Tuesday, September 24, 2013

The Fed's Exit Strategy Is All Talk And Pure Myth

Source: Lee Rogers, Blacklisted News
Last week’s highly anticipated announcement from the Federal Reserve was no surprise to myself and others outside of the mainstream corporate media. The Fed announced that they would not be scaling back their program of $85 billion in monthly asset purchases. This is despite the fact that in the weeks leading up to their announcement the general consensus on CNBC and other mainstream news channels was that the Fed was going to begin tapering these purchases. Many predicted that they would be reducing their asset purchases anywhere from $10 to $15 billion. This Fed announcement caught the corporate media propagandists completely off guard and made the vast majority of these people look incredibly stupid in the process. It is painfully obvious and should be even more so to people who follow the markets for a living that the U.S. economy is completely reliant upon the Fed’s asset purchases which are artificially propping up the bond and stock markets. All of this talk about the Fed having an exit strategy is nothing more than propaganda. The only exit strategy they have is to talk about the possibility that they will taper or end their asset purchases.
For years the Fed has talked about having an exit strategy but has done nothing substantive to reverse their low interest rate policies or debt purchases. They are in a box because if they end these policies yields on U.S. Treasury bonds will skyrocket and the U.S. government will no longer be able to service its enormous debt burden. Although this would allow the market to reset itself from all of the Fed created imbalances this is viewed as being politically impossible. On the other hand if they continue down this path of endless monetary stimulus the U.S. Dollar will be devalued into worthlessness. The Fed simply creates billions of Dollars out of thin air to purchase these assets. With more Dollars in existence it effectively makes each Dollar less valuable.
At some point the Fed will actually be forced to expand their asset purchases since real demand for U.S. Treasury bonds is in the toilet. China and Japan which are two of the largest foreign holders of U.S. debt are attempting to scale back their holdings. The same can be said about other foreign countries which are diversifying out of U.S. related debt instruments. This leaves the Fed as the only entity generating any demand for these bonds and this demand is completely artificial. This may prevent interest rates from going higher in the short term but in the long term the Fed will have devalued the Dollar to such an extent that nobody will want to hold Dollars let alone debt instruments denominated in Dollars.
Shortly after the Fed’s announcement the gold and silver markets reacted strongly to the upside. The Fed and other Western banking powers have for years sought to suppress the price of gold and silver to hide the fact that inflation is vastly understated in their bogus CPI numbers. With this in mind, Thursday’s spike in the gold and silver prices was not something that would have been welcomed by the Fed. This is why James Bullard the President of the St. Louis Federal Reserve went on Bloomberg radio the day after to claim that the Fed would probably taper in October. If the Fed didn’t taper now when most of the broader market was expecting a reduction in bond purchases, why would they decide to taper next month? Will a whole lot really change over the next month to warrant a shift in policy?
Even more ridiculous is the fact that he had the nerve to say that the recent decision not to taper was close. Perhaps he forgot that the Fed voted by a tally of 9 to 1 in favor of not tapering. That is not what anyone in their right mind would call a close decision. Clearly common sense and logic is not something the Fed likes to include in their propaganda announcements. With these comments this Bullard clown should take the last three letters of his name and replace them with a four letter word that starts with “S” and ends in “T”.
Following Bullard’s comments the gold and silver prices gave up much of Thursday’s gains. It could be argued that a significant portion of the general market actually bought the ridiculous Fed propaganda which helped contribute to the selloff. Most likely however is that Bullard’s comments were cover for another orchestrated take down in the gold and silver markets.
At this point it should be painfully obvious that the Fed cannot scale back their bond purchases. In fact they will eventually have to increase them in order to maintain the short term status quo. It is the only course of action that is politically viable for these vultures. Janet Yellen who is widely expected to be the next leader of the Fed will no doubt continue these insane policies. This is a woman who like outgoing Fed Chairman Ben Bernanke has spent most of her adult existence in academia or with the Fed so her understanding of real world economics is virtually nil. She’s even made statements advocating negative interest rates, continued money printing and other madness so she’s the perfect choice to continue this on-going debacle. It is shocking to see that the system has even lasted this long but at some point this whole experiment is going to end horribly. We will unfortunately witness one of the ugliest economic collapses the world has ever seen and the longer these policies continue the worse it will be.

Venezuela-China sign agreements for more than USD 20 billion

Within the framework of Venezuelan President Nicolás Maduro's first visit to China, on Sunday, China pledged to invest some USD 20 billion in social and oil projects in Venezuela.

Maduro and his Chinese counterpart Xi Jinping expressed their interest in consolidating China-Venezuela strategic alliance and signed a dozen cooperation and investment agreements, including a new line of credit amounting to USD 5 billion and an agreement to produce additional 200,000 oil barrels per day in the Orinoco Oil Belt.

Venezuela also agreed on the setting up of a joint venture with Chinese state-owned company Sinopec for the exploitation of Junín 10 bloc in the belt. USD 14 billion is expected to be invested in the project aimed at producing 200,000 barrels per day, said Maduro via Twitter.


Iceland Borrows European "Template" - Removes Large Deposit Guarantees

Iceland Borrows European "Template" - Removes Large Deposit Guarantees
23 September 2013
, by Tyler Durden (Zero Hedge)

Following the crisis in October 2008, Iceland's government declared all deposits in domestic financial institutions were 'blanket' guaranteed - an Emergency Act that was reafrmed twice since.

However, according to RUV, the finance minister is proposing to restrict this guarantee to only deposits less-than-€100,000.

While some might see the removal of an 'emergency' measure as a positive, it is of course sadly reminiscent of the European Union "template" to haircut large depositors.

This is coincidental (threatening) timing given the current stagnation of talks between Iceland bank creditors and the government over haircuts and lifting capital controls - which have restricted the outflows of around $8 billion.

The government will remove its blanket guarantee for large depositors...

Bill on deposit will be tabled in the winter.

There will be a deposit equivalent to one hundred thousand euros guaranteed.

Later on it is to withdraw from the 2008 statement of all deposits in domestic financial institutions were fully secured.

The bill is currently in the process of Finance, but the basis is very similar to the bill presented to Parliament in November 2010 but was not passed.

The Credit Bubble Is Not Only Back, It Is 94% Bigger Than In 2007

23 September 2013, by Tyler Durden (Zero Hedge)

If the Fed was worried about 'froth' in the markets earlier in the year, then this chart should have them panicking.

Of course, as Jim Bullard noted Friday, there is no bubble because everyone knows there is no bubble but judging by the massive surge in covenant-lite loan issuance, there is a bubble in forced demand for leveraged loans.

At $188.7 billion, the 2013 issuance of these highly unsafe loans (which have seen huge inflows since the Fed started talking taper back in May) is almost double that of the peak of the last credit bubble in 2007 and is five times the size of 2012 YTD issuance at this time.

As Reuters notes, Covenant-lite loans used to be reserved for stronger companies and credits, but are now so common in the U.S. leveraged loan market that investors are becoming wary of some credits with a full covenant package.

With corporate leverage at all-time highs, what could go wrong?

