Monday, September 9, 2013

Japan Q2 GDP revised up sharply, boosts case for tax hike

By Leika Kihara
TOKYO (Reuters) - Japan's economy expanded much faster than initially expected in the second quarter, adding to growing signs of a solid recovery taking hold and fortifying the case for Prime Minister Shinzo Abe to proceed with a planned sales tax hike next year.
The upbeat data came hours after Tokyo won its bid to host the 2020 Summer Olympics, which policymakers hailed as another tailwind propelling the world's third-largest economy out of years of grinding deflation.
The Olympic news and GDP data propelled the benchmark Nikkei (.N225) up 2.5 percent to close at 14,205.23, its highest closing since August 6.
A marked improvement in capital expenditure led to an upward revision in April-June gross domestic product (GDP) to an annualized 3.8 percent expansion from a preliminary 2.6 percent, data from the Cabinet Office showed on Monday.
The third straight quarter of growth, which roughly matched the median market forecast, underscored the strength of Japan's recovery and boosted the chance the government will proceed with a two-staged hike in the sales tax.
"Companies are replacing old equipment, which led to the large upward revision to GDP," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management. "This means the government can raise the sales tax as scheduled."
Bank lending rose 2 percent in the year to August with lending by major banks marking the fastest increase in more than four years, separate data showed, suggesting that the improving outlook is spurring more borrowing for fresh investment.
Japan emerged from recession in 2012 and data for much of this year has shown the benefits of Abe's reflationary policies and the Bank of Japan's aggressive monetary stimulus.
The second-quarter GDP follows an annualized 4.1 percent expansion in the first three months of this year, driven in large part by strong consumer spending.
Corporate capital spending, which had been seen as soft in an otherwise robust economy, was revised up to a 1.3 percent rise from the preliminary 0.1 percent decline, marking the first increase in six quarters.
The government has cited revised GDP as among key factors in deciding whether to go ahead with lifting the sales tax to 8 percent from 5 percent next April, and to 10 percent in 2015 -- a step seen as crucial in fixing Japan's tattered finances.
The latest reading gives the government more ammunition to counter critics of the plan, who have called for a delay or watering down of the tax increase on the view Japan's economy is still too weak to take the pain.
As positive data piles up, key ministers in the cabinet such as Economics Minister Akira Amari and Finance Minister Taro Aso have signaled the government's readiness to raise the tax.
"We've seen more positive signs" supporting the case for raising the sales tax, Amari told reporters, referring to the GDP data and Tokyo's successful bid to host the Olympics games.
But Abe, who has the final say on whether to proceed, is considered to be more cautious about raising the tax for fear of derailing a budding economic recovery and hurting the chance of beating deflation -- which is among his top policy priorities.
Service-sector sentiment worsened for the fifth straight month in August and retailers see the outlook deteriorating further, a government survey showed, with some companies complaining that consumers are already holding back on spending in anticipation of the increasing tax burden.
Etsuro Honda, an adviser to Abe and a vocal opponent of the tax hike plan, warned that raising the sales tax now could destroy a golden opportunity to end years of price declines.
"Japan is in the process of exiting deflation but is not out of it yet. The economy isn't back in an autonomous recovery phase," he told Reuters on Monday.
Chief Cabinet Secretary Yoshihide Suga, among Abe's closest associates, said hosting the Olympics will be positive for Japan's economy, but offered no sign on whether Abe will indeed proceed with the tax hike.
Abe is expected to decide on October 1, the day of the BOJ's closely-watched "tankan" business sentiment survey, Amari said, adding that the government is ready to craft a spending package of more than 2 trillion yen ($20 billion) to cushion the blow.
"According to the Finance Ministry, the economic drag (of the tax increase) would be just under 2 trillion yen," Amari told reporters. "But (spending that amount) wouldn't be enough to return the economy to a rising trend," he said.
(Additional reporting by Stanley White, Sumio Ito and Yoshifumi Takemoto; Editing by Eric Meijer)

Vodafone may fail to clinch Kabel Deutschland: paper

FRANKFURT (Reuters) - Vodafone may fail to reach the 75 percent threshold of acceptances from shareholders needed to clinch Germany's largest cable operator Kabel Deutschland, the Financial Times said on Monday.
"Some of Kabel Deutschland's shareholders believe that the amount of tenders offered will fall well short of this goal," the paper said, citing anonymous shareholders.
Vodafone agreed a 7.7 billion euro ($10.13 billion) offer for Kabel Deutschland in June, a near 40 percent premium to Kabel's share price before its interest first emerged.
Vodafone urged shareholders on Monday to accept the offer, saying in a statement that it would lapse if the 75 percent minimum acceptance threshold was not met by Wednesday.
It said Germany's Federal Cartel Office had confirmed it would not request a referral from Europe on the deal.
It also said the European Commission was expected to complete a Phase I review of the offer by September 20.
($1 = 0.7600 euros)
(Reporting by Edward Taylor and Paul Sandle; editing by Tom Pfeiffer)

