Tuesday, June 3, 2014
MAJOR: WE ARE ABOUT TO LOSE OUR FIRST AMENDMENT RIGHT!, World Bank warns of Food RIOTS! and more!
.LINKS
http://www.breitbart.com/Big-Governme…
http://rt.com/news/162640-spain-unemp…
http://www.naturalnews.com/045369_Wor…
http://www.reuters.com/article/2014/0…
http://www.weeklystandard.com/blogs/1…
http://news.yahoo.com/u-backs-japans-…
http://news.yahoo.com/ukraine-army-pu…
http://www.theguardian.com/world/2014…
http://generationnwo.blogspot.com/201…
http://investmentwatchblog.com/hagel-…
http://irasciblemusings.com/chinese-g…
http://www.eutimes.net/2014/05/us-dep…
http://www.nowtheendbegins.com/blog/?…
http://rt.com/shows/the-truthseeker/1…
http://www.voanews.com/content/china-…
Infrastructure Sticker Shock: Financing Costs More than Construction
Funding infrastructure through bonds doubles the price or worse.
Costs can be cut in half by funding through the state’s own bank.
“The numbers are big. There is sticker shock,” said Jason Peltier, deputy manager of the Westlands Water District, describing Governor Jerry Brown’s plan to build two massive water tunnels through the California Delta. “But consider your other scenarios. How much more groundwater can we pump?”
Whether the tunnels are the best way to get water to the Delta is controversial, but the issue here is the cost. The tunnels were billed to voters as a $25 billion project. That estimate, however, omitted interest and fees. Construction itself is estimated at a relatively modest $18 billion. But financing through bonds issued at 5% for 30 years adds $24-40 billion to the tab. Another $9 billion will go to wetlands restoration, monitoring and other costs, bringing the grand total to $51-67 billion – three or four times the cost of construction.
A general rule for government bonds is that they double the cost of projects, once interest has been paid.
The San Francisco Bay Bridge earthquake retrofit was originally slated to cost $6.3 billion, but that was just for salaries and physical materials. With interest and fees, the cost to taxpayers and toll-payers will be over $12 billion.
The bullet train from San Francisco to Los Angeles, another pet project of Jerry Brown and his administration, involves a bond issue approved in 2008 for $10 billion. But when interest and fees are added, $19.5 billion will have to be paid back on this bond, doubling the cost.
And those heavy charges pale in comparison to the financing of “capital appreciation bonds.” As with the “no interest” loans that became notorious in the subprime mortgage crisis, the borrower pays only the principal for the first few years. But interest continues to compound; and after several decades, it can amount to ten times principal or more.
San Diego County taxpayers will pay $1 billion after 40 years for $105 million raised for the Poway Unified School District.
Folsom Cordova used capital appreciation bonds to finance $514,000. The sticker price after interest and fees will be $9.1 million.
In 2013, state lawmakers restricted debt service on capital appreciation bonds to four times principal and limited their term to 25 years. But that still means that financiers receive four times the cost of the project itself – the sort of return considered usurious when we had anti-usury laws with teeth.
There is another alternative. In the last five years, China has managed to build an impressive 4000 miles of high-speed rail. Where did it get the money? The Chinese government has a hidden funding source: it owns its own banks. That means it gets its financing effectively interest-free.
All banks actually have a hidden funding source. The Bank of England just admitted in its quarterly bulletin that banks don’t lend their deposits. They simply advance credit created on their books. If someone is going to be creating our national money supply and collecting interest on it, it should be we the people, through our own publicly-owned banks.
Models for this approach are not limited to China and other Asian “economic miracles.” The US has its own stellar model, in the state-owned Bank of North Dakota (BND). By law, all of North Dakota’s revenues are deposited in the BND, which is set up as a DBA of the state (“North Dakota doing business as the Bank of North Dakota”). That means all of the state’s capital is technically the bank’s capital. The bank uses its copious capital and deposit pool to generate credit for local purposes.
The BND is a major money-maker for the state, returning a sizable dividend annually to the state treasury. Every year since the 2008 banking crisis, it has reported a return on investment of between 17 percent and 26 percent. While California and other states have been slashing services and raising taxes in order to balance their budgets, North Dakota has actually been lowering taxes, something it has done twice in the last five years.
