Friday, April 12, 2013

An Anarchist Squint at the Jobs Report

So the jobs report came out last week and rattled the market a bit. But there is a different perspective to this whole thing that I think is far more important. It also fingers a much more sinister trend afoot.
First, the conventional view: The unemployment rate fell to a new four-year low of 7.6%. Everybody knew that was bogus. It fell because half a million Americans left the job market. The unemployment figure the government publishes is a fiction anyway. It’s a government-manufactured number. I never really pay any attention to it, except to make fun of it, like I am now.
A somewhat less conventional view is to focus on job participation. This number is harder to fudge than the unemployment figure. It just shows you how many people are working or seeking work as a percentage of the civilian population (minus some adjustments for kids under 16, people in prisons, etc.).
Some people like this better and cite this chart as troubling:
I still don’t like this number.
The reason is that both figures are based on implicit assumptions that I find repulsive and evil. The idea is that the government should manage the economy to maximize employment. The idea is that higher is better. I don’t think any of these ideas are good ideas.
Employment should be a residual, the end result of a free people making their own choices about how much or how little they want to work. Counting jobs misses the point entirely. It’s like people who say the economy needs to “grow faster.” Why? The growth rate should be a residual, the end result of many choices consumers make. It should not be something managed to hit a target.
People forget that the economy does not exist to create numbers for economists and taxes for governments. It exists as a result of people cooperating with each other and making trades to satisfy needs and wants.
The problem is that we live in a society riddled with government intervention at every level. What these interventions do is discourage people from working. Most commentators focus on the number of Americans on some kind of federal assistance. That’s only part of it.
The other part of it is that government regulations (created in partnership with big business) keep a lot of people from creating their own work. You can’t open a restaurant in your own kitchen, for instance, without a lot of hassle — if you can do so at all. In fact, you could get in big trouble if you started serving meals to the public out of your house or back porch on a commercial basis. The government would shut you down and fine you at a minimum. It would do so under the guise of guarding the public’s health. (As if your incentive were to poison your neighbors.) And if you believe that, you are a fool. What it is really doing is protecting the establishment.
This is just one tiny example, but I could on for pages about how government discourages people from making their own living.
I’ve always liked this passage from professor Roderick Long, from a piece back in 2008:
“In the absence of licensure, zoning and other regulations, how many people would start a restaurant today if all they needed was their living room and their kitchen? How many people would start a beauty salon today if all they needed was a chair and some scissors, combs, gels and so on? How many people would start a taxi service today if all they needed was a car and a cellphone? How many people would start a day care service today if a bunch of working parents could simply get together and pool their resources to pay a few of their number to take care of the children of the rest? These are not the sorts of small businesses that receive SBIR awards; they are the sorts of small businesses that get hammered down by the full strength of the state whenever they dare to make an appearance without threading the lengthy and costly maze of the state’s permission process. The assistance that small firms receive comes largely at the expense, not of larger firms, but of still smaller firms — or of those who would start such smaller firms if they could.”
But the government is opposed to such anarchic job creation. It always has been. The work of professor James C. Scott is a particularly valuable aid in seeing why this is so. Scott is no scholar stuck in his ivory tower. He lives in an 1826 Connecticut farmhouse. The 76-year-old raises chickens, shears sheep and keeps bees. He lived for two years in a Malaysian village and hiked all over the hills of northern Burma (Myanmar). He also writes terrific books. I highly recommend his Two Cheers for Anarchism.
Anyway, his work makes plain that the state from the beginning wants people organized in ways that make them easier to tax, keep track of and subdue. You can’t have a free people running unlicensed businesses out of their homes!
What the government wants is for people to take jobs with big companies. The government wants cows to milk. And it’s easier to milk them when they all hang out in the same spots. Federal assistance programs are there to quell rebellion and create dependency. Too many unemployed people means a lot of time for meeting in coffeehouses plotting revolution. Better to give the sops something to keep them quiet, government thinks, while we dream up ways to create more tax-paying jobs that we approve of.
I recall a classic and much quoted passage from the anarchist Pierre-Joseph Proudhon (1809-1865):
“To be governed is to be watched over, inspected, spied on, directed, legislated at, regulated, docketed, indoctrinated, preached at, controlled, assessed, weighed, censored, ordered about, by men who have neither the right, nor the knowledge, nor the virtue… To be governed is to be at every operation, at every transaction, noted, registered, enrolled, taxed, stamped, measured, numbered, assessed, licensed, authorized, admonished, forbidden, reformed, corrected, punished. It is, under the pretext of public utility, and in the name of the general interest, to be placed under contribution, trained, ransomed, exploited, monopolized, extorted, squeezed, mystified, robbed; then, at the slightest resistance, the first word of complaint, to be repressed, fined, despised, harassed, tracked, abused, clubbed, disarmed, choked, imprisoned, judged, condemned, shot, deported, sacrificed, sold, betrayed; and, to crown all, mocked, ridiculed, outraged, dishonored. That is government; that is its justice; that is its morality.”
Government will always fail in its efforts to make society into some kind of abstract image, to fit it into some preconceived plan of what it should look like. That’s why the economy reels from one crisis to the next. And that’s why there is so much unhappiness and angst in the employment market today.
Chris Mayer
Original article posted on Laissez Faire Today

Right target, wrong shots

Southern Europeans are attacking Germany’s policies, but mostly for the wrong reasons

GERMANS seem beleaguered these days. Not only is their country the dominant actor in the euro crisis, but it is also being attacked for foisting on southern Europeans reforms and spending cuts that are prolonging recession and forcing unemployment unbearably high. All this is accompanied by none-too-subtle talk of the second world war and cartoons of Angela Merkel wearing a moustache.
Germans find this monstrously unfair. They have accepted a string of costly bail-outs in the past three years even though they were promised that the euro would never make them liable for other countries’ follies. The Cypriot bail-out showed that German patience with letting private creditors off the hook is exhausted. The attacks are having a political impact—witness the creation of a new anti-euro party (see article).
Yet the critics are mostly wide of the mark. Germany is not to blame for unpopular reforms; these are necessary for economic survival in a single currency that eliminates the options of independent monetary policy and currency devaluation. Mrs Merkel is not responsible for all budget cuts; these are unavoidable when governments become so indebted as to lose access to financial markets. She was not the author of the (abortive) idea to raid insured bank deposits in Cyprus; that was the Cypriot government’s attempt to spare offshore savers from bearing the entire bill for the island’s rescue.
The critics are more on target over Germany’s excessive insistence on austerity. Greece, Italy, Spain and most recently Portugal (see article) do belatedly have scope to slow the pace of deficit-cutting, but it took German and other creditors too long to give them a bit more leeway. Germany itself also has room to boost demand at home through fiscal policy and wage rises. With its economy close to joining the euro zone in recession, it would gain from exploiting that room to the full. Yet the fillip of more German demand would not necessarily save the rest of Europe from the difficult road ahead.
The oddity is that where Germany really now deserves blame, the critics are almost silent. The gravest long-term threat to the euro is Germany’s new-found reluctance to build a safer structure to underpin it. Mrs Merkel has a history of moving slowly and cautiously in the euro crisis, but recently she has started to go backwards.
The prime example is the banking union for the euro zone that she and her fellow leaders agreed on last year. The idea was that a single supervisor and a euro-wide bank-resolution mechanism would be better able to deal with large failing banks. Banking union would also sever the venomous connections that transmit insolvency from banks to governments and vice versa. Yet no sooner had the crisis begun to ease last autumn—after the European Central Bank (ECB) promised to do “whatever it takes” to save the euro—than Germany rowed back from banking union. It now argues that only future rescues, not legacy problems, should be covered, for example. Even agreement on a single supervisor is being held up on technical grounds.
The unhappy truth is that the euro zone is stuck in a halfway position. European leaders have agreed in principle that, to save the single currency, they must accept deeper economic and political integration, starting with their fiscal compact and continuing with banking union. But when it comes to turning principle into practice, obstacles keep emerging. And not just with banking union: leaders are now less ready to transfer more powers to Brussels or to create new mechanisms to hold countries to account. Instead, the hope seems merely to be that the ECB can keep the euro alive until the single currency is rescued by a world economic recovery.
Hope is not a policy
This is dangerously complacent. Already this year the messy bail-out of Cyprus has raised new fears in weaker countries that bank deposits may be at risk. The next euro-zone member likely to need a rescue is Slovenia (see article). An even bigger worry could be Italy, which is stuck in a political stalemate that seems to preclude further reforms to its moribund economy. Thanks to the ECB the markets have been in a quiescent mood, but just one unexpected political or economic accident anywhere could easily jolt them awake.
Mrs Merkel has reasons to tread carefully. Although most Germans strongly support the euro, they do not want the currency union to become a transfer union. Public opinion and the constitutional court make it harder for her to accept debt mutualisation. And although Germans generally seem to trust her handling of the euro crisis, she faces a testing election in September. Yet if the euro is to survive, Germany will have to embrace banking union as well as a degree of fiscal and political union. By pretending that full banking union is optional, German leaders are failing their voters, and prolonging the uncertainty in the rest of the euro zone.

