp;</p> <p>“Maybe they are the trailblazer, as there’s the specter of oversupply in many commodities,” James Wilson, a Morgans Financial Ltd. analyst, said by phone from Perth. “If you want higher prices for a commodity, you need to create price tension and to have less product in the market. Glencore’s doing that, though maybe under duress, and it’s something that other big companies should be thinking of.”</p> <p>&nbsp;</p> <p>“The main reason for the reduction is to preserve the value of Glencore’s reserves in the ground at a time of low zinc and lead prices, which do not correctly value the scarce nature of our resources,” the company said. Glencore is “positive about the medium and long-term outlook for zinc, lead and silver prices.”</p> </blockquote> <p>To be sure, the latest production cut is not the first for Glencore: the company has already curbed copper and coal supply as it navigates a collapse in raw materials that’s wiped $37 billion from its market value this year. </p> <p>More importantly, as Citigroup further added the move is unlikely to affect analysts’ earnings estimates for the company or cash-flow forecasts <strong>as the operations are unprofitable at current prices. </strong></p> <p>Simply said, with sales a function of price and volume, and with Glencore aggressively cutting volumes, it is hoping the price increase will (more than) offset the drop in volumes. Which is a big gamble as other cash-strapped miners step up their own production, in the process boosting supply and once again slamming the price of zinc (and copper) lower. </p> <p>It remains to be seen where the equilibrium price levels off after all these production cutbacks, although if the copper and zinc markets are anything like oil, it is certain that any volume reductions by Glencore will be promptly taken advantage of by Glencore's competitors, because in a global deleveraging and commodity supercycle repricing, he who cooperates while others defect, always loses the game theory.</p> <p>Still, the basis of Glencore's thinking is probably something very different: as we noted earlier in the week, the company has had no problems approaching its banks with requests for further funding, requests which the banks promptly satisfied knowing that if Glencore fails, it may take all of them with it.</p> <p>This is about to change. </p> <p>As we <a href="">reported two days ago</a>, according to BofA analysts as a result of the dramatic collapse in GLEN equity prices and tumble in its bonds, coupled with the surge in its default risk, the company has quietly become a "systemic risk."</p> <p>We laid out the conclusions as follows:</p> <ul> <li>Comparisons are being made with some financially leveraged companies during the 2008 Global Financial Crisis (GFC).</li> <li>If credit is downgraded, banks could lower their exposure to Glencore both in terms of RCFs &amp; LCs.</li> <li>The high yield market is small and, our credit strategist thinks we might initially see temporary dislocations in a scenario in which GLEN were downgraded to junk.</li> <li><strong>Bank stress tests could start to include commodity trader distress. This could lead to less availability and more expensive bank funding of traders.</strong></li> </ul> <p>It was the last bullet point that was most important, and overnight we got confirmation that Glencore has indeed become a systemic risk from a regulatory standpoint after the <a href="">FT reported </a>that the <strong>Bank of England has asked British financial institutions to reveal their full exposure to commodity traders and falling prices of raw materials amid concerns over the impact of the oil and metals slump</strong>. Or, in other words, <em><strong>their exposure to Glencore, Trafigura, Vitol, Gunvor and Mecuria.</strong></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The Bank of England’s <strong>Prudential Regulation Authority</strong>, which was set up in 2012 to ensure the “safety and soundness” of banks in the wake of the financial crisis, <strong>sent the requests to the UK’s big banks in the past week, according to three people with direct knowledge of the matter.</strong></p> </blockquote> <p>And just like that Glencore is in the same boat as China and Greece: the PRA move that mirrors similar inquiries it made earlier this year about the banks’ exposure to Greece and to China, was prompted by a sharp drop in the shares of Glencore, the biggest publicly listed trading-house-cum-miner at the start of last week.</p> <p>The damage control came fast and furious, with the FT quickly adding that this demand for exposure "was not provoked by any immediate concerns of a default, a person familiar with the matter said, <strong>but it was checking that banks knew what their exposures were to individual commodity houses and that they had examined the wider knock-on effects if a large commodity trader was to collapse.</strong>"</p> <p>But wait, didn't a paid-to-scribe UofHouston "professor" recently claim that <a href="">commodity traders were "not a systemic risk"? </a>The Bank of England seems to disagree. </p> <p>The FT also adds that "the PRA also wants to ensure banks — many of whom trade oil and metal themselves as well as financing commodity dealers and companies — are prepared in the event of a prolonged slowdown in the sector."