http://www.zerohedge.com/fullrss2.xml en Russia is de-dollarizing http://www.zerohedge.com/news/2014-10-23/russia-de-dollarizing <p><img src="http://www.zerohedge.com/sites/default/files/images/user134468/imageroot/2014/10/ruble.png" alt="ruble" title="ruble" /></p> <p>&nbsp;</p> <p class="MsoNormal">The ruble and other currencies do not compete against the dollar. They are dollar derivatives.</p> <p class="MsoNormal">The dollar is headed to ruin, but that doesn’t mean that any other paper currency can replace it. The others will fail first.</p> <p><!--[if gte mso 9]><xml> <o:DocumentProperties> <o:Subject>[See LCCN: 13001206 at catalog.loc.gov]. Library of Congress. Preservation Reformatting Division. </o:Subject> <o:Author>Morgan</o:Author> <o:Keywords> Untermyer, Samuel, 1858-1940.Uniited States. Congress. House. 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QFormat="true" Name="TOC Heading" /> </w:LatentStyles> </xml><![endif]--><!--[if gte mso 10]> <mce:style><! /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:Cambria; mso-ascii-font-family:Cambria; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Cambria; mso-hansi-theme-font:minor-latin;} --><!--[if gte mso 10]> <mce:style><! /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:Cambria; mso-ascii-font-family:Cambria; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Cambria; mso-hansi-theme-font:minor-latin;} --><!--[endif] --><!--[endif] --><!--StartFragment--><!--StartFragment--><!--EndFragment--><!--EndFragment--></p> <p class="MsoNormal">The dollar will fail last.</p> <p class="MsoNormal">&nbsp;</p> <p class="MsoNormal"><em>The failure of the dollar, and the transition to gold happens to be the theme of an event <a href="http://goldstandardinstitute.us/?page_id=737">The Gold Standard: Both Good and Necessary</a>, in New York on Nov 1. There hasn’t been a real recovery from the crisis of 2008, and there won’t be until we return to the use of gold as money. Please come to this event to hear Andy Bernstein present the moral case for capitalism, and Keith Weiner present the case against the dollar and for the gold standard.</em></p> http://www.zerohedge.com/news/2014-10-23/russia-de-dollarizing#comments Fail recovery Thu, 23 Oct 2014 06:11:45 +0000 Gold Standard Institute 496082 at http://www.zerohedge.com It’s Not Just Spying – How The NSA Has Turned Into A Giant Profit Center For Corrupt Insiders http://www.zerohedge.com/news/2014-10-22/it%E2%80%99s-not-just-spying-%E2%80%93-how-nsa-has-turned-giant-profit-center-corrupt-insiders <p><em>Submitted by <a href="http://libertyblitzkrieg.com/2014/10/20/its-not-just-spying-how-the-nsa-has-turned-into-a-giant-profit-center-for-corrupt-insiders/">Mike Krieger via Liberty Blitzkrieg blog</a>,</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>Dear NSA Employees, You Now Have a&nbsp;Green Light to Loot and Pillage. It&rsquo;s&nbsp;Time to&nbsp;Get Paid:</em></strong></p> <p>&nbsp;</p> <p><em>Are you&nbsp;just another one of those frustrated NSA employees who feels that&nbsp;unconstitutionally spying on your fellow citizenry under false pretenses&nbsp;isn&rsquo;t giving you same thrill&nbsp;it once did? If so, have no&nbsp;fear.</em></p> <p>&nbsp;</p> <p><em>Are you are sick and tired of&nbsp;having to spilt your precious working hours&nbsp;defending the&nbsp;destruction of our&nbsp;nation&rsquo;s founding document to those pesky terroristic&nbsp;media&nbsp;dinosaurs who still think investigative journalism belongs&nbsp;in Amerika? If so, have I got a solution for you. </em></p> <p>&nbsp;</p> <p><em>While it may sound too good to be true, trust me it&rsquo;s not. You see, in recent years almost all&nbsp;crony-capitalist criminal activities have been deemed legal in the land of the free (to pillage). This incredible opportunity allows you to directly&nbsp;leverage your intelligence skill-set to&nbsp;earn the big bucks you know you&rsquo;ve always deserved. You can now do just that by working in the private sector without having to give up that cushy government day job! I mean if we&rsquo;re going to have this banana republic thing going we may as well GET PAID.&nbsp;Am I right?</em></p> <p>&nbsp;</p> <p><em>Keep at it patriots,</em><br /><em>Michael Krieger</em></p> </blockquote> <p>If the above sounds like a joke, unfortunately it is not. Last week, two very important stories came out; one from Reuters and the other&nbsp;from Buzzfeed. They both zero in on how current NSA employees are using their expertise and connections to make big money in the private sector while still working at the NSA. Let&rsquo;s start with the Reuters story, which covers former NSA-head Keith Alexander&rsquo;s business relationship with the NSA&rsquo;s current&nbsp;Chief Technical Officer, Patrick Dowd.</p> <p>Before we get into the meat of this story, I want to set the stage with a little background. In case you forgot, Keith Alexander launched his own cyber-security firm,&nbsp;IronNet Cybersecurity Inc., earlier this year. I highlighted this development in the post,<a href="http://libertyblitzkrieg.com/2014/06/20/ex-nsa-chief-keith-alexander-is-now-pimping-advice-to-wall-street-banks-for-1-million-a-month/">&nbsp;</a><strong><a href="http://libertyblitzkrieg.com/2014/06/20/ex-nsa-chief-keith-alexander-is-now-pimping-advice-to-wall-street-banks-for-1-million-a-month/">Ex-NSA Chief Keith Alexander is Now Pimping Advice to Wall Street Banks for $1 Million a Month</a></strong>, in which I noted:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>So what&rsquo;s a Peeping Tom, anti-democratic, Constitution-trampling intelligence crony to do after leaving decades of &ldquo;public service?&rdquo; Move into the private sector and collect a fat&nbsp;paycheck from Wall Street, naturally. Following in the footsteps of some of the other top tier public sector cronies looking to cash out after doing their best to destroy the Republic, such as Banana&nbsp;<a href="http://libertyblitzkrieg.com/2014/03/04/bernankes-not-wasting-any-time-he-will-earn-250000-for-a-speech-in-abu-dhabi/">Ben Bernanke collecting $250,000 per speech</a>&nbsp;and Turbo Tax&nbsp;<a href="http://libertyblitzkrieg.com/2014/06/05/matt-stoller-destroys-timothy-geithner-in-his-epic-review-of-stress-test/">Timmy Geithner hopping over to private equity giant</a>&nbsp;Warburg Pincus, Mr. Alexander is in good crooked company.</em></p> <p>&nbsp;</p> <p><em>So what is Mr. Alexander charging for his expertise? He&rsquo;s looking for $1 million per month. Yes, you read that right. That&rsquo;s the rate that his firm,&nbsp;IronNet Cybersecurity Inc., pitched to Wall Street&rsquo;s largest lobbying group the Securities Industry and Financial Markets Association (SIFMA), which ultimately negotiated it&nbsp;down to a mere $600,000 a month.</em></p> </blockquote> <p>As if Mr. Alexander plowing right through the revolving door to earn $1 million per month from Wall Street less than a year after being at the center of perhaps the most expansive government violation of the Constitution in U.S. history wasn&rsquo;t bad enough, he is now hiring top people still working at the NSA to concurrently work at his cyber-security firm. I wish I was making this up.</p> <p><a href="http://www.reuters.com/article/2014/10/17/us-usa-intelligence-nsa-idUSKCN0I624Y20141017"><em>Reuters</em> reports</a>&nbsp;that:</p> <div> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div> <p><em>(Reuters) &ndash; The U.S. National Security Agency has launched an internal review of a senior official&rsquo;s part-time work for a private venture started by former NSA director Keith Alexander that raises questions over the blurring of lines between government and business.</em></p> <p>&nbsp;</p> <p><strong><em>Under the arrangement, which was confirmed by Alexander and current intelligence officials, NSA&rsquo;s Chief Technical Officer, Patrick Dowd, is allowed to work up to 20 hours a week at IronNet Cybersecurity Inc, the private firm led by Alexander, a retired Army general and his former boss.