Chart of the Day: Cumulative Global Mintage of Gold Coins 1970-2012

19 September 2013, by The Doc (Silver Doctors)

Graph Source: http://marketupdate.nl/nieuws/goud-e

20 Ordinary Americans Talk About The Economic Despair That Is Growing Like A Cancer All Around Them

By Michael Snyder
There are hundreds of formerly prosperous communities all over America that are being steadily transformed into rotting, decaying hellholes.  The good paying middle class jobs that once supported those communities are long gone, and they have been replaced with low paying service jobs if they have been replaced at all.  When you visit those communities, it is almost as if all of the hope has been sucked right out of the air.  It can be absolutely heartbreaking to look into the hollow eyes of someone that has totally given in to despair, but unfortunately the number of Americans that are giving up on the economy continues to grow.  Today, the labor participation rate is the lowest that it has been in 35 years, and more than 100 million Americans are enrolled in at least one welfare program.  It is easy to say that they should just “get a job”, but as I have written about repeatedly, our economy simply is not producing enough jobs for everyone anymore.  The percentage of working age Americans with a job has remained at the same level that it was at during the worst days of the last recession, and meanwhile the quality of our jobs has continued to steadily decline.  Median household income has fallen for five years in a row, but the cost of living continues to rise rapidly.  The middle class is being systematically shredded, and poverty is growing at an alarming rate.  The U.S. economy has been in decline for a long time, and the really bad news is that it appears that this decline is about to accelerate.
We are a nation that consumes far more wealth than we produce.  We are a nation that buys far more from the rest of the world than they buy from us.  We are a nation that has a “buy now, pay later” mentality.
As a nation, we have accumulated the largest mountain of debt in the history of the world.  40 years ago, the total amount of debt in our system (government, business and consumer) was about 2 trillion dollars.  Today, it is more than 56 trillion dollars.
The consequences of decades of incredibly foolish decisions are starting to catch up with us, and it is those at the bottom of the food chain that will suffer the most.
I could spend the rest of this article quoting 30 or 40 more statistics that show how bad things are, but today I wanted to do something different.  Today, I wanted to share some quotes from some of my readers about what they are seeing where they live.  The following are 20 quotes from ordinary Americans about the economic despair that is rapidly growing like a cancer all around us…
#1 David:
“Yes, the American economy is in the pits. I know five languages, have three degrees (including two graduate degrees), and have lived overseas for 16 years and I still can’t find a job in the USA. Everything is broken in America. Maybe I should give up my American citizenship.”
#2 Zach:
“I’ve been struggling since I finished college in the summer of 2010. My dream is to work in the courts, law enforcement but it’s almost impossible to get a call back for an interview. I interviewed with Garland, Texas PD for a position in the city jail and I made the final 30 of 300 applicants that applied for the 3 positions.”
#3 Akitawoman:
“I have two Master’s degrees, am 61 years old and earning $10 per hour. What does that say about the current economy?”
#4 Cincinnati Dave:
“I work for one of the banks mentioned in your article. I was in mortgages. I saw all of this coming, so several months ago I asked to get into another area of the bank and fortunately, for me, they granted by request. A lot of people are losing their jobs and there is really no prospects out there for anything else whereby the same kind of money could be made. I will make nothing near what I had been earning but am at the least grateful to be employed. This is all so sad to watch happen.”
#5 Iceman:
“I used to work for WF processing mortgages. The week that the rates went up, I was out of work, not one extra week of work.”
#6 Tim:
“The U.S. economy is producing mostly part-time, low-wage jobs. These jobs barely pay enough to put food on the table.”
#7 K:
“What I am aware of, is every person I know, who had to switch jobs in the last five years took a pay cut. The smallest cut among my friends was 10%, the average was closer to 18%. No we are heading down a bad road, and we are past the point of no return.”
#8 Makati:
“After spending most of my life in the middle class, I now consider myself lower class due to age and income. Nothing wrong with that. I am still able to provide myself with what I need and some of my ‘wants’. I am like most retirees today.”
#9 Mondobeyondo:
“As many of you already know (but maybe some new members of this blog don’t) – I live in Phoenix, Arizona. Where you live here, determines (to a great extent) your economic well being. Those in the “East Valley” – Chandler, Gilbert, Scottsdale, etc – have the jobs, the opportunities and the transportation. Those in the wealthier areas of the “West Valley” also have these benefits.
The remainder – those who live in the older west side of town, and the south side of town – are mainly forgotten and left to struggle. Many are hard working citizens who just want a chance. Unfortunately, chance costs money, in the view of many people, and as far as the municipal government is concerned, there’s no money for us. It’s cheaper to let them live in a tent in the park, where the cops at least have an excuse to evict them.”
#10 2Gary2:
“We are no longer the land of opportunity where anyone can make it.”
#11 GOM:
“There is no middle class here in the Florida Panhandle. Only folks who have money are the retired and they hate everyone. They own all the antique stores [big business] and most thriving businesses and restuarants. Military is big here, they spend every dime they have on stupid stuff and taxis. Tourist are way down since the spill. Now for the good news. A major food chain here is going out of business [Food World] Another is losing 20k a month to theft. Every other property it seems is up for sale. There are tons of empty real estate [store fronts] There are thrift stores opening everywhere. People are selling goods on the streets, only to be run off by the cops. Crime is getting out of hand. Most don’t go out after dark. Police are beating up the homeless at the beaches. Panhandling now is mainly younger people. Where did all the older ones go?”
#12 Rodster:
“In my area which is SW Florida, it’s been getting tighter for my customers so on a case by case basis I lower my price when they need auto repairs. I still find road signs advertising homes for sale (cash only). Many are advertised as foreclosed.

I’ve started seeing people living out of their cars. It’s not a daily occurrence but I have been noticing it.”
#13 Devery:
I have been looking after the homeless now for 4 years. Last winter I had an encounter where I was told that I could not hand out blankets and sleeping bags in the dead of winter and that I would be arrested for trespassing if “me and my friends” didn’t move along.
So, I adopted the policy that I would pull up next to them, have them get in the car and we would go for a drive. I would find a place to pull over and give them what they needed then I would drop them off in a different place.
#14 Robert:
“Around where I live in the SE, things seem ok but I live in a university town. Go to some of the surrounding small towns and it is desolate. Car dealerships closed. Entire streets with abandoned stores. The only activity is a one clerk post office. I know people in our church who are a paycheck away from going over the edge or going over due to a spouse dying and losing one of their social security checks. I see grim. More homeless. A local church is feeding many more including some folks living out of their cars—lots of children. Mostly minimum wage jobs in the area. If it were not for the university and its 34,000 students, this place would look as bad as the smaller communities.”
#15 TN Gal:
“Here in southeast TN we have jobs, mostly part-time or low wage. Our problem these days are so many people dependent on government programs no one wants to work. They do better on programs than working partying and paying for insurance. Housing still very depressed. Seeing more homeless around and local churches straining to provide food. Crime is up and drugs, which were down, are coming back with a vengeance. Middle class here are senior citizens on SS, younger retirees not the older ones. Older ones seem to be struggling. Sad.”
#16 Deb:
Michael, I live in North Central Illinois. About 60 miles southeast of Chicago. The town we live in has about 8,000 in it. Very “middle class” farm community. Unemployment is high and so is underemployment. We know many people living off 2 part time jobs. That seems to be the norm around here. Or people taking jobs that they would never of considered in the past, just to get by. My son used to work for CAT in Aurora, but was “let go” in order to bring in new workers at a lower pay scale. It took him over a year(which really isn’t bad) to find a part time job with 3M.
#17 Susan:
“Drive around Los Angeles at 3:00 AM any day and you will see the devastating and pervasive homelessness from 8 to 80 year olds.  And the massage parlors and hookers on the streets of used to be ‘high-end’ neighborhoods are exploding. No other way to make a living.”
“A couple of years ago it was reported 9K people a night slept in their cars here in San Diego County. Special car parks are set up in some church parking lots. The cops look the other way. Wonder what the figure is now?”
#19 Jimbo:
“My own viewpoint is that a collapse of the current economic system is inevitable and imminent.”
#20 El Pollo de Oro:
“During a conversation on prepping, someone recently said to me, ‘If things get half as bad as these preppers think they will, I don’t want to be alive.’ So, how bad will things will get? Real unemployment is already at Great Depression levels (John Williams’ Shadow Statistics contradicts the BLS’ bogus figures), but when this depression deepens, I think we’ll be looking at 50% or 60% unemployment easily. Much worse than the 1930s. It will be absolute hell for millions of Americans, and when the money stops flowing down to the man on the street, the blood will flow in the streets (Gerald Celente). Lots of it.”

