Putin, A Bully And A Thug Or A Great Statesman

Putin Is A Steely Statesman And Proven Leader

Russian President Vladimir Putin is in the news a great deal and the line Americans hear week after week during interviews with Washington's politicians and those entrusted with protecting our security is that Putin is a thug and a bully. This description of the former KGB officer is so ingrained in their repertoire that they seldom describe him in any other terms unless it is to add the words "dangerous or menace" into their performance in an effort to highlight the fact we should all be afraid. Clearly, the U.S. establishment loathes Putin and constantly paints him as an aggressor, a tyrant, and a killer that invaded and occupied Crimea.

Putin took power in late 1999 at a time when Russia was defenseless, bankrupt, and being carved up by a group stealing its resources in collusion with America. Putin changed that and resurrected the crumbling empire once again into a nation-state with coherence and purpose. He is credited with halting the theft of his country’s wealth by the plutocracy and restoring Russia's military strength. Putin with blunt rhetoric refused to accept for Russia a subservient role in an American-run world under a system drawn up by foreign politicians and business leaders. The fact is many Russians credit him with saving Russia and Putin’s approval rating, after 17 years in power, exceeds that of any rival Western leader. His impressive strides toward making Russia great again explain why he is revered at home but he has also gained admirers in the West, despite a press that is every bit as savage to him as they are to President Trump.

Putin Portrays A Tough Guy Image

If you see the Putin image as somewhat hyped or orchestrated you are right and a "tough guy" image is what he projects. Over the years America's deep state has unleashed attack after attack upon Russia and its leader. Painting Putin as a bully and a thug and has placed economic sanctions on Russia. Much of the hostility toward Putin stems from the fact that he not only defies the West, when standing up for Russia’s interests, he often succeeds in his defiance and goes unpunished and unrepentant. Whether you love or hate the man one thing that is difficult to deny is that Putin has played one hell of a game. He has maximized the sometimes meager tools at his disposal.

Putin is a power broker and over the years we have seen him reach out and establish relationships and bonds with many countries. We can thank Obama's misguided policies and all the anti-Russian talk flowing out of America for this. Much of what we see today grows out of Putin's mid-2012 response to Obama. Our deep state's relentless effort to destroy him has failed. Putin, when challenged, ran over Obama and showed the world who ran the show in both Syria and Ukraine. The policy Obama employed has in many ways backfired and only enhanced Putin's image. It also caused Putin to turn Eastward in an effort to expand and build economic ties with our enemies. Even today the narrative of how Russia interfered in our election also rings of  hypocrisy to all those who remember how Obama threatened the UK just before the Brexit vote that if passed America would send them to the end of the line when it came to trade.

It Will Be Interesting When Trump And Putin Meet

Simply put, Putin is a thorn in the side of America's deep state and the pro "New World Order" forces. He stands as a shield against the Western progressive vision of what mankind’s future ought to be and rejects the New World Order agenda established at the Cold War’s end by the United States. By putting "Russia first" he defies progressives and speaks for those millions of Europeans who wish to restore their national identities and recapture their lost sovereignty from the supranational European Union. When pressed Putin is non-apologetic in reminding the world Russia has a huge nuclear arsenal and will use it if necessary.

Years ago, Putin aligned himself with traditionalists, nationalists, and populists of the West, and against what they had come to despise as their countries are slowly assimilated into the New World Order by the politicians they have elected to protect their culture and civilization. Casting himself as a God and country Russian patriot Putin also stands against the progressive moral decline of a Western elite that has cut its Christian roots to embrace secularism and hedonism. His supporters tend to be dubious of the claims flowing from their own government and the mainstream media which often whitewash some rather unsavory behavior on the part of their country while at the same time fixating on stories of Putin's old KGB comrades assassinating journalists, defectors, and dissidents.

