France Bans Shipment of Gold & Silver in the Mail!

*Breaking
As the western financial collapse nears, the banksters are furiously working to shut down every financial exit available to the public to preserve their wealth from bankster confiscation.
France has just taken capital controls to a new level, banning the shipment of physical gold, silver, and cash through the mail, effectively shutting down the precious metals trade in France!

*Update: According to a reader who has attempted to mail a piece of jewelry to France, gold & jewelry are included in the capital controls ban.

From Market Update, via Google Translate:
In France, a new law that sending gold, silver and cash prohibits. Companies gold coins on sale and send by post can not exercise this new law work. Sites are also traders who are prevented by the new law. Operates like eBay
In September 2011, the French government took all measures to limit. anonymous cash purchases of gold and silver Since then, every purchase of bullion with a value of more than € 450 per bank transfer happen. With the new law since June 1 this year in force is also sending by post of banknotes and precious metals restricted.
The new legislation can be found on this website , where under Chapter I, the following Article D1 of the universal postal service and the postal service obligations is:
“L’insertion the billets de banque, the pièces et de metaux precieux est interdite dans les envois postaux, y compris dans les envois à valeur déclarée, lesson envois recommandes et les envois faisant l’objet de leur formalités attestant dépôt et leur distribution. “
Loosely translated the law says that inserting banknotes, coins and precious metals is prohibited in mail. That includes insured and registered mail shipments.
Barrier
For collectors of silver and gold coins the French Government raises a high barrier. If gold or silver to market will have to be resorted to look for another channel, or will be required to drive in order to retrieve it. The metal back and forth To jewelers not too difficult to make, there are exceptions in the law for sending jewelry.
According Express.be the French government seems to have a clear goal: preventing any transaction among individuals that gold and silver is involved. Another explanation is that the French government wants to get the money, more grip for cash and precious metals lend themselves well to.
Contradiction
Yet it is remarkable that this law has entered France. The central banks of the countries that are part of the Eurozone have agreed namely pure investment gold exempt from VAT. By this tax on gold deleting the threshold to buy physical gold just drastically reduced! Why the French Government has now assumed to hinder trade in physical gold a law is not entirely clear.
Maybe politicians not stomach that savers no confidence in their savings. Often buying physical gold or silver seen as a vote against the money system and the mismanagement of politicians and banks. Gold demand increasing its role as a safe alternative to savings in a bank account. Although the price of gold can fluctuate the precious metal has a permanent character. It does not perish and has had the status of a precious metal. Throughout the human history That is otherwise unrelated to the discussion or gold play in daily payments, a role because that opinions differ greatly.


*Update: According to a reader, jewelry is included in the ban:

I sold a piece of jewelry to someone in France, via ebay.  It was a tie tack with an automotive corporate logo on it.
I packaged it up, and took it to the post office for mailing.  The clerk asked me if there was any coins, money, silver, gold, jewelry, etc. in the package going to France.  I said there was a piece of jewelry in it (I didn’t know of this new rule prior).  She refused to accept the package, due to the new rules.
I then went to a different post office, and got the same questioning.  This time, what was in the package was a piece of corporate advertising.  It made it safe and sound to its destination.   I’m guessing that there will be lots of machine parts, government advertising, and lead weights being mailed to and from France compared to the past.

Marc Faber: QE Unlimited, Will Never Gonna End, But The Impact Is Diminishing

India raises duty on gold imports as demand surges

 

India is the world's biggest consumer of gold and demand for the metal has been rising further

India has increased the duty on gold imports for the second time in six months, in an attempt to rein in surging demand for the precious metal.

The finance ministry said it had raised the duty to 8% from 6%.
Gold is a preferred investment option among Indian consumers and the recent drop in its price has boosted demand.
But gold imports are also one of the biggest contributors to India's current account deficit, which has been rising, prompting concerns among policymakers.
A current account deficit, which is the difference between inflow and outflow of foreign currency, occurs when a country's total imports are greater than its exports.
A rising deficit impacts the country's foreign exchange reserves as well as the value of its currency. India's current account deficit hit a record high of 6.7% of its gross domestic product (GDP) in the October to December quarter.
The government has been trying to bring down the deficit and improve the country's finances amid threats of a downgrade in its ratings.
Right move? India's gold imports touched 162 tonnes in May, nearly twice the average level.
Some industry players said the latest move was likely to result in a sharp decline in shipments over the next couple of months.
"In April and May we imported around 300 tonnes. In June and July imports would be around 90 tonnes," said Prithviraj Kothari, director with RiddiSiddhi Bullions Ltd, a Mumbai-based gold wholesaler.
However, some argued that the increase in the import duty was unlikely to impact imports as consumer demand remained high. They warned that it might encourage smuggling.
"From the last few months all the wrong decisions are being taken by the government to tackle gold imports," said Mohit Kamboj, president of the Bombay Bullion Association.
"This is not going to help reduce imports but smuggling will increase."

Bill Gross & John Kay: Low Yields, Low Carry, Future Low Expected Returns Have Increasingly Negative Effects On The Real Economy And The System Is Geared Around Trading Profits That Create Market Bubbles That Inevitably Burst

From Bill Gross of PIMCO
Wounded Heart

Joseph Schumpeter, the originator of the phrase “creative destruction,” authored a less well-known corollary at some point in the 1930s. “Profit,” he wrote, “is temporary by nature: It will vanish in the subsequent process of competition and adaptation.” And so it has, certainly at the micro level for which his remark was obviously intended. Once proud, seemingly indestructible capitalistic giants have seen their profits fall short of “everlasting” and exhibited a far more ephemeral character. Kodak, Sears, Barnes & Noble, AOL and countless others have been “competed” to near oblivion by advancing technology, more focused management, or evolving business models that had better ideas more “adaptable” to a new age.

Yet capitalism at a macro level must inherently be different than the micro individual businesses which comprise it. Profits in totalcannot be temporary or competed away if capitalism as we know it is to survive. Granted, the profit share of annual GDP can increase or decrease over time in its ongoing battle with labor and government for market share. But capitalism without profits is like a beating heart without blood. Not only is it profit’s role to stimulate and rationally distribute new investment (blood) to the economic body, but the profit heart in turn must be fed in order to survive.

And just as profits are critical to the longevity of our capitalistic real economy so too is return or “carry” critical to our financial markets. Without the assumption of “carry,” or return over and above the fixed, if mercurial, yield on an economy’s policy rate (fed funds), then investors would be unwilling to risk financial capital and a capitalistic economy would die for lack of oxygen. The carry or return I speak to is most commonly assumed to be a credit or an equity risk “premium” involving some potential amount of gain or loss to an investor’s principal. Corporate and high yield bonds, stocks, private equity and emerging market investments are financial assets that immediately come to mind. If the “carry” or potential return on these asset classes were no more than the 25 basis points offered by today’s fed funds rate, then who would take the chance? Additionally, however, “carry” on an investor’s bond portfolio can be earned by extending duration and holding longer maturities. It can be collected by selling volatility via an asset’s optionality, or it can be earned by sacrificing liquidity and earning what is known as a liquidity premium. There are numerous ways then to earn “carry,” the combination of which for an entire market of investable assets constitutes a good portion of its “beta” or return relative to the “risk free” rate, all of which may be at risk due to artificial pricing.

This “carry” constitutes the beating heart of our financial markets and ultimately our real economy as well, since profits on paper assets are inextricably linked to profits in the real economy, which are inextricably linked to investment and employment. Without these, the wounded heart dies and shortly thereafter the body. But there comes a point when no matter how much blood is being pumped through the system as it is now, with zero-based policy rates and global quantitative easing programs, that the blood itself may become anemic, oxygen-starved, or even leukemic, with white blood cells destroying more productive red cell counterparts. Our global financial system at the zero-bound is beginning to resemble a leukemia patient with New Age chemotherapy, desperately attempting to cure an economy that requires structural as opposed to monetary solutions. Let me shift from the metaphorical to the specific to make my case.

