Tuesday, August 14, 2018

How Stupidity Might Delay Our Economic Collapse

The illusion of a robust economy has been propelled forward by the sheer quantity of economic growth rather than its quality. Two recent articles caught my attention in part because of how they highlight this issue. The first had to do with how the poorly crafted and shockingly large omnibus spending bill has created a situation encouraging government agencies to spend like drunken sailors. It seems that Federal agencies, now flush with cash, must obligate that money before the fiscal year ends on Sept. 30 or lose it to the Treasury Department.  The second Authored by WirePoints' Mark Glennon, op-ed via The Wall Street Journal, concerned the planned construction Chicago’s South Side of what has been deemed "The Obama Center" which when announced was herald as a victory for government because it was to be funded entirely with private money.

Wisdom is a valuable commodity and tends to be in short supply in Washington thus when Congress passed and President Trump signed the omnibus spending bill little thought was given to exactly  how the spending would play out. I'm referring to the fact that over the final seven weeks of fiscal 2018, the government is slated to embark on a spending spree of historic proportions as federal agencies look to spend $140 billion more than they expected to receive prior to the bill being passed. For many agencies, this translates into spending as much as 40% of their annual budget in the final two months of the fiscal year. Faced with seeing these funds returned to the Treasury if not spent analysts believe the federal market will see a monumental effort among procurement officials to rapidly spend as much on contracts as possible.

Omnibus Bill Has Resulted In "Must Spend Money"
According to the article in Nextgov, without a budget agreement in place the agencies spent cautiously through the first two quarters of fiscal 2018 before the omnibus bill was signed. This adds up to an additional $80 billion for defense and $63 billion for civilian agencies. This certainly is not the way I like to see business conducted because it tends to create waste. In my opinion, this is where the two articles come together at the intersection of "Stupidity and Wasteful Government Spending." 

Circling back to the Obama Center Article that stated, "When Barack Obama announced he would forgo a presidential library, the news was trumpeted as a win for good government." That was because instead, Mr. Obama would open an official center funded entirely with private money. One author at Politico, who called presidential libraries a “scam,” wrote that Mr. Obama “will rip off the band-aid, removing government from what it has no business paying for.” Sadly as with many of these projects, the devil is in the details. It has now been revealed that the financially battered taxpayers of Illinois will put up at least $174 million for roadway and transit reconfiguration needed to accommodate the Obama Center. With eighty percent of such spending is generally reimbursed by the federal government, Illinois officials expect to receive $139 million of this money from Washington.

Proposed Obama Center Sucks In Taxpayer Money
To be very clear, this is a private foundation and unlike a presidential library, the Obama Center won’t be run by the National Archives and Records Administration. The center won’t even house Mr. Obama’s records, artifacts, and papers, which will be digitized and available online. Instead, the center will be owned and operated by the Obama Foundation with a mission of training and preparing young people to become the next generation of leaders.” No doubt, Obama's definition of “leaders” will be political and that raises the question of why the state and city are giving the Obama Center official support. Under a deal approved by the City Council in May, the Obama Foundation will lease 19.3 acres in perpetuity for $1.

As for the road and transit money a Chicago public television station questioned if Illinois could afford to cough up $100 million to “assist” the Obama Center: “How could a public financing proposal fly in a state that is bleeding red ink, especially when the Obamas have promised 100 percent private funding?” In response, a spokeswoman for the Obama Foundation insisted that “construction and maintenance will be funded by private donations, and no taxpayer money will go to the foundation.” It seems that Illinois’s machine politicians dropped the spending appropriation for this into a 1,246-page budget bill, which was then presented to rank-and-file legislators only hours before the vote. When a few Republicans objected to spending state money for the Obama Center, they were told not to fret: Federal reimbursements were on the way.

It is my fear that the rush to spend by government agencies this "windfall of funding" that is ballooning the national budget and deficit will flow into funding a slew of questionable projects such as the one above. In the past, I have attempted to dispel and chip away at the myth "Public-Private Partnerships" have a great deal of merit. while they are often used to propel forward projects by adding an incentive for the private sector to undertake projects they might choose not to do alone it is often because the numbers often simply don't work. These collaborations between government and a private-sector company touted as our salvation tend to create boondoggles and white elephants. For a number of reasons, these projects are often haunted by problems that go from one extreme to another ranging from over-engineering to shoddy work with little oversight.

Needless to say, following our recent jump in the GDP the federal government going on a spending spree should become a driver of the American economy in coming months adding to the illusion our economy is on sound footing. As a bear, I look forward to the coming months with a bit of trepidation. When coupled with a huge number of stock buyback programs triggered by the Trump Tax Bill the forthcoming wave of spending and a huge number of misconceived public-private projects currently in the pipeline could carry the economy forward for a quarter or so. This is by no means an endorsement of the economy or enough to make me reconsider how this will end, it would be wise to recognize that markets are vastly overvalued and this positive scenario could rapidly be derailed by a tsunami of bad news from a number of sources.

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Saturday, August 11, 2018

Big Government's Failure To Address Our Woes

Big Government Does Not Always Work Better!
The failure of big government to address the problems and woes of our society has left many of us puzzled as to how we should proceed. The large number of government programs that have failed to carry out their duties and the dim view many Americans have towards Washington may be starting to take its toll on those who think big government is the answer. The Democratic Party has long been thought of as the party of "big government"  filled with believers that government can solve and is the answer to curing many of our woes. Sadly, cost and reality are quickly beginning to show the flaws in this theory, government is far better at providing access of citizens and good at passing popular laws, but the private sector tends to be more efficient and better at controlling costs.

Big government is not just an American problem and tends to be even worse in countries established long ago. It seems corruption and government both tend to grow in unison over time. The way in which an increasingly better-educated world population faces and deals with growing governments will determine the future of the Planet Earth. The saying "be careful what you wish for" may again be proven true as those wanting more government intervention experience the limits of government and bureaucracy while burdened by the true financial cost it imposes. We must remember that government is often not constrained by the power of the purse to strive for efficiency, where a business fails when it does not meet its goals of providing a good service or product at a reasonable cost government muddles on.

Over the last two centuries the United States government has been steadily moving away from Adam Smith’s idea of limited government and towards the view of Abraham Lincoln that the purpose of government should be to do for the people, whatever they needed done, but could not do for themselves or could not do as well for themselves as individuals.  At a time when the Country was young and adding state after state one might make the case that larger Government was appropriate.  As more and more citizens earned the right to vote and become better educated, they have been encouraged to look at the government, as their government. This has greatly changed the viewpoint of the functions of government and has resulted in large increases in governments activities.  The role of the government in America has changed at all levels.