Fed Stimulus Will Create Another US Government Orchestrated Bubble! STOP! – Judge Napolitano

Fed Stimulus Will Create Another US Government Orchestrated Bubble! STOP! – Judge Napolitano

Fed’s Dudley says economy too weak to taper

By Greg Robb and William L. Watts, MarketWatch

Dennis Lockhart, who heads the Federal Reserve Bank of Atlanta and is shown at right with his Chicago Fed counterpart, Charles Evans, suggests there is evidence that the U.S. economy has lost steam.
NEW YORK (MarketWatch) — Two senior Federal Reserve officials Monday expressed disappointment with the pace of the U.S. recovery, with New York Fed President William Dudley saying the economy is too weak for the central bank to pull back its bond-buying program.
Dudley expects headwinds holding back the economy to abate in early 2014. But he noted that “this is just a forecast [and] has not been realized yet.”
While the economy is slowly healing, there has been no pickup in its “forward momentum,” he said in a speech at Fordham University.
He blamed the sluggishness, in part, on a drag from fiscal policy, in the form of the expiration of the payroll tax holiday and higher tax rates in January, along with the budget sequester. The sharp rise in market interest rates since May, when investors began looking toward a potential cutback in Fed bond buys, is also holding back the economy, he said.
“The economy still needs the support of a very accommodative monetary policy,” Dudley, who always has a vote on the Fed policy-making committee, said.
A key ally of Fed Chairman Ben Bernanke, Dudley said he would like to see “economic news that makes me more confident that we will see continued improvement in the labor market” before he would vote to reduce the pace of the central bank’s asset-purchase program.
In a separate speech, Atlanta Fed President Dennis Lockhart said the economy may have lost dynamism.
“Is America losing its economic mojo?” Lockhart said in a speech in New York to a summit on creative leadership sponsored by the Louise Blouin Foundation. “There is some evidence to the affirmative.”
The U.S. central bank surprised many economists and investors last week by holding its monthly bond-buying program steady at $85 billion. Many had expected a $10 billion reduction, or tapering.
The comments by Dudley and Lockhart suggested that Fed officials were less content with the pace of the recovery and improvement in the labor market than previously thought. While some commentators contend that the Fed’s refusal to slow its bond buys in September raised questions about the central bank’s communications policy, Dudley said the decision was in keeping with guidance laid out by Bernanke in June.
Stocks were mostly lower in the wake of the speeches. The Dow Jones Industrial Average DJIA -0.32%  recovered some of its early losses but was still down 42 points to 15,408. Treasury prices 10_YEAR -0.48% inched higher, sending yields lower. 
In an interview later with The Wall Street Journal, Lockhart said he doubted that the Fed would taper in October.
“In the short time between now and the October meeting, I don’t think there will be an accumulation of enough evidence to dramatically change the picture” about where the economy now stands,” Lockhart said.
The Atlanta Fed president is not a voting member of the Fed’s policy-making committee, but his views often align with the consensus opinion.
Dudley said that there was a “hollowing out” of middle-income jobs that are particularly vulnerable to technology and automation. He said that rising income inequality was “definitely a problem.”
In his remarks, Lockhart said statistics show that fewer businesses are expanding their workforces and workers aren't leaving jobs for better opportunities, Lockhart said.
Startups are finding it hard to get capital in the wake of the financial crisis and worker output per hour worked — known as productivity — has slowed to a crawl, at least temporarily, he noted.
“There are reasons to believe that some of the decline is cyclical in nature and will reverse over time,” Lockhart said, but business leaders and government officials need to be proactive, he said.
One Fed officials who was a strong supporter of a September taper spoke later Monday. Dallas Fed President Richard Fisher told the Independent Bankers Association of Texas annual convention in San Antonio that a failure to step back the pace of purchases would “increase uncertainty about the future conduct of policy and call the credibility of our communications into question.” “I believe that it is exactly what has occurred, though I take no pleasure in saying so,” he added.
Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000. William L. Watts is MarketWatch's senior markets writer, based in New York. Follow him on Twitter @wlwatts.

Ron Paul: Internet Sales Tax Could Crush Small Businesses

One unique aspect of my homeschool curriculum is that students can start and manage their own online business. Students will be responsible for deciding what products or services to offer, getting the business up and running, and marketing the business’s products. Students and their families will get to keep the profits made from the business. Hopefully, participants in this program will develop a business that can either provide them with a full-time career or a way to supplement their income.
Internet commerce is the most dynamic and rapidly growing sector of the American economy. Not surprisingly, the Internet is also relatively free of taxes and regulations, although many in Washington are working to change that. For example, earlier this year the Senate passed the Marketplace Fairness Act, more accurately referred to as the national Internet sales tax act. This bill, which passed the Senate earlier this year, would require Internet businesses to collect sales tax for all 10,000 American jurisdictions that assess sales taxes. Internet business would thus be subject to audits from 46 states, six territories, and over 500 Native American tribal nations.
Proponents of the bill deny it will hurt small business because the bill only applies to Internet business that make over a million dollars in out-of-state revenue. However, many small Internet businesses with over a million dollars in out-of-state revenues operate on extremely thin profit margins, so even the slightest increase in expenses could put them out of businesses.
Some businesses may even try to avoid increasing their sales so as to not have to comply with the Internet sales tax. It is amazing that some of the same conservatives who rightly worry over Obamacare’s effects on job creation and economic growth want to impose new taxes on the most dynamic sector of the economy.
Proponents of the law claim that there is software that can automatically apply sales taxes. However, anyone who has ever dealt with business software knows that no program is foolproof. Any mistakes made by the software, or even errors in installing it, could result in a small business being subject to expensive and time-consuming audits.
Some say that it is a legitimate exercise of Congress’s Commerce Clause power to give state governments the authority to force out-of-state businesses to collect sales taxes. But if that were the case, why shouldn’t state governments be able to force you to pay sales taxes where you physically cross state lines to make a purchase? The Commerce Clause was intended to facilitate the free flow of goods and services across state lines, not to help states impose new burdens on out of state businesses.
The main proponents of this bill are large retailers and established Internet business. Big business can more easily afford to comply with a national Internet sales tax. In many cases, they are large enough that they already have a “physical presence” in most states and thus already have to collect state sales taxes. These businesses are seeking to manipulate the political process to disadvantage their existing and future small competitors. The Internet sales tax is a bad idea for consumers, small Internet business, and perhaps most importantly, the next generation of online entrepreneurs.
For more information about the small business program well as all other aspects of the Homeschool curriculum please go here. And to purchase a copy of my new book, The School Revolution: A New Answer for Our Broken Education System please go here.

Nanex ~ 20-Sep-2013 ~ Einstein and The Great Fed Robbery

One of Einstein's great contributions to mankind was the theory of relativity, which is based on the fact that there is a real limit on the speed of light. Information doesn't travel instantly, it is limited by the speed of light, which in a perfect setting is 186 miles (300km) per millisecond. This has been proven in countless scientific experiments over nearly a century of time. Light, or anything else, has never been found to go faster than 186 miles per millisecond. It is simply impossible to transmit information faster.

