Chinese Devaluation Extends To 3rd Day - Yuan Hits 4 Year Low, Japan Escalates Currency Race-To-The-Bottom Rhetoric

The "one-off" adjustment has now reached its 3rd day as The PBOC has now devalued the Yuan fix by 4.65% back to July 2011 lows.
The PBOC seeks to reassure...

• *CHINA PBOC SAYS YUAN REMAINS STRONG CURRENCY IN LONG-TERM
• *PBOC SAYS THERE IS DEMAND FOR DEVALUATION OF YUAN VS USD
• *PBOC CHANGE OF YUAN MECHANISM RELATED TO JULY CREDIT: ZHANG
• *PBOC SAYS YUAN CHANGE IS BENEFICIAL TO LONG TERM STABILITY
• *PBOC SAYS YUAN EXCHANGE RATE ADJUSTMENT ALMOST COMPLETED
• *YUAN RATE ADJUSTMENT POSITIVE TO CONFIDENCE IN YUAN: PBOC'S YI
• *NEW YUAN MECHANISM `POSITIVE' TO INTERNATIONALIZATION: PBOC YI
• *PBOC SAYS NO BASIS FOR YUAN'S CONSTANT DEVALUATION: ZHANG

Even before this evening's date with debasement history, Japan felt the need to step up the currency war rhetoric. Following disappointing Machine Orders data, Abe advisors Hamada warned that "Japan can offset Yuan devaluation by monetary easing," and so the race to the bottom escalates. China has its own problems as BofAML's leading economic indicator showed "the foundation for a growth recovery is not solid, facing more downward pressure," and while confusion reigns over why The PBOC would intervene at the close to strengthen the Yuan last night, the reality is the commitment isn’t to a devaluation for China’s exports, but undoubtedly its actions are directed toward trying to keep the wholesale finance interfaces somewhat orderly.  Finally, China’s devaluation couldn’t come at a worse time for Argentina - about a quarter of the country’s $33.7 billion of foreign reserves are now denominated in yuan, which suffered its biggest loss since 1994 on Tuesday.
Having devalued the (onshore) Yuan fix by 3.5% in the last 2 days, China did it again... shifting Yuan to 4 year lows

• *CHINA SETS YUAN REFERENCE RATE AT 6.4010 AGAINST U.S. DOLLAR

Offshore Yuan dropped back to 6.50...


And China Stocks have opened lower...

• *CHINA'S CSI 300 STOCK-INDEX FUTURES FALL 1% TO 3,975.2

S&P  Futures are fading...

Some more liquidity needed...

• *PBOC TO INJECT 40B YUAN WITH 7-DAY REVERSE REPOS: TRADER

And sure enough, not be outdone, Japan threatens to re-escalate the currency war...

• *ABE ADVISER HAMADA SAYS CHINA'S FX MOVE WILL TEND TO BOOST YEN
• *HAMADA: JAPAN CAN OFFSET YUAN DEVALUATION BY MONETARY EASING
• *HAMADA:BOJ MAY EASE IF CHINA MOVE HITS EXTERNAL DEMAND TOO MUCH

But China has it's own problems, as BofAML notes, China LEAP (leading economic activity pulse) fell to-3.9% YoY in July from -2.6% in June, as five of the seven LEAP components weakened.

Similarly, other macro activity data released in July worsened from a surprisingly strong June and disappointed the market. It suggests the foundation for a growth recovery is not solid, and economic growth faces more downward pressure as financial sector activity has slowed after the recent stock market slump.



On the demand side, housing starts further declined to 16.4% yoy in July after dropping 14.3% in June. We think destocking could still be ongoing in tier 3-4 cities and the housing market recovery has yet to drive acceleration in housing starts. Auto sales growth slumped to -7.1% YoY from -2.3%, likely due to weakening consumer demand for some big-ticket items amid stock market turmoil while staple good sales remained resilient.

Production-side components were mixed, with weaker power and steel output growth but slightly better cement output growth. Power and steel output growth was particularly poor in July, likely due to plummet in commodity and raw material prices on a bearish growth outlook amid stock market turmoil.

Medium- to long-term loan growth edged down by 0.8pp, but if taking into account local government debt swap, the decline would be 0.3pp instead.

*  *  *
The fallout from China's decision is going global...

China’s devaluation couldn’t come at a worse time for Argentina.

About a quarter of the country’s $33.7 billion of foreign reserves are now denominated in yuan, which suffered its biggest loss since 1994 on Tuesday.

*  *  *
And finally, here is Jeffrey Snider of Alhambra Investment Partners discussing the other reality of what is occurring in China - as opposed to the paint-by-numbers version spun on TV - explaining why the PBOC would seemingly “allow” devaluation one day and then act against it the very next. They are just trying to hold on for dear life, managing imbalances that are beyond their grasp.

While everyone remains sure that the PBOC is actively trying to “allow” the yuan to depreciate as some kind of export catalyst, the “dollar” continues to show (not suggest) otherwise. Liquidity and “dollar” markets are still roiled rather than soothed, especially the US treasury market where the bid right at the open (what look very much like continued collateral calls) pushes more like a combination of October 15 and January 15.



As if to underscore the runaway nature, the PBOC apparently intervened against this “devaluation” just last night. From the Wall Street Journal:

Tuesday, the People’s Bank of China surprised global markets with what looked like a win-win currency depreciation for the country—appearing to cede more control of its exchange rate to market forces, which the International Monetary Fund and others have long urged it to do, while also helping Chinese exporters.

Its intervention only one day later raised questions about its commitment to an exchange rate driven more by supply and demand and less by government direction.

The Journal’s confusion here is demonstrated by what is a mistaken assumption in the first paragraph leading to the mystery of the second. The PBOC’s commitment isn’t to a devaluation for China’s exports, but undoubtedly its actions are directed toward trying to keep the wholesale finance interfaces somewhat orderly. When the yuan was trading exactly sideways for nearly five months, that was the same setup; the PBOC was keeping the yuan stable so that it wouldn’t devalue and thus signal the depth of the “dollar” financing strain.

That is the problem orthodox commentary and theory has with wholesale finance, they just don’t get it. Devaluation of currency doesn’t mean that in this context just as a “strong dollar” isn’t anything like the term. Both are forms of internal disruption, the direction of that is just an expression of what manner of wholesale finance is becoming most unruly. Credit-based “money” systems do not operate like the currency systems from before 1971. Floating currencies aren’t really that, so much as they are just another form of traded liabilities in global banking.



The Chinese have a “dollar” problem just the same as the Swiss, Brazilians and the rest (including the dollar). There is a global retreat in eurodollar funding that is wreaking havoc, expectedly, globally. And in China that is particularly true as the Chinese banks through external corporates joined the “dollar short” several years back. Joined now under PBOC “reform”, there has been an almost hostility if not at least disfavor over the “dollar” intrusion as it has been taken as one primary element of the bubbles (what mainstream mistakes for “hot money”). As a result, the PBOC has been almost chasing “dollars” out of the system in an attempted orderly purge.

That led to what looked like historic “outflows” in 2015 as “dollar” conditions for the Chinese “short”, so it is absolutely no surprise to see this occurring now. The only mystery has been, as I have been writing for some time, what the PBOC was doing to counteract it during those five months. That would tell us both how serious the turmoil was and how ineffective whatever intervention would ultimately be.

From July 22:
The yuan has suddenly, right at the March FOMC meeting, gone limp. Trading has been confined, except for very brief, intraday outbursts, to an increasingly narrow range. Given its behavior particularly as a full part of the reform agenda to that point, this amounts to what can only be hidden and inorganic factors. Whether that means PBOC intervention is unclear, though suggested by even TIC, but this is the most important and unexplained dynamic in the “dollar” world at present.

Perhaps the June TIC updates will help shed some light on what has been going on with China’s “dollar short”, but I doubt it. The nature and especially the scale of what might be happening in the money markets has global implications, and may (conjecture on my part) start to explain the reversal in the Chinese stock bubble and ultimately even relate to the “dollar’s” renewed disruption in July so far.

Earlier July 8:
It’s not enough to notice how this [zero yuan volatility] is odd, as it appears, given wider circumstances, to be almost odd with a purpose. Whenever uncertainties grew about China’s reform, especially “allowing” defaults, “dollar” supplies tightened significantly and the yuan devalued. Given the fragility of the current situation, you can understand why, possibly, the PBOC might not want too much to get so far out of hand and so they may be supplying “dollars” to maintain orderly money markets both onshore and off. Given the plunge in import activity they may not really need to supply all that much, particularly in combination with prior and intended outflows as they effectively tried to chase speculators out of the country. Perhaps they did too much?

Whatever the case may ultimately be, it bears close scrutiny for several reasons. First, if this is correct (a very big “if”) then the financial system in China is worse, far worse, than it appears. Second, central bank attempts such as this are extremely finite as they are, over time, hugely inefficient. The PBOC might just be throwing everything in its arsenal at the financial system short of open “flood” declarations (which are themselves destabilizing; declaring an open emergency is as much confirmation of how bad everything is) trying to calm everything down in order to reassess. [emphasis added]

That is why the PBOC would seemingly “allow” devaluation one day and then act against it the very next. They are just trying to hold on for dear life, managing imbalances that are beyond their grasp. That is what occurred last night, as the Wall Street Journal confirms that Chinese banks were “selling” dollars on the PBOC’s behalf; which is, in the wholesale context, supplying “dollars.” The currency translation is just the recognition of that imbalance, which is in many forms like this kind of convertibility almost a “run.”

