http://www.zerohedge.com/fullrss2.xml/phonebook en Move Over Entrepreneurs, Make Way for Speculation! http://www.zerohedge.com/news/2015-09-03/move-over-entrepreneurs-make-way-speculation <p>by Keith Weiner</p> <p>&nbsp;</p> <p>Once upon a time, before banks and before even private lending, there was only one way to prepare for retirement. People had to hoard something durable. Every week, they would set aside part of their wages to buy salt (later, it was silver). Assuming it didn’t get wet, the salt accumulated until they couldn’t work any longer. Then, they would begin selling it off to buy groceries.</p> <p>This was the best they could do. By modern standards, it wasn’t a very good method. Stockpiling a commodity does not finance business growth, so the hoarder contributed no capital to the economy. And, it carries a very big risk: what if you run out before you die?</p> <p>The development of lending was a revolutionary breakthrough. Lending allowed the retiree to do business with the entrepreneur. The retiree has wealth, but no income. The entrepreneur is the opposite, with income but not wealth. The retiree lets the entrepreneur use his wealth, in exchange for an income. The entrepreneur is happy to pay interest, in order to grow his business and increase profits.</p> <p>At times throughout the centuries, governments prohibited lending at interest. They called it a pejorative name—<em>usury</em>. Sometimes, people could work around the law, but when they had to obey lending ceased. No one will risk his wealth, or even forego possession of it, without getting something in return.</p> <p>Today lending is not illegal, but the Fed has been driving down interest for over three decades. Its administered short-term rate is basically zero. Central bank apologists assert that this will help the economy. It hasn’t yet, and it never will. However, the main concern by both Fed defenders and foes alike is the worry that prices might rise. Well, prices aren’t rising now. So the former are smug and the latter are frustrated.</p> <p>They miss the real harm of zero interest.</p> <p>The Fed can force the rate to zero, but it cannot change economic law. As it chokes off interest, the sacred relationship between the saver and entrepreneur is breaking down. Lending to entrepreneurs is dying, and with it growth, opportunities, jobs, and new products. Our horribly weak economy is not <strong>in spite of</strong> the Fed’s policy. It is <strong>because of</strong> it. Leaches never cured a fever, and zero interest is not curing the global financial crisis.</p> <p>If an exchange of wealth and income is not possible, what’s left? It’s replaced with the <a href="http://snbchf.com/gold-standard/gold-standard-1-percent/">conversion of wealth to income</a>. Move over, entrepreneur. We don’t need you anymore. Make way for the speculator. Instead of financing productive business, speculation is now the best way to make a profit.</p> <p>The successful speculator receives someone else’s nest egg. He does not get this as a loan which has to be repaid. He gets it as <strong>income</strong>, as a <strong>profit</strong> on his winning trades. He can spend and consume that precious capital, something its previous owner would never do.</p> <p>It’s a perverse outcome, replacing lending with speculation. However, zero interest makes it necessary, desirable, and easy to bet on asset prices. Without adequate compensation, credit flows to Treasury bonds and major corporations who are performing financial arbitrages like share buybacks. There is always a <a href="https://monetary-metals.com/the-credit-gradient/">credit gradient</a> between a large corporation and a small business. However, the lower the interest rate, the steeper the gradient becomes.</p> <p>Speculation has become very desirable. People need bigger returns than they can get in normal lending. Speculation seemingly offers great returns. I don’t blame the player, I blame the <a href="http://snbchf.com/gold-standard/who-the-heck-consumes-capital/">Fed’s perverse game</a>.</p> <p>Speculation has become too easy. A <a href="http://snbchf.com/gold-standard/falling-yield-rising-asset-rising-yield-falling-prices/">falling yield is equivalent to rising asset prices</a>, so speculators are simply betting on the Fed’s trend. If I had a penny for every financially unsophisticated person who earnestly told me that I don’t understand the market, well, then I would be richer than most speculators.</p> <p>Whole generations now believe they will be able to speculate their way to a golden retirement. This is impossible, because they are not investing but consuming.</p> <p>&nbsp;</p> <p><em>This article is from Keith Weiner’s weekly column, called </em><a href="http://snbchf.com/gold-standard/interest-inflation/"><em>The Gold Standard</em></a><em>, at the Swiss National Bank and Swiss Franc Blog SNBCHF.com.</em></p> http://www.zerohedge.com/news/2015-09-03/move-over-entrepreneurs-make-way-speculation#comments Compensation Credit Swiss Franc Swiss National Bank Thu, 03 Sep 2015 07:23:56 +0000 Gold Standard Institute 512794 at http://www.zerohedge.com America - Good, Bad Or Ugly? Part 1: The Bad http://www.zerohedge.com/news/2015-09-02/america-good-bad-or-ugly-part-1-bad <p><a href="http://www.firstrebuttal.com/part-i-of-america-the-good-the-bad-and-the-ugly/"><em>Submitted by Thad Beversdorf via FirstRebuttal.com,</em></a></p> <p><em>I wanted to start with The Bad and then move on to The Ugly so that I can end on a positive note with The Good.</em></p> <p>So over the past couple days I&rsquo;ve read several articles in which someone who is publicly an adamant proponent of righteous behaviour was exposed as being a complete hypocrite (think essentially any politician).&nbsp; <strong>And this really got me to thinking about the epidemic that has befallen America.</strong>&nbsp; We no longer have anyone in positions of trust acting with any sense of integrity.&nbsp; Our policymakers, bankers, corporations, unions, etc., all of these institutions have become nothing but a mechanism to enhance the personal positions of those who have the ability to directly or indirectly control the actions of those institutions.</p> <p><strong>By the late 1990&rsquo;s the world was in the most prolonged period of global peace since WWII.&nbsp; Accordingly, military budgets around the world were being slashed.&nbsp; </strong>And so those with the powers that be decided the world therefore required some new wars to ensure peace continued (not kidding that is exactly what they argued), as I evidenced in an article last year, <a href="http://www.firstrebuttal.com/the-most-essential-lesson-of-history-that-no-one-wants-to-admit/" target="_blank">The Most Essential Lessons of History that No One Wants to Admit</a>.&nbsp; Now the thing is, it&rsquo;s not just politicians and policymakers that are devoid of any common decency these days but those who can manipulate every facet of our society.</p> <p><strong>Let&rsquo;s look at central bankers for instance.</strong>&nbsp; The other day David Stockman wrote a <a href="http://davidstockmanscontracorner.com/stanley-fischer-speaks-airballs-from-a-dangerous-academic-fool/" target="_blank">great article</a> highlighting the ridiculousness of statements by the Fed Vice Chair, Stanley Fischer.&nbsp; The point is Fischer is either out of touch, out of his mind or lying to us.&nbsp; But it&rsquo;s not just at the highest levels that we see this type of human decay.&nbsp; Not at all.&nbsp; Let&rsquo;s look to an area that so many of us know intimately, the financial services sector.&nbsp; Now there are a lot of examples we could use here but let&rsquo;s look at a particularly interesting firm infamous for its culture of indiscretions.&nbsp; Jefferies LLC, which used to be Jefferies &amp; Company Inc., is a mid tier investment bank, similar to Goldman Sachs in that it has no retail branches.</p> <p>In 2012 Richard Handler, CEO of Jefferies, was actually the highest paid banker on Wall Street.