Too bad the bad guys on Wall Street who pulled off The Great Fed Robbery didn't pay attention in science class. Because hard evidence, along with the speed of light, proves that someone got the Fed announcement news before everyone else. There is simply no way for Wall Street to squirm its way out of this one.

Before 2pm, the Fed news was given to a group of reporters under embargo - which means in a secured lock-up room. This is done so reporters have time to write their stories and publish when the Fed releases its statement at 2pm. The lock-up room is in Washington DC. Stocks are traded in New York (New Jersey really), and many financial futures are traded in Chicago. The distances between these 3 cities and the speed of light is key to proving the theft of public information (early, tradeable access to Fed news).

We've learned that the speed of light (information), takes 1 millisecond to travel 186 miles (300km). Therefore, the amount of time it takes to transmit information between two points is limited by distance and how fast computers can encode and decode the information on both sides. Our experience analyzing the impact of hundreds of news events at the millisecond level tells us that it takes at least 5 milliseconds for information to travel between Chicago and New York. Even though Chicago is closer to Washington DC than New York, the path between the two cities is not straight or optimized: so it takes information a bit longer, about 7 milliseconds, to travel between Chicago and Washington. It takes little under 2 milliseconds between Washington and New York.

Click for an animation

Therefore, when the information was officially released in Washington, New York should see it 2 milliseconds later, and Chicago should see it 7 milliseconds later. Which means we should see a reaction in stocks (which trade in New York) about 5 milliseconds before a reaction in financial futures (which trade in Chicago). And this is in fact what we normally see when news is released from Washington.

However, upon close analysis of millisecond time-stamps of trades in stocks and futures (and options, and futures options, and anything else publicly traded), we find that activity in these instruments exploded in the same millisecond. This is a physical impossibility. Also, the reaction was within 1 millisecond, meaning it couldn't have reached Chicago (or New York): another physical impossibility. Then there is the case that information on the Fed Website was not readily understandable for a machine - less than a thousandth of a second is not enough time for someone to commit well over a billion dollars that effectively bought all stocks, futures and options.

The Data

Fortunately for us, in the minutes before the Fed announcement at 14:00 on September 18, 2013, there was significant activity in Comex Gold Futures (traded in Chicago) and the ETF symbol GLD (traded in New York). This gives us an opportunity to measure closely, the exact (to the millisecond) amount of time between trading activity in Chicago and New York. The first chart shows about 3.5 minutes of time around the Fed Announcement release, giving us an overview. The stack of charts that follow allow you to easily compare between GLD (New York) and GC Futures (Chicago) for 6 different active periods. You will see that in the first 5 pairs - before the announcement, activity first shows up in GC Futures, followed by activity in GLD between 5 and 7 milliseconds later. In the last pair, which compares activity at exactly 2pm (14:00:00), you will see both GC futures and GLD react in the same millisecond of time.

See also: More Charts of Evidence, Wallpaper-sized chart of all stock trades at 2pm

1. Animation of December 2013 Gold (GC) Futures (Chicago) followed by GLD stock (New York) on September 18, 2013 from 13:57 to 14:00:30.

2. Zooming in 150 milliseconds of time for 6 different high activity periods minutes before and during the annoucement.

Each chart shows first, Gold Futures (GC - traded in Chicago) followed by GLD (traded in New York). The first 5 charts show events minutes before the news release: you can clearly see that Gold Futures (GC) trades before GLD. But the last chart shows the event at 14:00:00, where Gold Futures trades at the exact same time as GLD stock. This is physically impossible unless information was already present in Chicago and New York. It's easiest if you compare the bottom panels of each chart which shows trading volume for each millisecond.



There are 2 possibilities, and both aren't good news for Wall Street.

1. A Timed News Release by a News Organization

The Fed news was condensed by a news service into a simple "No Tapering" message (something easily readable by a machine) and then placed on news servers co-located next to trading machines in both New York and Chicago at some time before 2pm. The news machines are programmed to release the information at precisely 2pm, allowing the algos to react immediately at both locations. This is how some news services release privately compiled statistics like the Consumer Confidence or Chicago PMI. In those cases, we see the exact behavior as in the last chart above - an immediate reaction in New York and Chicago. But the Fed news was released from a lock-up room which prevents transmission of any information to the outside world. Also, if it was a timed news release, the data was released before 2pm relative to Washington (when it's 2pm in Chicago,  it's actually 1:59:59.995 relative to Washington). Given that several large news organizations were recently caught clandestinely sending news early we think it's less likely they would do something so bold, so soon.

2. Leaked to Wall Street

The Fed news was leaked to, or known by, a large Wall Street Firm who made the decision to pre-program their trading machines in both New York and Chicago and wait until precisely 2pm when they would buy everything available. It is somewhat fascinating that they tried to be "honest" by waiting until 2pm, but not a thousandth of a second longer. What makes this a more likely explanation is this: we've found that news organizations providing timed release services aren't so good about synchronizing their master clock - and often release plus or minus 15 milliseconds from actual time. Their news machines in New York and Chicago still release the data at the exact same millisecond, but with the same drift in time as the master clock. That is, we'll see an immediate market reaction at say, 15 milliseconds before the official scheduled time, but in the same millisecond of time in both New York and Chicago. Historically, these news services have shown a time range of about 30 milliseconds (+/- 15ms), and since this event started within 1 millisecond, it means the odds favor a leak over a timed news service.

What also makes this the more likely conclusion is this: we know the Bureau of Labor Statistics has recently hardened access to their lock-up room, weeding out all but respected news organizations. So imagine a reporter for one of these news organizations who is tasked with distilling the Fed news into a simple message that machines could read in less than a millisecond and interpret to mean, "buy all the things now". It's unlikely that Wall Street would place so much responsibility on one news reporter. Unless that reporter was a skilled - perhaps, dare we say, incentivized - trader. We think it's unlikely that a respected news organization would tolerate this clandestine behavior. Too much like crooks sneaking around at night.
Regardless of which possibility is correct (it could even be a combination of the two), the Fed news was certainly present in trading centers in Chicago and New York before 2pm. The evidence is overwhelming. It is unknown how many people had access to this information - for a timed news release, it would have been at least an administrator, probably Q.A. and others. What we do know is the resulting explosion of trading just 1 thousandth of a second after 2pm, was unprecedented in the history of Fed news announcements, and much of that trading was based on information obtained before the set Federal Reserve Board release time.

Marc Faber: “Fed’s Neo-Keynesian Clowns… Are Holding The World Hostage”

There is nothing safe anymore, because the money-printing distorts all asset prices,” is the uncomfortable response Marc Faber gives to Thai TV during this interview when asked for investment ideas. Faber explains how we got here “massive money-printing and ZIRP creates a huge pool of liquidity that does not flow evenly,” as it washes from Nasdaq stocks to real estate to emerging markets and so on. Each time, “the bubble inflates and then is deflated as the capital (liquidity) floods out.” The Fed, based on the doubling of interest rates since they began QE3 “has lost control of the bond market,” Faber warns; adding that while he expects some “cosmetic tapering,” the Fed members and other neo-Keynesian clowns will react to a “weakening US and global economy,” and we will be a $150 billion QE by the end of next year, as the world is held hostage to US monetary policy.