Portugal Considers Paying Public Workers In Treasury Bills Instead Of Cash

As reported late on Friday, just as the market closed, the Portuguese constitutional court decided that several provisions of the country's 2013 budget were not constitutional. According to the high court, cuts in wages and pensions of public employees were unfair (there's that word again) because they targeted only the public sector. The court rejected plans to cut one of the 14 paychecks that public workers usually get each year and to slash 6.4% from pensions for retirees.  This coincided with the government warning that the court's decision would put into question the country's ability to fulfill its €78 billion international bailout program, which in turn would send bondholders of Portuguese sovereign debt scrambling for the exits as suddenly the country may find itself in the ECB's "dunce" corner, with Draghi preparing to pull a "Berlusconi" on a government which can't even whip its judicial branch in line. However, of more immediate concern is how will the government now plug a hole of up to €1.3 billion in its €5.3 billion 2013 budget. A solution has, luckily, presented itself: bypass the unconstitutional provisions by paying government workers not in cash, but in government bills!
From the WSJ:
The Portuguese government is considering a plan to pay public workers and pensioners one month of their salary in treasury bills rather than cash after a high court ruled out wage cuts, a person familiar with the situation said Sunday.

"This is one of the ideas being considered," the person said.

By paying one month of salary in T-bills to public workers and pensioners, the government would save an estimated €1.1 billion in expenses, narrowing the budget gap significantly.
Incidentally, this plan makes perfect sense: with every central bank openly monetizing its debt, it has effectively made debt and cash equivalent.
Now if only Portuguese public workers had access to the same shadow transformation pathways and government bond repo collateralization opportunities afforded to the big banks, then every bill thus obtained would be able to serve as a source of nearly infinite rehypothecation potential, and thus, a DIY fractional reserve banking system provided to every individual.
Coming next: the full convertibility of Spanish Spiderman towels backed by the full faith and credit of the Rajoy kickback scandal, and fully convertible into chorizo.
All joking aside, the fact that this absurd option is even being contemplated shows just how deep into the rabbit hole event horizon the modern completely insolvent financial system has traversed.

Portugal faces HUGE new public spending cuts before Europe will pay for any more bailouts

  • Court rejects austerity measures that would reduce public sector perks
  • Deepens divide between protected civil servants and other workers
  • Government must now find other areas to cut to meet bailout terms

  • Portugal faces deep cuts to school and hospital funding after a court ruled it was unfair to cut perks enjoyed by protected civil servants.
    The government must now scramble to find other areas to make savings as it tries to meet the terms of its international bailout programme.
    The decision deepens the divide between a protected class of civil servants and other workers, whose lives have become far more precarious during the worst recession since the 1970s.
    Divisions: Lisbon has been the scene of regular protests over the government's cuts to public spending. A court has now rejected austerity measures that would have reduced holiday bonuses and other public sector perks
    Divisions: Lisbon has been the scene of regular protests over the government's cuts to public spending. A court has now rejected austerity measures that would have reduced public sector perks
    Although public sector pay has fallen faster than in the private sector during Portugal's economic crisis, state workers still earn on average double the wages of the private sector.
    Meanwhile, all Portuguese have been hit since January by the largest tax hikes in living memory, and many economists believe more austerity measures will prolong and deepen the slump.
    'This decision left me very worried. Civil servants benefit, but not the private sector. It's in the public sector where the government has to cut,' said Sonia Castro 39, an unemployed secretary.
    Jose Manuel, a 56-year-old taxi driver from Lisbon, said the only outcome he sees is that 'our lives will get worse.'
    Protests: The government has to search for others areas to cut after the court said it was unfair to single out civil servants for reductions in benefits.
    Protests: The government has to search for others areas to cut after the court said it was unfair to single out civil servants for reductions. Here demonstrators march against government austerity policies in Lisbon
    The European Commission and particularly Germany have urged Lisbon to waste no time in coming up with new savings in order to keep its bailout programme on track.
    On Sunday, Prime Minister Pedro Passos Coelho reaffirmed Lisbon's commitments to its fiscal tightening goals under an EU/IMF bailout, promising to compensate for the court decision with other spending cuts.
    Mr Coelho has managed to avert the court's decision bringing down his government. He survived a no-confidence vote last week and won President Anibal Cavaco Silva's support to stay in office.
    Demands: Portugal's Prime Minister Pedro Passos Coelho is under huge pressure to reduce his country's public spending
    Demands: Portugal's Prime Minister Pedro Passos Coelho is under huge pressure to reduce his country's public spending
    Portuguese benchmark bond yields jumped almost 20 basis points in early trading on Monday following Friday's constitutional court ruling - a sign of investor concern.
    'The key thing here now is that there is no political crisis, that the government stays on and that it is not planning to renegotiate bailout targets. It could have turned out much worse,' said Filipe Garcia, head of Informacao de Mercados Financeiros, an economic consultancy in Porto.
    Mr Coelho's pledge to meet targets with more spending cuts means Lisbon will now have to find another 0.8 percent of Gross Domestic Product (GDP) to satisfy the 'troika' of lenders - the EU, European Central Bank and International Monetary Fund - which demand austerity in return for bailout loans.
    Lisbon has already promised its lenders to cut 4 billion euros progressively in spending between 2013 and 2015 - and the pace of the cuts will now have to accelerate.
    Political scientist Viriato Soromenho Marques said the spending cuts were unlikely to cause new constitutional problems for now. 'But most importantly, they will cause problems with people's living standards, which are already very low.'
    The government now plans to cut spending in areas like the healthcare system, pensions and education.
    'They'll have to find solutions that don't run against the constitutional court's line, but I think it's possible to implement savings even in healthcare without getting barred by the court,' Garcia said.
    'Judging by their early response, the government has a backup plan ready.'
    Concern: Portugal's Parliament has been riven with division over how the government should respond to the country's economic woes
    Concern: Portugal's Parliament has been riven with division over how the government should respond to the country's economic woes
    Analysts said freezing investment in hospitals was one possible measure that could save hundreds of millions of euros, as well as raising the share of medical bills paid by patients.
    Analysts say cuts will still have to fall on the public sector wage bill and pensions which make up 60 percent of state spending. But protecting the perks of those with steady civil service jobs means imposing more pain on contractors. Some economists say new cuts are still a better option than more tax hikes.
    Lisbon has to cut the budget deficit to 5.5 percent of GDP this year from 6.4 percent in 2012, when it missed its goal but was still lauded by lenders for its efforts. 