The fact is Russian President Vladimir Putin not only remains popular in his own country where he was recently reelected by a huge margin but he also has admirers in nations whose political establishments are outright hostile to him. The fact is, Putin is viewed favorably by many people including millions who wish to see their nations secede from the EU. Many of these people see no problem and even their right to have their nation defined by a shared heritage, which usually includes a common language, a common faith or even a common ethnic ancestry. It will be most interesting to see if anything good comes from a meeting between Trump and Putin. working together the two countries could go a long way towards creating a far less dangerous world.


Footnote; This is part one of a two-part series. Part two will delve into things most Americans may or may not know about Russia. It will make an effort to bring a better understanding as to why the deep state continues to take a hard-line against more normal relations. 
Part two has now been published, the link is located below.
 http://brucewilds.blogspot.com/2018/09/russia-today-country-not-television.html

The EU Has Few Good Options As It Enters Rough Patch

Mrekel Is Under Huge Pressure Just To Survive

Both politically and economically the EU has few good options or pathways forward. It has entered a rough patch which in many ways is the result of years of inaction. Its banks are weak and concerns over the toll millions of newly arrived refugees will take on society are reaching a breaking point. Many of the issues that Donald Trump used to propel himself into the Presidency are hammering away at the foundation of the Euro-zone. We should remember high youth unemployment and those coming into the area with no desire to assimilate and adjust to existing European social norms are fueling an already tense situation. The debate as to whether to welcome or refuse immigrates and refugees will continue for a long time but it is difficult to deny those allowed to enter the EU are drawing on the resources of EU countries.

This has created what Bloomberg describes as "an escalating crisis that threatens to unravel the bloc’s passport-free travel area and dissolve Germany’s governing coalition." Europe, often referred to as the old world, has reinvented itself many times. This term is used in the context of, and contrast with, the New World (Americas). While the Old World also includes Africa and Asia, collectively, during most of the last few centuries Western Europe was calling the shots as it developed and colonized the world. The major overhaul of Europe following World War II may have rebuilt industries and helped clean house but as everywhere else in the world, it left an army of bureaucratic clowns and politicians at the top of the power pyramid and it didn't take long for them to muck up the works.

Exports And Imports From China 2008 And 2017

Many times throughout history we have seen the only thing that brings about real change is a crisis so large that it shakes institutions to their core and that may be what is about to occur. One issue the Eurozone has still yet to face in any real way is whether free trade really works. The Eurozone like many areas has not come to terms with the fact they are running a massive trade deficit with China. So far they have sidestepped the heavy onslaught of massive amounts of government-subsidized goods flowing in from Asia. While the EU has sported a huge trade deficit with Asia, America has taken the brunt of the pain over the last few decades by throwing its doors wide open. I want to suggest that China has continued to become more competitive than Europe in manufacturing and if trade policies remain unchanged the deficit is about to explode. One thing is clear, and that is both the EU and America consumers have benefited and seen inflation muted by Chinese imports but it also means fewer jobs at home.

Emotions Are Running High In Germany

Another problem is based on the narrative developed economies need and always benefit from the growth created by simply adding more people into the mix. The Pew Research Center, a nonprofit think tank in Washington, D.C., has concluded that immigrants are needed to continue to drive growth in the workforce, however, I content this is predicated on the flawed assumption that all growth is good. May I suggest quality is often more important than quantity when it comes to propelling a country forward and that the burden of feeding, educating, clothing, and housing those who add little to production can far outweigh the illusion of growth surrounding their arrival. When a machine can rapidly do the work of a hundred men the true value of human labor is greatly reduced. To make matters worse if those flowing into an area are resistant to adopting the mores of society and assimilating into the culture problems can develop, it is only by working in lock-step with the general population to be productive can this be avoided.

