Friday, July 8, 2016

Planet Debt—–45 Years Of Fiat Finance

Low Interest Rate Persons

She is a low-interest-rate person. She has always been a low-interest-rate person. And I must be honest. I am a low-interest-rate person. If we raise interest rates, and if the dollar starts getting too strong, we’re going to have some very major problems.
— Donald Trump

TrumpoYellTwo low interest rate persons! The Trumpsumptive president (Donald the Tremendous) can be seen here indicating the approximate size of the interest rate that will still keep us out of “major problems”.

BALTIMORE – With startling clarity, the presumptive Republican presidential nominee described himself – and Fed chief Janet Yellen.  But he could have just as easily been talking about his rival in this year’s presidential elections, Hillary Clinton.
Donald Trump had already gone broke – twice – by the time Bill Clinton took office. But then, the combination of lower interest rates and rising asset prices saved him.
And extraordinary abundance and prosperity of the Clinton years owes little to Mr.  and Mrs. Clinton and much to the fact that Alan Greenspan had inaugurated his famous “Greenspan Put” in 1987.

DJIA, 19871987 – the year of Greenspan’s original sin – click to enlarge.

Greenspan reassured investors that he had their backs with a rate cut whenever the stock market took a turn for the worse. This led to an “illusion of prosperity,” as stock prices rose, helping Bill get reelected… and gaining national prominence for Hillary as the aggrieved wife in the Monica Lewinsky affair.
Stock prices filled with hot air, until the bubble in the Nasdaq blew up in Clinton’s last year in office. Both of this year’s presumptive candidates are “low interest rate” people, all right. Their adult lives were marked by the credit cycle and their careers shaped by ballooning debt. And now, almost the entire world economy depends on low rates.
We live on Planet Debt.

Subzero Yields

The amount of government debt trading below zero yield rose to $11 trillion last week. In Japan, negative yields run out the yield curve until 2051. Overall, interest rates are said to be lower than they’ve been in 5,000 years.
This is a fanciful but entertaining factoid; you can’t compare the apples of Sargon the Great to those of Donald the Tremendous.

sargonThe famous (more or less) Sargon the Great, ruler of Akkad. What were interest rates in his time? And why did he get punched in the eye?

“How cometh it to be that interest rates ride so low… while the hack and the hustler ride so high?” you might wonder. We are glad you asked.
We have been connecting dots. These are dots that others do not want to connect. Because they connect to too many reputations, too many fortunes, and too many opinions.
We are talking about the line that runs from the post-1971 money system to the Deep State, passing through the spectacular rise of China… the spectacular fall of the U.S. (where the average man has made no financial progress in the last 40 years)… to the remarkable luck of the 1% (who got richer and richer, as most people around them lost ground).
Yes, the line ties together the great kvetches of our time: inequality, stagnation, alienation, globalization, debt, the failure of the economy, the failure of democracy… and the failure of our own culture.
According to political scientist Charles Murray, white middle- and lower-middle-class Americans now suffer from the ills that were once confined to ghettos – broken homes, drug addiction, unemployment, and violence. Surely, we’re not going to try to pin that on the Deep State, too?
Yes  –  we are.

eye-4Deep State eye, nearly all-seeing these days (it is said)
Image via

Deep State Money

“Our” money system is not “ours.” It is the money system created by, for, and of the financial insiders. It is the Deep State’s money system! But wait… we sense an objection: “Isn’t it the money system set up by our elected representatives – and supposed to serve us all?”
Oh, dear reader, sometimes you make us laugh. Really, where have you been? America’s money system is largely under the control of one organization – the Fed.
And the Fed was set up at a secret meeting of plutocrats and bankers (no kidding they rode down to Georgia in a private train, using phony names so they wouldn’t be identified).

FRBThe boys who hatched out the Federal Reserve in a secret meeting at Jekyll Island in 1910. The Fed was so obviously in the public interest, they were going there in secret, using fake names. Later, the Federal Reserve Act was passed in a vote held in the middle of the night on 23. December 1913 (just before Christmas), allegedly to make sure it would pass (no, that was of course sheer coincidence…).
Image via Wikimedia Commons

It is not owned by the people, nor by their government. It is owned by private banks. And it is controlled by a small group of unelected insiders – mostly bankers and their economists. It has never been audited. And no member of Congress really knows what it is up to.


On August 15, 1971, President Nixon made the fateful announcement that the world’s reserve currency, the U.S. dollar, would no longer be directly convertible to gold. But do you think Mr. Nixon came up with that on his own? Do you think he was advised by our elected representatives? No chance.
Instead, the insiders, the bankers, and the deepest of the Deep State elite had his ear. The president – and probably almost everyone else – had no real idea of what was going on, or why.

nixon2If one listens closely to Nixon’s speech in which he announced the “temporary closing of the gold window” (the temporary suspension of the dollar-gold conversion that has now lasted a cool 45 years), a good case can be made that he was probably utterly clueless… he definitely wasn’t graced with a whole lot of economic literacy, let’s put it that way.
Photo via Library of Congress

But that was 45 years ago. A lot has happened since. The new money was a Sahara for the common American; his income growth dried up… his wealth ceased growing. But it was Miracle-Gro for the Deep State.
The insiders sank their roots deeper and deeper into the U.S. economy, sucking out more and more wealth and power. Whether the insiders fully realized what they were doing in August 1971, we don’t know. But as the system developed, they liked it. More than that, they became dependent on it.
And now, almost the entire world – its stocks, bonds, real estate, and collectibles. along with its businesses, retailers, factories, investors, bonused-up executives, papered-up speculators, Ph.D. economists, and politicians – almost everybody with wealth or power depends on the insiders’ cheap money.