The interview is interspersed with Thai translation but is well worth the time (starting at 1:25):

There is nothing safe anymore, because the money-printing distorts all asset prices,” is the uncomfortable response Marc Faber gives to Thai TV during this interview when asked for investment ideas. Faber explains how we got here “massive money-printing and ZIRP creates a huge pool of liquidity that does not flow evenly,” as it washes from Nasdaq stocks to real estate to emerging markets and so on. Each time, “the bubble inflates and then is deflated as the capital (liquidity) floods out.” The Fed, based on the doubling of interest rates since they began QE3 “has lost control of the bond market,” Faber warns; adding that while he expects some “cosmetic tapering,” the Fed members and other neo-Keynesian clowns will react to a “weakening US and global economy,” and we will be a $150 billion QE by the end of next year, as the world is held hostage to US monetary policy.

The interview is interspersed with Thai translation but is well worth the time (starting at 1:25):
Parts 2 & 3 of interview:

http://www.youtube.com/watch?v=2-gv8hDmid4&t=0m43s (part 2)

There is nothing safe anymore, because the money-printing distorts all asset prices,” is the uncomfortable response Marc Faber gives to Thai TV during this interview when asked for investment ideas. Faber explains how we got here “massive money-printing and ZIRP creates a huge pool of liquidity that does not flow evenly,” as it washes from Nasdaq stocks to real estate to emerging markets and so on. Each time, “the bubble inflates and then is deflated as the capital (liquidity) floods out.” The Fed, based on the doubling of interest rates since they began QE3 “has lost control of the bond market,” Faber warns; adding that while he expects some “cosmetic tapering,” the Fed members and other neo-Keynesian clowns will react to a “weakening US and global economy,” and we will be a $150 billion QE by the end of next year, as the world is held hostage to US monetary policy.

The interview is interspersed with Thai translation but is well worth the time (starting at 1:25):
Parts 2 & 3 of interview:
http://www.youtube.com/watch?v=2-gv8hDmid4&t=0m43s (part 2)
http://www.youtube.com/watch?v=qpnT_OWLmXU&t=0m32s (part 3)
Parts 2 and 3 of this Marc Faber interview, continuing the above, are also on YT
Great to see Marc talking in Thai with his hosts … typical European, learns the local language
Amazing Marc Faber memory for dates, like nov 28 2008 bottom in Thai stock market …
Highlights from parts 2 and 3:
Part 2
Marc Faber talks about need to diversify – real estate, corp bonds, cash, gold, equities
You don’t have excess credit problem in Thailand but 100-200 trillion unfunded liabilities in US are the real US debt condition
Marc trusts local Thai banks, relatively solid, but not international banks … “We saw what happened in Cyprus. The whole world is like Cyprus, even worse.”
Crash / reset will arrive, doesn’t know when, within next 5 years most likely, but when it comes gov’t will have no money to assist like before
Part 3
10x real estate appreciation in some parts of Thailand, 3x or so around Marc’s home base of Chiang Mai
20% of assets should be in physical gold, and not paper gold
Thai safe deposit box great, but do not keep gold inside America in any form
Don’t speculate in gold, just buy some every month
He is a friend of Eric Sprott, Marc is on his board
Understands the suspicion there is no gold Fort Knox … talked about German gold, 5 trips in a cargo 747 would return it, plenty of cargo planes available, yet it will take 8 years to get that gold
Yet Marc doubts gold price manipulation, acknowledges that China wants to intensely buy gold
Marc owns corporate bonds from Russia, Kazakhstan, India
Notes corporate bonds have an equity character, unlike gov’t bonds, which often move opposite from equities in downturns, but corporates tend to move in the same direction, tho not dropping as much
Re currency, Marc likes Malaysian ringgit, and Singapore dollar for longer term,
“Gold is a currency, the only honest currency”
Interviewers very current, raise with Marc the Jim Willie issue about the BRICS developing a global non-dollar system
Marc agrees, dollar has greatly diminished and is sinking … China now exports more to resource producers, than to the US … Generally countries starting to trade more with China than with America
Peak of American power and prosperity was late 1950s / 1960s
bank guy in Brussels