An article By Kari Paul recently published on MarketWatch claimed that economists say 30 years of data show asylum seekers are not a burden on European countries. They may, in fact, be a benefit says the  French government research organization the Centre National de la Recherche Scientifique (CNRS), Clermont-Auvergne University and Paris-Nanterre University. Researchers examined the arrival of asylum seekers in European Union countries between 1985 and 2015. This followed the Yugoslav Wars between 1991 and 1999 where they linked an increase in immigrants who become permanent residents with a series of positive effects such as an increase in GDP, a decrease in the unemployment rate, and increased tax revenues.

Again, it could be argued much of the so-called positive effect was a "sign of the times" rather than a reflection of merely adding bodies to the population and that they had more skills and better educations than many of the recent arrivals. Part of the problem currently faced is that the Euro-zone and the European Central Bank have gone out of their way to sidestep correcting the structural problems that have grown over the years and the current economy is rather weak. The time the area bought since the 2008 economic crisis by low-interest rates and easy money dubbed QE has been squandered. Today with evidence of slowing growth and few good options it is possible the union itself may be in danger of dissolving especially if the euro falls into problems creating a scenario of bank contagion and failure.

Footnote; The chart and other data can be located at the site below,
http://ec.europa.eu/eurostat/statistics-explained/index.php/China-EU_-_international_trade_in_goods_statistics#EU_deficit_with_China_remains_substantial

Elon Musk May Soon Get His Comeuppance

Elon Musk may soon get his comeuppance for the total arrogance and disregard for what many people think are the rules of the road or common social norms. We don't hear this term often but it means a punishment or fate that someone deserves. Each day the divergence seems to grow larger between the Elon Musk we see and Elon Musk the visionary which the media claimed would revolutionize the way we live. The stock valuation of Tesla is over the moon for a company that has time after time failed to meet the benchmarks it has set for itself. Not only is the company burning through cash but it is having difficulty producing cars in the numbers and quality they promised. This has resulted in Tesla becoming one of the world’s most-shorted stocks.

Musk Has A History Of  Broken Promises

The day Musk is handed his just dessert could not come fast enough for the growing number of investors and Musk watchers that have become disenchanted by his erratic and sometimes capricious ways. This is highlighted by a recent effort to have him replaced as CEO of the company he founded by one of its largest shareholders. In reaction to this growing pressure, it seems Musk has redoubled his efforts to both talk up the stock price and returned to something that has helped in the past and that is to make predictions of pain for those who doubt Tesla's future. Shorts faced, in the words Musk used in his Twitter feed, the “short burn of the century". It should be noted this was in conjunction with him making a substantial buy of Tesla shares that kicked off a rally.

Regardless of Tesla's problems, many in the media continue to spin out positive stories such as a Market Watch piece titled; "Black Swan Author Defends Tesla After Actress Post Video Of Car Fire" This article may have exaggerated what Taleb actually said. It states that while Tesla skeptics, of which there are many, piled on, Nassim Taleb, New York University professor, “Black Swan” author and Tesla owner, stepped up to defend the company with some tweets of his own. Taleb pointed out that when it comes to cars catching fire numbers from the National Fire Protection Association states that two-thirds of the 152,300 car fires per year, on average, are caused by mechanical or electrical failures.

Tesla Numbers Are A Growing Concern

Part of the recent short squeeze rally concocted by Musk centers around his showing off Tesla’s newest production line in a weekend tweet as the electric-car company plunges forward towards its goal of making 5,000 Model 3 cars a week by the end of June. This new production line is the third at Tesla’s California facility. He claims the line was built in just three weeks in a tent-like structure next to the factory. This new line is rolling out dual-motor, high-performance $78,000 Model 3s that was introduced to the line only a few weeks ago. Musk was so happy that he sent an email to staff congratulating them on their efforts but said “radical improvements” still need to be made to reach their production goal.