&nbsp; And not to be left out in the cold, Handler&rsquo;s number two, Brian Friedman also topped the charts as discussed in a <a href="http://www.bloomberg.com/news/articles/2013-02-04/jefferies-hefty-compensation-is-credit-negative-moody-s-says" target="_blank">Bloomberg article from 2013</a> which explored the credit risk such payouts create.&nbsp; Now making absurd amounts of money may or may not be ethical but what I find more interesting is the blatant hypocrisy of guys like Richard and Brian.&nbsp; As has been written about many times (e.g. <a href="http://news.efinancialcareers.com/us-en/129601/the-secret-to-all-cash-bonuses-at-jefferies/" target="_blank">here</a> and <a href="http://www.businessinsider.com/jefferies-dick-handler-life-lessons-2014-8" target="_blank">here</a>) is the fact that Richard and Brian put out a monthly company wide letter with words of &lsquo;wisdom&rsquo; that are to guide and encourage their employees to rise above the fray.&nbsp; They look something like this from a recent monthly letter&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>&ldquo;&hellip;By the way, the capitalism concept really never took hold in Russia because the only way lasting, open markets work is through transparency, a culture of integrity and rule-following, and a true legal system.&rdquo;</em></strong></p> </blockquote> <p>Now that sounds admirable on the surface, however, the reality when we look at the culture at Jefferies is anything but above the fray.</p> <p>Remember Jesse Litvak?&nbsp; He&rsquo;s the only banker that has been personally prosecuted, convicted and sent to prison for fraud related to TARP and was a Jefferies Managing Director at the time.&nbsp; Now for those of you that don&rsquo;t remember, Litvak was caught lying to a customer when an employee of his accidentally sent that client an email exposing the lie.&nbsp; In the end, Litvak tried to explain away his actions to the court by saying it was common practice at Jefferies.&nbsp; The government agreed according to a quote from a <a href="http://www.bloomberg.com/news/articles/2014-07-23/ex-jefferies-managing-director-litvak-gets-two-year-sentence" target="_blank">bloomberg report</a>, &ldquo;<span style="color: #333333;"><em>Litvak wasn&rsquo;t the only employee who lied to his customers, the government said.</em> </span>&rdquo;</p> <p>Now some might feel well one example doesn&rsquo;t prove a corrupt culture, right?&nbsp; And I only wish it were but a fleeting example, unfortunately though isn&rsquo;t.&nbsp; Perhaps the most outrageous banking scandal of all time was Sage Kelly, Head of Global Health Care Investment Banking, for Jefferies.&nbsp;<em><strong> Sage Kelly is the real deal.&nbsp; He is Wall Street anthropomorphized in all its glory as depicted in a <a href="http://www.zerohedge.com/news/2014-10-29/why-every-banker-wall-street-suddenly-wants-be-jefferies-managing-director-sage-kell" target="_blank">classic article</a> by the boys at ZeroHedge.&nbsp; And again it appears that it wasn&rsquo;t just poor behaviour by one man but a culture taken on by several top investment bankers at Jefferies.</strong></em>&nbsp; And surely the severely outlandish culture adopted by these bankers is not the type of behaviour that goes unnoticed.&nbsp; For unlike artists, legends in banking are known, not in death, but in the here and now.</p> <p>What is less known is that Jefferies was actually sued by UBS for the way in which they acquired Sage and his Investment banking group from UBS, as this <a href="http://dealbook.nytimes.com/2009/06/25/ubs-accuses-jefferies-of-unlawful-raid-of-employees/?_php=true&amp;_type=blogs&amp;_r=0" target="_blank">article by the NYT</a> describes.&nbsp; But it appears that for Richard Handler and his executive officers, being called out for inappropriate behaviour is not a deterrent as some 3 years later Jefferies was sued by Newedge for the very same thing, as described in this <a href="http://www.ft.com/intl/cms/s/0/2656802c-c330-11e1-8d12-00144feabdc0.html#axzz3kVdJO19W">FT article</a>.&nbsp; It&rsquo;s beginning to seem that despite Richard and Brian&rsquo;s monthly words of moral and ethical enlightenment to their employees, it is them that have failed to live up to the benchmark they preach.</p> <p><strong>Now when a CEO is making $58M a year he should be held to a higher standard of accountability.&nbsp; But what we find is quite the opposite, as we regularly see now in America those in positions of notable status are exempt from consequences.&nbsp;<u> The Rich Handlers, Donald Rumsfelds, Hilary Clintons of the world reap all the upside and zero downside.</u></strong>&nbsp; Similar to the market having a Fed put, members of America&rsquo;s upper class have a legal put.&nbsp; They simply are not held to the same standard to which the rest of us are held.&nbsp; And so if Litvak had the letters CEO in front of his name surely he would have been spared any prison time.&nbsp; Instead a large fine would have been paid into the Treasury&rsquo;s General Fund and all would have been forgiven.</p> <p><u><strong>And so the consequences are worn by the non-elites, that is, the rest of us.</strong></u>&nbsp; The Rumsfeld lies that took us to Iraq and all of the subsequent continued fallout (now ISIS) are worn by soldiers fighting a synthetic enemy created in a social laboratory to perpetually expand defense industry contracts.&nbsp; The selling of favours and foreign policy deals by Hillary are worn by the families that lost loved ones in Benghazi.&nbsp; The multiple failures of Handler to properly manage risk and culture inside his firm led to rising legal and regulatory costs and declining business further leading him to shut down, only three years after purchasing, Pru Bache, a 130 year old company that had weathered the worst of storms.&nbsp; His failures are worn by thousands of non-six-figure income financial services sector employees that lost their jobs when he closed the doors on the 130 year old company but while he continues to receive his 8 figure compensation.</p> <p><strong>We can all think of literally a hundred examples of the legal put provided to those in the American upper class.</strong>&nbsp; And while any single example has a story of tragedy behind it, it is the assumed immunity we give across the board to those with a notable status that perpetuates their self serving indifference to those for which their duties are naturally responsible but now unaccountable. &nbsp; Yet we give them immunity, in part, because they do a fantastic job of portraying themselves as having concern for right and wrong and falling on wrong only due to circumstances outside of their control.</p> <p>This really pinpoints the issue.&nbsp; <strong>While we listen to politicians, central bankers and CEO&rsquo;s preach publicly about doing what&rsquo;s right, ensuring economic stability, protecting the middle class and watching out for our employees and customers, it&rsquo;s all absolute bullshit now isn&rsquo;t it.&nbsp;</strong> That is, while guys like Rich and Brian pretend to be angelic proponents of good behaviour their firm is clearly an absolute disgrace in an industry already known for its lack of integrity.&nbsp; And it&rsquo;s surely not just Jefferies but the general corporate and political culture in this nation that suffers from a lack of accountability and a lack of character.&nbsp; Apologies and fines are great but they don&rsquo;t deter the bad behaviour that always lands on the rest of us, that much is clear.</p> <p>This nation has <strong>become a land where character and integrity are secondary to profits for the few and self serving interests of the powerful</strong>.&nbsp; And as we are seeing already for the third time in this millennium&rsquo;s infancy, stability and prosperity can be but short lived for even the highest paid CEO&rsquo;s in such a world.</p> <p><em>In Part II, I am going to expose The Ugly by releasing a recorded conversation of perhaps, contextually, the ugliest example of just how callous and inhumane our banking executives have become.