http://www.zerohedge.com/fullrss2.xml/wp-content/plugins/uBillboard/Korean%20Buying%20Spree%20Boosts%20Brent%20Price en Janet Yellen Speaks Again - Live Feed http://www.zerohedge.com/news/2017-01-19/janet-yellen-speaks-again-live-feed <p>Following her Trump-weaker-dollar-destroying performance yesterday, Fed chair Janet Yellen reprises her role as Mnuchin-slayer tonight with an appearance at<a href="http://siepr.stanford.edu/events/economic-outlook-and-conduct-monetary-policy-special-event-janet-yellen-chair-board-governors"> Stanford&#39;s Institute for Economic Policy Research</a>. In a speech entitlted<strong><em> &quot;The Economic Outlook and Conduct of Monetary Policy&quot;</em></strong> she is expected to deliver a similarly hawkish tone confirming multiple rate hikes (though no rush) and <strong>potentially erasing the dollar weakness from today</strong>...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/01/17/20170119_yellen.jpg"><img height="315" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/01/17/20170119_yellen_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>Janet Yellen Live Feed (due to begin at 2000ET)...</p> <p><iframe frameborder="0" height="315" src="https://www.youtube.com/embed/Huo0A5SsUOc" width="560"></iframe></p> <p>As a reminder, <a href="https://www.federalreserve.gov/newsevents/speech/yellen20170118a.htm"><em>here is her speech from yesterday:</em></a></p> <p>Good afternoon. It is a pleasure to join all of you at the Commonwealth Club for lunch today, not the least because the club and the Federal Reserve have a few things in common. Both organizations, as it happens, have a board of governors and a chair. And both the club&#39;s and the Fed&#39;s histories extend back more than a century. The club, as many here know, was founded in 1903, and the Federal Reserve a decade later. Perhaps because of our shared origins in the Progressive Era, a period of reform in American life, we hold certain values in common. According to your website, the club is nonpartisan and dedicated to the impartial discussion of issues important to your community and the nation. <strong>At the Fed, we too are nonpartisan and focused squarely on the public interest.</strong> We strive to conduct our deliberations impartially and base our decisions on factual evidence and objective analysis. This afternoon I will discuss some challenges we&#39;ve faced in our recent deliberations and may face in the next few years.</p> <p>Perhaps, though, it is best to start by stepping back and asking, what is--and, importantly, what isn&#39;t--our job as the nation&#39;s central bank? And how do we go about trying to accomplish it? The Federal Reserve has an array of responsibilities. I&#39;ll mention our principal duties and then focus on one--monetary policy, the responsibility that gets the most public attention.</p> <p>In addition to monetary policy, we--in collaboration with other regulatory agencies at both the federal and state levels--oversee banks and some other financial institutions to ensure they operate safely and soundly and treat their customers fairly. <strong>We monitor the financial system as a whole and promote its stability to help avoid financial crises that could choke off credit to consumers and businesses.</strong> We also reliably and safely process trillions of dollars of payments for the nation&#39;s banks and the federal government and ensure that banks have an ample supply of currency and coin to meet the demands of their depositors. And we work with communities, nonprofit organizations, lenders, educators, and others to encourage financial and economic literacy, promote equal access to credit, and advance economic and community development.</p> <p>But, as I noted, monetary policy draws the most headlines. What is monetary policy, exactly? Simply put, it consists of central bank actions aimed at influencing interest rates and financial conditions more generally. Its purpose is to help foster a healthy economy. But monetary policy cannot, by itself, create a healthy economy. It cannot, for instance, educate young people, generate technological breakthroughs, make workers and businesses more productive, or address the root causes of inequality. Fundamentally, the energy, ingenuity, and know-how of American workers and entrepreneurs, along with our natural resources, create prosperity. Regulatory policy and fiscal policy--the decisions by the Administration and the Congress about how much and how the government spends, taxes, and borrows--can influence these more fundamental economic pillars.</p> <p>I&#39;ve said what monetary policy cannot do. <strong>But what can it do? It can lean against damaging fluctuations in the economy. </strong>Nearly 40 years ago, the Congress set two main guideposts for that task--maximum employment and price stability. We refer to these assigned goals as our dual mandate. When the economy is weak and unemployment is on the rise, we encourage spending and investing by pushing short-term interest rates lower. As you may know, the interest rate that we target is the federal funds rate, the rate banks charge each other for overnight loans. Lowering short-term rates in turn puts downward pressure on longer-term interest rates, making credit more affordable--for families, for instance, to buy a house or for businesses to expand. Similarly, when the economy is threatening to push inflation too high down the road, we increase interest rates to keep the economy on a sustainable path and lean against its tendency to boom and then bust.</p> <p>But what exactly do the terms &quot;maximum employment&quot; and &quot;price stability&quot; mean? Does maximum employment mean that every single person who wants a job has a job? No. There are always a certain number of people who are temporarily between jobs after having recently lost a job or having left one voluntarily to pursue better opportunities. Others may have just graduated and have started looking for a job or have decided to return to working--for instance, when their child starts school. This so-called frictional unemployment is evident even in the healthiest of economies.</p> <p>Then there is structural unemployment--a difficult problem both for the people affected and for policymakers trying to address it. Sometimes people are ready and willing to work, but their skills, perhaps because of technological advances, are not a good fit for the jobs that are available. Or suitable jobs may be available but are not close to where they and their families live. These are factors over which monetary policy has little influence. Other measures--such as job training and other workforce development programs--are better suited to address structural unemployment.</p> <p>After taking account of both frictional and structural unemployment, what unemployment rate is roughly equivalent to the maximum level of employment that can be sustained in the longer run? The rate can change over time as the economy evolves, but, for now, many economists, including my colleagues at the Fed and me, judge that it is around 4-3/4 percent. It&#39;s important to try to estimate the unemployment rate that is equivalent to maximum employment because persistently operating below it pushes inflation higher, which brings me to our price stability mandate.</p> <p>Does price stability mean having no inflation whatsoever? Again, the answer is no.<strong> By &quot;price stability,&quot; we mean a level of inflation that is low and stable enough that it doesn&#39;t need to figure prominently into people&#39;s and businesses&#39; economic decisions. </strong>Based on research and decades of experience, we define that level as 2 percent a year--an inflation objective similar to that adopted by most other major central banks.<a href="https://www.federalreserve.gov/newsevents/speech/yellen20170118a.htm#fn1" title="footnote 1"><sup>1</sup></a><a name="f1"></a>&nbsp;Individual prices, of course, move up and down by more than 2 percent all the time. Such movements are essential to a well-functioning economy. They allow supply and demand to adjust for various goods and services. By &quot;inflation,&quot; we mean price changes as a whole for all of the various goods and services that households consume.</p> <p><strong>No one likes high inflation, and it is easy to understand why. </strong>Although wages and prices tend to move in tandem over long periods, inflation erodes household purchasing power if it is not matched with similar increases in wages, and it eats away the value of households&#39; savings. So, then, why don&#39;t we and other central banks aim for zero inflation? There are several technical reasons, but a more fundamental reason is to create a buffer against the opposite of inflation--that is, deflation. Deflation is a general and persistent decline in the level of prices, a phenomenon Americans last experienced during the Great Depression of the 1930s and one that Japan has confronted for most of the past two decades. Deflation can feed on itself, leading to economic stagnation or worse. It puts pressure on employers to either cut wages or cut jobs. And it can be very hard on borrowers, who find themselves repaying their loans with dollars that are worth more than the dollars they originally borrowed. I am sure we all remember learning in school about farm families in the Great Depression who couldn&#39;t pay their mortgages and lost their homes and their livelihoods when crop prices fell persistently.</p> <p>Another important reason to maintain a modest inflation buffer is that too low inflation impairs the ability of monetary policy to counter economic downturns. When inflation is very low, interest rates tend to be very low also, even in good times. And when interest rates are generally very low, the Fed has only limited room to cut them to help the economy in bad times.</p> <p><strong>In a nutshell, the Fed&#39;s goal is to promote financial conditions conducive to maximum employment and price stability.</strong> And I have offered broad-brush definitions of each of those objectives. So where is the economy now, in relationship to them? The short answer is, we think it&#39;s close. The economy has come a long way since the financial crisis. As you know, the crisis marked the start of a very deep recession. It destroyed nearly 9 million jobs, and it&#39;s been a long, slow slog to recover from it. Unemployment peaked at 10 percent late in 2009, a level unseen for more than 25 years, and didn&#39;t move below 8 percent for nearly three years. Falling home prices put millions of homeowners &quot;underwater,&quot; meaning they owed more on their mortgages than their homes were worth. And the stock market plunged, slashing the value of 401(k) retirement nest eggs.</p> <p>The extraordinarily severe recession required an extraordinary response from monetary policy, both to support the job market and prevent deflation. We cut our short-term interest rate target to near zero at the end of 2008 and kept it there for seven years. To provide further support to American households and businesses, we pressed down on longer-term interest rates by purchasing large amounts of longer-term Treasury securities and government-guaranteed mortgage securities. And we communicated our intent to keep short-term interest rates low for a long time, thus increasing the downward pressure on longer-term interest rates, which are influenced by expectations about short-term rates.