China August inflation another sign economy is stabilizing

BEIJING (Reuters) - Steady consumer prices and slowing producer price deflation in August has added to the case the China's economy has arrested an extended slowdown and may be regaining some momentum, helped by targeted support measures and signs of improved export demand.
The muted inflation offers the People's Bank of China some room to maneuver in response to any shock that might arise as the U.S. Federal Reserve starts to taper its monetary stimulus.
However, any sharp policy shifts in the world's second-largest seem unlikely amid concerns about rising property prices and after efforts to curtail unregulated lending.
"There is no sign of any shift in monetary policy," said Jerry Hu, an economist at Shanghai Securities, who saw stable consumer prices in the months ahead.
"I think monetary conditions will become tighter, probably through a combination of quantitative tightening and low interest rates."
Consumer prices rose 2.6 percent in August from a year earlier, the National Bureau of Statistics said, in line with market expectations and July's 2.7 percent rise. Month-on-month, prices were up 0.5 percent, slightly stronger than a forecast rise of 0.4 percent.
Producer prices fell an annual 1.6 percent, less than both a market forecast of 1.8 percent and a fall of 2.3 percent in July. While factory-gate deflation has now lasted for 18 months, the pace of decline has steadily eased from a peak of 3.6 percent in September 2012.
There are increasing signs that China's economy is finding its feet after slowing in nine of the past 10 quarters, with other data already out for August showing some strength.
Exports rose more than expected, helped by improving demand in major markets, and manufacturing surveys suggested capital spending and industrial output have gathered steam in response to government steps to spur investment and promises to push through reforms.
As recently as a month ago, investors had worried that China was slipping into a deeper-than-expected downturn, especially after its money market was hit by an unprecedented cash crunch in June as the central bank sought to curtail credit growth.
But policymakers have stepped in with a series of measures aimed at stabilizing the economy, including quickening railway investment and public housing construction and introducing policies to help smaller companies with financing needs.
Data for industrial output, fixed asset and retail sales come on Tuesday is expected to increase confidence a sharp slowdown has been avoided.
Vice Finance Minister Zhu Guangyao has said there was no need for government stimulus and growth could instead be supported through structural adjustments.
For its part, the central bank has kept policy stable since the start of this year, with some fine-tuning to support the slowing economy while heading off inflation risks.
For now, a major uncertainty is how investors will respond if the U.S. Federal Reserve does begin trimming its stimulus later this month. Some see a risk that a clutch of big developing economies that are vulnerable to capital outflows.
"Given the weekend trade performance, we think China's economy is stabilizing, but a sustained upside trend is still uncertain," said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.
"The moderation in August imports reflected still weak domestic demand, and we should not underestimate the impact of tapering of U.S. monetary stimulus."
Officials have been optimistic about growth, saying there are clear signs of stabilization and that the annual GDP target of 7.5 percent -- a two-decade low -- is achievable.
(China Economics Team; Editing by John Mair)