The Trend From 20% To 35% Is Clear And Continues
Sadly the open-ended theme of larger Government is generally a mechanism to in some way transfer wealth. Mandates often unfunded are fostered upon business organizations and private citizens. It is the nature of bureaucracy to expand.  A new proactive movement of “cuteness” cloaked in a veil of flexibility and diversity allows politicians and bureaucrats use terms like "Private Public Partnership" and "quasi-government entities" has masked just how deep its roots have grown. Both of these allow a pathway for politicians to tinker without the personal financial risk that a businessman must take. The problem is that those within government love being creative especially when they do so on our dime. The use of sun-set legislation is underused and the bar set too low when it comes to extending and renewing government bodies. We tend to forget that the best time to kill a monster is while its small.

Shifting demographics are quickly weakening the Republican Party, if they do not adopt a more populist message and a big tent policy soon they will continue to lose power. This could have a very negative impact on America going forward. The polarization we see today may be mild compared to what we see in ten years if a large segment of the population feels its voice is unheard. If the checks and balances in our system fail anger will grow as more Americans begin to feel even more left out in the cold. Ironically the best friend of the Republican party has become big government and the Democratic party that has been eager to promote it as a cure to our woes. It must be pointed out that the cost of this experiment has soared over the years and created a national debt that threatens the economic health of future generations.

Governments must be of the people, for the people and honor laws that are rational and fair. The reality of ever-larger government has manifest itself in more scandals as departments overreach their missions. This can be seen in the military, the IRS, NSA and in our government's failure to accomplish tasks such as putting together a working and functioning Healthcare web site. With freedom comes responsibility, people must control their own governments. Once established and settled it is often difficult to change the way a nation chooses its leaders. This is true in America where our election system strongly discourages a third party and even out of date safeguards such as an illogical and out of date electoral college heavily influences our Presidential elections. This means small passionate groups of people can often skew results as their voices become amplified at the same time the value of other voters is diminished.

A government may be chosen by a variety of methods. A one vote one person system does not differentiate between the social or economic status of the voter, and while on the surface this would appear fair it could be argued that it is flawed. Today in a society geared to pander to political correctness the idea of questioning a person's competence to vote would draw massive outrage and give rise to protest. Another factor is the role of money in politics and how it, and lobbyist can corrupt the system by buying influence and favors. In many ways like in a pot of stew, these ingredients are thrown into the mix and allowed to simmer and commingle till a result is had.

As for the idea of reforming or improving our election system, that is very unlikely to happen as neither party wants to introduce a change that might benefit the other. The entrenched interest of the elites within the system block change. Having conceded hope, as I look around the world I like the idea of runoff elections where voters are allowed to choose their "two" favorite candidates. This lessens the chance of getting stuck with someone unpopular because a third party spoiler has skewed results. I like the politically "toxic idea" of limiting and qualifying voters, removing the "stupid" or allowing voters with more skin in the game such as landowners, the employed, or those who pay taxes to have more voice. To bring positive change it would be geared to the giving the middle-class an overwhelming voice rather than the wealthy or elite. I understand this flies in the face of current values in that doing something to earn the right to vote or prove you have a vested interest in society other than "just being here" is completely foreign to America.

Add to my wish list of "crazy" ideas the following. Eliminate the dreadful electoral college and the distortion it causes, it is mind-boggling as to how much this has skewed the political landscape. Next, I would like to see cut in half the number of members in both the House and Senate while at the same time placing term limits upon them. Limit all laws to under five pages even if this makes them less comprehensive, when laws become overly complicated they become impossible to follow. Last but not least, move toward more national referendums and votes, if American Idol can do it, so can we. In the future elections should also be held this way as long as proper verification can be confirmed.

Polls show that a majority of Americans feel we are moving in the wrong direction. At the same time, this does not indicate exactly what they think is the proper direction. It often takes courage to make the difficult and unpopular political and economic decisions that will cause pain but benefit society in the long run. A political system that encourages sidestepping these issues to pander to the masses in exchange for remaining in power pays a tremendous price that can stay hidden for only so long. This is a trap America has slipped into, getting out of this will prove quite difficult. I seriously question whether we have the fortitude to take the necessary steps required.


 Footnote; This post dovetails with many of my writings. Some of my solutions may come across as provocative but are food for thought. For more on governments role in our lives, I might suggest reading the article below. Other related articles may be found in my blog archive, thanks for reading.
           http://brucewilds.blogspot.com/2012/12/government-includes-quasi-government.html


Friday, August 10, 2018

Elon Musk And Tesla Motors - An Updated Overview

Tesla's Debt Is Up As Cash Flow Drops (click here to enlarge)
On Tuesday Elon Musk opened what may turn out to be a can of worms when he let rip what is now known as his infamous Tesla "going private" series of tweets. The latest dust-up surrounding Tesla stems from Elon Musk claims that he had a deal. Now all kinds of questions are surfacing such as where or who is the bank and is the SEC going to push hard and demand Musk is not just jawing the stock higher. The type of questions being asked suggests Tesla could come under an enforcement investigation if regulators develop evidence that Musk’s tweet was misleading or false. Reuters reports that Tesla's board of directors is currently not up to speed about a detailed financing plan and are seeking more information from Musk. The CEO's declaration and vow that "funding is secured" has only increased the disagreement between bulls and bears as to where Tesla is going.

With all the ruckus Elon Musk caused an update of an article written in early 2017, merits an update. Of course, this is on the heels of the shorts again getting burned on some rather ambiguous numbers flowing from Tesla during its most recent quarterly earnings release where it revealed a whopping 718 million dollar loss yet the stock rallied on claims it was making solid gains in production as Musk pushed a rosy scenario of future growth. It has been a while since we have heard any good news flowing from Tesla and shareholders should be worried. In a recent head-to-head comparison in Motor Trend, three reviewers compared the Tesla Model 3, Chevy Bolt, and Nissan Leaf in a test, and only one person picked the Tesla. Many people would be surprised to know that the reviewers were comparing the base versions of the Leaf and Bolt, which cost $30,000-35,000, to the fully loaded Model 3 that costs more than $60,000. On top of this Tesla has had huge production problems plague the Model 3, seen several Tesla's involved in gruesome crashes, general quality concerns, and the fact the company has been burning through cash at a massive rate.