</p> <p><span style="text-decoration: underline;"><em><strong>Now, it&#39;s fair to say, the economy is near maximum employment and inflation is moving toward our goal. The unemployment rate is less than 5 percent, roughly back to where it was before the recession. And, over the past seven years, the economy has added about 15-1/2 million net new jobs. Although inflation has been running below our 2 percent objective for quite some time, we have seen it start inching back toward 2 percent last year as the job market continued to improve and as the effects of a big drop in oil prices faded. Last month, at our most recent meeting, we took account of the considerable progress the economy has made by modestly increasing our short-term interest rate target by 1/4 percentage point to a range of 1/2 to 3/4 percent. It was the second such step--the first came a year earlier--and reflects our confidence the economy will continue to improve.</strong></em></span></p> <p><span style="text-decoration: underline;"><em><strong>Now, many of you would love to know exactly when the next rate increase is coming and how high rates will rise. The simple truth is, I can&#39;t tell you because it will depend on how the economy actually evolves over coming months. The economy is vast and vastly complex, and its path can take surprising twists and turns. What I&nbsp;can&nbsp;tell you is what we expect--along with a very large caveat that our interest rate expectations will change as our outlook for the economy changes. That said, as of last month, I and most of my colleagues--the other members of the Fed Board in Washington and the presidents of the 12 regional Federal Reserve Banks--were expecting to increase our federal funds rate target a few times a year until, by the end of 2019, it is close to our estimate of its longer-run neutral rate of 3 percent.</strong></em></span></p> <p>The term &quot;neutral rate&quot; requires some explaining. It is the rate that, once the economy has reached our objectives, will keep the economy on an even keel. It is neither pressing on the gas pedal to make the car go faster nor easing off so much that the car slows down. Right now our foot is still pressing on the gas pedal, though, as I noted, we have eased back a bit. Our foot remains on the pedal in part because we want to make sure the economic expansion remains strong enough to withstand an unexpected shock, given that we don&#39;t have much room to cut interest rates. In addition, inflation is still running below our 2 percent objective, and, by some measures, there may still be some room for progress in the job market. For instance, wage growth has only recently begun to pick up and remains fairly low. A broader measure of unemployment isn&#39;t quite back to its pre-recession level. It includes people who would like a job but have been too discouraged to look for one and people who are working part time but would rather work full time.</p> <p><strong>Nevertheless, as the economy approaches our objectives, it makes sense to gradually reduce the level of monetary policy support. Changes in monetary policy take time to work their way into the economy. Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road--either too much inflation, financial instability, or both. In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession.</strong></p> <p>The factors I have just discussed are the usual sort that central bankers consider as economies move through a recovery. But a longer-term trend--slow productivity growth--helps explain why we don&#39;t think dramatic interest rate increases are required to move our federal funds rate target back to neutral. Labor productivity--that is, the output of goods and services per hour of work--has increased by only about 1/2 percent a year, on average, over the past six years or so and only 1-1/4 percent a year over the past decade. That contrasts with the previous 30 years when productivity grew a bit more than 2 percent a year. This productivity slowdown matters enormously because Americans&#39; standard of living depends on productivity growth. With productivity growth of 2 percent a year, the average standard of living will double roughly every 35 years. That means our children can reasonably hope to be better off economically than we are now. But productivity growth of 1 percent a year means the average standard of living will double only every 70 years.</p> <p><strong>Economists do not fully understand the causes of the productivity slowdown. </strong>Some emphasize that technological progress and its diffusion throughout the economy seem to be slower over the past decade or so. Others look at college graduation rates, which have flattened out after rising rapidly in previous generations. And still others focus on a dramatic slowing in the creation of new businesses, which are often more innovative than established firms. While each of these factors has likely played a role in slowing productivity growth, the extent to which they will continue to do so is an open question.<a href="https://www.federalreserve.gov/newsevents/speech/yellen20170118a.htm#fn2" title="footnote 2"><sup>2</sup></a><a name="f2"></a></p> <p>Why does slow productivity growth, if it persists, imply a lower neutral interest rate? First, it implies that the economy&#39;s usual rate of output growth, when employment is at its maximum and prices are stable, will be significantly slower than the post-World War II average. Slower economic growth, in turn, implies businesses will see less need to invest in expansion. And it implies families and individuals will feel the need to save more and spend less. Because interest rates are the mechanism that brings the supply of savings and the demand for investment funds into balance, more saving and less investment imply a lower neutral interest rate. Although we can&#39;t directly measure the neutral interest rate, it is something that can be estimated in retrospect. And, as we have increasingly realized, it has probably been trending down for a while now. <strong>Our current 3 percent estimate of the longer-run neutral rate, for instance, is a full percentage point lower than our estimate just three years ago.</strong></p> <p>You might be thinking, what does this discussion of rather esoteric concepts such as the neutral rate mean to me? If you are a borrower, it means that, although the interest rates you pay on, say, your auto loan or mortgage or credit card likely will creep higher, they probably will not increase dramatically. Likewise, if you are a saver, the rates you earn could inch higher after a while, but probably not by a lot. For some years, I&#39;ve heard from savers who want higher rates, and now I&#39;m beginning to hear from borrowers who want lower rates. I can&#39;t emphasize strongly enough, though, that we are not trying to help one of those groups at the expense of the other. We&#39;re focused very much on that dual mandate I keep mentioning. At the end of the day, we all benefit from plentiful jobs and stable prices, whether we are savers or borrowers--and many of us, of course, are both.</p> <p><strong>Economics and monetary policy are, at best, inexact sciences.</strong> Figuring out what the neutral interest rate is and setting the right path toward it is not like setting the thermostat in a house: You can&#39;t just set the temperature at 68 degrees and walk away. And, because changes in monetary policy affect the economy with long lags sometimes, we must base our decisions on our best forecasts of an uncertain future. Thus, we must continually reassess and adjust our policies based on what we learn.</p> <p>That point leads me to repeat what I said when I began: Like the Commonwealth Club, the Federal Reserve was created more than a century ago during an era of government reform to serve the public interest.<strong> The structure established for the Federal Reserve back then intentionally insulates us from short-term political pressures so we can focus on what&#39;s best for the American economy in the longer run. I promise you, with the sometimes imperfect information and evidence we have available, we will do just that by making the best decisions we can, as objectively as we can.</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="957" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170119_yellen.jpg?1484863560" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/janet-yellen-speaks-again-live-feed#comments Business Central bank Central Banks Commonwealth Club Congress Deflation Economic policy Economy Fed Board in Washington federal government Federal Reserve Federal Reserve System Full employment Great Depression headlines Inflation Inflation targeting Janet Yellen Japan Labor Macroeconomic policy Macroeconomics Monetary Policy Monetary policy Purchasing Power Recession recovery Stanford's Institute for Economic Policy Research Unemployment Unemployment US Federal Reserve Fri, 20 Jan 2017 00:55:00 +0000 Tyler Durden 585928 at http://www.zerohedge.com Obama Fails To Breach $20 Trillion http://www.zerohedge.com/news/2017-01-19/obama-fails-breach-20-trillion <p>Over the past several years, a raging debate among debt-watchers was whether Obama would leave the presidency with more than $20 trillion in US national debt. We now have the answer, and can report that Obama failed in this particular endeavor... but just barely. According to the US Treasury, as of the most recent update, total Federal debt was some $39 billion short of the key "psychological level", clocking in at precisely&nbsp;<a href="https://treasurydirect.gov/NP/debt/current">19,961,467,137,973.64. </a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/total%20debt%2020%20trillion.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/total%20debt%2020%20trillion_0.jpg" width="500" height="51" /></a></p> <p>This means that both "<strong>Dow 20,000</strong>" and "<strong>Debt $20,000,000,000,000</strong>" accomplishments will belong to Trump. It is still unclear which comes first. </p> <p>And while some may be disappointed, Obama's achievement is still quite impressive: in exactly 8 years, total US debt has increased by $9.3 trillion, or 88% since Obama's first day in office.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/US%20debt%20final%20obama.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/US%20debt%20final%20obama_0.jpg" width="500" height="268" /></a></p> <p>On Obama's first day, Jan. 20, 2009, federal debt was $10,626,877,048,913.08.&nbsp; As of the close of business Wednesday, it was $19,961,467,137,973.64. The final debt number for Thursday, Obama’s last full day in office, will not be released until after Donald Trump is sworn in as president on Friday, although it is unlikely to surge by $40 billion.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/Obama%20final%20debt.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/Obama%20final%20debt_0.jpg" width="500" height="262" /></a></p> <p>The total debt added on Obama's almost doubled America's total indebtedness, and was nearly double the $4.9 trillion piled up during the presidency of George W. Bush. It also means that the total debt "owed" by each of America's <a href="https://www.bls.gov/news.release/empsit.t09.htm">124,248,000 </a>full-time employed workers amounts to $160,658, having increased by $75,129 during Obama's tenure. </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="963" height="504" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Obama%20final%20debt.jpg?1484872357" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/obama-fails-breach-20-trillion#comments Barack Obama Donald Trump Donald Trump Dow 20 Economy of the United States Government debt National Debt National debt of the United States Political debates about the United States federal budget Politics U.S. Treasury United States United States fiscal cliff Fri, 20 Jan 2017 00:32:48 +0000 Tyler Durden 585933 at http://www.zerohedge.com Trump Team Preparing "Dramatic Cuts To Government Spending" http://www.zerohedge.com/news/2017-01-19/trump-team-preparing-dramatic-cuts-government-spending <p>According to a report from <a href="http://thehill.com/policy/finance/314991-trump-team-prepares-dramatic-cuts">The Hill</a> this morning, President-elect Trump's transition team is already working with career staff at the White House on plans to slash federal spending.