The BND partners with local banks rather than competing with them, strengthening their capital and deposit bases and allowing them to keep loans on their books rather than having to sell them off to investors or farm the loans out to Wall Street. This practice allowed North Dakota to avoid the subprime crisis that destroyed the housing market in other states.
North Dakota has the lowest unemployment rate in the country, the lowest default rate on credit card debt, one of the lowest foreclosure rates, and the most local banks per capita of any state. It is also the only state to escape the credit crisis altogether, boasting a budget surplus every year since 2008.
This money is earmarked for specific purposes and cannot be spent on the state budget, but it can be invested. A portion could be invested as equity in a state-owned bank, and a larger portion could be deposited in the bank as interest-bearing certificates of deposit. This huge capital and deposit base could then be leveraged by the bank into credit, something all banks do. Since the state would own the bank, the interest would return to the state. Infrastructure could be had interest-free, knocking 50% or more off the sticker price.
By doing its own financing in-house, the state can massively expand its infrastructure without imposing massive debts on future generations. The Golden State can display the innovation and prosperity that makes it worthy of the name once again.
___________________________
Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.
“The numbers are big. There is sticker shock,” said Jason Peltier, deputy manager of the Westlands Water District, describing Governor Jerry Brown’s plan to build two massive water tunnels through the California Delta. “But consider your other scenarios. How much more groundwater can we pump?”
Whether the tunnels are the best way to get water to the Delta is controversial, but the issue here is the cost. The tunnels were billed to voters as a $25 billion project. That estimate, however, omitted interest and fees. Construction itself is estimated at a relatively modest $18 billion. But financing through bonds issued at 5% for 30 years adds $24-40 billion to the tab. Another $9 billion will go to wetlands restoration, monitoring and other costs, bringing the grand total to $51-67 billion – three or four times the cost of construction.
A general rule for government bonds is that they double the cost of projects, once interest has been paid.
The San Francisco Bay Bridge earthquake retrofit was originally slated to cost $6.3 billion, but that was just for salaries and physical materials. With interest and fees, the cost to taxpayers and toll-payers will be over $12 billion.
The bullet train from San Francisco to Los Angeles, another pet project of Jerry Brown and his administration, involves a bond issue approved in 2008 for $10 billion. But when interest and fees are added, $19.5 billion will have to be paid back on this bond, doubling the cost.
And those heavy charges pale in comparison to the financing of “capital appreciation bonds.” As with the “no interest” loans that became notorious in the subprime mortgage crisis, the borrower pays only the principal for the first few years. But interest continues to compound; and after several decades, it can amount to ten times principal or more.
San Diego County taxpayers will pay $1 billion after 40 years for $105 million raised for the Poway Unified School District.
Folsom Cordova used capital appreciation bonds to finance $514,000. The sticker price after interest and fees will be $9.1 million.
In 2013, state lawmakers restricted debt service on capital appreciation bonds to four times principal and limited their term to 25 years. But that still means that financiers receive four times the cost of the project itself – the sort of return considered usurious when we had anti-usury laws with teeth.
Escaping the Interest Trap: The Models of China and North Dakota
California needs $700 billion in infrastructure
over the next decade, and the state doesn’t have that sort of money in
its general fund. Where will the money come from? Proposals include more
private investment, but that means the privatization of what should
have been public assets. Infrastructure is touted to investors as the next “fixed income.”
But fixed income to investors means perpetual payments by taxpayers and
rate-payers for something that should have been public property.There is another alternative. In the last five years, China has managed to build an impressive 4000 miles of high-speed rail. Where did it get the money? The Chinese government has a hidden funding source: it owns its own banks. That means it gets its financing effectively interest-free.
All banks actually have a hidden funding source. The Bank of England just admitted in its quarterly bulletin that banks don’t lend their deposits. They simply advance credit created on their books. If someone is going to be creating our national money supply and collecting interest on it, it should be we the people, through our own publicly-owned banks.