Elon Musk stands as one of those iconic figures the world occasionally conjures up to wow and entertain the masses. As media generated symbols of success go he ranks up there with the best of them. Much of the aura that surrounds Musk comes from his success at PayPal. Musk co-founded X.com., an online financial service and e-mail payment company, in March 1999. One year later, in a 50/50 merger, X.com joined PayPal a company that operated an auction payment system similar in size to X.com. Musk was instrumental in organizing this deal due to his belief in emerging online transfer technology. The combined company at first adopted X.com as the corporate name, but in February 2001 changed its legal name to PayPal Inc. Musk is credited in driving the new PayPal to expand and focus on a global payment system, in October 2002, PayPal was acquired by eBay for $1.5 billion in stock, Musk, the company's largest shareholder, owned 11.7% of PayPal's shares.

Elon Musk, Visionary And Wonder-Boy?
With his youthful looks and forward thinking the media latched on to Musk and propelled him into being viewed as a visionary and wonder-boy that turns everything he touches to gold. When talking about the CEO of Tesla Motors, Bloomberg News almost always says "Billionaire Elon Musk", this happens so often that many people probably think his first name is "Billionaire". As to the source of his success, it seems Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. This figure includes a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups. He definitely goes where there is government money,” said Dan Dolev, an analyst at Jefferies Equity Research.

An example of how deep these subsidies feedback into the numbers is that as of early 2017, Tesla had already collected more than $517 million from competing automakers by selling environmental credits. In a regulatory system pioneered by California and adopted by nine other states, automakers must buy the credits if they fail to sell enough zero-emissions cars to meet mandates. I have written several articles about Tesla and Musk over the years but as I continued my research for this update and a more in-depth piece my eyes literally began to glaze over at the magnitude of the subsidies. Government support is a theme of all three of these companies, and without it, none of them would exist. Then comes the issue of corporate incest, in August of 2016 Tesla formally announced it would be acquiring ailing SolarCity in an all-stock $2.6 billion merger. At the time Musk owned 22% of SolarCity which was founded by his cousins. The merger was promoted on the idea that Tesla's mission since its inception was part of Elon Musk's overall "Secret Tesla Motors Master Plan" to expedite the world's transition to sustainable energy and away from a fossil fuel economy. Musk called the merger a no-brainer and said it was an accident of history that Tesla and SolarCity were ever separate companies.

In 2017 Only About 1 In 5,000 Cars Was A Tesla!
Tesla is in the news far more than a company with such a small footprint would merit. Much of its significance is derived from Musk who remains a master at getting press coverage, most of it "free" and positive advertisement. Please take note of how insignificant these numbers really are. Tesla Motors announced in early August 2009 that it had achieved overall corporate profitability for the month of July 2009 when it earned approximately $1 million on revenue of $20 million. Profitability arose primarily from improved gross margin on the 2010 Roadster, Tesla’s award-winning sports car known for its designs and "very sexy lines", similar lines have been on the drawing boards for years but were impractical because of the internal combustion motor and all the mechanical junk required to support it. Tesla, which like all automakers records revenue when products are delivered, shipped a record 109 vehicles at the time and reported a surge in new Roadster purchases. Even to date, Tesla's numbers remain small Tesla is said to have delivered 50,580 vehicles in all of 2015.

The value of Tesla's stock dramatically changed years ago following the report where it made its first quarterly profit, its market value soared to more than $10 billion. It should be noted a large part of the increase in the stock price occurred when people that had short positions in the stock were caught in a short squeeze and forced to buy back their stock. At the time Musk said, “I thought it would be quite difficult to raise the capital for Tesla.” he went on to state his realization the electric-car maker could retire its U.S. loan nine years early didn’t arise until Tesla shares unexpectedly surged. Since that time Tesla's fortunes have moved in lockstep with a surging stock market. In an upbeat article published by Inside EVs shortly after that time, it was pointed out that Ford stock had fallen 23 percent from 2015-2017, however, Tesla stock was on the rise, approaching an all-time high which gave the electric startup a market value of $43 billion compared to Ford’s $49 billion.

Tesla currently has a market cap of around 65 billion dollars while Ford its much large competitor languishes around 40. It is important to note that in January 2016, Ford Motor sold 173,723 vehicles in January 2016 while Tesla made a little over 80,000 cars in all of the prior year. As for Tesla's stock which continues trading at incredibly high multiples, much of that can be contributed to the historically low-interest rates and the luck of being in the "QE moment" rather than the company's financial success. Bears and those that doubted if the company could hold together ironically have pushed up the stock adding to the image that Musk lives a charmed life. Remember the company had received a huge government low-interest loan to kick start its existence, also note that it has no legacy cost or issues that plagued so many of its competitors. Now thanks to the gobs of money looking for any kind of return, Tesla can borrow cheaply. Like several other high flyers lead by self-promoters and propelled forward by media hype Tesla has been on a roll.

It does not take much research to see public subsidies for Musk’s companies stand out both for the amount, relative to the size of the companies, and for their dependence on them. No effort has been spared to spin Tesla and Elon Musk as a finished success, of course, the "proof will be in the pudding" when we look back years from now. Time will most likely determine whether Musk is viewed as an unabashed promoter or a serious visionary. Using government programs and loans as well as money from investors Musk has built a pulpit from which to position himself for praise and at times ridicule. David Stockman wrote in May of 2015, "In a world saturated with excess automotive capacity and dominated by some of the most formidable engineering, manufacturing and marketing organizations on the planet—Toyota, BMW and Ford, to name just three–There is no way that an amateurish circus barker like Elon Musk will ever make a profit selling electric vanity cars to the 1%." Stockman went on to state, "You might describe Tesla as $30 billion of capitalized hopium, but that would be too generous. In an honest free market, Tesla would have long ago been carted off to the chapter 11 junk shredder."

Tesla entered 2017 with the goal to launch a new car, open a large battery factory, and perfect autonomous driving but has encountered several setbacks. When all the hoopla ends, the question is whether larger competitors will simply overwhelm and crush Tesla, or will Tesla instead position itself to grow and maybe take over a competitor to help propel it forward. Remember this is a field where many have failed, one great example was the Delorean. I have become predisposed to discount, and have actually grown a massive aversion to "media hype", this is one reason you should color me skeptical. The city where I live, like other cities across the world, have a long list of bold men herald and declared to be "gods gift to business,"  many in the end flew too close to the sun only to crash and burn. Success has a way of making us humans giddy, creates a feeling if euphoria and can manifest into the illusion that we are invincible. In any case, what has happened at Tesla Motors and to Elon Musk's other ventures up until this point might be enhancing the meaning of the phrase, "I would rather be lucky than good!"