The PBOC then instructed state-owned Chinese banks to sell dollars on its behalf in the last 15 minutes of Wednesday’s trading, according to people close to the state banks.

The central bank took it as far as it could and then the “dollar” dam just burst on really bad economic data that was expected instead to confirm the bottom. At this point, it looks like they are left only to try to mitigate the damage they had been for five months hoping would never occur as the global economy was supposed to have healed on its own long before then (which was nothing more than FOMC and orthodox pipe dreams).

Another central bank has fallen prey to the decomposing “dollar”, as the global tremors of such central bank upsets ripple further and further.

There's More To Come - Offshore Yuan Signals Further Devaluation Tonight

Despite 2 significant interventions to stall what is likely an avalanche of wrong-way carry trade unwinds (or perhaps to stop the boat swinging to the other side too much), offshore Yuan has continued to depreciate since China closed and now implies another 1% devaluation is looming (having been up to a 2.6% discount earlier in the day).

PBOC intervened in CNY overnight...


But CNH remains adamant that more devaluation is coming...


CNH nailed it overnight... will it be right again tonight?

Charts: Bloomberg

Will the Bank of England now consider a Bank Rate cut?

by Shaun Richards
Over the past 48 hours or so the international environment has changed quite considerably as China for the second day in a row has devalued its currency. My subject of yesterday has seen an official fixing move of 1.6%% to follow yesterday’s 1.9%. However for the moment I would like to leave that hanging in the background as we look at UK monetary policy because today brings the monthly update on the labour market and in particular on average earnings or wages. With UK economic growth looking solid in 2015 then the Bank of England will have its nose to the ground on the subject of wage growth in the UK.
UK wage outlook
We have been update twice this week on the outlook for UK wages. The CIPD (Chartered Institute for Personnel and Development) offered what has become a familiar picture on Monday.

workers in occupations where there are skills or labour shortages and thriving sectors such as finance and construction seem likely to get pay increases well above current inflation. However, at the other end of the scale, many workers in areas such as manufacturing and public sector, are seeing only a very modest increase in living standards.  In between, the bulk of workers will continue to see moderate growth in their pay packets.

A typical increase is seen as being in the range 1% to 2% which is hardly the white heat of wage growth albeit that it does exceed official estimates of consumer inflation meaning that we have some real wage growth. However it too is welcome but thin.
A welcome piece of news in the CIPD report was that employers are looking to take on more young people (16-24) in the coming months. The optimistic view of that is that they are planning to invest in them and up skill whilst those of a more pessimistic nature might wonder if the upcoming living wage rules which have a lower level for under 25s have provoked a shift.
Resolution Foundation
They now publish a monthly update on what they think is happening on the wages front.

The analysis, which models recent labour market data to forecast short-term trends in regular (non-bonus) pay, predicts that average weekly earnings growth will stand somewhere between 2.7 and 2.8 per cent in the three months to June. That would leave it broadly in line with May’s figure of 2.8 per cent – which was the joint fastest level of real pay growth in eight years.

This is both simultaneously good and bad. The sunny side is that we seem to be sustaining solid wage growth which is pretty much real wage growth compared to official inflation and about 1% lower than that if you use the RPI. The cloudier theme comes if you consider how strong the quantity measures of the UK labour market have been and wonder if this is as good as it gets on this front. As we stand they are somewhat downbeat on prospects.

But the Foundation warns that pre-crisis earnings are unlikely to be restored before the end of the decade.

What about the official data?
They showed that the Resolution Foundation is a good guide to developments or at least it has been in a so far short life.

Comparing April to June 2015 with a year earlier, pay for employees in Great Britain increased by 2.4% including bonuses and by 2.8% excluding bonuses.

In real terms the numbers are still positive just not as good as last month.

Comparing the three months to June 2015 with the same period in 2014, real AWE (total pay) grew by 2.4%, compared with 3.3% in the three months to May.

If we look deeper into the data we see that for the single month of June total pay growth fell to 1.9% as weekly wages fell to £488 from the £492 of May. This can be an erratic series but it is hard to ignore an outright lower number which reduces the annual rate of growth.
What numbers should we use?
We need to use as many sources as possible as even the UK establishment seems to have lost a fair bit of faith in the statistics it produces. They have appointed a man who used to be Mr.Bean but is now Sir Charlie to look into them.

As an economy develops, the traditional ways of thinking about it cease to be so relevant,” he said, flagging concerns that official numbers may be incomplete in an internet age.

He feels that the numbers may have been relevant for the Great Depression of the last century but not now. I am very unclear where he is going with that as many of the numbers we use as much more recent developments. Perhaps he will discover that as he does his research.
However the fundamental point is that we are currently relying on numbers which are not especially reliable.
Employment and Unemployment
These have been strong over past couple of years or so but we are presently in the midst of something of a hiccup.

Comparing April to June 2015 with January to March 2015, the number of people in employment fell by 63,000 (to reach 31.03 million), the number of unemployed people increased by 25,000 (to reach 1.85 million).

So employment has fallen and unemployment risen albeit in small quantities compared to past gains. If we drill into the detail we see that unemployment rate rose in April (5.7%) and May (5.8%) before falling in June (5.5%). So perhaps a blip but we do know that so far the lowest level for the unemployment rate was February’s 5.4%.
Mark Carney
At this point it is hard not to think of his “sooner rather than later” statement with regards to Bank Rate rises with today’s headline numbers showing fading wage growth, a dip in employment and a rise in unemployment! Regular readers will know my thoughts on this front but is it rude to point out this piece of research from the Bank of England? The emphasis is mine

In this post, we show an estimate derived from a standard macroeconomic model which suggests that the (real) natural rate fell very sharply during the financial crisis, perhaps to as low as -6%, and that, despite a marked recovery since 2012, it remains around zero.

David Miles
David gave something of a valedictory interview to Bloomberg earlier this week and told us this.

David Miles said there was a “reasonable” argument for the Bank of England to raise interest rates at its meeting last week

As he was someone who voted for more QE just as the UK boomlet began it may be possible or even probable that David has topped and tailed things and certainly does not live up to the lyrics of Pete Townsend.

I can see for miles and miles and miles and miles and miles
Oh yeah

China Crisis
Whilst this something which is only two days old it has reverberated around financial markets as they quickly switched from “move along nothing to see here” to some significant changes. For example the modern safe haven of Germany’s two-year bond yield has fallen to -0.29% which is a new record low. Also I note that the Rupee of India is being hit as we consider the impact on emerging markets. If we consider that this could be quite an exporting of deflation then you might like to consider this from the July MPC Minutes.

For these members, the uncertainty caused by recent developments in Greece was a very material factor in their decisions:

If they thought that about Greece which is only around 2% of the Euro area what might they do following a genuine China Crisis.
As to today’s devaluation then our musical accompaniment comes from Britney Spears.

Hit me baby one more time

And Carly Simon

Its coming around again

Comment
Individual labour market reports can be misleading but we see that the UK numbers are maybe signalling something of a peak is happening now or in the case of unemployment has happened. Also as a counterpoint to the wage growth numbers it appears that productivity has improved as we have higher output with lower labour input. So even before we get to worries about China the Bank Rate hike may well be fading and find itself replaced by thoughts as to how close to 0% the statement below is?

it remains around zero.

Should it turn out to be 0% then Mark Carney will be below his lower bound of 0.5%. Perhaps he might contact the Riksbank of Sweden? Also he might want to avoid those who have followed his advice and fixed their mortgage rate.

Italian Bond Futures Flash-Crash Into Close

Fat-Finger, Flash-Crash, or Forced Liquidation... either way, something broke in the Italian bond futures market...
Fat finger?


or forced liquidation?