…

Well, there is my still incomplete thesis which when summed up would be this: Low yields, low carry, future low expected returns have increasingly negative effects on the real economy. Granted, Chairman Bernanke has frequently admitted as much but cites the hopeful conclusion that once real growth has been restored to “old normal”, then the financial markets can return to those historical levels of yields, carry, volatility and liquidity premiums that investors yearn for. Sacrifice now, he lectures investors, in order to prosper later. Well it’s been five years Mr. Chairman and the real economy has not once over a 12-month period of time grown faster than 2.5%. Perhaps, in addition to a fiscally confused Washington, it’s your policies that may be now part of the problem rather than the solution. Perhaps the beating heart is pumping anemic, even destructively leukemic blood through the system. Perhaps zero-bound interest rates and quantitative easing programs are becoming as much of the problem as the solution. Perhaps when yields, carry and expected returns on financial and real assets become so low, then risk-taking investors turn inward and more conservative as opposed to outward and more risk seeking. Perhaps financial markets and real economic growth are more at risk than your calm demeanor would convey.
Wounded heart you cannot save … you from yourself. More and more debt cannot cure a debt crisis unless it generates real growth. Your beating heart is now arrhythmic and pumping deoxygenated blood. Investors should look for a pacemaker to follow a less risky, lower returning, but more life sustaining path.

http://www.zerohedge.com/news/2013-06-04/bill-gross-ben-bernanke-its-your-policies-are-now-part-problem-rather-solution

Financial system ‘waiting for next crisis’
John Kay, the economist and author, will warn this week that the world is heading for another financial crisis because the economic system is geared around trading profits that create market bubbles that inevitably burst.
http://www.ft.com/intl/cms/s/0/f39bce2e-ca1a-11e2-af47-00144feab7de.html#axzz2VFnuo5vK

Marc Faber: “People With Financial Assets Are All Doomed”

As Barron’s notes in this recent interview, Marc Faber view the world with a skeptical eye, and never hesitates to speak his mind when things don’t look quite right. In other words, he would be the first in a crowd to tell you the emperor has no clothes, and has done so early, often, and aptly in the case of numerous investment bubbles. With even the world’s bankers now concerned at ‘unsustainable bubbles’, it is therefore unsurprising that in the discussion below, Faber explains, among other things, the fallacy of the Fed’s help “the problem is the money doesn’t flow into the system evenly, how with money-printing “the majority loses, and the minority wins,” and how, thanks to the further misallocation of capital, “people with assets are all doomed, because prices are grossly inflated globally for stocks and bonds.” Faber says he buys gold every month, adding that “I want to have some assets that aren’t in the banking system. When the asset bubble bursts, financial assets will be particularly vulnerable.”
Excerpted from Barron’s:
On the error of the Fed’s ways:

The Fed has been flooding the system with money. The problem is the money doesn’t flow into the system evenly.It doesn’t increase economic activity and asset prices in concert. Instead, it creates dangerous excesses in countries and asset classes. Money-printing fueled the colossal stock-market bubble of 1999-2000, when the Nasdaq more than doubled, becoming disconnected from economic reality. It fueled the housing bubble, which burst in 2008, and the commodities bubble. Now money is flowing into the high-end asset market - things like stocks, bonds, art, wine, jewelry, and luxury real estate.

Money-printing boosts the economy of the people closest to the money flow. But it doesn’t help the worker in Detroit, or the vast majority of the middle class. It leads to a widening wealth gap. The majority loses, and the minority wins.

…

The neo-Keynesians would argue that if the Fed hadn’t flooded the system with money, things would have been much worse. That might be true, but they would have been worse for a shorter period of time.

On the Bubble:

I am suggesting that in the fourth year of an economic expansion, near-zero interest rates will lead to a further misallocation of capital. I thought the U.S. market would have a 20% correction last fall, but it didn’t happen. I also said the market might explode to the upside before the correction occurred. We might be in the final acceleration phase now. The Standard & Poor’s 500 is at 1650. It could rally to 1750 or even 2000 in the next month or two before collapsing. People with assets are all doomed, because prices are grossly inflated globally for stocks, bonds, and collectibles.

http://www.zerohedge.com/news/2013-06-01/marc-faber-people-financial-assets-are-all-doomed

The Great Plunge is Coming
Are you ready for the next stock-market crash of the century? The Hindenburg Omen was spotted by eagle eyes on April 15th. It was confirmed by a sighting on May 29th. That gives us 40 days approximately before the market takes a plunge (apparently). That’s enough to spark fears on the market that we are in for a shaky time, but are those fears really justified and will the market plunge as the Hindenburg Omen predicts?
The Hindenburg is a technical analysis pattern that predicts highs and lows of the stock market based upon Norman G. Fosback’s High Low Logic Index (HLLI). It was invented by Jim Miekka in 1995. It’s used as a way of predicting big turndowns.
The Hindenburg has to meet four criteria and it is calculated using Wall Street Journal figures daily.
1. The sum of new 52-week highs and the sum of new 52-week lows must be equal or greater to 2.8% of the sum of NYSE issues advancing or declining on any given day.
2.  NYSE must be greater in terms of value than it was 50 days beforehand.
3. The McClellan Oscillator (money entering and leaving the market) must be negative on that day also (in other words, below zero equals a bearish market).
4. The 52-week highs must not be more than twice the 52-week lows (but the opposite does not hold).
http://www.zerohedge.com/contributed/2013-06-04/great-plunge-coming

Iraq Collapse Shows Bankruptcy Of Interventionism

We must learn the appropriate lessons from the disaster of Iraq. We cannot continue to invade countries, install puppet governments, build new nations, create centrally-planned economies, engage in social engineering, & force democracy at the bar…

DEUTSCHE BANK: We Don’t See A Bottom In Japanese Stocks — Should Correct For Several Months
The Japanese Nikkei 225 has corrected a staggering 15% since just May 22.

As a result, one of the world’s hottest stock markets is suddenly flirting with “bear market” territory – defined as a 20% price decline from the market’s previous peak.
In his latest note to clients, Deutsche Bank strategist Makoto Yamashita cautions that “we do not see a bottom,” and says it is “natural to assume that the Nikkei Average will correct for several months.”

Business Insider/Matthew Boesler, data from Bloomber
Read more: http://www.businessinsider.com/deutsche-bank-is-bearish-on-the-nikkei-2013-6#ixzz2VG333Wls

Treasury, UAW health care trust to sell 50M shares of GM stock

The U.S. Treasury and United Auto Workers union, capitalizing on the automaker’s rising stock price, will sell a combined 50 million shares of General Motors stock today.
The scheduled stock sale coincides with GM’s return to the S&P 500 index, and with today’s annual shareholders meeting at the Renaissance Center in Detroit.
Stock analysts say the return to the S&P will prompt significant demand for GM shares. The stock has recently traded near its highest level since February 2011. The Detroit-based automaker will replace H. J. Heinz Co. in the S&P 100 and 500 indices.
GM stock, set at $33 a share when the post-bankrupty company began public trading in 2010, lost 94 cents Wednesday in an overall down market, closing at $34.02. Shares are up about 19 percent since the beginning of the year.
The UAW’s Workers Retiree Medical Benefits Trust, which holds about 14 percent of GM, will sell 20 million shares, and the U.S. Treasury will sell 30 million of its 241.7 million shares.
The Treasury initially held 60.8 percent of GM as part of the U.S. $49.5 billion bailout.
The sale will bring the UAW’s remaining stake in GM to 9 percent of the company, and taxpayers’ share about 13 percent, compared with the 16.4 percent it owned as of April 30.
The move may mean the Treasury will sell off all its GM stock yet this year, rather than by the end of March 2014, which had been its earlier goal.
The Treasury sold nearly 20 percent of its remaining shares in General Motors Co. in the first three months of the year, the Detroit automaker disclosed Thursday, as well as 200 million shares sold to GM for $5.5 billion in December.
In total, Treasury has recouped $30.6 billion. At current trading prices, Treasury would lose around $10 billion on its GM bailout.
GM’s return to the S&P 500 will mark the purchase of GM shares by many stock index funds.
“We appreciate the opportunity to assist in this offering made possible by our rejoining the S&P 500,” said Dan Ammann, GM senior vice president and chief financial officer. “Our focus remains on continuing the progress we are making in the marketplace with world-class cars, trucks and crossovers.”
RBC Capital analyst Joseph Spak said the move means that the UAW trust will hold about 140 million shares after the sale, about the same size as the Canadian government's 140 million shares it still holds as part the Ontario and Canadian federal government's $10 billion GM bailout in 2008 and 2009.
"The accelerated sell-down by the government should be viewed positively," he said. "We believe (the Treasury exit) could be quicker — perhaps by the end of the year. This could open the door for additional capital actions including a potential dividend."