Models for this approach are not limited to China and other Asian “economic miracles.” The US has its own stellar model, in the state-owned Bank of North Dakota (BND). By law, all of North Dakota’s revenues are deposited in the BND, which is set up as a DBA of the state (“North Dakota doing business as the Bank of North Dakota”). That means all of the state’s capital is technically the bank’s capital. The bank uses its copious capital and deposit pool to generate credit for local purposes.
The BND is a major money-maker for the state, returning a sizable dividend annually to the state treasury. Every year since the 2008 banking crisis, it has reported a return on investment of between 17 percent and 26 percent. While California and other states have been slashing services and raising taxes in order to balance their budgets, North Dakota has actually been lowering taxes, something it has done twice in the last five years.
The BND partners with local banks rather than competing with them, strengthening their capital and deposit bases and allowing them to keep loans on their books rather than having to sell them off to investors or farm the loans out to Wall Street. This practice allowed North Dakota to avoid the subprime crisis that destroyed the housing market in other states.
North Dakota has the lowest unemployment rate in the country, the lowest default rate on credit card debt, one of the lowest foreclosure rates, and the most local banks per capita of any state. It is also the only state to escape the credit crisis altogether, boasting a budget surplus every year since 2008.
Consider the Possibilities
The potential of this public banking model for other states is huge.
California’s population is more than 50 times that of North Dakota.
California has over $200 billion stashed in a variety of funds
identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account earning a meager 0.264% annually. California also has over $400 billion in its pension funds (CalPERS and CalSTRS).This money is earmarked for specific purposes and cannot be spent on the state budget, but it can be invested. A portion could be invested as equity in a state-owned bank, and a larger portion could be deposited in the bank as interest-bearing certificates of deposit. This huge capital and deposit base could then be leveraged by the bank into credit, something all banks do. Since the state would own the bank, the interest would return to the state. Infrastructure could be had interest-free, knocking 50% or more off the sticker price.
By doing its own financing in-house, the state can massively expand its infrastructure without imposing massive debts on future generations. The Golden State can display the innovation and prosperity that makes it worthy of the name once again.
___________________________
Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.
The Velocity Of Money In The U.S. Falls To An All-Time Record Low
When an
economy is healthy, there is lots of buying and selling and money tends
to move around quite rapidly. Unfortunately, the U.S. economy is the
exact opposite of that right now. In fact, as I will document below,
the velocity of M2 has fallen to an all-time record low. This is a very
powerful indicator that we have entered a deflationary era, and the
Federal Reserve has been attempting to combat this by absolutely
flooding the financial system with more money. This has created some
absolutely massive financial bubbles, but it has not fixed what is
fundamentally wrong with our economy. On a very basic level, the amount
of economic activity that we are witnessing is not anywhere near where
it should be and the flow of money through our economy is very
stagnant. They can try to mask our problems with happy talk for
as long as they want, but in the end it will be clearly evident that
none of the long-term trends that are destroying our economy have been
addressed.
Discussions
about the money supply can get very complicated, and that can cause
people to tune out, but it doesn’t have to be that way.
To put it very basically, when there is lots of economic activity, there is lots of money changing hands.
When there is not very much economic activity, the pace at which money circulates through our system slows down.
That is why what is happening in the U.S. right now is so troubling.
First, let’s look at M1, which is a fairly narrow definition of the money supply. The following is how Investopedia defines M1…
A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency. It does not contain “near money” or “near, near money” as M2 and M3 do.
As you
can see from the chart posted below, the velocity of M1 normally
declines during a recession. Just look at the shaded areas in the
chart. But a funny thing has happened since the end of the last
recession. The velocity of M1 has just kept falling and it is now at a
nearly 20 year low…
Next, let’s take a look at M2. It includes more things in the money supply. The following is how Investopedia defines M2…
A measure of money supply that includes cash and checking deposits (M1) as well as near money. “Near money” in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits.
In the
chart posted below, we can once again see that the velocity of M2
normally slows down during a recession. And we can also see that the
velocity of M2 has continued to slow down in the “post-recession era”
and has now dropped to the lowest level ever recorded…
This is a highly deflationary chart.