Prolonging Pain: Sanctions on Iran over nukes hurt most vulnerable

Quantitative Easing Worked For The Weimar Republic For A Little While Too

There is a reason why every fiat currency in the history of the world has eventually failed.  At some point, those issuing fiat currencies always find themselves giving in to the temptation to wildly print more money.  Sometimes, the motivation for doing this is good.  When an economy is really struggling, those that have been entrusted with the management of that economy can easily fall for the lie that things would be better if people just had “more money”.  Today, the Federal Reserve finds itself faced with a scenario that is very similar to what the Weimar Republic was facing nearly 100 years ago.  Like the Weimar Republic, the U.S. economy is also struggling and like the Weimar Republic, the U.S. government is absolutely drowning in debt.  Unfortunately, the Federal Reserve has decided to adopt the same solution that the Weimar Republic chose.  The Federal Reserve is recklessly printing money out of thin air, and in the short-term some positive things have come out of it.  But quantitative easing worked for the Weimar Republic for a little while too.  At first, more money caused economic activity to increase and unemployment was low.  But all of that money printing destroyed faith in German currency and in the German financial system and ultimately Germany experienced an economic meltdown that the world is still talking about today.  This is the path that the Federal Reserve is taking America down, but most Americans have absolutely no idea what is happening.
It is really easy to start printing money, but it is incredibly hard to stop.  Like any addict, the Fed is promising that they can quit at any time, but this month they refused to even start tapering their money printing a little bit.  The behavior of the Fed is so shameful that even CNBC is comparing it to a drug addict at this point…
The danger with addictions is they tend to become increasingly compulsive. That might be one moral of this week’s events.
A few days ago, expectations were sky-high that the Federal Reserve was about to reduce its current $85 billion monthly bond purchases. But then the Fed blinked, partly because it is worried that markets have already over-reacted to the mere thought of a policy shift.
Faced with a choice of curbing the addiction or providing more hits of the QE drug, in other words, it chose the latter.
So why won’t the Fed cut back on the reckless money printing?
Well, as Peter Schiff recently noted, Fed officials seem to be convinced that any “tapering” could result in the bursting of the massive financial bubbles that they have created…
The Fed understands, as the market seems not to, that the current “recovery” could not survive without continuation of massive monetary stimulus. Mainstream economists have mistaken the symptoms of the Fed’s monetary expansion, most notably rising stock and real estate prices, as signs of real and sustainable growth. But the current asset price bubbles have nothing to do with the real economy. To the contrary, they are setting up for a painful correction that will likely be worse than the one we experienced five years ago.
As I have written about previously, the Federal Reserve is usually very careful not to do anything which will hurt the short-term interests of the financial markets and the big banks.
But at this point the Fed is caught in a trap.  If it continues to pump, the financial bubbles that it has created will get even worse.  If it stops, those bubbles will burst.  But as Doug Kass noted recently, it is inevitable that these financial bubbles will burst at some point one way or another…
“Getting in was easy. Getting out—not so much. The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up. The longer this continues the bigger the inevitable burst.”
In essence, we can have disaster now or disaster later.
But most Americans don’t care much about what is happening on Wall Street.  They just want economic conditions to get better for them and for those around them.  And to this day, the mainstream media continues to sell quantitative easing to the American people as an “economic stimulus” program by the Federal Reserve.
So has quantitative easing actually been good for the U.S. economy?
Not really.
For example, while the Fed has been recklessly printing money out of thin air, household incomes have actually been going down for five years in a row
Quantitative Easing Worked For The Weimar Republic For A Little While Too Real Median Household Income 425x255
What about employment?
Don’t more Americans have jobs now?
Actually, that is not the case at all.  Posted below is a chart that shows how the percentage of working age Americans with a job has changed since the year 2000.  As you can see, the employment to population ratio fell from about 63 percent before the last recession down to underneath 59 percent at the end of 2009 and it has stayed there ever since
Quantitative Easing Worked For The Weimar Republic For A Little While Too Employment Population Ratio 20131 425x255
So where is the “employment recovery”?
Can you point it out to me?  Because I have been staring at this chart for a long time and I still can’t find it.
So if quantitative easing has not been good for average Americans, who has it been good for?
The wealthy, of course.
Just check out what billionaire hedge fund manager Stanley Druckenmiller told CNBC about quantitative easing the other day…
This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.
“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”
Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”
“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”
Sadly, Druckenmiller is exactly correct.
Since the end of the last recession, the Dow has been on an unprecedented tear…
Quantitative Easing Worked For The Weimar Republic For A Little While Too Dow Jones Industrial Average 425x255
Of course these stock prices have nothing to do with economic reality at this point, but for the moment those that are making giant piles of cash on Wall Street don’t really care.
Sadly, what very few people seem to understand is that what the Fed is doing is going to absolutely destroy confidence in our currency and in our financial system in the long-term.  Yeah, many investors have been raking in huge gobs of cash right now, but in the long run this is going to be bad for everybody.
We have now entered a money printing spiral from which there is no easy exit.  According to Graham Summers, the Fed has “crossed the Rubicon” and we are now “in the End Game”…
If tapering even $10-15 billion per month from $85 billion month QE programs would damage the economy, then we’re all up you know what creek without a paddle.
Put it this way… here we are, five years after 2008, and the Fed is stating point blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re already in the End Game. Period.
Most Americans don’t really understand what quantitative easing is, and most don’t really try to understand it because “quantitative easing” sounds very complicated.
But it really isn’t that complicated.
The Federal Reserve is creating gigantic mountains of money out of thin air every month, and the Fed is using all of that newly created money to buy government debt and mortgage-backed securities.  Over the past several years, the value of the financial securities that the Fed has accumulated is greater than the total amount of publicly held debt that the U.S. government accumulated from the presidency of George Washington though the end of the presidency of Bill Clinton
The same day that the Federal Reserve’s Federal Open Market Committee announced last week that the Fed would continue to buy $40 billion in mortgage-backed securities (MBS) and $45 billion in U.S. Treasury securities per month, the Fed also released its latest weekly accounting sheet indicating that it had already accumulated more Treasuries and MBS than the total value of the publicly held U.S. government debt amassed by all U.S. presidents from George Washington though Bill Clinton.
To say that this is a desperate move by the Fed would be a massive understatement.  We have never seen anything like this before in U.S. history.
And look at what all of this wild money printing has done to our money supply…
Quantitative Easing Worked For The Weimar Republic For A Little While Too M1 Money Supply 425x255
In many ways, the chart above is reminiscent of what the Weimar Republic did during the early years of their hyperinflationary spiral…
Quantitative Easing Worked For The Weimar Republic For A Little While Too Hyperinflation Weimar Republic 425x531
Just like the Weimar Republic, our money supply is beginning to grow at an exponential pace.
So far, complete and total disaster has not struck, so most people think that everything must be okay.
But it is not.
In a previous article, I included an outstanding illustration from Simon Black that I think would be extremely helpful here as well…
Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room.
Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry.
But let’s assume that it’s an exponential leak.
At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.
By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.
For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes.
Are you starting to get the picture?
What the Federal Reserve is doing is systematically destroying the U.S. dollar, and the rest of the world is starting to take notice.
  • A d v e r t i s e m e n t
Why should they continue to lend us trillions of dollars at super low interest rates when we are exploding the size of our money supply?
It is simply not rational for other nations to continue to lend us money at less than 3 percent a year when the real rate of inflation is somewhere around 8 to 10 percent and reckless money printing by the Fed threatens to greatly accelerate the devaluation of our currency.
When QE first started, the added demand for U.S. government debt by the Federal Reserve helped drive long-term interest rates down to record low levels.
But in the long-term, the only rational response by all other buyers of U.S. government debt will be to demand a much higher rate of return because of the rapid devaluation of U.S. currency.
So QE drives down long-term interest rates in the short-term, but in the long-term the only rational direction for long-term interest rates to go is much, much higher and in recent months we have already started to see this.
The only way that the Fed can stop this is by increasing the amount of quantitative easing.
Right now, the Fed is buying roughly half a trillion dollars worth of U.S. Treasuries a year, but the U.S. government issues close to a trillion dollars of new debt and must roll over about 3 trillion dollars of existing debt each year.
If the Federal Reserve eventually decides to buy all of the debt, then interest rates won’t be a major problem.  But if the Fed goes that far our financial system would be regarded as a total joke by the remainder of the globe and we would reach hyperinflation much more rapidly.
If the Federal Reserve stops buying debt completely, the financial bubbles that they have created will burst and we will rapidly be facing a financial crisis even worse than what we experienced back in 2008.
But almost whatever the Fed does at this point, the rest of the world will probably continue to start to move away from the U.S. dollar as the de facto reserve currency of the planet.  This move is just beginning, but it is going to have major implications for us in the years ahead.  This is a topic that I will be addressing extensively in future articles.
Most of the debate about quantitative easing has focused on the impact that it will have on the U.S. economy in the short-term.
That is a huge mistake.
Of much greatest importance is what quantitative easing means for the long-term.
The rest of the world is losing confidence in the U.S. dollar and in U.S. debt because of the reckless money printing that the Fed has been doing.
But we desperately need the rest of the world to use “the petrodollar” and to lend us the money that we need to pay our bills.
As the rest of the planet starts to reject the U.S. dollar and starts to demand a much higher rate of return to lend us money, the U.S. economy is going to experience a tremendous amount of pain.
It is hard to put into words how foolish the Federal Reserve has been.  The Fed is systematically destroying what was once the strongest financial system in the world, and in the end we are all going to pay the price.

BREAKING! $3.39 Trillion!! Fed Owns More Treasuries and MBSs Than All Debt Amassed From Washington Through Clinton

The same day that the Federal Reserve’s Federal Open Market Committee announced last week that the Fed would continue to buy $40 billion in mortgage-backed securities (MBSs) and $45 billion in U.S. Treasury securities per month, the Fed also released its latest weekly accounting sheet indicating that it had already accumulated more Treasuries and MBSs than the total value of the publicly held U.S. government debt amassed by all U.S. presidents from George Washington though Bill Clinton.
$3.39T Quantitative Explosion: Fed Owns More Treasuries and MBSs Than Publicly Held Debt Amassed From Washington Through Clinton

All Federal Reserve Banks – Total Assets, Eliminations from Consolidation (WALCL)
  • 2013-09-18: 3,722,192 Millions of Dollars   Hide Last 5 Observations
2013-09-11: 3,662,035
2013-09-04: 3,654,182
2013-08-28: 3,644,456
2013-08-21: 3,645,668
Weekly, As of Wednesday, Not Seasonally Adjusted, Updated: 2013-09-19 3:52 PM CDT