</em></strong></p> <p>&nbsp;</p> <p><em>The arrangement was approved by top NSA managers, current and former officials said. It does not appear to break any laws and it could not be determined whether Dowd has actually begun working for Alexander, who retired from the NSA in March.</em></p> <p>&nbsp;</p> <p><strong><em>Current and former U.S. intelligence officials, some of whom requested anonymity to discuss personnel matters, said they could not recall a previous instance in which a high-ranking U.S. intelligence official was allowed to concurrently work for a private-sector firm.</em></strong></p> <div> <p>&nbsp;</p> <p><em>Alexander, who was the eavesdropping and code-breaking agency&rsquo;s longest-serving director, confirmed the arrangement with Dowd in an interview with Reuters. He said he understood it had been approved by all the necessary government authorities, and that IronNet Cybersecurity, not the government, would pay for Dowd&rsquo;s time spent with the firm.</em></p> </div> </blockquote> <div> <p>As if the entity paying Dowd for his time spent at the firm is the issue. Alexander is the definition of&nbsp;the word creep.</p> </div> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Dowd, he said, wanted to join IronNet, and the deal was devised as a way to keep Dowd&rsquo;s technological expertise at least partly within the U.S. government, rather than losing him permanently to the private sector.</em></p> </blockquote> </div> <div> <p>Oh I get it now. America has become so hopelessly&nbsp;corrupt, that the revolving door itself is becoming too much of a headache. So the solution is to just get rid of it completely.</p> </div> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&ldquo;I wanted Pat to stay at NSA. He wanted to come on board,&rdquo; Alexander said.</em></p> <p>&nbsp;</p> <p><em>Alexander and Dowd have jointly filed patents based on technology they developed while at the NSA. </em></p> <p>&nbsp;</p> <p><em><strong>&ldquo;If it isn&rsquo;t structured very carefully, this runs the risk of conflict of interest and disclosure of national secrets,&rdquo;</strong> Rothstein said. &ldquo;It is a situation that in the interests of good government should be avoided unless there&rsquo;s some very strong reason to do it.&rdquo;</em></p> </blockquote> <p>So Americans aren&rsquo;t entitled to any privacy because of a&nbsp;trumped up terrorist threat, yet top NSA employees can moonlight for private businesses involved in the same areas as the NSA with apparently no threat to national security. <strong>America has gone completely&nbsp;insane.</strong></p> <p>Unsurprisingly, this is just the tip of the crony-capitalist fraud that the NSA has become. In fact, Buzzfeed broke a related story recently. It reports how one of the most powerful individuals at the NSA,&nbsp;Teresa H. Shea., has several intelligence related businesses run from her home. She is the registered agent for one of them, her husband holds that position for the other.</p> <p>Teresa Shea is the&nbsp;director of Signals Intelligence, or SIGINT, which&nbsp;refers to all electronic eavesdropping and interception, including the controversial domestic surveillance program that collects information about Americans&rsquo; phone use. Naturally, no one is commenting.</p> <p><a href="http://www.buzzfeed.com/aramroston/second-business-at-home-of-nsa-official#395ryro">From Buzzfeed</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>On a quiet street in Ellicott City, Maryland, a blue-grey two-story clapboard house, set back from the road, is shaded by two sycamores and a towering maple. It&rsquo;s the unassuming home of one of the National Security Agency&rsquo;s most powerful officials, Teresa H. Shea.</em></p> <p>&nbsp;</p> <p><strong><em>In September, BuzzFeed News disclosed a potential conflict of interest involving Shea, the director of Signals Intelligence. Called SIGINT in espionage jargon, it refers to all electronic eavesdropping and interception, including the controversial domestic surveillance program that collects information about Americans&rsquo; phone use.</em></strong></p> <p>&nbsp;</p> <p><em><strong>As BuzzFeed News reported,&nbsp;<a href="http://www.buzzfeed.com/aramroston/exclusive-family-business-at-the-national-security-agency#2f5p3i1">there&rsquo;s a private SIGINT consulting and contracting business based at Shea&rsquo;s home</a>&nbsp;in that quiet neighborhood. Shea&rsquo;s husband, a business executive in the small but profitable SIGINT industry, is the resident agent for the firm, Telic Networks.</strong></em></p> <p>&nbsp;</p> <p><strong><em>In addition, James Shea also works for a major SIGINT contracting firm, DRS Signal Solutions Inc., which appears to do SIGINT business with the NSA.</em></strong></p> <p>&nbsp;</p> <p><em>DRS declined to comment, and the NSA declined to answer questions related to the Sheas, Telic Networks, or DRS.</em></p> <p>&nbsp;</p> <p><em><strong>Now there&rsquo;s a new wrinkle, which the NSA has also declined to discuss:</strong> <strong>Yet another company, apparently focused on the office and electronics business, is based at the Shea residence on that well-tended lot.</strong></em></p> <p>&nbsp;</p> <p><em>This company is called Oplnet LLC.</em></p> <p>&nbsp;</p> <p><em><strong>Teresa Shea, who has been at the NSA since 1984, is the company&rsquo;s resident agent.</strong> The&nbsp;<a href="https://www.documentcloud.org/documents/1312029-epson001.html">company&rsquo;s articles of organization, signed by Teresa Shea,</a>&nbsp;show that the firm was established in 1999 primarily &ldquo;to buy, sell, rent and lease office and electronic equipment and related goods and services.&rdquo; An attorney who also signed the document, Alan Engel, said he couldn&rsquo;t comment on client matters.</em></p> <p>&nbsp;</p> <p><em>Records show Oplnet does own a six-seat airplane, as well a condominium property with an assessed value of $275,000 in the resort town of Hilton Head, South Carolina.</em></p> <p>&nbsp;</p> <p><strong><em>This summer the NSA turned down a Freedom of Information Act request for Shea&rsquo;s public financial disclosure form. The agency said that, unlike every other federal agency, it could withhold the disclosure because of a sweeping 1959 law that allows it to keep almost everything secret.</em></strong></p> </blockquote> <p>Go ahead and read that twice. Read it three times. Still think we live in a free country?</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Financial disclosure forms are central to public monitoring of ethics and potential conflicts of interests by federal officials. Without that form, journalists or concerned citizens must comb through corporate incorporations, property records, UCC filings, and court records to learn about an official&rsquo;s financial interests outside of office. Often, these documents are not online and are in offices scattered across different states.</em></p> <p>&nbsp;</p> <p><em>Teresa Shea, as head of SIGINT, has defended the program in declarations in two federal court cases.</em></p> <p>&nbsp;</p> <p><em>Her husband has been involved in SIGINT as a private contractor and engineer since at least 1990, when he set up a company called Sigtek Inc., which would get hundreds of thousands of dollars in contracts with the federal government, according to a federal contracting database. On his&nbsp;<a href="https://www.linkedin.com/pub/james-shea/1b/391/193">LinkedIn page</a>, James Shea says the company&rsquo;s key markets included &ldquo;Defense SIGINT.&rdquo;</em></p> <p>&nbsp;</p> <p><strong><em>In 2010, Teresa Shea was appointed the director of all SIGINT at the NSA, after a period working in London. The same year, James Shea became vice president at a major SIGINT contracting firm, DRS Signal Solutions, a subsidiary of DRS Technologies.