Saturday, January 31, 2015

H. RES. 41

You can't make this up.  Pensioners--get ready to be smoked.  Dig a second well before the first one runs dry.  And it will run dry.  Congress is admitting it.

It's debatable whether this bill gets passed, but Congress is acknowledging that the federal government is broke.  Bold emphasis is mine.
    Expressing the sense of the House of Representatives that the Federal Government should not bail out State and local government employee pension plans or other plans that provide post-employment benefits to State and local government retirees.

January 21, 2015
    Mr. Chaffetz submitted the following resolution; which was referred to the Committee on Education and the Workforce

    Expressing the sense of the House of Representatives that the Federal Government should not bail out State and local government employee pension plans or other plans that provide post-employment benefits to State and local government retirees.
    Whereas the Federal Government is operating at an annual deficit and is increasing its outstanding debt every year;
    Whereas the Federal Government, as of January 2015, is carrying more than $18.0 trillion in debt, of which $13.0 trillion is owed to the public and $5.08 trillion is owed to Social Security and other trust funds;
    Whereas the Federal Government borrowed 14 cents for every dollar it spent in 2014;
    Whereas foreign governments, individuals, and corporations as of October 2014 own 47 percent of Federal debt held by the public;
    Whereas Social Security's unfunded liabilities in 2014 are $10.6 trillion over 75 years and $24.9 trillion over the infinite horizon;
    Whereas the Federal debt held by the public is expected to increase by more than $7 trillion from 2014 to 2024 according to the Congressional Budget Office;
    Whereas State and local governments are heavily dependent on Federal revenues;
    Whereas more than 16 percent of the entire Federal budget goes directly to States and local governments;
    Whereas more than 22 percent of total State and local government general revenue comes from the Federal Government according to Census Bureau's latest Annual Survey of State and Local Government Finance;
    Whereas numerous State and local government employee pension plans have offered overly generous retirement benefits to its employees and are in dire financial situations with combined unfunded liabilities of more than $4 trillion;
    Whereas many State and local government pension plans have understated liabilities and overstated asset growth rates and have employed methodologies that private sector plans are prohibited from using by Federal law; and
    Whereas several State and local pension plans are expected to fully exhaust their funds within ten years: Now, therefore, be it
Resolved, That it is the sense of the House of Representatives that—
(1) the Federal Government should not bailout State and local government employee pension plans and other post-employment benefit plans; and

(2) State and local governments should immediately institute reforms to their employee pension plans, including replacing defined benefit plans with defined contribution plans.

The Death Of The Middle Class And The Hard Truth
Therefore, it is my prediction that Yellen will not be able to raise rates and will soon have to adopt a very bearish stance towards the dollar. After all, a hawkish interest rate policy is untenable for a Fed that is now paralyzed with the fear of deflation, especially while the rest of the world is frantically printing money. 

Our central bank will not have the courage to allow the dollar’s rise to continue.  And, it is inevitable that Yellen and her comrades at the Fed will soon follow the lead of our Treasury Secretary in talking the dollar down. That may be music to the ears of multinational corporations and our government; but will be the death knell for the middle class.
I would add "a debased dollar will be music to the ears of gold bugs."

Friday, January 30, 2015

Forget the bank: Why many Americans are hiding cash

The contents of this article aren't surprising--many US households are genuinely concerned about the banking system.  What is surprising is that Yahoo Finance, a mainstream site, is reporting it.  What is even more surprising is that American Express published the results of the survey.  Are the money authorities starting to see the writing on the wall--that there is ground swell of the population which is uncomfortable with how paper currencies are being methodically debased with too much printing?  Did the media filter fall asleep at the button?
It's always prudent to have some cash around for emergencies, but cash hoarders believing fiat currency is a solid store of value will be severely disappointed.

Get physical, not paper.

Russia increases gold purchases by 123%

Man Who Predicted Collapse Of Euro Against Swiss Franc Issues Third Terrifying Warning To The World

CME Hikes Silver Margins By 11%

This explains the price plunge in silver yesterday.  Insiders were front running the announcement of the hike in silver margin requirements.  Status quo criminality.

