Friday, March 20, 2015

Local ice cream shop debuts new flavor, Michigan Pot Hole

SCREENSHOT FROM FREEP AND COURTESY OF ASHBY'S STERLING ICE CREAM
  • Screenshot from Freep and courtesy of Ashby's Sterling Ice Cream

We all hate pot holes — this young lady especially — but one local business is actually trying to help clean up Michigan's roads, Ashby's Sterling Ice Cream.

This Shelby Township sweet shop recently launched a brand new flavor, Michigan Pot Hole, and plans to donate 1 percent of sales from the product to the state for road repairs.

"It's kind of tongue in cheek and meant to be fun," Ashby's marketing director Dianne Tunison told the Freep recently.

So what exactly is this new flavor like? Ashby's described it on its website as "thick, black-tar fudge in chocolate ice cream with chunks of chocolate asphalt."

We'll give it a try.

Mind Boggling: Unsold Cars Wasting Away


Website: odometer.com
Source credit: odometer.com
Photography credits: belongs to their respective owner(s) and not to me.
Link: http://www.odometer.com/rides/10497/1…

Falling Interest Causes Falling Wages

Changes in the value of a loan are zero sum
monopolymoney2
Putting the Hurt on Labor

Interest rates have been falling for over three decades. Conventional economics has two things to say about this. One, inflation expectations are falling. Monetarists believe that the interest rate is set based on bond traders’ predictions of future price increases. Two, if employment and GDP are weak, then the central bank should increase the money supply. By increasing the money supply, it will cause rising prices, and somehow that causes workers to get hired. Federal Reserve Chair Janet Yellen wrote a paper defending this absurd claim (which I criticized).

Monetary policy is actually putting the hurt on labor. Let’s look at why. Workers are employed by businesses, so we must look at the incentives that push on businesses. Businesses constantly face a choice among several alternatives. They choose based on the desire to make profit and avoid losses. Monetary policy affects their decisions, because it distorts the profitability of every path.

Consider one common tradeoff: hiring labor versus buying expensive tools. Management decides based on which costs less. The more expensive a tool, the more attractive it becomes to hire workers and vice versa. Since most companies borrow when they buy tools, the most immediate cost of a tool is the monthly payment. When the rate of interest falls, the monthly payment falls as well. This puts downward pressure on employment and wages (I wrote about this here).

A falling interest rate impacts the wage by a subtler, but more powerful process. In a recent article, Professor Antal Fekete describes it:


“First we dwell a little longer on the problem of the present value of a cash flow (defined as the sum of individual payments discounted at the prevailing rate of interest, each for the period of time between now and when it becomes payable in the future.) Since the rate of interest is being cut, discount at a lower rate is involved. Therefore the present value of the cash flow is increased…

What does this mean for the terms of trade of those who need a cash flow for survival, such as all pensioners and all wage earners? Well, the price they have to pay for the cash flow is just its present value. Any cut in the rate of interest by the central bank affects them adversely. Their terms of trade deteriorates. For example, if the rate of interest is cut in half, then they have to pay twice as much for the same cash flow as before the cut. In practical terms this means that wage earners have to work roughly twice as hard to continue earning wages at the same level …”

Antal-Fekete
Present Value of Future Payments

Let’s take a step back and cover some essential background material and then we’ll get back to this point. One differentiator of Fekete’s economics is in his concept of the loan. Others think of it as an exchange of present goods for future goods, but he had an insight. The essential characteristic of a loan is that it involves an exchange of wealth and income. Fekete describes one party, often a retiree, as having cash but not income. The other party, typically an entrepreneur, has income but not cash. The deal benefits both.

The retiree needs the income to buy groceries, without consuming his life’s savings. Earning interest provides him an income for the rest of his life, without fear of outliving his savings. The entrepreneur wants to build a business without having to waste years saving up for the investment. Borrowed capital enables him to quickly build productive capacity. This new production will increase his income.

We can think of the loan as the purchase of an income stream. Cash up front is traded for an income paid over time. By definition, and by nature, the amount of cash paid is equal to the value of the stream of payments to be made in the future. The value of this series of future payment is not simply the arithmetic sum. It is the sum of the present values of those payments.

Let’s look at the concept of the present value of a future payment. Suppose someone will pay $500 one year from today. Do you value it at $500 right now? No, a future payment is always discounted, to compensate for locking up the cash for a year, and of course the risk of nonpayment. We need a way of determining how much $500 in one year is worth today. To calculate the discount, we use the prevailing interest rate. If the interest rate is 10%, then this $500 payment is discounted by $50. It is worth $450 today.

The value of a future payment rises if the interest rate falls. For example, if the interest rate falls 5%, then the discount is only $25. That makes the payment worth $475 today. If this is not clear, then it may help to think through a few examples. Consider payments due years in the future. This idea—that present value varies inversely with interest—is a key principle.

Changes in the value of a loan are zero sum. If the rate of interest falls, then the lender gains at the expense of the borrower. This conclusion is counter-intuitive and thus controversial, but it should not be. The income stream is worth more. This is the loss suffered by the borrower, and the gain enjoyed by the lender.

For example, here is a 5-year loan at 10% interest. If payments are made annually, then each is $263.80.

