Are You Prepared for “Financial Prohibition”?

Submitted by William Bonner, Chairman – Bonner & Partners

The War on Cash

ROME – What are we doing in Rome? We’ll tell you tomorrow. That will give us time to figure it out…

when-in-rome-2010_72231373522130Si fueris Romae, Romano vivito more – when in Rome, do as the Romans do!

Photo credit: Touchstone Pictures

In the meantime, remember: Cash is king. It’s one of the best-performing major asset classes this year. It’s also – by far – the safest. Even billionaire investor Carl Icahn is now urging investors to get into cash. Cash will someday disappoint us. But probably not today… or tomorrow.

But the authorities don’t like cash. As we’ve been warning Bill Bonner Letter readers, the feds have a bitter animosity toward cash. It has almost become a religious creed. Like the Temperance League’s attitude toward alcohol, the feds are afraid that cash is a pernicious temptation, leading to sin and suffering.

People have a “propensity to save,” they say. This, they believe, causes all sorts of social ills – from poverty to unemployment. Fortunately, the feds are there to protect us. They fight this weakness in the human character with a variety of measures. Zero-interest-rate policy (ZIRP), for example.

Shadow-economy-French-succumb-to-temptation-of-cash-as-taxes-climb-1The temptation of cash – even the French succumb to it! – click to enlarge. Continue reading

Six Months Later, Cries For More QE Already

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

On September 28, Mark Haefele, Global CIO at UBS Wealth Management, wrote at CNBC.com there was much more to the central banking offerings than currently employed. The implication, obviously, was a reassuring call to not heed any darkening outlook. Blaming that upon “overanalyzed data”, Mr. Haefele insisted that investors were becoming far too pessimistic given the potential monetarism yet untapped.

The progress made toward recovery has been largely overlooked, whereas the magnitude and breadth of the weak economic data has been overanalyzed. We believe disappointing data represents a mid-cycle slowdown, not a slide into recession. A combination of improving readings from the U.S. and a gradual recovery in China should help restore faith in the global growth picture.

There’s a very good chance that September’s payroll report, which came out after this article, rendered such reassuring support moot; at least in terms of investor confidence in the economic outlook such that it is right now. Stock market action, on its own, has been more conforming in excitement toward what central banks might do, but that is all still predicated on simply redoing what hasn’t worked. Even Mr. Haefele was depending on the same old:

In the euro zone, European Central Bank President Mario Draghi has been explicit in his willingness to unveil bigger monetary policy guns, saying on Sept. 3 that “the size, composition and duration” of quantitative easing could all be enlarged. We consider it likely that the Bank of Japan’s asset purchase program, running at 80 trillion yen ($663 billion) annually, will be increased in response to low inflation readings.
And in the U.S., while debate rages about the merits of the Federal Reserve’s recent non-decision, Chair Janet Yellen and her colleagues have proven they are flexible enough to maintain ultra-low interest rates if they see fit.
Second, we should remember that stimulus takes time to feed through into hard data.

While his second point was related to what he thinks should be a more patient approach to China, does time (lags) really matter at this point? For this orthodox perspective, China started “cutting rates” almost a year ago, and the country is still sinking and threatening the global economy with it. Continue reading

Greece Without Illusions

Submitted by Yanis Varoufakis  –  The Yanis Varoufakis Blog

ATHENS – “The costliest minor government reshuffle in Greece’s history.” That is at least one way to describe the result of the Greek general election on September 20. Indeed, with few exceptions, the same ministers have returned to the same offices as part of an administration backed by the same odd pair of parties (the left-wing Syriza and the smaller right-wing Independent Greeks), which received only a slightly lower share of the vote than the previous administration.

But the appearance of continuity is misleading. While the percentage of voters backing the government is relatively unchanged, 0.6 million of the 6.1 million Greeks who voted in the July 5 referendum on continued “extend-and-pretend” loans with stringent austerity strings attached did not turn out. The loss of so many voters in little more than two months reflects the electorate’s dramatic change in mood – from passionate to glum.

