Thursday, September 17, 2015

CENSUS: 46.7 Million In Poverty


(WASHINGTON)  The wallets of America’s middle class and poorest aren’t seeing any extra money, the U.S. Census reported Wednesday, a financial stagnation experts say may be fueling political dissent this campaign season.
The Census Bureau, in its annual look at poverty and income in the United States, said both the country’s median income and poverty rate were statistically unchanged in 2014 from the previous year.
Median income — the point where half of the households have income below it and half have income above it — showed no statistically significant change, despite the small drop to $53,700 in 2014 from 2013’s $54,500. Median income is a broad measure of the economic health of the middle class.
The poverty rate also showed no statistically significant change. In 2014, the poverty rate in the United States was 14.8 percent, which was the same as in 2013. The poverty rate had dropped in 2013 from 15 percent in 2012, the first such drop since 2006.
There were 46.7 million people in poverty, which is also a statistically similar number from the previous four years. In 2014, a family with two adults and two children was categorized as in poverty if their income was less than $24,008.
Census officials said they weren’t surprised by the flat numbers. “It’s not unusual for it not to go down two years in a row,” said Trudi J. Renwick, chief of the Poverty Statistics Branch in the bureau’s Housing and Household Economic Statistics Division.
The White House focused on the fact that some of the numbers increased, though census officials noted the change was not significant. “Real median income for family households rose $408 in 2014, while real median income for non-family households also rose but overall median household income declined,” administration officials said in a news release.
Republicans argued that the stagnating numbers reveal a need for change to the country’s welfare programs.
“Our current approach to fighting poverty, though well-intended, is failing too many Americans,” said House Ways and Means Committee Chairman Paul Ryan, a Wisconsin Republican. “This disappointing data, five years into an economic recovery, underscores the need for a new effort to modernize our country’s safety net programs.”
The latest numbers will feed into the 2016 political debate, with both parties trying to position themselves as advocates for the middle class.
The numbers may explain some of the political furor going on in the country, said Lawrence Mishel, president and CEO of the liberal Economic Policy Institute. “Anyone wondering why people in this country are feeling so ornery need look no further than this report,” Mishel said. “Wages have been broadly stagnant for a dozen years and median household income peaked in 1999.”
The Census report also showed that the number of uninsured Americans dropped in 2014, as the big coverage expansion in President Barack Obama’s law took effect. The share of the population uninsured the whole year was 10.4 percent, or 33 million people. When compared to 2013, nearly 9 million people gained coverage. A recent government survey that includes data from the first three months of this year shows that the uninsured rate continued to fall in 2015.
The report also said:
— Asian households had the highest median income in the United States at $74,300 in 2014. The median income for non-Hispanic white households was $60,300, for black households $35,400 and Hispanic households $42,500. The median income for white households decreased by 1.7 percent between 2013 and 2014, while there was no statistically significant change for black, Asian, and Hispanic households.
— The 2014 median earning of men was $50,400, while the median earning for women was $39,600. Neither number was statistically different from 2013.
— The median income of households maintained by the foreign-born increased 4.3 percent while the median income of households maintained by a native-born person declined 2.3 percent. The income of naturalized citizens and noncitizens were not statistically different from the year before.
— The number of men and women working full-time, year-round jobs increased by 1.2 million and 1.6 million, respectively, between 2013 and 2014. Census officials said the change suggested a shift from part-time, part-year work status to full-time, year-round employment.

Robert Shiller: Signs showing that we’re in a bubble

CNBC, Released on 9/15/15
“Earnings have grown so rapidly, and history suggests that earnings don’t usually keep growing like that.”
“People are forgetting long-term thinking.”

It’s Official:The American Middle Class Has Been Set Back A Quarter Century

economic collapse

(Matt Phillips)  More than six years after the end of the Great Recession, America’s middle class is still waiting for its recovery.
Inflation-adjusted US median household incomes suffered another flat year in 2014. In newly-released data, the Census Bureau pegged real US median household incomes at $53,657, statistically flat from the previous year. (The median income is the exact midpoint of US income distribution—half of households in the nation have incomes that are higher, and half have incomes that are lower.)
Over the long term, the picture is pretty clear. Effectively, inflation-adjusted US median household incomes are still roughly where they were in 1989, when they hit $53,306. That means the American middle class hasn’t made durable progress for 25 years ago. And median household incomes are still more than 6.5% below the peak back in 2007, when they were $57,357.
It should come as little surprise that household incomes have stagnated in recent years. After all, nominal wage gains this time around have been downright puny by the standards of other recent economic recoveries.
The stubborn refusal of household incomes to rise remains a frustrating hangover from the Great Recession, the worst US economic downturn since the Great Depression. But the data shows American standards of living began falling long before Lehman Brothers went bust seven years ago this week. Aside from a brief increase during the worst of the housing boom that preceded the Great Recession, US household incomes have been on a downward trend for around 15 years.
As per usual, economists have a number of different explanations. Some, such as MIT’s David Autor, point to increased polarization of the US labor market, where so-called “middle-skill” jobs—such as sales, office and administrative and factory workers—are increasingly being replaced by automated technologies. Such jobs represented roughly 60% of US employment back in 1979. By 2007 these jobs only amounted to 49%. By 2012, they were a mere 46%, Autor wrote in a 2012 paper. Unsurprisingly, wage growth for these types of jobs has been much slower than it has been for professional, technical and managerial jobs.
Increasingly, researchers are also looking at trade as a culprit. Trade—while beneficial to consumers buying cheaper goods—has hammered blue-collar wages in the US. An influential paper published last year found that workers who were forced to switch from manufacturing to lower-skill jobs between 1983 and 2002 saw real wage declines of anywhere from 12 to 17 percentage points. Some six million US manufacturing jobs were lost over that period. An update to that paper, which pulls results forward to 2008 finds an additional two million lost manufacturing jobs.
In other words, the benefits of trade are unevenly spread. Consumers with safe jobs win by getting access to cheaper products. Workers who compete with lower-cost foreign factory workers lose their jobs at the plant and have to take more fragile, lower-paid positions.
But there’s one class of American workers who seem blissfully unaware of the deleterious aspects of trade: Politicians. Democrats and Republicans have found precious little to agree on in recent years. But free trade is one of the things they seem to be able to get together on.
And there’s probably a good reason for that: They usually don’t spend their time with the blue collar crowd. (Reports have put the percentage of millionaires in Congress at more than 50%.)