&nbsp; The Hill reports that significant cuts are expected to the budgets of the Department of Commerce, Energy, Transportation, Justice and State, among others, and would total $10.5 trillion over 10 years.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The departments of Commerce and Energy would see major reductions in funding</strong>, with programs under their jurisdiction either being eliminated or transferred to other agencies. <strong>The departments of Transportation, Justice and State would see significant cuts and program eliminations.</strong></p> <p>&nbsp;</p> <p>The Corporation for Public Broadcasting would be privatized, while the <strong>National Endowment for the Arts and National Endowment for the Humanities would be eliminated entirely</strong>.</p> <p>&nbsp;</p> <p>Overall, the blueprint being used by Trump’s team would reduce federal spending by $10.5 trillion over 10 years.</p> </blockquote> <p>While details are scarce now, a <strong>200 page "skinny budget" document is expected to be released within the first 45 days of Trump's administration</strong> with a "full budget" to be released toward the end of his first 100 days in office. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Two members of Trump’s transition team are discussing the cuts at the White House budget office: Russ Vought, a former aide to Vice President-elect Mike Pence and the former executive director of the RSC, and John Gray, who previously worked for Pence, Sen. Rand Paul (R-Ky.) and Speaker Paul Ryan (R-Wis.) when Ryan headed the House Budget Committee.</p> <p>&nbsp;</p> <p><strong>Vought and Gray, who both worked for the Heritage Foundation, are laying the groundwork for the so-called skinny budget</strong> — a 175- to 200-page document that will spell out the main priorities of the incoming Trump administration, along with summary tables. <strong>That document is expected to come out within 45 days of Trump taking office.</strong></p> <p>&nbsp;</p> <p><strong>The administration’s full budget, including appropriations language, supplementary materials and long-term analysis, is expected to be released toward the end of Trump’s first 100 days in office, or by mid- to late April.</strong></p> </blockquote> <p><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/01/19/Trump-Make-America-Great-Again-3.jpg" alt="MAGA" width="500" height="296" /></p> <p>&nbsp;</p> <p>Ultimately the Trump budget is expected to be modeled after a blueprint published by the Heritage Foundation which envisions cutting or completely eliminating several programs that most people don't even know exist and therefore likely will not miss in the least.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The Heritage blueprint used as a basis for Trump’s proposed cuts calls for eliminating several programs that conservatives label corporate welfare programs: the <strong>Minority Business Development Agency, the Economic Development Administration, the International Trade Administration and the Manufacturing Extension Partnership.</strong> The total savings from cutting these four programs would amount to nearly $900 million in 2017.</p> <p>&nbsp;</p> <p>At the Department of Justice, the blueprint calls for eliminating the <strong>Office of Community Oriented Policing Services, Violence Against Women Grants and the Legal Services Corporation and for reducing funding for its Civil Rights and its Environment and Natural Resources divisions.</strong></p> <p>&nbsp;</p> <p>At the Department of Energy, it would <strong>roll back funding for nuclear physics and advanced scientific computing research to 2008 levels, eliminate the Office of Electricity, eliminate the Office of Energy Efficiency and Renewable Energy and scrap the Office of Fossil Energy</strong>, which focuses on technologies to reduce carbon dioxide emissions.</p> <p>&nbsp;</p> <p>Under the State Department’s jurisdiction, <strong>funding for the Overseas Private Investment Corporation, the Paris Climate Change Agreement and the United Nations’ Intergovernmental Panel on Climate Change are candidates for elimination. </strong></p> </blockquote> <p>But while many Trump supporters will applaud the efforts to scale back the federal governement, passing such an aggressive piece of legislation through Congress will be a challenge given that the Republican-controlled House just voted against a similarly aggressive budget in 2015 by a margin of 132 - 294.&nbsp; That said, the effort should make for some fun tweets over the coming weeks.</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="595" height="355" alt="" src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/Trump3_2.JPG?1484837364" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/trump-team-preparing-dramatic-cuts-government-spending#comments American people of German descent Climate change skepticism and denial Congress Department Of Commerce Department of Commerce Department Of Energy Department of Energy Department of Justice Department of Justice Department of State Donald Trump Donald Trump presidential campaign Economic Development Administration Environment Heritage Foundation House Budget Committee International Trade Administration Mike Pence Minority Business Development Agency National Endowment for the Arts National Endowment for the Humanities office of Electricity office of Fossil Energy Political positions of Donald Trump Politics Politics of the United States Presidency of Donald Trump Presidential transition of Donald Trump RSC Trump Administration Trump's administration United Nations United States White House White House Fri, 20 Jan 2017 00:20:00 +0000 Tyler Durden 585873 at http://www.zerohedge.com Will Real Estate Investors Take Over Airbnb? http://www.zerohedge.com/news/2017-01-19/will-real-estate-investors-take-over-airbnb <p><a href="https://priceonomics.com/will-real-estate-investors-take-over-airbnb/"><em>Via Priceonomics.com,</em></a></p> <p class="p4"><strong><span class="s1">In 2012, Jon Wheatley bought a $40,000 apartment in Las Vegas so that he could rent it out on <a href="https://www.airbnb.com/"><span class="s2"> Airbnb </span></a> .&nbsp; </span></strong></p> <p class="p4"><em><span class="s1">&ldquo;I was surprised by just how cheap real estate was in Las Vegas,&rdquo; says the British-born Wheatley. &ldquo;I didn&rsquo;t want to live in Vegas, and I wasn&rsquo;t planning on being there very much. So when I looked at Airbnb, it looked almost too good to be true.&rdquo;&nbsp; </span></em></p> <p class="p4"><em><span class="s1">Wheatley looked at the rates of similar apartments on Airbnb, and he decided that the apartment could pay for itself. He bought the flat and spent 3 weeks and $10,000 on furniture and renovations. After a year of remotely renting out the apartment, he <a href="http://gizmodo.com/i-bought-an-apartment-just-to-rent-it-out-on-airbnb-1458666661"><span class="s2"> says </span></a> , he&rsquo;d made $13,000 in profit.&nbsp; </span></em></p> <p class="p4"><em><span class="s1">When we ask if he recommends doing this, he replies, <strong>&ldquo;One hundred percent. The model definitely works.&rdquo; </strong></span></em></p> <p class="p4"><span class="s1">In only 8 years, Airbnb&rsquo;s premise&mdash;to allow someone to host a business traveler in a spare bedroom, or a family to rent their apartment to tourists while they&rsquo;re out of town&mdash;has made it a <a href="http://money.cnn.com/2015/06/27/technology/airbnb-funding-valuation-update/"><span class="s2"> $25 billion company </span></a> . Co-founder Brian Chesky <a href="http://www.bloomberg.com/news/videos/2015-10-13/airbnb-ceo-we-want-to-be-regulated"><span class="s2"> often talks </span></a> about how anyone can turn extra space in their home into an asset that helps them pay their rent. </span></p> <p class="p4"><strong><span class="s1">But the economics of short term rental sites Airbnb and VRBO also appeal to people who do not live in the house or apartment they rent out. This includes go-getters like Wheatley, as well as professional real estate investors. </span></strong></p> <p class="p4"><span class="s1">Outside the real estate scene, however, this development has not been met with a positive reaction. In cities like San Francisco and New York, where housing is a scarce, politicized resource, the <a href="http://www.ag.ny.gov/press-release/ag-schneiderman-releases-report-documenting-widespread-illegality-across-airbnbs-nyc"><span class="s2"> prevalence </span></a> of property owners renting out multiple apartments has inspired protests, critical press, and the attention of regulators and lawmakers. </span></p> <p class="p4"><span class="s1"><img class="cms-img" src="https://pix-media.priceonomics-media.com/blog/1130/ScreenShot2016-02-11at1.30.19PM.png" style="height: 253px; width: 600px;" /> &nbsp; </span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="p2"><em><span class="s1">Photo via <a href="https://www.airbnb.com/press/resources"><span class="s2"> Airbnb </span></a></span></em></p> </blockquote> <p class="p4"><span class="s1">What&rsquo;s missing from the already fractious debate over Airbnb, however, is the fact that the big players in the real estate market aren&rsquo;t involved. At least, they aren&rsquo;t involved <em> yet </em> . </span></p> <p class="p4"><span class="s1">Companies like AvalonBay and Camden Property Trust own tens or hundreds of thousands of units, and they <a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/02/28/AR2010022803107.html"><span class="s2"> spend </span></a> hundreds of millions of dollars buying and constructing residential buildings. These companies normally rent out apartments to people who sign year-long leases. But they could instead rent them out on sites like Airbnb. We partnered with Priceonomics to investigate&nbsp; </span> whether this real estate investing trend could spread to these big players.&nbsp;</p> <p class="p4"><span class="s1">At this point, we&rsquo;re seeing that the uncertainty created by municipal debates over how to regulate Airbnb is keeping major investors out of the short-term rental game. For individual investors, however, the door is more or less wide open.&nbsp; </span></p> <p class="p4"><u><span class="s1"><strong>The Rise of the Professional Airbnb Investor </strong></span></u></p> <p class="p4"><span class="s1">The financial benefit of an Airbnb property is clear to investors. They can make more money from short term rentals for the same reason you typically spend more on lodging while you&rsquo;re traveling than you do on rent.&nbsp; </span></p> <p class="p4"><span class="s1">So how many professional real estate investors list apartments on Airbnb? And how large are their businesses? </span></p> <p class="p4"><span class="s1">The best way to see whether there is a big trend of professional investors using Airbnb <em> would </em> be to see how many hosts rent out multiple properties on the site. (After all, most people don&rsquo;t have that many homes.) That kind of data, however, is hard to come by. The presence of professionals is a matter of controversy, which has made Airbnb <a href="http://qz.com/571165/airbnb-is-sharing-more-data-but-in-a-really-convoluted-way/"><span class="s2"> selective </span></a> about the information it shares. </span></p> <p class="p4"><span class="s1">But we can see how many professional investors used Airbnb in New York City by looking at a report&mdash;which is based on 4 years of subpoenaed data&mdash;released in late 2014 by the New York Attorney General.