From The Detroit News: http://www.detroitnews.com/article/20130605/AUTO0103/306050039#ixzz2VQN5AZGH

12 Clear Signals That The U.S. Economy Is About To Really Slow Down

by Michael

A lot of things that have not happened since the last recession are starting to happen again.  As you read the list below, you will notice that the year “2009″ comes up again and again.  There is a reason for that.  Many of the same patterns that we witnessed during the last major economic downturn are starting to repeat themselves.  In fact, many of the things that are happening right now have not happened in quite a few years.  For example, manufacturing activity in the U.S. has contracted for the first time in four years.  The inventory to sales ratio is the highest that it has been in four years.  Average hourly compensation just experienced the largest decline that we have seen in four years.  We also just witnessed the largest decline in the number of mortgage applications that we have seen in four years.  After everything that Barack Obama, the U.S. Congress and the Federal Reserve have tried to do, there has been no real economic recovery and now the U.S. economy is suddenly behaving as if it is 2009 all over again.  A whole host of recent surveys indicate that the American people are starting to feel a bit better about the economy, but the underlying economic numbers tell an entirely different story.  The following are 12 clear signals that the U.S. economy is about to really slow down…
#1 The average interest rate on a 30 year mortgage has risen above 4 percent for the first time in more than a year.
#2 The decline in the number of mortgage applications last week was the largest drop that we have seen since June 2009.
#3 Mark Hanson is reporting that “mass layoffs” have occurred at three large mortgage institutions…

This morning I was made aware that three large private mortgage bankers I follow closely for trends in mortgage finance ALL had mass layoffs last Friday and yesterday to the tune of 25% to 50% of their operations staff (intake, processing, underwriting, document drawing, funding, post-closing).
This obviously means that my reports of refi apps being down 65% to 90% in the past 3 weeks are far more accurate than the lagging MBA index, which is likely on its’ way to print multi-year lows in the next month.

#4 It was just announced that average hourly compensation in the United States experienced its largest drop since 2009 during the first quarter of 2013.
#5 As I wrote about the other day, the Institute for Supply Management manufacturing index declined to 49.0 in May.  Any reading below 50 indicates contraction.  That was the first contraction in manufacturing activity in the U.S. that we have seen since 2009.
#6 The inventory to sales ratio has hit a level not seen since 2009.  That means that there is a lot of inventory sitting out there that people are not buying.
#7 According to the Commerce Department, the demand for computers dropped by a stunning 9 percent during the month of April.
#8 As I noted in a previous article, corporate revenues are falling atWal-Mart, Proctor and Gamble, Starbucks, AT&T, Safeway, American Express and IBM.
#9 Job growth at small businesses is now at about half the level it was at the beginning of the year.
#10 The stock market is starting to understand that all of these numbers indicate that the U.S. economy is really starting to slow down.  The Dow was down 216.95 points on Wednesday, and it dropped below 15,000 for the first time since May 6th.
#11 The S&P 500 has now fallen more than 4 percent since May 22nd.  Is this the beginning of a market “correction”, or is this something much bigger than that?
#12 Japanese stocks are now down about 17 percent from the peak of May 22nd.  Japan has the third largest economy on the planet and it is one of the most important trading partners for the United States.  A major financial crisis in Japan would have very serious implications for the U.S. economy.
If we were going to have an “economic recovery”, it should have happened in 2010, 2011 and 2012.  Unfortunately, as a recent Los Angeles Times article detailed, an economic recovery never materialized…

Real GDP growth — the value of goods and services produced after adjusting for inflation — is 15.4% below the 3% growth trend of past recoveries, wrote Edward Leamer, director of the UCLA Anderson Forecast. More robust growth will be necessary to bring this recovery in line with previous ones.
“It’s not a recovery,” he wrote. “It’s not even normal growth. It’s bad.”

Now we are rapidly approaching another major economic downturn.
But poverty in America has continued to experience explosive growth since the end of the last recession and dependence on the federal government is already at an all-time high.
How much worse can things get?
Sadly, they are going to get much, much worse.
What the U.S. economy is experiencing right now is not just a cyclical downturn.  Rather, we are in the midst of a long-term economic decline that is the result of decades of very foolish decisions by our leaders.
It is imperative that we get the American people educated about what is happening.  If people do not understand what is happening, they are not going to get prepared for the hard years that are coming.
If you have a family member or a friend that does not understand the long-term economic collapse that is unfolding all around us, please show them my article entitled “40 Statistics About The Fall Of The U.S. Economy That Are Almost Too Crazy To Believe“.  It goes a good job of pointing out many of the reasons why we are heading for complete and total economic disaster.
And the point is not to fill people with fear.  Rather, there is a lot of hope in understanding what is happening and in getting prepared.  As we have seen over in Europe, those that get blindsided by economic problems often become totally consumed with despair.  Suicide rates have soared in economically-troubled nations such as Greece, Spain and Italy.
And the same thing is going to happen in the United States too.  In fact, the suicide rate in the United States has already been rising according to the New York Times…

From 1999 to 2010, the suicide rate among Americans ages 35 to 64 rose by nearly 30 percent, to 17.6 deaths per 100,000 people, up from 13.7.

In fact, today more Americans are killed by suicide than by car accidents.
Isn’t that crazy?
Unfortunately, this is only just the beginning.  When the system fails, millions of Americans are going to be convinced that their lives are over.  A lot of them are going to do some very stupid things.  We want to try to prevent as much of that as possible.
Thanks to decades of incredibly foolish decisions by our leaders, an economic collapse is inevitable.  This is especially true considering the fact that our leaders in Washington D.C. and elsewhere will not even consider many of the potential solutions which could help start turning our economic problems around.
So since there are no solutions on the horizon, we need to explain to people what is happening and help them to get as prepared as possible.
The years ahead are going to be very hard, but we have a choice as to how we will respond to the challenges in front of us.
We can face those challenges with fear, or we can face them with courage.
Choose wisely.

Bill Gross: Fed's QE Part of The Problem, Not The Solution

Largest Azri bank plans $100 mln loan, bid to develop Islamic banking

International Bank of Azerbaijan (IBA)

International Bank of Azerbaijan (IBA), the country's biggest lender, plans to raise $100 million through an Islamic syndicated loan this year to develop Islamic banking in the country, the bank said in a statement.
A senior IBA executive said at the end of 2012 that the bank was planning to raise a $150 million Islamic loan in 2013 and double its Islamic banking assets to $120 million by the end of this year.
"IBA held a series of presentations together with organisers of the syndication in the United Arab Emirates, Bahrain and Qatar," the bank said.
Emirates NBD Capital Limited, Barwa Bank, J.P. Morgan Limited and Noor Islamic Bank are among organisers of the syndication.
The one-year private syndication would be the first of its kind in Azerbaijan and would help IBA cater to the estimated 93 percent of its 9 million population who are Muslim.
IBA, 50.2 percent-owned by Azerbaijan's Ministry of Finance, holds a 40 percent share of banking assets in Azerbaijan. It offers sharia-compliant products through an Islamic window, which follow religious principles such as a ban on interest and on pure monetary speculation.