The Dirty Secret About Money that is Finally Being Exposed to the Masses

Phillip J. Watt, Contributor
Waking Times
Don’t you think it’s sad that so many people suffer from poverty, homelessness, unemployment, addiction and socioeconomic disadvantage in general? What about the fact that the majority of us haven’t found real peace in life because we’re all fighting to survive in a world which actually has more than enough resources for everybody? We find it sad, especially because all of these issues are either created or amplified by the ‘economic’ and ‘social’ systems that we have designed for the people of earth.
First, we need to change the way that we economize our global society because the suffering it causes is evidently pandemic, especially the boom/bust cycles that screw the livelihoods of the people whilst the rich get richer at everyone else’s expense. Simply, this transformation is fundamental to the future health, prosperity and vitality of our people. To evolve it will no doubt be a challenging and complex process, but that needn’t stop us; we are now at the ideal stage to deeply consider the ways we could collectively move forward.

The Purpose

This article is designed to amplify the collective awareness of a ‘private‘ central banking system that works for the 0.1% but doesn’t work for the people. Governments and citizens-of-earth alike need to transparently engage in an honest discussion about not just the removal of this system, but also the potential models we could implement to improve the global economy for our future.
Of course there will be disagreements on which way we should progress, but that’s not the point. There are so many people who are already aware of this necessity and who support different models and methodologies, so instead of this article being a ‘this way or the highway’ approach, its fundamental goal is to get people to join forces, as well as help more of us to be aware of and supportive towards the need for this massive change.
The harsh truth is that we have arrived at the doorstep of the next Global Financial Crisis. As it unfolds, collectively we will be unable to hide from the immense financial problems that plague us, including our enslavement to debt. It will no doubt shake and wake many from their slumber because of the impacts it will have on their own lives. Yet it’s not all doom and gloom; this might just be a blessing in disguise because it is an opportunity for the masses to join the awakening community and participate in the discussion on how we move forward both in the short and long-term future.

The Dirty Secret about Money

Ask yourself this question: did you know that governments can never run out of money? Don’t stress, not many people do. The truth is we operate under a fiat system where money is no longer backed by gold, so governments can create as much money as they want and direct it according to the economic and social needs of their nation.
No deficit. No surplus.
This is only possible of course if each individual country removes the ‘private’ central bank that controls the money of their nation, as well as stops selling their debt (bonds) to other private and foreign stakeholders. Simply, each government can take back the power to manage their countries money and remove the central banking system which is run by private families that make their living off governments (the tax system) and other banking institutions.
If you think this all sounds insane, you’re right. Why don’t governments just create the money themselves so they don’t have to rely on a tax system, as well as pay interest to rich families? The answer is that the so-called elite have their tentacles spread right through society, including the big multinational corporations that ‘purchase’ political campaigns and therefore government policy. They’re controlling our money and our minds.
Finally, the dirty secret about money is making its way to the masses.
There are alternative economic models already designed by legitimate economists which would effect this change to the way money is created. Steve Keen, an Aussie economist who works at Kingston University in London, is one of them. He has created a system called Debt Deflation, which also includes Quantitative Easing for the people, instead of for the finance and banking industry. Another alternative model is called Modern Monetary Theory (MMT), which is supported by Bill Mitchell from the University of Newcastle. There are many economists all over the world that also support the implementation of this system, which means the creation of community-based, publicly-operated central banks that fund all the essential services a society needs.
There are of course longer term solutions too, which I covered in a previous article. Here is an excerpt:
There are several approaches to transforming our social system to one in which everybody is cared for and nobody slips through the safety net. One is Ubuntu and Contributionism, whilst another is the Resource Based Economy. The tireless work carried out by Jacque Fresco and The Venus Project, as well as Peter Joseph and the Zeitgeist Movement, have illustrated the logic and methodology to undertake a transition to an economy where all resources and services are provided for free and each individual is inspired and encouraged to contribute their innate strengths and acquired skills for the benefit of their community.