Table : Loan Amortization

Year 1 2 3 4 5
Start Balance $1,000.00 $836.20 $656.02 $457.82 $239.80
Interest $100.00 $83.62 $65.60 $45.78 $23.98

The straight arithmetic sum of five $253.80 payments is $1,319. However the present value of the loan is less than that, because each future payment must be discounted. Here’s what that looks like.

Table : Discounting each payment

Year 1 2 3 4 5 Total
Payment $263.80 $263.80 $263.80 $263.80 $263.80 $1,319
Present Value $239.82 $218.02 $198.20 $180.18 $163.80 $1,000

The present value of the income stream works out to be exactly the amount of the loan. The first table shows the loan amortization, with an annual $263.80 payment covering current interest plus fully amortization. The second table shows the discounting of each payment. This is an elegant validation of the theory.

Now, let’s look at what happens if the prevailing interest rate drops to 5%. The loan payments don’t change. However, the present value of those payments does.

Table : Discounting at a lower interest rate

Year 1 2 3 4 5 Total
Payment $263.80 $263.80 $263.80 $263.80 $263.80 $1,319
Present Value $251.24 $239.27 $227.88 $217.03 $206.69 $1,142

Discounted at only 5%, the same payments have a higher net present value—14.2% higher.

A loan with a longer term is more sensitive to changes in interest rate. The present value of a 10-year loan, for example, increases by 25.6% with the same change in interest rate.

The great economist Ludwig von Mises was aware of the impact of interest on long duration loans. He looked at the combination of two extremes, zero interest and a perpetual income stream.

He wrote:

“If the future services which a piece of land can render were to be valued in the same way in which its present services are valued, no finite price would be high enough to impel its owner to sell it. Land could neither be bought nor sold against definite amounts of money…”

In other words, at zero interest the present value of land is infinite (as land produces income in perpetuity). For a perpetual income, each halving of the interest rate doubles the present value.

640px-Ludwig_von_Mises
Ludwig von Mises
Photo via Ludwig von Mises Institute

Accounting shines a spotlight on this phenomenon. However, it’s no moot abstraction. The loss to the borrower is real. No one would argue that the capital gain of a bondholder is somehow unreal. They should not argue against the loss of the bond issuer. It is the loss of the latter which provides the gains of the former. Proper accounting should always match reality. So what, in reality, is going on?

The Burden of Debt


Another way of thinking of the present value is the burden of debt. The more the rate falls, the more the debt load bears down on the borrower. The present value of an income stream is what any investor would pay to buy it. It is also what the debtor must pay to liquidate it.

Sometimes the best return for the owners is to sell the firm. However, that often requires paying off the debt. If that’s impossible, then the best option is off the table. The inability to liquidate debt causes many problems. So long as an enterprise has a dollar of debt, it’s an overhang. The lower the interest rate falls, the larger the overhang grows.

Let’s tie this all back to the worker. We can now see the connection between the wage and the loan. Both are an income stream, a set of payments to be made in the future. As with the loan, the present value of wages rises when interest falls. The employer is doubly squeezed, once by the increasing burden of debt, and twice when burden of wages increases too.

Something has to give. Either the worker must work harder, or else the employer must cut his pay. It’s a simple matter of survival for the employer. No firm can remain in business for long, if it allows liabilities to rise unchecked.

If productivity cannot be increased, and wages cannot be decreased, then the business must cut costs elsewhere. Often this amounts to substituting one form of capital loss for another, such as neglecting maintenance or research.

Now we’re ready to revisit the tradeoff of labor and capital, and tie our thesis together. The wages of labor are a series of future payments, but the price of a machine is paid up front. As the interest rate falls, the present value of both rises. That is, the present value of wages rises and the present value of the machine rises also.

When interest falls, wages subtract from the enterprise value and machines add to it. How perverse is that? How would you respond, if you were managing a business?

The central banks may say that increasing the money supply causes rising wages and increased employment. However, they increase money supply via bond purchases. This pushes bond prices up, which is the same think as pushing the interest rate down. It causes irreparable harm to employers, and consequently, to workers.


Change in Real WagesAnnual change in real wages, via Zerohedge – click to enlarge.

Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals.  Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads.  Keith is a sought after speaker and regularly writes on economics.  He is an Objectivist, and has his PhD from the New Austrian School of Economics.  He lives with his wife near Phoenix, Arizona.

Things Are Unraveling At An Accelerating Rate

Those who brought their consumption forward can no longer add to present consumption
european-stocks
by Charles Hugh Smith | Peak Prosperity

Does anyone else have the feeling that things are not just unraveling, but that the unraveling is gathering speed?

Though quantifying this perception is more interpretative than statistical, I think we can look at the ongoing debt crisis in Greece as an example of this acceleration of events.

The Greek debt crisis began in 2011 and reached a peak in 2012. The crisis was quelled by new Eurozone/IMF loans to Greece, and European Central Bank chief Mario Draghi’s famous “whatever it takes speech” in late July, 2012.

The Greek debt crisis quickly went from “boil” to “simmer,” where it stayed for almost two-and-a-half years. But no one with any knowledge of the gravity and precariousness of the situation expects the latest “extend and pretend” deal to patch everything together for another two years.  Current deals are more likely to last a matter of months, not years.