    Why Did Goldman And JPM Get Fed Minutes A Day Early?

    QE could end this Summer according to leaked Fed minutes.
    Why were FOMC minutes released to a few organizations a day early, and who got the data?  Peter Cook examines what happened and how it damages the Fed's already tattered reputation for transparency and fair play.
    Late update on the story...

    List of Banks and Lobbying Firms
    Who Got the Fed Minutes Early - WSJ
    American Bankers Association
    American Council of Life Insurers
    Barclays Capital
    BNP Paribas
    Capital One
    Carlyle Group
    The Clearing House Association
    The Cypress Group
    Fifth Third Bank
    Goldman Sachs
    The Gray Company
    Guggenheim Partners
    Independent Community Bankers of America
    J.P. Morgan Chase
    King Street
    National Association of Realtors
    Regions Bank
    Rich Feuer Anderson
    Roberts Raheb & Gradler
    Securities Industry and Financial Markets Association
    Standard & Poors
    Sullivan & Cromwell
    U.S. Bank
    Wells Fargo
    Whitmer & Worrall
    Williams & Jensen
    Government agencies or public-oriented entities:
    Austria Federal Ministry of Finance
    Bank of Japan
    Conference of State Bank Supervisors
    Congress (House & Senate)
    Consumer Financial Protection Bureau
    European Central Bank
    Federal Housing Finance Agency
    National Credit Union Administration
    Treasury Department
    White House

    UPDATE - Grayson Asks for Investigation into Fed leak

    Jim Rogers: ‘I Suspect They’ll Take the Pension Plans Next; I for One am Worried, and I’m Taking Preparations’

    Lew Rockwell - by Tekoa Da Silva

    I was able to reconnect for an interview with legendary Quantum Fund manager and commodities bull, Jim Rogers. This was an especially groundbreaking interview, as Jim shared thoughts on what governments around the world will be taking next, and what he’s doing right now to protect his personal bank accounts following the Cyprus collapse.
    Speaking towards the frightening implications of the Cyprus banking collapse, Jim said that, “It’s been condoned [now] by the IMF, the European union, and everybody else in sight; that a government in need, can take assets. We all knew they could tax us…but this is the first time that I’m aware of, that they’ve gone in and taken bank accounts. They took gold from people in the U.S. in the 1930′s…but I’ve never heard of them taking bank accounts. [Now] they’re doing it. So be careful [because], now they can take your bank account under this precedent.“
    When asked if bank account confiscation will be going worldwide, Jim said, ”Well, it’s now in their bag of tricks, but yes, they can do anything they want too now. I for one am worried and I’m taking preparations. Who knows if I’m right or not, but I’d rather be safe than sorry as all of those people who had money in Cyprus have learned. They thought they had a normal bank account… but now it’s been [taken] with the sanctions of many governments and institutions.”
    Jim also urged that, “If people have money in any account, anywhere in the world…cut it down to under the guaranteed amount. They might take that too someday when things get desperate, because the precedent has been set, but that’s where I would start if I had money in the bank anywhere in the world.”
    With respect to which assets governments will likely be coming for next, Jim said, ”401k plans, IRA’s, and pensions plans which the government knows about [may be next]…They’re rationale would be, ‘Well most people haven’t been doing well in their IRAs and pension plans for the past several years, so we’re going to help you. We’re going to take your pension plan and give you government bonds so that you have a guaranteed return.”
    Jim further added that, ”That’s how they’ll rationalize taking our money. They know where all the pension plans are because we have to report it, so they’re easily accessible by governments. They know where they are, what they are, and they’ll be able to snatch them away. Who knows what they’ll do, but they’ll certainly find some way to take our money when things get worse, they always have.”
    As a final chilling comment to end the interview, Jim noted that, “Anything they know about—they might easily take.”
    This was another powerful interview, conducted with an absolute legend of our time. It is required listening for serious investors and market students.

    A Global Recession? The Warning Signs Are Everywhere

    More Signs The Economy Is Rolling Over All Around The World

    Here’s SocGen with more thoughts:
    • Turmoil in Cyprus is pushing the economic surprise index back into negative territory in the eurozone.
    • Momentum is still declining in emerging markets as growth is slowing.
    • Only the US is managing to maintain strong economic momentum and we expect economic surprises to remain positive over there, especially in H2 2013.


    This Chart Contradicts The #1 Fear People Have About The Economy

    Following Friday’s jobs report, there’s been a renewed fear that the increase in the Payroll Tax is sapping the consumer.
    The primary reason for this is that retail employment actually fell significantly in March, as seen in this chart.

    retail employment

    Pork Prices Are Falling In The World’s Largest Pork Market

    And the government is adding to its national pork reserves.
    Chinese food inflation was up 2.7 percent year-over-year in March, down from six percent the previous month.

    This decline was led by a 5.5 percent decline in pork prices.
    China is the world’s largest pork consumer, and pork accounts for a significant chunk of the consumer basket.
    Pork prices have been falling since the Lunar New Year holiday. Bank of America‘s Ting Lu expects pork prices to stay weak in coming months for four key reasons:
    1. Sow breeding inventory has been at a “historically high level at around 20.7 million since September 2012.”
    2. Despite the dead pigs found floating in Chinese rivers there has been no report of swine flu.
    3. Demand for pork could be hit by the government’s crackdown on corruption, ‘gift giving’ and excesses that have hit the catering industry and high-end restaurants.
    4. Corn prices have declined and corn is an important feed grain for pigs.
    The hog-to-corn price ratio is below 6, “roughly a break-even level for pig farmers,” according to Lu. A lower ratio suggests that pork profitability has declined and it would make more sense to sell corn instead.

    china hog to corn price ratio chart

    Small Businesses Planning To Hire: 0%

    In a shocking state of affairs, it would appear the stock market’s wealth effect is not rubbing off on the real economy. The National Federation of Independent Businesses (NFIB) shows 0% of their members planning to hire. One can only presume we need moar QE, moar deficits, and moar wealth effect.
    Recovery? 0%!!

    JC Flowers: US, UK Inflation Best Way to Reduce Debt 

    1 killed, 1 hurt when Dumpster lifted into Terre Haute trash truck

    TERRE HAUTE, Ind. - A man was killed and another person was injured as they slept in a Dumpster that was picked up and crushed by a trash truck early Thursday morning.
    Terre Haute police told WTWO-TV that the driver picked up the Dumpster on Locust Street and that he heard screaming and stopped the truck at 7th Street and Wabash Avenue, outside a Hilton Garden Inn.
    The driver then found two people in the Dumpster.
    Police said one person was pronounced dead and the other was flown to an Indianapolis hospital suffering from severe injuries.
    The names of the victims were not released.
    Copyright 2013 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

    COMEX Silver Inventories Fall Off Cliff As Registered Silver Declines by 10% in 48 Hours!

    COMEX registered silver inventories have fallen off the proverbial cliff this week, as registered supplies have dropped a massive 10% in the last 48 hours! 
    Nearly 4 million ounces of physical metal has vaporized from COMEX vaults as the rush to physical intensifies in the wake of the Cyprus bail-in wealth confiscation as news has spread that nations the Western world over are preparing to shove the next banking crisis down the throats of depositors.