DeepStateIn the case of the Deep State, the post-Nixon Miracle-Gro has been especially effective with respect to the root system. It is now so deeply rooted, it can no longer be uprooted, at least as long as the Miracle-Gro is still working (and probably there’s already a plan B for the day after as well).

“Government can have no more than two legitimate purposes,” wrote the 18th-century English political philosopher William Godwin, “the suppression of injustice against individuals within the community and the common defense against external invasion.”
But now it has another purpose – a goal it is desperate to achieve – keeping the low-interest rate planet spinning.

Chart by: StockCharts

Chart and image captions by PT

The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

Video: Tariq Ramadan: Iraq War Waged for U.S. Economic Interests Has Destabilized All of Middle East – In the last week, more than 300 people have been killed in attacks by militants in Iraq, Turkey, Bangladesh and Saudi Arabia.

Via Youtube

Hillary Clinton Backs Monsanto: Claims that “To Be Anti-Monsanto” Is to Be “Pro Global-Warming”

hillary clinton1
On June 27th, I reported Hillary Clinton’s having privately told GMO industry lobbyists, on 25 June 2014, that the federal government should subsidize GMO firms in order to enable them to buy “insurance against risk,” and that without such federal subsidies, “this [insurance] is going to be an increasing challenge” for the industry to afford. I also reported that, in an interview she did immediately afterward with the GMO industry’s lobbying organization’s (the Biotechnology Industry Organization’s, or BIO’s) head, she compared the opponents of GMOs to the opponents of action in response to global warming; she said, in effect, that both environmental groups are ignoramuses who don’t know what scientists are saying about both the ’safety’ of GMOs and the dangers of global warming.
At the time when I wrote this news report (it was still news, even a year after the speech was given), the 15 June 2016 article in FORTUNE magazine, “Can Monsanto Save the Planet?” hadn’t yet come to my attention, but it importantly supplements the news that I had just reported, and so I now supplement the article I previously wrote on this.
The FORTUNE article argued that Monsanto is the world’s champion of environmentalism, by enabling the planet to provide food to an expanding population even as the planet will be getting hotter and hotter. It said that Monsanto, and other GMO firms, are the only hope for a planet that’s burning up. The FORTUNE article also assumed, as did Hillary Clinton’s presentation to GMO lobbyists and to their chief, the equal validity of the 97% of global warming scientists who believe that human-caused global warming is real, and of the GMO-corporate-funded bio-‘scientists’ who allege that GMOs have been proven to be safe long-term for human consumption and for the environment.
As regards the claim that the GMO-corporate funded ‘research’ proving GMOs to be safe is valid, there are many independently funded studies that have found GMOs not to be safe, and also not to be environmentally friendly. Funding of independent research on the question is sparse, but I tracked down the claimed main source of the funding of that meta-study (study of studies), and found it to be the Isvara Foundation, which seems to me likely to be independent of the GMO producers. Here is a summary of what that meta-study found: It found, for example, that, “A review that is claimed by pro-GMO lobbyists to show that 1,700 studies show GM foods are safe, in fact shows nothing of the sort. Instead many of the 1,700 studies cited show evidence of risk. The review also excludes or glosses over important scientific controversies over GMO safety issues. (p. 102),” and, “A review purportedly showing that GM foods are safe on the basis of long-term animal studies in fact shows evidence of risk and uses unscientific double standards to reach a conclusion that is not justified by the data. (p. 161).”
There is no comparison between the actual scientific consensus that global warming is real and man-made, and the phony ‘scientific’ ‘consensus’ that GMOs are safe. (And there’s more on that, and more.) Hillary Clinton, and the lobbyists know this, they can’t be so stupid as not to know, but they are paid to lie about it. The industry pays both them and their politicians (such as Clinton) to do this. (And Clinton wants to go even farther and have taxpayers help to fund the GMO firms, thus to subsidize those firms’ stockholders.)
Is it merely by coincidence that the puff-piece for the GMO industry (in the person of its main corporation, Monsanto) in FORTUNE magazine, and the secret statements that Hillary Clinton made at one of her $225,000+ speeches to (and interviews with) lobbying organizations, are almost carbon copies of each other?
You’ll have to decide that for yourself. But other voters won’t even be able to, because they read the standard ’news’ media, which hide such facts. (For example, the 27 June news report I did was rejected by virtually all newsmedia.) So, please pass along to other voters this news report, which is the third report that I’ve done about the only one of Hillary Clinton’s 91 speeches to lobbying organizations and to international corporations, which managed to have leaked out from behind her embargo against making public any of her corporate-funded speeches, for which she has received in total more than $21 million paid to her own account, not including any additional payments to her political campaign. Voters might think that Ms. Clinton ‘believes’ one way about an issue, when in fact she has actually been bought to impose as the future U.S. President the exact opposite. Her record shows: in public office, she does what her backers want, not what her voters might prefer. Ever since at least 1993, when she did what the HMO industry bought the Clintons to do in drawing up their healthcare plan (which plan the health insurers opposed strongly and successfully defeated), Hillary and Bill have both been on the take, being liberals or even ‘progressives’, who believe that their actual constituency is their paymasters — not their voters. They are similar to Barack Obama in this regard, no different — and no different from George W. Bush, and his father. (As regards Trump, he has no record at all in public office, so we can’t yet really know.)
And that’s why she continues to hide the transcripts and videos of her 91 corporate-paid speeches. But fortunately, the one speech she made to the GMO-producers, slipped away from her total control.
And the article in FORTUNE provides some evidence that the propaganda-campaign for the GMO industry is coordinated by their lobbying organization, the BIO, so that both one of their politicians, and one of their magazines, are singing the same song, even if different lyrics from it.