We can discern the same diminishing returns in Federal Reserve/central bank interventions, as the initial rounds of quantitative easing pushed stock and bond markets higher for years at a time, while the following interventions generated lower returns.

What factors are reducing the positive effects of intervention and causing increased volatility? Let’s start with the engine behind every central bank/state intervention and every “save” of the status quo: debt.

Debt Brings Forward Consumption & Income

Debt has one primary dynamic: borrowing money to consume something in the present brings forward consumption and income.  Economists describe trading future income for consumption today as bringing consumption forward. And since debt must be repaid with interest, bringing consumption forward also brings income forward.

Let’s say we want to buy a vehicle with cash, and it will take five years to save up the lump-sum purchase cost.  We forego current consumption to save for future consumption.

If we get a 100% auto loan now, we get the use of the vehicle (present-day consumption) and in exchange, we sacrifice some of our income over the next five years to pay back the auto loan. We brought consumption forward, and in essence took future income and brought it forward to pay for the consumption we’re enjoying today.

We can best understand the eventual consequence of this dynamic with a simplified household example. Let’s say a household has $2,000 a month in net income, i.e. after taxes, healthcare insurance deductions, etc., and rent (or mortgage payments), basic groceries and utilities consume $1,000 of this net income. That leaves the household with $1,000 in disposable income.

At the risk of boring finance-savvy readers, let’s briefly cover the difference between net income and disposable income. Net income can be earned (wages, salaries, net income from a sole proprietor enterprise, etc.) or unearned (dividends, interest income, rents, etc.) Net income can only rise by making more money or reducing taxes. There are limits to our control of these factors. In a stagnant economy, it’s tough to find better-paying jobs and harder to demand higher wages from employers.  Since governments’ expenditures are rising, taxes are also going up; it’s difficult for most wage-earners to cut their total tax load by much.

Disposable income is more within our control, as it is fundamentally a series of trade-offs between current consumption and future income/savings: if we choose to consume now, we have less income to save for future consumption or investments.  If we sacrifice consumption today, we have more money in the future for consumption or investing. If we borrow money to consume today, we’ll have less future income because a slice of our future income must be devoted to pay down the debt we took on to consume today.

If our household borrows money to buy a vehicle and the payment is $500 per month, the household’s disposable income drops from $1,000 to $500. If the household takes on other debt (credit cards, student loans, etc.) with payments of $500 per month, the household’s disposable income is zero: there is no money left to dine out, go to movies, pay for lessons, etc.

In effect, all of the future income for years to come has been spent.

The Only Trick To Expand Debt: Lower Interest Rates

There are only two ways to support additional debt: either increase net income, or lower the rate of interest on new and existing loans to free up disposable income.  Suppose our household refinances its auto loan to a much lower rate of interest and transfers its credit card debt to a lower-interest rate card.  Huzzah, each monthly payment drops by $100, and the household has $200 of disposable income to spend on current consumption or on more loans. Let’s say the household chooses to buy new furniture on credit with the windfall. This new consumption brought forward pushes the monthly debt payments back up to $1,000.

This additional debt-based consumption profits two critical players in the economy: the state (i.e. all levels of government) and the financial sector. The state benefits from the higher taxes generated by the sales, and the financial sector profits from transaction fees and the interest earned on the new loans.

The household’s consumption and debt rose as a result of lower interest rates, but there is a limit on this dynamic: lenders have to charge enough interest to service the loan, reap a profit and compensate shareholders for the risk of default.

If lenders fail to properly assess the risk of default. They will be unprepared to absorb the losses incurred as marginal borrowers default en masse. This places the lender’s own solvency at risk.

Using this trick to enable further expansion of debt thus creates a systemic risk that borrowers will over-borrow and lenders will not have sufficient reserves to absorb the inevitable losses as marginal borrowers default and other borrowers suffer declines in disposable income that trigger further defaults.

In other words, the trick of lowering interest rates yields diminishing returns: the more debt that is enabled,  the thinner the margins of safety and thus the greater the systemic risks rise in direct correlation with rising debt loads.

The Trick To Increase Consumption: Punish Savers

While lowering interest rates increases disposable income and enables an expansion of debt, it also generates a disincentive for households to forego current consumption by saving disposable income rather than spending it.  Near-zero interest rates actively punish savers by reducing the interest income earned on low-risk savings accounts and certificates of deposit (CDs) to near-zero. Savers are pushed into either investing in high-risk markets that benefit the financial sector or by spending rather than saving—a choice that benefits the state, as more spending generates taxes for the state.

The Global Expansion Of Debt Has Increased Systemic Risks

These are the basic dynamics of the entire global economy: interest rates have been pushed to near-zero to punish savers and encourage expansion of debt-based consumption. But this inevitably leads to a reduction in disposable income and current consumption, as debt brings forward both consumption and income.

Once the borrowers have maxed out their borrowing power, there is no more expansion of debt or additional debt-based consumption.  This is known as debt saturation: flooding the financial sector with more credit no longer boosts borrowing or brings consumption forward.