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Footnote #1; Another company in the same that was not so lucky and saw its fortunes fall was Fisker Automotive, for more on this folly read the post below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged,
               http://brucewilds.blogspot.com/2013/04/fisker-automotive-another-government.html

Wednesday, August 8, 2018

Currencies Continue Trading In A False Paradigm

Currency Wars Constitute Great Risk
With all that is happening in the world, you would think that currencies should be twisting in the wind. A wild and crazy currency market would flow over to stock markets but things appear "magically stable" and the question is why. A previous article on this site titled, "Currencies Are Trading In A False Paradigm" made the case that the major Central Banks being well aware of how devastating currency moves can be have gone out of their way behind the scenes to stabilize an unstable situation which they created with a decade of QE policies. Still, we have witnessed the emergence of Bitcoin and other new cryptocurrencies growing in the fertile soil left full of nutrients from fiat currencies in decay.

The argument that currencies are trading in a false paradigm extends past simple manipulation and is bolstered by their being sheltered from the storm of volatility by existing in a rather closed system. Wealth is somewhat trapped within this system of fiat money by laws and rules that discourage freedom of movement into more tangible stores. It is the coordinated collusion of the major central banks that have allowed this charade to exist. The fact it has not been recognized or acknowledged does not alter nor does it guarantee the system will continue. The failure of any of the world's four major reserve currencies will destroy the myth that major currencies are immune to the same fate that has haunted many currencies throughout history. When the nation granting a currency becomes unable to control their budget they lose credibility and are crushed under the weight of their debt.
Central Bank Balance Sheets Have Exploded

Today the markets are akin to a game of "Whack-A-Mole" where as soon as we take our eyes off one problem another pops up. First, our eyes are on Italy and the EU but before we can hone in on that we shift to China's slowing economy and trade wars, then quickly to surging bond prices in Japan. One thing the global economy doesn't need with all the uncertainty that is currently floating around is unstable currency markets. When you consider just how destabilizing currency swings can be it is easy to see how a strong dollar could obliterate the global economy. It should not be a surprise in our current situation that behind the curtain central bankers could be busy manipulating currencies so they trade in a narrow range that will not rock the boat.

Over the years countries have become very adept at coordinating policy and currency swaps are only one of the tools they use which now extends to even investing in stocks. When the dollar began to soar back in late 2014 the fear index began to rise and concerns were heard about the stress it was causing in countries that owed a great deal of debt that would have to be paid back in dollars rather than their own currency. The world currency market is a complicated place full of pathways that fall away or come back on themselves and many of the tools used to shape it are like a double-edged sword that can cut in either direction. In the case of China, capital is fleeing the country faster than the government can create new ways to bolster the currency and sadly for them much of it is flowing into America strengthening the dollar even more. Adding to China's woes is that as their currency falls they will hear more calls from Trump supporters to place duties and tariffs on their exports to America in an effort to level the playing field and reduce the trade deficit.

As World Reserve Currency The US Dollar Is King
Consider the possibility that currencies are trading in a false paradigm. Part of this paradigm encompasses the myth many people have come to accept that a major currency cannot fail or collapse. Investors should be prepared for a rude awakening when markets are hit by major changes in currency values. A dam has been built around our current system to protect market stability but pressure is building and when it breaks it will wreak major damage. The idea that a major currency cannot fail will be exposed as a myth as concern over the future of both the yen and the euro become more of an issue. Both currencies have major problems going forward. People often point to the fact that behind the dollar America stands with a rapidly growing national debt, however, at this point no other currency is powerful enough to step into the breach and the dollar's problems are nothing compared to the issues the euro and yen face.

Competitiveness and productivity develop at a different pace in different countries. Over time, this leads to large differences in growth and the shifting of wealth through currency valuations. When the "dollar union" of the U.S. threatened to fall apart during the Great Depression due to the different economic conditions and unequal potential apparent between states, the federal government found it necessary to enact federal income transfers from prosperous states to aid ailing ones. The federal budget rapidly increased and this practice of income transfers from one state to another to bind the states together as a union became permanently embedded in our system. Thus far the EU has failed to address this massive problem.

In the United States, a no-bailout policy of crisis-hit states that was enacted decades ago remains intact, however, through federal programs of "inter-system wealth transfers" America achieves that special something that the Euro-zone has been unable to accomplish. Inequality has a way of growing and must be addressed early. After a certain point, it becomes very difficult to implement a system that transfers wealth from the most prosperous to the most needy because too many people will feel cheated or resentful at what is more or less a default on past debts. The bigger a debt problem and inequality is allowed to grow the more people and institutions suffer when they become the victims of a default. Greece has fallen and continues to suffer the consequences of long term wealth drain and Italy now teeters on the brink.

During the last several years the question of how to exit the Euro-zone monetary union and the euro has become a topic of discussion. Uncertainty and fear relating to the costs of breaking away tend to discourage political leaders from taking the risk and decisive steps towards an exit but if one or more sizeable countries should choose to bolt from the shelter of the euro or the Euro-zone the currency could quickly unravel. A major cause of the Euro-zone problem is growing inequality among its members exacerbated by the lack of system-wide bank protection which causes money and wealth to flee the weaker countries and their failing banks. Japan faces an entirely different problem while national debt is an issue for the central banks that issue both currencies. Japan's debt is much larger and the country faces a demographic crisis that leaves it forced to support a population comprised of citizens far too old to work.

The problems described give credence to the possibility the yen and euro will fail or rapidly lose a great deal of their value at some point in this era where wealth leaps across borders at the push of a button and their demise will be fast, and swift. Like many Americans, I have railed against our growing debt and questioned whether it would destroy the dollar, however, when looking at the miserable alternative currencies before us the dollar is without a doubt king. We must not underestimate the advantage the dollar has enjoyed as the world's reserve currency or the size of debt floating across the globe comprised in dollar-based agreements. If the dollar proves victorious in the currency wars and triumphs as the last major currency standing the people of America will reap the benefits of a game well played or just plain luck.

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Monday, August 6, 2018

Weird Weather Events And Signs Of Climate Gone Awry

Horrific Wildfires In America's Western States
The horrific wildfires blowing throughout America's western states and California, in particular, have raised the concern of many people as to the type of situations we may see in the future. Some of these fires have grown so onerous and devastating they are being described as a "fire tornado," or what some are calling a "firenado." One of these ripped through Redding, producing whirling winds of fire in excess of 143 mph. Currently, some 1,500 structures have been burned to the ground in the Carr Fire alone, state fire officials predict the wildfires will cost California billions of dollars over the next decade. While we have been given a slew of reasons for this such as dry weather and a build-up of brush due to forest mismanagement it is difficult not to wonder how large a role climate change is adding to our problems.