Charts: Bloomberg

Carlos Slim, World’s 2nd Richest Man, Mexico’s Biggest Oligarch, Master of Slimlandia, Suddenly Loses Billions

By Don Quijones, Spain & Mexico, editor at WOLF STREET.
The world’s second richest man, Carlos Slim Helú, is doing something he hasn’t done for a long time: losing lots of money. According to El Financiero, Slim’s holdings are down $7.2 billion so far this year.
While that amount represents one-tenth of Slim’s total worth at the beginning of this year ($77 billion), it’s enough to hurt. After all, when one’s wealth is already so vast that it could buy up pretty much anything on the planet, including small nations, reputation is what ultimately counts.
Until recently, Slim’s reputation as an investor was virtually flawless. His ability to turn just about anything, from banking, retail and airlines to mining, printing, construction, restaurants and telecoms – particularly telecoms – into fortunes was unrivalled. But now losses are piling up. And is his reputation is getting dented.
Losing the Midas Touch?
Slim’s gold mining company, Minera Frisco SAB, has tumbled 53% this year, the worst performance among 90 international peers tracked by Bloomberg:
Mexico City-based Frisco has had only one profitable quarter in the past nine, and this year’s 6.7 percent slide in gold prices is just making things worse.
Slim owns 78 percent of Frisco, according to data compiled by Bloomberg, so he’s the biggest loser from the stock’s collapse; it has contributed to a $7.2 billion tumble in his fortune this year, the most among 400 rich people tracked by Bloomberg.
Laura Villanueva, an analyst at Mexican brokerage Monex Casa de Bolsa SA, sees more losses ahead for Frisco as the company struggles with falling output and a high debt load.
Frisco is not the only Slim-owned investment vehicle to have hit the wall. U.S.-traded shares of his telephone behemoth, America Movil SAB, have lost 12%, primarily as a result of losses in the Mexican peso and recent regulatory changes in Mexico. Shares in his bank, Grupo Financiero Inbursa SAB, have also fallen.
Meanwhile, his $74 million investment in the ailing Spanish construction behemoth FCC is increasingly looking like another bad bet. When Slim bought 25.5% of the company back in November last year, at an average price of €9.75 euros a share, many analysts hailed it as yet another piece of shrewd business from a man famed for snapping up bargains in the midst of panics and sell-offs. He even had to fight off interest from fellow billionaire investor George Soros.
But now FCC’s shares are languishing at €8.695, over 10% down from their original price, and rumors are fast spreading that the company could be on the verge of another debt restructuring and capital increase. For Slim, that could mean a further dilution of his capital and yet more squandered funds.
Little Sympathy in Slimlandia
While Slim is often celebrated in the international press for both his sharp business acumen and generous philanthropy, his recent misfortunes are unlikely to elicit much sympathy back home in Mexico, a country that boasts some of the worst inequality rates on the planet.
While Slim may not be the primary cause of that inequality, he is certainly one of the primary beneficiaries and arguably its most visible symptom — so much so that George Grayson, a Mexico expert at the College of William & Mary in Virginia, recently rechristened Mexico: “It’s virtually cradle to grave. It’s Slimlandia. You are engulfed by Slim in Mexico.”
Slim owns controlling interests in at least 222 different companies and minor stakes in countless more. His vast business empire is influential in just about every sector imaginable of the Mexican economy and accounts for a mind-blowing 40% of the listings on the Mexican Stock Exchange. As Paul Harris writes in The Guardian, the sheer scope of his holdings is breathtaking:
It is virtually impossible for Mexicans to go about their lives without in some way contributing to his fortune… They are born in Slim’s hospitals, drive on his Tarmac, smoke his tobacco. They build their houses from his cement, eat in his restaurants, talk on his phones, and sleep in bed linen made in his factories.
As I wrote in Slimlandia: Mexico in the Grip of Oligarchs, Slim is not Mexico’s only billionaire. There are 15 others on Forbe’s latest billionaire’s list, which this year does not include the fugitive Mexican drug trafficker Chapo Guzman, who bizarrely was featured on the list four separate times before a public outcry in Mexico put an end to the practice.
Together these 16 individuals – half of whom are or were owners of former state-run enterprises – boast a combined wealth of $144 billion, equivalent to 11.4% of Mexico’s GDP of $1.26 trillion in 2014.
Putting the Robber Barons to Shame
Even after his recent setbacks, Slim’s holdings account for just under half of that amount: his total wealth of approximately $70 billion is the equivalent of nearly 6% of Mexico’s GDP. This puts even the U.S. robber barons of the 19th century to shame: at the peak of his powers, John Rockefeller was worth just 2.5% of U.S. GDP.
It’s no coincidence that Mexico is the most unequal of the 34 nations that make up the Organization for Economic Cooperation and Development (OECD). As a recent in-depth report by El Daily Post reveals, there are 2,540 Mexicans whose net individual assets reach $30 million dollars or more.
They would fit into two Metro trains, but control 43% of the total individual wealth in the nation. Meanwhile, 61 million Mexicans, the equivalent to Italy’s total population, cannot afford a decent standard of living.
Most worrisome of all, the gaping gulf between the nation’s super rich and the super poor continues to grow at breakneck pace. In the last 40 years, Mexicans’ purchasing power has not just stagnated, as has happened in many Western nations, but hasshrunk by two-thirds. In 1976, a family on minimum wage could buy four times as much as today.
In the last 18 years, the average fortune of Mexico’s select group of 16 billionaires grew from $1.7 billion to $8.9 billion. Meanwhile, the average Mexican in the lower 20% has a net worth of $80 dollars. There are few better examples of systemic failure.
For decades, Mexico has followed — and in many ways continues to follow — the rule book of modern economic governance. It is Latin America’s second most privatized nation. And it has signed more free trade agreements than just about any other nation under the sun. Yet the result is ever-increasing concentration of power and wealth, stagnating incomes, rising prices, and dwindling choices for consumers who have to deal with Slim’s empire whether they want to or not. So his $7.2 billion loss so far this year elicits scant sympathy in Slimlandia. By Don Quijones, Raging Bull-Shit.
Mexico is already working on a recipe for its next debt crisis. Read… Corporate Dollar Debt Explodes in Mexico as Peso Dives

Rotten Apple: Former Leader Breaking Down

Via Dana Lyons' Tumblr,
This is just a quick-hitter post on another former leader that is breaking down. As we have mentioned several times – in particular on July 22 and August 5 – the ever-thinning stock market rally is starting to lose the relatively few leaders still keeping it afloat. That July post noted the relative weakness in the equal-weight Nasdaq 100, even as the cap-weighted index remained near its highs. One reason was the performance of Apple Inc. (AAPL), the largest stock in the index, and the entire U.S. market. When AAPL is moving higher, it can mask a lot of problems in the broader market. Unfortunately for bulls, AAPL is beginning to crack. It began on the day of the July post when it got crushed following its earnings release. It has since broken down more, recently dropping below its post-2009 UP trendline.


As the chart indicates, we are using a logarithmic scale. AAPL prices held the trendline in 2013 and 2014 but broke below just last week. Yesterday, the stock tried to retake the trendline – but it failed miserably, losing over 5% today.
For a market reasonably close to its 52-week high that has exhibited an almost unprecedented deterioration in breadth, it can ill-afford to lose the few leaders it has left – especially one rotten apple that just so happens to be the largest stock in the world.
*  *  *

Mannarino: “We Are In An Environment Of Peak Debt…and World Central Banks Are Going To Continue To Inflate It Despite That. There’s No Doubt About That. This Is The Situation We Are In.”

Gregory Mannarino TradersChoice, Released on 8/11/15
“We are in an environment of peak debt…and world central banks are going to continue to inflate it despite that. There’s no doubt about that. This is the situation we are in.”

 

What Recovery – Currency Wars – The Central Banks Will Continue To Game The System By Adding Money, Leveraging A Broad Tax On Everyone Who Holds Their Currency, By Using A Number Of Means To Devalue Their Currencies.

by Jesse’s Café Américain
image: https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg46vxPsklptRe9KN4T03sxG2W18pieeqPu3Kw8zebB1OJpxDKqrbOzxYb4QcoURRds0V5Vbnzu30DZCEIldKyviPGDvxnDa8nkaqzDIgaDfaPWAWGLgXnjwF1OkQvJxp5n8sG66CoE5ixW/s400/fortunetellrtnorecovery.JPG
China shocked the world markets overnight by devaluing their currency by the most in two decades.
A devaluation of this sort is designed to improve the domestic economy by stimulating exports, lowering domestic costs of production relative to other sources, and to inhibit imports by raising their relative prices.
In other words, China clearly signaled that the US dollar, to which they were matching their own currency, is overvalued relative to the state of the global economy, and especially their own.
China is ‘the canary in the coal mine’ for the global economy, a major source of labor and supply. Their own economy is sick because demand from overseas is down.
And why is demand lower? Because multinational corporations and the banking system have been financializing nearly everything to increase corporate profits and the wealth of a very few, pretty much at the expense of everyone else.
So if the people do not have the money to buy, and cannot keep increasing their private debt to service consumption because of the predatory lending and fees in the system, guess what happens to aggregate demand? Duh.
This is not new. This is not unknown to economists. Thanks for Wall Street Parade for reminding us of Franklin Roosevelt’s campaign speech delivered at Oglethorpe University in 1932 during the depths of the Great Depression.

“Our basic trouble was not an insufficiency of capital. It was an insufficient distribution of buying power coupled with an over-sufficient speculation in production. While wages rose in many of our industries, they did not as a whole rise proportionately to the reward to capital, and at the same time the purchasing power of other great groups of our population was permitted to shrink.
We accumulated such a superabundance of capital that our great bankers were vying with each other, some of them employing questionable methods, in their efforts to lend this capital at home and abroad. I believe that we are at the threshold of a fundamental change in our popular economic thought, that in the future we are going to think less about the producer and more about the consumer.
Do what we may have to do to inject life into our ailing economic order, we cannot make it endure for long unless we can bring about a wiser, more equitable distribution of the national income.”

The bankers have everyone focused on their interest rate antics while they have inflated their balance sheets obscenely, primarily for the benefit of the denizens of the FIRE sector who are acquiring productive assets and establishing monopolies with that paper.  The Fed is a key regulator of the banking system.  And they are failing badly.
You may disagree with the methods that FDR used during his ‘New Deal’ but I think his analysis of the problem was correct.  Andrew Jackson made similar observations in a different time and used different methods to address the issue.  They are outlined in his famous Farewell Address.