&nbsp; Watch for it.</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="266" height="173" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150902_bad.jpg?1441232480" /> </div> </div> </div> http://www.zerohedge.com/news/2015-09-02/america-good-bad-or-ugly-part-1-bad#comments ETC goldman sachs Goldman Sachs Iraq Prison Time Reality TARP Transparency Thu, 03 Sep 2015 02:20:00 +0000 Tyler Durden 512790 at http://www.zerohedge.com China's "Historic" 70th Victory Day Parade: Live Webcast http://www.zerohedge.com/news/2015-09-02/chinas-historic-70th-victory-day-parade-live-webcast <p>For those wondering why Chinese futures aren't crashing as of this moment, only to surge in the last hour of trading like plunge protected clockwork, the reason (and also the patriotic alibi behind China's "National Team" valiant, if failed, attempts to get a green Shanghai Composite close the past three days) is shown below: this is what Tiananmen Square looked like moments ago before the start of China's "historic" 70th V-day parade celebrating the anniversary of the end of the second world war as well as China's victory over Japan, not necessarily in that order (it is still unclear if those <a href="http://www.zerohedge.com/news/2015-09-02/dramatic-escalation-china-sends-five-navy-ships-alaska-coast-first-time-ever">five Chinese ships parked off of Alaska </a>are in any way related to today's festivities).</p> <p><iframe src="https://www.youtube.com/embed/ttp706_hSYI" width="500" height="281" frameborder="0"></iframe></p> <p>Here, via Xinhua, is a list of China's contributions in the war effort:</p> <ul> <li>1 million -- Since the July 7 Incident in 1937, when full-scale war against Japanese aggression broke out, the Chinese battlefield tied up about 1 million Japanese troops, or two thirds of the total Japanese army.</li> <li>This allowed the Soviet Union to deploy more than half a million troops from the Far East to the country's major battlefield with the German Nazis, thus accelerating its victory against Germany.</li> <li>1.5 million -- As the major battlefield of the Pacific War, China inflicted heavy casualties on the Japanese aggressors, costing them 1.5 million troops, which makes up more than 70 percent of total Japanese military casualties in the war.</li> <li>1.28 million -- After the war, more than 1.28 million Japanese troops surrendered their weapons to China, accounting for about 50 percent of those who surrendered overseas.</li> <li>35 million -- China was one of the crucial fighters in WWII and made tremendous sacrifices during the war. According to incomplete statistics, Chinese military and civilian casualties added up to approximately 35 million.</li> <li>That accounts for one third of the total casualties suffered by all countries during WWII.</li> </ul> <p>What makes this year's parade unique is that for the first time in addition to the countless participants from the People's Liberation Army, nearly 1000 troops from 17 countries will participate in the parade. </p> <p>The preparations started early as this video of downtown Beijing confirms. Alternatively, this is what China's capital will look like once the SHCOMP is back to 2000:</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">China's <a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> parade military vehicles move to downtown Beijing. <a href="http://t.co/Px67g3bJoJ">pic.twitter.com/Px67g3bJoJ</a></p> <p>— China Xinhua News (@XHNews) <a href="https://twitter.com/XHNews/status/639234035386966016">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>Then the troops starting arriving:</p> <blockquote class="twitter-video" lang="en"><p dir="ltr" lang="en">Video: Troops gather near Tian'anmen Square, ready for China <a href="https://twitter.com/hashtag/Vday?src=hash">#Vday</a> parade that marks 70th anniv of WWII end <a href="http://t.co/3DeEcNXJvQ">pic.twitter.com/3DeEcNXJvQ</a></p> <p>— China Xinhua News (@XHNews) <a href="https://twitter.com/XHNews/status/639247690916761600">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p dir="ltr" lang="en">Troops are all lined up along Chang'an Street in <a href="https://twitter.com/hashtag/Beijing?src=hash">#Beijing</a>, all prepared for the grand <a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> parade. <a href="http://t.co/EwC2dFCxS2">pic.twitter.com/EwC2dFCxS2</a></p> <p>— People's Daily,China (@PDChina) <a href="https://twitter.com/PDChina/status/639209400855580672">September 2, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p dir="ltr" lang="en">All Set to Go: Troops are standing by near <a href="https://twitter.com/hashtag/Tiananmen?src=hash">#Tiananmen</a> Square for the kick off of the <a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> parade. <a href="http://t.co/K7TWIPnfpm">pic.twitter.com/K7TWIPnfpm</a></p> <p>— People's Daily,China (@PDChina) <a href="https://twitter.com/PDChina/status/639224346825912320">September 2, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>... then the foreign soldiers: </p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Replay: Foreign soldiers from 17 countries train in Beijing for today’s <a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> parade <a href="http://t.co/AfkAauzNfV">http://t.co/AfkAauzNfV</a> <a href="http://t.co/5GMS6GZbsU">pic.twitter.com/5GMS6GZbsU</a></p> <p>— China Xinhua News (@XHNews) <a href="https://twitter.com/XHNews/status/639254421205970944">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>... and the people:</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Audience are arriving at the scene for the grand <a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> military parade, which is starting in an hour and a half. <a href="http://t.co/W8LAyKJS0L">pic.twitter.com/W8LAyKJS0L</a></p> <p>— People's Daily,China (@PDChina) <a href="https://twitter.com/PDChina/status/639234243411996672">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>... the occasional celebrity:</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Kungfu star <a href="https://twitter.com/EyeOfJackieChan">@EyeOfJackieChan</a> is seen at the scene of <a href="https://twitter.com/hashtag/Beijing?src=hash">#Beijing</a> <a href="https://twitter.com/hashtag/Vday?src=hash">#Vday</a> military parade among other spectators <a href="http://t.co/xhU1Eh4uLd">pic.twitter.com/xhU1Eh4uLd</a></p> <p>— China Xinhua News (@XHNews) <a href="https://twitter.com/XHNews/status/639242169820119040">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>... then the generals:</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Chinese troops and foreign military are preparing for the kick off of the <a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> parade in <a href="https://twitter.com/hashtag/Beijing?src=hash">#Beijing</a>. <a href="http://t.co/yHOkjm9mBi">pic.twitter.com/yHOkjm9mBi</a></p> <p>— People's Daily,China (@PDChina) <a href="https://twitter.com/PDChina/status/639237355707211776">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>Until finally Xi himself showed up:</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en"><a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> President Xi Jinping and his wife Peng Liyuan take photo with heads of foreign delegations and their spouses. <a href="http://t.co/U9r2IRDwBm">pic.twitter.com/U9r2IRDwBm</a></p> <p>— People's Daily,China (@PDChina) <a href="https://twitter.com/PDChina/status/639253870942756864">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"> <p dir="ltr" lang="en">Chinese President <a href="https://twitter.com/hashtag/XiJinping?src=hash">#XiJinping</a> and his wife welcome S. Korean President <a href="https://twitter.com/hashtag/ParkGeun?src=hash">#ParkGeun</a>-hye ahead of <a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> parade. <a href="http://t.co/tcRwpCV9p6">pic.twitter.com/tcRwpCV9p6</a></p> <p>— China Xinhua News (@XHNews) <a href="https://twitter.com/XHNews/status/639254521391124480">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>And, naturally, the guests of honor among