Those who brought their consumption forward can no longer add to present consumption, as their future income is already spoken for.

That’s where the global economy finds itself today.


This vast expansion of debt on the backs of marginal borrowers and the expansion of risky investments has greatly increased the systemic risk of losses from defaults arising from over-extended borrowers.

No wonder every attempt to further expand debt-based consumption is yielding diminishing returns: net income is stagnant virtually everywhere in the bottom 95% of the populace, and further declines in interest rates are increasingly marginal as rates are near-zero everywhere that isn’t suffering a collapse in its currency.

The diminishing returns manifest in three ways: the gains from each round of central-bank tricks are declining, the periods of stability following the latest “save” are shrinking and the amplitude of each episode of debt crisis is expanding.

That things are speeding up is not just perception—it’s reality.

In Part 2: The Coming Age Of Confiscation, we’ll look at the threat of the other fundamental driver of rising instability: the broken-logic TINA (there is no alternative) mind trap our global leaders are mired in. As the trajectory of the status quo worsens for all the reasons discussed above, government will become increasingly heavy-handed in appropriating the remaining wealth in order to keep things stumbling on just a little bit longer — justifying its actions by claiming it “has no other choice”.

The rich are 64% richer than before the recession, while the poor are 57% poorer

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The rich are 64% richer than before the recession, while the poor are 57% poorer http://ind.pn/18xfDqA 
 
The gap between richest and poorest has dramatically widened in the past decade as wealthy households paid off their debts and piled up savings following the financial crisis, a report warns today.
By contrast, the worst-off families are far less financially secure than before the recession triggered by the near- collapse of several major banks. They have an average of less than a week’s pay set aside and are more often in the red.
Younger workers have fallen behind older people while homeowners – particularly those who have paid off their mortgages – have become increasingly affluent compared with their neighbours who are paying rent.
http://www.independent.co.uk/news/uk/home-news/britains-divided-decade-the-rich-are-64-richer-than-before-the-recessionwhile-the-poor-are-57-poorer-10097038.html

 
 
 

Ebola crisis: Sierra Leone lockdown to hit 2.5m people

(AFRICA)  Sierra Leone is to enforce a three-day lockdown of key parts of the country to try to contain the Ebola epidemic.
There have been 3,702 reported deaths from Ebola in the West African nation.
A three-day curfew in September, keeping people at home under quarantine, was hailed as a success by authorities, despite some criticism.
The country’s National Ebola Response Centre says a new lockdown will come into place next week. It will affect close to 2.5m people.
While the number of cases has slowed since the peak of the outbreak, the virus is far from eradicated.
In the seven days leading up to March 15, there were 55 new cases in Sierra Leone, and 90 in neighbouring Guinea.
The number of new cases in Liberia – where most deaths have occurred – has not been registered.
Palo Conteh, the head of the NERC, told the AFP news agency that the curfew would take place across the Western Area of Sierra Leone, a part of the country that includes the capital, Freetown.
The districts of Bombali and Port Loko will also be affected.
“The lockdown will be conducted from March 27 to March 29 and will be like the one we conducted in September last year,” said Mr Conteh.
“The government and partners are hopeful that latent cases that are now not being reported or recorded will come out.”
Mr Conteh said that health workers will visit every house in the areas affected by the lockdown. They will remind people about the dangers of touching corpses and taking patients to traditional healers.
In other developments:
  • Guinea’s president Alpha Conde has called for a new push to eradicate Ebola after a rise in cases. On the weekend, a government report said 21 people were infected in a single day, compared to an average of eight a day;
  • A UN spokesman tells the BBC: “We are still seeing too many infections taking place” in Sierra Leone;
  • Liberia’s government is to pay $5,000 (£3,391) to the families of each of the 179 health workers who died from the virus there.
There have been 10,216 deaths due to Ebola, according to the World Health Organization.
The majority of those deaths have been in three West African countries – Liberia, Guinea and Sierra Leone.
The economic effect of the outbreak has been severe in Sierra Leone.
The World Bank estimates that the revenue of some parts of the population has dropped by as much as 40%, and that close to 180,000 people have lost work as a result of the crisis.
Despite dozens of new cases every week, the government is determined to meet a target to eradicate Ebola by 15 April.