Orders For 18-Wheelers Hits 4 Year Low, Down 34% Over Last Year

Not a good sign for the U. S. economy as orders for 18-wheelers are down 34% over last year.

This cautionary spending signal means companies are running out of money or the demand for shipping is dropping.
Either way this isn’t a good look according to this Reuters report:
U.S. orders for heavy duty trucks in June were down 34 percent from the same month last year to a four-year low as trucking firms were holding off on buying new 18-wheelers amid a weak freight environment, according to preliminary data released by a freight transportation forecaster on Wednesday.
“The Class 8 market is stuck in a holding pattern, at the bottom end of this cycle,” Don Ake, vice president for commercial vehicles at FTR said in a statement.
“Fleets are cautious as freight demand has cooled off this year,” he said.
Preliminary data showed 13,000 units ordered in June, the lowest monthly total since July 2012 and the worst June since 2009.
FTR said that all truck manufacturers were equally affected by the month’s weak order numbers.

Cost of insuring against default of Deutsche Bank’s sub debt is now higher than in 2008, when #Lehman went under.

Cost of insuring against default of Deutsche Bank's sub debt is now higher than in 2008, when went under.

Britain posts its best manufacturing figures in FIVE YEARS as officials claims the Brexit vote makes a UK-China trade deal more likely because it cuts out the 'frustrating' EU

  • Chinese trade official Xing Houyuan says Brexit will 'push China and the UK to make a trade treaty'
  • British trade minister Lord Price says he's 'optimistic' about future deals
  • Ex-Waitrose boss is in Hong Kong discussing future trade relationships
  • China Commerce Ministry says Brexit will 'create more chances in different fields for new investment'
  • China is frustrated by the EU says state-backed trade organisation official
Brexit makes the prospect of Britain striking a trade deal with China more likely, trade officials from both countries have said. 
Xing Houyuan, an official at the state-backed Chinese Academy of International Trade and Economic Cooperation, said China was being frustrated by the EU.  
But now Britain has left, he said the 'situation in Western Europe will push China and the UK to make a trade treaty,' he told the state-owned China Daily newspaper. 
And British trade minister Lord Price, a former boss of Waitrose, is currently in Hong Kong where he said the future of 'optimistic' about future trade deals with 'new trading markets' in the East. 
China's Commerce Ministry spokesman Shen Danyang also gave a positive outlook, telling China Daily that Brexit will 'create more chances in different fields for new investment'. 
The announcements came on the day Britain posted its best manufacturing figures in five years. 
Brexit makes the prospect of Britain striking a trade deal with China more likely, trade officials from both countries have said. Last year relations between China and the UK thawed after President Xi Jinping's state visit to Britain, pictured meeting David Cameron in Mansion House, central London 
Brexit makes the prospect of Britain striking a trade deal with China more likely, trade officials from both countries have said. Last year relations between China and the UK thawed after President Xi Jinping's state visit to Britain, pictured meeting David Cameron in Mansion House, central London 
He predicted global currency fluctuations caused by Brexit would not do lasting damage to Chinese investments in the UK, which would not be affected in the long-term.  
Contrary to claims during the referendum campaign that leaving the EU would leave Britain isolated and cut off from the global economy, the developments suggest Brexit could open up Britain to new opportunities.  

A treaty with the UK could be fast-tracked after years of China being 'frustrated by the EU,' China Daily reported. 
As a member of the EU Britain has not been able to negotiate individual trade deals with countries for years, with Brussels responsible for negotiations. 
It means Britain has been left without trade deals with the likes of Canada, Australia, Japan, China, the US and other countries because the EU has so far failed in attempts to secure deals. 
There are fears that this left the UK with few trade specialists who have the experience of striking trade deals.  
Oliver Letwin, the Cabinet Office minister tasked with preparing the Government's Brexit negotiations, said his unit is identifying how many staff it needs and said private sector staff will need to be hired, as well as the prospect of asking experts to 'train high-flying young civil servants'.  
David Cameron (right) took President Xi Jinping (left) to his local pub in Oxfordshire during the China premier's state visit to the UK last November  
David Cameron (right) took President Xi Jinping (left) to his local pub in Oxfordshire during the China premier's state visit to the UK last November  
Lord Price spoke about 'helping create a second Elizabethan Golden Age' by striking new deals with Commonwealth countries such as New Zealand, Australia and Canada and also with economies in the Far East such as China, Japan and South Korea. 
Speaking to the British Chamber of Commerce in Hong Kong, he said: 'I'm optimistic about the future: particularly in helping create a second Elizabethan Golden Age. 
'The first Golden Age was based on peace, prosperity, new trading markets and a flourishing of the arts. 
'There's also a prospect for striking new deals with Canada, New Zealand and Australia which could form the beginning of a Commonwealth trading pact.'
'And to the opportunities in the East, where for centuries British merchants have traded with China for tea, white gold and porcelain as well as with Japan, South Korea and other Asian nations.' 
He also said the UK is working towards 'a continued close trading relationship with Europe'.
Echoing Lord Price's positivity, Mr Shen told China Daily: 'The global investment environment will be more transparent and create more chances in different fields for new investment.
'Therefore, Chinese companies' outbound direct investment will remain positive and stable.' 
British manufacturing is growing steadily and figures for the three months to May were the best in five years, ONS data out today revealed 
British manufacturing is growing steadily and figures for the three months to May were the best in five years, ONS data out today revealed 
The Office for National Statistics today said manufacturing output came in at a better-than-expected fall of 0.5 per cent, dropping down from April's rise of 2.4 per cent, but remaining ahead of a predicted slide of 1.1 per cent.
Economists branded the performance as 'resilient', as manufacturing output rose 1.7 per cent in May compared to the same month in 2015.
Activity in the wider industrial production sector also slipped 0.5 per cent month-on-month, after picking up 2.1 per cent in April.
On an annual basis industrial output was up by 1.4% on May 2015. And in the three months to May, output grew by 1.9% at its quickest pace in six years. 
Martin Beck, senior economic advisor to the EY ITEM Club, said the results point towards a stronger performance from the UK economy in the second quarter.
He said: 'Following increases of 2.1 per cent and 2.4 per cent in production and manufacturing output respectively in April, May's fall of just 0.5 per cent is a surprisingly good outcome.
'The evidence we have from the official data and the business surveys suggests that even in the event of a further monthly decline in June, manufacturing output is on track to rise by almost 2 per cent in the second quarter.
'With April's strong readings for services and construction output also pointing to solid performances from those sectors, it now looks very likely that second quarter gross domestic product (GDP) growth will come in ahead of the first quarter's outturn of 0.4 per cent.'