China data boosts Asian shares, Nikkei sprints on Olympics

By Hideyuki Sano
TOKYO (Reuters) - Upbeat Chinese trade and inflation data lifted Chinese shares to three-month highs and boosted regional shares on Monday, while Japanese shares rallied and the yen dropped after Tokyo won its bid to host the 2020 Summer Olympics.
The dollar licked its wounds and U.S. debt yields were off two-year highs after a disappointing U.S. jobs report on Friday, which raised speculation the Federal Reserve may minimize the size of a likely reduction in stimulus many investors expect later this month.
European shares are expected to open slightly firmer, with both Germany's DAX (.GDAXI) and Britain's FTSE (.FTSE) seen rising about 0.1 percent, though concerns about U.S. intentions to strike Syria over its alleged use of chemical weapons could cap the gains.
Mainland Chinese shares surged after Chinese August inflation data added to optimism following solid trade figures published on Sunday.
The CSI300 <.csi300> index of the leading Shanghai and Shenzhen A-share listings jumped 3.4 percent, hitting its highest level since early June.
"Market sentiment has been turning more and more positive, with the A-share market strong. But there's still not a lot of fresh buying," said Jackson Wong, Tanrich Securities' vice-president for equity sales.
MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> rose 0.9 percent, with both Hong Kong's Hang Seng Index (.HSI) and Seoul's Kospi (.KS11) hitting their highest level in about three months.
China's exports grew 7.2 percent in August, above market expectations of a 6.0 percent rise from a year earlier.
That was followed by data showing consumer inflation held steady in August while producer price deflation continued to ease, another sign of a stabilizing economy.
Investors are bracing for more data from China including industrial production and retail sales on Tuesday. (ECONCN)
Japan's Nikkei share average (NIK:^9452) gained 2.5 percent, hitting a one-month high as investors bet hosting the Olympics would boost the economy -- through construction and higher prices -- by 3 trillion yen ($30 billion) over the coming seven years.
"In the short-term, this (Olympics-bid win) will be positive mainly through a boost on Olympic-related shares," said Ryota Sakagami, chief equity strategist at SMBC Nikko Securities in a report.
"In the longer run, its impact depends on how much the government can push for infrastructure investments and promotion of tourism business but it is likely to be positive for the Japanese economy and shares," he said.
But investors are also grappling with worries that withdrawal of the Fed's stimulus could destabilize asset prices worldwide.
Despite the soft job data, most U.S. primary dealers expect the Fed to announce at its next policy meeting September 17 and 18 that it will cut the extent of its bond purchases, according to a Reuters poll on Friday.
"Although the U.S. job data was disappointing on the whole, the jobless rate fell, inching closer to the 7.0 percent level, which the Fed said is a threshold to end the quantitative easing," said Tohru Yamamoto, chief fixed-income strategist at Daiwa Securities.
"The Fed will start tapering in September, perhaps little by little, like by $10 billion. It is hard to expect bond yields to fall before the next Fed meeting," he added.
Others think the Fed could trim its monthly bond buying from the current $85 billion to an even more modest $5 billion.
The 10-year U.S. Treasury yields stood at 2.940 percent, off a two-year high just above 3 percent hit on Friday.
The dollar index stood at 82.25 (.DXY), steadying from Friday's 0.6 percent fall. The euro fetched $1.3175, off Friday's seven-week low of $1.31045.
Against the yen, the dollar briefly rose to as high as 100.11 yen thanks largely to its strong correlation to Japanese shares, but quickly gave up gains on profit-taking to stand at 99.65 yen for a gain of 0.5 percent from late last week.
Elsewhere, U.S. crude oil futures slipped slightly but stayed near two-year highs supported by concerns a possible military strike against Syria could stir broader conflict in the Middle East and disrupt oil supplies. (O/R)
(Additional reporting by Clement Tan in Hong Kong; Editing by Eric Meijer)

The On-Going Collapse Of The U.S. Treasury Bond Market Is A Disaster In The Making