The Result

Can you see the implications of this systemic revolution? Can you see the positive impacts if we changed how money is created for society? There would always be enough cash to create jobs in the public sector when the private sector slumps, virtually creating full employment. Once it rebounds, jobs could be transferred back. In addition, a living wage could be implemented to help combat poverty and other socioeconomic disadvantage. This is so revolutionary that we could actually start dealing with these stubborn issues that plague our so-called modern society.
Education would also be provided for free. All the infrastructure that a nation needs could be built. The energy industry could be transitioned into renewable and footprint-free production. Food could be locally organised in a healthy and community-friendly way. The possibilities are endless.
Very few people are talking about this. Why? This is partly because the mainstream media, which is either owned or controlled by those who benefit from this system, will not give this option airtime or credibility. They allege to debunk it with dinosaur economists who are either paid or brainwashed to maintain the status quo. Meanwhile, the 99.9% continue to be treated like inferior beings and enslaved to debt.

Those in the awakening community know the truth though. The fact remains that this isn’t some fairy tale idea; we really could change the way that we economise our societies so that everybody benefits, not just the self-appointed ruling class. Furthermore, anyone who says “it will cause inflation” or some other Keynesian regurgitation, have no idea what they’re talking about, so it’s best to listen to the real experts on this one.

Final Thoughts

There was a US president that attempted to bring down this central banking tyranny. His name was John Fitzgerald Kennedy (JFK) and he was assassinated before he could implement it. Coincidence? Watch this documentary and decide for yourself.
The reality is that if you’re not angry after reading all of this, then you haven’t understood it. If you are, then good; you should be. We all should make this matter THE priority for ourselves and our future generations, especially now that the world has just begun the initial phase of another economic depression which will last the next several years. That is of course, unless we do something about it.
In addition, the other facts that we all should focus on is that each country has the innate power to highly regulate their finance sector and ensure criminal consequences for fraudulent banking, something that the only country that had the guts to do anything about was Iceland. This is also imperative to transforming our economy into a fair and just system for all.
In any case, we encourage each and every one of you to spend the time researching the following links. Before or afterwards, if you believe that we need transformations to our economic and monetary structures, then please sign the following petition and share within your network.
Ultimately, it is at this critical time in our history that we need to come together to intelligently and morally design an economy that works for everybody, our future generations and our natural systems.

World Holds Breath, Waits for “Death of the Dollar”

Wolf Richter,

Dismantling the dollar hegemony one yuan at a time.

I’ve been asked many times about the impending “death of the dollar.” I know some folks who expect the dang thing to die. They’re already envisioning the spectacle. An entire industry has sprung up to prepare and equip people for the moment when the dollar dies. It’s like insurance, the theme goes: hopefully you’ll never need it.
But the dollar is a human creation, a fiat currency. It doesn’t have a life of its own. It’s managed, rigged, and manipulated. It’s an accounting entity, a (lousy) store of value, and a means of handling transactions so you don’t have to barter your first-born for a Lexus.
As longs as it’s useful, the powers that be are going to keep it around. But over the long term, the dollar will do what it has done since the Fed was put in charge of it 100 years ago: it will lose value.

And the “strong dollar” these days? Ah, the irony!

It’s causing mayhem in the emerging markets where governments, corporations, and even consumers borrowed in dollars to save on interest. Now that their currencies are collapsing against the dollar, it’s getting very expensive to service these dollar debts, and they’re going to explode, and the holders of these debts are going to eat some big losses, unless they get bailed out again.
This “strong dollar” dents US exports and boosts imports. US corporations use it liberally as an excuse for their sorry revenues and earnings.
This is the value of the dollar in relationship to other currencies. These relationships are rigged to the nth degree. They go up and down and react to a million things, including central bank jawboning and monetary policies.

The actual value of the dollar? Don’t look!

It’s expressed in what the dollar can still buy in the US. And it’s terrible.
In terms of consumer goods and services, a single dollar isn’t buying much anymore. It used to buy a night in a hotel. After decades of inflation, Motel 6 came along and offered standard rooms for $6 a night. That was in the seventies. Now people don’t even remember where the name came from.
In my entire life, there were only three quarters – during the Financial Crisis – when the published data indicated that the dollar actually gained value in terms of consumer goods and services. The rest of my life, the dollar lost value, sometimes at a breath-taking pace, other times more leisurely.
In terms of assets, the dollar is more quixotic. It can lose value even faster. It now takes $1.2 million to buy a median home in San Francisco, likely a two-bedroom apartment in a so-so neighborhood. In 1993, the same median home in the same neighborhood cost around $250,000. It’s not that apartments have gotten bigger or better. It’s that the dollar has plunged in value against other assets.
Same thing happened in stocks, bonds, classic cars, art: the dollar buys hardly anything anymore.
But the dollar has a vicious way of suddenly reversing course and soaring in value against assets such as stocks or real estate. This makes people nervous. They call it a “crash,” and they try to get out of these assets, and in the process, the dollar becomes the most desirable asset out there, and suddenly you can buy stuff with it again [The Bull Market in Cash Is On].

Waning dollar hegemony in international trade.

The dollar has dominated the world as an international trading currency. The Petrodollar is an example. Suffice it to say that the euro was created in part to break the dollar’s hegemony and knock it off its pedestal as sole trading-currency superpower.
In 2005, the Eurozone was still abuzz with possibilities. Soon, it would price the oil it would buy from Saudi Arabia in euros. Trade would be de-dollarized. It didn’t take all that long before the euro debt crisis put the kibosh on those ambitions, but the euro has nevertheless become the second-largest trading currency in the world.
In its September 1 report, SWIFT noted that in July, 43.6% of global payments were in dollars; 28.5% were in euros. These percentages are very volatile, and there were months when the euro beat out the dollar. Number three was the UK pound at 8.7%. Number four, the Japanese yen at 2.9%. And number five, the Chinese yuan at 2.3%. Yuan use has been climbing, particularly in Asia, but it’s still just a tiny speck.
So the “de-dollarization” of trade is happening. But it’s happening at a glacial pace. Even when the dollar gets knocked off its perch as the number-one trading currency years down the road, it will remain, given the size of the US economy, among the top three.