In late November of 2012, a piece titled "Under-Reported Weather Events" appeared on this site pointing out that in our fast-moving world some stories concerning weird weather that should be noted were often overlooked and ignored. At the time it was becoming obvious that our busy world often overlooked or discounted what may be the "canary in the coal mine." A great number of hot and cold record-breaking temperatures have been shattered across the world over the last few years and some of the quirks in our weather patterns now hinge on the bizarre. Droughts and other harsh climate changes that negatively affect crop yields hold the potential to turn our lives upside-down.
Venice, Italy Knee Deep In On Water
Back then, we all saw and heard about hurricane Sandy, in addition to flooding the subway system of New York and halting financial trading, Sandy may have even tilted the Presidential election. If Sandy had indeed made a difference in the election outcome one might say Sandy has had the impact of also altering our future. While we are becoming more accustomed to these uncommon "weather occurrences", it is possible that we should be viewing them as a warning of worse yet to come. Over the years as the world's population has grown we are finding a greater impact on people's lives when such outliers occur.

At the time most of the world took little notice that in July 2012, when Beijing suffered its largest rainfall in 60 years. The storm caused widespread destruction and tragedy throughout China's capital, leaving 37 people dead. The rainstorm that created a record breaking 16 inches of rain and has caused $1.6 billion in flood damage. The storm started on Saturday afternoon and continued late into the night flooding everything in its path including major roads and underpasses while also crushing and collapsing homes. A repeat of flooding occurred in 2016, when heavy downpours caused havoc across usually dry areas. China at the time reported 576 people dead or missing in the first half of the year from such weather.

A picture of Venice, Italy where the tourist in the famous Saint Mark's Square found more than a little water drew little concern or interest in 2012. Heavy rain and a storm surge had left Venice severely flooded, it was the lagoon city's sixth worst flood on record. Residents and tourists were left to wade through the city on Sunday, with 70 percent of the city flooded, including pathways along Venice's fabled canals. By late afternoon the level had receded slightly to 4.6 feet above normal. The storm has also caused chaos across northern Italy, including Tuscany. Heavy rainfall and floods in Toscana caused hundreds of residents to flee their homes, in one area 9 inches of rainfall was recorded in just four hours.

Since then many events of flooding and drought have occurred across the globe to the same muted reaction. In desperation, some people plunged into the Aegean waters and tried to swim to safety recently as Gale-force winds topping 50 miles an hour have fanned a pair of wildfires near Athens. The fire that killed at least 75 people forced thousands of tourists and residents to flee in cars and buses, on foot, aboard boats and on makeshift rafts as it tore through a popular seaside area.

Still, events like these, flash floods, record setting heat, and drought continue to seem all too commonplace and are brushed out of our minds. Today even as this is being written little is even being made of the record shattering heat wave that currently grips much of Europe and has forced France to shutter four nuclear plants due to heat and a shortage of water in its rivers to cool reactors. The elevated river temperatures are even said to be responsible for massive number of fish die-offs in Germany last week.

Our ability to recover from storms and hurricanes like those that devastated both Houston and the Florida Keys last year should not allow us to forget their fury. The subject of climate change and how it might affect our very existence is not a new concern for me, for years I have preached quality over quantity and questioned the sustainability of the course mankind has chosen to pursue. If mankind is in any way responsible for climate change it will take years or even decades to make a difference after we alter our lifestyles. Sadly, efforts and pain to reset our course will not take place until the pain becomes unbearable and turning back the clock will prove harder than anyone can imagine.

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Footnote; To those interested the post below list what are considered the ten major threatening the planet.
    http://brucewilds.blogspot.com/2017/08/nuclear-war-moves-up-list-of-worlds-10.html

Friday, August 3, 2018

Debt Has Burgeoned, Is The Day Of Reckoning Near?


Debt Hangs Above Us Ready To Explode!
Debt takes many forms and shapes and is not contained in auto and student loans. With low-interest rates many companies have borrowed a great deal of money to buy back stock, this has been one of the forces driving the market ever higher. A comment from a reader highlights this and why it might be a big problem when he wrote;  It is fairly obvious that not all IOU's are deemed as trustworthy, and as trust drains from this over-indebted system, shakiest issuers' debt will lose value fastest. Junk debt is thus a Hindenburg in search of a spark all its own. Wait until corporations discover how difficult it may be to roll over all this share-buyback debt of the last few years. The artificially low-interest rates we have experienced over the last decade have skewed all markets especially the credit and debt markets. This created a debt explosion that extends into everything including consumer spending and the statistics surrounding their effects on the economy.

Debt Has Been Transferred To Public Sector
Those in charge of the economy have made the mistake of thinking markets are like clay that can be molded, this is in conflict with the law of economics where in reality markets are like water and will always seek and find their own level no matter who or what tries to control them. The massive debt load hanging above our heads has not receded or gone away it has merely been transferred to the public sector where those in charge of such things feel it is more benign. By a series of off-book and backdoor transactions those in charge have transferred the burden of loss from the banks onto the shoulders of the people, however, shifting the liability from one sector to another does not alleviate the problem. It appears the world has passed the point of no return when it comes to our experiment in monetary manipulation. Modern Monetary Theory (MMT)  was to be our salvation and a tool to even out economic cycles but instead, it has morphed into a massive debt machine that drives the economy forward. We may soon rue the day we started down this path for it leads to a very bleak place.

Debt Defaults  Equal A Transfer Of Wealth
Writing off bad debt is usually a painful process and I don't mean for the debtor but for the creditor the person, business, or institution that holds the paper. It generally constitutes an unplanned and involuntary financial adjustment. We as individuals should be concerned as to the many ways all this might spill over and affect our lives. Clever sounding terms like "transitory" are often used to mask growing problems and to inject a bit of sophistication to this problem while trying to brush reality aside. Sometimes a person arguing that growing debt is under control will even go so far as to explain that some of it is good debt or boast how we are enjoying the positive effects of the loose lending standards.

All debt is not created equal with the devil often buried in the details. This means the writing off of debt will not be an orderly and even process. One major difference is whether it is backed by assets or collateral. Many other factors affect the strength or impact of defaults. One example of this is when it becomes payable, some debt is stretched over decades while other obligations are short-term and paid with a balloon payment or all at one time.  Also, debt is computed at different interest rates and this can affect its long-term impact. Another often forgotten issue is whom the debt is owed to and the impact default will have on their ability to honor their current and long-term obligations. I have seen several businesses forced into bankruptcy when a large customer defaults and cannot pay its bills.