</em></strong></p> <p>&nbsp;</p> <p><em>As BuzzFeed reported in its first story on the Sheas, neither the NSA nor DRS will comment on whether the company has contracts with Teresa Shea&rsquo;s directorate.</em></p> <p>&nbsp;</p> <p><em>Asked if there was a conflict of interest, DRS spokesman Michael Mount said &ldquo;I understand your story, and we&rsquo;ll still decline to comment.&rdquo; He said that when responding to BuzzFeed News about questions concerning James Shea, the company has coordinated with the NSA.</em></p> <p>&nbsp;</p> <p><em>Matthew Aid, who has written a book about the NSA,&nbsp;<a href="http://www.amazon.com/dp/1596915153/?tag=buzz0f-20">The Secret Sentry</a>, said it would be difficult to understand why Oplnet, this second home-based business, was set up by Ms. Shea, without knowing more.</em></p> <p>&nbsp;</p> <p><em>But he adds that the fact that Shea&rsquo;s husband works for a SIGINT contractor, and has a SIGINT related company at the couple&rsquo;s home, is confounding.</em></p> <p>&nbsp;</p> <p><em>&ldquo;From a purely financial point of view, there&rsquo;s so much potential of conflict of interest.&rdquo;</em></p> <p>&nbsp;</p> <p><strong><em>&ldquo;The fact that the NSA will not respond to your request raises in my mind a host of questions. If there was nothing there, they could have come back to you and said, &lsquo;She&rsquo;d been diligent. She&rsquo;s in compliance.&rsquo; Then there&rsquo;s no story. But they&rsquo;ve said nothing. That to me is what could potential signal some problems.&rdquo;</em></strong></p> </blockquote> <p>Welcome to the American Dream in 2014. Looks a lot like the Soviet Dream.</p> <p>Utterly shameless.</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="218" height="165" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_NSA.jpg?1414026685" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/it%E2%80%99s-not-just-spying-%E2%80%93-how-nsa-has-turned-giant-profit-center-corrupt-insiders#comments Ben Bernanke Ben Bernanke Freedom of Information Act national security Private Equity Reuters Securities Industry and Financial Markets Association SIFMA South Carolina Thu, 23 Oct 2014 02:57:37 +0000 Tyler Durden 496081 at http://www.zerohedge.com United States Of China: In Which States Is Your Landlord Most Likely To Be Chinese http://www.zerohedge.com/news/2014-10-22/united-states-china-which-states-your-landlord-most-likely-be-chinese <p>America's #1 landlord may be private equity giant Blackstone, but closing in rapidly is none other than America's very own arch nemesis and ascendent superpower, China. But while until recently China's grand ambitions on US multi-family housing had largely flown under the radar, the recent sale of the Waldorf Astoria to a Chinese company has finally put the US on "China is coming" alert... and reincarnated a lot of the same jokes that swept the country by storm in the mid-80s when it appeared Japan, itself nursing a massive asset bubble, would run over Manhattan (everyone knows how that ended). </p> <p>As the <a href="http://blogs.wsj.com/chinarealtime/2014/10/22/the-top-10-u-s-states-where-chinese-are-investing-in-real-estate/">WSJ reports</a>, "big institutional Chinese investors who want global real-estate portfolios typically look for trophy projects in cities like New York, Los Angeles and London. Just this month, Hilton Worldwide agreed to sell its flagship Waldorf Astoria hotel in New York City to a Chinese insurance company for $1.95 billion—the steepest price tag ever for a U.S. hotel, brokers say, although it isn’t the highest on a per-room basis."</p> <p>However, it isn't just New York: "Chinese investors with smaller war chests want to be seen as international property players too, and they have their eyes on other cities. Over the past two years, more have sought to invest in offices and hotels in inland cities such as Chicago and Houston in the U.S., and Madrid and Frankfurt in Europe, according to a recent report by property consultancy Cushman &amp; Wakefield."</p> <p>“Chinese investors are distributing their investments across the whole country, not only focusing on selecting assets in prime locations…but also paying more attention to cities with lower prices and greater potential,” said James Shepherd, Cushman &amp; Wakefield’s head of research for Greater China.</p> <p>Too bad for China, the opportunities that are left for it by Wall Street are those that by now are virtually assured a negative IRR. But then again it was never about the profit: for Chinese institutions, US real estate, just like for Chinese retail buyers of luxury properties, is all about laundering hot money and parking it in a place that is relatively amicable towards Chinese funds. Which the US is. For now. </p> <p>So which states are most likely to see an influx of Chinese landlords in the coming months? </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The consultancy compiled a list of the top 10 U.S. states for Chinese investment. Though the top spots are no surprise—New York, which claims the top spot with more than $6.7 billion in investment, has a lead of more than $5 billion over runner-up California—others are less obvious. Texas, which comes in at No. 4, benefits from Houston, which has become more familiar to Chinese investors in recent years. The country’s state-owned behemoth China Petrochemical Corp., known as Sinopec, has operations there, and the city gained recognition with Chinese investors with the help of former Chinese basketball star Yao Ming, who played for the Houston Rockets.</p> </blockquote> <p>And visually:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/US%20states%20China%20investments.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/US%20states%20China%20investments.jpg" width="553" height="434" /></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="547" height="404" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_chinare.jpg?1414026342" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/united-states-china-which-states-your-landlord-most-likely-be-chinese#comments China Japan New York City None Private Equity Real estate Thu, 23 Oct 2014 02:28:23 +0000 Tyler Durden 496080 at http://www.zerohedge.com The "China-And-Japan-PMI-Beat-So-Things-Must-Be-OK" Meme In 2 Simple Charts http://www.zerohedge.com/news/2014-10-22/china-and-japan-pmi-beat-so-things-must-be-ok-meme-2-simple-charts <p>The reactions in USDJPY, Nikkei 225, S&amp;P futures, Gold, Treasury futures, and oil (in a word - none!) tells you all you need to know about the <strong>market&#39;s total loss of faith in the soft-survey-based PMI data</strong> from around the world (and in particular China and Japan). Despite dramatic weakness in a slew of hard-date economic indicators for both nations, the PMIs rose and beat. Japan&#39;s to 7-month highs (so much for moar QQE?) but <strong>New orders and Output tumbled</strong>. China rose and beat but <strong>all key components dropped</strong>. As the two charts below suggest... things in PMI data production-land need some better &quot;adjustments&quot; if they are to keep the dream alive...</p> <p>&nbsp;</p> <p>Just two simple charts...Soft-Survey-based PMI vs hard-data-based Industrial Production</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI2.jpg"><img height="315" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI2_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>China nailed it!</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI3_0.jpg" style="width: 600px; height: 432px;" /></a></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI1.jpg"><img height="314" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI1_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/news/2013-09-08/good-it-gets">And as a gentle reminder - here is BofA on the uselessness of soft-survey-based PMI data...