“But with overwhelming numbers and wealth on their side they are in constant danger of losing their fair influence in the Government, and with difficulty maintain their just rights against the incessant efforts daily made to encroach upon them.
The mischief springs from the power which the moneyed interest derives from a paper currency which they are able to control, from the multitude of corporations with exclusive privileges which they have succeeded in obtaining in the different States, and which are employed altogether for their benefit; and unless you become more watchful in your States and check this spirit of monopoly and thirst for exclusive privileges you will in the end find that the most important powers of Government have been given or bartered away, and the control over your dearest interests has passed into the hands of these corporations.”

The problem was not paper money per se, but the concentration of power and wealth which the abusive use of the monetary power had granted to a few powerful individuals and institutions.  No system is foolproof when a foolish people will allow the unscrupulous few to operate it in secrecy and without transparency, accountability and the rule of law.  And if anything is clear, the crony regulation by the Fed and others of the Banking System, or lack thereof, is a failure and the source of much of our mischief.

image: https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhROSDi2KjPril3fUSw2LHNcHmCL4bkiU4Ww36YwbKjNSmRuNbrtk00HrEysiOKVEv6nsy85fMJV7NATQFnGgUtc-tjxwt3td8av3jA4NoCyoy66-6hGtylo8blzC-xXxqDkfwjPPiWr2Ka/s400/MoveableFeast.png

And the primary reason we cannot acknowledge the facts of our own situation is that our political and financial class are caught in a credibility trap. They cannot speak the truth without compromising their own personal greed and will to power. And this is dangerous because FDR was a bit of an outlier, an odd combination of personal advantage and profound physical suffering, in a time that gave rise to terrible demagogues in the US and other countries.
The implications of this are an intensification of the currency war as the financial powers continue their stranglehold over the governments and the economic systems, inflating money but keeping the most of it for themselves, so that wages and income for the great mass of the public remains slack and a broad sustainable recovery is not thereby driven.  Say’s Law, which decrees that increased production creates its own demand through necessarily increased wages, is as great a canard as the efficient markets hypothesis.
So, the central banks will continue to game the system by adding money, leveraging a broad tax on everyone who holds their currency, by using a number of means to devalue their currencies.  And creating a few winners and many losers by running the confidence game, large and in charge, of being wise and perfectly objective administrators, and not cronies and viceroys for the moneyed interests. As James Montier pointed out in his essay here:

“Lest you think I am being unduly harsh on the world’s poor central bankers, let me turn to the wider idolatry of interest rates that seems to characterise the world in which we live. There seems to be a perception that central bankers are gods, or at the very least minor deities in some twisted economic pantheon. Coupled with this deification of central bankers is a faith that interest rates are a panacea.
Whatever the problem, interest rates can solve it. Inflation too high, simply raise interest rates. Economy too weak, then lower interest rates. A bubble bursts, then slash interest rates, etc., etc. John Kenneth Galbraith poetically described this belief as “…our most prestigious form of fraud, our most elegant escape from reality… The difficulty is that this highly plausible, wholly agreeable process exists only in well-established economic belief and not in real life.”

The US Dollar did not soar as measured by the DX index, but instead was flat as shown below.  As I noted, it is outdated and is now primarily the inverse of the Euro.  I would imagine the dollar and gold and other alternative safe havens got legs when priced in Chinese Yuan.
Stay tuned, because the action is just beginning.
Have a pleasant evening.

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Read more at http://investmentwatchblog.com/what-recovery-currency-wars-the-central-banks-will-continue-to-game-the-system-by-adding-money-leveraging-a-broad-tax-on-everyone-who-holds-their-currency-by-using-a-number-of-means-to-devalue-t/#gUju88xVxkAW3GAe.99

Russia Deepens Its Recession, 10 European Countries In Recession, China & Canada Heading Into Recession. Another Global Recession Already Here!

Russia deepens it’s recession

Russia’s economy shrank the most since 2009 after a currency crisis jolted consumer demand, while a selloff in oil threatens to drag the country into a deeper recession.
Gross domestic product contracted 4.6 percent in the second quarter from a year earlier after a 2.2 percent decline in the previous three months, the Federal Statistics Service in Moscow said on Monday, citing preliminary data. That was worse than the median forecast for a 4.5 percent slump in a Bloomberg survey of 18 analysts. The Economy Ministry had projected that output shrank 4.4 percent in the period, calling it “thelowest point” for Russia.

image: http://assets.bwbx.io/images/iNUBTfcqvMGQ/v1/488x-1.jpg

http://www.bloomberg.com/news/articles/2015-08-10/russian-economy-shrinks-4-6-as-oil-slump-risks-deeper-recession

Ireland, Belgium, Czech Republic, Italy, Portugal, Tawain, Slovenia, Ireland, and Netherlands…all in recession.
http://www.telegraph.co.uk/finance/financialcrisis/9160633/Countries-in-recession-in-pictures.html?frame=2174796
Greece is past recession and bankrupt…
China is heading toward recession

Russia’s economy shrank the most since 2009 after a currency crisis jolted consumer demand, while a selloff in oil threatens to drag the country into a deeper recession.
Gross domestic product contracted 4.6 percent in the second quarter from a year earlier after a 2.2 percent decline in the previous three months, the Federal Statistics Service in Moscow said on Monday, citing preliminary data. That was worse than the median forecast for a 4.5 percent slump in a Bloomberg survey of 18 analysts. The Economy Ministry had projected that output shrank 4.4 percent in the period, calling it “thelowest point” for Russia.

image: http://assets.bwbx.io/images/iNUBTfcqvMGQ/v1/488x-1.jpg

http://www.bloomberg.com/news/articles/2015-08-10/russian-economy-shrinks-4-6-as-oil-slump-risks-deeper-recession

Ireland, Belgium, Czech Republic, Italy, Portugal, Tawain, Slovenia, Ireland, and Netherlands…all in recession.
http://www.telegraph.co.uk/finance/financialcrisis/9160633/Countries-in-recession-in-pictures.html?frame=2174796
Greece is past recession and bankrupt…
China is heading toward recession

 

Canada is on verge of recession
The latest economic data from Canada shows that it is inching toward recession, after its economy posted its fifth straight month of contraction.
Statistics Canada revealed on July 31 that the Canadian economy shrank by 0.2% on an annualized basis in May, perhaps pushing the country over the edge into recessionary territory for the first half of 2015.
“There is no sugar-coating this one,” Douglas Porter, BMO chief economist, wrote in a client note. “It’s a sour result.”
The poor showing surprised economists, who predicted GDP to remain flat, but it the result followed a contraction in the first quarter at an annual rate of 0.6%. Canada’s economy may or may not have technically dipped into recession this year — defined as two consecutive quarters of negative GDP growth — but it is surely facing some serious headwinds.
http://money.cnn.com/2015/08/04/news/economy/canada-on-verge-of-recession-oil/
US crude oil dips below $43 for first time since March on concerns of weaker demand from China – @CNBCnow
http://www.breakingnews.com/topic/us-economic-indicators/
This is all in the MSM; but it’s hidden back in the business sections of the website…never front page news. And certainly not on prime time televised MSM.
Herein USA it is “hidden news”…they print it, but never on the front page of a website. And 95% of Americans don’t read the business pages and wouldn’t understand them if they did.
And the MSM here releases bad economy info little by little, with days in between. It seems as if all the major world players, aka illuminati or whatever — are in on it together. They are hoping to control the crash and usher in the NWO.

AC

 

 

 

MUST WATCH: 13 Year Old Victoria Grant On Corrupt Banking, Governments And Corporations

Don't Be Fooled By the Chinese Yuan Devaluation; The US Dollar is Pitiful

By Simon Black

As the saying goes, “Fool me once, shame on you. Fool me twice, shame on me.”

(… to which George W. Bush famously added after flubbing the aphorism on live TV, “can’t fool me again!”)

For months, despite every shred of data pointing to a weaker economy, China’s currency has been strengthening.

This was really counterintuitive. When an economy is weak, its currency tends to suffer.

But that didn’t happen in China.

Even when China’s stock market suffered one of the biggest crashes in history a few weeks ago, the currency barely moved.

None of this made any sense.


Just look at Greece-- problems in that single nation, one of the smallest economies in Europe, dragged down the currency used by 18 other nations in Europe to its lowest level in more than a decade.

But when problems broke in China, the renminbi actually got stronger. And party bosses insisted that they would not devalue their currency.

Fool me once.

Yesterday they showed the world what their promises really mean: nothing. And in a surprise announcement, they devalued the renminbi by roughly 2%.

2% might not sound like very much. But in currency markets, especially for a major one like China’s, 2% is a huge move.

Curiously, in the very same announcement, Chinese officials stated that they would not devalue the currency again, and that Tuesday’s move was a one-time thing.

Fool me twice.

Less than 24-hours later they did it again -- a second devaluation that saw the renminbi tumble to as low as 6.57 per US dollar, a 6% decline in roughly 36 hours.

Again, this is a steep drop for a currency, and I expect that there’s more to come.

All of this raises an interesting question about the future of the US dollar.

Because if an economy as large and powerful as China’s has had to concede defeat, does this mean that “King Dollar” will rule forever?

No chance.

Remember that the dollar’s strength is derived from its status as the primary global reserve currency.