Source: Lee Rogers, Blacklisted News
With an endless amount of criminality originating from Washington DC and the on-going rush to war against Syria there is one very critical development that has gone largely unnoticed outside of financial circles. The U.S. Treasury bond market which has been artificially propped up through the Federal Reserve’s bond purchasing policies has really started to unravel over the past few months. The interest rate on the 10-year note has quickly moved up from roughly 1.5% this past May and is now floating around the 3% mark. We have also seen the U.S. government run massive annual deficits around the $1 trillion mark that are piling on to an already enormous debt level. The official U.S. national debt total recently passed $16 trillion and that’s not including all of the unfunded liabilities which would make that number multiple times higher. If both the national debt level and bond interest rates continue to rise, it will soon become impossible for the U.S. government to service its existing debt obligations. Needless to say this type of situation would cause an untold amount of havoc to not only the American economy but the global economy as well. To counter this possibility the Fed will likely expand their bond purchasing programs but we are quickly reaching a point where these policies will soon have no effect in bailing out the system.
There is no question that the bond market has been in a bubble artificially inflated by the Fed. For some time now the Fed has enacted aggressive debt monetization policies by purchasing billions of Dollars’ worth of U.S. government debt with money that they simply created out of thin air. Despite all of these massive bond purchases it is fairly obvious that they are starting to lose control of the market. The Fed is now the most significant buyer of U.S. government debt as real demand is vanishing. The general market is finally starting to realize that buying U.S. government debt is a horrible investment. This is one of the reasons why we are seeing the bond market crash with interest rates greatly rising in such a short period of time.
China which has previously maintained an enormous appetite for U.S. government debt has been quietly diversifying and reducing their purchases. Between China and Russia both countries currently hold a combined total of over $1 trillion worth of U.S. government debt which is roughly 25% of all debt that is foreign owned. With geopolitical tensions on the rise between the U.S. and both countries it would not be implausible for them to more quickly diversify from these holdings. The fact that both China and Russia have become huge net buyers of gold is evidence of this. On top of this total foreign demand for U.S. government debt has also significantly declined in recent months.
Currently the Fed is creating $85 billion out of thin air each month to buy both U.S. government debt and mortgage backed securities. The Fed and their economic propagandists have referred to this policy as quantitative easing or QE. In the long term these policies do nothing but dilute the value of the U.S. Dollar as they increase the total aggregate amount of Dollars in circulation. The greater number of Dollars in circulation the less each Dollar is worth and the more it costs to obtain goods and services. Despite claims otherwise this by definition is inflation and it is clearly reflected to anyone who shops regularly.
The economic propagandists will have you believe that the Consumer Price Index or the CPI is the most accurate measure of inflation available. This is nothing more than a big lie. The CPI is a statistical calculation that has been consistently manipulated in order to make people believe that inflation is low. In its current form the CPI doesn’t even include food and energy in its calculation which makes the statistic an utterly meaningless measure of true inflation. The main reason why the central planners always refer to the CPI is because it allows them to falsely claim that inflation is low and this gives them the supposed justification to implement their reckless policies of money creation. The phony numbers also allow the U.S. government to rip off senior citizens whose social security payments do not get properly adjusted to the true rate of inflation. If let’s say the CPI were calculated using the statistical formula used during the 1970s the CPI would be closer to 10% instead of 2% as is currently claimed.
There should be no question that the U.S. Dollar is being devalued. In fact since the establishment of the Fed back in 1913 the U.S. Dollar has lost roughly 99% of its original purchasing power. This in of itself makes the U.S. Dollar a lousy long term investment and this is important to understand in the larger context of what’s happening with the bond market. The reason being is because as bad as a long term investment in the U.S. Dollar is, an investment in U.S. government bonds is far worse. Due to the Fed’s manipulation of the bond market these debt instruments offer a rate of return far less than the real inflation rate. So as it stands now it is extremely difficult to comprehend why anyone in their right mind would want to buy them. By purchasing these bonds you are in essence loaning money to the U.S. government in return for future interest rate payments that will be paid in devalued Dollars. Combine this with the Fed’s continued ultra-loose monetary policies and there is simply no way to predict how much purchasing power a Dollar will have a couple of years from now let alone 10 years or 30 years from now.
The Fed has put themselves into a situation that they can’t get out of. Fed Chairman Ben Bernanke has for some time talked about having an exit strategy to end their QE programs when there really isn’t one. In fact it looks as if the Fed’s exit strategy consists solely of them talking about having an exit strategy. Recently the buzz word “tapering” has been put out by various Fed officials and financial news propagandists. The Fed is not tapering or cutting back on their QE programs but is instead just talking about the possibility of doing so. If the Fed cuts back their bond purchases they will risk losing complete control over the bond market. The bond market has fallen dramatically over the past few months with the Fed just talking about the possibility of cutting back bond purchases. If the Fed actually went ahead and stopped or even just slowed down their purchases the reaction in the bond market would be violent to the down side.
Without the Fed’s on-going intervention interest rates would be much higher due to decreasing general market demand for U.S. government debt. The problem for the central planners is that if rates rise even just a few percentage points the U.S. government could face problems servicing their existing debt obligations. The U.S. government is already dependent on running massive deficits to keep the entire system operating. There is also a decreasing amount of people participating in the work force and fewer people with full time jobs. This means that less tax revenue is coming into the system which will force the U.S. government to borrow more. This poses a serious problem because if they can’t pay the interest on their existing debt obligations, borrowing more money to continue the status quo becomes impossible.
The talk about tapering and exit strategies from the Fed is meaningless as they will have no choice but continue their QE programs if they want to keep the system from imploding. In fact not only will they have to continue these policies but they will have to expand them in order to artificially cap interest rates on the bonds. The proper course of action would in fact be to abandon these programs and let the system implode so the market can reset itself. As painful as this would be in the short term this would at least be the start of a more permanent long term solution. Unfortunately this is not a politically feasible option. It is highly unlikely that the Fed will sit idly by and risk the U.S. government reaching a point where they are unable to service their debt obligations. It is also equally as unlikely that the empty suits in Washington DC will balance the budget and drastically reduce their spending hence avoiding the need to borrow. With this in mind, it appears obvious which direction the Fed will move towards.
Unfortunately for the Fed they are reaching a point where even endless QE policies are going to be entirely ineffective at controlling the bond market. At some point these policies will result in so much inflation that it won't matter how many bonds they purchase. When this happens there will be no real demand for U.S. Dollars and even less demand for U.S. government debt because inflation will have run out of control. As stated before, nobody will want to buy a debt instrument that is going to pay them interest back in a currency whose future purchasing power is in question. We are already starting to see this with the increased demand for physical gold and silver. This represents a growing number of people who are losing faith in the long term stability of the U.S. Dollar and are converting out of Dollars and into more tangible assets.
Another aspect to this collapsing bond market is the fact that interest rates for home mortgages generally correlate to the movement of Treasury yields. As the rates on these bonds move up so too will mortgage interest rates. In fact we have already started to see this happen over the past 3 months as the rates for both 15 year and 30 year home loans have risen sharply. These higher interest rates will reduce the demand for home loans resulting in less demand for homes which will cause home prices to move sharply lower. This is just one of many negative economic consequences that will undoubtedly result from a collapsing bond market.
In closing what’s happening is really quite simple. If the Fed continues printing endless amounts of money the Dollar’s purchasing power will eventually be destroyed and if they do nothing the bond market will crash resulting in the U.S. government being unable to pay its bills. No matter what course of action the Fed takes the end result is not going to be good. Besides being great for Israel and the Jewish lobby, this looming economic disaster could be one possible reason why the Obama regime is poised for a military strike on Syria based off of extremely dubious circumstances. The U.S. financial system in its current state simply cannot be sustained so why not start a war to distract people from what will undoubtedly be a horrific mess. If this results in a World War 3 type scenario, Obama could draft unemployed young people into the military under the guise of national security. This would help reduce the amount of young people on the streets rioting and protesting against his evil regime during an economic collapse. A war would also provide cover for the Fed to justify the expansion of their bond purchases and the Obama regime to blame the poor economy on the war. Whether or not the American people would buy into any of this is a whole other question especially considering that most Americans are against military intervention in Syria.
Despite all of that, what is happening in the bond market is extremely important. This is definitely something everyone should pay attention to over the next several months. It will be interesting to see what the Fed’s next move will be but it will likely consist of more money creation and bond purchases. After all, they will do whatever it takes to keep the evil Zionist controlled Washington DC enslavement system afloat as long as humanly possible.