The Big Banks and Commodities Future Trading Commission Conspired to Hide Speculation from Congress

Big Banks and Government Agency Have Been Cooperating In Market Manipulation for Decades

One of our favorite topics is the many ways that big banks manipulate prices.
Last night, Rolling Stone financial writer Matt Taibbi gave some very interesting details about how the big banks have gamed commodities prices.
For 60 to 70 years, the regulations preventing speculators from betting on commodities worked pretty well.  Only commodity producers or buyers – you know, the people who are supposed to set prices – could hedge their bets.
But in the early 1990s, the big financial companies starting applying to the Commodity Futures Trading Commission (CFTC) for “exemptions” … so that they could speculate on commodities.
Specifically, they asked to be artificially treated as real commodity producers or consumers – even though they weren’t producing or buying commodities – so that they could “hedge” bets (in name only) on products they didn’t even possess.  (Sound familiar?)
In 1991, the CFTC started issuing exemption letters.  The first letter was written to J. Aron, a subsidiary of … Goldman Sachs.
Pretty soon, every major bank in the U.S. was given an exemption.
Congress didn’t know about the exemptions.  Indeed, the House Agricultural Commission – which oversees the CFTC – didn’t even find out about the exemptions until 6 years later … in 1997.
When a congressman on the Agricultural Commission asked the CFTC for a sample of one of the exemption letters, the CFTC official said he had to ask Goldman Sachs whether or not the CFTC could show a copy to Congress.  In other words, the banks were already running D.C. by the 90s.
Commodities speculation has exploded since the exemption letters were issues.
For example, in 2003, there was only $29 billion in speculative activity in the commodities markets.  By 2007-2008, there was over $300 billion in commodities speculation.

Lessons from Economic Crises in Argentina

By David Galland, Managing Director

Nick Giambruno: Joining me now is David Galland, the managing director of Casey Research. His internationalization story, which involved moving his life and his family from the US to Argentina, was recently featured in Internationalize Your Assets, a free online video from Casey Research. He is perfectly suited to help us better understand some of the important lessons in internationalization that Argentina offers. Welcome, David.
David Galland: Nice to be here.
Nick: First, why don't you give us a little background about the Argentine people and how they have learned to deal with their government and recurring financial crises?
David: A good way to think about Argentina is that it is an immigrant society, very much like the US, except that the dominating culture emerging from the melting pot was Italian. This is why Argentines tend to be famous for their dark good looks, vibrant culture, and excellent food. Unfortunately, they also inherited "Italian style" politics. I think that's a useful context for understanding the consistent dysfunctioning of the Argentine government.
This at least partially explains Argentina's long love affair with the Peróns. The country had one of the most successful economies in the world until Juan Perón came into power and destroyed it. And, with some rare bright spots, it's gone through long periods of financial crisis ever since. Despite that, the Perónistas are still very much in charge.
If you look at the history of financial crises in Argentina, you will see there is almost no 10-year period when there isn't a financial crisis. As a result, the population has become extremely resilient in the face of financial crises. When you mention the faltering state of the economy, every Argentine you talk to will shrug and make a comment along the lines of, "No problem; this is Argentina, we're used to it." In other words, they have become fatalistic about such things.
But that doesn't mean they are complacent, because thanks to their long experiences with financial crises Argentines have become masters at dealing with things like inflation and ridiculous government policies. For the most part, the government is highly ineffective, and so the Argentines just ignore it. Reasonably intelligent people always figure out ways to work around whatever the latest decree the government comes up with, then they tell their family members and friends. The word spreads so that in no time at all, the populace at large has figured out how to deal with the government's latest misstep, as often as not turning it to their personal advantage. As a consequence, there is a very robust underground economy; if people can do business off the books, they do. Argentines pride themselves on their ability to outsmart the government.
Nick: How can the actions of the Argentine government give us insight into what a desperate government is capable of and what might be in store for the United States?
David: The current Argentine government is dominated by true believers – young people who have that idealistic notion of equality for all, and who believe that government mandates can fix anything that ails. They are hardcore socialists, leaning towards communism. But, as is the case in the United States, they really don't know what they are doing and so pursue policies that are incredibly shortsighted. They are uninformed as far as history and economics are concerned and blunder from one harebrained policy to another. There is literally nothing that they will not try.
It is like a textbook case in government gone mad.
They have stolen the retirement accounts, devalued the currency, and put capital controls in place. There are trade controls so that people can't import necessities into the country, but instead, have to manufacture them locally, with the government giving monopolies to their friends. They have price controls, which force the local supermarkets to not raise their prices. This will ultimately lead to shortages. And there are already shortages of certain items. They didn't like an opposition newspaper, so they nationalized the newsprint manufacturing industry. In fact, just about every single thing that you could do to screw up a country, they have done. It is comical to see the extremes they have gone to. For example, in Argentina, if you publish an inflation statistic that differs from of the official government numbers, you could be hit with a $100,000 fine. I had never heard of this anywhere else – except maybe in communist Russia. They are really completely out of control and the country is spinning off into la-la-land. Frankly, I love living right in the midst of all of it.
There is a lesson to be learned from all of this, and I think it is a very important one. When it comes right down to it, any government – not just the Argentine government, but the US government as well – will simply do whatever it thinks it needs to do to keep the status quo intact, with no moral or ethical considerations.
In the case of Argentina, and the United States as well, it is a testament to the legacy strengths of the country – minerals, an educated population, agricultural land in abundance, energy resources – that despite a history of bad governance, the economy is still remarkably robust. People living outside of the country would be forgiven, based on the media reporting, for thinking the place is a basket case – but, against all odds, it isn't. To a large extent that is because the government's policies have chased much of the economic activity underground.
Nick: I think something that exemplifies some of the points you've just made was the recent debacle with the minister of the economy. During an interview he was asked a very straightforward question on the Argentine inflation rate. He uncomfortably stumbled through his answer and cut the interview short . How was that received in the country?
David: It was widely reported. At this point, the Argentines have a great sense of humor about their government, as in the majority of them think it's a joke. That said, people are fed up too. In the seven months that we have lived down here, there have been two massive, countrywide protests totaling around two million people. That's about 5% of the country's population. In most countries that would be enough to send a dictator and the government scrambling for their private jets to get out of town.
The Kirchner government, however, has basically said, "Let the people protest. We don't care; it's just a bunch of noise." To a certain extent, that is true. But it's getting to the point where one of these days it's going to boil over. In addition to the middle class, the unions – which have traditionally been a bastion of support for the Perónistas – are starting to show up in the streets as well. If the government's purported friends are starting to protest against them, then you have to wonder how much longer the current regime can last.
Nick: Given the situation you just described, what's it like for you personally to be living on the ground in a country that is going through all this? Does the inflation work to your advantage if your money is not denominated in pesos and not located in the country?
David: Yes, absolutely. Argentina is really two different countries. First, there is Buenos Aires , which is a big city and contains by far the largest percentage of the country's population. In BA there is a bit of crime, and in certain parts of the city you are going to have more crime, but generally speaking, you would be surprised to know that you were in the beating heart of a crisis. Restaurants are full; the stores are open and full of very nice stuff. Second, there are the provinces, which are mostly rural and agriculturally oriented. Here the central government's authority is weak, and the people are relaxed. The quality of life is tremendous. This is not just the case for Americans, or people who are non-peso based; it's pretty much for everyone. Food in a place like Cafayate, where we live, is so cheap it's almost free. You can walk out of a store with a huge bag of fresh produce and it's going to set you back only a few bucks. A kilo of fine tenderloin will cost you maybe five dollars. Back here in the US a couple of days ago I paid $22 for less than a pound of steak. Then there's the cost of labor. In Argentina, we have an extremely competent maid who comes in for five hours a day, five days a week and does all the cleaning and laundry – drudge work that people in the Western world have learned to view as an unavoidable part of life – and the cost is all of about $40 a week.