</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>By some accounts, these data are better indicators than the hard numbers that come out of the government</strong>. After all, they are released very early, they are raw unfiltered data (other than seasonal adjustment), they are never revised and they are simple to interpret. <span style="text-decoration: underline;"><strong>We disagree</strong></span>. In our view, they are useful as a rough and ready early read on the economy. However, once the corresponding official data are released, we put very little weight on these surveys.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>It is important to understand how crude these surveys are.</strong></span> Each month, a few hundred purchasing managers are asked if a variety of activity variables are up, down, or the same relative to the prior month. Their responses are then converted into diffusion indexes: the sum of the number managers reporting activity is &ldquo;increasing&rdquo; and half of those reporting &ldquo;the same.&rdquo; Note that there is some guesswork involved: the survey is taken before the month is over and some of the questions cover areas of the firm that are difficult for a purchasing manager to get a timely read on. For example, a purchasing manager may not have a very precise idea of what is happening to hiring in a large, diverse firm. Moreover, since they don&rsquo;t gather specific numbers for each series, they may have to make a rough guess, particularly if the trend is slightly up or down.</p> <p>&nbsp;</p> <p><strong>Fans of the two indexes point out that they are relatively stable, easy to interpret and never revised. However, in our view, the simplicity of the data is a drawback, not an advantage.</strong> It means no attempt is made to correct misreporting or to include late respondents. Moreover, the sample they use is not representative of the overall economy. They represent a broad cross-section of industries, but they <strong>oversample big firms</strong> and they make no attempt to adjust for the birth and death of firms.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Of course - what really matters is the narrative is alive... (from HSBC/Markit)</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The HSBC China Manufacturing PMI improved to 50.4 in the flash reading for October, up from 50.2 in the final reading for September. Domestic as well as external demand showed some signs of slowing although both remained in expansion territory. Disinflationary pressures intensified, as both the input and output price indices declined further. Meanwhile both employment and inventory indices improved. <u><strong>While the manufacturing sector likely stabilized in October, the economy continues to show signs of insufficient effective demand. This warrants further policy easing and we expect more easing measures on both the monetary as well as fiscal fronts in the months ahead.&quot;</strong></u></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="958" height="501" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_PMI1.jpg?1414029289" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/china-and-japan-pmi-beat-so-things-must-be-ok-meme-2-simple-charts#comments China Crude Japan Markit Nikkei None Thu, 23 Oct 2014 02:03:23 +0000 Tyler Durden 496079 at http://www.zerohedge.com Meanwhile, This Is Who Is Quietly Buying All The Cheap Oil http://www.zerohedge.com/news/2014-10-22/meanwhile-who-quietly-buying-all-cheap-oil <p>With the US Shale Oil industry up in arms, Venezuela screaming, and Russia awkwardly quiet <em>(as the Ruble slides with the falling oil price stabilizing domestic inflows)</em>, <a href="http://www.zerohedge.com/news/2014-10-10/why-oil-plunging-other-part-secret-deal-between-us-and-saudi-arabia">the 'secret' Saudi-US oil deal</a> that pressured prices for crude down to $80 <em>(18-month lows today)</em> has 'hurt' a lot of the world's producer nations. However, as <a href="http://www.bloomberg.com/news/2014-10-17/oil-tankers-to-china-jump-to-nine-month-high-amid-crude-rout-1-.html">Bloomberg reports,</a> there is one nation that is very grateful. <strong>The number of supertankers sailing toward China’s ports surged to a nine-month high as over 80 very large crude carriers (VLCCs)</strong> - the industry’s biggest ships - sail toward the Asian country’s ports. At an average of 2 million barrels each, the <strong>160 million barrels will help refill China's <a href="http://www.zerohedge.com/news/us-contemplates-releasing-crude-strategic-reserve-china-resumes-building-emergency-inventory">727 million barrel SPR</a></strong><a href="http://www.zerohedge.com/news/us-contemplates-releasing-crude-strategic-reserve-china-resumes-building-emergency-inventory"> which it started in 2012</a>.</p> <p>&nbsp;</p> <p>There are 89 tankers sailing for Chinese ports, 80 of which are VLCCs - the highest since January 3rd.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_China.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_China_0.jpg" width="600" height="317" /></a></p> <p>&nbsp;</p> <p><a href="http://www.bloomberg.com/news/2014-10-17/oil-tankers-to-china-jump-to-nine-month-high-amid-crude-rout-1-.html"><em>As Bloomberg reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The number of supertankers sailing toward China’s ports surged to a nine-month high </strong>amid speculation an oil-price slump is encouraging the world’s second-biggest crude importer to accelerate purchases.</p> <p>&nbsp;</p> <p><strong>There are 80 very large crude carriers, the industry’s biggest ships, sailing toward the Asian country’s ports,</strong> according to IHS Fairplay vessel-tracking signals compiled by Bloomberg at about 10 a.m. today. That’s the <strong>highest since Jan. 3. Average shipments are 2 million barrels.</strong></p> <p>&nbsp;</p> <p>Brent crude, the global benchmark, plunged to a four-year low yesterday amid speculation Saudi Arabia, Kuwait and other nations in the Organization of Petroleum Exporting Countries won’t curb production. The slump is likely encouraging buying to fill China’s strategic stocks, according to Energy Aspects Ltd., a London-based consultant.</p> <p>&nbsp;</p> <p><strong>“There’s a lot of bargain hunting going on,”</strong> Richard Mallinson, an analyst at Energy Aspects, said by phone. “Whilst prices are low <strong>we think there’ll be buying for Strategic Petroleum Reserve filling</strong> and also just trying to capture these discounted crudes.”</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>The 80 bound for China compare with an average of 63 for the past two years and match a record in data that started in October 2011. </strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>In summary, just like Chinese gold imports rise when the price of gold drops; so China does the logical thing with other commodities, (i.e. oil) <strong>when prices tumble and instead of selling into the paper rout, it buys all the physical it can get its hands on</strong>.</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="952" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_China.jpg?1414027056" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/meanwhile-who-quietly-buying-all-cheap-oil#comments China Crude Kuwait Saudi Arabia Thu, 23 Oct 2014 01:30:45 +0000 Tyler Durden 496078 at http://www.zerohedge.com It Will Take 398,879,561 Years To Pay Off The US Government's Debt http://www.zerohedge.com/news/2014-10-22/it-will-take-398879561-years-pay-us-governments-debt <p><em>Submitted by <a href="http://www.sovereignman.com/trends/new-data-shows-it-will-take-398879561-years-to-pay-off-the-debt-15309/">Simon Black of Sovereign Man blog</a>,</em></p> <p><strong>The US government&rsquo;s debt is getting close to reaching another round number&mdash;$18 trillion. It currently stands at more than $17.9 trillion.</strong></p> <p>But what does that really mean? It&rsquo;s such an abstract number that it&rsquo;s hard to imagine it. Can you genuinely understand it beyond just being a ridiculously large number?</p> <p>Just like humans find it really hard to comprehend the vastness of the universe. <strong>We know it&rsquo;s huge, but what does that mean?