Interestingly Business Insider has come out questioning if much is really is being produced by the tent production line dubbed GA4 which stands for, General Assembly #4. It is possible it is merely a prop to confuse or take our eyes off his failings. It seems fewer than 100 vehicles have come off this line since it began operation in the first part of June. Business Insider also reported that Tesla has only built made around 6,000 Model 3s this month, well short of the 5,000/week quota set by Musk who recently told employees that he would be at the Fremont factory “almost 24/7 for the next several days” to make sure the teams that are behind get “as many resources as they can handle.”

My point is that a CEO's job is not to hype up a companies stock but to run and guide a company forward taking Musk's actions over the line and into the area of blatant stock manipulation. Where there is smoke there is generally fire and this is not a pun referring to the recent number of Teslas that have burst into flames but has to do with the reality of so many investors being negative on Tesla stock. Unfortunately, for the shorts, shares are up almost 30% in the past month mainly as a result of Musk's antics and toying with those of little faith. Between his constant warnings such as, "They have about three weeks before their short position explodes." Such statements do not add to true price discovery but can extend a Ponzi scheme that is harmful to investors.

The IMF - What Is It - And Is It Overrated ?

The IMF's primary purpose is to ensure the stability of the international monetary system, this includes the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. The IMF loans and redistributes money around the world helping to stabilize countries if they are failing or economically unstable but many people do not understand who the IMF is or how it is funded. While the IMF exerts a fair amount of influence, it is political in nature and often seems to push whichever way the wind blows bring up questions as to how muddled this system is. With a loud voice in the process of supporting various countries, the IMF is overrated as to how much it actually contributes to solving problems.

In reality, the organization often uses only a small amount of money to make the very desperate march in line, at times this means not solving problems but helping to kick the can down the road. As to who and what the IMF is, we all know IMF stands for, the International Monetary Fund. It is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It is a way for rich nations like the United States to manipulate, redistribute or loan money to troubled nations without putting the issue out in the open. As an institution the IMF acts as a mechanism to stabilize the world economy, however many countries see it as merely a  glorified mouthpiece for the worlds economic powers seeking stability.

Many People See The IMF As An Unfriendly Enforcer

Following its mandate to shore up the weak economies thus protecting loans about to default the mechanisms of economic stabilizers it employes can be used to move, support or break currency trends, some more quietly than others. Currency swaps, both reported, and "unreported" can lead to games, abuses, and the false illusion of stability. For example, Goldman Sachs helped Greece raise over a billion dollars of off-balance-sheet funding in 2002 through a currency swap. This allowed the government to hide debt. Greece had previously succeeded in getting approval to join the euro on 1 January 2001, in time for the physical launch in 2002, looking back we now see this was done by faking its deficit figures.

IMF Director Christine Lagarde

When the IMF weighs in it adds validity to the message rich countries want to promote, this is often the message of  "be responsible". The amounts of loans and monies promised often do not appear large to many Americans in relation to budgets in the United States. Why do these numbers seem so small? You might think that it is because these countries are so very small but another possibility is Americans are just "crazy stupid" in the way they spend and treat money. With the dollar being the reserve currency of the World we have become a bit warped making it difficult to internalize how large a store of value a billion dollars actually represents.

The IMF is not limited to just dealing with America's neighbors but is currently involved in countries all over the world such as Cyprus, Tunisia, Argentina, Ireland, Greece, and many more. The rapidly changing economic landscape across the world has a way of creating the impression the IMF is putting out conflicting statements. Often their positions appear to be "all over the board" this leads me to believe that while the IMF tries to plug holes and put out fires, they are behind the curve. Part of the problem remains that no "single bullet" will fix all of the worlds economic ills. For example what recipe will allow Caribbean countries to deal with their various problems such as high debt and low growth, while at the same time strengthening their financial institutions. This means the IMF can only jump in and assist and their power is often rather limited.