The buck was never the sole reserve currency.

Reserve currencies are those that are held in large enough quantities by governments and central banks as part of their foreign exchange reserves. The IMF tracks this, and there are many of them. The dollar is number one and the euro number two.
The currency composition of official foreign exchange reserves in Q1 2015 put the dollar at 64.1% and rising from its recent low of 61% in 2013. But in the halcyon days of the mid to late 1990s at the eve of the euro, it accounted for about 71%.
The euro dropped to 20.7% in Q1, down from its peak in 2009 of 27.6%. The debt crisis did more than just destroy the economy of Greece. It destroyed the once growing confidence in the euro among central banks! If the debt crisis hadn’t happened – if pigs could fly – the euro would by now be at rough parity with the dollar. That was the pipedream of the euro architects.
The Japanese yen rose to 4.2%, highest since 2002, somewhat ironically as the Bank of Japan has vowed to devalue the yen, and then has proceeded to do so very successfully. In 1995, the yen still accounted for 6.8%. The UK pound was in fourth position at 3.9%. The Canadian dollar and the Australian dollar share fifth place, at 1.9% each.
The Chinese yuan is not among them. But it will eventually be anointed a serviceable reserve currency. Gradually, it will begin to show up on central bank balance sheets. These changes happen at a glacial pace. But they do happen, and eventually, inevitably, the yuan will play a major role as reserve currency.
One thing is certain: in the foreseeable future, neither the euro nor the yuan can knock the dollar off its perch as number one reserve currency.

But the buck stops here.

Real cash-in-fist, however, is on the way out. The war on cash has been declared. And younger folks don’t even carry cash. Electronic payments dominate. The anonymity of paying with cash, so dear to folks like me, means nothing to them. And putting hundred-dollar bills under the mattress makes the bed uneven. So someday, the dollar as cash-in-fist will be truly dead.
But for the remainder? A former colleague called me during the market turmoil in August, apparently to network. It’s been a while, so I asked her how she’s doing. “Like the Dow,” she said. “Everything’s still there, but a lot lower.”
And that will be the long-term fate of the dollar.

The Biggest Silver & Gold Scam In History

From the Bank of Int’l Settlements Qrtly report: “…a world in which debt levels are too high, productivity growth too weak and financial risks too threathening… It is unrealistic and dangerous to expect that monetary policy can cure all the global economy’s ills.”

From the Bank of Int'l Settlements Qrtly report (!!)

China Liquidated A Record $83 Billion In Treasurys In July

Back in May, when we first reported the "The Identity Of The Mystery "Belgian" Buyer Of US Treasurys" we made it clear that i) China was using Belgium as an offshore proxy for Treasury buying and - as of this year - selling and ii) that more selling was imminent.
Then, when we last updated this analysis on July 17, 3 weeks before the market was shocked by China's announcement, we explicitly said that "putting all of this together, it reveals that China has already dumped a record total $107 billion in US Treasurys in 2015 to offset what is now quite clear capital flight from the mainland, and the most aggressive attempt to keep the Renminbi stable."
All of this was confirmed on August 11, and over the past month when not only China devalued its currency but proceeded to dump a record amount of Foreign Reserves, some $94 billion in the month of August.
There was some question how much of these reserves was US Treasurys, and whether the liquidation via "Belgium" that we first reported in May, had continued. Moments ago, thanks to the latest TIC update, we got the answer. And boy was it a doozy.
First, we look at "Belgian" holdings which, as a reminder are not Belgian at all, but mostly Chinese, as a result of Euroclear allowing China to transact out of the European country anonymously. It is here that the massive build up started in late 2013 is now officially over, and after a another massive sale of $53 billion in US paper via Euroclear, Belgian holdings are back to just $155 billion, the lowest in over two years.

What does this mean for total Chinese holdings? Well, as disclosed mainland Chinese holdings decline by "only" $30 billion, the biggest monthly sale since December 2013.
But as we first pointed out, one has to combine Belgium and China to get the true picture.
Here is how said picture looks, when also superimposing China's total disclosed foreign reserve on the chart.

The answer: according to TIC, China, between its mainland and Euroclear holdings, sold a record $83 billion in Treasurys in the month of July. It also means that China has liquidated a whopping $184 billion notional in US Treasurys in 2015.
And since the current Belgian liquidation has brought Belgium's holdings to levels pre the Chinese buying spree, it likely means that China is all out of "Euroclear" holdings, and the residual Chinese holdings are only those held by China as of this moment, which according to TIC amounted to about $1240 billion.
Finally, and here it the punchline: the sale of ~$83 billion took place in July. This is before China announced its devaluation on August 11 and before, as we also first reported, it sold another $100 billion in Treasurys in August.
One can see why suddenly even PBOC official Jiao Jinpu said, earlier today, that the Chinese central bank sees "callenge from FX reserves drop."
Should this unprecedented pace of reserve liquidation - read Treasury dumping - continue, the Fed will have no choice but to engage QE4 in very short notice just to absorb the now confirmed record selling of US paper by China.
Source: TIC

Cameron and Osborne quietly pay the £1.7BILLION bill from Brussels which they dismissed as 'totally unacceptable'