</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>A person familiar with the move said: “This is not something we do every month, it is situation-specific,” adding it was a specific response to the recent share price moves of Glencore and other commodity trading houses. </p> </blockquote> <p>Why is this a milestone development for Glencore? Because as BofA explained, now that Glencore is clearly in the central bank's microscope, banks will be much more careful about how much liquidity they provide the commodity-trader with $100 billion in counterparty exposure:</p> <p>Recall from BofA: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>GLEN had an unencumbered asset base of over US$90bn in property, plant, equipment and inventories at the half year. However, for bank investors and regulators, after the crisis, gross nominal exposure is a key metric – including committed facilities. <strong>We believe many banks may now be more carefully reviewing their exposure to the commodities complex</strong>. Glencore’s banks span the globe, with 60 in a recent financing. Glencore has stated it has locked its financing in for an extended period, but a desire to hedge would be powerful at the banks, as likely that regulators will include commodity and energy exposures in the next stress tests as it is a stated area of focus. <strong>These stress tests typically take gross exposures and assume elevated loss-given-default - a potential 5x capital uplift. </strong>A system positioned one-way on a credit has historically tended to keep spreads high; implying rising debt costs which are likely to put pressure on credit quality: convexity is alive and well.</p> </blockquote> <p>What does this mean for Glencore, and its stakeholders? It means that today's rally is certainly welcome for a company which recently lost 80% of its post-IPO equity value. However, the long-term prospect remains nebulous, and as we said first in <a href="">March of 2014</a>, ultimately a bet on Glencore - <strong><em>in either direction </em></strong>- is a bet on China. If China fails to create a solid economic recovery, and push commodity prices higher, Glencore is merely buying time even as its cash flow dwindles, as its asset base shrinks and while what few unencumbered assets it has become encumbered with liens or are pledged, thus eliminating the company's ability to boost liquidity when it needs it most. </p> <p>For now Glencore has avoided the worst, but now that it is a "systemic risk", should there be another major swoon lower in commodity prices, it may not be so lucky next time. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="620" height="465" alt="" src="" /> </div> </div> </div> Australia Bank of England China Citigroup Convexity Copper default Fisher Greece High Yield Kazakhstan Prudential recovery Fri, 09 Oct 2015 13:49:27 +0000 Tyler Durden 514622 at FOMC Becomes Self-Aware: Lockhart "Understands" Why People May Be "Skeptical" Of The Fed <p>Having reiterated all the key talking points of "data-dependence", "downside risks", "labor slack", and the economy is "improving", The Fed's Dennis Lockhart then admitted...</p> <ul> <li><strong>LOCKHART: UNDERSTAND WHY PEOPLE MAY GET LITTLE SKEPTICAL OF FED</strong></li> </ul> <p>We wonder just what makes him "understand" the world's growing skepticism?</p> <p>And if there was any doubt at just which "data" The Fed is dependent on...</p> <ul> <li><strong>*LOCKHART: VIX INDEX SPIKED IN AUG, NOW 'SETTLED BACK'</strong></li> <li><strong>*LOCKHART: WATCHING GLBL EVENTS FOR SIGNS OF SPILLOVR INTO US</strong></li> </ul> Dennis Lockhart Fri, 09 Oct 2015 13:44:42 +0000 Tyler Durden 514621 at WTI Crude Tops $50, Energy Stocks Soar To Biggest Week Since 2008 (But Credit Ain't Buying It) <p><strong>WTI Crude is back above $50 to its highest in almost 3 months </strong>following a 10%-plus gain on the week (the 2nd best since Jan 2009). This surge has sparked the <strong>biggest surge in European and US Oil &amp; Gas stocks since 2008</strong> as Bloomberg notes, output from the world&rsquo;s biggest consumer drops and Shell and PIMCO claim the&nbsp;worst may be over (while Goldman sees &quot;lower for longer&quot; suggesting this rally is a squeeze). However, while Energy stocks and raw materials are soaring, <strong>credit markets remain notably less impressed</strong>.</p> <p>&nbsp;</p> <p>Following the 2nd biggest week in crude since January 2009...</p> <p><a href=""><img height="298" src="" width="600" /></a></p> <p>&nbsp;</p> <p>WTI Crude broke above $50 for the first time since July...</p> <p><a href=""><img height="369" src="" width="600" /></a></p> <p>&nbsp;</p> <p><em><strong>&ldquo;The stocks have been oversold over the past year and that&rsquo;s helping the rally now,&rdquo;</strong></em>Jason Kenney, European head of oil and gas equity research at Banco Santander SA, said by phone from Edinburgh. <strong><em>&ldquo;Question is where will oil prices settle now? Investors think oil companies can weather the storm because they&rsquo;ve got so many levers to pull.&rdquo;</em></strong></p> <p>However, Credit markets remain notably unimpressed (and given their focus on cashflows, we suspect at this level of risk, they are less momo and more fundamentally driven)...</p> <p><img alt="" src="" style="width: 600px; height: 311px;" /></p> <p>&nbsp;</p> <p><a href=""><em>As Bloomberg reports, </em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Oil may rise to a &ldquo;baseline&rdquo; of about $60 a barrel in one year&rsquo;s time as the impact of supply cuts becomes more evident from early 2016,&nbsp;Greg Sharenow, an executive vice-president at Pimco</strong>, said in an e-mail. U.S. crude output is down about 440,000 barrels a day from a four-decade high of 9.61 million barrels in June.</p> <p>&nbsp;</p> <p><u><strong>Still, companies remain cautious after a rally earlier this year was shortlived</strong></u>. While production cuts&nbsp;may help draw a line under the rout, prices are set to remain &ldquo;lower for longer&rdquo; because of excess inventories, according to Pimco, which manages $15 billion of commodity assets. Shell plans for a long stretch of low prices, Van Beurden said this week in London.