It clearly indicates that economic activity in the U.S. has been steadily slowing down.
And if we are honest, we have to admit that we are seeing signs of this all around us. Major retailers are closing down stores at the fastest pace since the collapse of Lehman Brothers, consumer confidence is down, trading revenues at the big Wall Street banks are way down, and the steady decline in home sales is more than just a little bit alarming.
In
addition, the employment situation in this country is much less
promising than we have been led to believe. According to a report put
out by the Republicans on the Senate Budget Committee, an all-time
record one out of every eight men in their prime working years are not in the labor force…
“There are currently 61.1 million American men in their prime working years, age 25–54. A staggering 1 in 8 such men are not in the labor force at all, meaning they are neither working nor looking for work. This is an all-time high dating back to when records were first kept in 1955. An additional 2.9 million men are in the labor force but not employed (i.e., they would work if they could find a job). A total of 10.2 million individuals in this cohort, therefore, are not holding jobs in the U.S. economy today. There are also nearly 3 million more men in this age group not working today than there were before the recession began.”
Never before has such a high percentage of men in their prime years been so idle.
But
since they are not counted as part of “the labor force”, the government
bureaucrats can keep the “unemployment rate” looking nice and pretty.
Of course if we were actually using honest numbers, the unemployment rate would be in the double digits, our economy would be considered to have been in a recession since about 2005, and everyone would be crying out for an end to “the depression”.
And now we are rapidly approaching another downturn. In my recent articles entitled “Has The Next Recession Already Begun For America’s Middle Class?” and “27 Huge Red Flags For The U.S. Economy“, I detailed much of the evidence for why this is true.
And those that run the Federal Reserve know all of this.
That is
one of the reasons for all of the “quantitative easing” that they have
been doing. The folks at the Fed know that the U.S. economy would
probably drift into a deflationary depression if they just sat back and
did nothing. So they flooded the system with money in a desperate
attempt to revive economic activity. But instead, most of the new money
just ended up in the pockets of the very wealthy and further increased
the divide between those at the top and those at the bottom in this
country.
And now
Fed officials are slowly scaling back quantitative easing because they
apparently believe that the economy is getting “back to normal”.
We shall see.
Many are not quite so optimistic.
For example, the chief market analyst at the Lindsey Group, Peter Boockvar, believes that the S&P 500 could plummet 15 to 20 percentwhen quantitative easing finally ends.
Others believe that it will be much worse than that.
Since 2008, the size of the Fed balance sheet has grown from less than a trillion dollars to more than four trillion dollars.
This unprecedented intervention was able to successfully delay the
coming deflationary depression, but it has also made our long-term
problems far worse.
So when the inevitable crash does arrive, it will be much, much worse than it could have been.
Sadly,
most Americans do not understand these things. Most Americans simply
trust that our “leaders” know what they are doing. And so in the end,
most Americans will be completely blindsided by what is coming.
Market Veteran Warns: “Massive Shocks in the World Financial System in Coming Years”
There
is a euphoria being enjoyed by many in the investment world and in
economic circles centered around the notion that the world has recovered
from the financial crisis of 2008. Stock markets in the United States
have risen to all time highs. Mainstream financial experts imply this is
a key indicator of economic growth, improved consumer confidence, and a
return to boom times.
But not everyone agrees. Swiss market veteran Egon Von Greyerz suggests
that exactly the opposite is the case, noting that the underlying
economic fundamentals all over the world are indicative of massive
problems from the United States to China.
In an interview with King World News Von
Greyerz highlights his reasoning, citing numerous data points that
paint a completely different picture from the one being shown to the
majority of the world’s citizens.