  • Prime Minister said he was 'downright angry' at the demand in October
  • Cameron banged lectern and vowed not to 'to get out our cheque book'
  • But European Commission says Britain has now 'paid the amount due'

Britain has quietly paid in full a £1.7billion European Union surcharge that David Cameron described as 'appalling'.
The Prime Minister said he was 'downright angry' and said the British public would find the 'vast sum 'totally unacceptable' when the EU revised membership contributions last October.
But the European Commission has revealed that Britain has now 'paid the amount due' with two instalments on 1 July and 1 September.
David Cameron and George Osborne, pictured in the Commons today, condemned the demand from Brussels last year but Britain has now paid up
David Cameron and George Osborne, pictured in the Commons today, condemned the demand from Brussels last year but Britain has now paid up
The EU made the massive demand after recalculating the income of member states dating back almost 20 years.
After Mr Cameron was told about the surcharge at an EU summit in Brussels, he angrily denounced it as 'not an acceptable sum of money'.
In a lectern-thumping speech, he said: 'We are not going suddenly to get out our cheque book and write a cheque for two billion euros. It is not going to happen.
'You didn't need to have a Cluedo set to know someone has been clubbed with the lead piping in the library.'
The EU agreed to move the deadline for payment from last December to the beginning of this month – after the general election – but it has not reduced the sum.
A fortnight after the bill was revealed, Chancellor George Osborne claimed to have halved it at negotiations in Brussels.

As he emerged from an Ecofin meeting with fellow EU finance ministers he declared Britain would pay just £850 million, telling reporters: 'We have halved the bill ... it's a result for Britain.'
However, a cross-party House of Commons Treasury Committee report published earlier this year found Mr Osborne's claim was 'not supported by the facts'.
British contributions to the EU are subject to a rebate, which means the UK receives a proportion of the amount it pays back a year in arrears.
The rebate was famously won by Margaret That‎cher because a significant proportion of the EU's budget is spent of agricultural subsidies and the UK has a relatively small farming sector.
Treasury officials claimed that Mr Osborne had negotiated that the rebate would apply to the bill, but the Commons report said he would have known this would happen automatically.
The framework set out in official EU documents 'does not appear to leave a great deal of room for uncertainty' that the rebate would 'inevitably' apply, the report said.
'This should have been clear to HM Treasury' as soon as it received the revised figures for gross national income (GNI) which gave rise to the surcharge.
The chart shows the monstrous bill handed to the UK in October last year by the EU in comparison with other member states
The chart shows the monstrous bill handed to the UK in October last year by the EU in comparison with other member states

Addressing the House of Commons days after the Ecofin meeting, Mr Osborne said that it was 'not clear' that the rebate would apply to the surcharge to the extent that it did.
But the committee said it found Mr Osborne's argument 'unpersuasive', adding: 'The specific claim to have halved the bill through negotiation is difficult to support.'
Britain was asked to pay more after the EU's statistical body Eurostat reviewed the way it asked member states to calculate the size of their economy.
After the Office for National Statistics provided new figures, which included a revaluation of the size and contribution of the UK's charity sector, the British economy was found to be larger than previously determined.
When the revised numbers from all countries were compiled it was decided Britain had been underpaying towards the EU, while others had paid too much.
France received £801million, while Germany had £614million returned.
Ukip MEP Jonathan Arnott, who is a member of the European Parliament's budget committee, said it was 'unthinkable' that the surcharge had been paid in full.
'For Cameron to label this bill as 'appalling' and 'completely unacceptable' and yet pay it in full shows the sort of politics this man is willing to deal in,' he said.
'It is deceitful, hypocritical and it stinks of the old politics of which people are sick.'
'It truly is a case of the EU saying 'pay up' and Cameron saying 'how much?' 

S&P: Japan govt’s strategy to revive econ growth & end deflation appears unlikely to reverse fiscal deterioration.

Gold Is Manipulated, Economy Is An Illusion, There Will Be Riots In The Streets: Craig Hemke

Inside Janet Yellen’s Brain at 4 a.m.…

GUALFIN, Argentina – Poor Janet Yellen.
Usually, we reserve our pity for the poor, the downtrodden, and the hopeless. But today, we spare a thought for the clueless… and feel Yellen’s pain.
Markets are tense. Investors seem to be holding their breath.
Everyone is waiting to see what the Fed will do.
There must be hundreds of thousands – if not millions – of well-educated adults sitting on the edges of their seats… eager to hear what this rather ordinary functionary will say.

No Return to Sanity

Will Janet Yellen proudly put the Fed on the side of the angels, announcing that she and her crew have decided to move the Fed’s key interest rate to a more normal level… regardless of how much it costs the cronies?
Will she admit that the Fed’s ZIRP and its three QE programs have been failures? Or that they have shifted trillions of dollars toward the rich while leaving Main Street poorer?
Will she beg forgiveness for such errant policy decisions over such a long time and vow publicly never to interfere with the market again?
No, she won’t.
She will say the outlook is favorable – generally, clearing skies and fair weather is in the forecast. But there are some clouds forming out to the east that could lead to stormy weather.
So she will urge a cautious return to normalcy. She may be feeling confident and allow for a small rate increase… or she may be feeling fearful and decide to hold off for a while.
We don’t know. And it probably doesn’t matter much.