</strong> It&rsquo;s so many times greater than anything we know or have experienced.</p> <p>German astronomer and mathematician Friedrich Bessel managed to successfully measure the distance from Earth to a star other than our sun in the 19<sup>th</sup>&nbsp;century. But he realized that his measurements meant nothing to people as they were. They were too abstract.</p> <p>So he came up with the idea of a &ldquo;light-year&rdquo; to help people get a better understanding of just how far it really is. And rather than using a measurement of distance, he chose to use one of time.</p> <p>The idea was that since we&mdash;or at least scientists&mdash;know what the speed of light is, by representing the distance in terms of how long it would take for light to travel that distance, we might be able to comprehend that distance.</p> <p>Ultimately using a metric we are familiar with to understand one with which we aren&rsquo;t.</p> <p><strong>Why don&rsquo;t we try to do the same with another thing in the universe that&rsquo;s incomprehensibly large today&mdash;the debt of the US government?</strong></p> <p>Even more incredible than the debt owed right now is what&rsquo;s owed down the line from all the promises politicians have been making decade after decade. These unfunded liabilities come to an astonishing $116.2 trillion.</p> <p>These numbers are so big in fact, I think we might need to follow Bessel&rsquo;s lead and come up with an entire new measurement to grasp them.</p> <p>Like light-years, we could try to understand these amounts in terms of how long it would take to pay them off. We can even call them &ldquo;work-years&rdquo;.</p> <p><strong>So let&rsquo;s see&mdash;the Social Security Administration just released data for the average yearly salary in the US in fiscal year that just ended. It stands at $44,888.16.</strong></p> <p><strong>The current debt level of over $17.9 trillion would thus take more than 398 million years of working at the average wage to pay off.</strong></p> <p>This means that even if&nbsp;<strong>every man, woman and child in the United States</strong>&nbsp;would work for one year just to help pay off the debt the government has piled on in their name,&nbsp;<strong>it still wouldn&rsquo;t be enough</strong>.</p> <p>Mind you that this means contributing&nbsp;<strong>everything</strong>&nbsp;you earn, without taking anything for your basic needs&mdash;which equates to slavery.</p> <p>Now, rather than saying that the national debt is reaching $18 trillion, which means nothing to most people, you could say that the debt would currently take almost 400 million work-years to pay off. Wow.</p> <p>When accounting for unfunded liabilities, the work-years necessary to pay off the debt amount to astonishing 2.38 BILLION work-years&hellip;</p> <p>And the years of slavery required are only growing.</p> <p>As an amount alone the debt is meaningless, but in terms of your future enslavement it can be better understood.</p> <p>To put this in perspective even further&mdash;what was the situation like previously?</p> <p><strong>At the end of the year 2000, the national debt was at $5.7 trillion, while the average yearly income was $32,154. That&rsquo;s 177 million work-years.</strong></p> <p><strong>Again&mdash;wow.</strong></p> <p>So just from the turn of the century, we&rsquo;ve seen the time it would take to pay off the national debt more than double. That means that more than&nbsp;<strong>twice as many future generations have been indebted to the system in just 14 years</strong>.</p> <p>It sounds terrible, and it is. But remember, your future generations will only be indebted if you let them be.</p> <p>What the US government does may affect everyone, but it&rsquo;s up to you whether or not you and your children are directly enslaved and tied to the system.</p> <p>Break your chains while you can and set yourself and your offspring free.</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="592" height="272" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_debt.jpg?1414006061" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/it-will-take-398879561-years-pay-us-governments-debt#comments National Debt Thu, 23 Oct 2014 01:03:10 +0000 Tyler Durden 496077 at http://www.zerohedge.com 7.6 Billion Reasons Why The US 'War On Drugs' In Afghanistan Failed http://www.zerohedge.com/news/2014-10-22/76-billion-reasons-why-us-war-drugs-afghanistan-failed-1-chart <p>The <strong>US Embassy in Kabul, Afghanistan is &quot;disappointed,&quot;</strong> according the statement department latter below, responding to the <a href="http://www.sigar.mil/pdf/Special%20Projects/SIGAR-15-10-SP.pdf">Special Investigator General for Afghanistan Reconstruction (SIGAR) findings</a> over poppy cultivation in the troubled nation. Simply put, despite the <strong>United States spending approximately $7.6 billion on counternarcotics efforts in Afghanistan</strong> (as of June 30, 2014), <strong><span style="text-decoration: underline;">opium poppy cultivation levels in Afghanistan hit an all-time high in 2013 (with a 50% rise last year alone)</span></strong>. Of course, like any good government agency, deny and blame someone else, as the DOD went on to state that<em> &quot;the failure to reduce poppy cultivation and increase eradication is due to the lack of Afghan government support for the effort.&quot;</em></p> <p><span style="text-decoration: underline;"><strong>Poppy Cultivation hits an all-time high - despite counternarcotics spend by the US government of $7.6bn!!</strong></span></p> <p><em><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_poppy1.jpg"><img height="437" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_poppy1_0.jpg" width="600" /></a></em></p> <p><em>From SIGAR,</em></p> <p><strong>Dear Secretary Kerry, Secretary Hagel, Attorney General Holder, and Administrator Shah: </strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>I am writing to provide the results of SIGAR&rsquo;s analysis of recent trends in opium poppy cultivation in Afghanistan. As you know, the <strong>narcotics trade poisons the Afghan financial sector and undermines the Afghan state&rsquo;s legitimacy by stoking corruption, sustaining criminal networks, and providing significant financial support to the Taliban and other insurgent groups</strong>. <span style="text-decoration: underline;"><strong>Despite spending over $7 billion to combat opium poppy cultivation and to develop the Afghan government&rsquo;s counternarcotics capacity, opium poppy cultivation levels in Afghanistan hit an all-time high in 2013</strong></span>.</p> <p>&nbsp;</p> <p>According to the United Nations Office on Drugs and Crime (UNODC), Afghan farmers grew an unprecedented 209,000 hectares of opium poppy in 2013, surpassing the previous peak of 193,000 hectares in 2007. With deteriorating security in many parts of rural Afghanistan and low levels of eradication of poppy fields, further increases in cultivation are likely in 2014.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>As of June 30, 2014, the United States has spent approximately $7.6 billion on counternarcotics efforts in Afghanistan. Multiple sources of funding support these efforts</strong></span>, including the Department of Defense (DOD) Afghan Security Forces Fund, the State Department&#39;s (State) International Narcotics Control and Law Enforcement fund, the DOD Drug Interdiction and Counter-Drug Activities fund, financial support from the U.S. Drug Enforcement Administration, and the U.S. Agency for International Development&rsquo;s Economic Support Fund. Counternarcotics efforts include the development of Afghan government counternarcotics capacity, operational support to Afghan counternarcotics forces; encouragement of alternative livelihoods for Afghan farmers; financial incentives to Afghan authorities to enforce counternarcotics laws; and, in limited instances, counternarcotics operations conducted by U.S. authorities in coordination with their Afghan counterparts.