The Quiet Plan to Sell Off America’s National Forests

(Claire Moser)  A proposal to seize and sell off America’s national forests and other public lands could make its way into the House GOP’s budget resolution when it is announced this week.
In a recent memo to the House Budget Committee, Rep. Rob Bishop (R-UT), chair of the House Natural Resources Committee, proposed that America’s public lands be transferred to state control. He then requested $50 million of taxpayer money to be spent to enable transfers to “start immediately.” The memo states that public lands “create a burden for the surrounding states and communities,” and “the solution is to convey land without strings to state, local, and tribal governments.”
Bishop’s plan and similar proposals to give away America’s public lands are controversial. A majority of voters in those regions believe the proposals would likely result in states having to raise taxes, open prized recreation areas to drilling and mining, or sell lands to private interests to cover the substantial costs of management.
Despite these concerns — and despite the fact that these proposals are extremely expensive, unpopular, and most importantly, unconstitutional — there is a strong likelihood that Rep. Bishop’s request will be included in the House GOP’s budget, thanks to intensive lobbying efforts by a handful of right-wing politicians and special interest groups.
As reported by E&E Daily, the American Lands Council (ALC), an organization founded by Utah state Rep. Ken Ivory (R), hired a lobbyist at the end of last year to “educate congressional lawmakers on the benefits of relinquishing federal lands to the states.” Federal lobbying disclosure formsshow that the ALC paid the lobbyist, Michael Swenson, $150,000 for just three months of lobbying work.
Swenson, whose other clients include a Utah mining company, has denied being paid the sum. He told E&E the lobbying disclosure form was a “mistake,” and that he was paid just $20,000 in the last quarter of 2014.
ALC’s lobbying payments have drawn additional scrutiny because the organization’s budget is dependent on taxpayer money, contributed by county governments in the West. According to the Center for Western Priorities (CWP), 47 county governments have spent a total of more than $219,000 for ALC membership. Most of these county governments receive substantial federal grant money through the Payment in Lieu of Taxes Program (PILT), raising questions about whether American taxpayer dollars are being channeled to fund lobbying of the federal government. A federal law, known as the Byrd Amendment, prohibits the use of federal funds from a grant to be used for lobbying federal officials.
A recent flood of state-level proposals to seize and sell off America’s public lands is the result, in part, of efforts by the Koch-backed American Legislative Exchange Council (ALEC) to disseminate ‘model legislation’ to conservative lawmakers in Western states.
The state of Utah is thus far the only state to have passed such a measure, however. In 2012, the Utah legislature passed a bill demanding public lands be transferred to state control by December 2014. The state plans to sue the federal government and is currently accepting proposals to launch a $2 million fight.
Politicians in nine other states are also developing and advancing similar legislative proposals, supported by expensive taxpayer-funded studies. According to a CWP analysis, Western states have spent a total of $816,000of taxpayer funds on such studies in recent years.
Whether Rep. Bishop’s proposal makes it into the House GOP budget or not, the Congressman has made it clear that disposing of national forests and public lands will be one of his top priorities as chair. The House Republican majority is expected to release its 2016 budget resolution this week.