IMF Can Rescue Those In Trouble

One of the things the IMF does is to offer countries flexible lines of credit as a way to reassure markets they are following economic policies approved by the Washington-based fund. The IMF said recently reported that it had reached such an agreement with Argentina for a $50 billion credit line to stem a drop in the value of the Argentine peso and shore up the government of President Mauricio Macri, as he accelerates plans to reduce fiscal deficits. The Argentine peso has dropped about 20% against the dollar since late April. Christine Lagarde indicated the fund supports Argentina's plan to try to cut its budget deficit and bring down soaring inflation and said: "As we have stressed before, this is a plan owned and designed by the Argentine government, one aimed at strengthening the economy for the benefit of all Argentines."

While director Christine Lagarde is popular the agency often lacks real solutions and answers for the worlds cash-strapped. Several years ago Lagarde while on the Jon Stewart Daily Show bragged and conceded how bad things were at the depth of the crisis and how they were forced to lie about it, this does wonders for my confidence in the system. Bottom line the IMF is generally behind the curve in our fast-changing world and simply a tool for rich countries to promote their agenda, simply put, the IMF does not have all the answers. While pushing and putting pressure on Europe from the bully pulpit, the IMF lacks the ability to solve really big problems like those facing the euro and what to do with Greece or about Italy's burgeoning debt.

China Data Indicates Broad Slowing Of Economy

Unlike events that happen in Las Vegas that has prompted the slogan, "anything that happens in Vegas stays in Vegas" things that happen in China do not stay in China. This is obvious from the huge amount of wealth fleeing the country over the last few years. Chinese money and wealth flowing across porous borders can be seen in soaring house prices in Vancouver and most of Australia, however, the subject we want to focus on at this time has to do with recent data from China indicating a broad slowdown in activity. Data recently released points to the slowest investment growth in over 22 years which is a clear indication that regulatory crackdowns in the banking sector are starting to filter through to the broader economy.

Growth In China Is Expected To Slow

Reuters reports data coming out of China indicates the country's economy is starting to cool from a multi-year crackdown on riskier lending that is pushing up borrowing costs for companies and consumers. This is thought to be the main reason China’s central bank left short-term interest rates unchanged, this surprised markets which had expected it to follow a hike by the Federal Reserve. China’s fixed-asset investment (FAI) growth cooled to 6.1 percent in January-May from the same period a year earlier, the slowest pace since at least February 1996. This is being seen as more companies have started complaining that it is harder to get financing and a growing number of firms are beginning to default on bonds.

The main reason China's headline growth has appeared so resilient up until now is that government policy has focused on the banking sector rather than corporate debt reduction or deleveraging. With the GDP expanding at a steady 6.8 percent for three straight quarters many China watchers have been optimistic China's multi-prong crackdowns on pollution, questionable local government spending and off-balance sheet “shadow” financing was moving along without a hitch. Of course, most of those projecting huge future growth point to OBOR and the powerful engine of infrastructure spending to pull the economy forward and even the fact this slowed to 9.4 percent in the first five months, from 12.4 percent in January-April and warnings from the IMF of malinvestments do little to dampen their enthusiasm.

Credit And Debt Drive China's Growth

With many infrastructure projects in the pipeline, it is a relatively easy sector for the government to inject stimulus if it chooses. As for other data, May industrial output rose 6.8 percent from a year earlier, versus estimates for a small dip from April’s 7 percent. Retail sales grew 8.5 percent in May, the slowest since June 2003, analysts had expected a slight pick-up to 9.6 percent. Still, at this point,  even as overall credit growth and private sector investment cools it is expected the economy will maintain relatively sound in the second half and grow around 6.5 percent for the full year, in line with the government’s target.

Trade stood out as a bright spot in China's latest numbers but the threat of rising trade tensions with the United States could end that and exporters front-loading their shipments may have added to those numbers. Still, key to what happens is the policy of the central bank (PBOC) where recent easing measures appear to have had little positive impact on the economy. To some extent the PBOC is trapped, it can't hike over fears of slowing down the economy too far, and it can't ease or else risk another round of capital outflows and a spike in inflation. It is interesting how turmoil in Europe caused by problems flowing from Italy, the summit between Trump and Kim, and rumblings in emerging markets have temporarily taken eyes off of China.