Nearly every government, commercial bank, and central bank in the world holds US dollars in reserve, and the dollar is used as the primary currency in global trade.

Whether in Saudi Arabia or South Africa, a barrel of oil is priced in US dollars. Even jets manufactured in France and sold to European airlines are priced in US dollars.

But this status is by no means written in stone. The US dollar is not the first global reserve currency, and it won’t be the last.

We can go back in time to the Byzantine solidus, or the Venetian gold ducat, or the Spanish dollar, or the British pound, and see that no reserve currency lasts forever.

Especially when its fundamentals are so poor.

The US government is insolvent. Its major institutions and pension funds are insolvent. The central bank is borderline insolvent.

These are not any wild assertions; their own financial statements admit their insolvency.

Which means that there’s nothing underpinning the dollar’s reserve status except confidence.

And confidence is very fickle. Like a high school popularity contest, it wanes and it booms.

Right now that confidence is on an upswing, primarily because every other major option looks really bad.

The euro is acting out its Oedipal complex. Japan is a complete fiscal disaster spending over 25% of tax revenue just to pay interest. And China is rapidly deteriorating.

Sure there are some outliers like the Swiss franc that are in better shape. But the market for Switzerland’s currency is far too small to absorb trillions of dollars in global capital flows.

In the beauty pageant of major currencies, the US dollar is clearly the least ugly at the moment.

And I think anyone owning dollars should look at this as a gift.

Right now we have a tremendous opportunity to sell what’s expensive and buy what’s cheap.

The dollar hasn’t been this expensive in years. And many non-dollar assets haven’t been this cheap… ever.

Here in Turkey, the lira is at its lowest level in history. The South African rand is at its lowest level in history. We wrote about Indonesia’s rupiah on Monday.

I’m looking at real estate in Colombia at the moment where US dollar buyers can pick up high quality property for less than the cost of construction.

In Chile, the cheap exchange rate and slowing economy helped our fund to recently close on a farm at $4.3 million that cost $10 million less than two years ago.

In Australia there are a number of junior mining stocks that are trading for less than the amount of cash that they have in the bank.

There are countless deals like this all over the world... especially if you’re buying in US dollars.

It’s foolish to expect that any reserve currency will last forever.

And it’s even crazier to expect a reserve currency with such pitiful fundamentals as the US dollar to last forever.

But markets are not orderly and efficient. They are chaotic.

Which means that, on rare occasions, enormous opportunities present themselves to buy high quality assets on the cheap.

That opportunity is now.

Our Government, Destroyer of Jobs

(Charles Hugh Smith)  If our government can’t destroy all the private-sector jobs directly, it will do so indirectly by borrowing so much money the system collapses.
Conventional economists and pundits are puzzled why jobs growth has been so anemic in this “recovery.”
Here’s one factor they overlook: our government.
In theory, our government is supposed to encourage private sector job growth. In reality, all the hundreds of pages of regulations are killing job growth, one small business and one job at a time.
Correspondent/entrepreneur Ray Z. was kind enough to share his experience of trying to open a bagel shop and create six jobs:
“For many years, many of my friends and family who have come to my home and experienced my cooking, have told me that I should “open a restaurant”. Of course, I took this with a grain of salt, since many people say this exact phrase, to many other people. There are a lot of people who are able to create very delicious meals.
About five years ago, there was a restaurant for sale, not too far from my home and business. I thought about buying the restaurant, but at that time, the economy was not doing well and I wanted to take a wait and see attitude before I committed to anything. Eventually, the restaurant closed down and a different type of business opened up in the space that had been a restaurant.
That business went under in the middle of 2014 and I decided it might be time to open a retail food establishment in the space that used to be a restaurant. How hard could it be?
I signed a lease with the property owner for his 1000 square foot space. I contracted with a general contractor and designed the restaurant floor space on a CAD program I have on my office machine.
Having boot-strapped two seven figure companies from the ground up over the past 25 years, I knew all of the permits needed in order to open a regular business. First, I had to have my attorney file for incorporation in my state.
Then, I secured my FEIN (Federal Employer Identification Number) from the IRS, opened a bank account, got my sales and use tax permit (to collect sales taxes) from the State and contacted the person at the state level who is responsible for food establishments at the state level. The department that handles such things is the Nevada Health Department.
The inspector who is responsible for my geographic area (since I live in a sparsely populated county, we don’t have a county health department) at the state level told me that since the space had not been a restaurant for a few years, I would need to pay additional fees the first year and my endeavor would be treated as a “new” retail food establishment.
The cost was an additional $500, but that’s just the way it is. The property already had a grease interceptor (1500 gallons), floor drains, a mop sink, air exchanger on the roof and was mostly plumbed. I’ll get back to this later.
I submitted plans to the state contact person and was told that my symbology was not standard for the plumbing and electrical. The suggestion was made that I seek the services of an architect. Very well. I did. I found an architect who has done some restaurants in the area and we got to work. I submitted my floor plan to him, which he said was very detailed and seemed to use the space to its maximum potential.
However, he did mention that if I were going to serve one single person as a dine-in customer, I would have to have at least one ADA compliant bathroom. The space had two existing bathrooms that were ADA, but not the latest version. So, those would have to be upgraded.
Next, he told me that if I served, in-house, I would need to provide two ADA compliant bathrooms. I was going to remove one of the ADA bathrooms, so I could have more seating, but if I had more seating, I would need two bathrooms. Catch-22.
My architect submitted to the state for review and was told that I would need to expand the hallway. That means that the current hallway walls would need to be completely gutted, with plumbing removed and drains moved.
I guess it really did not matter though, since according to the State of Nevada, I was required to have EIGHT (8) sinks in my 1,000 square foot space. I needed two bathroom sinks (which I had), one dirty sink with three wells, clearly labeled “wash, rinse, sanitize”; this sink needed to have two side-boards of not less than 18 inches etc.
I also had to have one prep sink, with a wand facet, one dedicated mop sink, two hand wash stations (that could not be near any other sinks) and a bar sink for smoothies. This meant I had to have an extra floor drain put in, while the others needed to be moved. Great. 8 sinks. Cost to bring the plumbing to code and provide engineered drawings and system? $20-25 thousand.
After six revisions to the plans (to make the state happy), I finally gave the plans to a general contractor. He sent it to his electrical and plumbing sub-contractors. They informed the general that due to code issues, they would have to quote an engineered HVAC system that provided balanced air for the replacement needed by the hood exhaust. The hood exhaust would need to be tied into the HVAC, so that my customers would be in an environment that met the state standards for air quality.
OK. The plumber also said that I needed a brand new, engineered waste pipe system, one that could only be installed by jack hammering the entire plumbing system, since the state was requiring a detailed drawing of the pipes in the floor, and since it was put in before they had these requirements, they would want it all dug up and put into a plan. Great. Engineered HVAC cost? $40,000 (even though the place seemed to work fine for 25 years with an evaporative cooler and a gas heater).
Next, I was told that since I would need a 200 amp electrical service panel (which I knew), the power company would have to replace the transformer on the pole outside, since new construction (the buildings are 30 years old, but hey, it’s a restaurant) requires new EPA compliant transformers. The power company fee alone would be 12-15 thousand dollars. Cost to upgrade electrical to code? $20,000, including power company costs to install EPA approved transformer.
Next, I was told that I would have to have the gas pipe dug up, jack hammered and replaced with a larger diameter gas line. This would be $20,000 or so dollars. The reason is, of course, that the new code requires a minimum pipe diameter for gas; even though I was only going to have one appliance on gas; the range. Everything else is electric.
Keep in mind that all of this was taking time. In point of fact, from the time I signed the lease in late December, until just this past week, I was doing nothing but getting my paperwork ready and trying to comply with government mandates. Essentially, I spent 7 months trying to not only figure out what I needed to do, while I was paying rent and utilities, but I also spent many hours trying to figure out the complexities of what the state required.
For instance: Each food establishment is required to have at least one Food Service Handling Manager. Each person who serves or prepares food has to take a Food Handler Course. The manager course is about 500 dollars, when all is said and done. The food handler course is about half of that. This is an annual fee.
Aside from what I was being required to do for the construction, the state also required the following:
— A complete list of vendors. Said vendors must be USDA certified wholesale food suppliers. No farmer’s markets, supermarket or home grown.
— A complete menu, listing calories of each ready-made product.
— A sample of my labels for prepackaged product showing nutritional data, ingredients, warnings about any allergens (peanut etc).
— My estimate of how many employees I thought I would need (so they can tax me on each employee, annually, something the county does too)
— Certificates for any employees who would be handling food, including any managers. My Federal EIN and my State tax ID.
— Complete plans, contractors, amount of estimated business (so they can PRE TAX me on estimated sales taxes)
It just goes on and one.
The law in Nevada is called the Nevada Revised Statutes, or NRS. The statutes for retail food are about 500 pages thick. That’s just the codes that cover food. This does not cover the building, electrical, plumbing and service codes (such as ADA compliance, handicap parking, etc.)
So, I quit. They beat me.
It always amazes me when politicians use the sound bite of how they will “create jobs”. Well, I am an entrepreneur and have created thousands of jobs over the past 25 years. I have also be responsible for over 500 million in savings to my customers over that time period. This means that 500 million dollars of wealth that was saved, could be put into new technologies, new business ventures for into savings.
I am a job creator. But here are at least six jobs that I won’t be creating.
Government is not a creator of jobs. It’s a destroyer.”
Thank you, Ray, for this detailed account of what creating a job entails in the real world.
Government economists, think-tank pundits and Big Media talking heads prattle on about creating jobs, but they have zero experience in creating even one job.
Were they pushed away from the state-cartel trough, they would be clueless about how to start, fund, and profitably operate an enterprise that created jobs.
Every statute, code and regulation has a justification. I’ve sat in on meetings of engineers and government officials tasked with dreaming up “improvements” to the building codes. Cost never comes up, and neither does cost/benefit analysis.
Yes, a hallway that’s a few inches wider might be beneficial. But what are the odds of someone losing their life because the hallway only meets previous codes?
Yes, a 1-inch gas line might have some small advantage over a 3/4-inch gas line, but is that advantage worth $20,000 to a small business or its customers?
Government regulation is supposed to address life safety and the exploitation of workers and the public. But unbeknownst to the status quo, it’s supposed to do so with an eye on cost-benefits and diminishing returns.
Would the bagel shop have been demonstrably less safe if it had four sinks instead of eight sinks?
The irony here in over-regulating small business food establishments is the vast majority of the tainted food scandals originate in the factory-meat processing plants of Big Ag.
The government’s solution to absurdly high costs of opening a small business is: borrow more money. Never mind that the benefits of blowing $120,000 are so marginal they cannot even be calculated; we make the rules, you follow them, and if you can’t afford to follow the rules, then don’t open the business.
This is how you get an economy of bureaucrats justifying their existence with 500-page manuals regulating private enterprise and abandoned Main Streets and malls.
The government assumes private enterprise will jump through an endless number of hoops to operate a business, and that there is an endless supply of willing entrepreneurs who will volunteer to put themselves at risk of bankruptcy.
Back in reality, there is not an endless supply of people willing to jump through an insane number of hoops and risk their capital and health on starting a risky enterprise. (Memo to state regulators: unlike your job, every enterprise is risky. It’s called capitalism. You can look it up.)
When the costs of starting and operating a business soar, the odds of succeeding drop accordingly.
Guess what, our government: you forgot that ultimately you live off the private sector. Yes, let’s pile on another 500 pages of regulations–no problem–nothing could be easier for those in secure jobs funded by taxpayers.
But if the private-sector jobs go away, who’s left to pay for state employees to shuffle thousands of pages of regulations and enforce countless “improvements”?
There are ways to ensure public safety and make it straightforward to start a business and create jobs. A few cities/counties have one-stop systems where those willing to start a business can get all the permits and paperwork at one counter.
Officials actually work with the entrepreneur to figure out how to meet codes or pehaps get a variance to skirt regs that offer little benefit but would kill the business.
Many others have phony facsimiles of one-stop counters, fake props set up for PR purposes. The process isn’t really simplifed; nobody cares if you succeed or not; the purpose was to make the local government appear as if it cares. It doesn’t.
Government has the answer, of course: just borrow more money from our kids and grandkids. If taxes aren’t enough, just borrow more money.
If our government can’t destroy all the private-sector jobs directly, it will do so indirectly by borrowing so much money the system collapses.
Good job, regulators; forget costs and cost-benefit analyses; go ahead and add another 500 pages of regs without any regard for costs or consequences. We’ll all end up paying for your blindness and cupidity.