    From SRSrocco:
    Comex Registered Fall off Cliff

    Elizabeth Warren Tears Into Federal Regulators For Shielding Big Banks

    Think Progress – by Igor Volsky
    Sen. Elizabeth Warren (D-MA) embarrassed government regulators during a Senate Banking Committee hearing on Thursday morning as she demanded to know why they won’t reveal how frequently big banks illegally foreclosed on homeowners. In January, regulators abandoned a case-by-case review of foreclosure fraud conducted by some of the nation’s largest banks in favor of a $9.3 billion settlement. Under the deal, most of the 4.4 million homeowners who were foreclosed on in 2009 or 2010 received less than $1,000 each.  
    Fair housing advocates and Democratic lawmakers panned the agreement, claiming that it short-circuited a more detailed review process (known as Independent Foreclosure Review) and let banks off the hook for illegally foreclosing on millions of homeowners. Regulators had initially claimed banks broke the law or made errors in 6.5 percent of all the loans reviewed, though the number has since been revised upward.
    During the hearing, Warren pressed officials from the Office of the Comptroller of the Currency and The Federal Reserve for answers about how frequently banks broke the law, only to discover that regulators didn’t know the exact number before reaching their settlement and were now unwilling to publicize the error rate. “You’re saying that the [you] did not have an estimate in mind of how many banks had broken the law and how many home owners were the victims of illegal activities?” Warren asked in disbelief. She pressed for public disclosure, but was told that the information about banks’ illegal activities is proprietary and may not ever be released:
    WARREN: So you have made a decision to protect the banks but not a decision tell the families who have been illegally foreclosed against?
    RICHARD ASHTON (FEDERAL RESERVE): We haven’t made a decision about what information we would provide to individuals. [...]
    WARREN: So I just want to make sure I get this straight. Families get pennies on the dollar in the settlement for having been the victims of illegal activities or mistakes in the banks’ activities. You now know individual cases where the banks violated the law and you’re not going to tell the homeowners or at least it’s not clear if you’re going to do that?
    Watch it:

    Last week, the Government Accountability Office issued a report of the reviews and concluded that regulators at the Fed and OCC gave banks “too much leeway” in how the reviews were conducted, implying that the shoddy review process led to a hastened settlement instead of a complete review process. “On Tuesday, regulators released new information suggesting that banks may have made errors in as many as 30 percent of all loans that qualified for a review,” the Huffington Post reported.

    Guess How Many Millionaires Collect Unemployment

    Millionaires raked in $80 million from jobless benefits.
    Means testing, anyone?
    And we're talking about households with adjusted annual gross income of more than $1 million, not net-asset millionaires.  I put the over/under at 1,000 families.  I wasn't even close.  Yet Congress will do nothing to fix the problem because Democrats do not want to see unemployment insurance means tested.  Pelosi warns of a means-testing slippery slope as we drift closer to fiscal oblivion.
    Almost 3,200 households -- about 20 percent of them from New York -- that reported adjusted gross income of more than $1 million received jobless-insurance payments averaging $12,600 in 2010, the latest year for which figures are available, according to IRS data compiled by Bloomberg.  Those payments outpaced the total incomes for about 25 million U.S. households.
    The final sentence is without question the most shocking part of the story.
    Get the details at Bloomberg...

    Debt spiral could push Portugal into new bail-out, admits EU-IMF

    Portugal could face a second bail-out as the country, mired in recession and deeply divided over eurozone austerity measures, is caught in a debt spiral of soaring costs and borrowing to pay back EU-IMF loans.

    Debt spiral could push Portugal into new bailout, admits EU-IMF
    Portuguese pensioners during a protest against austerity measures. Photo: AP
    Portugal, which is struggling to implement eurozone austerity measures, will owe the EU and IMF €78 billion in bail-out loans when it has to return to the financial markets for financing in July next year.
    Leaked EU-IMF troika documents admit that this will be nigh on impossible because Portugal will need to borrow €14.1 billion in 2014, up 30pc more annually than before the bail-out, at higher interest costs than those that caused its initial crisis in 2011.
    "Portugal has the challenge of needing to finance more than pre-crisis albeit with a sub-investment grade rating," the document leaked to the Financial Times admitted.
    "There is substantial funding risk for Portugal given that it is still subject to substantial vulnerabilities at the end of the programme."
    The leaked troika documents, to be discussed by Europe's finance ministers this weekend, set out options to help Portugal and Ireland by extending the repayment plan for loans.
    Eurozone ministers are expected to agree to give both countries an extra seven years but a confidential analysis of Portugal predicts that even with extra time for repayments the country could need a second bail-out.
    Next year's financing trap will close even tighter in 2015 when Portugal will need to borrow €15 billion at high interest rates, compared to the €10bn-€12bn the country borrowed with lower costs before the bail-out.
    "The task of issuing medium and long-term debt above what is already held by market participants might be very demanding without an improvement in Portugal's sub-investment grade rating and the build-up of a stable investor base," the report said.
    Even with a seven year repayment extension, the EU-IMF analysis predicts that Portugal's financing burden will rise between 2014 and 2017 at a time when financial markets are wary of the southern European country's ability to pay back borrowing, concerns that will drive up interest rates.
    "At this stage Portugal's market access can only be considered as limited and opportunistic," the report said.
    Portugal was plunged into a new round of political crisis last weekend after its constitutional court blocked austerity measures contained the country’s 2013 budget, measures that are the condition of continued EU-IMF funding.

    Why Lie About Inflation? Because It Covers Up Bigger Lies

    by Phoenix Capital Research

    More and more analysts are catching on to the fact that Government measures of inflation are phony. The US Government tells us that inflation, as measured by the CPI, is 0.8%. This is largely a work of fiction however as the actual cost of goods purchased by consumers has increased.
    The US Government hides this fact by changing the CPI regularly to underplay the threat of inflation. One of the most famous examples is the decision to drop food and energy prices from directly impacting the CPI via a gimmick called “hedonic adjustments.”  In simple terms, if food or gas prices jump 100%, the CPI won’t rise anywhere near that much.
    The CPI rigging goes much further than this.  The CPI also adjusts how it measures the price of homes and rents. So if home prices or rent prices jump substantially, the jump won’t show up in the CPI.
    By way of example, think back to the summer of 2008. At that time, the price of gasoline was at an all time high with Oil priced at nearly $150 per barrel. Food prices were approaching records. And home prices were only 10% off their all-time highs.
    At that time, the official reading for CPI was 4%. The US Government claimed that with gas, food and housing prices (the most basic essentials) all at or near all time highs, that inflation was just 4%.
    Why do this?

    Because by downplaying inflation you can overstate growth. All economic growth in the US accounts for inflation via a “deflator” measure. If GDP grows 3% and inflation was 2%, then real growth was 1% in very very simple terms.
    By using a low CPI deflator, the Government can overstate growth dramatically. A great example is the fourth quarter GDP growth measure for 2012 which, if using an accurate inflation measure, would have registered over NEGATIVE 1%.
    However, by using a phony deflator measure, the US got away with a 0.4% growth rate. And the media could proclaim that things are still positive, albeit not as positive as they were in the third quarter.
    This is yet another reason why Governments and Central bankers will always downplay inflation. It’s also why you’ll never hear a Central banker warn that inflation is a problem.
    However, by any reasonable measure, real inflation today is closer to 6%. Stocks love inflation at first, until their costs start to increase dramatically. At that point inflation is a REAL KILLER for profits. This doesn’t mean stocks can’t soar (see Zimbabwe’s stock market returns) but it does mean you’re not getting any richer from them.

    To learn more about Private Wealth Advisory…

    Best Regards,
    Graham Summers

    Judge Napolitano: Bailed-Out Banks Using Gov't Aid To Pay Back Gov't Loans

    Why Are The Banksters Telling Us To Sell Our Gold When They Are Hoarding Gold Like Crazy?