The US Economy Has Not Deleveraged! (click to enlarge)
The world of bankruptcy and unpaid debt has become a complicated place where protection for one party can leave another totally exposed. We have seen things like "clawbacks" or the government making an exception and changing the rules as in the case of shafting the bondholders of General Motors during the bailout. Yes, writing off debt can be a slippery slope. The debt that is written off takes something with it when it leaves this world and that is the wealth of someone else! In today's low-interest rate easy money environment it is much easier to hide under-performing assets and the inability to repay debt. Low-Interest rates tend to foster an extend and pretend attitude that becomes apparent and crystal clear only after rates climb and put stress on the system.

 Across the globe, since 2008 the central banks and governments of the world have played a giant game of hide the debt which has resulted in increased speculation that propels the creation of leverage or carry trades that multiple risks. It also tends to move demand forward and cause an increase in the improper allocation of capital. A great deal of what is being seen as deflation flows from a loop being created from lower interest payments on things like autos, sadly this is a one-off and only goes to distort prices and mask deeper problems developing under the surface. Lessons from the "Financial World" can be doled out rather rapidly making it important to pay close attention, they include new terms like bank bail-ins where you can be given a very expensive "haircut" to "claw-backs" a term referring to how a deal isn't over even after its over.

As noted above, the problem of debt hangs above our heads as a Hindenburg in search of a spark. It is important to consider how this will all play out or shakedown during the next financial crisis or time of economic stress and while it is yet to be determined the ramifications remain powerful. Often unpaid debt shifts the pain or obligation to another party and transfers wealth, usually, this is not a voluntary act unless the note is being forgiven by the holder. I see bad debts on the rise and the effect to both the economy and the lives of those waiting to be paid will be massive and undeniable in coming years. Defaults will reveal their ugly side when pensions are cut, inflation edges higher, or simply by resulting in lowering our overall standard of living. The fact is some way or form the piper must be paid and that is when we will be reminded that there is no such thing as a free lunch.

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Saturday, July 28, 2018

Conservatives Silly To Discount New Liberal Up-start Alexandria Ocasio-Cortez

A sanity check reveals that many conservatives may be guilty of the cardinal sin of being so vain they fail to recognize the potential of  Alexandria Ocasio-Cortez to become a force to be reckoned with if she grows into her new role within the Democratic party. While Ocasio-Cortes is still a political novice she has seized the hearts and minds of a number of liberals searching for a fresh young face free from the baggage of corruption that plagues so many politicians. To not see this young woman as a political threat screams of the same kind of hubris and haughtiness displayed by those that declared there was no way in hell that Donald Trump would ever be elected President.

Trump Haters Love This New Kid On The Block!
The fact is this young lady, like Barack Obama, is in a cultural sweet spot. To the many voters who "don't see color" this personable energetic progressive latino woman who speaks Spanish as well as English may just be the answer for a society that has cast blame for many of society's woes upon the white men that have monopolized the power structure. Because of this, I'm a bit appalled how rapidly many conservatives have brushed aside the idea she might be an issue or thorn in their side for many years to come. Her potential to gain a motivated and dedicated following should not be underestimated. Using terms like millenniums, moral courage, idealist and fairness she has a way forward and because of her youth plenty of time in which to evolve.

Efforts to diminish her by labeling Ocasio-Cortes as stupid may only galvanize support for her as those drawn to her are forced to defend her from attacks. While those of us a bit more well seasoned may see her as naive because of her youth many of her followers are in the same place or blinded by the failure of current leaders to address their needs. The message and the empathy Ocasio-Cortes projects to these people coupled with the promises she represents of both "free stuff" and a larger voice can be very appealing. As a bonus Ocasio-Cortes paints a picture that what she brings to the table are win-win propositions for the masses in a country of rapidly growing inequality. Adding to her allure is that all this can and will be paid for by simply having the rich and those who have taken advantage of us paying their "fair" share. 

28-year-old Alexandria Ocasio-Cortez
 Alexandria Ocasio-Cortez (born October 13, 1989) is an American politician, educator, community organizer, and political activist. [1] On June 26, 2018, Ocasio-Cortez won the Democratic primary in New York's 14th congressional district, defeating the incumbent, Democratic Caucus Chair Joe Crowley, in what has been described as the biggest upset victory in the 2018 midterm-election season.

An article published in the Daily Caller blasted how this "new face" of the Democratic party botched yet another simple question about her political views that sheer spunk and tenacity couldn't overcome. It went on to say that on last night's Daily Show, host Trevor Noah pitched Ocasio-Cortez perhaps the slowest softball he could by simply asking her to explain how she's planning on paying for her "Medicare for All" agenda along with her other ideas on funding Democratic Socialism. "This is an excellent question," she replied then she took off on an answer that did not compute but centered around fairly taxing the rich and slashing military spending.

As a proof of just how polarized the nation has become the Huffington Post ran a rather positive piece about the same Daily Show appearance that took a totally different view of what happened. Here they write that host Trevor Noah "grilled her" and how she spoke about the need for America to re-prioritize what we want to accomplish as a nation. Ocasio-Cortez is then quoted as saying, “Really, what this is about is saying, health care is important enough for us to put first. Education is important enough for us to put first. And that is a decision that requires political and moral courage, from both parts of the aisle. Period.” (The Huffington Post contains the total interview-click here)

Ironically, it is possible that the angst our media stirs up may be what drives America to occasionally choosing a leader promising to bring us together. It will be interesting to see whether Ocasio-Cortez can avoid the trap of demonizing her opponents if so she will gain even more stature. In the same way, many white voters decided to elect Obama and saw the act as regulating racism into a thing of the past many voters might be willing to give Ocasio-Cortez more credence for having the answers than she deserves. One thing we can be sure of and that is when it comes to politics often it is not about facts or even the truth but whether you can sell your vision to the voters.

Friday, July 27, 2018

National Debt Exploding Is A Fraud Cast Upon Us All

Click (Here) To View National Debt Clock
While we fixate on an improving GDP the national debt is not just growing but it is exploding. A marvelous take on the soaring national debt was recently presented by James Grant on The Sounding Line. It was followed by Jim Chanos speaking on fraud Chanos states, "The fraud cycle follows the financial cycle and so as you’ve noticed for the last eight or nine years… we’ve been in a pretty epic bull market." Both these speakers noted the dangers faced when central banks venture down the path of QE by greatly expanding the supply of fiat money and how the journey ultimately ends in tears.

America is not alone in spending far more than it takes in and running a deficit, however, that does not make it right or mean that it is sustainable. Much of our so-called economic growth is the result of government spending. Both Grant and Chanos claim this has created a false economic script and like a Ponzi scheme, it has a deep relationship to fraud. History confirms that during such cycles the argument flourishes that, "this time is different" but always, in the end, proves wrong.