Permanent Emergency

Once you begin manipulating markets, it’s a hard habit to break.
First, investors come to look forward to it. Then businesses become hooked on it. And then you can’t stop even if you wanted to.
After nearly seven years of emergency financial policies, we are now in a permanent emergency.
But it is a phony emergency. Markets are supposed to go down as well as up. They’resupposed to correct their mistakes. They’resupposed to destroy malinvestment to make way for new capital formation.
It’s never been a real emergency; it was capitalism at work.
Poor Janet Yellen must not know what to think.
On the one hand, she is lauded as the most powerful woman in all history. Helen of Troy was a bit player by comparison. Cleopatra was merely the love interest in the battle between Julius Caesar and Mark Antony.
Susan B. Anthony? No one knows what she did… if anything.
But Janet – she has the entire world economy in her hand. She can squeeze it. She can bounce it on the floor. She can do what she wants with it.
On the other hand, there are the dark nights… when she must realize she is in way too deep.
She is supposed to do what no mortal can do. She is in charge of fixing – at least to the extent she is able – the most important price in a market economy: the price of credit.
It must have occurred to her that she shouldn’t be fixing it at all. Only the gods know what the price of credit should be. She is just human. If she sets the price of credit, she is bound to err.
What’s going on? Has she been set up to take the fall for Greenspan and Bernanke?
But wait… in a fiat money system banks don’t lend out deposits… or even a fraction of deposits. Instead, with a few keystrokes, banks create money ex nihilo (out of nothing) when they lend.
Surely, the head of the central bank can decide at what price banks can rent out capital, no?

Janet Yellen’s Brain at 4 a.m.

If I raise the rate, just a little, I’ll probably be hailed as a sober, responsible economist. After all, it is unnatural for the federal funds rate to be so low for so long.
And those charts and graphs on my “dashboard”… they seem to be saying that things really are returning to normal. People have jobs. The economy is growing. Why worry?
Of course, I know perfectly well those charts are mostly garbage. All the data is so jigged and jived by the back-office boys, who knows what is really going on?
And here I’ve got Bill Dudley at the New York Fed, Goldman Sachs, and Larry Summers all telling me that natural market forces are already tightening credit conditions… without waiting for the Fed. And that if we raise rates now, we’ll just be making a bad situation worse.
Maybe they’re right. But those zero-bound rates must be causing distortions that we don’t know about. The junk bond market, for one. And the corporate bond market, in general. How were we to know those rascal corporate execs would borrow money at our low rates just to goose up their shares, via buybacks, so they could earn even fatter bonuses?
And now, stock prices depend on our ultra-low rates. That’s crazy. They must know we’ll raise rates sooner or later. Then the people who bought stocks at some of the highest valuations in history… like those gamblers at Goldman… they must realize that they’ll lose money.
I guess it’s almost our duty to teach them a lesson…
But what if all these dumb-heads who’ve been gaming the Fed… betting that we’ll keep ZIRPing along for far longer than we probably should have… what if they panic?
What if we get a couple days of 1,000-point drops on the Dow? Won’t they all start pointing their fingers at me… claiming I caused the panic?
Of course, I did nothing of the sort. It’s not my fault they bought stocks at such high valuations. We were just trying to boost asset prices so the “wealth effect” would make Americans rush out and spend.
We have to raise the interest rate at some time, or the entire system will become unmoored… drifting to who knows where… and washing up on who-knows-what rocks.
But what if Larry is right? What if a rate increase makes credit conditions too tight? What if that provokes a sell-off in stocks… and sets in motion a chain of events such as those that led to the Great Depression?
Then stock markets plunge. The “wealth effect” turns negative. World trade collapses even further. Unemployment rises. And we end up in a new depression that lasts 10 years…
What if they say it’s my fault? What if they call it the Yellen Depression?
Oh, no… It’s not fair… It’s not fair… Boo-hoo… sob… sob… I should have stayed at Harvard. I’d have tenure. I’d have a nice pension. George and I could go the Martha’s Vineyard in the summer. It would be such a nice life.

Standard & Poor's downgrades Japan from AA- to A+

Chris McGrath | Getty Images
U.S. ratings agency Standard & Poor's downgraded Wednesday its credit rating for Japan from AA- to A+, but has revised its outlook for the world's third-largest economy from negative to stable.
In a statement accompanying the re-rating, S&P added that economic support for Japan's sovereign creditworthiness has continued to weaken over the past three to four years and that the government's strategy to revive economic growth and end deflation appeared unlikely to reverse deterioration in next two to three years.
Recent cabinet office data released last week showed that the Japanese economy shrank an annualized 1.2 percent in April-June, less than the initial estimate of a 1.6 percent contraction. The median market forecast was a revision to a 1.8 percent contraction.
Read MoreJapan's Q2 GDP revised up but pressure on Abe, BoJ remains

Nonetheless, the data is expected to keep policymakers under pressure to do more to energize the fragile recovery.
Marcel Thieliant, Japan Economist at Capital Economics, called last week's data "hardly reassuring."

"The upshot is that price pressures are unlikely to strengthen as quickly as policymakers hope, so the chances of hitting the 2 percent inflation by next summer remain slim. We stick to our view that the BoJ will step up the pace of easing at its end-October meeting."