    By Michael Snyder
    Economic Collapse

    The big banks are breathlessly proclaiming that now is the time to sell your gold.  They are warning that we have now entered a “bear market” for gold and that the price of gold will continue to decline for the rest of the year.  So should we believe them?  Well, their warnings might be more credible if the central banks of the world were not hoarding gold like crazy.  During 2012, central bank gold buying was at the highest level that we have seen in almost 50 years.  Meanwhile, insider buying of gold stocks has now reached multi-year highs and the U.S. Mint cannot even keep up with the insatiable demand for silver eagle coins.  So what in the world is actually going on here?  Right now, the central banks of the world are indulging in a money printing binge that reminds many of what happened during the early days of the Weimar Republic.  When you flood the financial system with paper money, that is eventually going to cause the prices for hard assets to go up dramatically.  Could it be possible that the banksters are trying to drive down the price of both gold and silver so that they can gobble it up cheaply?  Do they want to be the ones sitting on all of the “real money” once the paper money bubble that we are living in finally bursts?
    Over the past few weeks, nearly every major newspaper in the world has run at least one story telling people that it is time to sell their gold.  For example, the following is from a recent Wall Street Journal article entitled “Goldman Sachs Turns Bearish on Gold“…
    Another longtime gold bull is turning tail.
    Investment bank Goldman Sachs Group Inc. said Wednesday that gold’s prospects for the year have eroded, recommending investors close out long positions and initiate bearish bets, or shorts. The shift in outlook was the latest among banks and investors who have soured on gold as its dozen-year runup has been followed by a 12% decline in the last six months.
    Goldman began the year predicting gold would decline in the second half of 2013, but said Wednesday the drop began earlier than expected and doesn’t appear likely to reverse. Like others, the firm said the usual catalysts that have been bullish for gold during its run are no longer working.
    Major banks over in Europe are issuing similar warnings about the price of gold.  The following is from a Marketwatch article entitled “Sell gold, buy oil, Societe Generale analysts say“…
    Analysts at Societe Generale predict in a note Thursday that gold prices will fall below $1,400 by the year’s end and continue heading south next year.
    They cite two main reasons:
    1.  Inflation has so far stayed low and now investors are beginning to see economic conditions that would justify an end to the Fed’s quantitative easing program.
    2.  The dollar has started trending higher, which should make gold prices move lower as the physical gold market is extremely oversupplied without continued large-scale investor buying.
    And even Asian banks are telling people to sell their gold at this point.  According to CNBC, Japanese banking giant Nomura is another major international bank that has turned “bearish” on gold…
    Nomura forecast gold prices will fall in 2013, on Thursday, becoming the latest bank to turn bearish on the precious metal which has been a favorite hedge for investors who fear aggressive monetary stimulus will lead to rising inflation.
    “For the first time since 2008, in our view, the investment environment for gold is deteriorating as economic recovery, rising interest rates and still benign Western inflation (for now) will likely leave some investors rethinking their cumulative $240 billion investment in gold over the past four years,” wrote Nomura analysts in a sector note on Thursday.
    A lot of financial analysts are urging people to dump gold and to jump into stocks where they “can get a much better return”.  They make it sound like it is only going to be downhill for gold from here.  The following is from a recent CNBC article entitled “Gold’s ‘Death Cross’ Isn’t All Investors Are Worried About“…
    Gold is flashing the “death cross” but the bearish chart pattern is not the only thing scaring investors.
    The magnetic appeal of a rising stock market has pulled some investment funds away from the yellow metal. Since the beginning of the year, stocks are up nearly 7 percent and gold is down nearly 6 percent.
    But if gold is such a bad investment, then why are the central banks of the world hoarding gold like crazy?
    According to the World Gold Council, gold buying by global central banks in 2012 was at the highest level that we have seen since 1964
    Worldwide gold demand in 2012 was another record high of $236.4 billion in the World Gold Council’s latest report. This was up 6% in value terms in the fourth quarter to $66.2 billion, the highest fourth quarter on record. Global gold demand in the fourth quarter of 2012 was up 4% to 1,195.9 tonnes.
    Central bank buying for 2012 rose by 17% over 2011 to some 534.6 tonnes. As far as central bank gold buying, this was the highest level since 1964. Central bank purchases stood at 145 tonnes in the fourth quarter. That is up 9% from the fourth quarter of 2011, and the eighth consecutive quarter in which central banks were net purchasers of gold.
    This all comes on the heels of decades when global central banks were net sellers of gold.  Marcus Grubb, a Managing Director at the World Gold Council, says that we are witnessing a fundamental change in behavior by global central banks…
    Central banks’ move from net sellers of gold, to net buyers that we have seen in recent years, has continued apace.  The official sector purchases across the world are now at their highest level for almost half a century.
    Meanwhile, insiders seem to think that gold stocks are actually quite undervalued right now.  In fact, insider buying of gold stocks is now at a level that we have not seen in quite some time.  The following is an excerpt from a recent Globe and Mail article entitled “Insider buying of gold stocks surges to multi-year highs“…
    The TSX global gold index has lost about a third of its value over the past two years. The S&P/TSX Venture Exchange, stock full of gold mining juniors, hit a multi-year low this month.
    Yet, executives and officers who work within those businesses are showing remarkable confidence that the sector is poised for better times.
    In addition, the demand for physical silver in the United States seems to be greater than ever before.  According to the U.S. Mint, demand for physical silver coins hit a new all-time record highduring the month of February.
    And demand for silver coins has not abated since then.  Just check out what has been happening in April so far
    The US Mint has updated April sales statistics for the first time since last week, and to no surprise, the Mint again reported more massive sales, with another 833,000 silver eagles reported sold Monday!   The April total through 6 business days is now 1.645 million ounces, bringing the 2013 total to a massive 15.868 million ounces.  In response to the continued massive demand for silver eagles, the mint also has begun rationing sales of silver eagles to primary dealers resulting in supply delays!  Just as was seen in January, tight physical supplies have seen premiums on ASE’s skyrocketing over the weekend and throughout the day, as ASE’s are rapidly becoming as scarce as 90%!
    Something does not appear to add up here.
    I also found it very interesting that according to Reuters, Cyprus is being forced to sell most of their gold reserves in order to help fund the bailout of their banking system…
    Cyprus has agreed to sell excess gold reserves to raise around 400 million euros (341 million pounds) and help finance its part of its bailout, an assessment of Cypriot financing needs prepared by the European Commission showed.
    So exactly who will they be selling that gold to?
    And I also found it very interesting to learn that Comex gold inventories have been falling dramatically over the last few months.  The following is from a recent article by Tekoa Da Silva
    A stunning piece of information was brought to my attention yesterday. Amid all the mainstream talk of the end of the gold bull market (and the end of the gold mining industry), something has been discretely happening behind the scenes.
    Over the last 90 days without any announcement,stocks of gold held at Comex warehousesplunged by the largest figure ever on record during a single quarter since eligible record keeping began in 2001 (roughly the beginning of the bull market).
    In particular, something very unusual appears to be happening with JP Morgan Chase’s gold…
    JP Morgan Chase’s reported gold stockpile dropped by over 1.2 million oz.’s, or rather, a staggering $1.8 billion dollars worth of physical gold was removed from it’s vaultsduring the last 120 days.
    So what does all of this mean?
    I don’t know.  But I would like to find out.  Someone is definitely up to something.
    Meanwhile, the central banks of the globe seem determined to put their reckless money printing into overdrive.
    For example, the Bank of Japan actually plans to double the monetary base of that country by the end of 2014 as a recentTime Magazine article described…
    On Thursday, the new governor of the Bank of Japan (BOJ), Haruhiko Kuroda, announced that the central bank would double the monetary base of the country — adding an additional $1.4 trillion — by the end of 2014 in an attempt to end the deflation plaguing the economy. To achieve that, Kuroda will buy government bonds and other assets to inject cash into the economy — what has now become familiar as quantitative easing, or QE — to bump inflation up to a targeted 2%. The plan is part of a greater strategy ushered in by new Japanese Prime Minister Shinzo Abe to restart the economy through massive fiscal and monetary stimulus. It also expands on the efforts by theFederal Reserve, Bank of England and European Central Bank to stimulate growth and smooth over financial turmoil by infusing huge sums of new money into the global economy.
    Many in the western world have been extremely critical of this move, but the truth is that we actually started this “currency war”.  The Federal Reserve has been recklessly printing money for years, and even though we are now supposedly in the midst of an “economic recovery”, the Fed is actually doing more quantitative easing than ever.
    Anyone that thinks that gold and silver are bad investments for the long-term when the central banks of the world are being so reckless should have their heads examined.
    However, I do believe that gold and silver will experience wild fluctuations in price over the next several years.  When the next stock market crash happens, gold and silver will go down.  It happened back in 2008 and it will happen again.
    But in response to the next major financial crisis, I believe that the central banks of the globe will become more reckless than anyone ever dreamed possible.  At that point I believe that we will see gold and silver soar to unprecedented heights.
    Yes, there will be huge ups and downs for gold and silver.  But in the long-term, both gold and silver are going to go far, far higher than they are today.
    So what do you think will happen to gold and silver in the years ahead?  Please feel free to post a comment with your thoughts below…

