Bernanke is Still Bubble Blind

Submitted by Michael Pento – Pento Portfolio Strategies

Even though the former Chairman of the Federal Reserve is now getting paid privately for his economic and market prognostications, he is still unable to identify or acknowledge the monumental bubbles that central banks have engineered. Mr. Bernanke, who was recently interviewed in Korea, tried to assure investors that rate hikes (whenever they begin) would be good news for the U.S. economy. He was also very “optimistic” there would not be a hard landing in China. And, not surprisingly, the man who is now gainfully employed at the Brookings Institution, Pimco and hedge fund Citadel, is also “encouraged” by Japanese Premier Shinzo Abe’s growth strategy. This is despite the fact that the thrust of Abenomics has been to depreciate the value of the Yen by 35 percent in the past two and a half years.

However, investors need to question if the solace Mr. Bernanke is trying to once again pervade should be accepted with complete alacrity. After all, the erstwhile Fed Head completely missed the real estate-related credit bubble and the effects of its collapse upon the global economy. And now he has again become blind to the bubbles in China, Japan and the United States.

The command and control communist government of China has been on a debt binge since the year 2000. Total credit market debt has soared 28 times (from $1 trillion to $28 trillion) in the past 15 years! And, in response to the worldwide Great Recession of 2007, the government of China put in place policies that quadrupled the total debt outstanding—rising from 160 percent of GDP, to nearly 290 percent today. Continue reading

Ukrainians Dispossessed, Americans are next

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Over the last 15 months Ukrainians have paid for Washington’s overthrow of their elected government in deaths, dismemberment of their country, and broken economic and political relationships with Russia that cost Ukraine its subsidized energy. Now Ukrainians are losing their pensions and traditional support payments. The Ukrainian population is headed for the graveyard.

On June 1 the TASS news agency reported that Ukraine has stopped payments to pensioners, World War II veterans, people with disabilities, and victims of Chernobyl. According to the report, Kiev has also “eliminated transport, healthcare, utilities and financial benefits for former prisoners of Nazi concentration camps and recipients of some Soviet-era orders and titles. Compensations to families with children living in the areas contaminated by radiation from the Chernobyl accident will be no longer paid either. Ukraine’s parliamentary opposition believes that the Prosecutor General’s Office should launch an investigation against Prime Minister Arseniy Yatsenyuk who actively promoted the law on the abolition of privileges.”

Notice that this is a yank of the blanket from under the elderly in Ukraine. “Useless eaters,” they are assigned to the trash can. How do the deceived Maiden student protesters feel now that they are culpable in the destruction of their grandparents’ support systems? Do these gullible fools still believe in the Washington-orchestrated Maiden Revolution? The crimes in which these stupid students are complicit are horrific.

Yatsenyuk, or Yats as Victoria Nuland calls him, is the Washington stooge that the US State Department selected to run the puppet government established by Washington. Yats sounds like a right-wing Republican when he refers to pensions, compensations, and social services as “privileges.” This is the Republican view of Social Security and Medicare, programs paid for by the payroll tax over the working lives of Americans. The Republicans stole the payroll revenues and spent them on their wars that enrich Wall Street and the military/security complex, and now blame “welfare handouts” for America’s fiscal plight.

Is Monsanto’s right to turn Ukraine into GMO food production a privilege? ls VP Biden’s son’s right to destroy Ukraine’s surface and underground water in fracking operations a privilege? Are the external costs imposed on Ukrainians by these looting activities a privilege? Of course not! These are not privileges. This is the operation of free market economics creating the greatest good for the greatest number. (As many Americans will not realize that I am engaging in satire, I would like to affirm that I am.) Continue reading

Government-Granted “Freedom”

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Orwellian Language – the Slide toward “Velvet Glove” Fascism Continues

Sometimes we get the feeling the ruling elites are investing the laws they enact with a kind of impertinent, slap-in-your-face black humor. How else to explain the Orwellian names given to the liberty-crushing laws that have been put in place since the “war on terror” started?

The latest example is the misnamed “Freedom Act”, the purpose of which appears to be to make legal what was hitherto plainly illegal – inter alia whole-sale spying by the government on the citizenry. The legislation has been sold to the serfs as absolutely necessary to “prevent terror attacks”. As we have previously pointed out, the average US citizen is statistically far more likely to die from drowning in a bathtub or simply by falling from a chair rather than from a terror attack. No special laws have been proposed yet to save us from the evil of bathtubs and chairs, in spite of the danger evidently emanating from these deadly household furnishings.

editorial-201106021Many people indeed begin to watch what they are saying once they are aware of being under constant surveillance. As we have previously argued, this undermines an important pillar of civilization.