Donald Trump is right: America’s real unemployment rate is 40%

trump the wall

()  As depressing as the statistic sounds, the jobless rate was a lot higher in the 1970s.
Donald Trump’s presidential campaign is not predicated on the candidate’s mastery of or allegiance to facts.
His views on things like immigration or international tradeare just not supported by any relevant statistics. So whenThe Donald called into CBS’ Face the Nation on Sunday and claimed that Americans are living in a “false economy,” where the unemployment rate is actually 40% rather than the 5.1% as reported by the Labor Department, you’d be forgiven for believing this was just another Trumpian whopper.
But actually, this view can be supported by actual statistics. If you use the broadest definition of unemployment, the ratio of people over the age of 16 with jobs to the overall 16-and-over population, the Labor Department says that 40.6% of the population is unemployed.
Unfortunately, the veracity of Trump’s analysis ends there. As you can see from the above chart, 40% of the 16-and-over population not having a job is nothing new in America. Trump’s campaign slogan, Make America Great Again, presumably refers to his hope of returning America to it’s post-war glory, when the U.S. economy accounted for a much larger share of global GDP than it does today. But that was a time when a lower percentage of Americans of working age had a job.
When you study the statistics carefully, you find that the employment-population ratio has much more to do with social factors than the strength of the economy. As it became socially acceptable (and for middle class families economically necesssary) for women to enter the workforce in large numbers, the ratio rose. As the country aged and a greater share of workers entered retirement years, the ratio fell.
It’s also true that the Great Recession has affected the labor market in ways that are still being felt. Long-term unemployment skyrocketed and has yet to fall back to pre-crisis levels, and that fact shows up in the employment-population ratio. But to claim that the unemployment rate is a statistic that, as Trump said, “was made up by the politicians for the politicians . . . so they could look good,” has no basis in fact.
The Labor Department compiles and publishes many different measures of the health of the labor market, with the “official” rate, also known as U3, just being one of many. As I have written before, these numbers cannot be understood in a vacuum:
Sure, Wall Street and the White House might have an incentive to convince people that the economy is better than it actually is. (The media, on the other hand, is encouraged to play up bad news, which gets more attention.) But it’s an insult to the public’s intelligence to suggest that it could be tricked into thinking the economy is good just because the Labor Department says so.
The economy and the labor market are certainly not back to full strength, which is why the Federal Reserve, for instance, hasn’t yet begun raising rates even with the “official” unemployment rate lower today than the post-war average. But that doesn’t mean this particular statistic is a lie, or without its uses. It’s simply one of many statistics we must use to understand the health of the economy.

A $2 trillion bet against Fed raising rates this week

Casino economy vs. physical economy, hazard wins every time. Do not wonder the common sense got lost in the process and the madmen rule.

With investors fixated on Thursday’s key Federal Reserve FOMC meeting announcement and the prospect of the first interest-rate hike since the Great Recession, the message from a group of CFOs representing more than $2 trillion in market cap is in line with much of the market: Don’t hold your breath.
The majority CFO view has moved from betting on a September rate hike when last polled in May to a majority view in the August poll that the first rate hike gets backed up to 2016. Less than a quarter of CNBC Global CFO Council members polled believe the Fed will raise interest rates after its meeting on Thursday (compared to 47 percent in May’s poll). In the previous CFO poll, only 16 percent of CFOs were betting on the Fed delaying action until 2016.
Wall Street doesn’t think the Fed will announce a rate hike this week, either. The CME FedWatch shows that traders put the probability at only 25 percent, down from 40 percent last month.

Big Banks Cutting Tens Of Thousands Of Jobs; Huge Implications; Significant Fed Tightening Looks Like A Hard Sell. The Opposite Is Much More Likely.

by John Rubino
Some major banks — which over the past few decades have grown into the biggest financial entities the world has ever seen — appear to have hit a wall, and are now shedding tens of thousands of workers. Some recent examples:

Barclays plans to cut more than 30,000 jobs

(CNBC) – Barclays plans to cut more than 30,000 jobs within two years after firing Chief Executive Antony Jenkins this month, The Times reported on Sunday.
This redundancy program, which could reduce the bank’s global workforce below 100,000 by 2017 end, is considered as the only way to address the bank’s chronic underperformance and double its share price, the newspaper said, citing senior sources.
These job cuts are likely to affect staff at middle and back office operations, where largest savings are achieved, the Times said.
The paper said that a potential candidate, who would replace Jenkins, is expected to ax jobs much faster and more deeply than the ousted boss.

Deutsche Bank to cut workforce by a quarter

(Reuters) – Deutsche Bank aims to cut roughly 23,000 jobs, or about one quarter of total staff, through layoffs mainly in technology activities and by spinning off its PostBank division, financial sources said on Monday.That would bring the group’s workforce down to around 75,000 full-time positions under a reorganization being finalised by new Chief Executive John Cryan, who took control of Germany’s biggest bank in July with the promise to cut costs.
Deutsche’s share price has suffered badly under stalled reforms and rising costs on top of fines and settlements that have pushed the bank down to the bottom of the valuation rankings of global investment banks. It has a price-book ratio of around 0.5, according to ThomsonReuters data.
Deutsche is mainly reviewing cuts to the parts of its technology and back office operations that process transactions and work orders for staff who deal with clients.
A significant number of the roughly 20,000 positions in that area will be reviewed for possible cuts, a financial source said. Back-office jobs in the group’s large investment banking division will be concentrated in London, New York and Frankfurt, the source said.
PostBank has about 15,000 positions, pointing to roughly 8,000 layoffs at Deutsche once the unit’s spinoff is completed as planned in 2016.