So, despite the overarching reality that the government is dysfunctional and that this is currently being evidenced in the inflation, the quality of life in Argentina for anyone with a few bucks is very, very high.
When I first arrived in the country, I was expressing bewilderment about how screwed up the government was and all of their stupid policies to a friend of mine who owns a local café. After listening patiently, my friend looked at me and said, "David, is the sun not shining, is the wine not plentiful, and is the food not good? So what are you worried about?" It's a fatalism, but it's also a realism that the people don't worry about the government. And because the government is so inefficient, people can, for the most part, ignore it with impunity. That's not the case in the Western countries where the government has become very adept at using the latest technologies to keep an eye on the populace.
Another friend of mine, a retired successful businessman said, "You know, Argentina is the best country in the world. We just need a little better government." And I looked at him and I said, "Just a little better?" And he said, "Yeah, just a little better. We don't want them to become too efficient, then we wouldn't be able to get away with everything we are able to get away with."
That said, there are obviously middle-class and lower-class people who are struggling under the inflation. Again, this is especially the case in the big city where the social safety net of friends and family is not quite as tightly knit, and where ready access to the straight-from-the-farm produce is not as easy.
For anyone whose net worth isn't tied up in pesos and who keeps most of their money out of the country, the current inflation has been a real boon.
You can go to the best restaurant in town and your entrée is going to cost you five to seven dollars, and this is a very good restaurant. A bottle of wine that would cost you $40, $50, $60 in the States, costs you maybe $5-6. The quality of life is incredible. A lot of that has to do with the exchange rate, which has been as much as ten pesos to the dollar recently. When we first started coming down here, it was like three and a half. In short, the inflation is a real benefit if you don't have your savings and income tied up in the peso.
Nick: From what it sounds like, despite having capital controls, those measures are mostly aimed at people trying to take so-called hard currency, like US dollars, out of the country. For those bringing them into the country, it doesn't appear that there is much of a problem. Is that the case?
David: You would think they would want more US dollars to flow into the country, but the government policy is so balled up they have put up some barriers to bringing money into the country. That said, there are simple mechanisms you can use to get around the restrictions that are completely legal. One of which involves buying Argentine bonds on the international market and selling them back in Argentina. As for the Argentines who want to get their money out of the country, they have to be extra clever, but they are very good at this kind of stuff. For me, dealing with this situation has been a great experience. Unlike in the US, where everything is straightforward and the rules generally make sense, in Argentina it's a very fluid situation. I love the fact that I feel like I'm getting a degree in economic crises and how to operate in one.
Nick: Do Argentines favor gold? What about getting gold in and out of the country and buying or selling it in the country?
David: This is a very interesting question. I've asked that question in the context of economic crises around the world and throughout history. Gold only comes in as sort of the asset of last resort. We did a crisis panel at one of our conferences a couple of years ago, and we had people who had been through the hyperinflation in Zimbabwe and Serbia, and we also had someone from Argentina. I was moderating the panel and asked them all what factor gold played in preserving their wealth. Everyone said it was not a factor. Instead, they all used whatever strong currency they could get their hands on. In the case of Serbia it was the deutschemark. In the case of the Zimbabwe it was the South African rand, and in the case of Argentina it was, and still is, the US dollar.
In Argentina, the whole country revolves around US dollars; it's their medium of exchange and how they preserve their cash. For now at least, the US dollar is king in Argentina. Personally, I exchange my dollars in a coffee shop where I slip behind the cashier's counter and this very cute girl does the exchange from stacks of pesos and thousands of dollars. At some point, if the dollar starts to really collapse and there isn't a suitable regional or local currency to take its place, I think you will see more transactions in gold.
As far as gold transactions in the country, there are dealers in Salta City, which is the nearest big city to us. Private transactions can also be arranged. In Buenos Aires, of course, you can buy and sell gold easier, but it's just not part of the culture at this time.
Nick: Turning to real estate, there are many people who are potentially interested in Argentine real estate as we approach what appears to be the bottom of the current crisis. What are your thoughts?
David: I'm a big fan. We own a lot of real estate in Argentina, most of bought when it was a lot cheaper. If you are a dollar-based investor and you can get your money into the country at a good exchange rate, then the real estate prices are very reasonable. That said, I would add that the biggest market for Argentine real estate currently is for Argentinians, because they have to find a place to put their currency before its purchasing power erodes further. Right now it is depreciating probably at 30% to 45% a year. My general sense is that people who have their money outside of the country aren't in a rush to bring it into Argentina. I can't fault them for that.
As far as I'm concerned, if you can afford to live in La Estancia de Cafayate and you don't, you are a fool. But that's a lifestyle decision, not a pure investment decision. Cafayate is a really beautiful place, with all the amenities and a great community of people. It's like the Napa Valley 80 years ago. Most people who are looking to make a pure investment right now should probably wait a bit longer. I don't think the current crisis is over yet.
Nick: Last year the government made it illegal for people to use US dollars in real estate transactions. Now, as you mentioned, not everybody follows these types of rules. Is this something that's adhered to? It could actually work to your significant advantage, if you are foreign investor or someone who is looking to make a lifestyle decision to buy property in Argentina, if there is a further significant decline in the peso and you are forced to use pesos in real estate transactions.
David: Absolutely. Provided you can get your money into the country and get a good exchange rate, which you can, using that bond trade method I mentioned previously. Cafayate is a small valley with a limited amount of real estate available. It is very much on the upswing, and prices are definitely going higher in dollar as well as peso terms. In terms of putting your money into a pure investment or real estate speculation, I don't think you could go wrong buying in Cafayate at this point, especially if you get in at the right exchange rate. You have to have the right mentality though, as it is not a traditional investment.
Nick: What is the endgame with this current crisis? Do you think there will be devaluation of the official exchange rate or some other wealth-confiscation measures? What do you think will signal that we're at the bottom?
David: I don't think you are going to see wealth confiscation. The foreign percentage of ownership of the Argentine economy is pretty small, so I don't think they would go after wealthy foreigners. Could they go after the wealthy Argentines? It's possible, but Argentina is not a big country and everybody knows each other. Most of these government officials have managed to steal themselves enough money to become part of the elite they would potentially be targeting. So I don't see wealth confiscation coming. I think the endgame will come when you get three or four million people in the streets and the government realizes it has to do something. Maybe they would give into the pressure for a devaluation of the peso.
Regardless, in the next election this October, I think there is a good chance the current government will get voted out. If the new government isn't completely stupid, then I think you could end up with a real economic boom. That's the history of Argentina, a crisis followed by a boom. I don't think we are at the bottom of the current crisis yet, but I think we are getting there.
Nick: All right David, thanks for your time and insight into the situation. There are indeed many lessons that Argentina can teach for those wise enough to absorb them.
David: My pleasure.
Argentina is one of several strong candidates for internationalizing your wealth, as well as your life. In addition to the things David mentioned, there's much more to consider in taking this very important step... such as how and from where to get a second passport... the best ways to move wealth out of your home country... opening an offshore bank account... investing in foreign stock markets... and much more. Fortunately, the Casey Research team has put together a fact-filled, comprehensive report that is an invaluable resource for anyone developing an internationalization plan. Learn more about Going Global 2013 and start your internationalization adventure today.