In the past, the massive amounts of new credit being created in China have caused havoc in markets across the world and pushed up total debt to dangerous levels. This is all occurring at a time when the amount of geopolitical upheaval going on between Washington and Beijing is extremely high and a slew of trade data from China has not been released on time. This has increased concern over the lack of transparency of future data releases and has caused suspicion to grow over Chinese intent and if they are hiding something. If indeed, things that happen in China do not stay in China, then we should be prepared to see any problems or mishaps in China to spread and ripple outward to infect global markets.


Footnote; For more on China see the links posted below.
 http://brucewilds.blogspot.com/2018/02/chinas-bold-one-belt-one-road-agenda.html
 http://brucewilds.blogspot.com/2018/04/china-warned-of-risk-from-loaning-to.html
 http://brucewilds.blogspot.com/2017/12/china-state-driven-business-model.html
 http://brucewilds.blogspot.com/2017/10/china-china-china-it-is-all-about-china.html
 http://brucewilds.blogspot.com/2017/11/nafta-let-us-favor-regional-trade-over.html
 http://brucewilds.blogspot.com/2016/09/chinas-aviation-industry-quickly.html
 http://brucewilds.blogspot.com/2017/11/follow-money-trade-deficit-with-mexico_21.html
 http://brucewilds.blogspot.com/2016/06/chinas-debt-problem-grows-more-ominous.html
 http://brucewilds.blogspot.com/2016/01/japans-strong-economic-link-to-china.html

Public-Private Partnerships Tend To Create Boondoggles

Over the years we have been hearing a lot of good things about "Public-Private Partnerships" and how they can propel forward needed projects by adding an incentive for the private sector to undertake projects they might choose not to do alone. Often this is because the numbers often simply don't work. These collaborations between government and a private-sector company while touted as our salvation tend to create boondoggles and white elephants. These so-called partnerships constitute a great risk and are ripe for abuse with the devil often lurking in the details buried deep within complex agreements. These projects are often haunted by problems that go from one extreme to another ranging from over-engineering to shoddy work with little oversight.

Phone Companies Loved This "Joint Venture"

Often the private partner participates in designing, completing, implementing and funding the project, while the public partner focuses on defining and monitoring compliance with the objectives. Risks are distributed between the public and private partners according to the ability of each to assess, control and cope with them. The risk-sharing may be in the form of "guaranteeing" a certain occupancy such as was the case of a hotel recently constructed where I live, or the government may pick up part of the cost of the project by providing low-cost loans or supplying part of the infrastructure needed for the project to proceed.

Public-private partnerships have typically been used and found in municipal, transport, and environmental infrastructure such as highways, airports, railroads, bridges, tunnels, water and wastewater facilities, school buildings, prisons, student dormitories and entertainment or sports facilities. They also hide in the form of "funding and promoting research." Expensive studies paid for by the government to determine whether a project is viable or needed by a community is often the first step down this slippery slope. Public officials are pushing on a string when they envision and undertake glorious and unsustainable projects in an effort to better their communities. For a second we will consider their motivation as pure but even if it is the possibility for corruption is everywhere.

This can be seen in situations where the public partner agreed to pay a guaranteed a minimum occupancy or income no matter the demand and it turns out that there are fewer users than expected for the service or infrastructure. An example of government funding and joining up with a company is Solyndra, the solar-panel maker that received more than half a billion dollars in federal loans from the Obama administration only to go bankrupt but it isn’t the first dud for U.S. government officials trying to play venture capitalist in the energy industry.

Since 1961 an Energy Department report in 2008 estimated that the federal government had spent $172 billion on basic research and the development of advanced energy technologies. The Clinch River Breeder Reactor, The Synthetic Fuels Corporation, The hydrogen car and Clean coal are but a few examples spanning several decades that make up a graveyard of costly and failed projects funded with taxpayer money. Not a single one of these initiatives which received great praise when conceived is producing or saving a drop, a watt or even a whiff of energy. Instead, these efforts of government to partner with private enterprise have managed to burn through hundreds of times more taxpayer money than the ill-fated Solyndra.