&nbsp; </span></p> <p class="p4"><span class="s1">According to the <a href="http://www.ag.ny.gov/pdfs/AIRBNB%20REPORT.pdf"><span class="s2"> report </span></a> , 94% of Airbnb hosts in New York city rented out 2 units or fewer. This supports the Airbnb company line that the <a href="http://www.nytimes.com/2015/12/04/technology/airbnb-says-data-dump-shows-misuse-of-service-is-rare.html"><span class="s2"> majority of users </span></a> are average joes renting out their homes. The other 6% of hosts, however, listed from 3 to <em> 272 </em> units. They earned a collective $168 million and were responsible for over a third of all bookings and revenue in the city. </span></p> <p class="p4"><span class="s1"><img class="cms-img" src="https://pix-media.priceonomics-media.com/blog/1130/NYC_report.png" style="height: 360px; width: 601px;" /></span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="p2"><em><span class="s1">Table from the New York State Attorney General&rsquo;s report <a href="http://www.ag.ny.gov/pdfs/AIRBNB%20REPORT.pdf"><span class="s2"> &ldquo;Airbnb in the City&rdquo; </span></a></span></em></p> </blockquote> <p class="p4"><span class="s1">During this time period, over 100 users had 10 or more properties. So at least in New York City <a href="http://www.travelandleisure.com/travel-tips/travel-trends/new-york-airbnb-law"> prior to recent legislation </a> , major, million-dollar real estate businesses use Airbnb. It&rsquo;s possible that these apartments are pieces of larger real estate empires. But this data suggests that mostly small-scale investors use Airbnb&mdash;not billion dollar real estate companies.&nbsp; </span></p> <p class="p4"><span class="s1">To gauge how many real estate professionals use short term rental sites, we also talked with the founders of companies that help people rent out properties on Airbnb. These founders confirmed that most professionals on Airbnb are personal investors, but they also offered evidence that major real estate companies are interested. </span></p> <p class="p4"><span class="s1">Peter Abualzolof of <a href="https://www.mashvisor.com/"><span class="s2"> Mashvisor </span></a> , a real estate analytics startup focused on short term rentals, works mostly with amateur investors. Abualzolof says that he and his co-founders started Mashvisor at a <a href="https://startupweekend.org/"><span class="s2"> Startup Weekend </span></a> where they met many tech workers who wanted to buy Airbnb properties. The company helps some full-time investors, but most people are in the mold of Jon Wheatley. </span></p> <p class="p4"><span class="s1">Jim Breese says he works with people renting out spare rooms, personal investors, and some large ventures. He is the co-founder of <a href="http://learnairbnb.com/"><span class="s2"> LearnAirbnb </span></a> , a young company that helps hosts &ldquo;start, grow, and optimize [their] Airbnb business like a professional.&rdquo; The chart below shows the results of a LearnAirbnb survey. As co-founder Jim Breese points out, almost one third of these hosts view Airbnb as a business. </span></p> <p class="p4"><span class="s1"><img class="cms-img" src="https://pix-media.priceonomics-media.com/blog/1130/ScreenShot2016-02-11at1.38.45PM.png" style="height: 431px; width: 599px;" /> &nbsp; </span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="p2"><em><span class="s1">Data via <a href="http://learnairbnb.com/"><span class="s2"> LearnAirbnb </span></a> . The survey asked questions of 836 hosts who&rsquo;ve worked with LearnAirbnb or one of its partners. </span></em></p> </blockquote> <p class="p4"><span class="s1">Breese has worked with a client who owns a 30-unit complex. He knows of groups of friends pooling a few hundred thousand dollars to purchase properties to Airbnb, as well as people raising funds from investors to do the same. But he hasn&rsquo;t worked with really large real estate companies. &ldquo;I don&rsquo;t personally know anyone making $2 million a year,&rdquo; he says. </span></p> <p class="p4"><span class="s1">Sean Conway of <a href="https://www.pillowhomes.com/"><span class="s2"> Pillow </span></a> offered us some of the best evidence that big companies are interested in Airbnb properties. Pillow manages short term rentals&mdash;its staff will take care of listing your apartment, confirming guests, and everything else. Conway says that Pillow rents out families&rsquo; vacation homes and apartments that belong to consultants who travel 5 days a week. But he has also been approached by major investors.&nbsp; </span></p> <p class="p4"><span class="s1">&ldquo;We&rsquo;ve had investors with 500 units come to us and say, &lsquo;We want you to take all of them,&rsquo;&rdquo; says Conway, &ldquo;and we say, &lsquo;No way, we&rsquo;re a start up!&rsquo;&rdquo; </span></p> <p class="p4"><u><span class="s1"><strong>The Obstacles to Airbnb-ing at Scale </strong></span></u></p> <p class="p4"><span class="s1">From looking at the report on Airbnb&rsquo;s New York City data and talking with people in real estate, we can conclude that some significant commercial business happens on Airbnb.&nbsp; </span></p> <p class="p4"><span class="s1">But we&rsquo;ve yet to find evidence that real estate companies with tens of thousands of units do short term rentals on Airbnb. Those companies declined our requests for comment, and even Pillow, Conway says, despite getting requests to manage hundreds of properties, has not talked with the major players. </span></p> <p class="p4"><span class="s1">They could just be keeping their plans quiet, but there are many reasons why short term rentals could remain the purview of average joes and smaller-scale investors.&nbsp; </span></p> <p class="p4"><span class="s1">At RealtyShares, our reasoning for not accepting investments for Airbnb properties is simple: they&rsquo;re too new. Investors want to see a track record when evaluating a deal, and since Airbnb is only 8 years old, there&rsquo;s less data and the market is immature. </span></p> <p class="p4"><span class="s1">Renting out an Airbnb also has elements of the hospitality industry that are foreign to the real estate business. Sure, you can find out the average price and occupancy rates in a neighborhood. But if you do a poor job promoting your Airbnb listing and satisfying your guests, you&rsquo;ll never make the revenue you anticipated.&nbsp; </span></p> <p class="p4"><span class="s1">Another problem for big real estate investors is that they can&rsquo;t benefit from economies of scale with Airbnb. Usually a company like AvalonBay owns entire buildings, which saves on the costs of upkeep for each unit. The company can hire on-site repair staff, make upgrades to the entire building in one go, and so on. That&rsquo;s not the case when you have 200 units scattered around town.&nbsp; </span></p> <p class="p4"><span class="s1">This isn&rsquo;t necessarily a crippling problem. Several companies that rent out individual houses, which have the same scaling problems, have recently had <a href="https://www.reit.com/node/16799/single-family-rentals-home-sweet-home"><span class="s2"> billion dollar IPOs </span></a> . Other tools, like Pillow&rsquo;s management service and Nest thermostats, make managing many Airbnbs easier and more efficient. Investors could also rent out an entire complex on Airbnb, although at that point they&rsquo;re really in the hotel business.&nbsp; </span></p> <p class="p2"><span class="s1"><img class="cms-img" src="https://pix-media.priceonomics-media.com/blog/1130/apartment_chart.jpg" style="height: 450px; width: 600px;" /></span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="p2"><em><span class="s1">Apartment photo by <a href="https://www.flickr.com/photos/axeldeviaje/300817092"><span class="s2"> Axel Tregoning </span></a></span></em></p> </blockquote> <p class="p4"><span class="s1">A more paralyzing obstacle is that Airbnb dominates the short term rental market for apartments, which means that investors would be at the mercy of a single company. If Airbnb decided to cap its prices or demand a bigger cut of the profits, every real estate company&rsquo;s short term rental investments would go to hell.&nbsp; </span></p> <p class="p4"><span class="s1">But the biggest deterrent, the uncertain and hostile regulatory environment, supersedes all of these. Voters and governments in some of the biggest cities in the short-term rental market are taking action to reduce their impact and ward off professional hosts. For people living in these cities, this backlash is hard to miss.&nbsp; </span></p> <p class="p4"><span class="s1">In order to prevent investors from renting out apartments full-time on Airbnb, San Francisco limits the number of days a unit can be occupied by short term renters to 90 days. Last November, 45% of voters <a href="http://www.theguardian.com/us-news/2015/nov/04/san-francisco-voters-reject-proposition-f-restrict-airbnb-rentals"><span class="s2"> supported </span></a> a ballot measure that, if it passed, would have reduced that cap to 75 days.&nbsp; </span></p> <p class="p4"><span class="s1">In New York, it&rsquo;s <a href="http://www.wnyc.org/story/please-explain-airbnb-nyc/"><span class="s2"> illegal </span></a> to rent out an apartment in a residential building if the owner is not home. Meanwhile, a number of resort towns have <a href="http://www.npr.org/sections/thetwo-way/2015/05/13/406587575/santa-monica-cracks-down-on-airbnb-bans-vacation-rentals-under-a-month"><span class="s2"> banned </span></a> short term rentals outright, and critics <a href="https://medium.com/matter/living-and-dying-on-airbnb-6bff8d600c04#.inc6gezg6"><span class="s2"> question </span></a> whether the decentralized short term rental model can ensure safety without the regulations that exist for hotels. </span></p> <p class="p4"><span class="s1">Scott Shatford has been tracking the <a href="http://blog.airdna.co/most-profitable-airbnb-cities-in-america/"> profitability </a> of investments in Airbnb properties, which can be dependent on the regulatory environment of a given city. As the CEO of Airdna, an Airbnb data and analytics company, Shatford explains, &quot;One of the interesting trends that we see with the short-term rental investments is a shift towards secondary markets, where there is less regulation and more untapped opportunities.&quot; </span></p> <p class="p4"><span class="s1">Not every city wants to ward off Airbnb. Peter Abualzolof of Mashvisor cites Philadelphia and Seattle as cities passing laws to legitimize short term rentals. Still, the situation is uncertain and in flux. &ldquo; <em> I&rsquo;m </em> even confused,&rdquo; says Abualzolof. &ldquo;I try to do the research and provide information, but I&rsquo;m very hesitant, because it&rsquo;s very vague.&rdquo; There&rsquo;s no city where a property owner can know exactly how Airbnb will be regulated&mdash;or even if it will be legal&mdash;ten years down the line. </span></p> <p class="p4"><span class="s1">If you&rsquo;re an investor at a company deciding where to invest hundreds of millions of dollars, that&rsquo;s not what you want to hear.&nbsp; </span></p> <p class="p4"><u><span class="s1"><strong>Airbnb&rsquo;s White Whales? </strong></span></u></p> <p class="p4"><span class="s1">Major real estate companies are unlikely to get involved in short term rentals until the regulatory situation is more clear. But there is another way they could get involved: as landlords partnering with tenants who host Airbnb travelers.