Nestle Continues Stealing World’s Water During Drought

(Dan Bacher)  The city of Sacramento is in the fourth year of a record drought – yet the Nestlé Corporation continues to bottle city water to sell back to the public at a big profit, local activists charge. The Nestlé Water Bottling Plant in Sacramento is the target of a major press conference on Tuesday, March 17, by a water coalition that claims the company is draining up to 80 million gallons of water a year from Sacramento aquifers during the drought.
The coalition, the crunchnestle alliance, says that City Hall has made this use of the water supply possible through a “corporate welfare giveaway,” according to a press advisory.
A coalition of environmentalists, Native Americans and other concerned people announced the press conference will take place at March 17 at 5 p.m. at new Sacramento City Hall, 915 I Street, Sacramento.
The coalition will release details of a protest on Friday, March 20, at the South Sacramento Nestlé plant designed to “shut down” the facility. The coalition is calling on Nestlé to pay rates commensurate with their enormous profit, or voluntarily close down.
“The coalition is protesting Nestlé’s virtually unlimited use of water – up to 80 million gallons a year drawn from local aquifers – while Sacramentans (like other Californians) who use a mere 7 to 10 percent of total water used in the State of California, have had severe restrictions and limitations forced upon them,” according to the coalition.
“Nestlé pays only 65 cents for each 470 gallons it pumps out of the ground – the same rate as an average residential water user. But the company can turn the area’s water around, and sell it back to Sacramento at mammoth profits,” the coalition said.
Activists say that Sacramento officials have refused attempts to obtain details of Nestlé’s water used. Coalition members have addressed the Sacramento City Council and requested that Nestle’ either pay a commercial rate under a two tier level, or pay a tax on their profit.
In October, the coalition released a “White Paper” highlighting predatory water profiteering actions taken by Nestle’ Water Bottling Company in various cities, counties, states and countries. Most of those great “deals” yielded mega profits for Nestle’ at the expense of citizens and taxpayers. Additionally, the environmental impact on many of those areas yielded disastrous results.
Coalition spokesperson Andy Conn said, “This corporate welfare giveaway is an outrage and warrants a major investigation. For more than five months we have requested data on Nestlé water use. City Hall has not complied with our request, or given any indication that it will. Sacramentans deserve to know how their money is being spent and what they’re getting for it. In this case, they’re getting ripped off.”
For more information about the crunchnestle alliance, contact Andy Conn (530) 906-8077 camphgr55 (at) gmail.com or Bob Saunders (916) 370-8251
The press conference and protest will take place just days after Jay Famiglietti, the senior water scientist at the NASA Jet Propulsion Laboratory/Caltech and a professor of Earth system science at UC Irvine, revealed in an op-ed in the LA Times on March 12 that California has only one year of water supply left in its reservoirs. (http://touch.latimes.com/#section/-1/article/p2p-83043355/)
“As difficult as it may be to face, the simple fact is that California is running out of water — and the problem started before our current drought. NASA data reveal that total water storage in California has been in steady decline since at least 2002, when satellite-based monitoring began, although groundwater depletion has been going on since the early 20th century.
Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain.”
Meanwhile, Governor Jerry Brown continues to fast-track his Bay Delta Conservation Plan (BDCP) to build the peripheral tunnels to ship Sacramento River water to corporate agribusiness, Southern California water agencies, and oil companies conducting fracking operations. The $67 billion plan won’t create one single drop of new water, but it will take vast tracts of Delta farm land out of production under the guise of “habitat restoration” in order to irrigate drainage-impaired soil owned by corporate mega-growers on the west side of the San Joaquin Valley.
The tunnel plan will also hasten the extinction of Sacramento River Chinook salmon, Central Valley steelhead, Delta and longfin smelt, green sturgeon and other fish species, as well as imperil the salmon and steelhead populations on the Klamath and Trinity rivers. The peripheral tunnels will be good for agribusiness, water privateers, oil companies and the 1 percent, but will be bad for the fish, wildlife, people and environment of California and the public trust.
The Delta smelt may already be extinct in the wild!
In fact, the endangered Delta smelt, once the most abundant fish in the entire Bay Delta Estuary, may already be extinct, according to UC Davis fish biologist and author Peter Moyle, as quoted on Capital Public Radio.
“Prepare for the extinction of the Delta Smelt in the wild,” Moyle told a group of scientists with the Delta Stewardship Council. (http://www.capradio.org/articles/2015/03/16/endangered-delta-smelt-may-be-extinct))
According to Capital Public Radio:
“He says the latest state trawl survey found very few fish in areas of the Sacramento-San Joaquin Delta where smelt normally gather.
‘That trawl survey came up with just six smelt, four females and two males,’ says Moyle. “Normally because they can target smelt, they would have gotten several hundred.’
Moyle says the population of Delta smelt has been declining for the last 30 years but the drought may have pushed the species to the point of no return. If the smelt is officially declared extinct, which could take several years, the declaration could change how water is managed in California.
‘All these biological opinions on Delta smelt that have restricted some of the pumping will have to be changed,’ says Moyle.
But Moyle says pumping water from the Delta to Central and Southern California could still be restricted at certain times because of all the other threatened fish populations.”
The Delta smelt, an indicator species that demonstrates the health of the Sacramento-San Joaquin River Delta, reached a new record low population level in 2014, according to the California Department of Fish and Wildlife’s fall midwater trawl survey that was released in January.
Department staff found a total of only eight smelt at a total of 100 sites sampled each month from September through December
The smelt is considered an indicator species because the 2.0 to 2.8 inch long fish is endemic to the estuary and spends all of its life in the Delta.
The California Department of Fish and Wildlife (CDFW) has conducted the Fall Midwater Trawl Survey (FMWT) to index the fall abundance of pelagic (open water) fish, including Delta smelt, striped bass, longfin smelt, threadfin shad and American shad, nearly annually since 1967. The index of each species is a number that indicates a relative population abundance. For more information, go to:http://www.indybay.org/newsitems/2015/01/09/18766643.php
Poster’s footnote:
Nestle plant in Sacramento steals people’s water during a drought and sells it back to them at a great profit.
Nestle markets the people’s water under 17 different brand names in their plastic bottles while clogging the world’s landfills.
1 http://www.dailykos.com/story/2015/03/16/1371402/-Water-coalition-to-hold-press-conference-regarding-shutdown-of-Nestle-Plant?d
2 http://www.nestle-waters.com/brands/all-brands

CAPITAL CONTROLS On the Way: Greece Needs MIRACLE to Avoid EU Exit


Sources:
“20150318_EOD13.jpg 2,089×1,198 pixels”
http://www.zerohedge.com/sites/defaul…
“20150318_API.jpg 1,459×1,198 pixels”
http://www.zerohedge.com/sites/defaul…
“Dijsselbloem Says Capital Controls May Help Avert Grexit – Bloomberg Business”
http://www.bloomberg.com/news/article…
“Greece Optimist Throws in Towel Seeing Tsipras Go ‘Plain Nuts’ – Bloomberg Business”
http://www.bloomberg.com/news/article…
“Greek PM to meet Russia’s Putin in Moscow on April 8: govt official | Top News | Reuters”
http://ca.reuters.com/article/topNews…
“News and events — Moscow Exchange”
http://www.moex.com/n8971/?nt=201
“20150318_starts.jpg 959×503 pixels”
http://www.zerohedge.com/sites/defaul…
“America’s Skills Challenge: Millennials and the Future – Introduction”
http://www.ets.org/s/research/30079/i…