Insiders and Hedge Funds Dumping Monsanto Stock

Company insiders and institutional investors alike have been dumping shares of the Monsanto Company in recent months.
While consumers have concerns with Monsanto’s business due to its genetically modified organism (GMO) products, investors are worried about its business practices and stock performance.
“People increasingly don’t like Monsanto, and that’s a direct result of all the growing realizations about the dangers of GMOs, [and] Monsanto’s predatory business practices,” said Mike Adams, editor of Natural News.
Quarterly Earnings
For its 2013 fiscal third quarter the St. Louis-based Monsanto reported better than expected earnings due to Latin American corn business and seeds business in the United States.
Net sales were at $4.3 billion, up by 1 percent from the 2012 third quarter. Net income for the quarter decreased by 3 percent and operating expenses increased because of a 5 percent increase in research and development Costs.
On the positive side, Monsanto reports that the demand for the company’s products has increased, but it is lacking acreage to meet that demand.
Insiders Dumping Shares
The company’s stock was somehow volatile during the year, trading both above and below $100 per share in 2013. However, over the last three months it has gained 2.5 percent, trailing the benchmark S&P 500 Index which had increased 7.7 percent during the same period.
A significant number of Monsanto shares, including insider shares, were traded, with 198,550 shares being traded over the last three months and 1.3 million during the past year. However, only 22,023 shares were bought while 176,527 were sold during the past three months. Over the past year, 1.1 million shares were sold, while only 207,305 shares were bought.
Nasdaq disclosed that 19 officers sold the company’s shares during the past three months and 59 company insiders disposed of 128 shares over the past year.
All insider trading were from execution of options. The officers held shares at a fixed price and sold the shares at the market price, making substantial profits.
In the stock market, the holder of an option may sell a certain amount of securities at a given price and at a given time. The stock transaction happens on completion and not when the option is distributed.
“Over the last half-year time period, Monsanto Company has seen zero unique insiders purchasing, and 10 insider sales,” according to Insider Monkey, a website which tracks insider activity.
One of the major Monsanto insider sellers was Hugh Grant, Chairman and CEO. He sold a total of 487,420 shares between January 2012 and July 2013, profiting greatly by exercising his options.
Investors Unload Monsanto Stock
Besides officers of Monsanto, some funds have distanced themselves from the company ahead of the third quarter investor reporting, given the recent negative coverage of GMO foods and their health risks.
The number of hedge funds holding long positions decreased 6 percent during the second quarter, with 59 funds retaining their investments in Monsanto, according to Insider Monkey.
According to Natural News, Vinik Asset Management and Point State Capital reduced their positions in Monsanto by a combined total of about $156 million.
A few analysts recommend that investors, especially hedge funds, reduce their exposure to Monsanto, as well as to funds that hold a significant number of stocks in the company, such as Lone Pine Capital and Blue Ridge Capital.

Most Americans against defunding Obamacare: Survey

A solid majority of Americans oppose defunding the new health care law if it means shutting down the government and defaulting on debt.
The CNBC All-America Economic Survey of 800 people across the country conducted by Hart-McInturff, finds that, in general, Americans oppose defunding Obamacare by a plurality of 44 percent to 38 percent.
Opposition to defunding increases sharply when the issue of shutting down the government and defaulting is included. In that case, Americans oppose defunding 59 percent to 19 percent, with 18 percent of respondents unsure. The final 4 percent is a group of people who want to defund Obamacare, but become unsure when asked if they still hold that view if it means shutting down the government.
The Republican-party-led House voted 230-189 on Friday to adopt a short-term government spending bill that would eliminate all funding for the new health care law. The measure could lead to a government shutdown in less than two weeks. The poll, which has a margin of error of plus or minus 3.4 percent, was conducted Monday through Thursday of last week. Full results will be released this Thursday.
(Read more: Obamacare's biggest test: How many enroll? )
In general, men are roughly split on the issue, with 43 percent supporting defunding, 42 percent opposing and 15 percent unsure. But when the issue of a government shutdown and default is included their support declines: 56 percent oppose defunding and only 14 percent solidly favor the measure.
Women are more firmly opposed to defunding the new health care law under any circumstances, with 47 percent opposed, 33 percent in favor and 20 percent unsure.
A 51 percent majority of Republicans generally support defunding with 36 percent opposed and 13 percent unsure. However, when including the issue of a government shutdown and default, the picture changes: 48 percent of Republicans oppose defunding Obamacare, while 36 percent support it.
However, a 54 percent majority of Republicans who also identify themselves as Tea Party supporters want the new health care law defunded even if it means a government shutdown -- the only demographic measured in the poll with such a majority.
Republicans who do not identify themselves as Tea Party supporters hold views closer to those of Democrats than to Republicans that do identify themselves as Tea Party supporters: They oppose defunding Obamacare 44 percent to 36 percent with 20 percent unsure.

Independents are more troubled by the prospect of defunding Obamacare and shutting down the government than the broader population. In general, they oppose defunding by a slight plurality of 44 percent to 40 percent. However, when the issue of shutting down the government is included, opposition to the measure swells to 65 percent, while support drops to just 14 percent.