</p> <p>&nbsp;</p> <p>&ldquo;People could be thinking, how much worse can it get from here,&nbsp;so there&rsquo;s a rotation from short positions to long,&rdquo; Michael Powell, a managing director of investment banking at Barclays Plc, said in London this week. <u><strong>&ldquo;Then you ask, is this the spring of this year all over again?&rdquo;</strong></u></p> </blockquote> <p><em>Charts: Bloomberg</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="971" height="503" alt="" src="" /> </div> </div> </div> Barclays Crude Momo PIMCO Fri, 09 Oct 2015 13:22:15 +0000 Tyler Durden 514619 at VIX Trips From 37 To 20 Have Been All-Or-Nothing For Stocks <p><a href=""><em>Via Dana Lyons&#39; Tumblr,</em></a></p> <p><strong>Everyone knows that spikes in the S&amp;P 500 Volatility Index, a.k.a. &ldquo;VIX&rdquo;, are associated with distress in the equity markets.</strong> The recent August decline in stocks was a perfect example of this as the VIX jumped from near 11 to over 50 in just a few weeks with the S&amp;P 500 dropping by more than 10%. As stocks have recovered, the VIX has calmed down. <strong>As of Monday, the VIX closed below 20 for the first time since the middle of August. Such returns to&nbsp;&ldquo;normalcy&rdquo; in the VIX have typically been associated with a return to calmer times in the equity market. </strong>This recent round trip in the VIX got us wondering how reliable of an all-clear signal that has been for stocks historically. So&hellip;surprise, we checked it out.</p> <p>We originally searched for all occasions in which the VIX first returned to below 20 after having spiked above 40. Upon looking, however, we noticed that there were a few near-misses that would be interesting if included. Therefore, we adjusted our search for spikes above 37. Yes, this is pure data-mining, and we pride ourselves on avoiding such gimmicks. After all, our ultimate goal is to make our clients more money. Thus, mining for trivial data points is a waste of our time. This study certainly falls into that trap, however, we think the results are interesting enough to publish &ndash; and may serve a valuable lesson too.</p> <p><strong>As it turns out, since the inception of the VIX in 1986, there had been 13 occasions (before the recent one) in which the VIX climbed over 37 before dropping back below 20.</strong></p> <p>&nbsp;</p> <p><figure class="tmblr-full" data-orig-height="1055" data-orig-width="1718"><img alt="image" data-orig-height="1055" data-orig-width="1718" height="307" src="" width="500" /></figure> </p><p>&nbsp;</p> <p><strong>So what was so interesting about these VIX trips from over 37 to under 20? </strong>The most interesting thing is that this signal was not at all a consistent harbinger of calmer, happier times for stocks. In fact, in the longer-term, i.e., 1-year out, this signal was the opposite of consistent. The results were binary. They were like Babe Ruth&rsquo;s batting output: a home run or a strike out, all or none.</p> <p><u><em><strong>Of the 13 prior signals, 8 led to 1-year gains between +10% and +22%. The other 5 resulted in 1-year losses of between -12% and -40%. Here are the dates along with their 1-year returns:</strong></em></u></p> <p><figure data-orig-height="315" data-orig-width="216"><img alt="image" data-orig-height="315" data-orig-width="216" height="315" src="" width="216" /></figure> </p><p><i>(We took a little liberty in the 10/11/2010 event. The actual 1-year return was +3%, as of 10/11/2011 when the market was just emerging from the steep correction. Just 1 week later, however, the return had risen to +10%.)</i></p> <p>So what gives? <strong>The difference between the two outcome regimes lies in the transition of market structure.</strong> Those events seeing positive 1-year returns were emblematic of the customary environment in which a drop in the VIX to lower levels signals a more placid climate, conducive to stock market gains. In other words, a VIX drop below 20 is akin to crossing the threshold into&nbsp;&ldquo;home run&rdquo; territory for stocks.</p> <p><strong>On the other hand, the events that led to 1-year losses occurred concurrently with a shift in market structure from a low-volatility environment to one of elevated volatility.</strong> In these cases, the initial spikes above 37 were not merely temporary dislocations. They were warning shots that ushered in this new high-volatility environment. In these kinds of environments, drops below 20 do not signify a threshold crossing. More accurately, they signal an&nbsp;&ldquo;oversold&rdquo; status, or the lower bound of the elevated volatility climate.</p> <p><strong>So how do we know if the current signal is a&nbsp;&ldquo;threshold crossing&rdquo; into a better climate for stocks, or the lower bound of a new climate of elevated volatility? </strong>One possible clue may come in the behavior of the VIX going forward. Following the 5 events that saw the market lower 1 year out, the lowest the VIX was able to reach was the upper-15&prime;s. This may be a level to keep an eye on as a significant breach may be a clue that the favorable low-volatility environment isn&rsquo;t dead yet.</p> <p><strong>We cannot know for sure at this point if a volatility shift has occurred. </strong>We do have our reasons to be suspect of stocks in the longer-term, but not based on this data. Perhaps the best takeaway from this study is that a drop in the VIX below the 20 level is not an automatic all-clear sign for stocks. Similar moves have, on several occasions, marked the lower bound of a new high-volatility environment.</p> <p>In other words, stocks are not an automatic home run here. A year from now, it is entirely possible that stocks will have struck out.