</p> <p>&nbsp;</p> <p>Despite the significant financial expenditure, opium poppy cultivation has far exceeded previous records. Affordable deep-well technology has turned 200,000 hectares of desert in southwestern Afghanistan into arable land over the past decade. Due to relatively high opium prices and the rise of an inexpensive, skilled, and mobile labor force, much of this newly-arable land is dedicated to opium cultivation. Poppy-growing provinces that were once declared &#39;poppy free&#39; have seen a resurgence in cultivation. Nangarhar province in eastern Afghanistan, considered a model for successful counterinsurgency and counternarcotics efforts and deemed &lsquo;poppy free&rsquo; by the UNODC in 2008, saw a fourfold increase in opium poppy cultivation between 2012 and 2013. <span style="text-decoration: underline;"><strong>The UNODC estimates that the value of the opium and its derivative products produced in Afghanistan was nearly $3 billion in 2013, up from $2 billion in 2012. This represents an increase of 50 percent in a single year. </strong></span></p> </blockquote> <p>Who is to blame?</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>For its part, DOD acknowledged the significance of increased opium poppy cultivation in Afghanistan</strong>, and that &ldquo;poppy production is on the increase and is a significant threat to U.S. and international efforts in Afghanistan.&rdquo; Like the Embassy Kabul response, DOD highlighted its efforts and those of other U.S. government agencies to build a &ldquo;reliable Afghan counterdrug partner and enduring Afghan [counternarcotics] capacity.&rdquo; <strong>However, DOD went on to state that &ldquo;the failure to reduce poppy cultivation and increase eradication is due to the lack of Afghan government support for the effort.&quot;</strong></p> </blockquote> <p>The State Department is disappointed:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_poppy2.jpg"><img height="673" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_poppy2.jpg" width="581" /></a></p> <p>*&nbsp; *&nbsp; *<br />Once again, government efficiency exposed.</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="1150" height="838" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_poppy1.jpg?1414004804" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/76-billion-reasons-why-us-war-drugs-afghanistan-failed-1-chart#comments Afghanistan Corruption Thu, 23 Oct 2014 00:31:15 +0000 Tyler Durden 496076 at http://www.zerohedge.com Caught On Tape - Some Folks Jumped The White House Fence, Again http://www.zerohedge.com/news/2014-10-22/caught-tape-folks-jumped-white-house-fence-again <p>Just weeks after <em>WhiteHouseFenceJumperGate</em> saw the head of the Secret Service dispatched - having been disappointed not to be able to implement her reforms that would ensure the safety of the White House, the agency reports:</p> <ul> <li><strong>*MAN STOPPED AFTER JUMPING WHITE HOUSE FENCE: SECRET SERVICE</strong></li> </ul> <p>What is worse - much worse - is this african-american chap proceeds to <strong>kick and harass the guard dogs sent to dispatch him</strong>... an egregious act in anyone's book.</p> <ul> <li><strong>*AGENTS WITH DOGS STOPPED WHITE HOUSE JUMPER, AGENCY SAYS</strong></li> </ul> <p>Caught On Tape - the dreadful dog-kicking moment...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Video of the incident Wednesday night taken by TV news cameras shows a man in white shorts just inside the White House fence on Pennsylvania Avenue.</p> <p>&nbsp;</p> <p><strong>The video shows the man lifting his shirt as if to show agents that he has no weapons. The man is then seen kicking and punching two Secret Service dogs that were released on him.</strong></p> </blockquote> <p>&nbsp;</p> <p><iframe src="//www.youtube.com/embed/s5Q7SIhxCpY" width="560" height="315" frameborder="0"></iframe></p> <p>* * *</p> <p><em>As The Washington Post reports,</em></p> <p>Secret Service officials apprehended a person who jumped the White House fence late Wednesday, news reports said.</p> <p>Authorities shut down Lafayette Park after the incident, moving dozens of tourists to H Street. Reports said the White House was under lockdown.</p> <p>Philippe Melaku-Bello, a peace protester who said he regularly spends time outside the White House, said he saw five to six officers with batons out standing over a man on the ground. He said the man was not moving. Officers immediately started moving bystanders farther from the White House. While he was moving away, he heard the barking of a Secret Service dog.</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="622" height="462" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_WHDog.jpg?1414022566" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/caught-tape-folks-jumped-white-house-fence-again#comments White House Thu, 23 Oct 2014 00:04:14 +0000 Tyler Durden 496075 at http://www.zerohedge.com Central Banker Admits Central Bank Policy Leads To Wealth Inequality http://www.zerohedge.com/news/2014-10-22/central-banker-admits-central-bank-policy-leads-wealth-inequality <p>Six years after QE started, and just about the time when we for the first time said that the primary consequence of QE would be unprecedented wealth and class inequality (in addition to fiat collapse, even if that particular bridge has not yet been crossed), even the central banks themselves - the very institutions that unleashed QE - are now admitting that the record wealth disparity in the world - surpassing that of the Great Depression and even pre-French revolution France <strong>- is caused by "monetary policy", i.e., QE.</strong></p> <p>Case in point, during the Keynote speech by Yves Mersch, ECB executive board member, in Zurich on 17 October 2014 titled "<a href="http://www.ecb.europa.eu/press/key/date/2014/html/sp141017_1.en.html">Monetary policy and economic inequality</a>" he said:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>More generally, inequality is of interest to central banking discussions because monetary policy itself has distributional consequences which in turn influence the monetary transmission mechanism. For example, the impact of changes in interest rates on the consumer spending of an individual household depend crucially on that household’s overall financial position – whether it is a net debtor or a net creditor; and whether the interest rates on its assets and liabilities are fixed or variable. </p> <p>&nbsp;</p> <p>Such differences have macroeconomic implications, as the economy’s overall response to policy changes will depend on the distribution of assets, debt and income across households – especially in times of crisis, when economic shocks are large and unevenly distributed. For example, by boosting – first – aggregate demand and – second – employment, monetary easing could reduce economic disparities<strong>; at the same time, if low interest rates boost the prices of financial assets while punishing savings deposits, they could lead to widening inequality</strong>. </p> </blockquote> <p>Alas, in the past 6 years, low interest rates have not only boosted financial asset prices but have resulted in the biggest artificial asset bubble ever conceived. As for reducing unemployment, don't ask Europe - and its unprecedented record unemployment, especially among the youth - how that is going. As for the US where unemployment is "dropping", ask the 93.5 million Americans who have dropped out of the labor force, those whose real wages haven't risen in the past 20 years, or the soaring part-time workers just how effective monetary policy has been in the US.</p> <p>Back the Mersch' <em>shocking </em>discoveries:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>So what do we know about the impact of monetary policy on the distribution of wealth, income and consumption? A comprehensive study published recently by the National Bureau of Economic Research (NBER) outlines five potential channels by which more accommodative measures might affect inequality.