Americans losing homes for unpaid property taxes as little as $44

On the day Bennie Coleman lost his house, the day armed U.S. marshals came to his door and ordered him off the property, he slumped in a folding chair across the street and watched the vestiges of his 76 years hauled to the curb.
Movers carted out his easy chair, his clothes, his television. Next came the things that were closest to his heart: his Marine Corps medals and photographs of his dead wife, Martha. The duplex in Northeast Washington that Coleman bought with cash two decades earlier was emptied and shuttered. By sundown, he had nowhere to go.
All because he didn’t pay a $134 property tax bill.

Part 2 — As federal agents investigated a sweeping bid-rigging scheme at Maryland’s tax auctions, some of those same suspects were in the District, engaging in dozens of rounds of unusual bidding. Coming Monday.
Part 3 — District tax officials have made hundreds of mistakes in recent years by declaring property owners delinquent even after they paid their taxes, forcing them to fight for their homes. Coming Tuesday.

The retired Marine sergeant lost his house on that summer day two years ago through a tax lien sale — an obscure program run by D.C. government that enlists private investors to help the city recover unpaid taxes.
For decades, the District placed liens on properties when homeowners failed to pay their bills, then sold those liens at public auctions to mom-and-pop investors who drew a profit by charging owners interest on top of the tax debt until the money was repaid.
But under the watch of local leaders, the program has morphed into a predatory system of debt collection for well-financed, out-of-town companies that turned $500 delinquencies into $5,000 debts — then foreclosed on homes when families couldn’t pay, a Washington Post investigation found.
As the housing market soared, the investors scooped up liens in every corner of the city, then started charging homeowners thousands in legal fees and other costs that far exceeded their original tax bills, with rates for attorneys reaching $450 an hour.

How you could lose your home

Property owners in the District risk losing their homes over relatively small amounts in unpaid property taxes. Here’s a look at the process:

If you don’t pay your taxes, the District sells a lien for the tax debt to an investor, usually a company. The investor gets a lien.