£8 BILLION is locked into's failing IT schemes, El Reg analysis reveals

Shared services centres and 'tower' contracts on the ropes

editorial only image of Whitehall. Pic Daniel Gale/Shutterstock
Whitehall. Pic: Shutterstock
The UK government has £8bn locked into IT contracts which are at high risk of failure, according to an analysis of the Infrastructure Project Authority's accounts by The Register.
Of 143 major projects representing £405bn of government spending, The Register identified 19 IT projects that were flagged as “red” or “amber/red” in the Infrastructure and Projects Authority's annual report.
That means delivery is unachievable or highly unlikely.
Projects given the highest red risk rating included the Department for Transport's £222m move to the Cabinet Office's shared service centre, run by IT provider arvato, along with the Home Office's £185m project to migrate from its Oracle ERP to the shared services project.
Both departments noted the red status reflects problems with the “go live” date in the cross-government programmes and the increased costs of having to run existing systems for an extended period of time.
That is, perhaps, unsurprising, as the chief exec of the civil service, John Manzoni, named the two shared services centre projects as one of the three major programmes in government keeping him up at night.
The Ministry of Justice's £411.6m electronic tagging programme was also flagged as “red” by the body.
Some of the other projects rated as “amber/red” include the Home Office's £307m Digital Services at the Border programme, intended to " deliver a new generation of Border Security Systems"; and HMRC's £600m programme to overhaul its tax systems.
Efforts by both the Home Office and Ministry of Justice respectively to break up their legacy contracts by moving to a "tower model" were also rated as being at high risk of failure.
The Home Office said of its £369.5m Technology Platforms for Tomorrow: "The timescale pressure has been reduced by the identification of a ‘handover period’ with the incumbent supplier's contracts, though the time taken to identify possible solutions based on User Research with the Government Digital Service (GDS) has eaten into this, and significant financial and solution / plan risks for the programme remain."
Meanwhile the MoJ described its £1.7bn Future IT Sourcing as "complex with elements being delivered at different points of the life cycle in sequence".
The Rural Payments Ageny's £215.88m IT system for Common Agricultural Policy payments is, not surprisingly, still rated as high risk after its disastrous failure last year.
But while the £8bn locked into failing government IT contracts is not to be sniffed at, that figure is significantly lower than the figure from last year.
That is mainly because the much-delayed £16bn Universal Credit programme received an improvement in its health rating this year of amber.
Of the 143 major projects, many will still require a large chunk of tech even if not specifically IT-related. The National Audit Office spending watchdog has warned that one third of the government's major projects due to be delivered over the next five years are on track to fail. It has also said that thousands of techies are needed to rescue failing projects. ®

Jim Hightower: Banks Don't Commit Crimes, Bankers Do

Until the feds charge reckless bankers individually, they'll shake down shareholders to bail them out for misdeeds.

Report Suggests U.S. Must Cut Social Security Benefits

PHOTO CREDIT 401(K) 2012
PHOTO CREDIT 401(K) 2012
The recent Report of the Commission on Retirement Security and Personal Savings established by the Bipartisan Policy Center reflects a lot of work and thought by knowledgeable committee members and a superb staff headed by Bill Hoagland, a former high-level Senate staffer.  But the Commission’s failure to recognize the limitations of safe harbors and tax credits for 401(k)s and, most importantly, its recommendation to cut Social Security severely limits the usefulness of the document.  Let me go quickly through the Commission’s recommendations.

Improve access to workplace savings plans

The Commission rightly recognizes that half of private sector workers do not participate in a retirement plan and acknowledges the need for a federal – not a state-by-state – solution.  The proposal is to mandate that employers with 50 or more employees automatically enroll their workers in:
1) a 401(k) or defined benefit plan;
2) an enhanced MyRA; or
3) a new “Retirement Security Plan” – essentially a multiple employer plan without the need for participating businesses to be closely related.
Unfortunately, this proposal would likely pick up only roughly a third of the uncovered – missing those at firms with fewer than 50 employees, uncovered workers at firms where the employer provides a plan, and the 16 percent of the workforce who are self-employed or work as contractors.
For those who have a plan, the Commission misses the opportunity to make 401(k)s work better by mandating auto-enrollment and auto-escalation of default contribution rates, opting instead for another set of safe harbors.  We have seen the limits of the 2006 Pension Protection Act safe harbors.  It’s time for a more direct approach.

Promote personal savings for short-term needs and preserve retirement saving

This group of proposals addresses the leakage issue.  The Commission recommends changes that would allow employers to automatically enroll employees into two accounts – one for short-term needs and one for retirement.  It also recommends facilitating rollovers so that employees do not cash out.  These ideas are a step in the right direction.