Cartoon via Terrence Nowicki

Apart from the vanishingly small statistical likelihood of actually being harmed by terrorists, it is noteworthy that such laws – the true purpose of which is highly unlikely to be congruent with their stated purpose – are enacted even while the government engages in activities that are bound to worsen these statistics in the future. The so-called “war on terror” so far actually seems to be similarly successful as the “war on poverty” and the “war on drugs”. In fact, it appears to be ranking quite high on the list of the biggest government boondoggles.

terrorSince the “war on terror” started, terrorism has grown like never before. One should expect such outcomes to some extent, but this one is actually putting quite a few other failed government schemes to shame … via Washington Post, click to enlarge. Continue reading

Gold At $64,000 – Bloomberg’s ‘China Gold Price’

Submitted by Mark O’Byrne  –  GoldCore

– Bloomberg Intelligence suggest gold-backed yuan see gold at $64,000 per ounce
– “Chinese gold standard would need a rate 50 times bullion’s price”
– As China-U.S. relations deteriorate, gold-backed yuan possible
– Dollar and financial and monetary dominance of U.S. at risk
– U.S. and China war of words continues to escalate
– China rejects U.S. hegemony in Southeast Asia
– Currency war to escalate

If China were to partially back its yuan with gold it would require a gold price of $64,000 per ounce, 50 times gold bullion’s price today, according to a recent article from respected Bloomberg Intelligence.

goldcore_chart4_05-06-15
It seems like an outlandish forecast. However, as tensions between the U.S. and China continue to escalate such a scenario is not actually as implausible as it may first appear.

If China were to back its yuan with gold it would require a price of $64,000 per ounce according to a recent report from Bloomberg.

While Bloomberg give no details as to how they arrive at this figure, our “back of envelope” calculations would confirm that at its current value relative to the dollar the yuan would indeed require gold – priced in dollars – to be priced in the tens of thousands of dollars.

Chinese M1 money supply is roughly 33.64 trillion yuan which at todays exchange rate equates to around $5.4 trillion.

Bloomberg conservatively estimate China’s gold reserves at around 3150 tonnes although many analysts believe the figure to be much higher.

In order to back $5.4 trillion yuan with 3150 tonnes of gold, the gold price would need to be in the region of $48,600 per ounce.

Bloomberg conclude that, at today’s prices, it would be “basically impossible” for China to fully back its yuan with gold. Indeed, at $1,200 per ounce, it would require over 126,000 tonnes to back $5.4 trillion.

Bloomberg states that “there’s no evidence” that China seeks to adopt a traditional gold standard. However, China’s appetite for gold in recent years has been voracious and it is clear that they and the People’s Bank of China (PBOC) place great strategic importance on the precious metal.

The Chinese have been quite overt in recent months in their ambition to establish the yuan as a rival reserve currency and it is likely that they intend gold to play a role in that ambition.

If China were to even partially back its currency with gold it would gain further favour across the world as a reliable reserve currency when viewed against the increasingly debased U.S. dollar. In order to maintain some semblance of credibility the U.S. would likely be forced to follow suit.

For the U.S. to back its gargantuan M1 with its stated, and almost certainly grossly overstated, gold reserves of 8,500 tonnes it would push gold prices to multiples of their current price. Continue reading

France Is a Dead Country

Submitted by William Bonner, Chairman – Bonner & Partners

The French are Leaving

“Old people, they should be killed at birth.”

Boris Vian

Still nothing to report from the financial markets. The Dow and S&P both ticked up about a half a percentage point on Wednesday. And gold has been hovering around $1,190 for over a week. Is everyone at the beach already? Are investors waiting for something to happen? We don’t know…

PARIS-IS-DEAD-Magazine-3 (ohne insert)

Let us hope Agatha Rousselle remains alive …

Image via parisisdead.com / Author: René Habermacher

Meanwhile …

“France is a dead country.” A young man gave it to us straight.

“If you are young and you have any ambition, you leave France. You go to London, or the U.S.A., or China. There’s no point staying in France. I am French. It breaks my heart to leave. But I can’t stay. I don’t like being dead that much.”

Our friends in Paris tell us the same thing. Their children have left. If they want to visit their grandchildren they have to travel overseas. Meanwhile, prices of top properties in London, Vancouver, and New York are higher than ever. But prices in Paris are soft.

“We’d like to sell our house [in Paris],” says a friend. “It’s perfect for a young family. But the young family we would sell it to has moved to London.” Maybe it’s the weather. Maybe it’s the economy. But the capital of the Fifth Republic seems depressed. And old.

“The Biggest Scandal in France”

Yesterday, we took the train out to Normandy. We bought first-class tickets, hoping to have some extra space to work. But the first-class compartment was the same as second class. Only shabbier. The seats were grimy. The upholstery was worn and greasy.