When first unveiled in March of last year the 2018 financial year budget was projected to be $440 billion. An under-reported and unnoticed report was issued last week by the Office of Management and Budget which is required to from time to time review and update the U.S. federal budget. The report titled the “Mid-Session Review” paints a far bleaker forecast of the deficit going forward than originally predicted. The last report issued in February indicated we were looking at a deficit of $873 billion now for the fiscal year ending on September 30th they are predicting the deficit will come in at $890 billion. This means the deficit is now expected to roar in at double what they predicted in March of 2017.

To many people, such a miss would bring up the question of whether the discrepancy in the 2018 budget is an outlier or a sign of incompetence. This is especially troubling when we look forward to finding the next batch of numbers has also been ratcheted upward drastically increasing next years budget deficit as well. What was projected as a total budget deficit of $526 billion for 2019 Fiscal Year has now been revised to a staggering $1.085 trillion. These numbers, of course, are presented assuming the economy will move forward without a recession or slip into crisis. This moves them away from reality and opens the door to the likelihood if wrong the deficit will be far worse.

Debt Has Grown Faster Than Wealth Across The World
Not only should the sheer size of these numbers trouble us but we should remember that until last year some Washington optimists were forecasting that deficits would begin to decline in 2020 and that we would even have a small surplus of 16 billion in 2026. The updated revisions have washed away this glimmer of hope and replaced it with trillion dollar deficits not only next year but in the year after and even more of these going forward. Interestingly, a read of the summery that begins on page one of the Mid-Session Review comes across as a promotional piece using terms like MAGAnomicics both praising and touting the Trump administration for its vision and great work.

This is a time where it would be wise to remember numbers don't lie but the people using them do. Washington specializes in putting lipstick "On A Pig." and this report is an example of how they re-frame a colossal train wreck into something more palatable. The report even goes so far as to assure us that the deficit will fall to 1.4 percent of the GDP in 2028, currently, it stands at 4.4 percent. Those of you who have followed this blog know that I have written about the national debt on several occasions and in an article at the end of last year it was pointed out that many Americans no longer consider this an important issue. As a result of having survived with little effect what was years ago described as a financial cliff we have become emboldened and now enjoy a false sense of security. Today instead of dire warning we hear news from Washington and the media how the stock market continues to push into new territory and all is well.
Past Estimates Have Been Very Very Wrong

Those who have been through bankruptcy will tell you that running up debt is far easier than paying it off. We should also be aware that figures released by the U.S. Treasury are for public consumption rely on accounting tricks which massively understate how much debt is really being accumulated. The myth that a scenario of growth coupled with a falling deficit will allow us to outgrow many of the problems we face brings with it a false optimism and hope. It is important to remember predictions of future spending and revenue often turn out to be wrong. The chart to the right predicted that by 2019 the national debt would top 12 trillion dollars. Projections made by the government or any group predicting budgets based on events that may or may not happen at some future date are simply that, projections or predictions and not fact.

This means that such numbers most likely will prove to be totally unreliable. The ugly truth many people ignore is that starting last year entitlements became the driving force that will carry the deficit higher and higher into nosebleed territory. Even though we have seen deficits reach unprecedented levels the deficits in our future will be dramatically worse. Any claim that Washington has the budget deficit back under control is a total lie. We are currently mired in the midst of the greatest government debt bubble in the history of the world. Circling back to the talk James Grant and Jim Chanos participated in at the New York Historical Society, both men make it perfectly clear they see what is being cast upon us is a giant fraud and we should be dubious of those making promises this will end well.

Sunday, July 22, 2018

The Future Of America's Deep State May Be In Peril

The term "deep state" refers to the theory that there exists a coordinated effort by entrenched career power brokers in government to influence state policy without regard for democratically elected leadership. Events during the last few months and several embarrassing revelations have eroded the credibility of what many people view as America's Deep State. This has added to the feeling that change is in the air as well as creating an aura that something is very very wrong inside the beltway. One of the side-effects of the polarization of American is that citizens on both sides of the political spectrum have come to feel betrayed by those they elect and the government in general. The men our institutions have held up as symbols of our virtue have seen their reputations tarnished as more and more it appears their agenda has been skewed by bias, for personal gain, or institutionalized inertia. James Clapper the former Director of National Intelligence, the FBI's James Comey, and John Brennan the former CIA director are all falling from grace.

The Deep State Has Sabotaged Trump's Russian Peace Effort
The proof of decades of deceit continues to trickle out drip by drip causing us to be dubious of anything we have been told or led to believe. The Deep State has many tools at its disposal to maintain the status-quo the most notable being a lazy and complicit media or what we often refer to as the free press. It has become clear that propaganda is not simply a tool to be used to soften the hearts and minds of those who oppose us but also as a weapon to manipulate the American people into a sheep-like state where we can be controlled by those in power.

The intelligence apparatus put together to help us win World War II did not disband but merely morphed into a giant fear spreading monster fueled by the military-industrial complex seeking power and profit. With the aid of technology, spying has gone mainstream as hundreds of billions of dollars have flowed into a system collecting, cataloging and storing information on all of us. This has allowed espionage and often illegal clandestine operations to flourish at the cost of common sense. This translates into a world where big-brother knows where we are at every minute because of GPS and watches us from cameras in the sky and through our own electronic devices.

James Clapper even tells a lie about his lies!
In a world where so many issues are presented to us in black or white, good or evil, and people have become comfortable in turning to their smartphones for answers we face, the real danger is that society will fail in devising a suitable path forward. The fact this is happening at a time when the world is changing ever faster also complicates and lessens the possibility of a good outcome. The question of where to go from here in a complicated world simply reinforces the difficulties we face. A good example of just how messed up and how devoid of ethics the intelligence system is the recent revelation by James Clapper in a CNN interview that former President Obama instigated the ongoing investigations into Donald Trump and those in his orbit which is destined to further inflame the political divide.

John Brennan as CIA director, another disaster?
The constant flood of bad actors paraded in front of us has revealed the Deep State does exist and is corrupt to its core. Equally disturbing is that we have come to accept the idea that even when willingly committing acts punishable by law these individuals will be held unaccountable. The phrase that, "the emperor has no clothes" comes to mind, however, the fact this is recognized does not alter the fact or necessarily constitute immediate change. Those engaged in carrying out the mission of the Deep State often use the argument of the greater good as justification of their sins this proves denial can be a strong force but just as strong is that it is reinforced with years of momentum galvanized by money and power.