</p> <p>*&nbsp; *&nbsp; *</p> <p><i><a data-rapid_p="17" href="" target="_blank">More</a> from Dana Lyons, JLFMI and My401kPro.</i></p> <p>&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="496" height="312" alt="" src="" /> </div> </div> </div> Equity Markets None Volatility Fri, 09 Oct 2015 13:01:51 +0000 Tyler Durden 514618 at Global Depression Coming - Even "Powerhouse" Germany and UK Slow "Dramatically" <p>- IMF warn of “fresh financial crisis”</p> <p>- German exports fall 5.2%, largest slump since recession of 2009</p> <p>- German imports also fall 3.1%</p> <p>- Many sectors across German economy see unexpected declines in factory orders and industrial production</p> <p>- UK Chief Financial Officers (CFOs) report sharp rise in uncertainty</p> <p>- UK PMI has fallen to lowest level since April 2013</p> <p>- Hope for the best but be prepared for less benign scenarios</p> <p>&nbsp;</p> <p><img src="" width="849" height="436" /></p> <p><em><strong>IMF 2015 Global National Debt Map - IMF</strong></em></p> <p><span style="font-size: 1em; line-height: 1.3em;">The IMF have been growing more vocal in recent weeks about the possibility of another financial crisis and severe recession. The head of financial stability at the IMF, José Viñals has said that this outlook “does not rely on extreme assumptions at all”.</span></p> <p><span style="font-size: 1em; line-height: 1.3em;">IMF head, Christine Lagarde has said that the slow down now being seen in China and other large emerging markets will cut economic growth globally back to levels last seen during the crisis of 2009.&nbsp;</span></p> <p><span style="font-size: 1em; line-height: 1.3em;">Viñals added “If we don’t get it right we could set the clock back in terms of growth.”</span></p> <p><span style="font-size: 1em; line-height: 1.3em;">In its financial stability report the IMF said:</span></p> <p><em><span style="font-size: 1em; line-height: 1.3em;">“Shocks may originate in advanced or emerging markets and, combined with unaddressed system vulnerabilities, could lead to a global asset market disruption and a sudden drying up of market liquidity in many asset classes.”</span></em></p> <p><span style="font-size: 1em; line-height: 1.3em;">Just this week, we covered the similar starking warning from the BIS, the central bank of central banks, &nbsp;who warned of “major fault lines” in the global financial system and a “global debt bubble.”</span></p> <p>Right on cue yesterday figures out of “powerhouse” Germany show a dramatic and unexpected decline in economic activity. Imports and exports slumped in the month - with exports slumping 5.2% in August relative to the previous month. At the same time imports into Germany are also faltering with the most recent figures showing a decline of 3.1%.&nbsp;</p> <p><span style="font-size: 1em; line-height: 1.3em;">Germany’s manufacturing industry, Europe's biggest industry in the EU’s largest economy, is taking a hit from sharply slowing demand in emerging markets and developing markets.</span></p> <p><span style="font-size: 1em; line-height: 1.3em;">It is believed that the turmoil being experienced by German flagship companies Volkswagen and Deutsche Bank and geopolitical uncertainty in the Ukraine and Middle East and tensions with Russia are contributing factors to the malaise.&nbsp;</span></p> <p><span style="font-size: 1em; line-height: 1.3em;">The situation is more that just a crisis in confidence. Major chemical company BASF SE has announced a curb in spending and reduced profit and sales expectations going forward. Bloomberg also cite a German steel industry report which shows that “crude steel production fell almost four percent in September.”&nbsp;</span></p> <p>Two major shipping companies who handle three quarters of containers into Hamburg have indicated that weaker trade with Russia and China has caused them to cut their 2015 earnings forecast.</p> <p><strong>Meanwhile in the UK, there are also signs of a sudden economic slowdown.</strong></p> <p><span style="font-size: 1em; line-height: 1.3em;">The purchasing managers index (PMI) in the UK as compiled by Markit has fallen to its lowest level since April 2013 at the height of the sovereign debt crisis.&nbsp;</span></p> <p><span style="font-size: 1em; line-height: 1.3em;">Headline services PMI fell to 53.3 in September down from 55.6 in August. Their figures indicate that the UK economy is growing at 0.3% down more than 50% from the rate of growth in the second quarter.</span></p> <p>"Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular. There are also signs that consumers have become more cautious and are pulling back on their leisure spending," Chris Williamson, chief economist at Markit, said according to Reuters.</p> <p>The Guardian report that service sector businesses ranging from those in finance to restaurants were experiencing salaries pressure while prices charged rose “marginally”. These companies also say that generation of new business was at its slowest pace since April 2013.&nbsp;</p> <p><span style="font-size: 1em; line-height: 1.3em;">An earlier composite PMI from Germany fell as did those out of Italy and Spain. France's composite reading was the only economy to buck the trend and rose marginally to 0.2 percent growth in the third quarter, according to Markit.</span></p> <p>Another sign of the slowdown in the UK is a survey by Deloitte showing that the “chief financial officers (CFOs) of some of Britain’s biggest companies reported a sharp rise in uncertainty facing their businesses,” according to the Guardian.&nbsp;</p> <p>Some 60% of those surveyed believed that the economic slowdown in China would have a negative impact on their business.