    FLASHBACK: FDR Issues Executive Order 6102 Banning Gold Ownership

    Source: Daily Bail

    This week marks the 80th anniversary of FDR's decree.
    It remained the law of the land for more than four decades.  Only on Dec. 31, 1974, was it finally repealed by President Nixon.
    Executive Order 6102
    Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates
    By virtue of the authority vested in me by Section 5 (b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled ‘‘An Act to provide relief in the existing national emergency in banking, and for other purposes,’’ in which amendatory Act Congress declared that a serious emergency exists, I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of this order:

    Section 1.
    For the purposes of this regulation, the term ‘‘hoarding’’ means the withdrawal and withholding of gold coin, gold bullion or gold certificates from the recognized and customary channels of trade. The term ‘‘person’’ means any individual, partnership, association or corporation.

    Section 2.
    All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:
    (a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.
    (b) Gold coin and gold certificates in an amount not exceeding in the aggregate $100 belonging to any one person; and gold coins having a recognized special value to collectors. of rare and unusual coins.
    (c) Gold coin and bullion earmarked or held in trust for a recognized foreign Government or foreign central bank or the Bank for International Settlements.
    (d) Gold coin and bullion licensed for other proper transactions (not involving hoarding) including gold coin and bullion imported for reexport or held pending action on applications for export licenses.

    Section 3.
    Until otherwise ordered any person becoming the owner of any gold coin, gold bullion, or gold certificates after April 28, 1933, shall, within three days after receipt thereof, deliver the same in the manner prescribed in Section 2; unless such gold coin, gold bullion or gold certificates are held for any of the purposes specified in paragraphs (a), (b), or (c) of Section 2; or unless such gold coin or gold bullion is held for purposes specified in paragraph (d) of Section 2 and the person holding it is, with respect to such gold coin or bullion, a licensee or applicant for license pending action thereon.

    Section 4.
    Upon receipt of gold coin, gold bullion or gold certificates delivered to it in accordance with Sections 2 or 3, the Federal Reserve Bank or member bank will pay therefor an equivalent amount of any other form of coin or currency coined or issued under the laws of the United States.

    Section 5.
    Member banks shall deliver all gold coin, gold bullion and gold certificates owned or received by them (other than as exempted under the provisions of Section 2) to the Federal Reserve Banks of their respective districts and receive credit or payment therefor.

    Section 6.
    The Secretary of the Treasury, out of the sum made available to the President by Section 501 of the Act of March 9, 1933, will in all proper cases pay the reasonable costs of transportation of gold coin, gold bullion or gold certificates delivered to a member bank or Federal Reserve Bank in accordance with Section 2, 3, or 5 hereof, including the cost of insurance, protection, and such other incidental costs as may be necessary, upon production of satisfactory evidence of such costs. Voucher forms for this purpose may be procured from Federal Reserve Banks.

    Section 7.
    In cases where the delivery of gold coin, gold bullion or gold certificates by the owners thereof within the time set forth above will involve extraordinary hardship or difficulty, the Secretary of the Treasury may, in his discretion, extend the time within which such delivery must be made. Applications for such extensions must be made in writing under oath, addressed to the Secretary of the Treasury and filed with a Federal Reserve Bank. Each application must state the date to which the extension is desired, the amount and location of the gold coin, gold bullion and gold certificates in respect of which such application is made and the facts showing extension to be necessary to avoid extraordinary hardship or difficulty.

    Section 8.
    The Secretary of the Treasury is hereby authorized and empowered to issue such further regulations as he may deem necessary to carry out the purposes of this order and to issue licenses thereunder, through such officers or agencies as he may designate, including licenses permitting the Federal Reserve Banks and member banks of the Federal Reserve System, in return for an equivalent amount of other coin, currency or credit, to deliver, earmark or hold in trust gold coin and bullion to or for persons showing the need for the same for any of the purposes specified in paragraphs (a), (c) and (d) of Section 2 of these regulations.

    Section 9.
    Whoever willfully violates any provision of this Executive Order or of these regulations or of any rule, regulation or license issued thereunder may be fined not more than $10,000, or, if a natural person, may be imprisoned for not more than ten years, or both; and any officer, director, or agent of any corporation who knowingly participates in any such violation may be punished by a like fine, imprisonment, or both.

    This order and these regulations may be modified or revoked at any time.

    Signature of Franklin Delano Roosevelt
    Franklin D. Roosevelt 

    The White House,

    Prospering in the Bernanke Asset Bubble with Gregory Mannarino

    Raiding your retirement to pay for college

    Find ways to help kids without risking your safety net

    Conventional wisdom suggests, as do prudent advisers, that you should never, ever raid your retirement accounts to pay for your children’s or grandchildren’s college costs.
    After all, you or your children can borrow money to pay for school; you can’t do the same when it comes to your retirement. But as parents of college-age children look at the financial aid packages now arriving in their mailboxes, and as these very same parents look at their first quarter balances in their 401(k) and IRA accounts, it would be hard not to ask the question: Are there times when it makes sense to raid your retirement account to pay for college?

    Generally the answer is no. “The problems with using retirement accounts to pay for a child’s or a grandchild’s education are real,” said David Mendels, director of planning at Creative Financial Concepts. For starters, he said most of us have inadequate retirement savings and can ill afford to use them to pay for anything other than their intended purpose.
    Others are of the same opinion. “My initial advice would be ‘don’t do it!’ but blanket statements are dangerous,” said C.E. Scott Brewster of Brewster Financial Planning.
    So what then are exceptions to the rule?

    Are you 100% funded?

    Well, in rare instances it might make sense as part of an overall plan. “If someone was 100% secure in their own retirement and did not need the money they might then use some of their IRAs or 401(k)s to pay for their children or more likely grandchildren’s college costs,” said Brewster.
    He noted, for instance, that many grandparents pay no taxes at all because they have high medical costs that as a tax deduction wipe out any taxable income they have. “Those grandparents in a 0% tax bracket might find distributing some money from their retirement plans is a very wise thing to do,” said Brewster. “Better to distribute it when you are in a 0% tax bracket to pay [for] grandkids’ college or grad school than leave the IRA or 401(k) to your grandkids when you die and then when they take the money out the grandkids could be in a 50% tax bracket—federal and state—if they, because of great schooling, became a doctor or lawyer or other high-income professional.”
    The bottom line, said Brewster, is if you take money out of IRAs and 401(k)s, make sure you have a plan and know why it is an intelligent thing to do.