Simple Home Tests to Determine Whether Your Bullion Is Real or Fake

by Precious Metals Market Update
Just about all bullion investors worry about counterfeits. Those concerns are magnified when someone is buying for the first time. Stories about fake coins from Asia and gold bars drilled and filled with Tungsten have been in the headlines recently. But the truth is, counterfeiting is just about as old as the concept of money itself.
Before diving into all the ways that fakes can be detected, the first and best protection is to work with a reputable and knowledgeable dealer such as Money Metals Exchange. Recently voted “Best in the USA,” Money Metals has high quality control and internal screening standards, plus it stands behind the metals that it sells to customers.
Fortunately, making phony coins or bars isn’t easy. The equipment involved is significant – it takes far more than a color printer and the right paper. And making fakes good enough to pass a few simple tests is darn near impossible.
Some testing equipment, such as mass spectrometers and sonogram machines, are expensive and impractical for the typical person to use. However, here are some lower budget ways you can determine whether or not the bullion you hold is genuine:
Size and Weight

image: http://www.moneymetals.com/uploads/content/426324rft.jpg
Gold and silver are extraordinarily dense metals – much denser than just about any base metal, including lead. That means just about all fakes that weigh correctly will be too large in diameter and/or thickness. Or they will be underweight in order to achieve the right diameter and thickness. Simply comparing the diameter and thickness of the coin in question with others known to be genuine could be enough to put you at ease.
If not, an inexpensive set of calipers and a jeweler’s scale are a good way of checking. Every coin or round is produced with close tolerances in terms of diameter, thickness, and weight. You can find these dimensions on the “Specifications” tab on our coin and round product pages.
Investors might also consider Fisch Testers. Genuine coins will be both small enough in diameter and thin enough to fit through a slot in the tool, while remaining heavy enough to tip the tool on its fulcrum. Simple and very effective.
Sound or “Ping” Testing

image: http://www.moneymetals.com/uploads/content/346ytg.png
Authentic gold and silver coins chime when struck and the difference is notable versus base metals. (For more about the melodic Ring of Truth you hear in Sound Money, read Guy Christopher’s essay here.)
Base metal coins will sound duller and their ring will be shorter — much like the difference between clinking crystal versus glass champagne flutes.
Try balancing the coin on your fingertip and strike it with another coin. Thisvideo provides a good demonstration.
Investors with an iPhone can also install the CoinTrust application and test a short list of the most popular gold and silver coins by gently spinning them on a hard surface with the phone’s microphone positioned nearby.
Magnetism
The above video on ping testing also references another simple technique for using a magnet to identify fakes. Gold and silver are non-magnetic. Placing a strong magnet on a coin and tipping it to watch whether the magnet slides off, as it should, or sticks, like it would to a counterfeit, requires only an inexpensive magnet and a few seconds. (Note that some base metals used in counterfeiting are also non-magnetic, so we suggest doing this in conjunction with some other techniques listed.)
Thermal Conductivity Testing for Silver
Silver is one of the best conductors of thermal energy found in nature. That makes it easy to test silver bullion using nothing more than an ice cube. Place an ice cube on top of a coin, round, or bar, and you should see it begin melting almost instantly as heat is quickly transferred. Holding a coin or round between fingers or in the palm of your hand makes the results even more noticeable as the silver rapidly cools to your touch.
Acid Testing

image: http://www.moneymetals.com/uploads/content/4tgf.png
Investors can purchase inexpensive acid test kits for gold and silver. Watching the color change in a drop of acid can reveal whether or not a sample is genuine. However, acids should be handled carefully. Your items can be permanently discolored.
Since bullion coins, rounds, and bars are valued for their metal content, not their beauty, discoloration is unlikely to reduce the value of your bullion by more than a small amount. But it’s still wise to use acid testing sparingly and with caution.
A Word about Tungsten Fakes
Some of the hardest to detect counterfeit gold products involve tungsten. Tungsten’s density is close to that of gold, and it is relatively inexpensive. Here are some of the best ways to avoid problems:
  • Avoid large gold bars. 10-ounce and larger gold bars are among the easiest to tamper with as they can be drilled, filled with tungsten, and then plugged again with gold. This is more difficult with units 1 oz and smaller. Tungsten is extraordinarily hard whereas gold is soft. This means tungsten is very difficult to use in minting or fabricating small items. It is brittle, and stamping it with a design will result in coins with less detail unless it has been plated with a thick layer of gold.
  • Ring testing as outlined above should still offer defense against tungsten fakes.
  • If the deal is too good to be true, it probably is. Never buy gold bullion below its melt value unless you know and trust its origins.
  • Buy silver. No metal shares a similar density to silver, making it even more difficult to make good counterfeits than with gold. Plus, the financial incentive is lower.

image: http://www.moneymetals.com/uploads/content/5745yw.png
Recently some of the more prominent mints and refiners have begun employing technology to mark products with seals that assure authenticity. For example, Sunshine Minting rounds and bars carry a seal that reads “VALID” when viewed using their proprietary lens and oriented correctly.
Investors can expect this sort of technology to be more widely used in the coming years. (Note: the lens carries a cost of around $20.00 and needs to be purchased separately from the metal itself.)
As mentioned above, the best defense against fake bullion is to buy from a reputable dealer. Money Metals Exchange sources products directly from well-regarded mints and refiners and employs good quality controls. That is why we can confidently stand behind every product we sell – guaranteeing authenticity, weight, and purity.