It surprised me to see how many of those top economists and fund managers were totally bullish on the global economy based on their view of growth in the United States.I also went to a conference for ultra-high net worth individuals in Singapore, and I noticed very little fear or concern about the risks in the world today.So this is a very dangerous time with the people who control the investment markets having very little regard for the risks and the dangers that the world is currently facing.…We have discussed the massive risks which are present in the system and they are more ubiquitous now than ever — Japan, EU, UK, US, China, and geopolitical risks. The financial system has the same problems today as it had in 2008, but the money printing over the last few years has achieved a calm and complacency that will lead to massive shocks in the world financial system in coming years.…A lot of the economic indicators in the U.S. are very weak. Retail sales are plunging, bank profits are falling, home sales are falling fast, both existing and new homes, and 56 percent of Americans have sub-prime credit today.…Global debt is now around $275 trillion, or 385 percent of world GDP. That’s $38,000 of debt for each and every person in the world. Even the average American is one paycheck from bankruptcy. So how does anyone ever believe that any of this debt could ever be repaid? Well, it won’t be, that’s absolutely guaranteed.All this will lead to unprecedented money printing and hyperinflation. Thereafter we are likely to see a deflationary collapse of the financial system. We will certainly be looking at a very different world in coming years.Excerpts from full interview made available by King World News
The notion that the global economy is in recovery and that the United States has exited the recession of 2008/2009 is a facade.
Michael Snyder at the Economic Collapse Blog and Jim Quinn of The Burning Platform recently noted that despite the purported success of government cash infusions, America’s death rattle is growing louder as household retail brands are being absolutely pummeled by a lack of consumer spending.
Retail store results for the 1st quarter of 2014 have been rolling in over the last week. It seems the hideous government reported retail sales results over the last six months are being confirmed by the dying bricks and mortar mega-chains. In case you missed the corporate mainstream media not reporting the facts and doing their usual positive spin, here are the absolutely dreadful headlines:Wal-Mart Profit Plunges By $220 Million as US Store Traffic Declines by 1.4%Target Profit Plunges by $80 Million, 16% Lower Than 2013, as Store Traffic Declines by 2.3%Sears Loses $358 Million in First Quarter as Comparable Store Sales at Sears Plunge by 7.8% and Sales at Kmart Plunge by 5.1%JC Penney Thrilled With Loss of Only $358 Million For the QuarterKohl’s Operating Income Plunges by 17% as Comparable Sales Decline by 3.4%Costco Profit Declines by $84 Million as Comp Store Sales Only Increase by 2%Staples Profit Plunges by 44% as Sales Collapse and Closing Hundreds of StoresGap Income Drops 22% as Same Store Sales FallAnn Taylor Profit Crashes by 75% as Same Store Sales FallAmerican Eagle Profits Tumble 86%, Will Close 150 StoresAeropostale Losses $77 Million as Sales Collapse by 12%Big Lots Profit Tumbles by 90% as Sales Flat & Exiting Canadian MarketBest Buy Sales Decline by $300 Million as Margins Decline and Comparable Store Sales Decline by 1.3%Macy’s Profit Flat as Comparable Store Sales decline by 1.4%Dollar General Profit Plummets by 40% as Comp Store Sales Decline by 3.8%Urban Outfitters Earnings Collapse by 20% as Sales StagnateMcDonalds Earnings Fall by $66 Million as US Comp Sales Fall by 1.7%Darden Profit Collapses by 30% as Same Restaurant Sales Plunge by 5.6% and Company Selling Red LobsterTJX Misses Earnings Expectations as Sales & Earnings FlatDick’s Misses Earnings Expectations as Golf Store Sales PlummetHome Depot Misses Earnings Expectations as Customer Traffic Only Rises by 2.2%Lowes Misses Earnings Expectations as Customer Traffic was FlatOf course, those headlines were never reported. I went to each earnings report and gathered the info that should have been reported by the CNBC bimbos and hacks. Anything you heard surely had a Wall Street spin attached, like the standard BETTER THAN EXPECTED.
Those are the facts.
Last week well known contrarian economist John Williams made two dire predictions.
First, the government’s Q1 economic growth numbers would be revised
downward and actually show that the economy shrank for the first three
months of the year. This has now been confirmed with official revisions showing negative one percent growth.
Second, Williams predicts that
come July 30 the second quarter will verify that the United States has
entered another recession, which is officially defined as two
consecutive negative growth quarters.
Once these data are released it will confirm what we’ve been warning about for many months –
that there is and has been no economic recovery. The U.S. (as well as
China and Europe) are about to hit the next wave of this broader
depression.