To those of us with a libertarian tilt and a dislike of big government, the Deep State by its very nature is an annoyance. Even if we try to coalesce around the conclusion the enemy of my enemy is my friend political and cultural polarization and the lack of a clear path forward tends to paralyze efforts to bring about meaningful change. We should remember that over the decades failures within and the intentional misdirection of America's intelligence community has contributed to millions of deaths and destroyed a countless number of lives across the world. This all calls into question whether the world would have been better off without these so-called public servants. This is an issue that could be debated until the end of time but what is clear is the fact we could have done much better.  

Friday, July 20, 2018

China's Economy Continues To Wobble

Investors need to pay more attention to what is really happening in China rather than the stir up over Trump's recent trip to Europe. Other distractions have a way of allowing us to see the "forest from the trees" such as footage released from a  CNBC interview that was released just after 6 a.m. ET on Friday morning. In the piece, President Trump said he's "ready to go to 500 billion and slap tariffs on every single Chinese-made product entering the U.S." Showing a bit of impatience with the current process of dealing with China he stated, "I’m not doing this for politics. I’m doing this to do the right thing for our country." With so much of China's economic success coming as a result of a massive trade surplus with America it is not difficult to make a case that the economy of China is often given far too much credit for stability.

Rapid Growth Slowing - Now What?  (Click To Enlarge)
Rapid growth over the years has created an illusion of strength that discounts its total dependence upon exports to fuel malinvestment driven by corruption and poor judgment. The financial missteps in China have continued and it will only be when their economy falters that we will learn to what extent or hear more stories about how they have masked their problems. The largest indication of problems ahead come from data recently released pointing to the slowest investment growth in over 22 years. This is a clear indication that regulatory crackdowns in the banking sector are starting to filter through to the broader economy.

While the Chinese have made progress in diversifying their economy, the country still relies heavily on making and exporting toys, clothes, car parts and other goods to the United States and elsewhere. Within months the United States trade conflict could escalate as another $200 billion in Chinese goods get targeted with tariffs. The IMF has warned that growing trade tensions between America and the rest of the world could shave as much as 0.5% off growth by 2020, costing the global economy 430 billion dollars. While the Washington based organization made a concerted effort to spin this off as a rebuke of President Trump by saying the U.S. would find itself particularly vulnerable "as the focus of global retaliation" and could suffer most as a relatively higher share of its exports are taxes in global markets many economists see China taking the brunt of the pain.

Shadow Banking Is In Collapse
The topic of a trade war is so sensitive in China that several sources working for Chinese media report that China’s censors are scrambling to control the trade war narrative by giving the media a list of dos and don't when reporting on the topic. Those briefed on these internal instructions told the South China Morning Post that they were told not to “over-report” the trade war with the U.S. and be extremely careful about linking the trade war to stock market falls, the depreciation of the yuan or economic weakness to avoid spreading panic. “When you report a fall in the stock market index or a weakening in the yuan’s exchange rate, you can’t use ‘trade war’ in your headline,” one source with an official Chinese media outlet stated. Concern over the impact is so high that China has gone to a full court press approaching the EU to join them in pushing back against tariffs.

Still of greater concern than just tariffs the figures we are seeing warn of problems in many areas of China's economy and indicate that massive debt is taking a toll on growth as money is siphoned away from investment to service past obligations. Chinese stocks are in bear market territory and the currency is weakening. The answer to Chin's problems will most likely not come from the World Trade Organization where Beijing has filed a complaint about a batch of levies by America in response to alleged violations of intellectual property or a new round of money flooding into its banking system. The fear is more credit while juicing growth and ramping up spending on big projects like highways and airports but could undermine efforts to break the country’s addiction to borrowing.

The latest news is that the Yuan is again sliding and in offshore trading has reached the lowest level since July 12, 2017. This was in response to the PBOC weakening its fix on the onshore yuan below 6.7 for the first time since the the start of the yuan drop in June and Beijing launching a quasi-QE, in which the central bank announced the introduction of incentives that will boost the liquidity of commercial banks, helping them to expand lending and increase investment in bonds issued by corporate and other entities. It will do so by using monetary policy instruments such as its medium-term loan facility (MLF). Many currency traders view this as an indication China is comfortable with a gradual depreciation of the yuan going forward. It must be noted that the yuan has fallen more than 4% in the past month making it the worst performer among 31 major currencies.

This somewhat sneaky way of adding liquidity into the system through the banks rather than directly by the central follows a record collapse or decline in shadow banking. The fact is that for years growth in China has been fueled by its government expanding the money supply and debt. This has distorted markets across the world. It is even responsible for causing housing prices to soar in many parts of Canada. This is why it is so baffling that many economists have chosen to ignore or given a pass to the ramifications of China's policies as they affect the big picture. This has accelerated since the global financial crisis of 2008, China's local governments and state-owned companies borrowed heavily to build cities and roads, invest in businesses and bolster financial markets. The spending spree resulted in a domestic debt hangover, particularly among some of the country's bloated and inefficient state-owned companies. This has created an unstable situation that continues to fester.

Wednesday, July 18, 2018

How Dare Russia Spy On Us, We Would Never Do That!

While we are being told how Russia is the worst, please take a deep breath and remember this little jewel. This article published in October 2013, left a bit of egg on the face of America's National Security Agency when they were found to be monitoring the mobile phone of German Chancellor Angela Merkel. Informed sources in Germany said she was "livid" over the reports and convinced, on the basis of a German intelligence investigation, that the reports were utterly substantiated.

While President Obama assured Merkel it was not happening Berlin promptly signaled that the rebuttal referred to the present and the future and did not deny that Merkel's communications had been monitored in the past. Asked by the Guardian if the US had monitored the German Chancellor's phone in the past, a top White House official declined to deny that it had. This is all a bit sad don't you think.

Angela Merkel's call to Obama: are you bugging my mobile phone?

Germany sees credible evidence of US monitoring of chancellor as NSA surveillance row intensifies.
Please Barack, Tell Be It Isn't So!
When asked how he had communicated with Merkel during an EU summit in Brussels in 2008, then French president Nicolas Sarkozy said: "We call each other's mobiles and write text messages."
It seems the US National Security Agency tapped phone calls involving German Chancellor Angela Merkel and her closest advisers for years and spied on the staff of her predecessors, according to WikiLeaks. A report released by the group suggested NSA spying on Merkel and her staff had gone on far longer and more widely than previously realized. WikiLeaks said the NSA targeted 125 phone numbers of top German officials for long-term surveillance. 
So much for those living in a glass house not throwing stones. Thank goodness for the loud bipartisan outrage over Russia getting up into our business because it is only all the noise that helps us forget our past sins. 
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