</p> <p><span style="font-size: 1em; line-height: 1.3em;">&nbsp;</span></p> <p><a href=""><img src="" width="782" height="535" /></a></p> <div> <div><strong>BULLION COIN &amp; BAR PREMIUMS &amp; AVAILABILITY - October 9, 2015</strong></div> <div><strong><br /></strong></div> <div>The threat to growth highlighted by the IMF is a symptom of a system which remains very vulnerable and in a worst case scenario could implode as it did in 2008.&nbsp;</div> <div>Alas today, there appears to be no new growth without new debt and with every sector of the global economy already choking on debt there are few options available to policy makers.&nbsp;</div> <div>Many well placed analysts have warned that when the next crisis hits the inability of central banks to dramatically lower rates will result in unprecedented policy measures such as negative interest rates with the abolition of physical cash, bail-ins and aggressive debasement of currency in the form of QE.&nbsp;</div> <div>Gold is the tried and tested historical safeguard against political, economic and monetary recklessness.</div> <div>Investors should hope for the best while making preparations for less benign scenarios. This can be achieved by reducing leverage and speculation and having a healthy allocation to physical precious metals in the safest vaults in the world.</div> <div></div> <div></div> </div> <div>Read more on the <a href=""> blog</a></div> <div></div> <div></div> <div> <div><strong>IMPORTANT NEWS</strong></div> <div>Gold rises on dovish Fed minutes, set for weekly gain – Reuters</div> <div>Gold Prices Rise In Asia On Dovish Fed Tone – WSJ</div> <div>Gold ticks up but uncertainty over U.S. rate hike timing lingers – Reuters</div> <div>Gold settles lower, then tops $1,150 after FOMC minutes – MarketWatch</div> <div>Pimco calls worst of commodity crunch over with oil seen gaining – The Economic Times</div> <div></div> <div><strong style="font-size: 1em; line-height: 1.3em;">IMPORTANT ANALYSIS</strong></div> <div><strong><br /></strong></div> <div>Bruised Germany Is Canary in Coal Mine for Europe’s Troubles – Bloomberg [Video]</div> <div>Glencore’s $100 Billion ‘Gorilla’ Means Bad News for Banks – Bloomberg</div> <div>Peter Boehringer: Bundesbank still has failed to deliver a gold bar list –</div> <div>Global Financial Meltdown Coming? Clear Signs That The Great Derivatives Crisis Has Now Begun – Smarter Analyst</div> <div>IMF warns emerging market companies have overborrowed $3 trillion – Reuters</div> <div></div> </div> <div>Read more <a href="">News &amp; Commentary</a> on</div> BIS Central Banks China Deutsche Bank Germany Global Economy Italy Markit Meltdown Middle East National Debt PIMCO Precious Metals Recession Reuters Sovereign Debt Ukraine Volkswagen Fri, 09 Oct 2015 12:50:56 +0000 GoldCore 514617 at Obama Weighs "Syria Retreat" As White House Ends Training Of Moderate Rebels <p>This past weekend we called Obama's latest failed attempt to replace Syria's president (after a comparable attempt in 2013 also ended in failure) for what it is: "<a href="">Make no mistake, this is shaping up to be the most spectacular US foreign policy debacle since Vietnam - and we don't think that's an exaggeration.</a>" </p> <p>Some of our high level observations:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The US, in conjunction with Saudi Arabia and Qatar, attempted to train and support Sunni extremists to overthrow the Assad regime. Some of those Sunni extremists ended up going crazy and declaring a Medeival caliphate putting the Pentagon and Langley in the hilarious position of being forced to classify al-Qaeda as "moderate." The situation spun out of control leading to hundreds of thousands of civilian deaths and when Washington finally decided to try and find real "moderates" to help contain the Frankenstein monster the CIA had created in ISIS (there were of course numerous other CIA efforts to arm and train anti-Assad fighters, see below for the fate of the most "successful" of those groups), the effort ended up being a complete embarrassment that culminated with the admission that only "four or five" remained and just days after that admission, those "four or five" were car jacked by al-Qaeda in what was perhaps the most under-reported piece of foreign policy comedy in history. </p> <p>&nbsp;</p> <p>Meanwhile, Iran sensed an epic opportunity to capitalize on Washington's incompetence. Tehran then sent its most powerful general to Russia where a pitch was made to upend the Mid-East balance of power. The Kremlin loved the idea because after all, Moscow is stinging from Western economic sanctions and Vladimir Putin is keen on showing the West that, in the wake of the controversy surrounding the annexation of Crimea and the conflict in eastern Ukraine, Russia isn't set to back down. Thanks to the fact that the US chose extremists as its weapon of choice in Syria, Russia gets to frame its involvement as a "war on terror" and thanks to Russia's involvement, Iran gets to safely broadcast its military support for Assad just weeks after the nuclear deal was struck. Now, Russian airstrikes have debilitated the only group of CIA-backed fighters that had actually proven to be somewhat effective and Iran and Hezbollah are preparing a massive ground invasion under cover of Russian air support. Worse still, the entire on-the-ground effort is being coordinated by the Iranian general who is public enemy number one in Western intelligence circles and he's effectively operating at the behest of Putin, the man that Western media paints as the most dangerous person on the planet. </p> </blockquote> <p>Today, less than a week later, we have confirmation that this assessment was accurate, following two major developments in the Syria global proxy war. </p> <p>First, <a href="">Bloomberg reports </a>that a week into Russia's military intervention in Syria, some top White House advisers and National Security Council staffers <strong>are trying to persuade President Barack Obama to scale back U.S. engagement there, to focus on lessening the violence and, for now, to give up on toppling the Syrian regime</strong>.