which none other than Vladimir Putin:</p> <blockquote class="twitter-tweet" lang="en"><p dir="ltr" lang="en">Live: President <a href="https://twitter.com/hashtag/XiJinping?src=hash">#XiJinping</a> &amp; first lady Peng Liyuan greet <a href="https://twitter.com/hashtag/Putin?src=hash">#Putin</a> ahead of China's <a href="https://twitter.com/hashtag/VDay?src=hash">#VDay</a> parade <a href="https://twitter.com/KremlinRussia_E">@KremlinRussia_E</a> <a href="http://t.co/5lifr4SU7H">pic.twitter.com/5lifr4SU7H</a></p> <p>— China Xinhua News (@XHNews) <a href="https://twitter.com/XHNews/status/639249793802371072">September 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><script src="//platform.twitter.com/widgets.js"></script><p>&nbsp;</p> <p>Finally, for those sitting in front of their computer in Chinese stock market rollercoaster withdrawal, here is a live feed from Beijing to fill the transitory void in your lives:</p> <p> <iframe src="https://www.youtube.com/embed/i_OaQpcUL-Q" width="500" height="281" frameborder="0"></iframe></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="1024" height="576" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/vday%20teaser.jpg?1441245719" /> </div> </div> </div> http://www.zerohedge.com/news/2015-09-02/chinas-historic-70th-victory-day-parade-live-webcast#comments China Germany Japan None Twitter Twitter Vladimir Putin Thu, 03 Sep 2015 02:03:11 +0000 Tyler Durden 512793 at http://www.zerohedge.com "It's A Tipping Point" Marc Faber Warns "There Are No Safe Assets Anymore" http://www.zerohedge.com/news/2015-09-02/its-tipping-point-marc-faber-warns-there-are-no-safe-assets-anymore <p><em><strong>Markets have &quot;reached some kind of a tipping point,&quot;</strong></em> warns Marc Faber in this brief Bloomberg TV interview. Simply put, he explains, &quot;because of modern central banking and repeated interventions with monetary policy, in other words, with QE, all around the world by central banks - there is no safe asset anymore.&quot; The purchasing power of money is going down, and Faber &quot;would rather <strong>focus on precious metals because they do not depend on the industrial demand as much as base metals</strong> or industrial commodities,&quot; as it&#39;s now<strong><em> &quot;obvious that the Chinese economy is growing at nowhere near what the Ministry of Truth is publishing.&quot;</em></strong></p> <p>&nbsp;</p> <p>Faber explains more... <strong><em>&quot;I have to laugh when someone like you tries to lecture me what creates prosperity&quot;</em></strong></p> <p><script src='//cdn.gotraffic.net/projector/latest/bplayer.js'>BPlayer(null, {"id":"794gXpiFRAmY4s7kObv70g","htmlChildId":"bbg-video-player-794gXpiFRAmY4s7kObv70g","serverUrl":"http://www.bloomberg.com/api/embed","idType":"BMMR","autoplay":false,"log_debug":false,"ui_controls_popout":false,"wmode":"opaque","share_metadata":{"canonical_url":"http://bloom.bg/1fUUme4"},"use_share_overlay":true,"video_autoplay_on_page":false,"use_js_ads":true,"ad_code_prefix":"","ad_tag_gpt_preroll":true,"ad_tag_gpt_midroll":true,"ad_tag_sz_preroll":"1x7","ad_tag_sz_midroll":"1x7","ad_tag_sz_overlay":"1x7","ad_network_id_preroll":"5262","ad_network_id_midroll":"5262","ad_network_id_overlay":"5262","ads_vast_timeout":10000,"ads_playback_timeout":10000,"use_comscore":true,"comscore_ns_site":"bloomberg","comscore_page_level_tags":{"bb_brand":"bbiz","bss_cont_play":0,"bb_region":"US"},"use_chartbeat":true,"chartbeat_uid":"15087","chartbeat_domain":"bloomberg.com","vertical":"business","ad_tag_overlay":"business/videooverlay","use_parsely":true,"source":"BBIZweb","module_conviva_insights":"enabled","conviva_account":"c3.Bloomberg","zone":"video","ad_tag_cust_params_preroll":"","width":640,"height":360,"ad_tag":"","ad_tag_midroll":"","offsite_embed":true});</script></p> <p>&nbsp;</p> <p><em>Some key exceprts...</em></p> <p><u><strong>On what central banks hath wrought...</strong></u></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>I think that because of modern central banking and repeated interventions with monetary policy, in other words, with QE, all around the world by central banks there is no safe asset anymore. </strong></u>When I grew up in the &#39;50s it was safe to put your money in the bank on deposit. The yields were low, but it was safe.</p> <p>&nbsp;</p> <p>But <strong>nowadays, you don&#39;t know what will happen next in terms of purchasing power of money. What we know is that it&#39;s going down.</strong></p> </blockquote> <p><u><strong>On the idiocy of QE...</strong></u></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>in my humble book of economics, wealth is being created through, essentially, a mixture of capital spending, and land and labor. </strong>And if these three production factors are used efficiently, it then creates a prosperous society, as America became prosperous from its humble beginnings in 1800, or thereabout, to the 1960s, &#39;70s.<strong> But it&#39;s ludicrous to believe that you will create prosperity in a system by printing money. That is economic sophism at its best.</strong></p> </blockquote> <p><u><strong>On the causes of iunequality...</strong></u></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>unfortunately the money that was made in U.S. stocks wasn&#39;t distributed evenly. </strong>And we have precise statistics, by the way published by the Federal Reserve, who actually benefited from the stock market boom post-2009. This is not even one percent of the population. It&#39;s 0.01 percent. They took the bulk.</p> <p>&nbsp;</p> <p><strong>And the majority of Americans, roughly 50 percent, they don&#39;t own any shares anyway.</strong> And in other countries, 90 percent of the population do not own any shares. So the printing of money has a very limited impact on creating wealth.</p> </blockquote> <p><u><strong>On China&#39;s lies... and its commodity contagion...</strong></u></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>I indicated on this program already a year ago, the Chinese economy was decelerating already then. It&#39;s just that the fund managers didn&#39;t want to accept it.</strong></p> <p>&nbsp;</p> <p>And <strong>now it&#39;s obvious that the Chinese economy is growing at nowhere near what the Ministry of Truth is publishing in China, </strong>but more likely either no growth at all or maybe around two percent, but no more than that.</p> <p>&nbsp;</p> <p><strong>So that has a huge impact on commodity prices, and in turn it has a huge impact on the economies of all the raw material producers around the world </strong>from Latin America, to Australasia, Russia, Middle East, Africa and so forth. And these countries then with falling commodity prices have less money to buy, also less money to buy American goods.</p> </blockquote> <p><u><strong>On Asian currency devaluation... and a Chinese economic collapse...</strong></u></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Yes. These countries just followed the example of what Mr. Draghi and Kuroda tried to achieve </strong>with lowering the value of their currencies, which is actually to create a depression in real incomes and a contraction of world GDP in dollar terms, and a contraction of world trade in dollar terms, which is of course negative for economic growth around the world.</p> <p>&nbsp;</p> <p>Well, I mean, we have to put the achievements of China and also of President Xi in the context of what China was 20, 30 years ago, and what it is today. And it&#39;s a remarkable change. Now will China have a very serious setback? And don&#39;t forget, the U.S. after 1800 had numerous financial crises, and depressions, and the Civil War, and went through World War I, and through the depression years, and World War II and so forth. And the country continued to grow.</p> <p>&nbsp;</p> <p><strong>I think China is, from a cyclical point of view now, in a very serious downturn, serious.</strong> And from a secular point of view, I think there is still tremendous growth opportunity in China in the long run. But, as I said, cyclically I think they&#39;re going to have a tough time</p> </blockquote> <p><u><strong>On where to invest...