The typical lien amount, just a fraction of the property’s value
Tax liens the District has sold from 2005 to 2012
Note: The District no longer sells tax liens on houses for delinquent tax bills under $1,000. Lien amounts include property taxes, penalties and interest. The District doesn’t track legal fees charged to homeowners. The estimates of legal fees is besed on a Post study of more than 200 cases. The foreclosure and court cases are through mid-2013.
Source: Data from D.C. Office of Tax and Revenue and D.C. Superior Court
Families have been forced to borrow or strike payment plans to save their homes.
Others weren’t as lucky. Tax lien purchasers have foreclosed on nearly 200 houses since 2005 and are now pressing to take 1,200 more, many owned free and clear by families for generations.
Investors also took storefronts, parking lots and vacant land — about 500 properties in all, or an average of one a week. In dozens of cases, the liens were less than $500.
Coleman, struggling with dementia, was among those who lost a home. His debt had snowballed to $4,999 — 37 times the original tax bill. Not only did he lose his $197,000 house, but he also was stripped of the equity because tax lien purchasers are entitled to everything, trumping even mortgage companies.
“This is destroying lives,” said Christopher Leinberger, a distinguished scholar and research professor of urban real estate at George Washington University.
Officials at the D.C. Office of Tax and Revenue said that without tax sales, property owners wouldn’t feel compelled to pay their bills.
“The tax sale is the last resort. It’s also the first resort — it’s the only way in the statute to collect debt,” said deputy chief financial officer Stephen Cordi.
But the District, a hotbed for the tax lien industry, has done little to shield its most vulnerable homeowners from unscrupulous operators.
Foreclosures have upended families in some of the city’s most distressed neighborhoods. Houses were taken from a housekeeper, a department store clerk, a seamstress and even the estates of dead people. The hardest hit: elderly homeowners, who were often sick or dying when tax lien purchasers seized their houses.
One 65-year-old flower shop owner lost his Northwest Washington home of 40 years after a company from Florida paid his back taxes — $1,025 — and then took the house through foreclosure while he was in hospice, dying of cancer. A 95-year-old church choir leader lost her family home to a Maryland investor over a tax debt of $44.79 while she was struggling with Alzheimer’s in a nursing home.
Other cities and states took steps to curb abuses, such as capping the fees, safeguarding houses owned by the elderly or scrapping tax sales altogether and instead collecting the money themselves.
“Where is the justice? They’re taking people’s lives,” said Beverly Smalls, whose elderly aunt lost her home in Northeast Washington. “It’s just not right.”
Read more

Poland Confiscates Half Of Private Pension Funds To "Cut" Sovereign Debt Load

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel's playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state - i.e., confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a more politically correct name for it: pension overhaul.
By way of background, Poland has a hybrid pension system: as Reuters explains, mandatory contributions are made into both the state pension vehicle, known as ZUS, and the private funds, which are collectively known by the Polish acronym OFE. Bonds make up roughly half the private funds' portfolios, with the rest company stocks.
And while a change to state-pension funds was long awaited - an overhaul if you will - nobody expected that this would entail a literal pillage of private sector assets.
On Wednesday, Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings.  The funds would effectively be left with only the equities portions of their assets, even this would be depleted, and there will be uncertainty about the number of new savers joining.
But why is Poland engaging in behavior that will ultimately be disastrous to future capital allocation in non-public pension funds (the type that can at least on paper generate some returns as opposed to "public" funds which are guaranteed to lose)? After all, this is a last ditch step which no rational person would engage in unless there were no other option. Simple: there were no other option, and the driver is the same reason the world everywhere else is broke too - too much debt.
By shifting some assets from the private funds into ZUS, the government can book those assets on the state balance sheet to offset public debt, giving it more scope to borrow and spend. Finance Minister Jacek Rostowski said the changes will reduce public debt by about eight percent of GDP. This in turn, he said, would allow the lowering of two thresholds that deter the government from allowing debt to raise over 50 percent, and then 55 percent, of GDP. Public debt last year stood at 52.7 percent of GDP, according to the government's own calculations.
To summarize:
  1. Government has too much debt to issue more debt
  2. Government nationalizes private pension funds making their debt holdings an "asset" and commingles with other public assets
  3. New confiscated assets net out sovereign debt liability, lowering the debt/GDP ratio
  4. Debt/GDP drops below threshold, government can issue more sovereign debt
And of course, once Poland borrows like a drunken sailor using the new window of opportunity, and maxes out its new and improved limits, it will have no choice but to confiscate more assets, and to make its balance sheet appear better, until one day, there is nothing left in the private sector to confiscate. At that point the limit itself will have to be legislated away, and Poland will simply continue borrowing until one day there are no foreign lenders willing to take the same risk as the nation's private pensioners. At that point, Poland, which is in the EU but still has the Zloty, can just go ahead and monetize its own debt by printing unlimited amounts of its currency.
Of course, we all know how that story ends.
The response to the confiscation was, naturally, one of shock:
The reform is "a decimation of the ...(private pension fund) system to open up fiscal space for an easier life now for the government," said Peter Attard Montalto of Nomura. "The government has an odd definition of private property given it claims this is not nationalisation."

"This is worse than many on the markets had feared," a manager at one of the leading pension funds, who asked not to be identified, told Reuters.
"The devil is in the detail and we don't yet know a lot about the mechanism of these changes, what benchmarks will be use to evaluate our performance... (It) looks like pension funds will lose a lot of flexibility in what they can invest."
Catastrophic consequences for fund flows aside, the Polish prime minister had a prompt canned response:
Tusk said people joining the pension system in the future would not be obliged to pay into the private part of the system. Depending on the finer points, this could mean still fewer assets in the private funds.

"The (current) system has turned out to be built in part on rising public debt and turned out to be a very costly system," Tusk told a news conference.