Over the decades, many of the governments failed projects have been hidden from public view in that they are not hard assets on the ground but rather in IT projects that simply do not get the job done even after a huge number of extensions and cost overruns have occurred. A Bookings Institute study about failed government projects found that improper oversight and/or poor leadership were often to blame. After studying thousands of government IT projects worth $10 million the study found that as little as 6.4%  could be classified as successful. Though it is not strictly an IT project, the US Air Force’s F-35 fighter jet program has been plagued by complex software problems that have led some to question its viability.  If the critics are proved right, the $400 billion F-35 program might one day be viewed as the most expensive failed government project in modern times. It is another example of how hard it is to admit failure and stop throwing good money after bad in an effort to salvage some part of a bad investment.

Federal Money Often Flows Into Public-Private Partnerships

The truth is that history is littered with these failed projects. Often their announcements are accompanied by promises and hype but sadly the synergy these projects are intended to create never occurs. These so-called, "bridges to nowhere" and boondoggles tend to be forgotten and brushed aside each time public servants and their cronies get together. In America they are known as "Public-Private Partnerships" and in a country like China where the economy is controlled and driven by the government, they could be viewed as just another form of corruption. In many ways, the whole concept of China's, "One Belt One Road" initiative could be described as an extension of public-private partnerships into an "If We Build It They Will Come" scheme.

Government officials have used wishful thinking and the idea that "If We Build It They Will Come" as justification and the foundation to undertake monuments to their glory. Often public officials are pushing on a string when they envision and undertake glorious and unsustainable projects in an effort to better their communities. For a second we will consider their motivation as pure but even if it is such that does not guarantee a positive result. They promote the narrative it will create growth and prosperity to move their economy forward. Tossing out the virtues of a project and the narrative it will pay for itself many times over creates a win-win scenario leaving those promoting the project as forward-thinking heroes. Interestingly as you might expect. Federal money often flows into these Public-Private Partnerships so that local officials can paint them as freebies that cost the taxpayer nothing.

A white elephant is a term derived from the story that the kings of Siam, now Thailand, would make a present of one of these animals to those they wished to ruin. This is a possession which its owner cannot dispose of and whose cost, particularly that of maintenance, is out of proportion to its usefulness. In the same way, the public is often haunted by the products what flows from governments meddling in the business sector. Local and city governments also love to exercise this tool to push their growth agenda forward even if they are heavily indebted, the secret is to stretch out the timeline. In the city where I live, I'm seeing financially unviable projects move forward based on partnerships that have contract periods of 25 to 30 years or longer.

Many of these projects like wasteful infrastructure projects are the politicians way of creating jobs today and based on the hope they will prove to be a valuable asset in coming years. While it is difficult in our fast moving world to remain vigilant to such schemes being pushed through we as citizens should be very leery of such projects. Voters caught up in their own busy lives or simply too lazy to demand good governance quickly forget or appear powerless to halt their public servants from playing fast and loose with taxpayer money. This is why we should fear the promise of something for nothing and these so-called investments for the greater good.

North Korea's View - And Something We Should Consider

The Korean War Is Remembered As Ugly And Harsh

Under the category of "sometimes you don't know what you don't know" may be the fact that North Korea claims a long list of grievances against America dating back to right after World War II. A blog site that I follow by the name of Viable Opposition which has a reputation for good research recently published an article titled; "War Crimes in Korea - Guilty as Charged" where it presented some rather damning evidence of U.S. crimes in Korea leading up to and during the Korean War. Many of these are contained and revealed in a 1952 report issued by the International Association of Democratic Lawyers (IADL), A Non-Governmental Organization.