    Pay interest on college loans instead of raiding retirement accounts

    Others agree that it makes sense to raid your retirement accounts, but only under rare conditions.
    “The only exception would be if someone’s retirement account was so well funded and they were absolutely certain that the market was not going to go south in their lifetime and they know they will never outlive their retirement savings,” said L. Ann Coulson, an assistant professor at Kansas State University. “Then raiding retirement funds would be fine.”
    The only problem is that it is unlikely that any of that would happen. “The reality is that there are too many uncertainties with retirement and retirement savings,” said Coulson.
    Others note that raiding one’s retirement account leaves one little time to make up for any distributions. “The older you are, the less time you have to make up for the loss,” said Rosilyn Overton, an associate professor at New Jersey City University.
    To be fair, Coulson said, there are ways for parents to help their children or grandparents to help grandchildren pay for college costs without putting their own retirement at risk “If they truly want to help their children/grandchildren, let the child borrow conventional student loans and then the parent/grandparent can pay the interest costs on the loans while the child is in school—that way interest is not accruing on interest,” she said.
    Then once the child has graduated, if the parent is feeling fairly confident about retirement savings, they can help the child pay the loans off. But, Coulson noted, that should she would be much more comfortable if they used current income rather than retirement funds to do that.
    Page 1 Page 2

    Millionaires Raked in $80M in Jobless Benefits

    Here are the numbers for 2009
    from WSJ:
    Second, even if millionaires don’t deserve assistance, focusing on them loses sight of bigger benefits spending. The 2,362 Americans with $1 million received just $20.8 million in assistance in 2009, a figure that’s just 0.02% of total reported unemployment benefit income and “relatively small,” the CRS says. “The potential administrative costs [of making high-income groups ineligible for benefits] could outweigh the potential savings.” By contrast, there are over 120,000 Americans in households earning between $200,000 and $500,000 getting assistance, to the tune of over $1 billion — and over 800,000 Americans in households earning $100,000 to $200,000 getting nearly $7 billion in benefits. Does someone in a household earning $175,000 really need this assistance either? Where do we draw the line? It isn’t so clear.

    Chinese colonel says bird flu is US biowarfare

    The American Flu

    Chinese colonel says latest bird flu virus is U.S. biological weaponAP

    April 9, 2013 6:05 pm
    A Chinese Air Force officer on Saturday accused the U.S. government of creating the new strain of bird flu now afflicting parts of China as a biological warfare attack.
    People’s Liberation Army Sr. Col. Dai Xu said the United States released the H7N9 bird flu virus into China in an act of biological warfare, according to a posting on his blog on Saturday.
    The charge was first reported in the state-run Guangzhou newspaper Southern Metropolis Daily and then picked up by several news outlets in Asia.
    State Department spokesman Jason Rebholz dismissed the claim. “There is absolutely no truth to these allegations,” he told the Washington Free Beacon.
    Seven deaths from the bird flu outbreak were reported as of Tuesday in state-run Chinese media. As many as 24 people reportedly were infected by the disease in Shanghai, Jiangsu, Zhejiang, and Anhui.
    Chinese authorities are trying to calm public fears of a major epidemic, claiming there is no evidence the virus can be transmitted between humans.
    The government also is claiming that the outbreak is not related to the recent discovery of thousands of dead pigs floating in a river in China.
    The accusation of U.S. biological warfare against China comes as the Pentagon is seeking closer military relations with China. Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, is set to travel to China for talks with Chinese military leaders later this month.
    Dai is a military strategist who in the past has been outspoken in seeking to foment conflict between China and the United States. He told the Global Times in August that China should go to war over U.S. support for Japan’s claims to the disputed Senkaku Islands.
    Writing on Sina Weibo, a Chinese microblogging site akin to Twitter, Dai stated that the new bird flu strain was designed as a biological weapon similar to severe acute respiratory syndrome (SARS), which he also claimed was developed as a U.S. bio-weapon, that affected the country in 2003.
    According to Dai’s posting, the new flu outbreak should not be a cause for concern. “The national leadership should not pay too much attention to it,” the PLA lecturer at the National Defense University wrote. “Or else, it’ll be like in 2003 with SARS!”
    “At that time, America was fighting in Iraq and feared that China would take advantage of the opportunity to take other actions,” he said. “This is why they used bio-psychological weapons against China. All of China fell into turmoil and that was exactly what the United States wanted. Now, the United States is using the same old trick. China should have learned its lesson and should calmly deal with the problem.”
    Dai said that even if “a few may die” from the flu outbreak, it will not equal one-thousandth of the deaths caused by vehicle accidents in China.
    Dai in the past has called for China to punish the United States for U.S. arms sales to rival Taiwan, by selling arms to U.S. enemies. “China recognizes that a few perfunctory protests will not have any effect,” Dai said in 2010. “China can’t directly sanction American arms companies since they did not do business with China … but China can sanction companies that are doing business with China directly, like Boeing or General Electric.”
    Dai also has said the United States has used crises with North Korea and offers of cooperation on the issue as a plot to drive a wedge between Beijing and its fraternal communist ally.
    Dai also has said U.S. efforts to counter Chinese espionage and intelligence-gathering were part of a U.S. “plot theory” of “western countries threatening others by [releasing] information gained through spying in order to damage the reputations of other countries.”
    A State Department official said China notified the World Health Organization (WHO) on March 31 about its first detected human cases of H7N9 infection. Fourteen cases were confirmed by the WHO by April 5, of which six were fatal. The organization said there is no evidence of human-to-human transmission.
    “U.S. Embassy Beijing and U.S. Consulate Shanghai are monitoring the situation, working closely with counterparts at the U.S. Centers for Disease Control, and the Beijing and Shanghai municipal governments,” the official said.
    The colonel’s accusation provoked a widespread response on Chinese websites. One post in reaction joked that Dai’s comment about auto deaths must mean that the United States and Germany are responsible for a conspiracy to produce cars, according to a report in Hong Kong’s South China Morning Post.
    Luo Changping, deputy editor of Caijing, said most PLA soldiers would not support Dai’s comments and he urged the colonel to resign and apologize to those who have died from the current bird flu outbreak.
    A defiant Dai then said in a new posting Sunday that “it is common knowledge that a group of people in China have been injected with mental toxin by the United States.”
    “Now, a group of fake American devils are attacking me,” he wrote in another post. “I will not retreat even half a step.”
    Analysts say the colonel’s remarks are a reflection of the growing xenophobic atmosphere within the Chinese military that views the United States as its main enemy.
    Former State Department intelligence analyst John Tkacik said China’s military was largely to blame for mishandling the 2003 outbreak of SARS. Tkacik said there was speculation when the epidemic began that “the PLA suspects SARS had emanated from its own biological laboratories and was all the more eager to keep it secret.” China is known to have a covert biological arms program.

    30% of CNT Silver Inventories Withdrawn from COMEX Vaults in 2 Days!

    Epic drainage of physical silver inventories continued Tuesday, as 17.3% of CNT’s physical silver inventories vaporized for the 2nd consecutive day, cutting CNT’s physical silver inventories by 1/3 in only 48 hours!
    Brinks’, CNT, Delaware, HSBC, & Scotia (every vault except JPM) all saw significant physical withdrawals, as a massive 2.7 million ounces of physical metal fled COMEX depositories.

    COMEX SILVER 41013
    Chart Courtesy SRSrocco
    Got PHYZZ? 

    Big banks 'more dangerous than ever', IMF's Christine Lagarde says

    Europe needs to recapitalise, restructure or shut down its banks as part of a vital clean-up of the industry, International Monetary Fund managing director Christine Lagarde said as she warned that the threat from world’s biggest lenders was “more dangerous than ever”.