"We believe that, apart from the positive consequence of this decision for public debt, pensions will also be safer."
You see, he is from the government, and he is confiscating the pensions to make them safer. Confiscation is Safety and all that...
Polish officials have tried to reassure investors, saying the overhaul avoids the more radical options of taking both bond and equity assets away from the private funds outright.

They say the old system effectively made Polish public debt appear higher than it really is.
Well, once you nationalize private assets, the public debt will lindeed appear lower than it was before confiscation: we give them that much.
End result: "The Polish pension funds' organisation said the changes may be unconstitutional because the government is taking private assets away from them without offering any compensation.... This may lead to the private pension systems shutting down," said Rafal Benecki of ING Bank Slaski."
Unconstitutional? What's that. But whatever it is, it's ok - after all the public pension system is still around. At least until that too is plundered. But in the meantime, all such pensions will be "safer", guaranteed.
But best of all, in the aftermath of Cyprus, we now know what the two most recent European blueprints for preserving the myth of solvency are: bail-ins, which confiscate deposits, and pension fund "overhauls", which confiscate, well, pension funds.
And now, back to the global recovery soap opera.

World on bailout life support’, G-20 Leaders – failed to deliver results on global recovery

This week Katie Pilbeam takes the show on the road to St. Petersburg for the annual G20 Summit. There, she tracks down Christine Lagarde and grills the head of the IMF on the wisdom of the monetary easing policy adopted by the world’s central banks. Plus, emerging BRICS nations launch their development bank to rival the World Bank and the IMF. And we catch up with our in-house trader Sean Thomas for a peek at his portfolio
G-20 Leaders – failed to deliver results on global recovery.
The G-20 summit ended worse than expected on Friday – with acrimony, division & name-calling over Syria. The conference, which was originally conceived as an economic forum, also failed to deliver results on global recovery.
In the end, even a meeting between Barack Obama and Vladimir Putin failed to deliver results. Participants at the G-20 summit in St. Petersburg couldn’t manage to find a common position on Syria. The American president demanded that punitive action be taken against Syria, but his Russian counterpart stood between Obama and his allies. Now any decision on a possible military strike against Damascus will be up to the US Congress.

IBM closes down its retiree health insurance program

"Obamacare will take care of t
"Obamacare will take care of them" 

Here is comes folks: Massive pension defaults
Actions like this have been a "quiet" policy of Corporate America for several years now and the trend is accelerating.

Big corporations are using arithmetical sleight of hand to throw retirees off the bus.

Since few retirees are actuaries and are incapable of analyzing the math, almost none of them realize how these "new and improved" programs are screwing them. Even when they do, thanks to Congress and the courts, there's little or nothing they can do about it.

This is a multi-TRILLION dollar scam and it's the first phase of the inevitable default of pension obligations worldwide. This is a major deflationary signal, perhaps the biggest one yet - and the least understood and acknowledged.

Ellen Schultz, a reporter for The Wall Street Journal, has covered the "new" retirement crisis for more than a decade.

Her book "Retirement Heist" explains it all. We'll be covering this topic in greater detail in the weeks and months to come.

The Number Of Private Sector Jobs Fell By 278,000 Last Month But The Economy Is Getting Better?