Terrorism funding just one thing big banks are getting away with - whistleblower Everett Stern

Everett Stern (Reuters / Tim Shaffer) / Reuters 

Banks say they are the pillar of the modern society – ruling the streams of money across the globe and keeping a tight grip on the world’s economy; What is going on in offices of top level management is kept in a most valuable secrets. Even governments are afraid to get in confrontation with the enormous financial giants. But today we talk to a man who single-handedly fought the corrupt banking system, with no one behind his back; Whistleblower Everett Stern is today’s guest on Sophie&Co.
Follow @SophieCo_RT
Sophie Shevardnadze: Our guest today is whistleblower Everett Stern, former employee of one of the world’s banking giants HSBC.
You’ve been very vocal about your experience with HSBC. Can you tell our viewers in a nutshell, in simple words, what it’s all about?
Everett Stern: Sure. This is not a normal banking scandal, I mean this is about a bank sponsoring terrorism and killing people, that’s what it is about, and it is about defending the US and defending the world as a whole against terrorism, and saying that “too big to jail” is not an OK policy for any government to have.

Our Future Is (Literally) Crumbling Before Our Eyes

Our reinforced concrete infrastructure sends a dire warning
by Chris Martenson
The sorts of predicaments the world faces — ranging from over $200 trillion in debt, to our unsustainable addiction to fossil fuels, to our over-stressed ecosystems — all require that we get deadly serious about confronting them ASAP, and make difficult decisions and trade-offs.
However, our global leaders always seem to opt to kick the can down the road if at all possible. Short-term thinking and near-term priorities dependably get precedence over doing the right thing for the future. Tomorrow’s generations are thrown under the bus by selfishly motivated actors today.
As I’ve put forth over and over again: we’re simply not going to make it unless we get much more serious about our efforts than we have been to date. Yes, it’s a wonderful thing that Elon Musk is building sexy electric cars; but even a single minute spent with a pencil, paper and the aggregate energy statistics on transportation will reveal that there’s an enormous gap between where we currently are and where we need to be.
Most will never spend that minute; which is why I continue to do what I do.
For example, many people wave their arms lazily at the statistics for wind-generated electricity and never bother to ask if its current growth rates can be sustained. Or wonder just how tremendously massive the scale of the effort will need to be to meet any realistic sustainability goals.
In a prior companion piece to this article, I quoted a study which determined that to simply meet the wind power goal put forth in the recent Paris accord, the world would have to massively upshift from installing 37 wind towers per day currently to more than 1,300 per day by 2028.
Can we do that? Maybe. But not without a maniacal commitment to making it happen. And that’s the thing: the world is instead hoping that somehow ‘the market’ will deliver sufficient wind power in time. Given the state of the global financial system — with its more than $200 trillion(!) in debt — is that really something we want to leave to hope?
But leaving the economic and political issues of that challenge aside, I’d like us to focus on the more practical issues of the energy investment required to build out a new energy infrastructure, not to mention the longevity and durability of the components we’d be installing.
I’ve always found this time-lapse video of a single wind tower installation mesmerizing. The skill on display is amazing:

Here’s a brief summary for those of you too busy to watch this construction process right now: Diesel, diesel, diesel, reinforced concrete, diesel, petroleum, diesel.  That is, installing a wind tower like this requires a huge amount of fossil fuels to accomplish.
To focus in further, watch from the 45-second mark to one minute.  What you’ll see there is 96,000 pounds of reinforcing steel, and 53 cement trucks used to pour the windmill’s base.
Which brings us to an overlooked and very important part of the story: reinforced concrete. If the pyramids are a lasting testimony to the durability and long-term thinking of the ancient Egyptians, then reinforced concrete will be modern society’s opposite statement. A legacy of short-term thinking and a disposable mindset.
This article does a wonderful job of laying out what I mean:
The problem with reinforced concrete
June 17, 2016
By itself, concrete is a very durable construction material. The magnificent Pantheon in Rome, the world’s largest unreinforced concrete dome, is in excellent condition after nearly 1,900 years.
And yet many concrete structures from last century – bridges, highways and buildings – are crumbling. Many concrete structures built this century will be obsolete before its end.
Given the survival of ancient structures, this may seem curious. The critical difference is the modern use of steel reinforcement, known as rebar, concealed within the concrete. Steel is made mainly of iron, and one of iron’s unalterable properties is that it rusts. This ruins the durability of concrete structures in ways that are difficult to detect and costly to repair.
While repair may be justified to preserve the architectural legacy of iconic 20th-century buildings, such as those designed by reinforced concrete users like Frank Lloyd Wright, it is questionable whether this will be affordable or desirable for the vast majority of structures. The writer Robert Courland, in his book Concrete Planet, estimates that repair and rebuilding costs of concrete infrastructure, just in the United States, will be in the trillions of dollars – to be paid by future generations.
Steel reinforcement was a dramatic innovation of the 19th century. The steel bars add strength, allowing the creation of long, cantilevered structures and thinner, less-supported slabs. It speeds up construction times, because less concrete is required to pour such slabs.
These qualities, pushed by assertive and sometimes duplicitous promotion by the concrete industry in the early 20th century, led to its massive popularity.
Reinforced concrete competes against more durable building technologies, like steel frame or traditional bricks and mortar. Around the world, it has replaced environmentally sensitive, low-carbon options like mud brick and rammed earth – historical practices that may also be more durable.
Early 20th-century engineers thought reinforced concrete structures would last a very long time – perhaps 1,000 years. In reality, their life span is more like 50-100 years, and sometimes less.
Building codes and policies generally require buildings to survive for several decades, butdeterioration can begin in as little as 10 years.
The main issue is simple: putting in steel reinforcing bars lowers the cost and weight of installing reinforced concrete, but at the severe expense of reducing the lifespan of that concrete — from millennia to perhaps a hundred years, and sometimes far less.
Steel corrodes (rusts). When it does, it expands and leads to something you’ve seen but perhaps not recognized: concrete cancer.
In every single reinforced concrete structure, silently behind the smooth exterior, the concrete is breaking itself apart due to the corroding steel inside.