&nbsp; </span></p> <p class="p4"><span class="s1">In December 2015, <em> Bloomberg&nbsp; </em><a href="http://www.bloomberg.com/news/articles/2015-12-17/airbnb-seeks-blessing-of-u-s-landlords-for-tenants-to-profit"><span class="s2"> reported </span></a> that Airbnb is in talks with billion dollar, multi-home real estate companies. In the past, landlords have clashed with tenants who they suspect break their lease by listing their apartment on Airbnb. These multi-home real estate companies are&mdash;indirectly through property management companies&mdash;the nation&rsquo;s biggest landlords. Airbnb is reportedly offering to share profits with these companies if they bless their tenants&rsquo; use of short term rentals.&nbsp; </span></p> <p class="p4"><span class="s1">The companies are not offering updates or details on the talks. A representative of Camden Property Trust told us that it would be &ldquo;premature&rdquo; to comment.&nbsp; </span></p> <p class="p4"><span class="s1"><img class="cms-img" src="https://pix-media.priceonomics-media.com/blog/1130/ScreenShot2016-02-11at1.32.10PM.png" style="height: 274px; width: 600px;" /></span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="p2"><em><span class="s1">Photo via <a href="http://vrbo.com/"><span class="s2"> VRBO </span></a></span></em></p> </blockquote> <p class="p4"><span class="s1">We did, however, get a glimpse of how this might work by talking to a local landlord and real estate investor. As he chose to remain anonymous, we&rsquo;ll call him John Smith. </span></p> <p class="p4"><span class="s1">Smith has experimented with the type of arrangement Airbnb is proposing to major real estate investors. He partnered with a tenant, modified the tenant&rsquo;s lease so he could rent out extra rooms in his apartment, and helped him register with the city.&nbsp; </span></p> <p class="p4"><span class="s1">When we ask how the experiment went, Smith responds, &ldquo;There is absolutely something there.&rdquo; The market rental rate for the apartment is around $6,000 a month, and Smith and the tenant made about that much from just one bedroom by putting bunkbeds in it, hostel-style.&nbsp; </span></p> <p class="p4"><span class="s1">Still, Smith is not sure whether it&rsquo;s a good arrangement for landlords. Short term rentals come with extra costs&mdash;more wear and tear, higher electric bills, more expensive insurance&mdash;and he&rsquo;s unsure whether the increased profit is worth the occasional headaches involved with the hospitality industry. </span></p> <p class="p4"><span class="s1">The most interesting takeaway from the experiment, though, has nothing to do with profits and everything to do with the ethos Airbnb tries to communicate. To counter critics and regulators who say Airbnb makes housing more expensive, Airbnb reps <a href="http://www.wired.com/2015/11/prop-f-has-failed-but-the-battle-for-sfs-soul-will-go-on/"><span class="s2"> talk about </span></a> how it helps hosts make money to pay their rent, and the company&rsquo;s narrative <a href="http://blog.airbnb.com/belong-anywhere/"><span class="s2"> centers </span></a> around creating a sense of belonging that is absent when you stay in a hotel.&nbsp; </span></p> <p class="p4"><span class="s1">Smith&rsquo;s experience echoes these talking points. He says that one of his tenants who rented out spare rooms on Airbnb used the extra money to quit his job and pursue artistic interests&mdash;and that he&rsquo;s enjoyed hosting travelers, because he&rsquo;s a big fan of hostels.&nbsp; </span></p> <p class="p4"><span class="s1">For this reason, Airbnb may eschew professional investors who want to rent out entire apartments in favor of working with real estate companies through landlord-tenant partnerships. </span></p> <p class="p4"><u><span class="s1"><strong>Who Rents the Future? </strong></span></u></p> <p class="p4"><span class="s1">Airbnb is the posterchild of the sharing economy. By giving people a way to monetize an underutilized asset&mdash;a spare bedroom, Americans&rsquo; <a href="http://eyeonhousing.org/2011/08/where-are-the-nations-second-homes/"><span class="s2"> 7 million </span></a> second homes, apartments that belong to people who are on vacation&mdash;the company created a huge, new industry. </span></p> <p class="p4"><span class="s1">But as business reporter Will Alden <a href="http://ww.nytimes.com/2014/11/30/magazine/the-business-tycoons-of-airbnb.html"><span class="s2"> has written </span></a> , decentralized services tend to become reliant on a small number of professional users. Anyone can run an auction on eBay, but full-time &ldquo;power sellers&rdquo; dominate the site. Similarly, professionals and &ldquo;ad-hoc temp agencies&rdquo; claim a large share of the work on TaskRabbit.&nbsp; </span></p> <p class="p4"><span class="s1">Now, this is happening on Airbnb. The appealing economics of short term rentals has attracted professional investors, and services that manage properties, use data to identify promising properties, and provide concierge services are popping up to support them. </span></p> <p class="p4"><span class="s1">&nbsp; </span><img class="cms-img" src="https://pix-media.priceonomics-media.com/blog/1130/this_apartment_goes_up.jpg" style="height: 399px; width: 600px;" /></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="p6"><em><span class="s3">Apartment photo by <a href="https://commons.wikimedia.org/wiki/File:AIMCO_apartment_interior.jpg"><span class="s4"> AIMCO/Architecturist </span></a></span></em></p> </blockquote> <p class="p4"><span class="s1">But in Airbnb&rsquo;s case, the rise of professional investors has contributed to a backlash&mdash;from residents and regulators who believe it raises rents, and from tenants and co-op boards who dislike seeing strangers with suitcases in their building every night.&nbsp; </span></p> <p class="p4"><span class="s1">Depending on how the fight to regulate Airbnb and its peers shakes out, professional investors could be banned, welcomed, or treated differently in every city around the world. Perhaps partnering with landlords will be how the big players in real estate will get involved.&nbsp; </span></p> <p class="p4"><span class="s1">When we talked to people buying Airbnb properties and the founders of companies meant to support them, they expressed confidence that regulation would ultimately accommodate short term rentals. </span></p> <p class="p4"><span class="s1">&ldquo;I don&rsquo;t know what [the regulation] is going to be,&rdquo; says Jim Breese of LearnAirbnb, &ldquo;but once people start to see, &lsquo;Hey we can co-exist,&rsquo; and once everyone sees how much money is in hospitality, everyone will want what they believe is their fair share.&rdquo;&nbsp; </span></p> <p class="p4"><span class="s1">Several compared the situation to how Uber has overcome attempts to ban its ride-hailing services and how the music industry has gotten over its fear of piracy in order to profit from streaming. </span></p> <p class="p4"><span class="s1">Whether they are right will determine if Airbnb becomes a gold rush for investors, remains a moneymaker for millions of homeowners and renters, or does a bit of both. </span></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="666" height="467" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170119_airbnb.jpg?1484863093" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/will-real-estate-investors-take-over-airbnb#comments Airbnb Brian Chesky Business Business Las Vegas New York City New York State Pillow Homes Real estate Renting Software Uberisation Vacation rental Websites Wimdu Fri, 20 Jan 2017 00:15:00 +0000 Tyler Durden 585925 at http://www.zerohedge.com "El Chapo" Extradited To The US http://www.zerohedge.com/news/2017-01-19/el-chapo-extradited-us <p>The third time behind bars for Joaquin "El Chapo" Guzman may be the unlucky one: on Thursday, Mexico's most notorious cartel kingpin who twice brazenly escape from prison and spent years on the run as the country's most wanted man, was extradited to the U.S. on Thursday to face drug trafficking and other charges.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/chapo%201.jpeg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/chapo%201_0.jpeg" width="500" height="348" /></a></p> <p>In a major victory for the US DEA, Mexico's Foreign Relations Department announced Guzman was handed over to U.S. authorities for transportation to the U.S. on Thursday, the last full day of President Barack Obama's administration and a day before Donald Trump is to be inaugurated. </p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/chapo_0.jpg" width="500" height="326" /></p> <p>The U.S. Justice Department issued a statement confirming that Guzman was en route to the United States and expressed gratitude to Mexico for its cooperation.</p> <p>As <a href="https://apnews.com/418fef49c042432f9388d618c923fc41">reported by the AP</a>, a senior U.S. official said the U.S. Drug Enforcement Administration took custody of Guzman in Ciudad Juarez, which is across the border from El Paso, Texas, and a plane carrying him departed for New York at 5:31 p.m. EST.&nbsp; The convicted Sinaloa cartel boss has been held most recently in a prison near Ciudad Juarez. </p> <p>El Chapo was recaptured a year ago after escaping from a second maximum-security prison through a tunnel dug to his cell. He had fought extradition since then. </p> <p>Upon return to the US, Guzman faces the possibility of life in a U.S. prison under multiple indictments in six jurisdictions around the United States, including New York, San Diego, Chicago and Miami. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>A federal indictment in the Eastern District of New York, where Guzman is expected to be prosecuted, accuses him of overseeing a trafficking cartel with thousands of members and billions of dollars in profits laundered back to Mexico. It says Guzman and other members of the Sinaloa cartel employed hit men who carried out murders, kidnappings and acts of torture. </p> <p>&nbsp;</p> <p>He was first indicted by a U.S. federal grand jury in July 2009. A superseding indictment was issued in May charging him and Ismael "El Mayo" Zambada with a variety of drug, gun and money laundering charges as part of an ongoing criminal enterprise. </p> </blockquote> <p>A Mexican Foreign Relations Department statement said a court had ruled against Guzman's appeal and found that his extradition would be constitutional. Obama's White House, which was down to a skeleton staff hours before Trump takes office, said it had no immediate comment.</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="800" height="462" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/chapo%20teaser.jpg?1484869196" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/el-chapo-extradited-us#comments Barack Obama's administration Cocaine Crime Crime in Mexico Donald Trump Foreign Relations Department Heroin Ignacio Coronel Villarreal Ismael Zambada García Joaquín Guzmán Law Methamphetamine Mexican Drug War Mexico Mexico's Foreign Relations Department Organized crime Sinaloa Sinaloa Cartel U.S. Drug Enforcement Administration U.S. Justice Department White House White House Thu, 19 Jan 2017 23:42:57 +0000 Tyler Durden 585932 at http://www.zerohedge.com Does Michael Moore Matter Anymore? An Open Letter From One Filmmaker To Another http://www.zerohedge.com/news/2017-01-19/does-michael-moore-matter-anymore-open-letter-one-filmmaker-another <p><a href="http://strike-the-root.com/does-michael-moore-matter-anymore-open-letter-from-one-filmmaker-to-another"><em>Authored by Douglass Herman via Strike-The-Root.com,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;This is the true joy in life &ndash; being used for a purpose recognized by yourself as a mighty one: being thoroughly worn out before you are thrown on the scrap heap; being a force of nature instead of a feverish, selfish little clod of ailments and grievances complaining that the world will not devote itself to making you happy.