The Insider’s Economic Dictionary: F Is for FIRE Sector

By Michael Hudson
This piece first appeared at the website of University of Missouri, Kansas City economics professor Michael Hudson. Read the rest of the Insider’s Economic Dictionary here.
Factoid: A hypothesis, rumor or story so consonant with peoples’ preconceptions that it is accepted as a fact or working assumption, even though it often is made up a priori. Among the most notorious examples are the ideas of diminishing returns, equilibrium, that privatized ownership is inherently more efficient than public management, and that trickle-down economics works. (See Junk Science.)
Factor of production: Labor and capital are the two basic factors of production, creating value. Many classical economists also treated land as a factor of production, but it is rather a property right. It is needed for production, like air, but as a legal right it becomes an institutional opportunity to charge rent, via a legal claim permitting landlords to levy a toll for access to a given site. In this respect air, water, technology, patents and similar inputs are not strictly speaking factors of production, which involve costs that ultimately are reducible to labor inputs. Interest-bearing debt claims hardly can be treated as a payment to a “factor of production,” as if they were an inherent part of the production process.
Fallacy, economic: Economic fallacies are often generated by language coinage in the political arena and the popular press to be carried forward into subsequent eras. For example, S. Dana Horton pointed out in his Silver and Gold (1895) that “The fallacies that lurk in words are the quicksands of theory; and as the conduct of nations is built on theory, the correction of word-fallacies is the never-ending labor of Science. … the party in this country, one of whose great aims was, at one time, the perpetuation of slavery, owed much of its popular vote to the name Democracy.” Like so many public relations and lobbying efforts in the present era, seemingly bland economic and business characterizations can stultify generations of economic thought.
Falling rate of profit: In Marxist economics, profits were expected to decline as production became more capital intensive, leading depreciation (a return of the capital invested, in contrast to a return on capital) to rise as a proportion of overall cash flow. Strictly speaking, this did not mean that profit rates as such would fall, merely that the role of capital recovery would rise.? Under finance capitalism, profits fall because of the rising debt-intensity of production as more corporate cash flow (see ebitda) is paid out as interest, leaving less available as profit.
Federal Reserve System: The U.S. central bank, established in 1914 (seven years after the 1907 financial panic) to decentralize monetary authority from the U.S. Treasury to the commercial banking system and regional business, in conjunction with providing more flexible credit via the banking system. In 1951 the Fed reached an accord with the Treasury regarding the conflict of interest in which the government sought to borrow at the lowest possible interest rate, while banks wanted high rates, ostensibly to fight inflation. But as the Gibson Paradox illustrates, trying to fight inflation by raising interest rates often tend to aggravate it. Fed policy along these lines led to stagflation by the end of the 1970s under Fed Chairman Paul Volcker, while the reversal of this policy, flooding the economy with low-interest credit under Alan Greenspan, fueled asset-price inflation after 1992, much as had been the case in the 1920s under Fed Chairman Benjamin Strong.
Fictitious costs: Costs over and above labor and capital that are factored into pricing, especially of regulated monopolies such as railroads in 19th-century America. The most notorious costs are interest charges (which are treated as a cost of doing business rather than as a business decision to leverage one’s own investment), stock options and bonds issued to financial and political insiders, as well as the management and underwriting fees charged by money managers and investment bankers. Neoliberal reforms greatly expand opportunities for such pseudo-costs to proliferate.
Fictitious costs are book-keeping costs not economically necessary for production to take place. As such, they are costs accruing to fictitious capital, most notoriously in the form of “watered stocks” that railroad barons and other captains of industry or emperors of finance issued to themselves around the turn of the 20th century. Such costs are institutional in character, associated with the transition from industrial capitalism to finance capitalism.
Fiduciary responsibility: Money managers look at their clients in much the same way a lawyer does: “How much can I make off this person without formally breaking the law?” The answer usually depends on how much the client has, and how high a commission the money manager can make. The norm among many insurance-company managers and brokerage houses is to unload bad securities onto the client (as companies such as H&R Block and others did with Enron stock), or to “churn their accounts” to generate trading fees. Even quicker money has been made recently by negotiating a complex derivative straddle almost guaranteed to wipe out the hapless risk-taker. The objective of money managers thus is to minimize legal restraints on fiduciary irresponsibility, euphemized as “responsibility.” The post-Enron prosecutions of New York Attorney General Eliot Spitzer provide a compendium of stratagems that money managers, banks, insurance companies and stock brokers have been able to get away with by “stretching the envelope” of fiduciary responsibility.
More far-sighted money managers of long-term funds have no way of knowing how much money their clients may accumulate over their working life, but are satisfied simply to take a commission on whatever is invested – say, 2%. This is as much as most stocks yield in dividends these days. The money manager’s objective in agreeing to this fee is thus to obtain all the earnings on the current return their clients receive.
The biggest bonanza of all would be to gain responsibility for managing the Social Security system’s compulsory saving. Its privatization would steer funds into the stock market, producing financial gains to savers and higher commissions for money managers. A rise in price/earnings ratios would increase proportion of current income absorbed in management commissions. If the manager guesses wrong and stock prices decline, the manager’s commission will be paid in any cases. Only the losses belong fully to their clients. (See Bubble, Labor Capitalism.)
Finance Capitalism: A term coined by Bruno Hilferding to signify the evolution of industrial capitalism into a system dominated by large financial institutions rather than industrial firms.
FIRE sector: An acronym for Finance, Insurance and Real Estate, combined in the national income accounts to reflect the symbiosis between these sectors. See Rentier.
Fiscal surplus: A deficit for the economy at large, paid to the government as taxes and user-fees. The monetarist idea that a fiscal surplus can be “healthy” overlooks the deflationary effect that such surpluses have on economies, whose major source of monetary growth typically consists of the economy’s surplus with the government, that is, a Keynesian-type fiscal deficit. (See Chartalism, Debt Deflation, Sinking Fund, State Theory of Money and Treasury.)
Forced saving: In Communist economies, the deduction of wage credits to build up accounts to prepay for consumer goods that will be delivered at a future time. In the United States, wage withholding to prepay for public Social Security and medical insurance, as well as for pensions. (See Labor Capitalism, Pension-fund Capitalism, Savings and Tax Shift.)
Fragility: Financial markets become fragile as the volume of debt service expands at compound interest to a point where it exceeds the ability to pay. The term was coined by Hyman Minsky, who explained that financial markets tended to turn into Ponzi schemes, the stage of the credit cycle in which debtors borrowed from the creditors the interest payments falling due. The effect was to add the interest that fell due onto the debt balance. This is how Latin American countries financed their foreign debt until the system imploded in 1982 with Mexico’s insolvency. Debt leveraging collapses at the point where income and new loans are unable to cover the interest charges, resulting in a break in the chain of payments. (See Debt Deflation.)
Free lunch: Most business is now all about seeking a free lunch, that is, payment for goods or services that have no counterpart in actual costs of producing them. (See Economic Rent and Parasitism.) In order to deter public regulation against this practice, its recipients adopt the cloak of invisibility provided by Milton Friedman’s claim that there is no such thing as a free lunch. His doctrine promotes free markets (q.v.), which open the way for rent-seekers to obtain a free lunch at society’s expense. (See Chicago School.)
Free markets: Markets dominated by the financial and propertied classes whose objective is to secure all discretionary income for themselves, ultimately by asset stripping, leaving the economy without freedom of choice except to pay the rentier class. Hence, a market in which choice is minimized, by stripping away all government protection against monopoly and predatory behavior. (See Free Lunch, Kleptocrats, Military Junta and Race to the Bottom.)
Fundamentalist: If one is going to invent an ideology, the line of least resistance is to claim that one is going back to its origins to restore its “fundamentals.” Christian, fundamentalists supporting the rich against the poor have expurgated the Bible’s economic message, replacing Biblical sanctions against usury and economic selfishness with a diversionary focus on sexual intolerance. (See Crusade.)
chelsea.parker.photo (CC BY-ND 2.0)
Copyright: TruthDig

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Should Poor People Eat? Let’s Hear From Both Sides!

OK, so maybe this headline is slightly unfair, but it seemed like a good way to capture the essence of a USA Today story (9/18/13) about the fight over food stamps.
As you may already know, House Republicans are looking to cut some $40 billion from the SNAP program, otherwise known as food stamps, over the next 10 years.
It’s not unusual for politicians to disagree; one would hope that journalism might intervene on the side of the facts. But here’s how USA Today‘s Paul Singer presented the issue:
The cost of the federal food stamp program has exploded over the past decade, according to the Department of Agriculture. In 2001, the program served 17 million people at a cost of just over $15 billion. By 2012, there were 46 million people enrolled at a cost of a little under $75 billion.
Democrats say the program has grown because the economy tanked; Republicans argue much of the expansion is attributed to states giving benefits to people who do not qualify.
Well OK then–either there was a massive economic collapse, or people are cheating the government. Who’s to say which side is right?
The paper gets quotes from lawmakers–Republican Eric Cantor’s office explains they aim to “restore the integrity of this safety-net program,” while Massachusetts Democrat Jim McGovern says the idea that people are cheating in order to get food stamps instead of working is “a lie.”
Again, who’s right? That would seem to be a rather important matter. Luckily there’s plenty of evidence available. Alan Pyke of ThinkProgress recently noted (9/6/13) that the latest report from the Department of Agriculture’s inspector general found no problems with “high-dollar overpayments” in the SNAP program. And according to the Center on Budget & Policy Priorities (3/28/13), SNAP “has one of the most rigorous payment error measurement systems of any public benefit program,” with a very small amount of funds going to overpayment (about 2 percent of the total cost of the program). And the group’s research also shows that increased enrollment in SNAP is historically correlated with economic downturns. This is what caused the size of the program to spike in 2008 and 2009; the rate of growth has slowed considerably since then.
So there does not seem to be much of a problem with “waste”–which is the core argument that one side of this debate is making (unless their real aim is to simply reduce the amount of money poorer people get to buy food). But USA Today doesn’t seem interested in arriving at this conclusion, preferring to take the line they use in the subhead–that these cuts “could cut waste or hurt poor, depending on viewpoint.”
That’s balance, of course–and it’s also very misleading.
Copyright: Truth Out