Behind the Rise in House Prices, Wall Street Buyers

Emily Berl for The New York TimesJoe Cusumano, a real estate agent, outside a home in Riverside, Calif. He said much of his business came from large investors.

The last time the housing market was this hot in Phoenix and Las Vegas, the buyers pushing up prices were mostly small time. Nowadays, they are big time — Wall Street big.
Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing.

“The growth is being propelled by institutional money,” said Suzanne Mistretta, an analyst at Fitch Ratings. “The question is how much the change in prices really reflects market demand, rather than one-off market shifts that may not be around in a couple years.”
Wall Street played a central role in the last housing boom by supplying easy — and, in retrospect, risky — mortgage financing. Now, investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest.
Blackstone, which helped define a period of Wall Street hyperwealth, has bought some 26,000 homes in nine states. Colony Capital, a Los Angeles-based investment firm, is spending $250 million each month and already owns 10,000 properties. With little fanfare, these and other financial companies have become significant landlords on Main Street. Most of the firms are renting out the homes, with the possibility of unloading them at a profit when prices rise far enough.

While these investors have not touched many healthy real estate markets, they are among the biggest buyers in struggling areas of the country where housing prices have been increasing the fastest. Those gains, in turn, have been at the leading edge of rising home prices nationwide.
Some see the emergence of Wall Street buyers as a market-driven answer to the nation’s housing ills. Investment companies are buying up rundown homes at a time when ordinary people can’t or won’t.
Nationwide, 68 percent of the damaged homes sold in April went to investors, and only 19 percent to first-time home buyers, according to Campbell HousingPulse. That is helping to shore up prices and create confidence in the broader markets.
“When people write the story of this housing recovery, these investors will be seen to have helped put the floor under the housing market,” said David Bragg, an analyst at Green Street Advisors. “In some of the key markets, that contributed to the recovery.”
The story, though, often looks more complicated on the ground. Joe Cusumano, a real estate agent in Riverside County, Calif., said that in recent months 90 percent of his business had been for companies like Invitation Homes, a Blackstone subsidiary. Home values in Riverside County have risen by 15 percent in the last year, according to CoreLogic.
But Mr. Cusumano said he wondered if faraway investors would properly maintain the homes they buy. He said that Invitation Homes had been willing to put money into the properties, but he was not so sure about the other players. He also worries what will happen when these investors start selling, as they inevitably will.
“The thing that scares me is the values going up so quickly,” said Mr. Cusumano. “That’s what happened before and that’s what’s scaring me. Is this going to happen again?”
The idea of investors’ buying homes and renting them out is nothing new. But in the past, landlords were almost always local. Now big investors are using agents like Mr. Cusumano to stake a claim to entire neighborhoods.
In a sign of the potential peril ahead, some of the investment firms have recently taken the first steps to cash out.
The investment fund financed by Colony Capital filed last week to go public, the second firm to do so in May. Another early player in the business, the Carrington Holding Company, said last week that prices had risen too far, leading the firm to begin selling some of its holdings.
Fitch Ratings warned last Tuesday that prices for single-family homes in the regions with the biggest housing rebounds had been outpacing the growth rate in the local economies and “could stall or possibly reverse” if big investors start selling.
“We see economies that continue to struggle — we don’t see them recovering enough to justify this drastic increase in prices,” said Ms. Mistretta at Fitch.
Despite the recent gains, housing prices remain well below their precrisis highs. In Riverside, for example, home values are still down more than 40 percent from their 2006 records, according to CoreLogic.
To the extent that the housing rebound is becoming overheated in some pockets, it does not carry the most significant risks of the real estate boom that came crashing down in 2008. The new investment groups are not heavily indebted, making them less vulnerable to small movements in real estate values, and the risks are not spread as widely through the financial system.
Nearly all of the big investors have insisted that they plan to rent the houses they are buying for years to come. The Blackstone unit, Invitation Homes, has opened 14 offices across the country to serve the homes it has bought, a spokesman for the firm said.
At American Residential Properties, which went public in May, the chief executive, Stephen G. Schmitz, said that if other firms start selling their houses, “we’ll step up our buying.”
He added: “We still think that we’re in a buyer’s market.”
Yet some investment companies are already pulling back in the markets that have had the fastest growth. In Phoenix, the percentage of all house purchases involving investors fell to about 25 percent in March from a high of 36 percent last summer, according to the Campbell HousingPulse Survey. The same survey shows that investors have been increasing their presence in new areas like Florida and California.
All of this has made it hard for house hunters like Jeff Martin, who is looking to buy a fixer-upper in Riverside County. Mr. Martin, 58, has made offers on 15 houses over the last year. Last Wednesday, he received his latest rejection. On most of the houses, Mr. Martin has lost out to investors offering all cash.
Mr. Martin, a retired Navy veteran, puts much of the blame on banks that have been holding onto empty houses, lowering the supply of available homes. He said he has trouble faulting the investors, given that he was involved in real estate financing during the last boom. But he is worried that if mortgage rates begin to rise he will lose out on his opportunity to buy. Rising mortgage rates could also lead to a broader slowdown in the real estate recovery.
Mr. Cusumano said that the investors he works for have been trimming back their purchases in the area. His agency closed on three houses for investors in May, down from eight in February.
But the fevered pitch of the market has not died down.
In late May, one of his clients closed on a house just a month after it went on the market. There were eight bidders, despite a listing that said “NEEDS TLC!!” Mr. Cusumano’s client won the house only after agreeing to go $500 over the asking price of $194,500.
“It’s just a strange market,” he said. “We are in uncharted territory.”

Emily Berl for The New York TimesMr. Cusumano said he was concerned that outside investors would fail to take care of properties the way local buyers would.

A version of this article appeared in print on 06/04/2013, on page A1 of the NewYork edition with the headline: Wall St. Buyers Behind the Rise In House Prices.

U.S. worker productivity increases as hourly compensation drops

Phil Richards waits for directions over his headset to fill an order for grocery supplies outside the Unified Grocers distribution center in Santa Fe Springs on Aug. 22, 2012. American workers were more productive in the first quarter of 2013, while hourly compensation fell. (Jay L. Clendenin / Los Angeles Times)

By Alejandro Lazo

June 5, 2013, 9:02 a.m.

American workers increased their productivity in the first quarter as hourly compensation fell.
The Bureau of Labor Statistics reported a productivity increase of 0.5% at an annual rate during the first quarter of 2013. The increase reflects a 2.1% increase in output and a 1.6% increase in hours worked.
Compared with the first quarter of 2012, productivity was up 0.9%. That compares with an average annual gain of 2.3% in the 11 years that ended in 2011, according to Bloomberg News.
Meanwhile hourly compensation fell 3.8% in the first quarter. That decline was the largest in the series, kept since 1947.
Patrick Newport, an economist with IHS Global Insight, said the drop in compensation was not worrisome but the weak productivity was.
“Hourly compensation jumped in the fourth quarter of 2012, in part because of bonuses granted earlier than planned (to avoid higher anticipated tax rates),” he wrote in an email analysis. “The first quarter drop was payback for the previous quarter’s windfall. “
The weak growth in productivity should be worrisome because it is linked to research and development, Newport noted, and it is the best gauge of a nation’s long-term success.
Employers have been getting more out of their workers during the years of the recession.
A Los Angeles Times series earlier this year explored how employers are using technology that creates a harsher work environment. According to the series, employers now: “read emails and monitor keystrokes, measure which employees spend the most time on social networking websites and track their movements inside and outside the office. They can see who works fastest and who talks the most on the phone. They can monitor how much time people spend talking to coworkers — and how much time they spend in the bathroom.”

UCLA Anderson Forecast paints dismal picture of economic recovery

"It's not a recovery. It's not even normal growth. It's bad," UCLA economist Edward Leamer says. 

 

Contractors work on a new home under construction at Taylor Morrison Home Corp.'s La Solara Community in Dublin, Calif. (David Paul Morris, Bloomberg / May 14, 2013)

By Ricardo Lopez, Los Angeles Times

June 5, 2013, 1:00 a.m.

The country's tepid growth in its gross domestic product isn't creating enough good jobs to build a strong middle class, according to a UCLA report released Wednesday.

"Growth in GDP has been positive, but not exceptional," UCLA economists wrote in their quarterly Anderson Forecast. "Jobs are growing, but not rapidly enough to create good jobs for all."
The report, which analyzed long-term trends of past recoveries, found that the long-anticipated "Great Recovery" has not yet materialized.
Real GDP growth — the value of goods and services produced after adjusting for inflation — is 15.4% below the 3% growth trend of past recoveries, wrote Edward Leamer, director of the UCLA Anderson Forecast. More robust growth will be necessary to bring this recovery in line with previous ones.
"It's not a recovery," he wrote. "It's not even normal growth. It's bad."
That has long-term implications in the face of technological advancements that continue displacing workers, Leamer said. And the country's education system isn't adequately developing the workforce of the future, he said.
"Regrettably we reward teachers if their students can regurgitate the information on standardized tests," he wrote. Future workers will need creative and analytical thinking skills for 21^st century jobs, he said.
Though GDP growth has been lackluster since the recession ended, the sustained housing recovery is expected to boost GDP over the next couple of years and further bring down the unemployment rate, Leamer said.
Economists predict the U.S. jobless rate will fall to 6.9% by the end of 2014 and edge down to 6.4% by the end of 2015.
GDP growth is expected to average 1.9% this year, 2.9% in 2014 and 3% in 2015.
Despite the less-than-rosy outlook for the U.S., California's economic picture is brighter in large part because of demand for California goods, such as computers and other technology, UCLA economists said.
The Golden State outperformed the U.S. in the rate of payroll jobs growth in the 12-month period that ended in April 2013. Only Utah has added jobs faster than California.
California's job growth has been spread across several industries, including leisure and hospitality and white-collar jobs in the professional and business services sector.
But construction, which has long been a drag on the state's recovery, is propelling economists' optimism about future growth — albeit with some caveats.
Though the number of housing starts has doubled since the recession low, tight credit conditions for new-home buyers have made it tougher to secure mortgages. Young adults are facing staggering student loan debt that will force them to put off buying homes until later in life, said senior economist David Shulman.
Outstanding student loans have tripled since 2004, according to Federal Reserve Bank figures. In 2012, public and private student loan levels reached $966 billion.
"Never before have so many young people been saddled with so much non-mortgage debt, and that burden will keep them out of the home buying market for years to come," Shulman wrote.
In California, much of the residential construction has been of multiunit housing, particularly in urban areas as people move away from the suburbs and closer to the city. In Hollywood, for instance, Los Angeles city officials have green-lighted a plan to build high-rise apartments and condominiums. Several projects are currently under construction in the neighborhood.
Building contractors, however, are complaining of labor shortages as the lengthy downturn created a dearth of construction workers, said Jerry Nickelsburg, a senior economist who studies the California economy.
Many skilled trade workers switched to different fields to weather the downturn, Nickelsburg said. That means contractors are spending money on training new workers or are likely to invest in labor-saving technologies in the future.
Still, the growth of payroll jobs in construction and other fast-growing industries such as healthcare is expected to generate more income and boost the state's recovery.
The UCLA forecast projects that California's unemployment rate will drop to 8.8% by the end of this year and fall to 7.7% by the end of 2014. The pace of job growth is expected to speed up to 2.2% in 2015, further pushing down the jobless rate to 6.8% by the end of that year.
ricardo.lopez@latimes.com