&rdquo; ~ George Bernard Shaw</p> </blockquote> <p><strong>Mike: I&rsquo;m a fellow Michigander, a fellow filmmaker like yourself, raised with small town Midwestern values like the ones you claim to have.</strong> I&rsquo;ve mostly applauded and admired your efforts in the past. Indeed, long before I became a filmmaker, I championed your documentary film, <em>Fahrenheit 9/11</em>. While working as an Alaska commercial fisherman, I lobbied the local theater owner, Rusty, to show the film there in Kodiak, Alaska in 2004. He said he despised you but I told him the Orpheum would be packed for several showings and he&rsquo;d make a nice fat profit. And he did.</p> <p><em>Speaking of nice fat profits, how&rsquo;s your weight, buddy? You really should contact my friend Gillian Michael and get on a weight loss program. Maybe you could make a documentary while you do it. Call it High Fructose Snowflakes or Fast Food Fat Folks or something really fun and creative. Like that guy who made Supersize Me.</em></p> <p><u><strong>Sadly, in recent years, you&rsquo;ve seemed to become almost a parody of yourself.</strong></u> Like a cartoon character or one of those loopy <em>Saturday Night Live</em> sketches that are more embarrassing than funny. Where, I wonder, is the old Mike Moore? The guy who tilted at windmills, who stood up to the powerful with homespun humor and a shaky camera? <strong>Indeed, the very same things you said to the auto industry in </strong><em><strong>Roger and Me,</strong></em><strong> years ago, are the very same things Donald Trump is saying to the auto industry today. </strong>Or so it seems to me.</p> <p>To your credit, you sounded prescient when you said, LOUD AND CLEAR, that this presidential election would be the Biggest Fuck You to those in power. Bravo; you were right. To Wall Street, Big Business, The Media and Washington DC, the average working class Deplorable spoke out on election day. But you forgot to add Yourself, Mike. Seems to me that America said fuck you to people like YOU. Lots of folks in the &ldquo;flyover&rdquo; states said fuck you to Hollywood and highly-paid celebs like yourself. I mean, you were worth an estimated $50 million and the proud owner of nine homes according to divorce court records a couple years ago. Trump supporters backed a rich fellow like yourself. But they wished and hoped and prayed that ALL of you rich hypocrites would move somewhere else, anywhere else &ndash; as many claimed they would - and help us make America great again. But those were idle threats from the affluent idle, sad to see.</p> <p>Like yourself, I&rsquo;m disgusted with what our country has become, and like yourself and millions of others, I want to do something about it. But a Two Million Snowflake March on Washington DC will be more counterproductive than anything, I believe. How about Love Trumps Hate? You do remember that slogan, right? Act locally and think globally, and maybe just a little <a class="ext" href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=12&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwiY3orjsbjRAhXohFQKHUKLDQgQFghMMAs&amp;url=http%3A%2F%2Fwww.strike-the-root.com%2Fkindness-generates-kindness&amp;usg=AFQjCNGoW5qUlP6I6A4KxRaiHGujeeKxnA&amp;sig2=Y1NgsTmYGl7AneRS6cV1Jg&amp;bvm=bv.143423383,d.cGw"><span style="text-decoration: underline;">Kindness Generates Kindness</span></a>.</p> <p>Since you&rsquo;re going to DC, suppose you suggest to Black Lives Matter they get a life, not take a life. Stop harassing folks, stop kidnapping kids, and do what you and I did when we were young. Work for a living. Maybe you could suggest to all of your millions of Facebook and Twitter followers that <strong>they take a tip from fellow playwright G.B. Shaw about &ldquo;Being a force of nature instead of a feverish, selfish little clod of ailments and grievances complaining that the world will not devote itself to making you happy.&rdquo; </strong></p> <p>The election, that you and so many others claimed was hacked by Russians, was a huge FU to fat hypocrites like yourself. We said FU to people who called themselves progressive but were no more progressive than the biggest Bushco Neocons. We said fuck you to Hollywood. We said go-to-hell to the shitty music and television industry and spoiled celebs like yourself, sanctimonious folks who backed the corrupt Clinton Machine. We saw through it, and for better or worse, we rejected it.</p> <p>So now, Mike, you want all the sore losers like yourself, many of them struggling from payday to payday, to get on over to Washington DC to protest? Why not offer to pay their tickets, both travel tickets and disorderly conduct tickets? I mean, put up or shut up, Mike.</p> <p><u><strong>Put Up or Shut Up Protest</strong></u></p> <p>Let me ask you this, Mike.<strong> Did you ever protest, actually protest, anything Obama or Clinton or Holder did in the past eight years?</strong> Did you protest Fast &amp; Furious gun running to Mexican drug gangs? Did you, Mike? Or droning wedding parties? Or did you protest the vicious destruction of small countries like Iraq, Syria or Libya, independent nations that never attacked America?</p> <p>Did you ever protest the wholly undeserved Nobel Peace Prize given to Barack Obama? Did you? Because most of the folks I know would have thanked the committee and said no thanks to that prize. What kind of narcissist accepts a prize they haven&rsquo;t earned? But that&rsquo;s what Obama did, and most so-called Liberals support him and consider he&rsquo;s done a great job. Why is that?<strong> You get all angry about Trump, and claim he didn&rsquo;t earn the presidency. And yet you seem to be okay with a guy who bombed more folks than ALL of the dictators we toppled. And got a peace prize for doing it! Seems to me that Liberalism is a disease of denial or hypocrisy. </strong></p> <p>Can I just give you a suggestion, Mike? Your devotion to justice and activism is laudable. <strong>But you cannot support human rights at the higher cost of human wrongs</strong>. <strong>You soon become morally bankrupt.</strong> Even for a guy as wealthy as you.</p> <p>Suppose instead you threw your considerable weight behind worldwide causes of truth and justice. Like the freedom flotilla to Gaza, like Colonel Ann Wright supported and lots of the veterans did, too. Or how about trying to stop wars BEFORE they start? Before the shadow state and the swamp creatures in DC rubber stamp some immoral war? Make a documentary about that, Mike.</p> <p>Now about your considerable weight: How about a Reality TV show called Celebrity Biggest Loser? Seems like a sure winner to me.</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="136" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170119_moore.jpg?1484860623" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/does-michael-moore-matter-anymore-open-letter-one-filmmaker-another#comments American people of German descent B+ Barack Obama Business Climate change skepticism and denial Donald Trump Donald Trump Eminem Entertainment Fuck Hip hop Human Interest Iraq Michael Moore Neocons Reality Supersize Me The Apprentice Twitter Twitter United States WWE Hall of Fame Thu, 19 Jan 2017 23:35:00 +0000 Tyler Durden 585924 at http://www.zerohedge.com California Governor Jerry Brown Admits To $1.5 Billion "Math Error" In State Budget http://www.zerohedge.com/news/2017-01-19/california-governor-jerry-brown-admits-15-billion-math-error-state-budget <p>Budgeting can be difficult, particularly for expansive state budgets that require a ton of inputs to support 1,000s of line items each of which can result in massive variances depending on the development of various economic indicators like interest rates, commodity prices, etc. throughout the year.</p> <p>That said, while forecasting variances are inevitable, we, as taxpayers, generally rely on our expensive budget office employees to at least present annual budgets that reflect sound mathematics and accounting principles.&nbsp; Unfortunately, that seems to be too much to ask of the <strong>math-challenged administration of California Governor Jerry Brown which decided to double count certain cost savings and simply "forgot" to incorporate other expenses</strong> altogether.&nbsp; Per the <a href="http://www.latimes.com/politics/essential/la-pol-ca-essential-politics-updates-in-sacramento-s-first-hearing-on-state-1484693129-htmlstory.html">LA Times</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Budget staffers said there were, in fact, two mistakes:<br /> </p><p style="padding-left: 30px;">&nbsp;</p> <p style="padding-left: 30px;">-&nbsp; A <strong>double counting of state savings from a program that coordinates health, behavioral and long-term care services with local government</strong>. That error understated expenses by $913 million.</p> <p style="padding-left: 30px;">&nbsp;</p> <p style="padding-left: 30px;">-&nbsp; <strong>A forgotten state government cost from two counties — San Mateo and Orange</strong> — enrolling in the coordinated program, which meant missed expenses of $573 million.</p> </blockquote> <p><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/01/19/2017.01.19%20-%20Jerry%20Brown_0.JPG" alt="Jerr Brown" width="600" height="437" /></p> <p>&nbsp;</p> <p>Embarrassingly, when asked about the "mistakes" that resulted in a $1.6 billion budget deficit, the Chief Deputy Director of Brown's Department of Finance could offer no other explanation than that the <strong>"math was wrong" </strong>while another spokesman admitted, <strong>“There’s no other way to describe this other than a straight up error in accounting, which we deeply regret."</strong></p> <p>Meanwhile, adding insult to injury, Brown's administration allegedly discovered their "accounting errors" several months ago but didn't disclose them to State Senators until last week.&nbsp; Per <a href="http://www.mercurynews.com/2017/01/18/1-8-billion-error-adds-to-california-deficit-projection/">Mercury News</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The administration discovered accounting mistakes last fall, but it did not notify lawmakers until the administration included adjustments to make up for the errors in Brown’s budget proposal last week.</p> <p>&nbsp;</p> <p>The Department of Finance said it <strong>did not account for $487 million in rebates from drugmakers that the state must pay the federal government </strong>to reimburse Washington for its share of Medi-Cal drug costs.</p> <p>&nbsp;</p> <p>The state also miscalculated costs for the Coordinated Care Initiative, an experimental program in seven counties to improve care for a group of high-needs patients eligible for both Medi-Cal and Medicare, the federally funded health plan for seniors and people with disabilities.</p> <p>&nbsp;</p> <p><strong>Officials double-counted some of the expected savings, leading to a budget hole of $913 million, and undercounted the costs in San Mateo and Orange counties by $573 million.</strong></p> <p>&nbsp;</p> <p>In his spending plan, Brown proposed eliminating the Coordinated Care Initiative because he said the program was not cost effective, angering counties that said the change would shift $550 million in costs to them.