    Billions of pounds of QE unlikely to cause inflation - IMF. IMF chief Christine Lagarde has welcomed Japan's massive new money priting programme.
    Christine Lagarde, the IMF's managing director, has warned that too-big-to-fail banks are "more dangerous than ever" 
    Speaking in New York ahead of next week’s IMF Spring meeting, Ms Lagarde launched a broadside against the financial services industry for resisting urgent reform.
    “In too many cases – from the United States in 2008 to Cyprus today – we have seen what happens when a banking sector chooses the quick buck over the lasting benefit, backing a business model that ultimately destabilizes the economy. We simply cannot have pre-crisis banking in a post-crisis world.
    “We need reform, even in the face of intense pushback from an industry sometimes reluctant to abandon lucrative lines of business.”
    Almost five years since Lehman Brothers collapsed, she claimed: “The 'oversize banking’ model of too-big-to-fail is more dangerous than ever. We must get to the root of the problem with comprehensive and clear regulation.”
    Regulators have forced banks to increase significantly their loss-absorbing capital buffers since the crisis, but are still working on "resolution" mechanisms that will allow giant lenders to fail without hitting the taxpayer and threatening financial stability.
    Regulators must also work together, she added, amid evidence that some countries are caving into pressure from the banking lobby. “Financial sector reform efforts must be coordinated internationally. We are already seeing countries pulling in different directions in some areas, such as in calculating the riskiness of assets and curbing banking excesses,” Ms Lagarde said.
    The eurozone has yet to grapple with its banking problems convincingly, which is harming efforts to revive growth in the region.
    “Especially in the periphery, many banks are still in an early stage of repair – not enough capital and too many bad loans on their books. Even outside the periphery, there is a need to shrink balance sheets, reduce reliance on wholesale funding, and improve business models,” she said.
    Because the banks are broken, cheap credit is not getting through to the parts of the economy that need it. “Because of insufficient financial repair, monetary policy is “spinning its wheels” – meaning that low interest rates are not translating into affordable credit for people who need it,” she said.
    “So the priority must be to continue to clean up the banking system by recapitalising, restructuring, or – where necessary – shutting down banks.” One option for eurozone would be “direct recapitalisation by the European Stability Mechanism”, the region’s bail-out fund, she added.
    The UK is leading the field on bank reform, with the Bank of England last month demanding lenders find another £25bn of capital despite already being far better capitalised than European peers.
    Ms Lagarde's comments came as she said the global economy was improving and “no longer looks quite as dangerous as it did six months ago”. The world is now in a three speed recovery of countries doing well, such as the emerging markets, those “on the mend, like the US, and those that “still have some distance to travel”, like the eurozone.
    “We know the future we want. We know the path to get there. The task before us now is to act, to make that future a reality, to get ahead – and stay ahead – of the crisis,” she said.

    Tobin Tax is madness for Europe, and economic war against Britain

    France's experiment with the Tobin Tax has proved a spectacular flop. Its finance ministry admits that the scattershot levy on financial transactions has raised just a third of the money expected since August.

    Eiffel Tower, snow
    One French banker told Les Echos that the Tobin Tax was 'a weapon of mass destruction that is going to ruin our financial sector' 
    Total takings will be a paltry €800m in 2013, but that overlooks the much greater damage inflicted on French finance, industry and the government's own tax base. "France is shooting itself in the foot," said Paul-Henri de La Porte du Theil, head of French finance industry AFG.
    Jean-Yves Hocher from Crédit Agricole said it would cost his company €17bn. One French banker told Les Echos that the tax was "a weapon of mass destruction that is going to ruin our financial sector".
    The Bourse de Paris and the nexus of French funds in Paris was already in slow decline even before this act of idiocy. Le Figaro fears that the entire industry will now whither on the vine.
    Nobody seems to be listening to warnings, even when they come from Maya Atig, the soft-spoken director of French debt agency. She said any revenue from the tax would merely offset “the extra costs that we might have to pay” as liquidity drains away and yield spreads rise. Instantly proving her right, Denmark's €110bn pension fund ATP said it is no longer accepting French bonds as collateral.
    Italy has not done much better since it launched its Tobin tax. Undaunted, 11 EMU states, including Germany, will press ahead together in 2014, to the delight of Singapore or New York. "Sheer madness," said Prime Minister David Cameron.
    One wonders how much self-inflicted damage the eurozone can endure. Spot gas prices are already four times higher than in the US. Energy prices as a whole are three times higher. You might as well shut down the European chemical, steel and glass industries.
    Yet France has a moratorium on shale gas. Germany is running down its nuclear reactors, relying on a utopian dash for renewables and Baltic wind-power. Italy says it won't touch shale or nuclear. Buona fortuna.
    Euroland is stumbling into ever deeper crisis, left behind in perma-slump as the growth differential with the US becomes entrenched at 2pc to 3pc. We are literally watching the moment when Europe loses its footing in the world.
    The Tobin Eleven will impose a fee of 0.1pc for trade on shares and bonds, and 0.01pc for derivatives. These rates are far higher than the Swedish tax in 1989 that led to an 85pc crash in bond sales and a 98pc fall in bond futures, before being abandonded.
    ICAP market analysts warn that the tax will "undermine prospects for sustainable economic recovery in the eurozone", raise borrowing and hedging costs across the board, make EU companies sitting ducks for takeovers and hobble banks as they grapple with €4 trillion of deleveraging. It does not make Europe safer. It will "increase the vulnerability of the financial system".
    The International Capital Market Association says it would devastate the repo market, a vast pawn shop that allows banks to raise funds quickly and easily by pledging assets. It expects transactions to plunge by two-thirds overnight.
    Even that may be optimistic. Gabriele Frediani from the electronic market MTS said trades would collapse by 99pc. “The Repo market would disappear overnight,” he said.
    The repo market - $8 trillion in the EU and US combined - is a crucial lubricant of global finance. It was a failure of the repo system after the Lehman crash that set off the downward spiral in 2008. "The collapse of the repo market contributed to a liquidity shock that had far-reaching consequences for the global financial system," said an IMF study.
    ICMA says that much of the current collateral system for banks will "cease to be viable" under the current plan. Investors will be driven into "unsecured deposits" not covered by the tax. The European Central Bank would struggle to conduct monetary policy.
    It would be some comfort if London were at least able to offer refuge for those fleeing this misadventure, but the tax is drafted in such a way that it catches much of the City's business. The text covers all assets issued in the Tobin bloc or if there is a Tobin counterparty, even if the trade is in London, and territoriality be damned.
    The House of Lords EU Committee says the Tobin Tax will have "far-reaching adverse consequences" for the City and wants a challenge at the European Court. Lord Harrison said he is "highly alarmed" that the Tobin Tax has been allowed to creep on us and slammed the "complacency" of both Whitehall and the City. "Some in London appear to hope that by closing their eyes to the proposal it will go away."
    Whether or not you think there is a concerted assault on Britain, the fact is that for the first time in EU history a major country has been overridden in a field where it is the dominant player and has a vital interest. The rules of the game are that Germany is never threatened on the car industry, nor France on agriculture. This principle has been breached. It is a declaration of economic war.
    Let us all agree that top bankers behaved very badly. Let us agree too with Vince Cable that the fraternity operated like a cartel, rewarded far beyond ability or worth to society.
    That said, the global crisis would have occurred even if bankers had been saints. The roots lie in the "China effect", the world "savings glut", and the whole way that globalisation has worked for 20 years.
    The rising powers of Asia and the oil bloc accumulated $10 trillion of reserves, flooding bond markets with money. Japan put $1 trillion into play through the carry trade. Central banks in the West played their part by running negative real interest rates. They set the price of credit too low, especially in Club Med and Ireland.
    All this combined into one colossal bubble. Bankers were the agents, not the cause. The witchhunt against them gathering force in this country has a nasty edge, and it has the character of a pogrom in much of Europe. We should be careful.
    It is hard to see how this crisis can be defused. Germany's Wolfgang Schauble has belatedly realised that the EU is playing with fire by pushing the UK too far. British exit would be "catastrophic", he said, asking how the EU could convince anybody in Asia that it has a future if a key member is walking out.
    This olive branch comes late in the day. Euroland leaders cannot exempt Britain from the Tobin tax because they know that their own finance will migrate en masse to London if they do, yet they are too committed to this suicidal enterprise to retreat altogether. So we must fight.