</p> <p>It adds that "the administration came to this conclusion late. Despite warnings from U.S. intelligence agencies that Putin's military buildup was intended to keep Assad in power, the White House nonetheless decided to explore cooperating with Russia on the ground. Throughout the summer and into the fall, top Russian officials -- including Putin himself in a meeting last month with Obama at the U.N. -- said they were not committed to keeping Assad in power for the long term, and would only target Islamic State fighters in their military offensive, according to U.S. officials."</p> <p>So U.S. intelligence is shocked that following a multi-year campaign which was launched in 2011, which escalated in 2013 to a near-naval war, and which culminated in 2014 with the "mysterious" emergence of ISIS whose stated purpose according to leaked CIA documents was a simple one: to depose Assad, that Obama's biggest antagonist on the global superpower stage, Russian president Putin would do everything in his power to prop up his own key pawn in the middle east. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Putin's intervention has had the U.S. flummoxed from day one. As the Russian military moved into Syria, U.S. intelligence officials tell us, the intelligence community was skeptical that it intended to focus its military campaign on the Islamic State. Even so, as the New York Times reported, the U.S. was surprised by the speed with which Russia built and then announced its new coalition with the governments of Syria, Iran and Iraq to support its military campaign.</p> </blockquote> <p>Did we say "U.S. intelligence"? Scratch that.</p> <p>In any event, after confirming virtually every word of our conclusion from past weekend, now that the administration realizes it is trapped without a credible way out absent de-escalation, it has no choice but to do just that:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Obama has ruled out engaging in a proxy war with Putin's military, leaving few good options. One path, however, would mean finding ways to tamp down the fighting by negotiating small, local ceasefires with the Assad regime. “The White House somehow thinks we can de-escalate the conflict while keeping Assad in power,” one senior administration official told us.</p> <p>&nbsp;</p> <p>“The current policy of the United States and its partners, to increase pressure on Assad so that he ‘comes to the table’ and negotiates his own departure, <strong>must be rethought</strong>,” Malley’s predecessor at the National Security Council, Philip Gordon, wrote at Politico as Russia was amassing its forces in Syria.</p> </blockquote> <p>The planted Bloomberg story, meant solely to lessen the blow from the latest foreign policy humiliation adds that "that view, being pushed by top White House National Security staffers, including senior coordinator for the Middle East Rob Malley, is not new. But it has received fresh emphasis given Russian intervention."</p> <p>To be sure, there are neo-con war hawks, led by John Kerry and Samantha Power, who as a reminder was the puppet-masted behind the Ukraine coup, who want to escalate to the bitter end, even if it literally ends in a mushroom cloud: "The NSC view is opposed by top officials in other parts of the government, <strong>especially Secretary of State John Kerry and U.S. Ambassador to the UN Samantha Power. They are trying to persuade Obama that the only way to solve Syria is to increase the pressure on Assad in the hopes he will enter negotiations."</strong></p> <p>However, just like in the 2013 Syria campaign, when Kerry huffed and puffed and ultimately folded, so two years later the man who married into the Heinz family fortune will have no choice but to fold again:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Yet Kerry and Power now find themselves without any hope that Putin might bring the Syrian regime to the table. Kerry, though always skeptical of Russia, has been the point man on engaging the Russian government through several conversations with Foreign Minister Sergei Lavrov. But it’s now clear the Russians were leading the Obama administration down the primrose path.</p> </blockquote> <p>Others in Congress have already understood the endgame: Senate Foreign Relations Committee Chairman Bob Corker said that by not doing more to confront Putin’s escalation, "the administration is tacitly admitting it will no longer be able to secure Assad’s ouster."</p> <p>The implications are profound: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"If Assad is staying and there’s no political process in sight, this argument goes, <strong>the U.S. might as well focus on alleviating the suffering of the Syrian people and mitigate the growing refugee crisis.</strong></p> <p>&nbsp;</p> <p>Local ceasefires have been struck sporadically throughout the war, mostly in areas under siege by the Assad regime. The United Nations special envoy for Syria, Staffan de Mistura, has been pushing this idea for over a year.</p> </blockquote> <p>This means that the dramatic migrant exodus heading into Europe, which is now spun as positive for the economy, and would have been the catalyst form more deficit-funding QE as a result of debt-funded spending spree required by Germany to pay for the millions in refugees, may be coming to an end, with substantial implications for monetary policy.