</p> </blockquote> <p>Of course, the blatant attempt to cover up their "math error" rather than quickly admit the mistake last fall, led California State Senator John Moorlach to ask the obvious question of what other errors may be buried in the expansive budget, saying <strong>“It makes you wonder what else is not right. … When something like this happens, the trust factor gets eroded, and you lose confidence in what’s being provided to you."</strong>&nbsp; But, no matter the size of the various other "math errors" that come to light, we're quite certain that California's liberal legislators in Sacramento stand ready, willing and able to implement whatever tax hikes may be necessary to address such issues.</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="930" height="678" alt="" src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017.01.19%20-%20Jerry%20Brown.JPG?1484844200" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/california-governor-jerry-brown-admits-15-billion-math-error-state-budget#comments Brown's administration Budget Budget Deficit Department of Finance ETC Federal assistance in the United States federal government Government Healthcare reform in the United States Medi-Cal Medicare Medicare Medicare Politics Presidency of Lyndon B. Johnson Social Issues United States Thu, 19 Jan 2017 23:15:00 +0000 Tyler Durden 585886 at http://www.zerohedge.com Peter Schiff Warns "Trump Deficits Will Be Yuuge": What That Means For Gold & The Dollar http://www.zerohedge.com/news/2017-01-19/peter-schiff-warns-trump-deficits-will-be-yuuge-what-means-gold-dollar <p><em><a href="http://www.europac.com/commentaries/trump_deficits_will_be_huge_0">Submitted by Peter Schiff via Euro Pacific Capital,</a></em></p> <p><strong>There is much we don&rsquo;t know about how the Trump presidency will play out.</strong> Will the Wall get built? Who will pay for it? Will it have at least some fencing? Will repeal and replace happen at exactly the same time? Will Trump throw a ceremonial switch? Will there be a Trump National Golf Course in Sochi? It&rsquo;s anyone&rsquo;s guess.&nbsp; <strong>But of one thing we can be fairly certain. President Trump is very likely to preside over the largest expansion of Federal budget deficits in our history.</strong> Trump has built his companies with debt and I&rsquo;m sure he thinks he can do the same with the country. His annual budget deficits are likely going to be huge. This development will make a greater impact on the investment landscape than most on Wall Street can imagine.</p> <p>In the past half-century, Republican presidents have been the going away winners at the deficit derby, a fact that should make any true conservative blush. The sad truth is that annual deficits exploded under Ronald Reagan and George W. Bush, and generally contracted under Bill Clinton and Barack Obama (despite the latter&#39;s distinction of having added more total debt than all previous presidents combined.) <strong>Some of the explanation is just luck of the draw, some walked into office in the midst of recessions they didn&rsquo;t create. But the better part of the explanation is baked into the political dynamics.</strong></p> <p>Democrats want to raise spending and taxes. Republicans want to cut spending and taxes. But whereas Democrats have generally succeeded on both of their missions, Republicans have just succeeded in one. (Actual spending cuts require politically difficult choices that are much harder to vote for than perennially popular tax cuts). This puts a giant thumb on the Republicans&rsquo;&nbsp;budgetary scale.</p> <p><strong>Like prior Republicans, Trump has promised to cut taxes, on both corporations and individual taxpayers&hellip;even the wealthy. But unlike prior Republicans, he has not paid a word of lip service to spending cuts. He has promised to spend now, and spend big. Trump just doesn&rsquo;t do the austerity thing. It&rsquo;s for losers.</strong></p> <p>In addition to fronting the cost of building the 2,000 mile Wall (accounts receivable has a reliable address in Mexico),&nbsp;Trump plans big increases in military spending, both on active military and on our veterans. His reboot of Obamacare has yet to be presented, but as he has promised that no one will lose coverage, not even those with pre-existing conditions, we can be sure that Trumpcare won&rsquo;t be cheap. But his big project will likely be his promised $1 trillion plus infrastructure spending plan. Most importantly, he diverges from most Republicans by promising no structural changes in Social Security and Medicare, the entitlement leviathans that are the sources of the vast majority of Federal red ink.</p> <p><strong>To aid him in these budget-busting efforts, Trump will have the benefit of a compliant Congress in which his own party controls both Houses.</strong> Most Republican senators and representatives now seem eager to jump aboard the Trump train and will likely pass anything he sends to the Hill. Those who resist should prepare for the kind of political hardball that we have rarely seen in this country (I&rsquo;m talking to you Lindsay Graham).&nbsp;If Republicans couldn&rsquo;t hold the line on Obama, how will they do so with Trump and, politically, why would they even want to? Grandstanding against Obama&rsquo;s big deficits, even to the point of forcing a government shutdown, did not play well politically. Standing up against Trump will involve considerably more risk with Republican primary voters.</p> <p><strong>Even if none of Trump&rsquo;s taxing and spending plans come to fruition, the United States would still be on the threshold of a sobering era of debt expansion.</strong> The age of trillion dollar plus annual deficits began in 2009 when the financial crisis tripled a very large $458 billion deficit in 2008 into a record smashing $1.4 trillion in 2009. Three more trillion-dollar deficits followed. But since 2009, excluding a small increase from 2010 to 2011, the deficits have declined steadily. By 2015, they had&nbsp;decreased&nbsp;to $438 billion,&nbsp;slightly below where they were before the crisis began. (Of course these smaller deficits exclude hundreds of billions of additional debt that is borrowed off budget.)&nbsp;These developments have caused many to conclude that budgetary issues are no longer at the top of the agenda.</p> <p><strong>But,&nbsp;as a result of the failure of Republicans and Democrats to achieve any kind of agreement on long-term budgetary reform, the six-year run of declining deficits has come to an end. </strong>The 2016 deficit was more than&nbsp;$100 billion wider than 2015. This marks the first year since 2009 that the deficit increased from the prior year (except for a minimal .001% expansion in 2011 over 2010). This is just a down payment on things to come.</p> <p>The Congressional Budget Office (CBO) - the closest Washington comes to actual objectivity - issues long-term budget assumptions. Except for a relatively small dip from 2017 to 2018, the CBO sees continuous deficit expansions every year through the end of the next decade, culminating&nbsp;in continual&nbsp;$1 trillion deficits every year starting in 2024. (8/23/16 CBO report) That&rsquo;s the good news.<strong> The bad news is that in making these projections, the CBO has to make some very rosy assumptions. The most egregious of these is that the U.S. economy will avoid recession for the entirety of the next decade.</strong></p> <p>Over the past century we have seen a recession, on average, every 60 months&nbsp;(based on data from National Bureau of Economic Research and Bureau of Labor Statistics). According to current figures, the economy has been in expansion for 92 consecutive months. This means that the current expansion is already 50% longer than average. Expecting it to last for nearly 18 years is completely without precedent.&nbsp;&nbsp;I believe it will be sooner rather than later that we will have another recession,&nbsp;which&nbsp;will greatly enlarge the deficits. History is clear on that point. The Great Recession caused the deficit to triple. Even the mild recession of 2001 turned a $236 billion&nbsp;surplus&nbsp;into a $157 billion&nbsp;deficit&nbsp;in just two years.&nbsp;The next recession&nbsp;I expect to&nbsp;work similar magic. But, in addition to being blind to recessions, the CBO was also blind to Donald Trump.</p> <p>In making its projections,&nbsp;the CBO simply assumed that the taxing and spending laws currently on the books would remain unchanged. The projections&nbsp;do not account for any tax cuts or spending increases. As mentioned previously, Trump has virtually promised to do both in the first year of his presidency. If he is successful, we could return to trillion dollar deficits much sooner than the CBO thinks. <strong>A recession could push the red ink well into record territory.</strong></p> <p><strong>The graphs below chart the prices of gold and the dollar versus annual budget deficits since 1990. <em><u>The data shows clearly that after a few months of lag time,&nbsp;the price of gold has followed the long-term expansion and contraction of deficits, while the dollar has moved&nbsp;in the opposite direction.</u></em></strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/01/17/20170119_schiff1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/01/17/20170119_schiff1_0.jpg" style="width: 600px; height: 247px;" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/01/17/20170119_schiff2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/01/17/20170119_schiff2_0.jpg" style="width: 600px; height: 309px;" /></a></p> <p><strong>Of course,&nbsp;who&nbsp;on Wall Street has picked up on these macro trends.</strong> In fact, one of the biggest issues currently being discussed is how the U.S. economy will deal with a perennially strengthening dollar. They are assuming that the Federal Reserve will be raising rates and that the economy will be expanding under the Trump stimulus thereby strengthening the dollar and attracting flows from abroad.<strong> This type of &ldquo;trees grow to the sky&rdquo; thinking is similar to Clinton-era assumptions that the national debt would be repaid by perpetual budget surpluses, or the feeling earlier in this century that real estate prices could never decline.</strong></p> <p>To make these assumptions,&nbsp;Wall Street must ignore the obvious ramifications of big deficits, in particular the need for the Federal Reserve to step up and buy all the new debt that the Trump administration will have to issue. <strong>The last time the government had to find buyers for more than a trillion dollars per year of debt, it&nbsp;relied on foreign central banks.</strong> Eight years ago, the vast majority of Treasury debt was purchased by China and Japan (and, to a lesser extent, Saudi Arabia, Russia and other emerging nations in Asia and Latin America). But as the debt surge persisted, the real heavy hitter became the Federal Reserve itself which, through its Quantitative Easing (QE) Program, bought more than half a trillion dollars of Treasury debt per year from 2009 to 2014.</p> <p><strong>But there can be little expectation that the foreign buyers will be returning for a repeat performance</strong>. Currently, both China and Japan are looking to draw down foreign exchange and are engaged in active selling of U.S. Treasuries in order to keep their currencies from declining against the dollar&nbsp;(Scott Lanman, 10/18/16, Bloomberg). What&rsquo;s more, Donald Trump is likely to engage in aggressive trade wars that may&nbsp;certainly discourage other foreign central banks from supporting our debt issuance.</p> <p>Also,&nbsp;bond analysts are now convinced that the 35-year plus bond bull market, which began in 1980, finally topped out in July of 2016, when European and Japanese yields sank deeply into negative territory and yields on the 10-year Treasury hit 1.36%&nbsp;(Peter Boockvar, 9/19/16, CNBC). Since then bond prices are down significantly across the board.