After VISA's Stock Split, The Most Important Company In The Dow Jones "Industrial" Average Is...

Thanks Obamacare: This Is What Americans Spent The Most Money On In Q4

Sunday, January 25, 2015

This Is What Gold Does In A Currency Crisis, Euro Edition

De-Dollarization Complete: Iran Abandons US Dollar In Foreign Trade

"QE Benefits Mostly The Wealthy" JPMorgan Admits, And Lists 8 Ways ECB's QE Will Hurt Everyone Else

It took JPMorgan six years to figure this $hit out?  That QE benefits the wealthy--at the expense of the masses?  Really?  Thanks for that breakthrough insight for the geniuses at JPMorgan.

Spot The Difference: Money Printing, Then And Now

"Cheerful" Dutch Financier Becomes 4th ABN Amro Banker Suicide

The Epochal Consequences Of Woodrow Wilson’s War

Thursday, January 22, 2015

Paul Craig Roberts – The Whole World Is Staring Down The Barrel Of A Gun As Global Collapse Looms

Head of IT Companies Monitoring Pentagon, FBI, NSA and Army Presumed Dead After Suspicious Fire

The data security business is dangerous these days.

Central bank prophet fears QE warfare pushing world financial system out of control

“We are in a world that is dangerously unanchored,” said William White, the Swiss-based chairman of the OECD’s Review Committee. “We’re seeing true currency wars and everybody is doing it, and I have no idea where this is going to end.”

Man Who Predicted Collapse Of Euro Against Swiss Franc Makes Second Terrifying Prediction

SocGen Explains That Since The ECB's QE Will Fail, It Will Need To Be Increased To €3 Trillion, Include Stocks

And to think that SocGen would point to Japan as the shining example of the Keynesian experiment as a success?

Tuesday, January 20, 2015

Another Former Central Banker Finally Gets It: "The Idea That Monetary Stimulus Is The Answer Doesn't Seem Right"
What is it about central bankers who wait to tell the truth only after they have quit their post. First it was the maestro himself, the Fed's Alan Greenspan (most recently in "Greenspan's Stunning Admission: "Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It"), and now it is the Bank of England's former head, Mervyn King, who yesterday told an audience at the LSE that "more monetary stimulus will not help the world economy return to strong growth."

Leader of Al Qaeda group in Iraq was fictional, U.S. military says

Richest One Per Cent Disappointed to Possess Only Half of World’s Wealth

Panic At Davos After Swiss Move As Bank Runs Accelerate And Financial System Begins To Implode

Report says richest 1% will control most wealth by 2016


They will ban bathtubs next.

Earth-Shaking Swiss Move Creates Enormous Chaos As London Gold Pool II Falters

James Turk, in typical fashion, is clear and concise in his breakdown of the re-pricing of the Swiss franc, and ultimately, gold.

Monday, January 19, 2015

If the Fed Has Nothing to Hide, It Has Nothing to Fear

Can You Just Surrender In A Currency War?

Apparently, yes, as the Swiss National Bank has done.

Serious Questions Surround Germany’s Alleged 120 Ton Gold Repatriation From U.S. And Paris

Here, here...

Germany's Bundesbank Resumes Gold Repatriation; Transfers 120 Tonnes Of Physical Gold From Paris And NY Fed

It is coincidental that as soon as Ukraine grudgingly surrendered its sovereign gold that somehow the US Treasury was able to ship repatriated gold back to Germany (without serial numbers, of course).

Germany repatriates more gold: Bundesbank

As often is the case, the comments in this article are as interesting as the article itself.  At least the mainstream media is picking up on the meme that countries are repatriating their sovereign gold, even if the details or logic are misguided.

Saturday, January 17, 2015

Ditching the Dollar.