</strong></u></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>I would rather focus on precious metals, </strong>gold, silver, platinum because they do not depend on the industrial demand as much as base metals, as industrial commodities.</p> <p>&nbsp;</p> <p>If I had to turn anywhere, where, as you say, the opportunity for large capital gains exists, and the downside risk is in my opinion, limited, it would be the mining sector, specifically precious metals, mining companies, in other words, gold shares.</p> <p>&nbsp;</p> <p><strong>I would buy mining stocks. I am not saying they will go up, but I think they will go down less than a lot of other shares. </strong>And by the way, if you ask me about relative value, I think emerging markets are not yet cheap, cheap, but I think the return expectation I would have over the next seven to 10 years by investing in emerging markets would be much higher than, say, in U.S. stocks. The U.S. market is overhyped and is expensive in terms of valuations from a historical perspective. Emerging markets are no longer terribly expensive.<br />&nbsp;</p> </blockquote> <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="172" height="160" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150902_faber.jpg?1441233809" /> </div> </div> </div> http://www.zerohedge.com/news/2015-09-02/its-tipping-point-marc-faber-warns-there-are-no-safe-assets-anymore#comments Central Banks China Federal Reserve Marc Faber Middle East Monetary Policy Precious Metals Purchasing Power World Trade Thu, 03 Sep 2015 01:45:00 +0000 Tyler Durden 512792 at http://www.zerohedge.com Who Would Win World War 3? The Infographic http://www.zerohedge.com/news/2015-09-02/who-would-win-world-war-3-infographic <p>For those unaware, China is conducting a massive military parade on Wednesday to commemorate the 70th anniversary of the end of World War II. </p> <p>The event - which is accompanied by a three-day public holiday - is important for Xi Jinping, who is keen to project China’s strength to the world, especially in the wake of the country’s economic deceleration and highly publicized stock market meltdown.&nbsp;</p> <p>Of course the parade also comes amid heightened tensions between Washington and Beijing. </p> <p><strong>China’s land reclamation efforts in the South China Sea - where the PLA has constructed nearly 3,000 acres of new sovereign territory atop reefs - has regional US allies on edge. The dispute came to a head earlier this year when China effectively threatened to shoot down a US spy plane carrying a CNN crew over the Spratlys.</strong>&nbsp;</p> <p>It’s against this backdrop that we recently brought you <a href="http://www.zerohedge.com/news/2015-08-22/who-would-win-war-south-china-sea-pentagon-infographic">infographics</a> demonstrating China’s South China Sea naval superiority on the way to asking who would win a maritime conflict. Below, <a href="http://www.cnn.com/2015/09/01/asia/china-military-parade-preview/index.html">courtesy of CNN</a>, is a simple infographic which puts the militaries of the US and China side by side on the way to <strong>making a comparison that may well become increasingly relevant in the new bipolarity.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/08/ChinaVsUS.png"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/08/ChinaVsUS_0.png" width="600" height="329" /></a></p> http://www.zerohedge.com/news/2015-09-02/who-would-win-world-war-3-infographic#comments China Meltdown SPY Thu, 03 Sep 2015 01:10:21 +0000 Tyler Durden 512786 at http://www.zerohedge.com Guest Post: Trump Can Win The GOP Nomination http://www.zerohedge.com/news/2015-09-02/guest-post-trump-can-win-gop-nomination <p><a href="http://www.thefiscaltimes.com/Authors/B/Bruce-Bartlett"><em>Submitted by Bruce Bartlett via The Fiscal Times,</em></a></p> <p><em>To save myself from answering this question repeatedly, these are the thoughts I have had about Trump since he became a presidential candidate, which were partly expressed in a Politico article over a month ago.</em></p> <p><strong>First of all, I think his support is firm and shows no sign of diminishing. </strong>He has already weathered storms such as his criticism of John McCain that would have doomed any other candidate. Anyone who thinks he is the current version of Cain, Bachmann, Santorum or other nutcase that briefly led the GOP field in 2012 is dead wrong.</p> <p>Keep in mind also that in primary elections, one doesn&rsquo;t need majority support to win in a field with multiple candidates. And intensity of support is often more important than the percentage. Support for the designated favorite of party insiders is often exaggerated in polls and I think Trump&rsquo;s supporters are unusually motivated.</p> <p><strong>Second, Trump&rsquo;s positions on the issues are largely irrelevant to his success.</strong> None of his supporters care whether a wall across Mexico is remotely feasible or that he regularly flip-flops on the issues. What he is selling is attitude and a certain fascistic form of leadership. He will get things done, his supporters believe. And it&rsquo;s less important what he will do than that he will do something.</p> <p>Ironically, Republicans brought this on themselves in two ways. To begin with, they grossly oversold what they could do just with control of Congress. The Republican base really seems to have simply forgotten about the presidential veto or the Senate filibuster. They seem to have thought all they had to do was pass bills with a simple majority and they would magically become law. How else to explain voting over and over and over again to repeal Obamacare. It makes no sense unless my assumption is correct.</p> <p>Additionally, Republicans are suffering from the gridlock that they themselves caused. We all know that nature abhors a vacuum, but I think it abhors gridlock as well. That has always been the appeal of fascism and it would be very foolish to believe that Americans are immune from its attractive qualities of getting things done that need to get done. And let us not forget that Trump is talking about genuine problems even if his solutions are simplistic or even wrongheaded.</p> <p><strong>My third point in Trump&rsquo;s favor is his willingness to fund his own campaign and ability to run such a campaign on the cheap.</strong> By the latter, I mean that he started his campaign with close to 100% name ID and he has the amazing ability to get massive free media exposure any time he wants it. The mainstream media seem powerless to ignore the newsworthiness of anything he says about anything at any time in any place. In lieu of a traditional campaign staff, all Trump needs are the PR people he has long employed, a scheduler and a pilot for his plane.</p> <p>Related to this, I would note that Trump has a very powerful ally in the form of talk radio. Rush Limbaugh and Mark Levin have been especially strong in their support for Trump, in part because Trump&rsquo;s base and theirs are one and the same. It is extremely valuable to any candidate to have such a megaphone at his disposal, whipping up support, attacking his enemies, explaining away his mistakes etc. This also explains why Trump can treat Fox News with the disdain it deserves. It helped create the Trump monster, thinking he could be controlled, and discovered to its horror than he cannot.</p> <p><strong>Fourth, as a consequence, the traditional means of controlling an out-of-control candidate are not available to the GOP leadership. </strong>They cannot deny him media exposure or money or organizational support because he doesn&rsquo;t need them. Moreover, the anointed GOP nominee, Jeb Bush, has turned out to be a remarkably poor politician. His ineptness makes me wonder how he ever got elected dog catcher. And the rest of the GOP field lacks the name ID or support to catch up. But, importantly, because several have deep pocketed supporters, they too can afford to stay in the race indefinitely, keeping the field divided to Trump&rsquo;s advantage..