Top 5 Bitcoin Common Myths Exposed and Debunked

By Evander Smart

Plenty of people out there don’t understand Bitcoin. This is understandable, as Bitcoin is not a concept that is easily understood by the layman. The problem is people tend to fear and dismiss things they don’t understand, which creates a caldron of myths and half-truths that are designed to wither away that thing they wish into the cornfields. Bitcoin also has no direct marketing team or leadership to defend its name against such barbs, so it is fairly vulnerable. 

So today, I’ll step to its defense against common attacks from those outside of the ecosystem looking to throw stones through Bitcoin’s decentralized and transparent windows. Most arguments have a layer of truth covering a thin argument at best. Here are some common issues disseminated from the anti-Bitcoin position, and then I can provide the pro-Bitcoin side of the digital ledger if you will.

“Bitcoin’s drop in price since Mt. Gox – Since Bitcoin has no underlying value, the decline is price versus the US Dollar equals a loss of its overall confidence and popularity. People holding bitcoin today are those who purchased bitcoins at the top and are waiting to recoup their investment, or just suckers who believe that Bitcoin will one day go mainstream.”

The simple converted price of a Bitcoin is only one metric of Bitcoin market value, used by default since the world has never had such an innovative asset before. The price before the fall of Mt. Gox, and as it entered the Chinese market for the first time, was obviously a massive bubble. Bitcoin was still up over $100 versus its position two years ago, before the rise and fall of Mt. Gox.

Regarding its popularity, while the Bitcoin price was dropping throughout 2014, Bitcoin transactions increased on a consistent basis all year long and are now back at their peak all-time levels of late 2013. This easily dispels the lack of popularity argument. People use it now more than ever. Plus the endorsements of major mainstream players like Paypal, Microsoft and Wikipedia are not signs of a broader market interest? The rapid increase in venture capital in 2015, already surpassing 2014’s total year in six months time, should be ignored? Also, during the recent “Grexit” crisis last month, worldwide transactions in Bitcoin doubled. Explain that away?

Price is definitely down from its peak, but a lower price also makes entry into the market much easier for new investors. If the price moved from $1000 in 2013 to $2-3000 today, how many people would really be able to enter the market at those prices? Meanwhile, how many media pundits would be screaming “Bubble” every day, almost wishing for a market correction? The mainstream media would rail against Bitcoin either way.

“Mining Is Bitcoin’s real weakness. The price decline has also led to a serious blow to Bitcoin production or “mining.”

A number of mining operations have gone under since Mt. Gox, so this argument has some foothold in truth. Also, many of those started their operations when Bitcoin was a $700-1000 product. When you start there, and the value drops all year, you aren’t trained in how to run a mining operation at more realistic market levels. The miners who were successful when the Bitcoin price was $100-150 two years ago are still around. Those short-term players fade, and only the strong survive. If you were mining two years ago when Bitcoin sold for much less than it does today, you would know how to make money during bubbles and after a market correction.

Miners, by and large, aren’t going anywhere. Mining is not for newbies or people out for a quick hit. Only the strong survive, and this ride has made them stronger in the long-run.

“Consumers are vulnerable when they use Bitcoin over established payment systems. The biggest reason Bitcoin will never take hold is because there is no insurance against theft, loss or even if you send your coins to the wrong person. Once the coins leave your account, you have no more claim to them.”

If the Bitcoin technology never grows from now on, and we still send public keys instead of a less onerous transaction code, there may be a point here. Where some see flaws, I see a billion-dollar opportunity for an entrepreneur to improve Bitcoin. Over the coming years, we won’t use a mess of characters to send funds to each other, just like we do not use computer IP addresses anymore. A fair point, but by no means a death sentence for Bitcoin. It’s an opportunity.

“People aren’t using Bitcoin! The goal to have every merchant accept Bitcoin as payment is a lofty dream, but the reality is, that many businesses are not considering adopting Bitcoin in the near future.”

Meanwhile, the reality is many businesses are joining “The Future of Money”. Microsoft, Expedia, and CNN have joined the fold, as the number of merchants has passed 100k worldwide. Plenty of large retailers have already passed on digital alternatives like  Apple Pay already, including Wal-Mart. Outside of the cabal of usual suspects who came up with that plan, adoption has been slower than they expected. Bitcoin has been on a consistent rise worldwide for years. Apple Pay, for example, spiked last fall and has fallen on its face every since.

“Bitcoin is a Passing Trend and will fail. Not from lack of trying, but rather its status will never be more than an interesting concept championed by those in the techie or libertarian camp. Holding Bitcoin is more of a political expression rather than a sound economic investment.”

If new technology is “a passing trend”, that would make sense, but history does not support his argument. This was a common refrain twenty years ago when the Internet started to gain market traction. The Internet was just a toy for nerds to send messages 25 years ago. How did that turn out? He didn’t jump on that bandwagon? He didn’t rail against that?

In a global society that has gravitated to every new tech product from the Game Boy to the Apple Watch, Bitcoin hasn’t been a hit? The facts don’t support your argument. Five years ago, it was that nerdy tech toy nobody used. Today, it has since gone global, and governments are holding meetings every day on how to deal with Bitcoin.

Bitcoin is not just a currency, but a new technology that spans the globe, and helps improve many current centralized systems that need upgrading, or replacing. It’s not here to be quickly adopted, or as some quick fix. That’s it’s greatest strength. It is a bevy of technological apps, and its currency is just the first of many to come. It is here to change, and improve, many mainstream protocols we use today, but could be much better with the Bitcoin technology.

The only question is when will it happen

They seem to have an inverse relationship. As one obsolete form of fiat currency fails, a new digital technology rises to replace it, in The Technology Age. Bitcoin was only a few cents five years ago, traded between Satoshi Nakamoto and Hal Finney. Now it’s worth hundreds of dollars and is traded on global exchanges. Critics like to ignore these facts.