Dust To Dust

What all this means is that literally everything you see today that’s made of concrete will need to be replaced within a hundred years of its installation.  Every bridge, every building, every roadway…all of them.
They’re just rotting away from the inside, silently and relentlessly.  When the rot progresses far enough, it leads to something called ‘spalling’, which is when the surface of the concrete crumbles away to reveal the rusted steel beneath.
Once you notice this, you’ll see it everywhere:
Of course, it’s true that anything you build will erode over time and require maintenance and care to provide longevity. The problem with reinforced concrete is that it’s extremely difficult to remedy once it’s poured because the affected parts are inside and hard to access.
So it’s nearly universally true that everything poured from concrete over the past century, as well as most of what is still being poured today, is fated to have a very short, very disposable lifespan.

Why This Matters

So let’s travel forward just a few short years into the future. There we find hundreds of trillions of dollars more of global debt, even greater sums of unfunded liabilities, much more expensive fossil fuels (as explained in this recent podcast with Art Berman) — all competing with a crumbling concrete-built environment that will have to be torn down and replaced.
Where the article above concludes that trillions of dollars will need to be be spent just in the US alone to replace its concrete infrastructure, that number will be at least an order of magnitude higher for the entire globe.
And we don’t get much incremental benefit for the cost of replacing a crumbing piece of infrastructure. When you tear down a bridge and replace it you still have one bridge performing the services of one bridge. Sure, you occupy a number of people in the construction and manufacturing trades for a while, but you don’t get any added value beyond that. It’s not the same as putting in a new bridge at a new location to open up a new geographic area for greater economic activity.
You just get your bridge replaced.  One for one: an economically neutral exchange that costs a lot of money.
My larger question here is this: Can all the competing future demands even allow all of the current concrete infrastructure to simply be replaced, let alone expanded?
What if there’s not enough energy for that task, plus the demands of feeding and sheltering and defending ourselves?
It’s my strong belief that we’ll regret the short-term mentality that led us to trade durability for lower cost. Furthermore, I contend that competing future demands will prevent us from replacing all of our decaying infrastructure with similar copies.
Either they won’t be replaced at all because we cannot afford to do so (see: Detroit) or we’ll have to bite the bullet and begin installing truly durable structures that won’t simply tear themselves apart from the inside in a few short decades. Which will likely be a lot more expensive to build.


Hopefully I’ve opened your eyes to the folly of building our society atop a foundation with an expiration date.
Reinforced concrete structures are crumbling all around us, something that’s immediately obvious once you begin to look for it for yourself. In most cases, it isn’t poor construction practices that are to blame, but simple chemistry and the decision to use steel as a reinforcing agent. The very best construction company in the world will still see their efforts end in ‘concrete cancer’ sooner or later.
There are some newer ways of slowing or mitigating this effect, but those aren’t always used. In my observation, more often than not they’re simply not deployed.  Steel is laid down, usually with rust already showing upon it, and then the concrete is poured over it. And that’s that.
This disposable mindset is rooted in the false assumption that we’ll always have abundant surplus energy to use. Wasteful practices are not a problem if you always have access to abundant surplus energy. Otherwise, as in the case we’re finding ourselves in, they bring tragedy.
Perhaps that tragedy will be many years in the future. But its inevitability is assured.
If we were thinking about all of this clearly, we’d not be pouring wind tower bases using reinforced concrete. Instead, we’d build pads that would be durable for centuries, because presumably we’re investing in wind power for the very, very long haul.
In the end, isn’t there something terribly ironic about making a future-betting ‘investment’ in wind upon a base of reinforced concrete that is, by definition, destined for a short, disposable life?
That alone says much about just how un-serious we really are. And how out of integrity our actions are with the very premise of sustainability.

~ Chris Martenson

Rearranging The Deck Shares——Central Banks Inflating Massive Debt Bubble Even Further

With the markets closed on Monday for the annual “Independence Day”holiday, the technical analysis from the past weekend’s missive still holds. As I stated:
“I discussed the likelihood of Central Banker’s leaping into action to stabilize the financial markets following the British referendum to leave the E.U. 
Then on Thursday more announcements came from both the Bank of England and ECB:
“While many had predicted a market crisis of magnitude stemming from the “Brexit” vote, the reality was a 100-point swing in the markets in just one week. No matter how you bet, you were probably wrong.”
“So, yes, from “Brexit Fears” to “Brexit MEH” in just one week. Talk about volatility.”
Over the weekend, the Bank of England (BOE) took further action to stabilize currency and bond markets yesterday:
“The Financial Policy Committee’s measures on Tuesday included reducing capital requirements for banks, which Carney called a “major change.” The countercyclical capital buffer was cut to zero from 0.5 percent of risk-weighted assets, a move the FPC said would raise the capacity for lending to companies and households by as much as 150 billion pounds ($197 billion). 
The buffer — designed to be bolstered in good times and eased in downturns to support lending — had been increased, effective in March next year. Officials now see it staying at zero until at least June 2017. 
Carney and the FPC gave a stark warning to banks that they should not use the extra funding they now have to increase dividend payouts.
I am sure the banks will absolutely NOT use the funding for the creation of additional profits or increasing payouts to shareholders. (sarcasm)
Of course, while everyone is currently focusing on Britain following the recent referendum, it is a variety of other issues that are weighing on the markets.
  • Bear Stearns 2.0: Standard Life & Aviva Property Halt Redemptions (Zerohedge)
  • The Italian “Debt Job”, The Next Crisis (WSJ)
  • Swiss Yield Curve Negative Out To 50 Years (Zerohedge)
  • China’s Debt Frenzy Leading To Depression Event (MarketWatch)
  • Bond Yields Pricing In Something Very Bad (The Telegraph)
While global Central Banks continue to perpetuate the illusion that“everything is going according to plan,” the reality is the debt bubble has only grown bigger. Of course, while Central Banks continue to “rearrange deck chairs” by shuffling bad debt around the globe and fostering continued bailouts of banks and hedge funds, the “ship is still slowly sinking.” 