</p> <p>&nbsp;</p> <p>The first is the ‘<strong>income composition channel</strong>’: while most households rely primarily on earnings from their work, others receive larger shares of their income from business and financial income. If more expansionary monetary policy raises profits more than wages, then those with claims to ownership of firms will tend to benefit disproportionately. Since the latter also tend to be wealthier, <strong>this channel should lead to higher inequality in response to more accommodative monetary policy.</strong></p> <p>&nbsp;</p> <p>The second is the ‘<strong>financial segmentation channel</strong>’: if some individuals and organisations frequently trade in financial markets and are affected by changes in the money supply before others, then an increase in the money supply will redistribute wealth towards those most connected to markets. <strong>To the extent that households that participate actively in financial transactions typically have higher income, then this channel also implies that consumption inequality should rise after expansionary monetary policy shocks.</strong></p> <p>&nbsp;</p> <p>The third is the ‘<strong>portfolio channel</strong>’: if low-income households tend to hold relatively more cash and fewer financial assets than high-income households, <strong>then potentially inflationary actions on the part of the central bank would represent a transfer from low- to high-income households. Again, this would tend to increase consumption inequality. </strong></p> </blockquote> <p>And here is where it gets funny, because even during its confessional, the ECB has to at least cover some of its tracks:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The NBER study outlines two further channels that tend to move inequality in the opposite direction in response to expansionary monetary policy. The first is the ‘savings redistribution channel’: lower interest rates will benefit borrowers and hurt savers. <strong>To the extent that savers are generally wealthier than borrowers, this will generate a reduction in consumption inequality.</strong></p> </blockquote> <p>Alas, it is completely the opposite. Because "wealthy savers" instead allocate their spare cash into equity investments, while "poor borrowers" are increasingly more shut out of the credit market. Those who aren't, paradoxically end up paying every higher APRs on their credit card statements. It is for their benefit that neo-socialist administrations such as Obama's has conceived such wealth-imbalance neutralizing trinkets such as Obamaphones and "free" healthcare insurance.</p> <p>It gets funnier:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The second is the ‘earnings heterogeneity channel’: earnings from jobs are the primary source of income for most households and earnings for high- and low-income households may respond differently to monetary policy. This could occur, for example, if unemployment falls disproportionately on low-income groups: evidence does suggest that that labour earnings at the bottom of the distribution are most affected by business cycle fluctuations. <strong>So if monetary policy reduces unemployment, it will also reduce inequality.</strong></p> </blockquote> <p>Yes, it does, if only in theory. The problem is that <em>in practice </em>QE is only "reducing unemployment" among those 55 and older while leading to a record low labor participation rate among Americans in the prime 25-54 age group.</p> <p>There are more such amusing anecdotes in the speech how <em><strong>in theory </strong></em>the central banks aim to do well, when in practice they achieve precisely the opposite, but the punchline is the following attempt by one central bank, the ECB, to scapegoat another, the Bank of Japan, <em><strong>for doing precisely what the ECB hopes to do soon</strong></em>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>One final piece of literature on monetary policy and inequality outside the euro area lies in recent research by Ayako Saiki and Jon Frost at De Nederlandsche Bank. They have examined the impact of unconventional monetary policy on the distribution of income in Japan, a country whose long history of non-standard measures makes it particularly relevant. <strong>Their results show that while aggressive monetary policy finally seems to be having the desired effect on the economy, this strong medicine has come with the unwanted side-effect of higher income inequality.</strong> </p> <p>&nbsp;</p> <p>They suggest a straightforward mechanism via the portfolio channel: <strong>an increase in the monetary base (through purchases of both safe and risky assets) tends to increase asset prices. </strong>Higher asset prices benefit primarily those on higher incomes, who hold a larger amount and share of overall savings in equities, and thus benefit from greater capital income. <span style="text-decoration: underline;"><strong>Overall, the Bank of Japan’s unconventional policies have widened income inequality, especially after the collapse of Lehman Brothers in 2008, when quantitative easing became more aggressive.</strong></span> </p> <p>&nbsp;</p> <p>The researchers conclude that their study holds lessons for other countries undertaking unconventional monetary policy. While preventing deflation and repairing the monetary transmission mechanism at the zero-bound is inherently a difficult undertaking, <strong>Japan’s experience provides a cautionary tale on the potential side-effects. </strong>It is possible that the portfolio channel will be even larger in the US, the UK and many euro area economies, where households hold a larger portion of their savings in equities and bonds.</p> </blockquote> <p>So it took the smartest people in the room six years to figure out that instead of fixing the economy, their policies are in fact leading to even greater class inequality: inequality so great that Monsieur Piketty wrote a massive tome about how inequality has never been greater! And somehow, in this bizarro New Normal, Bernanke, Yellen, Draghi et al. have become the patron saints of socialists everywhere: the same group of people who should be at arms over the epic wealth redistribution central bankers have achieved: redistribution that takes from the poor and gives to the rich.</p> <p>But while we are confident that even economists ultimately have a long overdue Eureka moment, what is a bigger question is why are central bankers finally starting to admit the glaringly obvious? This is a very slippery slope, because once you tell one truth, you then have to admit the second, and the third and the next. </p> <p>And while we are delighted that this process will ultimately prove that everything we have warned about from the beginning will be true, a greater concern is that the social outcome which will result, once this process of&nbsp;<em>pulling one's head out of the sand of willful ignorance</em> ends with its inevitable conclusion, will be a very violent, and very bloody one. </p> <p>A process which now appears to have commenced. </p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/wealth%20redistribution.JPG" width="389" height="400" /></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="389" height="400" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/wealth%20redistribution.JPG?1414018252" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/central-banker-admits-central-bank-policy-leads-wealth-inequality#comments Bank of Japan Central Banks fixed France Great Depression Japan Lehman Lehman Brothers Monetary Base Monetary Policy Money Supply New Normal Quantitative Easing Unemployment Zurich Wed, 22 Oct 2014 23:29:11 +0000 Tyler Durden 496073 at http://www.zerohedge.com Goldman Explains 'The Road To Recovery' In 1 Simple Chart http://www.zerohedge.com/news/2014-10-22/goldman-explains-road-recovery-1-simple-chart <p>In Goldman Sachs&#39; view, there are three very different near-term paths that economies and markets can now follow, and that imply very different outcomes for financial markets:</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_GS.jpg"><img height="476" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_GS_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Through the looking glass: Scenarios for a post-crisis world</strong></span></p> <p><strong>Seven years after the start of the financial crisis, economic and financial conditions remain far from normal. </strong>In the &lsquo;Wonderland&rsquo; of near-zero interest rates, many of the traditional relationships that have governed the way in which markets and cycles evolve have broken; the value of historical analysis has weakened.