UniCredit plans to cut around 10,000 jobs

(Reuters) – UniCredit (CRDI.MI), Italy’s biggest bank by assets, is planning to cut around 10,000 jobs, or 7 percent of its workforce, as it seeks to slash costs and boost profits, a source at the bank told Reuters on Monday.The planned cuts will be concentrated in Italy, Germany and Austria, several sources said, adding that they include 2,700 layoffs in Italy that have already been announced.
A UniCredit spokesman declined comment beyond noting that the bank’s CEO Federico Ghizzoni had on Sept. 3 said there were no concrete numbers on potential lay-offs, after a report said it was considering eliminating 10,000 positions in coming years.
UniCredit, which has 146,600 employees across 17 countries, is under pressure to boost its profits as low interest rates are expected to keep hurting its earnings in coming years.
Such a sudden, widespread retrenchment can mean several things:
1) Technology is making a lot of back office staff redundant. That’s reasonable and to be expected. Automation of knowledge work will be one of the big stories of the coming decade and finance is a prime target. A quick look at the growth of crowdfunding (from zero in 2009 to an estimated $50 billion in peer-to-peer loans in 2016) tells you all you need to know about the future of conventional bank lending.
2) The profitability of core banking operations is going to crater in the coming year and these guys are trying to get out in front of it — while hoping to hide the deterioration within massive workforce reduction write-offs.
3) The availability of good jobs for European college graduates — already too low — is going to shrink further. It’s virtually impossible for a finance-dependent system to grow while major banks are shrinking, so Europe will remain stuck in neutral while its governments pile up ever-greater debts and more peripheral countries join Greece on the public dole. And the euro will, at some point, be devalued suddenly and drastically.
5) The other big banks can’t be in much better shape, since they’re all operating in the same zero-interest rate, low-growth world. In the US, where auto loans have been a singular bright spot, what happens when cars stop selling? We may be about to find out. See U.S. factory output declines on sharp drop in auto production.
6) The global recovery is a mirage. Six years in, with stock and bond prices near record levels, demand for support staff in deal-driven entities like banks should be rising. Layoffs on this scale are bottom-of-a-recession events.
Add it all up, and significant Fed tightening looks like a hard sell. The opposite is much more likely.

World Bank Warns Of Financial Turbulence If US Fed Raises Rates… Deutsche Bank: Interest-rate Hike Could Tank Stocks by 40%

The World Bank published a report today warning of possible financial turbulence in developing countries if the Federal Reserve raises interest rates this Thursday.
The BBC summarizes:
The World Bank has warned developing countries to brace themselves for possible financial turbulence when the US Federal Reserve starts to raise interest rates.
It could come as early as Thursday when the Fed concludes a policy meeting.
A new report from the World Bank says there will probably be a modest impact on developing countries.
But it also warns there is some risk that it could be worse.
The Bank says it is possible that there would be sufficient disruption to capital flows into developing countries to harm economic growth and financial stability.
‘Perfect storm’
US interest rates have been practically zero for more than six years and as the economy continues to recover, the Fed is sure to raise interest rates at some stage. The prospect has been a major concern for financial markets all year.
Developing countries are bound to be affected when it happens and the first step might be imminent.
Interest-rate hike could tank stocks by 40%
NEW YORK – Bankers worldwide are warning a decision by the Federal Reserve to increase interest rates could precipitate a stock-market collapse.
Deutsche Bank, the European Union’s biggest bank, has grabbed attention by issuing a warning to the Federal Reserve that a rise in U.S. interest rates now would constitute nothing less than a “premeditated controlled demolition” that could cause global stock markets to collapse a dramatic 40 percent.

JP MORGAN COMEX GOLD is about to RUN OUT! 252 to 1 paper/real gold ratio!

Comexodus: JPMorgan’s Vault Is One Withdrawal Away From Running Out Of Deliverable Gold
One week ago, when we reported the record plunge in registered gold held by the various Comex gold warehouses in general, and JPMorgan in particular, which saw the “gold coverage” ratio, or the number of paper claims through open futures interest for every ounce of deliverable gold, soar to what we then thought was a record, and unsustainable 207x, we thought this situation would be promptly rectified as a few hundred thousand ounces of eligible gold would be “adjusted” back into the “registered” category.

Not only has this not happened, but with every passing day the situation is getting progressively worse.

…there was a record 252 ounces of gold paper claims to every gold physical ounce of currently available and deliverable gold..

To summarize: last week we were confident that JPM would promptly adjust a few hundred thousands ounces of Eligible gold back into Registered status to silence growing concerns about Comex distress. A week later we are not as concerned by the relentless surge in paper gold dilution, as we are that JPM still has not even bothered to do this. Especially since with just 335 kilograms of gold, or less than 27 bricks, JPMorgan is now just one withdrawal request away from running out of deliverable physical gold.
And apparently the gold in London is gone too.
UPDATE 2: IS THE US ALREADY BROKE AND NOBODY IS LENDING US GOV money from months?!?!? : go here and answer here:
150 Days: Treasury Says Debt Has Been Frozen at $18,112,975,000,000

( – The portion of the federal debt that is subject to a legal limit set by Congress closed Monday, August 10, at $18,112,975,000,000, according to the latest Daily Treasury Statement, which was published at 4:00 p.m. on Tuesday.

That, according to the Treasury’s statements, makes 150 straight days the debt subject to the limit has been frozen at $18,112,975,000,000.
$18,112,975,000,000 is about $25 million below the current legal debt limit of $18,113,000,080,959.35.