Copyright © 2013, Los Angeles Times

 

Thousands Protest Austerity Measures in Spain, Germany and Portugal

On Saturday thousands have taken to the streets of Spain, Germany and Portugal to protest austerity measures in the debt stricken nations.  Protesters could be seen carrying banners saying, “No more cuts” and “Screw the Troika,” referring to the European Commission, the European Central Bank and the International Monetary Fund, the groups that bailed out a number of European Union nations.

Photo: ABC News

by Derrick Broze
Intellihub.com
June 4, 2013
For four years now protests have raged through much of the European Union as a result of austerity measures implemented in response to the 2008 financial crisis and the loans that followed.
In Frankfurt, Germany protestors faced off with police near the headquarters of the European Central Bank. The police claimed about 7,000 protesters would not move after police surrounded a smaller group of protesters wearing masks.
In Lisbon, Portugal around 15,000 people rallied outside the headquarters of the International Monetary Fund, chanting “IMF, out of here!”
Euronews reported  protestors In Madrid, Spain numbered around 7,000. Protesters marched to the central Neptuno fountain near Parliament, chanting “Government, resign.”
Last Wednesday saw  a particularly disturbing scene where Spanish firefighters clashed with riot police in Barcelona. The firefighters were also fighting against proposed cuts to their salaries. In Catalonia, the economically powerful region of Spain, hundreds of public employees, wearing yellow helmets and red jackets, rallied in front of the parliament building. There were numerous reports of the use of flares, smoke bombs and coffins labeled “public services” being set on fire.
According to the Associated Press, the European Union granted several member states, including Spain, additional time to manage their budgets in the face of economic turmoil.
With the American economy under an equal amount of stress, many Americans are looking to alternative currencies, barter networks and community gardens as strategies to combat rising food prices and unemployment. We have to ask ourselves if we would rather wait til our options are starve, or riot. By pursuing solutions now we can help better our situation in the future.
 GOOGLE: AGORISM

The Sell-off Is Spreading: Markets Now In Triple-Digit Loss Territory; UBS CIO Warns Of Japanese “Abegeddon” Scenario!!! DOW -200!!! Dow Jones Drops Under 15,000!!!

Markets Around The World Getting Smoked — Dow On The Verge Of Falling Below 15,000
Markets across Europe just closed at their lowest levels of the day.

The London FTSE 100 fell 2.1%, the French CAC 40 fell 1.9%, the German DAX lost 1.2%, the Spanish IBEX 35  retreated 0.9% and the Italian FTSE MIB fell 1.0%.
European markets are now trading at six-week lows.
Meanwhile, in the United States, the Dow Jones Industrial Average is down 1.2% (off 180 points), and is now trading at 14,991.
The S&P 500 is down 1.1%, and the NASDAQ is 1.0% lower. All three are trading at their lowest levels of the day.
The S&P 500 is trading around 1617 this morning, 4.1% off its peak level of 1687 turned in on May 22.
http://www.businessinsider.com/world-markets-are-getting-smoked-today-4-2013-6
Markets Now In Triple-Digit Loss Territory

After this morning’s economic data releases.

http://www.businessinsider.com/moneygame#ixzz2VMSNGfZq
The gold trade is just not working
http://www.businessinsider.com/goldman-investments-that-are-working-2013-6
UBS CIO Warns Of Japanese “Abegeddon” Scenario
Last night’s over-promised and under-delivered ‘third arrow’ from Abe appears to have solidified market opinions about the chances of Abe slaying his deflation-monster nemesis. UBS’ CIO Alex Friedman fears that Japan may face a fearsome stagflation – where accelerating inflation in asset prices is not met by higher growth rates – a scenario he calls “Abegeddon.” In an “Abegeddon” scenario, Friedman said “investors may grow increasingly concerned about the sustainability of Japanese debt levels that could lead to a ‘stampede’ out of government bonds.” With Nikkei 225 futures having faded their European morning bounce and pressuring back towards the 20% ‘bear market’ correction levels once again, it seems the ‘stampede’ is out of growth-expectation-driven equities as JGBs are bid for now. That bid (no matter how hard the BoJ tries) is unlikely to last if the doubt grows as Japan’s debt-to-GDP would rise above 300% (from 226% currently) and the 10Y JGB yield could approach 5%!




http://www.zerohedge.com/news/2013-06-05/ubs-cio-warns-japanese-abegeddon-scenario

zerohedge‏@zerohedge1 min 
USDJPY < 99

Dow Jones Drops Under 15,000
Dow 15,000 hats off.

http://www.zerohedge.com/news/2013-06-05/dow-jones-drops-under-15000
 DOW -199!!!
http://www.marketwatch.com/

Icelandic Parliament: Big Icelandic Banks Were Public Banks … Which Were Privatized FOR FREE Shortly Before They Tanked

Iceland’s Looting Analogous to America’s … Can U.S. Follow their Successful Turnaround?

Birgitta Jonsdottir is a member of the Icelandic parliament. She knows a good deal about the financial crisis.  Indeed, before being elected to parliament, she made a documentary about the collapse of Iceland’s economy as an investigative journalist.
Last night, Jonsdottir (pronounced “yont-Daughter”) disclosed a stunning fact in a speech I attended:

All our banks were actually public.  They were privatized a few years prior to the financial crisis.

Jonsdottir explained that Iceland’s banks grew to 5-7 times the size of the country’s GDP during the county’s brief bubble after privatization.
And the Icelandic parliament – in a fact-finding report – later found that the bankers never paid anything to “buy” the banks from the government or the people.   In other words, sweetheart deals and corruption meant that a handful of people looted the banks without paying a penny.
America is analogous.  The prosperity which our ancestors worked so hard to build – and the very vision of prosperity of the Founding Fathers – has been looted.
Jonsdottir says that it wasn’t just the bankers who were corrupt … it was also the Icelandic politicians, media, academia … all of the people in a position of power.
She points out that – as bad as things are in America – they were as bad in Iceland.  And yet they took the bulls by the horn and turned things around.

The Warnings Are Again Accelerating. And So Is The Happy Talk From Wall Street Casino Insiders, About Rallies, Housing Recoveries, Perpetual Cheap Money. Don’t Listen. The Next Crash Will Happen By Year-End.

By Paul B. Farrell, MarketWatch

New crash coming? When? Before year-end?

In “Stocks for the Long Run,” economist Jeremy Siegel researched all the “big market moves” between 1801 and 2001. Bottom line: 75% of the time, there is no rationale for “big moves.” No one can predict them. Maybe technicians and traders can pick short-term moves the next second. Maybe tomorrow. But the long-term “big market moves?” No way.