The shift reflects the mandate that Prime Minister Alexis Tsipras sought and gained. Last January, when I stood with him, we asked voters to back our determination to end the “extend-and-pretend” bailouts that had pushed Greece into a black hole and operated as the template for austerity policies across Europe. The government that was returned on September 20 has the opposite mandate: to implement an “extend-and-pretend” bailout program – indeed, the most toxic variant ever. Continue reading

Immigration Revisited

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Milton Friedman on the Core of the Problem

Below we want present two short video excerpts from a presentation by the late Milton Friedman, in which he is talking about the thorny issue of immigration, including “illegal” immigration – with a hat tip to Mish, who pointed the existence of these video documents out to us.

Friedman goes to the core of the problem. Long-time readers may recall an article by our friend and regular contributor Keith Weiner, which we published a while ago: Immigration for Republicans. Judging from the comments section, this is quite an emotional topic that tends to provoke intense reactions. As it turns out, Keith was making arguments that are very similar to Milton Friedman’s.

milton-friedman-1Chicago School economist Milton Friedman

Photo credit: The Friedman Foundation for Educational Choice

Milton Friedman rightly asks, why is there actually a problem at all? Would anyone consider the wave of immigration to the US from Europe during the 19th century a bad thing nowadays? Of course not; in fact, most people would end up denouncing their own forebears if they did that. Were these immigrants rich? No, most of them were dirt-poor. They spoke little if any English, and were primarily what in today’s terminology would be called “economic refugees”. In other words, in none of their most important and obvious characteristics were they any different from modern-day immigrants. Continue reading

Gold to “double in price and surpass its inflation-adjusted high of $2,500 per ounce in the next 3 to 5 years”

Submitted by Mark O’Byrne  –  GoldCore

The bullish outlook for gold prices was covered by Dow Jones Marketwatch yesterday.

“Gold prices may be ready to make a significant move higher as holdings of the precious metal in the SPDR Gold Trust exchange-traded fund climb to their highest level in more than two months.”

GoldCore believes that gold may have “bottomed in the summer,” and could climb to as high as $1,300 an ounce by the end of this year.  Longer term, O’Byrne expects gold to “double in price and surpass its inflation-adjusted high of $2,500 per ounce in the next 3 to 5 years.”

The metal “remains undervalued when compared to assets such as stocks, bonds and property—all of which have surged in recent years,” he said.

The full article from Marketwatch can be read here – Gold may be on verge of ‘breakout’ higher as ETF holdings rise. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

In America, It’s Expensive To Be Poor (Economist)
Morgan Stanley Predicts Up To A 25% Collapse in Q3 FICC Revenue (Zero Hedge)
Bill Gross Sees Stocks Plunge Another 10%, Urges Flight to Cash (Bloomberg)
Treasury Auction Sees US Join 0% Club First Time Ever (FT)
Big US Firms Hold $2.1 Trillion Overseas To Avoid Taxes (Reuters)
Lower Interest Rates Hurt Consumers: Deutsche Bank (Bloomberg)
Bernanke Says ‘Not Obvious’ Economy Can Handle Interest Rates At 1% (MarketWatch)
UK Finance Chiefs Signal Sharp Fall In Risk Appetite (FT)
Commodity Collapse Has More to Go as Goldman to Citi See Losses (Bloomberg)
Emerging Market ETF Outflows Double as Losses Hit $12.4 Billion (Bloomberg)
China’s Slowing Demand Burns Gas Giants (WSJ)
BP’s Record Oil Spill Settlement Rises to More Than $20 Billion (Bloomberg)
Glencore Urges Rivals To Shut Lossmaking Mines (FT)
Norway Seen Tapping Its Wealth Fund to Ward Off Oil Slump Risks (Bloomberg)
South East Asia Economic Woes Test Built-Up Reserves, Defenses (Reuters)
Samsung Seen Tapping $55 Billion Cash Pile for Share Buyback (Bloomberg)
German Factory Orders Unexpectedly Fall in Sign of Economic Risk (Bloomberg)
Top EU Court Says US-EU Data Transfer Deal Is Invalid (Reuters)
US, Japan And 10 Countries Strike Pacific Trade Deal (FT)
TPP Trade Deal Text Won’t Be Made Public For Four Years (Ind.)
Air France Workers Rip Shirts From Executives After 2,900 Jobs Cut (Guardian)
Nearly A Third Of World’s Cacti Face Extinction (Guardian)

Read much more here: Debt Rattle October 6 2015 – TheAutomaticEarth.com