Death Of Free Markets As Deflation Engulfs The World

"If It’s Not A Hard Asset, It’s No Asset"

The balance sheet that ate Switzerland

The Interest Rate Observer's Jim Grant nailed his bullish call for the Swiss Franc to appreciate back in September 19, 2014.  Long call options on the Swissie made a killing.  For the unwashed masses unable to participate in ISDA derivatives, Grant has been pounding the table on gold.
we venture that the SNB will sooner or later be forced to permit the franc to appreciate and thus to enrich the holders of low-priced, three-year call options on the Swiss/euro exchange rate. It's a long shot, to be sure--the options are cheap for a reason--but we judge that the prospective reward is worth the obvious risk.

More money printing or sub-zero rates may once again set a fire under Swiss house prices, macro-prudential policies notwithstanding. It may ruin the life insurers. At some point, the Swiss National Bank would have to decide whether propping up the export sector is worth the cost. If these circumstances, a bet (and, to be clear, it is very much a bet) on the franc appreciating against the euro might pay. A three-year, at-the-money option on the franc appreciating against the euro is priced at 3.7% of notional today according to Bloomberg. To return to its high of 1.03 francs per euro on Aug. 10, 2011, the franc would appreciate by 17%.

While there is nothing especially exotic about this option, it is available only to institutional investors with an International Swaps and Derivatives Association agreement in place with a too-big-to-fail bank. For readers not so situated, there is always gold, which--in our opinion--the franc is no longer as good as.


Shanghai Gold Exchange and World Gold Council partner to develop the Shanghai Free Trade Zone as a global gold market

This will surely panic the manipulators on Wall Street and in London.  The concern is the WGC has traditionally been the mouthpiece of the manipulators, despite their charter of stimulating demand for gold.

What game is the House of Saud playing?

This article outlines one of the most precarious rivalries between two countries:  that of Iran and Saudi Arabia--and the resultant geopolitical cross-currents.  But the overarching concern is Saudi Arabia's succession will invariably be messy--and dangerous.

Gorbachev Interview: 'I Am Truly and Deeply Concerned'
NATO's eastward expansion has destroyed the European security architecture as it was defined in the Helsinki Final Act in 1975. The eastern expansion was a 180-degree reversal, a departure from the decision of the Paris Charter in 1990 taken together by all the European states to put the Cold War behind us for good. Russian proposals, like the one by former President Dmitri Medvedev that we should sit down together to work on a new security architecture, were arrogantly ignored by the West. We are now seeing the results.

Thursday, January 15, 2015

So Much Changes In 48 Hours

In the "do as what I'm about to do, instead of do as I say" category, the Swiss National Bank just threw those short the Swiss Franc under the bus.  In a classic "Wall Street head fake," the victims were not only institutional or pension funds, but also Wall Street firms themselves.

CHF shorts just got carried out on a stretcher.

"It's Carnage" - Swiss Franc Soars Most Ever After SNB Abandons EURCHF Floor; Macro Hedge Funds Crushed

There are many counterintuitive cross-currents due to the Swiss National Bank removing the peg between the Swiss Franc and the Euro, but one unintended consequence is prices of precious metals soared--at least when priced in USDollars.  In stark contrast, the price of gold--when priced in USDollars--plummeted due to the violent appreciation of the Swiss Franc.

The currency wars continue to wreak havoc on forex speculators and global financial systems, with far-reaching implications for the average consumer.

It begins: IRS launches International Data Exchange service

The US Economy Is So Bad... Even Lottery Sales Are Collapsing

Russia Cuts Off Ukraine Gas Supply To 6 European Countries

And so it begins--the dawning of a very cold Europe.  It's pitifully hilarious that European officials are claiming to be caught off-guard by Russia cutting off natural gas supplies to Europe.

Monday, January 12, 2015

ISIS Supporters Hack US CentCom's Twitter, YouTube Account, Threaten US Soldiers, Release "China Scenario" Details

What goes around, comes around...

A List Of 97 Taxes Americans Pay Every Year

New G20 Rules: Cyprus-style Bail-ins to Hit Depositors AND Pensioners

I gave presentations on the dangers of a looming bank bail-in in 2013, and this is another good article from Ellen Brown on the topic.