</p> <p>This means it is very unlikely that the stop-Trump forces can coalesce around one candidate. The field will remain divided until the end, meaning that Trump needs no more support than he has now to win the nomination. As I have said repeatedly, the key to understanding Trump is not the ceiling on his support, but the floor, which appears higher than the ceiling of all the other candidates.</p> <p><strong>Lastly, I think many Republicans simply delude themselves that Trump is not a serious candidate who cannot, for some reason, get the nomination.</strong> I say, don&rsquo;t underestimate his ego, which we know is and always has been enormous. If he can win the GOP nomination, why shouldn&rsquo;t he go for it? I would also point to the example of Wendell Willkie, a very Trump-like candidate who won the GOP nomination in 1940. Then as now, he took advantage of the fact that as the anti-government party, Republicans are unusually attracted to non-politicians.</p> <p><em><strong>I am not yet ready to predict that Trump will be the GOP nominee, but I am disinclined to bet against him. I honestly don&rsquo;t see how any of his current opponents can beat him. I think his odds of winning the nomination are better than even. Whether he can win the general election is another question that I will discuss at a later date.</strong></em></p> <p>Final note - the Democrats&rsquo; growing disarray plays into Trump&rsquo;s hands because it reduces the importance of electability as a prime requirement for the GOP nominee.</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="190" height="164" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150902_trump.jpg?1441231474" /> </div> </div> </div> http://www.zerohedge.com/news/2015-09-02/guest-post-trump-can-win-gop-nomination#comments ETC Fox News Guest Post John McCain Mexico Nomination None Obamacare Third Point Thu, 03 Sep 2015 00:35:00 +0000 Tyler Durden 512789 at http://www.zerohedge.com Meanwhile, In Sweden, Banks Are Refusing To Open Savings Accounts http://www.zerohedge.com/news/2015-09-02/meanwhile-sweden-banks-are-refusing-open-savings-accounts <p>Early in July, Sweden’s Riksbank <a href="http://www.zerohedge.com/news/2015-07-02/swedens-qe-officially-broken-riksbank-doubles-down-lowers-rates-even-more-negative-b">proved its dedication</a> to the post-crisis central bank mantra of “<em>if it’s broken, break it some more</em>” when, after becoming the first country to witness observable, indisputable evidence of QE’s failure, the central bank pushed rates further into negative territory and expanded QE.&nbsp;</p> <p>The problem for Sweden, as we documented in “<a href="http://www.zerohedge.com/news/2015-06-25/first-time-ever-qe-has-officially-failed">For The First Time Ever, QE Has Officially Failed</a>”, is that QE had soaked up so much of the available high quality collateral that bond yields and the krona were moving in the wrong direction (i.e. higher) meaning that more QE would only exacerbate the situation, leading to still higher yields and a stronger currency. Incidentally, to avoid distorting the market even further, Morgan Stanley thinks the Riksbank may have to resort to mortgage bonds in the not-so-distant future.&nbsp;</p> <p>Of course as we’ve seen, things can always get NIRP-er-er in the new paranormal which is why the market is pricing in a 50% chance of more easing from the Riksbank at tomorrow’s meeting.&nbsp;</p> <p>The problem is that if you go NIRP and still are not able to achieve the kind of economic outcomes you were looking for by essentially forcing depositors to choose between a tax on their savings and pulling money out and spending it, well then <strong>the next logical thing to do is to stop accepting deposits, which is apparently what it’s come to in Sweden.</strong> Here’s more from <a href="http://sverigesradio.se/sida/artikel.aspx?programid=2054&amp;artikel=6245946">Radio Sweeden</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>Richard Landén from Helsingborg, southwest Sweden, tried to open a simple savings account at Swedbank. But the bank wanted him to move over his entire account, including his monthly salary deposits and any savings he had.</em></strong></p> <p>&nbsp;</p> <p><em>"You have to be an complete customer, they said. It's either that or nothing at all, apparently," Landén told Swedish Radio News.</em></p> <p>&nbsp;</p> <p><em>Swedbank declined to comment on the case.</em></p> <p>&nbsp;</p> <p><em>Sweden's central bank has cut its key interest rate, the repo rate, to -0.35 percent, meaning making a profit on savings alone has become nearly impossible. The central bank will announce its next interest rate decision on Thursday.</em></p> <p>&nbsp;</p> <p><em>Exactly how many people have been denied opening a savings account is hard to say. But savings advisor Claes Hemberg at Avanza Bank thinks it's a new trend. Several customers have been in touch with him about it</em></p> <p>&nbsp;</p> <p><strong><em>"Yes, savers get in touch and ask: 'Can the bank refuse me?'" he said.</em></strong></p> <p><strong><em>&nbsp;</em></strong></p> <p>&nbsp;</p> <p><em><strong>"I think it's pretty bad style.</strong> At the same time, I have been a customer there before five years ago and has been very well treated. In this case, it was quite the contrary. It was a strange attitude from the beginning, I think," says Landen.</em></p> <p>&nbsp;</p> <p><em>According to Swedish law, barring any extenuating circumstances like suspected money laundering or large debts, banks are not allowed to deny anyone from opening an account.</em></p> </blockquote> <p>But deny they apparently will, because "simple" (i.e. probably small) savings accounts are nothing but a cost center, money-losing hassle and because anyone looking to open such an account isn't likely to be an individual with vast economic resources (i.e. is likely to be middle income at best), and because those types of people have a far higher propensity to spend what's in their pocket (see chart below) shutting them out kills two birds with one humiliating denial stone by alleviating the bank of the aggravation of servicing their accounts and by refusing to allow people to save, thereby effectively forcing the issue in terms of M2 velocity.</p> <p><a href="http://www.zerohedge.com/news/2013-10-04/definitive-rich-vs-poor-chart-rich-hold-assets-poor-have-debt"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/09/Poor%20Consume.jpg" width="557" height="573" /></a>&nbsp;</p> <p>So in other words Mr. Landén from Helsingborg, either give the bank enough of your business to matter or else go do your patriotic duty and spend whatever you had planned to save. The Riksbank will thank you for it.</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="434" height="304" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/Sweden.png?1441212112" /> </div> </div> </div> http://www.zerohedge.com/news/2015-09-02/meanwhile-sweden-banks-are-refusing-open-savings-accounts#comments Bond M2 Morgan Stanley Thu, 03 Sep 2015 00:30:21 +0000 Tyler Durden 512761 at http://www.zerohedge.com Heresy! China Won't Stick To IMF, World Bank Lending "Religion" With AIIB http://www.zerohedge.com/news/2015-09-02/heresy-china-wont-stick-imf-world-bank-lending-religion-aiib <p>Back in April, China was flying high. The stock market had reached dizzying heights on the back of an unprecedented surge in margin debt, creating billions in paper profits for millions of farmers and housewives turned day traders. Around the same time, Beijing had <a href="http://www.zerohedge.com/news/2015-04-07/china-cant-believe-its-luck-investment-bank">accidentally</a> pulled off a major diplomatic coup. The China-led Asian Infrastructure Investment bank had just wrapped up a wildly successful membership drive after a surprise decision by the UK to back the new venture opened the floodgates and emboldened other US allies who, despite Washington’s best efforts to convince them otherwise, decided to join up.