There is, as Williams noted, no
way of saving the system at this point, echoing Von Greyerz’s
assessment that we will soon be living in an unrecognizable world.
It won’t all happen overnight, but a collapse is all but assured at this point.
Those who have made the effort to get informed and taken steps to prepare for the inevitable calamity that is to come will fare much better than the 99% percent of Americans who will be totally blindsided when life as we have come to know it comes to an abrupt halt.
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Spanish court makes first conviction of bankers since start of crisis
But ex-heads of bailed-out lender Caixa Penedès may avoid jail by returning retirement checks
Former director general of Caixa Penedès, Ricard Pagès. / EFE
For the first time since the economic crisis began, a group of bankers has been found guilty of financial crimes in Spain.
But the former leaders of Caixa Penedès, a Catalan savings bank that received €915 million in state aid before being bought out by another bank, may be able to avoid going to jail despite their joint five-year conviction.
Instead, former director general Ricard Pagès Font and his three aides have promised to return the €28.6 million in retirement plans that they granted themselves before leaving the lender. Caixa Penedès was ultimately bought out by Banco Sabadell in October 2013 after receiving the bailout money.
Judge José María Vázquez Honrubia has taken into account the attenuating circumstance that the defendants admitted to the facts. Pagès had awarded himself €11.6 million; Santiago José Abella got €5.7 million, and there was €6.1 million for Manuel Troyano and €4.8 million for Juan Caellas.
The ruling describes the former bank officials as guilty of mismanaging the lender. Standing before the judge, the accused were told that “you have acted in a malicious, insidious, deceptive way towards society. By bypassing the savings bank’s control mechanisms, and using a president and a board who were there practically for decorative purposes, you put you personal interests ahead of social interests, abusing the trust placed in you as executives.”
Beginning in 2010 many savings banks were forced
by the government to merge to avoid a chain reaction of bankruptcies
across the country
They are just some of several savings banks officials to have come under fire for awarding themselves hefty bonuses as their companies struggled to survive in the wake of the Spanish property market crash, to which they had been heavily exposed. Beginning in 2010 many of the country’s savings banks were forced by the government to merge to avoid a chain reaction of bankruptcies.
Some lenders had to be completely nationalized. This was the case with Bankia, the result of the merger between Caja Madrid and six other lenders. The former head of Caja Madrid, Miguel Blesa, is now the target of a court investigation into alleged wrongdoing in connection with the sale of preferential shares to small investors who lost their life savings, as well as the ruinous acquisition of the City National Bank of Florida.
The failed Valencian lender CAM also wants prison terms for two former execs who raised their own salaries by several orders of m
What Signals The Collapse Of The Dollar? Billionaires Dumping US Stocks Now! America Has Close To Zero Gold!!
You want plain talk and plain signals leading up to the dollar collapse?
Do you really want to know what is going on?
Do you really want to know what to look for, so you can prepare?
Have you ever thought of raising your own chickens in your backyard? You should, because the price of eggs is going sky high.
If they starve you to death, you will be ready to do anything they want.
The rich will have no problem coping with the collapse of the dollar, but common folk will starve.
You are living in the most evil of times. All you see from our government is fraud.
Want to invest? Invest in yourself, and watch this video now.
This man is a straight talker anyone can understand. He speaks on the whole mess and you can look for as the dollar collapses.
Just because the stock market looks good, don’t believe it. It is hyperinflated. Billionaires are dumping stocks as we speak!
The housing market is hyperinflated. The bubble will burst again.
Food prices are hyperinflated, and are the number one indicator of the collapse of the dollar.
FROM ARTICLE:
A handful of billionaires are quietly dumping their American stocks . . . and fast.
Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.
Buffett’s holding company, Berkshire Hathaway, has been drastically reducing its exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced its overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.
With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.
Unfortunately Buffett isn’t alone.
Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase according to a recent filing. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.
Finally, billionaire George Soros has sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.
A handful of billionaires are quietly dumping their American stocks . . . and fast.
Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.
Buffett’s holding company, Berkshire Hathaway, has been drastically reducing its exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced its overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.
With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.
Unfortunately Buffett isn’t alone.
Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase according to a recent filing. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.
Finally, billionaire George Soros has sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.
What
about America’s gold? Is it still in Fort Knox? Kirby says, “I don’t
believe America possesses any substantial amount of gold. America claims
to have sovereign holdings of just over 8,000 metric tons. I believe
that number is grossly inflated, and it might be close to zero.” What
would happen to the dollar if it was indeed fact that America had very
little gold left in its vaults? Kirby contends, “There would be calamity
in the financial markets around the world. . . . If the 8,000 tons of
gold has grown feet and is not where it is supposed to be, it would
certainly qualify as a national secret. This would also explain why the
United States has been so dead set against a proper audit of its gold
reserves.”
Kirby has 15 years’ experience as an international derivatives broker. There are hundreds of trillions in derivatives spread around at the major global banks. There is no public market, no standards, and no guarantees. If someone miscalculates by a small amount, Kirby says the whole system could crash. Kirby explains, “You’ve got one bank in Germany that’s got a derivatives book that is 20 times the size of Germany’s GDP . . . . Germans have seen their currency go to zero. Germans know this can happen because it’s happened to them. Americans don’t think this can happen to them. Americans think they can print money until the cows come home and that they can control anything by printing more money. You can’t solve a problem of indebtedness by continuing to print money. This is fraud on the highest, highest order. This is not going to end well. What they are doing is bluffing with the future of humanity. They are bluffing with the future of mankind.”
Kirby has 15 years’ experience as an international derivatives broker. There are hundreds of trillions in derivatives spread around at the major global banks. There is no public market, no standards, and no guarantees. If someone miscalculates by a small amount, Kirby says the whole system could crash. Kirby explains, “You’ve got one bank in Germany that’s got a derivatives book that is 20 times the size of Germany’s GDP . . . . Germans have seen their currency go to zero. Germans know this can happen because it’s happened to them. Americans don’t think this can happen to them. Americans think they can print money until the cows come home and that they can control anything by printing more money. You can’t solve a problem of indebtedness by continuing to print money. This is fraud on the highest, highest order. This is not going to end well. What they are doing is bluffing with the future of humanity. They are bluffing with the future of mankind.”
Mountain Woman
The Wrath Of Abenomics: Sales Collapse, Inflation Soars
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
Even
the soothsayers and Abenomics spin doctors expected a downdraft after
Japan’s consumption tax was jacked up to 8% from 5%, effective April 1.
But not this.
The tax
hike had been pushed through parliament by Prime Minister Shinzo Abe’s
predecessor. It was supposed to save Japan. But no one wants to pay for government
spending. The tax proved to be so unpopular that Prime Minister Noda
and his government were unceremoniously ousted at the end of 2012.
Japan
is in terrible fiscal trouble. Half of every yen the government spends
is borrowed, now printed by the Bank of Japan. Expenditures can’t be
cut, apparently, and government handouts to Japan Inc. had to be
increased. Yet something had to be done to keep the gargantuan deficit
from blowing up the machinery altogether, and it was done to those who
spend money.
The
consumption tax is very broad, impacting goods and services bought by
businesses and individuals, from haircuts and vegetables to construction
materials. So the 3-percentage-point increase would be levied on much
of the economy.
But
here is the thing: money that people and companies keep in the bank
earns nearly nothing, and even a crappy 10-year Japanese Government Bond
yields less than 0.6% per year. But if buyers frontloaded major
purchases by a few months or even a year to beat the consumption-tax
increase – buying that refrigerator or heavy-duty truck a year earlier
than they normally would, for example – they’d save 3% of the purchase
amount. That’s pure income. And tax-free for individuals. The biggest
no-brainer in Japanese financial history.
Every
company and individual frontloaded whatever was sufficiently practical
and substantive, and whatever they could afford. It started late last
year and culminated in the January-March quarter. As a result, GDP
soared at an annual rate of 5.9%, a phenomenal accomplishment for Japan.
The
Japanese have been through this before. Ahead of the prior
consumption-tax hike from 3% to 5% effective April 1, 1997, consumers
and businesses went on a buying binge of big-ticket items. The economy
boomed for a couple of quarters, then woke up with a terrific hangover
as spending on durables by businesses and consumers ground to a halt,
and the economy skittered into a nasty recession that lasted a year and a
half!