So why predict an “87%” chance of another meltdown in 2013? Because in the real world of statistical probabilities, historical facts and expert opinions danger signals are flashing wild. In mid-2008 we summarized the predictions of 20 experts over several years. Predicted a meltdown in a few years — markets crashed two months later. Fast.

In retrospect, it was inevitable, thanks in part to the hype, arrogance and incompetence of Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson who failed to prepare America.

The warnings are again accelerating. And so is the happy talk from Wall Street casino insiders, about rallies, housing recoveries, perpetual cheap money. Don’t listen. The next crash will happen by year-end.

Yes, there’s a 13% chance the next Fed chairman will keep printing cheap money into 2014. But on New Years Eve our aging bull will be 4½ years old, well past Bill O’Neill’s “average” 3.75 years for putting this bull out to pasture.

So unless you’re shorting, all bets on Wall Street casinos for 2014 are megarisk, like 2008. Like a Stephen King horror film, you feel it coming. Could happen anytime, even tomorrow, says Siegel’s research, or the unpredictable logic in Nassim Taleb’s “Black Swan.”

Here are 10 other predictions adding credibility to a crash by the end of 2013:

1. Warren Buffett ‘guaranteed’ new bubble, new recession four years ago

Actually he saw it coming early. Shortly after the 2008 crash Warren Buffett was asked: “Do you think there will be another bubble leading to a huge recession?” Yes, “I can guarantee it.” Cycles happen.

Next question: “Why can’t we learn the lessons of the last recession? Look where greed has gotten us.” Then with the impish grin of a Zen master, Uncle Warren replied, “Greed is fun for a while. People can’t resist it.” But “however far human beings have come, we haven’t grown up emotionally at all. We remain the same.”

Yes, one of world’s richest men was personally guaranteeing another bubble, another “huge recession.” Now, four years later, that time bomb is ticking louder, closer.

2. Federal Reserve’s Council: ‘Unsustainable bubble in stocks, bonds’

The International Business Times just reported on the minutes of the Federal Reserve Board Advisory Council’s mid-May meeting. Members expressed “strong concerns over the Fed’s low-interest-rate policies and its bond-purchase program, which they say could trigger unmanageable inflation and an ‘unsustainable bubble’ in the stock and bond markets.” Some “pointed out that near-zero interest rates could not be sustained in the long run.”

Why? “A spike in inflation could force the Fed to hike interest rates, hurting business confidence and consumer spending, and prove disastrous to the U.S. economy, which is still clawing its way back from the debilitating effects of the 2008 financial crisis.”

Get it? The Fed and Wall Street insiders hear something’s dead ahead.

3. Peter Schiff is ‘doubling down’ on his ‘doomsday’ prediction

Euro Pacific Capital CEO Peter Schiff, author of “The Real Crash: America’s Coming Bankruptcy,” is “not backing away from doomsday predictions about the U.S. economy,” wrote MarketWatch’s Greg Robb last week. He sees the no-win scenario: “Either the Fed stops QE and starts selling the Treasurys and mortgage-related assets on its balance sheet, thus triggering a recession, or else faces an inevitable, even-worse, currency crisis.”

The “idea that the U.S. economy is in recovery is based entirely on rising asset prices … Asset prices are only rising because rates are low. As soon as rates go back up, asset prices will” fall.

Last year on Fox Business Schiff warned: “We’ve got a much bigger collapse coming.” Then last week: “I am 100% confident the crisis that we’re going to have will be much worse than the one we had in 2008.” His 100% beats our 87%.

4. Bill Gross: ‘Credit supernova’ turning 2013 bull into big bad bear

Yes, Gross sees a ‘credit supernova’ dead ahead. His firm has $2 trillion at risk when the Federal Reserve cheap money finally explodes in America’s face, brings down the economy, again. Gross warns: “Investment banking, which only a decade ago promoted small-business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi finance.”

Bernanke’s Ponzi finance is self-destructive, lethal and massive. Endless cheap money upsets the balance between credit expansion and real economic growth, resulting in diminishing returns. Very bad news.

5. Gary Shilling predicts the ‘grand disconnect’ will trigger ‘shocker’

Yes, economist Gary Shilling predicts a “shocker” before the end of the year. Worse because investors are “paying little attention to weak and declining economies around the world, and concentrating on the flood of money being created by central banks.”

The “grand disconnect” is driving up stocks “while the zeal for yield, amidst low interest rates, benefited junk bonds and other low-quality debt.” Wall Street’s blowing a nasty new bubble, repeating the run-up to the 2008 crash.

6. ‘Kaboom ahead,’ an ‘ominous third phase’ of 2008 Meltdown

“Bond guru buying stocks. Sees ‘Kaboom’ Ahead,” shouted the Bloomberg Market headline about Jeffrey Gundlach, CEO of Doubleline Capital. Earlier he predicted the 2008 meltdown. But now he says the real damage is yet to come.

“The first phase of the coming debacle consisted of a 27-year buildup of corporate, personal and sovereign debt. That lasted until 2008.” Then cheap money “finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth.” Next, an “ominous third phase,” a bigger crash, whose impact will far exceed the damage of 2008.

What’s he buying? Hard assets. Plus “sitting on cash,” waiting to scoop up more at “fire-sale” prices, “it’s worth waiting.”

7. ‘Tick, tick … boom!’ InvestmentNews sees bond crash dead ahead

A few months ago InvestmentNews front page is so powerful you can hear sirens on a flashing, warning in huge bold type: “Tick, tick … boom!” Their readers: 90,000 professional advisers who trust INews forecasts.

This was the biggest warning since 2008: “What will your clients’ portfolios look like when the bond bomb goes off?” Not “if” but “when.” Yes, they expect the bond bomb to explode soon.

Wake up, INews sees extreme dangers for millions of Americans who have “no idea what’s about to happen to them … Tick, tick … boom!”

8. Reagan’s budget director sees an ‘apocalypse … get out now’

Recently David Stockman warned of an economic “apocalypse” dead ahead, “arising from a rogue central bank that has abetted the Wall Street casino, crucified savers on a cross of zero interest rates and fueled a global commodity bubble that erodes Main Street living standards through rising food and energy prices … get out of the markets and hide out in cash.”

Stockman’s not merely warning of a crash ending the bull rally since 2009. This “grand bubble” has been building for 32 years since the Reagan revolution. He’s atoning for a generation of politicians with no moral compass: “Capitalism has morphed into a monopoly ruled by politicians who are serving a wealthy elite. Competition is a joke.”

9. Nouriel Roubini: ‘Prepare for the perfect storm’ in an unstable world

Yes, prepare, prepare, prepare. Roubini told Slate.com: Our world is a game of dominos, any one of which could put in motion a global collapse: “Sooner or later, another ugly fight” over debt, markets will “become spooked” with “a significant amount of drag … on an economy that has grown at barely a 2% rate.”

Scanning the world’s hot-button triggers in the euro zone, China, BRICs, Iran, Middle East, Pakistan, oil markets, Dr. Doom warns, the “drums of actual war will beat harder.” Any one of these trends “alone would be enough to stall the global economy and tip it into recession.”

10. Jeremy Grantham: America’s growth and prosperity ‘gone forever’

Grantham’s GMO firm manages $100 billion. He focused on Richard Gordon’s disturbing research: “Is U.S. Economic Growth Over?” Yes, says Grantham, “the U.S. GDP growth rate … is gone forever.”

For centuries before the Industrial Revolution growth was under 1%. Then the growth trend till “1980 was remarkable: 3.4% a year for a full hundred years,” driving the American dream. “But after 1980 the trend began to slip,” says Grantham,“ by over 1.5% from its peak in the 1960s and nearly 1% from the average of the last 30 years.” By 2100, America’s GDP growth will fall back to where it started before the Industrial Revolution, to an annual rate less than 1%.

Buffett guarantees … Schiff doubles down … Gross sees supernova … Shilling’s grand disconnect … Gundlach’s ominous third phase … Stockman’s apocalypse … InvestmentNews tick, tick, boom … Roubini’s perfect storm … Grantham’s growth gone forever … place your bets at Wall Street’s casinos … the risk’s only 87% … or is it 100%?

Paul B. Farrell is a MarketWatch columnist based in San Luis Obispo, Calif. Follow him on Twitter @MKTWFarrell.