</p> <p>The effort to recruit members was in fact so successful, that Beijing <a href="http://www.zerohedge.com/news/2015-03-26/china-not-another-us-does-not-seek-yuan-hegemony">went out of its way</a> to dispel the notion that the new bank represented an attempt on China’s part to usher in a new era of yuan hegemony and rewrite the rules of the post-War global economic order.&nbsp;</p> <p>Despite the Politburo’s best efforts to toe the line between acknowledging the bank’s early success and unnerving Western members who, although happy to participate, are still acutely aware that a dying hegemon is still a hegemon and therefore would prefer it if Beijing didn’t rub the whole thing in Washington’s face, it was abundantly clear to everyone involved that the AIIB represented no less than a changing of the guard and a revolution against the US-dominated multilateral institutions that many emerging countries believe have failed to respond to seismic shifts in the global economy.&nbsp;</p> <p>Unfortunately for China, the AIIB was forced to take a back seat in terms of media coverage to the country’s dramatic equity market meltdown and, subsequently, to the devaluation of the yuan which, you’re reminded, will play an outsized role in any financing extended by the new lender. But as the carnage in financial markets grabs the headlines, the AIIB is quietly making preparations to officially commence operations and as Reuters notes, China is set to “rewrite the unwritten rules of global development finance” by doing away with certain conditionalities required by Western multilateral lenders. Here’s <a href="http://mobile.reuters.com/article/ousivMolt/idUSKCN0R14UB20150901">Reuters with the story</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>The Asian Infrastructure Investment Bank (AIIB) will require projects to be legally transparent and protect social and environmental interests, <strong>but will not ask borrowers to privatize or deregulate businesses for loans, four sources with knowledge of the matter said.</strong></em></p> <p>&nbsp;</p> <p><strong><em>By not insisting on some free market economic policies recommended by the World Bank, the AIIB is likely to avoid criticism leveled against its rivals, who some say impose unreasonable demands on borrowers.</em></strong></p> <p>&nbsp;</p> <p><em>It could also help Beijing stamp its mark on a bank regarded by some in the government as a political as much as an economic project, and reflects scepticism in China about the virtues of free market policies advocated in the West.</em></p> <p>&nbsp;</p> <p><em>"Privatization will not become a conditionality for loans," said a source familiar with internal AIIB discussions, but who declined to be named because he is not authorized to speak publicly on the matter.</em></p> <p>&nbsp;</p> <p><strong><em>"Deregulation is also not likely to be a condition," he added. "The AIIB will follow the local conditions of each country. It will not force others to do this and do that from the outside."</em></strong></p> <p>&nbsp;</p> <p><em>A reduced focus on the free market could give the AIIB greater freedom to run projects, said a banker at a development bank who declined to be named.</em></p> <p>&nbsp;</p> <p><em>For example, development banks that finance a water treatment plant may require the price of treated water to be raised to recoup costs, even if local conditions are not conducive to higher prices.</em></p> <p>&nbsp;</p> <p><em>The AIIB, on the other hand, could avoid hiking prices and rely instead on other sources of financing, such as government subsidies, to defray costs, he said.</em></p> <p>&nbsp;</p> <p><em>A successful AIIB that sets itself apart from the World Bank would be a diplomatic triumph for China, which opposes a global financial order it says is dominated by the United States and under-represented by developing nations.</em></p> <p>&nbsp;</p> <p><em>Criticism of international development lending is not new, said Susan Engel, a professor at Australia's University of Wollongong who has studied the impact on the World Bank of free market ideas often referred to as the Washington Consensus.</em></p> <p>&nbsp;</p> <p><strong><em>"It's a religion - this commitment to the involvement of the private sector even in sectors where, in fact, their involvement is shown to do harm," Engel said of the U.S.-based lender.</em></strong></p> </blockquote> <p>By not insisting on privatization for funds - which has recently manifested itself in the auctioning of Greek state assets in exchange for loans from Brussels and ultimately, from the IMF - the AIIB will give borrowers a choice, which will in turn allow them to select the financing option that they believe best fits their particular circumstances. This echoes comments <a href="http://www.zerohedge.com/news/2015-07-15/china-led-bank-will-keep-america-honest-provide-alternative-imf-nomura-says">made by Nomura's Rich Koo</a> in July. Recall:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Until now the IMF was the only choice for countries in need of financial assistance, which meant they had no choice but to accept the economic and fiscal reforms it demanded.<span style="white-space: pre;"> </span></em></p> <p>&nbsp;</p> <p><strong><em>But if the IMF has competition, countries in need of help will most likely shop around for the institution offering the easiest terms.</em></strong></p> </blockquote> <p>While that choice may, as Koo goes on to note, lead some countries to "delay necessary reforms," it may also allow everyone involved to avoid the type of mistakes that are inevitable when decisions are made unilaterally. That is, to the extent the IMF is fallible (and if they are anything, it's fallible), the existence of an alternative could prove invaluable in a crisis scenario. We go briefly back to Koo:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>There is something to be said for the US argument that there should be only one refuge for economically troubled nations which takes responsibility for ensuring they carry out necessary reforms. <strong>However, that view is based on the underlying assumption that the US and the IMF will correctly diagnose the problems it encounters.</strong></em></p> <p>&nbsp;</p> <p><strong><em>In reality, the US and the IMF completely misread the Asian currency crisis that began in 1997, and their errors caused tremendous damage to crisis-struck countries in the region.</em></strong></p> <p>&nbsp;</p> <p><em>The decision of many Asian countries to participate in the AIIB is probably due in part to a distrust of the US born during the currency crisis.</em></p> </blockquote> <p>And with that, we will conclude with the following question: How ironic will it be when the first loans China makes through the AIIB are to the very same Asian countries who supported the new lender because of their negative experience with US-led institutions during the last Asian Financial Crisis, but whose descent into a replay of that crisis is the direct result of China's move to devlaue the yuan?</p> http://www.zerohedge.com/news/2015-09-02/heresy-china-wont-stick-imf-world-bank-lending-religion-aiib#comments China Global Economy headlines Meltdown Reality Reuters World Bank Yuan Thu, 03 Sep 2015 00:00:21 +0000 Tyler Durden 512784 at http://www.zerohedge.com The QE End-Game Decision Tree: Not "If" But "When" Central Banks Lose Control http://www.zerohedge.com/news/2015-09-02/qe-end-game-decision-tree-not-if-when-central-banks-lose-control <p>Make no mistake, the writing has been on the wall for quite some time and we haven't been shy about pointing it out.</p> <p><strong>Central banks are losing control.</strong></p> <p>Trillions upon trillions in post-crisis asset purchases haven’t given the global economy the defibrillator shock the world’s central planners were depending on to bring about a sustained and robust recovery. </p> <p>Indeed, the opposite appears to have materialized. </p> <p><strong>Subdued demand and trade looks to have become structural and endemic rather than cyclical and rather than create "healthy inflation", seven years of accommodative monetary policy has only served to bury the world in a global deflationary supply glut.