&nbsp;&nbsp;If this trend continues, it will discourage private buyers from making the jump into Treasuries. In other words, the Fed may be the only game in town when it comes to financing future deficits in a new bond bear market.&nbsp;</p> <p><strong>This would mean that the QE programs that many had assumed to be a thing of the past can&nbsp;return with a vengeance, becoming the signature program of the Trump era. </strong>When this reality sinks in,&nbsp;you may witness&nbsp;the dollar&nbsp;begin a long and steady decline from its current decades-high strength. At the same time, gold, gold stocks, commodities and foreign stocks&nbsp;could finally enter a&nbsp;turnaround.&nbsp;</p> <p>Ultimately, I expect years of dollar decline to culminate in a crisis, with the dollar plunging in value, as the world abandons it as its primary reserve currency.<strong><em> The last time the dollar was on the brink of collapse it was saved by the financial crisis of 2008. Next time we will not be so lucky!</em></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="1200" height="494" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170119_schiff1.jpg?1484850124" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/peter-schiff-warns-trump-deficits-will-be-yuuge-what-means-gold-dollar#comments Austerity Barack Obama Bear Market Bond Bureau of Labor Statistics Bureau of Labor Statistics Business Central Banks China Congress Congressional Budget Office Congressional Budget Office Deficit reduction in the United States Donald Trump Donald Trump Economy Economy of the United States Federal Reserve Fiscal policy Foreign Central Banks Great Recession Japan Latin America Medicare Medicare Mexico National Bureau of Economic Research National Debt National debt of the United States None Obamacare Peter Boockvar Peter Schiff Political debates about the United States federal budget Politics Quantitative Easing Real estate Reality Recession Reserve Currency Saudi Arabia Trade Wars Trump Administration United States United States federal budget United States fiscal cliff US Federal Reserve Thu, 19 Jan 2017 22:55:00 +0000 Tyler Durden 585923 at http://www.zerohedge.com Washington D.C. Turned Into "Virtual Fortress" As 250,000 Protesters Descend Upon The City http://www.zerohedge.com/news/2017-01-19/washington-dc-turned-virtual-fortress-250000-protesters-descend-upon-city <p>Over the past couple of days, we've highlighted a couple of the mass protests that are being planned by disaffected Hillary supporters in an effort to disrupt the various Trump inaugural events that get kicked off tomorrow evening.&nbsp; Perhaps the most aggressive "disruptions" have been planned by groups called<strong> "DisruptJ20"</strong> and the<strong> "DC Anti-Fascist Coalition"</strong> and include plans to <strong>"paralyze the city"</strong> with <strong>"clusterfuck blockades"</strong> of bridges and tunnels, "stink bombs" in ventilation systems and chaining metro trains to station platforms to shut down rail traffic.&nbsp; Unfortunately for them, all of their plans were caught on tape by Project Veritas (see "<a href="http://www.zerohedge.com/news/2017-01-16/project-veritas-exposes-plot-disrupt-deploraball-butyric-acid">New Video Exposes Anti-Trump Groups Plotting Criminal Acts To Disrupt Inauguration</a>") so we suspect police will be well prepared.</p> <p>As <a href="http://www.reuters.com/article/us-usa-trump-protests-idUSKBN1531GH">Reuters </a>points out this morning, efforts to disrupt the inaugural process will have to evade a massive force of <strong>28,000 security personnel and miles of fencing and roadblocks fortified by sand-laden dump trucks and other heavy equipment.&nbsp;</strong> </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Washington will turn into a virtual fortress ahead of Donald Trump's presidential inauguration on Friday, as the U.S. capital braces for more than a quarter-million protesters expected during the Republican's swearing-in.</p> <p>&nbsp;</p> <p><strong>About 28,000 security personnel, miles (kilometers) of fencing, roadblocks, street barricades and dump trucks laden with sand will be part of the security cordon clamped around 3 square miles (almost 8 square km) of central Washington.</strong></p> <p>&nbsp;</p> <p><strong>"If we do have a mass arrest, we'll be able to get people processed very quickly,"</strong> he said in an interview with Washington's NBC 4 television station.</p> </blockquote> <p><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/01/19/2017.01.19%20-%20DC%20Protests_0.JPG" alt="DC" width="600" height="335" /></p> <p>&nbsp;</p> <p>And, if America's millennial snowflakes are able to break through rhe police fortress they will undoubtedly be met by the <strong>"<a href="http://www.zerohedge.com/news/2017-01-16/bikers-trump-vow-form-wall-meat-protect-inauguration-protesters">Wall of Meat</a>"</strong> recently promised by the <strong>"Bikers for Trump"</strong> group which has vowed to go <strong>"toe-to-toe with anyone that is going to break through any police barriers."</strong></p> <p>Overall, the inauguration is expected to draw a crowd of 900,000 with 250,000 of those guests showing up to protest the new President-elect.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Police have forecast that some 900,000 people, both supporters and opponents, will flood Washington for the inauguration ceremony</strong>, which includes the swearing-in on the steps of the U.S. Capitol and a parade to the White House along streets thronged with onlookers.</p> <p>&nbsp;</p> <p>About 30 groups that organizers claim will <strong>draw about 270,000 protesters</strong> or Trump backers have received permits for rallies or marches before, during and after the swearing-in. More protests are expected without permits.</p> <p>&nbsp;</p> <p>By far the <strong>biggest protest will be the Women's March on Washington on Saturday</strong>, which organizers expect to draw 250,000 people.</p> </blockquote> <p>Luckily, at least one helpful protest group will be on hand with plans to calm down the rowdy masses by passing out 4,200 doobies.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>One Washington inaugural protest will come amid a haze of pot smoke as pro-marijuana protesters show their opposition to Trump's choice for attorney general, Alabama Republican Senator Jeff Sessions, a critic of pot legalization.</p> <p>&nbsp;</p> <p>The group plans to distribute 4,200 joints at the inauguration and urge attendees to light up. Possession of small amounts of marijuana is legal in Washington, but public consumption is not.</p> </blockquote> <p>As we've said before, we wish all the protesters the best of luck...we're sure your dreams of disrupting the democratic process will be well rewarded with a free night's stay at a local DC jail.</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/01/12/Millennial%20Meme.JPG" alt="Millennial" width="480" height="175" /></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="770" height="430" alt="" src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017.01.19%20-%20DC%20Protests.JPG?1484830715" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/washington-dc-turned-virtual-fortress-250000-protesters-descend-upon-city#comments American people of German descent Business Central Washington Climate change skepticism and denial DC Anti-Fascist Coalition Donald Trump Donald Trump presidential campaign NBC Politics Politics of the United States Presidency of Donald Trump Reuters Stop Trump movement The Apprentice United States Washington D.C. White House White House Women's March on Washington Thu, 19 Jan 2017 22:54:40 +0000 Tyler Durden 585851 at http://www.zerohedge.com What Steve Mnuchin Thinks About The "Strong Dollar" http://www.zerohedge.com/news/2017-01-19/what-steve-mnuchin-thinks-about-strong-dollar <p>In Steven Mnuchin's nearly 6 hour confirmation hearing on Thursday, there was just one critical exchange lasting all of 90 or so seconds. It was Mnuchin's response to a question from Senator Pat Toomey how he feels about a strong dollar. The question was predicated by Trump's recent interview with the WSJ in which he voiced concern about the dollar’s recent appreciation, saying the currency was “too strong."</p> <p>Mnuchin's response: the dollar is "very, very strong", and "what you see is people from all over the world wanting to invest in the U.S. currency;" However, he hedged saying that while a strong dollar is great in long term, "it was meant to be that perhaps in the short term, the strength in the currency as a result of free markets and people wanting to invest here, <strong>may have had negative impacts on -- on our ability in trade.</strong>"</p> <p>Here is the exchange in full:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>TOOMEY</strong>: Would you agree that many of the periods of strong economic growth that we've had in recent decades have corresponded to periods of a strong dollar and that often, if our economy is performing well and the world perceives our economy to have a bright future, the inevitable result will be a stronger dollar?</p> <p>&nbsp;</p> <p><strong>MNUCHIN</strong>: Let me just comment on that because I think that the U.S. currency has been the most attractive currency to be in - for very, very long periods of time. I think that it's important and I think you see that now more than ever. <strong>The currency is very, very strong and what you see is people from all over the world wanting to invest in the U.S. currency. I think when the president-elect made a comment on the&nbsp; U.S. currency, it was not meant to be long-term comment.</strong></p> <p>&nbsp;</p> <p><strong>It was meant to be that perhaps in the short term, the strength in the currency as a result of free markets and people wanting to invest here, may have had negative impacts on -- on our ability in trade. </strong>But I agree with you, the long-term strength - over long periods of time, is important. And again, that's a reflection of - I believe we have the most attractive investment environment in the world, and we just have to protect our U.S. companies so they're not forced abroad.</p> </blockquote> <p>On tape:</p> <p><iframe src="https://www.bloomberg.com/api/embed/iframe?id=8ff5f73a-599e-47e4-892c-28cf9e63ff7a" width="500" height="281" frameborder="0"></iframe></p> <p>That said, as <a href="https://www.bloomberg.com/news/articles/2017-01-19/mnuchin-says-long-term-strength-of-u-s-dollar-is-important">Bloomberg pointed out</a>, earlier in the hearing, Mnuchin departed from the text of his prepared testimony to say he “will enforce trade policies that keep <strong>our currency strong on the world exchanges </strong>and create and protect American jobs.” The line in his written statement reads: “I will enforce these trade policies that keep and protect American jobs.” </p> <p>Still, while readers may disagree, the market interpreted Mnuchin's statement as agreement with Trump that the dollar may indeed be too strong, if only in the "short-term."</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/01/15/20170119_yellen_0.jpg" width="500" height="263" /></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="205" height="115" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/download%20%2859%29.jpg?1484865582" /> </div> </div> </div> http://www.zerohedge.com/news/2017-01-19/what-steve-mnuchin-thinks-about-strong-dollar#comments Business Currency Dollar Economy Foreign exchange market Hard currency Pat Toomey Reserve currency Steven Mnuchin Testimony United States dollar Thu, 19 Jan 2017 22:40:55 +0000 Tyler Durden 585929 at http://www.zerohedge.com