</p> <p><strong>There are three main paths from here</strong>, in our view: a &lsquo;secular stagnation&rsquo; scenario, a &lsquo;sustained moderation&rsquo; and a &lsquo;normalisation&rsquo; based on a new global growth engine (driven by restructuring, the US energy revolution and/or a major consumption shift in China). The first is broadly better for bonds than equities, while the second is better for equities than bonds. &lsquo;Normalisation&rsquo; would be very good for equities and negative for bonds.</p> <p><span style="text-decoration: underline;"><strong>Path 1 &ndash; &lsquo;Secular Stagnation&rsquo;: </strong></span></p> <p>Growth remains well below the previous trend and inflation and rates stay low.</p> <p>Equities achieve a low return (although in areas with low valuations, it is still likely to be reasonable in real terms). Volatility stays low.</p> <p><span style="text-decoration: underline;"><strong>Path 2 &ndash; &lsquo;Great Moderation&rsquo;: </strong></span></p> <p>Growth recovers, but is not strong enough to raise inflation pressures; technological innovation also keeps a lid on inflation. Interest rates rise but very slowly. It is not a &lsquo;normal&rsquo; cycle since rates inflation remains subdued, but there is at least sufficient growth to generate profit expansion.</p> <p>Equities outperform bonds. Volatility stays low. Bonds become the &lsquo;riskier&rsquo; asset.</p> <p><span style="text-decoration: underline;"><strong>Path 3 &ndash; &lsquo;Normalisation&rsquo; &ndash; a new growth engine:</strong></span></p> <p>This is the more positive route that markets may take. It is possible that longer-term growth is enhanced but technology keeps a lid on inflation and the trade-off between growth and rates becomes more favourable for risky assets. Any new strong secular drive for growth is unlikely to have an impact in the near term, but there are various potential drivers. The stronger growth could come, perhaps, from:</p> <ul> <li>major structural reforms in places like India and Europe;</li> <li>the impact of the US energy revolution; and</li> <li>a significant growth driver from Chinese consumption.</li> </ul> <p>In truth, the outcome may also vary by region. The US, for example, looks much more likely to achieve a moderation than, say, Europe. Already, Europe is following a stagnation path from an economic perspective. But even here, this need not be bad for investors. What matters is not so much the outcome, but the outcome relative to expectations. This scenario is largely priced in for Europe. Of the three, a return to &lsquo;normal&rsquo; &ndash; triggered by a major new growth engine &ndash; would clearly be the most positive for equities and the most negative for bonds. But it is also the least likely, in our view, at least in the nearer term.</p> <p>Of the other two, the moderation scenario is the more positive for equity holders in absolute terms and, barring sharp rises in interest rates or exogenous shocks, it could still last for a long time. It is unlikely to be very negative for bond holders while inflation stays low, central banks remain accommodative and regulation results in many &lsquo;non-economic&rsquo; buyers. However, there are factors, both positive and negative, that may ultimately come into play over the next few years and could also result in quite different outcomes.</p> <p><span style="text-decoration: underline;"><strong>Great Moderation...&nbsp; leading to:</strong></span></p> <p>There are probably two possible medium/long-term scenarios that are likely to stem from a Great Moderation (path 2).</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Outcome 1 &ndash; Equity re-rating.</strong> A long period of stable growth and low inflation encourages significant rises in equity valuations and, eventually, very low returns for a long time thereafter. In this outcome, good near-term returns in equities (relative to other asset classes) gradually push valuations up to levels that imply low long-term returns, just as with other asset classes. The performance in equities may be enhanced by further margin rises as technology constrains the returns to labour. While this extends the bull market in equities, it implies that very low returns become much more likely over the longer run.</p> <p>&nbsp;</p> <p><strong>Outcome 2 &ndash; Bond bubble bursts. </strong>Lower-for-longer inflation and accommodative policy could push bond and credit yields down further, creating a bubble. When an adjustment in interest rates finally happens, it may trigger a more aggressive bear market in bonds and credit; equities could also fall sharply. The risks here are significant given the extraordinarily low risk premia priced into fixed income markets. Just as with equities in the late 1990s, fixed income assets have been increasingly priced on a relative basis (against ever lower yielding government bonds). There is a growing gap risk across fixed income &ndash; and a real danger that when the risk-free rate adjusts, liquidity across fixed income will disappear.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Moderation is Goldman&#39;s base case but they realize the Fed is now entirely boxed-in.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="text-decoration: underline;"><strong>In our view, if we are wrong in expecting the great moderation path to dominate markets over the next year, then the next most likely outcome is probably the derailing of the moderation path as a result of a sharper re-rating of equities as investors are gradually&nbsp; forced up the yield curve. </strong></span></p> <p>&nbsp;</p> <p>The next most likely exit from moderation would likely come from a rise in bond yields. While equities would likely outperform in this scenario, at least over the medium term, it&nbsp; would likely trigger higher volatility and a setback in prices across the major asset classes. The risks to the bond market here may not stem purely from higher inflation coming through (as in 1994 for example), but perhaps from central banks being seen to be behind the curve as forward inflation expectations rise. <span style="text-decoration: underline;"><strong>Anything that pushes long rates higher may result in enhanced &lsquo;gap risk&rsquo; heightened by a lack of liquidity. This may become particularly strong in the credit market.</strong></span></p> </blockquote> <p>In other words, <strong>the Fed is desperate for higher yields to signalize a recovery and higher terminal rate, but it can&#39;t afford it as it would lead to bond market dislocations.</strong></p> <p>*&nbsp; *&nbsp; *</p> <p><em>Source: Goldman Sachs&#39; Peter Oppenheimer</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="927" height="735" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_GS.jpg?1413997498" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/goldman-explains-road-recovery-1-simple-chart#comments Bear Market Bond Central Banks China fixed Goldman Sachs goldman sachs India Peter Oppenheimer recovery Volatility Yield Curve Wed, 22 Oct 2014 23:03:38 +0000 Tyler Durden 496074 at http://www.zerohedge.com