“What is the difference between first class and second class?” we asked the ticket taker when he went down the aisle.

“Well, there really isn’t any, except that first class is more expensive, so there are fewer people.”

We looked into the second-class compartment. It had no more people than the first. But we are not writing to pass along travelers’ tales. We keep our eyes open in the hopes of learning something. And what we are learning here in France is that it has the same problems as the U.S. – maybe worse.

Young people do not leave the country only because it is sluggish and stale; they leave because it is rigged against them. This is “The biggest scandal in France,” as the magazine Le Point calls it. It calls its young “The Generation of Pigeons.”

In France, as in America, older people have used government to give themselves money and privileges… and turned the young into chumps. For example, the average income tax rate on a 30-year-old is nearly three times as high as the rate on a 65-year-old.

The unemployment rate for young people aged 15 to 24 is two to three times higher than the rate for older people. For those who dropped out of high school, barely one out of two has a job. And French employment law is infamously favorable to people who are already in the system – but vicious to those who aren’t.

france-unemployed-personsRecently the number of unemployed persons in France reached a new record high Continue reading

Recessionary ‘Feel’ Remains In Trade

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

I understand the idea behind trying to get exports to fit into the orthodox conventions about the dollar and global trade, even if I don’t agree with that at all, as it at least makes some plausible sense. If the dollar is up against trade partners, in simple math terms you might expect to see fewer US exports heading overseas – the currency translation makes our goods “more expensive.” But where that has at least a logical basis, there is none on the import side. If US goods are more expensive, then foreign goods are much cheaper, relatively, and thus with robust jobs and all that there should be a massive infusion of imports right now.

The opposite is, of course, the case, where imports continue to collapse in 2015. The resolution of the West Coast port strike, which is so often referenced in all this, amounted to a March increase of just 2.1% year-over-year. That followed February’s alarming 4.4% decline. But rather than all these cheapened imports and freely flowing ports opening up the spigot for burgeoning domestic demand, imports fell almost 6% in April! That was the worst month since March 2013 and the initial inflection off the 2012 global slowdown. If there is a robust US economy hiding in here, it is the most camouflaged in history.

ABOOK June 2015 ExIm Imports YY

The 6-month average for overall US imports is now negative, at -0.5%, which shows significant deterioration in just 2015 alone. This really isn’t surprising, as with factory orders US imports, apart from any ideas about the dollar and currency exchange, are a part of the supply chain where recessionary sales and record high inventories are never going to lead to anything good and positive for global trade. Rather than the idea about the dollar and all that, this is yet another data point confirming the US heading toward what looks suspiciously like recession.

Since the global economy is really and truly global, a US moving in that direction is never going to be far from the rest of the world doing the same. That is why, in addition to the import figures, I don’t find the currency explanation in any way compelling. As it is, exports decline only when there are recessions – global “demand”, not currency exchanges. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

In Greek Debt Puzzle, the Game Theorists Have It (NY Times)
Greece Misses IMF Payment In Warning Shot, Showdown With Europe Escalates (AEP)
A Speech of Hope for Greece (Yanis Varoufakis)
EU/IMF Lenders Demand Asset Sales, Pension Cuts In Greek Proposal (Reuters)
Greece’s IMF Repayment Delay Smacks Of Both Desperation And Defiance (Guardian)
Greek Finance Ministry: German WWII Debt €280 To €340 Billion (Kathimerini)
Stay Out Of Harm’s Way – The Casino Is Fixing To Blow (David Stockman)
The Lawsuit Machine Going After Student Debtors (Bloomberg)
Bernie Sanders: Let’s Spend $5.5 Billion to Employ 1 Million Young People (BBG)
Housing Bubble Was Built By JP Morgan, Barclays (MarketWatch)
The Real Reason Why There Is No Bond Market Liquidity Left (Zero Hedge)
US Workers Ask: Where’s My Raise? (WSJ)
Levels Of UK Household Debt At Record High (Independent)
There’s a Big Decision Looming for Chinese Stocks (Bloomberg)
We Are The Propagandists: US Turns Truth In Ukraine On Its Head (Salon)
Kiev Allows Foreign Armed Forces, ‘Potential Carriers Of Nukes’ In Ukraine (RT)
US Knowingly Conceals Ceasefire Violations By Kiev (RT)
Global Dairy Costs Drop to 5-Year Low on Record Milk Output (Bloomberg)
Californians Urged To Rip Out Their Lawns (Guardian)
The Rewilding Plan That Would Return Britain To Nature (BBC)
Number of Migrants Trying to Reach Europe via Greece Has Surged by 500% (Vice)

Much more here: Debt Rattle June 5 2015 – TheAutomaticEarth.com