Barack Obama Oval Office

Have you heard about the "wonderful" employment numbers that were just released?  Last month, the unemployment rate declined to 7.3 percent.  Somehow this happened even though the percentage of working age Americans with a job actually declined and the number of private sector workers fell by 278,000.  So how did the federal government magically produce a drop in the unemployment rate even though less people have jobs?  Well, they did it by pretending that more than half a million Americans "dropped out of the labor force" last month.  If the government is to be believed, the number of Americans that want to work dropped by an astounding 516,000 in a single month even though the population of our country is constantly increasing.  The federal government continues to feed us absolutely absurd numbers month after month, and at this point "the official unemployment rate" is essentially meaningless.
But that doesn't mean that Barack Obama is about to drop the charade.  In fact, he continues to insist that the economy is getting better.  The following is an excerpt from one of Obama's recent weekly radio addresses...
Over the past four and a half years, we’ve fought our way back from the worst recession of our lifetimes. And thanks to the grit and resilience of the American people, we’ve begun to lay a foundation for stronger, more durable economic growth.
Oh really?
Does he actually believe that anyone is still buying what he is saying?
The cold, hard truth is that the U.S. economy has not recovered while Obama has been in the White House.  If you doubt this, please see my previous article entitled "33 Shocking Facts Which Show How Badly The Economy Has Tanked Since Obama Became President".
Since World War II, the percentage of working age Americans that is employed had always bounced back dramatically after a recession ended.
Unfortunately, that has not happened this time.
As you can see from the chart posted below, the percentage of working age Americans with a job has stayed below 59 percent since late 2009.  This chart reflects the most recent employment numbers...
Employment-Population Ratio 2013
So where is the recovery Obama?
Can he possibly put a positive spin on the chart above?
Of course not.
The truth is that the official unemployment rate should still be up around 10 percent like it was a few years ago.
But that wouldn't make Obama look very good, would it?  So the U.S. government has been pretending that millions upon millions of Americans have been "leaving the labor force".  This has pushed the labor force participation rate to a 35-year-low...
Labor Force Participation Rate
At this point, we have more than 90 million Americans that are considered to be "not in the labor force"...
On Friday, the BLS reported that the 90,473,000 Americans not currently in the labor force marked the first time the figure exceeded the 90 million threshold.
In January 2009, when President Obama first took office, there were 80.5 million Americans 16 years and older not in the labor force, meaning the number of Americans not in the labor force has increased 10 million during his presidency.
For men, the BLS reported the labor force participation rate, the percentage of the population working or considered looking for work, was 63.2 percent in August, basically unchanged from 63.5 percent in July. It’s also a record low.
How low can that number possibly go?
Meanwhile, the quality of our jobs continues to decline rapidly as well.  If you can believe it, at this point more than 40 percent of all U.S. workers actually make less than what a full-time minimum wage worker made back in 1968.
As a result, the U.S. middle class is steadily dying.  The following is from a recent Yahoo article...
It’s the elephant in the room no one wants to talk about…
The middle class in the U.S. economy is on the verge of collapse. Yes, I said collapse. That social class that once helped the U.S. economy grow and prosper is coming apart. Will the U.S. economy ever be the same without it or is this the new norm?
For much more on this, please see my previous article entitled "44 Facts About The Death Of The Middle Class That Every American Should Know".
And unfortunately, things look like they may start getting a lot worse for ordinary Americans.
There are a couple of major events which could potentially cause our economic decline to accelerate greatly in September...
#1 Fed Tapering
Right now, there is not much demand for U.S. Treasury bonds.  Foreigners have become net sellers of U.S. Treasuries and domestic demand has become quite weak.  Without the Federal Reserve buying up tens of billions of dollars worth of U.S. Treasuries each month, where will the demand come from?
That is a very good question.  If the Fed starts to taper quantitative easing in September, that is almost certainly going to send bond yields soaring.  Already, bond yields have been rising steadily, and if they get too high it is going to be absolutely disastrous for the U.S. economy.
#2 War With Syria
If the U.S. attacks Syria, it will likely cause financial markets all over the planet to descend into chaos and send the price of oil skyrocketing.
And that assumes that the conflict is limited to only the United States and Syria.  If Syria decides to retaliate by launching missiles at Israeli cities, that will set off a major regional war in the Middle East and the consequences for the global economy will be off the charts.
So as bad as the U.S. economy is right now, the truth is that things could easily get much, much worse.
Let us hope for the best, but let us also prepare for the worst.

The IRS Touches Up JPM For $6Bn. (Paper Money-Dont Get Excited)

In this episode of the Keiser Report, Max Keiser and Stacy Herbert, discuss an America that has turned into an old hag raping and murdering itself and the currency spikes that are a sign that someone is banging the close. In the second half, Max talks to David L. Smith of the Geneva Business Insider about refining gold in Switzerland in order to satisfy demand in the Far East and a time in which governments and bankers will get their hands on gold by fair means or foul.

Jim Willie- The U.S. Is In An Indefensible Position, Both With War And Monetary Policy, Nations Need to Depart from Dollar or Enter Third World

‘UK govt. underestimates poverty rate’

British government has underestimated the impact of rising poverty rates on childcare, charity has warned.
According to a study by the 4Children charity, the new baby boom and poverty rates has caused nursery education crisis in the country.
Earlier last week, Britain™s Deputy Prime Minister Nick Clegg said families earning less than £16,190 a year would receive 15 hours a week of free childcare for their two-year-olds.
The 4Children figures, however, said this would not be possible because of the shortfall in numbers of child caretakers.
The charity said an average of 51 more childcare workers are needed to be employed at each English local authority to meet childcare demands over the next five years.
œBy 2018 we are set for a 200,000 shortfall in childcare places for two-, three- and four-year-olds. Only action to grow the workforce and the number of childcare providers will ensure the government can continue to guarantee childcare places for all eligible families,” the charity™s chief executive Anne Longfield said.
…read more
Republished from: Press TV

College Conspiracy (Full Version)

College Conspiracy is the most comprehensive documentary ever produced about higher education in the U.S. The film exposes the facts and truth about America’s college education system. ‘College Conspiracy’ was produced over a six-month period by NIA’s team of expert Austrian economists with the help of thousands of NIA members who contributed their ideas and personal stories for the film. NIA believes the U.S. college education system is a scam that turns vulnerable young Americans into debt slaves for life.