Read more at http://investmentwatchblog.com/simple-home-tests-to-determine-whether-your-bullion-is-real-or-fake/#q3FbMlDymjLBtLfp.99

Marc Faber: The Central Bankers Are Mad & Deranged

The U.S. Economy Just Keeps Disappointing, Options Market Signals 2007-Like Crash Risk, The Oil Bust Trigger 75,000 Layoffs And Counting

The U.S. economy keeps disappointing.
Last week, we reported on how the U.S. economy was the most disappointing major economy in the world based on the Bloomberg Economic Surprise Index, which measures incoming economic data against economist expectations.
These measures tend to move in cycles, as they reflect both the absolute economic data as well as the optimism or pessimism of the forecasters, which is in itself cyclical.
For the U.S. we keep driving lower, hitting depths not seen since the economic crisis. Again, this doesn’t mean that the economy is anywhere near as bad as it was then. But whether it’s a slowdown caused by the harsh winter or something else, relative to where economists thought we would be, the U.S. is missing by a large margin.
image: http://media.gotraffic.net/images/iFGwF.wUYdr0/v1/-1x-1.png
A major disappointment.
Source: Bloomberg

 Options Market Signals 2007-Like Crash Risk, Goldman Warns:
Although US equity prices have demonstrated a remarkable propensity to completely disregard apparently unimportant things like macro fundamentals, forward earnings estimates, and top-line growth projections, we’ve long argued that eventually, reality will come calling and the farther stretched valuations become in the meantime, the more painful the correction will be. As we noted on Sunday, the cracks are starting to form as DB became the first sell-side firm to predict that EPS will in fact not grow in 2015, prompting us to remark that “EPS growth in 2015 [is] now a wash (if not negative), which implies the only upside for the S&P 500 will once again come from substantial multiple expansion.” Against this backdrop of declining revenues, declining earnings, and pitiable economic projections (thanks a lot Atlanta Fed Nowcast), we bring you yet another sign that a “correction” may indeed be in the cards: an epic decoupling of put prices and S&P P/E ratios. 
Here’s Goldman:
Long-dated crash put protection costs on the SPX have more than doubled over the past 9 months. We believe it is an important development to watch as it implies investors are increasingly concerned about downside risk even as US equities trade near all-time highs. Based on our conversations with investors over the past few months, it appears the increase in long-dated put prices has largely gone unnoticed among equity and credit investors. In fact, Investment Grade credit spreads have actually tightened slightly over the same period. The rise in long-dated equity put prices may signal an increasing fear that a substantial market correction is on the horizon, despite low short-term put prices which suggest low probably of a near-term drawdown vs history.
As you can see from the following, this is no trivial divergence — it’s actually quite the anomaly:
image: http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/03/GS1.jpg
Furthermore, the usually tight correlation between the cost of OTM put protection and CDS spreads looks set to break down entirely as the CDS market doesn’t seem to be pricing in the same type of nervousness as the options market…
http://www.zerohedge.com/news/2015-03-17/options-market-signals-2007-crash-risk-goldman-warns
Housing Starts Plunge by the Most in Four Years:
(Bloomberg) — Housing starts plummeted in February by the most since 2011 as plunging temperatures and snow became the latest hurdles for an industry struggling to recover.
Work began on 897,000 houses at an annualized rate, down 17 percent from January and the fewest in a year, the Commerce Department reported Tuesday in Washington. The pace was slower than the most pessimistic projection in a Bloomberg survey of 81 economists.
“Today’s report leaves me a little concerned,” said Michelle Meyer, deputy head of U.S. economics at Bank of America Corp. in New York. “While the initial reaction is to dismiss much of the drop because of the bad weather, the level of home construction continues to be depressed.”
Permits to build single-family dwellings fell to the lowest level in almost a year, indicating home construction is lacking traction after contributing little to economic growth in 2014. At the same time, the data underscore a shift toward more demand for rental properties that make up a smaller part of the market.
http://www.bloomberg.com/news/articles/2015-03-17/home-starts-plunge-on-weather-while-u-s-building-permits-rise
Itemizing The Oil Bust: 75,000 Layoffs And Counting:
The American Oil Bust of 2015 is making it cheaper to fill up our tanks at the gas station, but it is decimating our nation’s oil and gas workforce as companies slash spending in hopes of surviving the downturn.
I received a very thorough spreadsheet from some well placed friends in the industry; it tabulates with more precision than I’ve seen anywhere else which companies have cut jobs, and how many. You can find the full list below. The conclusion: the worldwide oil and gas industry, including oilfield services companies, parts manufacturers and steel pipe makers, has laid off 74,000 so far. [Note: the original version of this story said 75,000, but we’ve since revised a couple companies’ numbers.]
Considering that about 600,000 work in the U.S. oil and gas sector, this is a big hit. And it’s important to note that most of these are solid middle class jobs. There’s not many industries where a guy with little more than a high school education can make $100,000 a year, but that’s a common pay package for drilling rig workers. I’m told by people who operate a lot of drilling rigs that for every rig mothballed about 40 people lose their jobs. The U.S. rig count is down by more than 700 from this time last year.
http://www.forbes.com/sites/christopherhelman/2015/03/16/oil-layoffs-itemized-75000-and-counting/
Headlines:
  1. Calpers Chief Sees Lower Returns as Bull Market in Stocks Ebbs
  2. City school front office salaries average in $100K (Baltimore)
  3. Argentina Default No Longer Foreign Affair as Refuge Endangered

Jim Grant: The Fed Has Virtually Nationalized The Banking Sector