What Do Bonds Know?

This brings me to my point for today. Central Bank interventions are creating a massive debt bubble by encouraging speculation in the riskiest of debt structures by institutions. Of course, why wouldn’t institutions buy high-risk debt when they are backstopped by Central Banks in the event of a creditor default. Of course, that speculation, demand for bonds, continues to drive interest rates lower as money chases yield.
This morning the interest rate on the 10-year U.S. Treasury reached 1.39% which is the lowest level on record following the 2012 low as the nation fretted over a “debt default from a Government shutdown.”  Of course, falling U.S. bond yields at that time, as investors piled into U.S. debt for safety, showed that fears of a default were unprecedented.
Today, investors are piling once again into the safety of the U.S. Treasury for a higher yield versus just about every other creditworthy sovereign issuer globally.
It is also worth noting that the current market action following the “Brexit”is not so dissimilar to what we saw in 2008. From the WSJ: 
“After Lehman Brothers fell over in September 2008, equities slumped, then rallied back to their previous levels within a week. Brexit isn’t Lehman, but the stock market is behaving similarly.
In 2008, shareholders made an epic mistake: They assumed Lehman would be manageable. This time the assumption is that central banks will ride to the rescue and corral any problems. Investors expect global easy money, adding yet another central-bank prop to the stockade protecting shares from weak economic growth. The result is some unusual, and worrying, behavior in the bond market.
Since the Brexit vote, Treasury yields have tumbled, and they kept falling even as shares recovered. On Friday, 10-year and 30-year yields set new lows, as did British and Japanese benchmarks. Bondholders think central banks will worry about the economic impact of Brexit, keeping rates lower for longer. This is quite different from what happened after Lehman, when bond yields rebounded with shares, as bond investors made the same mistaken judgment that there would be few long-run effects from a midsize U.S. bank failure.”
The ratio between stocks and bonds is sending a clear warning.
As shown above, the dark blue solid line is the ratio between stock prices and bond prices. Not surprisingly there is a high level of correlation between this ratio and the rise and fall of stock prices. This is with the exception of just two periods: the run-up of asset prices during QE3 and leading up to and following the “Brexit” vote.
“Last week’s divergence of bonds and equities isn’t healthy. Bond markets are screaming that the world economy is slowing, and shareholders have their fingers in their ears singing ‘la-la-la I can’t hear you.’ Stocks are no longer about growth, but about a desperate search for safe alternatives to low-yielding bonds.”
Since Brexit, the drive for bonds has been particularly sharp. However, as James stated, the drive for yield is not just about bonds but also about anything that pays a yield. Utilities, consumer staples, health care and telecommunications have been the leading sectors as they pay the highest dividends.
However, DO NOT be mistaken. This chase for yield is not something new but has been a growing bubble born of Central Bank interventions since the end of the financial crisis. As shown the dividend yielding stocks of the S&P 500 have outperformed every other major asset equity asset class. This should not have happened.
The result has been a push of valuations of mature, dividend-paying, low growth companies to extreme levels. The result will be, not surprisingly, a reprisal of the “Nifty Fifty” crash from the late-70’s. In other words, with the defensive sectors at extreme overbought levels, during the next major-market reversion there will be no “safe place” to hide for investors.
The same goes for bonds and I agree with Doug Kass’ recent commentary:
“I believe that fixed-income markets around the world are in a bubble of monumental proportions — and as is the case with most bubbles, the irrational is being rationalized. 
I can say with a high degree of probability that when this whole bond bubble blows up, it will wipe out years of profits for many!”
Now, let’s be clear, while I agree with Doug that bonds are extremely overbought currently, it also does not mean rates will go soaring off to the moon either. The chart below shows the current condition and the expected levels of the rebound. 
It is unlikely that rates in the U.S. will exceed 3.0% currently. A rapid rise in rates, will lead to a whole variety of bad economic consequences and ultimately a recession from such low levels of current growth. Such a spike in rates will also coincide with a fairly substantial major market reversion unlikely to be contained or controlled by the Fed and the damage will be felt across virtually every asset class in the market.
However, while “Brexit” is the continued focal point of Central Banks globally, the real “risk” for asset markets is never what is “seen” but rather what is “unseen.”  That problem can be summed up in just one word:“China.” I agree with Mark St. Cyr on this point.
All it will take is just one time, or one player to upset this apple cart of illusion which is desperately being maintained, and it all unravels. And as I’ve iterated many times previous I believe that player is China.
As central banks keep intervening mightily within the capital markets as I have stated before: to think China will idly stand by and just ‘suck up’ the consequences of those actions is a fools game. And as proof I would like to point out that as the central banks were busily propping up the markets before, during, and after the Brexit vote. China (once again) devalued the Yuan in a move not seen, and reminiscent in size and scope of August last year. You know, when everything was seeming to come off the rails – once again.”
Of course, it could be something else entirely.