</strong> And that’s just the big picture. The more granular we get, the more apparent it is that central banks are no longer in the driver's seat. </p> <p>Inflation expectations across the eurozone <a href="http://www.zerohedge.com/news/2015-09-02/citi-failure-ecb-qe-looks-clear-and-global-reserve-unwind-will-only-make-it-worse">have collapsed</a> despite Mario Draghi’s best efforts to assure the public that PSPP has been an overwhelming success and similarly, inflation expectations <a href="http://www.zerohedge.com/news/2015-08-23/wasnt-supposed-happen-crashing-inflation-expectations-suggest-imminent-launch-qe4">have tumbled</a> in the US ahead of a expected rate hike which looks less likely by the day. Meanwhile, in Sweden, the Riksbank has sucked so much high quality collateral from the system that QE <a href="http://www.zerohedge.com/news/2015-06-25/first-time-ever-qe-has-officially-failed">has actually reversed itself</a>, giving the world its first look at what happens when QE <a href="http://www.zerohedge.com/news/2015-07-02/swedens-qe-officially-broken-riksbank-doubles-down-lowers-rates-even-more-negative-b">demonstrably</a> fails. And let’s not forget Japan, where the world’s most hilariously absurd example of central bankers gone stark raving mad has done exactly nothing to pull the country out of the deflationary doldrums. </p> <p><strong>And so here we stand, on the precipice of crisis with central banks having run out of both ammunition and credibility. </strong>In short,&nbsp;it’s time to ask if central banks have officially lost control. For the answer, and for the "QE end-game decision tree", we go to BNP.</p> <p>Note that if CB's <em>do</em> lose it, the likely scenario is: <strong>"deflation, vicious cycle... economic depression".</strong></p> <p>* &nbsp;* &nbsp;*</p> <p><em>From BNP<span style="white-space: pre;"> </span></em><span style="font-size: 1em; line-height: 1.3em; white-space: pre;"> </span></p> <p><strong>Not "IF" but "WHEN central banks lose control?"</strong><span style="font-size: 1em; line-height: 1.3em; white-space: pre;"> </span></p> <p>The global financial repression pushed investors to invest cash in risky assets, such as property and equity. <strong>The scale of global policy interventions is trumping all fundamental factors for now.</strong> Investors should keep in mind that the road is never straight and next month should be full of potentially disruptive events impacting sharply overcrowded assets and trades. <span style="text-decoration: underline;"><strong>History shows that such misallocation of resources creates bubbles that can last before fully blowing; the question is not if, but when.</strong></span></p> <p><strong>Risk assets and risk parameters would be massively affected in the event central banks lose control;</strong> in the meantime, EDS Asia believes that central bank maturities that use forward guidance matter more than the QE process itself. The Fed and the ECB have been providing guidance which partly explains the low short-term volatility. The BoJ is moving toward this behaviour, managing the news flow: therefore there is a case for the NKY index going up slowly with a lower upfront volatility and a term structure closer to the US one: in that sense, we have started to observe an "SPX-isation of the NKY Index" in the past few months before this summer’s risk-off, as short dated volatility was trading lower. In China, the PBoC intervention learning curve is steep; this is the reason we believe the next equity leg up will be accompanied by an elevated volatility regime.</p> <p>The quantitative easing started in the US more than six years ago and the SPX index, as well as selective risky assets, are now hovering at the high end of their valuation histories. Recent price actions are testimony of the fragility of imbalances built over the years. Investors may recall the Japan easing experience in 2005 and 2006; an early exit, together with a global financial crisis, caused a Japanese equities meltdown (between mid-2007 and late-2008).<span style="white-space: pre;"> </span></p> <p><strong>In the decision tree, EDS Asia addresses the potential "QE end-game scenarios" [attempting to] answer the question "Are central banks losing control?" and providing a time horizon and probabilities affecting each path, which should allow investors to get a clearer overview.&nbsp;</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/08/QEEndGame.png"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/08/QEEndGame_0.png" width="600" height="398" /></a></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="891" height="591" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/QEEndGame.png?1441233313" /> </div> </div> </div> http://www.zerohedge.com/news/2015-09-02/qe-end-game-decision-tree-not-if-when-central-banks-lose-control#comments Central Banks China Eurozone Global Economy Japan Meltdown Monetary Policy Quantitative Easing recovery Testimony Volatility Wed, 02 Sep 2015 23:42:09 +0000 Tyler Durden 512791 at http://www.zerohedge.com Martin Armstrong Warns: The #1 Terrorist Group Is You, Domestic Citizens http://www.zerohedge.com/news/2015-09-02/martin-armstrong-warns-1-terrorist-group-you-domestic-citizens <p><span style="text-decoration: underline;"><em><strong>Understand this now.</strong></em></span> <a href="http://www.theburningplatform.com/2015/09/02/the-1-terrorist-group-domestic-citizens/">As Jim Quinn explains,</a> <strong>YOU are the enemy of the state. </strong><em>They don&rsquo;t give a shit about you. They treat you as sheep and cows to be sheared and milked. If you start questioning them, they will slaughter you. They have militarized the police forces and put you under 24 hour surveillance because they fear an uprising. </em>There only a few hundred thousand of them and there are millions of us. <strong>A conflict is looming.</strong></p> <p><a href="http://www.armstrongeconomics.com/archives/36768"><em>As Armstrong Economics&#39; Martin Armstrong details,</em></a> <strong><em>government talks about Islamic terrorists, but their number one fear is YOU.</em></strong></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/09/20150902_you.jpg"><img height="383" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/09/20150902_you_0.jpg" width="600" /></a></p> <p>The internment camps are for you, not Islamic extremists. Government CANNOT honor its promises so it will not even try.</p> <p>They are confiscating money everywhere, doubling fines, and punishing people for insane things.</p> <p><em>A neighbor received a ticket and a $200 fine for using a cell phone while driving. The use? Looking at the Google Maps. She even went to court with her phone records to prove she was not on the phone. The judge declared that she should have looked at that BEFORE she left. I suppose if you write down the directions and look at the piece of paper that is OK, you just can&rsquo;t look at it on your phone. That applies to even looking at the time on your phone.</em></p> <p><span id="more-104889">&nbsp;</span></p> <p>The government claims it wants to eliminate guns to protect society. The problem will be that the criminals do not buy their guns at a store. <em><span style="text-decoration: underline;"><strong>They want to disarm the public because you are their number one fear as outlined in this<a href="https://www.start.umd.edu/pubs/START_UnderstandingLawEnforcementIntelligenceProcesses_July2014.pdf">&nbsp;discussion paper</a>.</strong></span></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="194" height="154" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150902_enemy.jpg?1441230730" /> </div> </div> </div> http://www.zerohedge.com/news/2015-09-02/martin-armstrong-warns-1-terrorist-group-you-domestic-citizens#comments Google Martin Armstrong Wed, 02 Sep 2015 23:25:00 +0000 Tyler Durden 512787 at http://www.zerohedge.com