The Internet started to gain popularity primarily based upon its ability to send an email, but we’ve all learned it was far more than just a digital message service. Bitcoin is the son of the Internet, and will show naysayers things they’ve never seen before, and will use in their future if they’re smart. Comparing Bitcoin to a US Dollar is like comparing the Internet to a mailed letter. One is the standard, and one is the future. Since I don’t have any plans on going anywhere for the next thirty or forty years, I’ll bet on technology’s future, over obsolete centralized 20th-century systems.

Everything in this world is changing based on new technologies, and Bitcoin will be at the heart of this brave new world. It is changing things right now. the local Bitcoin critic or mainstream pundit doesn’t see it as being a major factor because he chooses not to. You see what you want to see. Maybe that’s the whole problem. Bitcoin cannot be held in your hand, so maybe critics believe it doesn’t exist because it can’t be held like a dollar bill. Older critics like Warren Buffett use this defense mechanism. 

Then air in your lungs, the thoughts in one’s mind, the information sent online or by smartphone also must be figments of our imagination. They must be irrelevant because they are intangible in the physical plane. The evolution of mankind has moved us beyond all of these mundane talking points, from race, to size, to gender being seen as limitations by the establishment. 

These naysayers always lose in the end. Just like you cannot measure the impact of the human spirit, or the Internet’s influence tangibly, Bitcoin’s future of growth won’t be found on any ruler. The 21st century is ready for this.
The only real question is: Are you ready for Bitcoin?

Hawaii May Be Screwed When TSHTF

I think this is an interesting article because, well …. I never think about what condition Hawaii will be in when the shit hits the fan. Do you?  Paradise might have some serious problems.

Hawaii’s government launched the Aloha+ Challenge … ““to at least double local food production” to where 30% of food consumed in Hawaii is grown locally by 2030. Reading between the lines, that means Hawaii cannot become food independent.
Why? There simply is not enough land to support the current, and growing, population. From government tables …. the total land in Hawaii is 4.1 million acres of which 1.9 million of those acres being used for agriculture. The rest is urban, conservation, or rural land. In other words, just about half of all the available land in Hawaii is being used for agriculture yet, over 90% of Hawaii’s food is imported.
In the book “Value of Hawaii”, Charles Reppen (a taro farmer) writes about the problems related to sustainable agriculture in Hawaii and how urbanization is increasing and it being a major problem. With more and more people that occupy the island, that equates to more mouths that will have to be fed. Reppen estimates that Hawaii would need to have over SIX Million acres of land dedicated to farming to feed Hawaii’s growing population.
Since Hawaii does not have that much land, he advocates a change in diet. If beef were removed from the picture then the number of acres needed would be much lower. And the enormous pineapple plantations (and banana, coffee, etc) can be converted to grow useful calories. However, that would put a severe dent in Hawaii’s GDP. When the SHTF, Hawaiians might have to become mostly vegetarians (I assume they’ll still be able to fish). No bacon for you!!
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HONOLULU—When my Airbus touched down at Honolulu International Airport, I was one of 30,843 people to arrive in Hawaii on a June day. As a crush of tourists mobbed rental car counters and taxi stands, massive container ships steamed into the Port of Honolulu just across the harbor, carrying some of the 6 million pounds of food shipped to Hawaii every day to feed the state’s 1.4 million residents and 8 million annual visitors. On nearby runaways, cargo planes landed packed with fresh fruit and other perishable items that wouldn’t survive the 2,500-mile ocean voyage. The world’s most isolated chain of islands, Hawaii imports nearly 90 percent of its food at a cost of more than $3 billion a year.

There’s a high environmental price to be paid for relying on a 747 or 40,000-ton ship as your food truck. The largest cargo vessels can emit as much pollution as 50 million cars in a year, according to a 2009 study, and shipping accounts for about 4 percent of global greenhouse gas emissions. Just consider the carbon footprint of putting a Hawaiian steak on local plates: Tens of thousands of calves are raised on the Big Island of Hawaii every year and then loaded on barges to the mainland. There they’re fattened, slaughtered, shrink-wrapped, and shipped back across the Pacific to the islands. Meanwhile, pests and parasites that hitch a ride on this nonstop caravan of cargo ships are decimating Hawaiian wildlife, forests, and farm fields at a cost of hundreds of millions of dollars a year.
But if the status quo is bad, what happens if the ships stop coming could be far worse.
“I think there’s a sense here in Hawaii that if we have a hurricane or a tsunami, how long could we last with our food supply?” said Jenai Wall, chief executive of Foodland, Hawaii’s largest supermarket chain, which relies on imports for about 80 percent of its sales. She paused. “Not very long.”
Probably less than a week, actually.
“If something catastrophic happened on the mainland, we’d have about three days of food in the stores,” said Una Greenaway, a farmer on the Big Island. “We’re very, very food insecure here, but we don’t have to be.”
Greenaway, who grows coffee, cacao, apples, bananas, and pineapples on a five-acre farm, is part of a burgeoning local food movement in Hawaii that’s attempting to reverse decades of deepening dependence on imports. In recent years, there’s been a flowering of farms, farmers markets, and eat-local campaigns across the islands. Not all that different, in other words, from what’s going on in the crunchier parts of the mainland. But this is no foodie fad. It’s state policy. As globalization and climate change upend worldwide food production, Hawaii is moving to foster homegrown agriculture in a way that could be a model for others. One key: kicking the state’s severe addiction to another carbon-intensive import—oil.

The Sustainable Past
The first food imported to Hawaii arrived in the canoes of ancient Polynesians, who began to colonize the uninhabited islands between 500 and 700 C.E. Onboard were the starchy staple taro, sugarcane, sweet potatoes, coconuts, breadfruit, bananas, pigs, and chickens. Those crops and others became the staples that, by the time of European contact in 1778, supported a population historians estimate was between 150,000 and 1 million. Without access to draft animals, wheels, or metal tools, the ancient Hawaiians developed the ahupua’a, a sophisticated and sustainable agricultural system that ran from the ocean to upland valleys. The Hawaiians harvested the bounty of the sea and grew taro and other crops on irrigated inland fields. The ahupua’a produced enough food to leave even commoners the leisure time to surf.
Diseases introduced by Europeans decimated the native Hawaiians, and by the mid-19th century the ahupua’a had been supplanted by vast American-owned sugarcane and pineapple plantations and cattle ranches, a trend accelerated by the U.S.-backed overthrow of the Hawaiian monarchy and annexation of the islands in the 1890s. By 1936, only 37 percent of Hawaii’s food supply was locally grown, according to University of Hawaii researchers.
Food imports soared in the ’60s when the advent of jet travel triggered a tourism boom that would become the mainstay of the Hawaiian economy. Between 1960 and 2005, Hawaii lost half its farmland as Big Ag began to abandon sugarcane and pineapple plantations, unable to compete against growers elsewhere. “Although the decline in farm acreage to present has not yet reached the ‘critical point’ where Hawaii’s food security would be threatened, the trend is a warning sign for Hawaii’s future food security,” said a 2007 report issued by the Hawaii Department of Agriculture.
By 2010, Hawaii was producing only 30.1 percent of the fresh vegetables, 38.1 percent of the fresh fruits, and 9.3 percent of the protein consumed on the islands, according to a 2013 study by University of Hawaii researchers PingSun Leung and Matthew Loke. Local dairies supplied all of Hawaii’s milk in the early 1980s; by 2010, most were out of business after a federal court ordered the state to allow imports. Today, 86 percent of milk on store shelves comes from the mainland. Seafood has sustained Hawaiians for millennia, and people here consume nearly twice as much fish per capita as those on the mainland. Yet, Hawaii flies in about half of its seafood, mainly from overseas.
Even taro is imported.
A staple food of the ancient Hawaiians, the starchy tuber played a central role in their creation myths and spirituality. “The latest data we have for taro is that we’re consuming 332,000 pounds of fresh taro a year but are only producing 100,000 pounds, so we import the rest,” said Leung.

Hanalei Valley taro field, Kauai. (Photo: Getty Images)

Powered by Water
So why doesn’t Hawaii grow more of its own food? For one thing, huge swaths of agricultural land remain locked up in now-defunct plantations or are controlled by companies that grow genetically engineered seeds, one of the state’s largest exports—the pineapple of the 21st century. What farmland is available comes with hard-to-get and high-priced leases. Farmworkers are also difficult to find and command higher wages than on the mainland, according to Leung, who studies the economics of Hawaiian agriculture and food imports. And just about everything else used in farming—energy, fertilizer—costs more here and must be imported. Globalization and free trade agreements, meanwhile, have made some imported food cheaper than homegrown, even if it does have to be shipped across the world.
You can see those challenges—and the future of local agriculture—on the Big Island of Hawaii, the cradle of ancient Hawaiian civilization. The ahupua’a fed Hawaiians for more than a thousand years, but sugarcane’s reign lasted fewer than 150. The last of the single-crop plantations that dominated this island for much of the 19th and 20th centuries shut down in 1994.
A cornucopia of crops has blossomed on the Big Island since the collapse of big sugar. As I drove through a vast former plantation north of Hilo, the main town on the wet east side of the island, I passed fields planted with cucumbers, bell peppers, taro, and other fruits and vegetables. Off a one-lane road is Hamakua Springs Country Farms, where Richard Ha and three generations of his family grow bananas on 600 acres carved from the plantation. When oil prices skyrocketed in the summer of 2008 before the global financial crash, Ha said he realized it would be impossible to foster sustainable agriculture without sustainable energy.
Hawaii burns imported oil to generate 70 percent of its electricity, which is not only a dirty way to produce power but also makes the state—and farmers—extremely vulnerable to wild swings in energy costs. “Electricity prices were scary,” said Ha, dressed in shorts and a rumpled polo as we stood in the open-air packinghouse at Hamakua where workers clean and package bananas. “Fertilizer prices went up, and my workers were asking to borrow money for gas so they could get to work. Anything we can do to lower our cost by moving away from oil is going to start to give us more of an advantage in agriculture.”