But this time, it’s different. On March 23, about a week before the tax hike would take effect, the Nikkei polled
corporate executives as they were still floating on a sea of optimism
from all the money that rampant frontloading was bringing in faster than
they could count. They weren’t concerned: 70.2% said that sales would
remain stable or decline no more than 5% in fiscal 2014, which started
April 1; 55.4% said the economy, supported by strong consumer spending,
would improve by September, and 74.3% saw that happening no later than
December. So no big deal.
Alas, the Ministry of Economics, Trade, and Industry just released a dose of reality.
Total retail sales in April plunged 19.8% from March and were down 4.4%
year over year. But this includes sales of perishable and small items
not suited for frontloading, and convenience-store sales (which rose a
smidgen). In stores where people buy durable goods, such as appliances,
watches, or cars, sales were awful.
At
“large retailers,” sales swooned 25.0% from March and 5.4% year over
year. At supermarkets, where people also buy some durable goods, sales
fell 3.9% year over year – people even stocked up on non-perishable food
and beverages. At department stores, where people buy jewelry, designer
clothing, or French purses, sales fell 10.6% year over year. It wasn’t
just retail. Sales between businesses – nearly 2.5 times the value of
retail sales – plunged 20.4% from March and 3.7% year over year. In
short, it was the largest decline in sales since March 2011, when the
Great East Japan Earthquake and tsunami that killed over 19,000 people,
brought commerce to a near-standstill.
Those
sales were in prices that had been inflated by 3%. That tax-hike money
doesn’t stay with the seller but is turned over to the government. In
actual merchandise sales, the scenario is 3 percentage points worse. So
sales at, for example, large retailers on a comparable basis dropped
28%, not 25%.
At the
end of January, the Japan Automobile Manufacturers Association (JAMA)
forecast that passenger and commercial vehicle sales would dive 9.8% in
fiscal 2014, to 4.85 million units, the lowest since earthquake year
2011. JAMA’s prediction was pooh-poohed as catastrophist.
Turns out, the good people at JAMA are optimists; vehicle sales got demolished in
April. As measured by registrations, all categories plunged: new cars
-60.3% from March; mini cars (with tiny 500cc engines) -48.9%; trucks of
all sizes, including minis -58.0%. Total vehicles sales, retail and
commercial, cars, trucks, and buses plummeted 63.3% to 345,226 units,
down from 939,761 units in March.
It was
the worst performance since the 292,043 units that were sold April 2011,
the first full month after the horrific earthquake. Even March 2011 had
been better as the first ten days had been tracking normally. Here is
the chart of that epic collapse in total vehicle sales:
Most of
the vehicles sold in Japan are made in Japan – despite decades of
screaming by US automakers, which have yet to get their foot in the
door. This means production schedules are going to get cut, hours will
be reduced, component purchases will be whittled down…. And the whole
chain reaction of a large complex manufacturing sector slowing down will
worm its way into the statistics over the coming months. Same as in
1997.
The
slowdown will add to the slowdown already underway in business and
consumer spending on durable goods. And all the hype about the
phenomenal January-March quarter and how Abenomics was performing
miracles, and how consumers were finally starting to spend is already
turning into furious spin-doctoring as economists are fanning out to
explain that this time, it’ll be different, that April was just a blip,
that all this frontloading won’t lead to a long recession, as it did
last time.
And on
May 30, the hapless Japanese consumers woke up to find out officially
what they’d already figured out on their own: inflation in April had
soared 3.4% for all items from a year earlier, with goods prices up a dizzying 5.2%.
But their incomes have been stagnating. The wrath of Abenomics is
slamming them: inflation without compensation. Inflation mongers will be
ecstatic, but this can’t possibly be good for the Japanese people, or
the economy.
China’s
actions “discourage” Japanese corporations from doing business there,
said the Japanese government, and that’s exactly what has been happening
for months. In a most dramatic way and where it hurts China the most.
Read….. Exodus of Japan Inc. Slams China
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