Venezuelans Throng Grocery Stores Under Military Protection

According to Jim Sinclair, these are the results of currency-induced cost-push inflation.

Here They Go Again—-Subprime Delinquencies Rising In Autoland

Man Asked To Speak To Chinese Officials Warns Of Disastrous Series Of Global Defaults

Thursday, January 8, 2015

Gold & Silver Ready For Massive & Historic Upside Surge

Bank Secrecy Act Requirements

Cash Purchases of $3,000-$10,000, Inclusive
MSBs that sell money orders or traveler’s checks are required to record cash purchases involving $3,000- $10,000, inclusive.
Multiple cash purchases of monetary instruments totalling $3,000 or more must be treated as one purchase which must be recorded if:
1. They are made at the same time, or
2. The MSB has knowledge that such purchases occurred during one business day.
How to record a money order or traveler’s check sale for cash of $3,000-$10,000, inclusive:
1. Verify and record customer information, including ID.
2. Record transaction information – amount, date of sale and serial number(s) for each instrument.
3. Keep the record for 5 years from the date of transaction.
Money Transfers of $3,000 or More
MSBs that provide money transfer services must obtain and record specific information for each money transfer of $3,000 or more, regardless of the method of payment.
How to record a money transfer of $3,000 or more for money transfer senders and receivers:
1. Verify customer ID.
2. Record customer and transaction information.
3. Sender must provide certain information to the receiving MSB or other receiving financial institution.
4. Keep the record for 5 years from the date of transaction.
Currency Exchanges of More Than $1,000
Currency exchangers must keep a record of each exchange totaling more than $1,000 in either domestic or foreign currency.
How to record a currency exchange:
1. Record customer information.
2. Record transaction information.
3. Keep the record for 5 years from the date of transaction.

Krugman's Japanese Legacy: Record Households On Welfare, Corporate Bankruptcies Soar, Majority Of Households Worse Off

Monetary Death by Proxy

Monday, January 5, 2015

Russia's "Startling" Proposal To Europe: Dump The US, Join The Eurasian Economic Union

Europe is finally coming around to the fact that a healthy Russia is good for a healthy Europe.

Former White House Official Warns Of Terrifying Cyprus-Style Global Endgame

The conflict over equities vs. fixed-income is becoming increasingly precarious.  Stocks offer a decent hedge against currency debasement (there are several bullish factors already mentioned ad nauseum in previous blog entries).  For instance, in the case of extreme hyperinflation, the dollar may collapse in value, even if equities soar nominally (but perversely decline in inflation-adjusted terms).  Traditionally, equities also offer higher returns, even if they come with higher risk than bonds.  So the financial authorities are encouraging investors to chase higher returns by taking on more risk, which is so wrong on many layers it's too daunting to even categorize here.

Stock indices continually reach all-time highs, even if underlying economies are either collapsing or fail to reach escape velocity.  Marketing capitalization has decoupled from economic fundamentals, and surely that gap will close.

On the other hand, bonds offer little upside as zero-interest-rate policies remain firmly in place.  ZIRP is necessary, if destructive longer-term.  They are necessary to keep the over-indebted western economies from imploding, but destructive because they deepen the debt burdens with more debt.  Upon further examination, the risk/return profile of sovereign bonds becomes even more pernicious.  Real (inflation-adjusted) returns on bonds are even less attractive in the context of insolvent governments borrowing funds from investors and offering negative yields.  In other words, investors are risking their funds and being punished with negative yields by taking on that risk.  The numerous bond risks (e.g. inflation, currency, higher interest rates, default, liquidity, etc.) loom ever larger with more money printing.  Yes, QE has ended, but the printing press continues unabated with foreign currency swaps, and ever-expanding US Treasury borrowing.  And should borrowing needs surge, QE will resume.

Lunacy has swept across capital markets, specifically fixed-income.  The Japanese government bond market is a train wreck waiting to happen.  But what are the alternatives, especially with bail-in measures put in place, increasing the likelihood of mandated confiscation of savings accounts--both bank deposits and investment money market funds?