</p> <p>Bloomberg's own conclusion shows a glimmer of hope that the end is not in sight just yet:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Caught between two camps in his administration, Obama may not end up shifting the U.S. approach to Syria at all, although the de-escalation side has the momentum</strong>. Either way, as Russia, Iran and the Syrian regime change facts on the ground, the relative position of America and the Syrians it has supported becomes graver by the day.</p> </blockquote> <p>And then moments ago, the <a href="">NYT confirmed that the de-escalation </a>process has begun, when it reported that "<strong>the Obama administration has ended the Pentagon’s $500 million program to train and equip Syrian rebels, </strong>administration officials said on Friday, in an acknowledgment that the beleaguered program had failed to produce any kind of ground combat forces capable of taking on the Islamic State in Syria." </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Pentagon officials were expected to officially announce the end of the program on Friday, as Defense Secretary Ashton B. Carter leaves London after meetings with his British counterpart, Michael Fallon, about the continuing wars in Syria and Iraq.</p> <p>&nbsp;</p> <p>A senior Defense Department official, who was not authorized to speak publicly and who spoke on the condition of anonymity, <strong>said that there would no longer be any more recruiting of so-called moderate Syrian rebels to go through training programs in Jordan, Qatar, Saudi Arabia or the United Arab Emirates</strong>. Instead, a much smaller training center would be set up in Turkey, where a small group of “enablers” — mostly leaders of opposition groups — would be taught operational maneuvers like how to call in airstrikes.</p> </blockquote> <p>To be sure, the admin tried to soften the blow: moments ago <a href=";feedName=politicsNews">Reuters added </a>that "The U.S. military program to train and equip Syrian rebels is not "ending" but is instead being refocused, a senior U.S. defense official said on Friday, ahead of an announcement on overhauling the troubled U.S. effort." No matter how one diplomatically phrases it though, at this point the wheels are in motion.</p> <p>Which brings us to our own conclusion from last week: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>If Russia ends up bolstering Iran's position in Syria (by expanding Hezbollah's influence and capabilities) and if the Russian air force effectively takes control of Iraq thus allowing Iran to exert a greater influence over the government in Baghdad, the fragile balance of power that has existed in the region will be turned on its head and in the event this plays out, one should not expect Washington, Riyadh, Jerusalem, and London to simply go gentle into that good night.</p> </blockquote> <p>It is precisely this scenario that U.S. "intelligence" just realized, and why Obama is now sounding the retreat. The only question is whether Putin, who is now on the offensive across the mid-east region, agrees to take Obama's olive branch, or whether he continues the "<em>campaign to end ISIS</em>", in the process creating the biggest shift in the mid-east balance of power with a <em>Russia-Syria-Iran-Iraq </em>axis, and with China waiting patiently in the wings.</p> <p><img src="" width="600" height="400" /></p> <p>Finally, this may be just the catalyst that ends the torrid surge in oil higher over the past week now that the biggest geopolitical factor pushing black gold above $50 is in the rear view mirror.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="640" height="427" alt="" src="" /> </div> </div> </div> B+ Barack Obama Bob Corker China Germany Iran Iraq Middle East Monetary Policy national security New York Times Obama Administration Reuters Saudi Arabia Turkey Ukraine Vladimir Putin White House Fri, 09 Oct 2015 12:41:07 +0000 Tyler Durden 514616 at One Part Of The Economy Is Booming: The Underground/Cash-Only Sector <p><a href=""><em>Submitted by Charles Hugh-Smith of OfTwoMinds blog,</em></a></p> <p><em>If you make it so burdensome to operate a legit business, then you&#39;re basically giving people without big lines of credit and capital few choices but to work in the cash-only underground economy.</em></p> <p><strong>It won&#39;t be much of a surprise to those living outside the Washington D.C. beltway and the Unicorn Herd of start-ups selling for millions of dollars that the underground cash-only economy is one of the few bright spots in the U.S. economy.</strong> Correspondent B.U. recently submitted this report from rural America in response to my entry <a href="" target="resource">What Happens to our Economy as Millions of People Lose the Habits of Hard Work?</a>, which mentioned those in the cash-only sector as not showing up in official employment statistics:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>It is very common for folks where I live to get some form of subsidy be it SSI or WIC or whatever. Then they maintain their lifestyle by: </em></p> <p>&nbsp;</p> <p><em>-- Selling items for cash on Craigslist: </em></p> <p>&nbsp;</p> <p><em>This is mostly sub $1500 cars, Building materials or scrap metal. </em></p> <p>&nbsp;</p> <p><em>I know quite a few folks that are doing very well in this line of business. </em></p> <p>&nbsp;</p> <p><em>--Selling at various &lsquo;trades-days&rsquo;: </em></p> <p>&nbsp;</p> <p><em>A friend mine clears ~$100K just trading in gold, firearms and ammunition. </em></p> <p>&nbsp;</p> <p><em>Others I know trade cattle and livestock. </em></p> <p>&nbsp;</p> <p><em>Another friend repairs cars at his home. He has weeks of backlog and turns away work all the time. </em></p> <p>&nbsp;</p> <p><em>The key to all of this is that these folks have no official business. They trade only in cash. They do not make deposits in the bank except for the government checks. </em></p> <p>&nbsp;</p> <p><em><strong>The point is that for these folks, unplugging was a pay raise just in the tax exposure.