Lance Robertslance_sig
Lance Roberts is a Chief Portfolio Strategist/Economist for Clarity Financial. He is also the host of “The Lance Roberts Show” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter, and Linked-In
This is a syndicated repost courtesy of RIA. To view original, click here.

All Hell Breaking Loose in Europe: Deutsche Bank Crashing Towards The Inevitable Lehman Moment, Italian Banks Face The Perfect Storm, Funding Crisis Accelerates, Stock Meltdown, Could Fall And Take Eurozone With It!

Deutsche Bank crashing.
All time low.
11,400 -0,820 -6,71%
Jim Willie: If Deutsche Bank Goes Under It Will be Lehman TIMES FIVE!
“Deutsche Bank Poses The Greatest Risk To The Global Financial System”: IMF

Deutsche Bank to Initiate the Next Financial Crisis? Stock Could Be Headed to Zero
Remember Lehman Brothers and the chaos that it created when it failed? If you think that the Worlds’ Central Banks are now wiser and consequently will not allow another similar event to occur, think again.
For two years in a row, the American unit of Deutsche Bank has failed the Fed’s stress test, which determines the ability of the bank to weather another financial crisis.
n 2007, Lehman had a leverage (the ratio of total assets to shareholder’s equity) of 31-to-1. At the time that Lehman filed for bankruptcy, it had $639 billion in assets and $619 billion in debt. Still, it caused a systemic risk worldwide.
In comparison, Deutsche Bank has a mind-boggling leverage of 40-times, according to Berenberg analyst, James Chappell.
Why Can’t the European Central Bank save Deutsche Bank? The nominal value of derivatives risk that Deutsche Bank holds on its books is $72.8 trillion. What is more alarming is that the market cap of Deutsche Bank is less than $20 billion. If the domino effect does occur, Germany with its GDP of $4 trillion or the EU with a GDP of $18 trillion will not be in a position to gain control over it.

Markets worry as Italian banks face the perfect storm

A rocky 2016 has gotten worse on the Brexit vote, and now bank bailout funds may have to grow bigger.
Italian banks are the new Brexit
Saddled with too many bad debts, Italy’s banks have the potential to drag Europe into yet another crisis. The country’s prime minister, Matteo Renzi, may defy EU rules and bail them out.
Italy Could Spark European Bank Crisis
Italian banks on edge, could fall and take Eurozone with it
According to Lorenzo Bini Smaghi is the entire banking system under pressure from unrest in Italy. Italian banks have to deal with hundreds of billions in bad loans and the Italian government is looking for ways to rescue banks

European banks lead equity markets down
Euro Stoxx banks index on course to its lowest ever close
Italy’s deepening banking crisis could RIP the eurozone apart, warn experts
ITALY’S banking crisis threatens to collapse the eurozone’s financial system and bankrupt the entire bloc, experts have warned.
Pound hits new low on Brexit nerves
It’s all collapsing. Of course it is when countries can’t print their own currencies…
Financials bore the brunt of the selling, with Commerzbank, Deutsche Bank, Credit Agricole, BNP Paribas and Societe Generale Group tumbling 2-6%.
The pan-European Stoxx Europe 600 index was down 1.8% in midday trading after declining 1.7% in the previous session.
The German DAX was tumbling 2.2% and France’s CAC 40 index was losing 2.3%. The UK’s FTSE 100 was declining 1.3%, erasing early gains.
A Look Inside Europe’s Next Crisis: Why Everyone Is Finally Panicking About Italian Banks
The result is that impaired loans at Italian banks now exceed €360 billion—quadruple the 2008 level—and they continue to rise.
In total, the financial sector in the country has roughly €300 billion of ‘bad’ debt, which needs to be addressed one way or the other. This might not be such an enormous problem if it was not for the fact that, as previously mentioned, Italy’s economy is chronically weak. This in turn affects the ability of the country’s government to provide a viable bailout package for the banking sector. Government debt in Italy now stands at almost 140% of GDP, second only to Greece in eurozone in gross terms.
Italian banks in big trouble!!
Video inside the link
Panic sets in over Italian banks and investors wonder whether the problem can extend all over Europe.
EU Banks Crash To Crisis Lows As Funding Crisis Accelerates

The signs are everywhere – if you choose to look – Europe’s banking system is collapsing (no matter what Draghi has to offer). From record lows in Deutsche Bank and Credit Suisse to spiking default risk in Monte Paschi, the panic in Europe’s funding markets (basis swaps collapsing) is palpable.
Tumbling to a fresh post-Brexit low, Europe’s Stoxx 600 Bank Index is testing EU crisis lows…
With Credit Suisse smashing to record lows…

and Deustche Bank crashing towards the inevitable Lehman moment…
Senior and Sub CDS are widening dramatically today with Italy’s short-sale ban…
Forget Brexit — Italy is poised to tear Europe apart
Italian ‘zombie’ banks put EU financial system at risk
Italy’s banking problems could lead to ‘Italeave,’–says/
Italy: Europe’s next domino to fall?
Ex-ECB Banker Stokes Europe’s Banking Panic: “People Are Starting To Withdraw From The Market”
A summary of Bini Smaghi’s key points:
  • “There is no rationality in the market”
  • People are starting to withdraw from the market and to go to very liquid assets
  • “The bail-in wil scare the markets and small investors”
  • Europe needs a credible back-stop for its banking system, EU banking rules need to be assessed, policy makers need to be pragmatic
  • European solution is needed for Italy; “in this situation, you need policy to step in”
  • Opportunity to consolidate Italian banking industry
  • Germany has too many banks that are not profitable
  • Market concern on Brexit is that we’re in for “very long” negotiations
  • U.K. economy is sitting on major imbalances’’
  • U.K. cutting corporate taxes creates risk of tax competition across Europe, leading to bigger deficits and debts