I think there’s a sense here in Hawaii that if we have a hurricane or a tsunami, how long could we last with our food supply? Not very long.

– Jenai Wall, chief executive of Foodland supermarkets

He gestured across the floor toward a forklift and a pile of pallets. “Even moving a pallet around the farm is based on diesel.”
These days, though, the power lies in Ha’s hands. From his iPhone he controls a small hydroelectric power plant that he installed on the farm last year. We climbed into Ha’s pickup and drove up a red dirt road that winds up the windward slopes of Mauna Kea. Past fallow fields at the top of the farm lies a tributary of a river that flows down the volcano. Back in plantation days, a flume carried harvested sugarcane down the mountain to a mill. The flume is still here but now channels water to an underground pipe that flows into a small building where the constant stream powers a turbine that generates 100 kilowatt-hours of electricity.
That’s enough energy to run the entire farm, including power-hogging refrigerated storage rooms, with 60 kilowatt-hours left over. “Our electricity bill used to be $12,000 a month,” Ha said. “The payment on the hydro is only $6,000.”
With all that extra carbon-free electricity on tap, Ha said he’s considering how to expand his farm, perhaps to raise tilapia, mushrooms, and more. He argues that if the Big Island made more use of its geothermal resources—the world’s largest active volcano, Mauna Loa, sits to the southwest—that would result in lower agricultural costs and encourage more people to farm.
“Things are changing,” Ha said. “We were at an Italian restaurant yesterday, and it was all sourced locally. It makes you so happy to see that.”
Indeed, before meeting Ha, I stopped for a late lunch at the Sweet Cane Café in Hilo, where the ingredients come straight from the owners’ organic farm. There was a line out the door as surfers, soldiers, and security guards queued up for taro burgers and blueberry-coconut-sugarcane smoothies.

Harvested bananas at Hamakua Springs Country Farms.
(Photo: Todd Woody)

At the Hamakua packinghouse, bunches of newly picked bananas hung from a conveyor built from parts salvaged from a slaughterhouse that shut down as ranchers began to ship their calves to the mainland for processing. “It sounds unreasonable, but it’s more profitable from the ranchers’ point of view,”  Leung said of the long trip “local” beef has to make.
That’s because Hawaii’s climate is not hospitable to growing hay and corn for cattle, and importing cow chow is actually more expensive then exporting cows. But the Big Island’s pasture does grow year-round, and one of the state’s biggest ranches has launched a joint venture to raise grass-fed cattle, no barge required.
The growing taste for homegrown food could help alleviate environmental disasters spawned by Hawaii’s dependency on imports. As we drove across the upper reaches of the farm, Ha pointed out stands of dead Ohia trees. The native trees, which shelter birds and other wildlife and are a keystone of the Hawaiian ecosystem, have been dying in droves from what scientists have identified as a fungal disease. “Although we can’t be 100 percent certain that the strain is nonnative, all evidence currently suggests that it must be a nonnative introduction to Hawaii,” Flint Hughes, an ecologist with the U.S. Forest Service in Hilo, said in an email. Reducing food imports could lower the risk of such epidemics, he continued, though he noted that pests could also arrive on the island in a shipment of nonfood plants and soil.

A Silicon Valley for Ag
The day before I arrived in Hawaii, Gov. David Ige signed legislation committing the state, which pays the nation’s highest electricity rates, to obtain 100 percent of its energy from solar, wind, and other renewable sources by 2045. That target dovetails with another state policy to promote independence by expanding and diversifying local agriculture and reducing the islands’ reliance on imported food.
Some 20 miles north of Honolulu, the government is attempting to create a Silicon Valley of agriculture by buying up abandoned pineapple plantations and transforming the former company town of Wahiawa into an ag-tech hub for central Oahu.

Bullit Hatcheries on Oahu. (Photo: Todd Woody)

“When I was a kid, this place was bustling,” said state Sen. Donovan Dela Cruz, 41, as he piloted his gray Toyota pickup around the town of 18,000 where his grandfather worked as a truck driver for the Dole pineapple plantation after emigrating from the Philippines.
The agricultural estate began withering away decades ago, and the last big plantation shut down in the early 1990s. For the past several years, Dela Cruz has been the driving force behind what is called the Whitmore Project, named after a former plantation workers’ camp on the outskirts of town. State and local agencies pitched in $25 million to buy 1,700 acres of former pineapple land bordering Wahiawa that will be subdivided and leased to Oahu farmers. The state also bought 24 acres in Whitmore Village, the former workers’ camp, and a 30,000-square-foot warehouse in Wahiawa that will be retrofitted for food packing and processing.
“The industry to revitalize the economy is ag,” said Dela Cruz, who wears shorts and a T-shirt and talks a mile a minute as we pull into Whitmore Village. “The idea here is to have this be a hub for all the packing and processing you need, as well as to be a retail hub. If you’re a farmer who leases the ag land we’re starting to buy, your operations would be here, and there would be no need to build new infrastructure.”
One of the first tenants at Whitmore Village is Bullit Hatcheries. On the day we visited, Austin Kanamu, son of owner Alex Kanamu, was tending large white tanks of tilapia. Other tanks were overflowing with hydroponically grown watercress and strawberries. Blueberries grow elsewhere on the property. A warehouse next to the tilapia farm is set to become a processing plant, which would allow Bullit to sell packaged fish to supermarkets and government agencies. “One reason we came here is that right now there’s no place that has processing for fish,” said Austin.
Dela Cruz’s vision is to create more earning potential for Hawaiian agriculture by encouraging farmers to produce value-added products, such as the juices, jams, and syrups that are now almost entirely imported. Dole, for instance, grows 40 acres of cacao nearby but ships the beans to the mainland to be processed into chocolate.
“It’s all about the margin,” he said as we stopped by an area coffee grower’s retail outlet that sits surrounded by vacant farmland. The place was packed with tourists sipping Hawaiian-grown and -roasted coffee while shopping for souvenirs. “When you do this, you help to start to help other industries,” Dela Cruz said as he picked up a small blue-glazed coffee mug handmade by a local artisan. “It’s $25! Oh my god.” He spied a jar of jam. “Look at that—fifteen bucks,” he said. “A police officer in Whitmore Village makes this in his spare time. They can’t keep it in stock. You can’t get that kind of margin at a farmers market.”

Grown Here, Not Flown Here
One thing Hawaiian farmers don’t have to worry about is demand for local food. “We try to source everything we can local, and if we can’t find it here, then we bring it in from the mainland,” Wall, Foodland’s chief executive, said at the supermarket chain’s Honolulu headquarters. “Our produce team has worked with a lot of local farmers, even asking them to grow things for us that we have historically had to buy from mainland sources.”
More than 20 percent of the items on Foodland store shelves are locally grown or made. At the company’s Aina Haina store in Honolulu, a banner that reads “Locally Grown in Hawaii” flies over a produce section featuring taro, cassava, peppers, okra, turnip, string beans, red cabbage, and asparagus. An orange tag tells shoppers that the luau leaves, for instance, came from Twin Bridge Farms on Oahu, while the long beans were grown on the North Shore at Ho Farms, which plans to start farming at Whitmore. Throughout the store, orange tags identify every Hawaiian product, from soy sauce and bread to chocolate-covered macadamia nuts. More than 200,000 people have pledged to eat homegrown food one day a week as part of Foodland’s “Eat Local Tuesday” campaign.

Locally grown produce displayed in a grocery store.
(Photo: Willy Blackmore)

“It’s good for the economy,” said Wall, “and we also feel that Hawaii depends so much on food from elsewhere that the more we can get here, the more sustainable we’ll help our community to be.”
How self-sufficient can Hawaii become? The University of Hawaii’s Leung said the state now produces about 80 percent of its tomatoes and all of its watercress, and other homegrown vegetables are cost-competitive with mainland varieties.
“I think we’re doing quite well, because there’s a lot of momentum and people are aware of local food and are willing to support that,” he said. “But when people talk about being 100 percent food self-sufficient, that’s pie in the sky. There has to be a balance in reality. Hawaii is part of a country, and we don’t set import rules.”
“Some food we’re never going to grow, like wheat and rice,” he added.
Who needs wheat and rice, asks Greenaway, who has been farming on the Big Island for nearly 40 years. (Disclosure: Greenaway’s daughter is a contributor to TakePart.) Taro and breadfruit, which sustained the ancient Hawaiians, can serve as locally grown substitutes, she argued.
“We can grow all our food here, but we need to teach people how to grow food for themselves and also how to eat it,” she said.