</strong> When they get sick, they claim indigent and get whatever they need. </em></p> <p>&nbsp;</p> <p><em><strong>The spread between the burden of regulation and taxes is getting so onerous that folks are just falling into the very solution you describe.</strong></em></p> <p>&nbsp;</p> <p><em>I believe your focus is more professional in nature in terms of folks being a hired gun (i.e. free-lancer/contract employee). But what I see are the non-professionals as the ones who are really moving to fill the void of value that is growing as deflation/inflation oscillate. </em></p> </blockquote> <p><strong>Thank you, B.U., for the straight-up report from the real world.</strong> Despite the fact I pay all my taxes (and am royally reamed as a result), I sympathize with those making tax-free incomes in the cash-only economy.</p> <p>Back when I had multiple employees in the 1980s, I was basically working to pay workers compensation insurance (40% to 80% of the hourly wage for construction workers), liability coverage, unemployment insurance, disability insurance, FICA (employers&#39; share of Social Security), excise tax, income tax, rent on the office that we were required by law to maintain, healthcare insurance for all the employees, filling out HUD/FHA forms required when building homes with FHA loans, and so on. Then there&#39;s the cost of accounting and tax returns (complicated when you&#39;re operating a business), and a long list of other expenses I&#39;ve forgotten.</p> <p>My partner and I had a stock response when any employee griped about all the money we must be making: we&#39;d take out our keys to the office and offer it to them, and say &quot;payday&#39;s on Friday. It&#39;s all yours.&quot; I&#39;d have been relieved if any had been dumb enough to accept the offer. No one ever did.</p> <p><strong>It&#39;s no wonder that legit small business and self-employment is often a struggle for financial survival.</strong> I&#39;ve covered the travails of one serial entrepreneur in launching a new business in today&#39;s America: the costs were so heavy that he gave up. It was impossible to actually make a living once you met all the absurd regulations, codes and requirements.</p> <p>The people enforcing the regulations (&quot;just doing my job&quot;) are paid by taxpayers; their job is safe, their paycheck and benefits guaranteed.</p> <p><em><a href="" target="resource"> Our Government, Destroyer of Jobs</a> (August 12, 2015)</em></p> <p><em><a href="" target="resource"> The Troubling Decline of Financial Independence in America</a> (August 28, 2015)</em></p> <p><em><a href="" target="resource">The Fading American Dream of Working for Yourself</a> (October 2015)</em></p> <p><strong>Financial independence is the American Dream</strong> because it gives us the freedom to say <a href="" target="resource"> Take This Job And Shove It</a> (Johnny Paycheck).</p> <p><strong>This chart shows the tax-paying self-employed as a percentage of those with jobs (all nonfarm employees).</strong> According to the FRED data base, there are 142 million employed and 9.4 million self-employed. (The incorporated self-employed, typically physicians, attorneys, engineers, architects etc. who are employees of their own corporations, total about 5 million.)</p> <p><img border="0" src="" /></p> <p><strong>This chart depicts self-employment from 1929 to 2015.</strong> Self-employment is cratering in the &quot;recovery&quot; of high taxes, senseless regulations and burdensome report-filing (big fines if you don&#39;t comply), tax preparation, business licence fees, fishing-expedition lawsuits, etc.</p> <p><img border="0" src="" /></p> <p><strong>I have no problem with paying all my taxes for a couple of reasons.</strong> One relates to &quot;Render therefore unto Caesar the things which are Caesar&#39;s.&quot; That&#39;s my view, but I don&#39;t hold anyone else to it. That&#39;s up to them to deal with.</p> <p>I live by Andy Grove&#39;s dictum <em>Only the paranoid survive</em> and for good reasons. (Intel co-founder Grove wrote a book with this as the title: <a href=";camp=1789&amp;creative=9325&amp;creativeASIN=0385483821&amp;linkCode=as2&amp;tag=charleshughsm-20&amp;linkId=PSJXHZGD7J4JXSBE" target="resource">Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company</a>.)</p> <p><strong>Having experienced <a href="" target="resource">COINTELPRO</a> in the early 1970s, I know what&#39;s it like to be <em>an enemy of the State</em>.</strong> Violating tax codes makes you a very easy target for the state. If you want to draw a target on your back, be my guest. I&#39;m going to pass.</p> <p><em>(The FBI thug who &quot;was just doing his job&quot; snarled at me, &quot;This isn&#39;t the Sunshine Biscuit Company, this is the FBI!&quot; Hopefully their witty-threat training has improved.) </em></p> <p><strong>Anyone who can&#39;t find a state/Corporate America job or says <a href="" target="resource"> Take This Job And Shove It</a> has my sympathy.</strong> I&#39;ve been down to my last $100, and it&#39;s a lonesome, troublesome feeling. If you make it so burdensome to operate a legit business, then you&#39;re basically giving people without big lines of credit or plenty of capital and regulatory expertise few choices but to work in the cash-only underground economy.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="463" height="300" alt="" src="" /> </div> </div> </div> B+ Corporate America ETC FBI recovery Unemployment Unemployment Insurance Washington D.C. Fri, 09 Oct 2015 12:24:34 +0000 Tyler Durden 514615 at