Most Americans take a dim view of North Korea and see its government as evil to the core. For years Americans have been told how the harsh oppressive regime has been responsible for the deaths of millions of its citizens from starvation.  Life for most of North Korea’s 25 million people is grim with frequent nationwide famines due to a combination of bad weather and regime mismanagement of the economy. Tough methods are often used to keep the North Korean people under control which means human rights monitors are generally banned from the country and very little radio communication between citizens and outsiders is allowed. This means many North Koreans do not even know just how poor and backward the country is.

Singapore Bask In The Hope The Summit Will Go Well

This all becomes rather important considering the Trump-Kim summit scheduled to be held at a luxury resort on the island of Sentosa in Singapore on June 12th. Singapore’s role as host of the summit comes with significant expenses, including extensive security measures. Former U.S. Ambassador to Singapore David Adelman said. “For Singapore, the benefits of hosting the summit clearly outweigh the costs. Singapore understands the value of being a good global citizen." Hosting the summit further develops Singapore’s reputation as a place where East meets West.

While China is not a recognized player in the summit between President Trump and North Korean leader Kim Jong Un they will be busy protecting their interest. This means U.S. officials will be prepared to counter a wide variety of spying techniques Beijing might use to get all they can out of assisting America and North Korea in reaching an agreement. If China offers to guarantee to place North Korea under an umbrella of safety such a move would go a long way in allowing Kim to consider giving up his nuclear arsenal. Americans are naive if they think China won't exact a price for this cooperation whether it is stepping away from Taiwan, standing down in the South China Sea or allowing China to continue to abuse us in trade.

The report sighted at the beginning of this article is so damning it is very difficult and almost un-American to take it to heart, however, we should also remember that war has a way of turning the enemy into monsters. This allows inhuman acts not only to occur but to be justified. Viable Opposition should be applauded for finding what most of us would consider a rather obscure document that has been buried in time that might help us understand why the Korean peninsula has never been able to heal and families remain torn apart and separated after so many decades. The war, of course, followed World War II pitting  America against the spread of Russian and Chinese influence at a time of elevated fear. War is ugly and emotions run high which means soldiers retaliate when they see their brothers killed.

The IADL found many things that will bother Americans. The commission indicated that American forces in Korea used bacteriological warfare against both the DPRK armed forces and the nations civilian population even using insects to spread disease. In addition on various occasions, American planes spread asphyxiating and other gases which fall into the category of chemical weapons. Even more troubling and supported by witnesses are huge mass massacres and intentional attacks on civilians. The bottom-line is the unanimous conclusion was the United States was guilty of crimes against humanity during the Korean War and that there was a pattern of behavior which constitutes genocide.

Viable Opposition backs this up with the more recent conclusion of the 2001 Korea International War Crimes Tribunal which examined the testimony of civilians from both North and South Korea. It reports that each of the nineteen separate crimes alleged in the initial complaint they looked at has been established to have been committed beyond a reasonable doubt. This is no small thing, from the middle of 1950 to 1953 the conservative western estimate is that over 4.6 million Koreans perished. This includes 3 million civilians in the north and half a million in the south. Again, terms such as abundant evidence of genocidal U.S. conduct, systematic leveling of buildings, deliberate destruction, illegal use of biological and chemical weapons, mass rapes. widespread atrocities committed by U.S. and ROK forces against civilians and prisoners of war are used. This was backed up by documentary and eyewitness evidence.

Less known was that in the five years prior to this the Tribunal concluded the US government acted to divide Korea against the will of the people opposing and disrupting plans for any peaceful reunification. They reported during this time we trained, directed. and supported the ROK in the murder, imprisonment, torture, surveillance, and harassment of hundreds of thousands of individuals and groups that were sympathetic to the north or considered nationalist. This included even peasants seeking land reform and union organizers. To make matters worse it seems the U.S. government systematically manipulated, controlled, directed, misinformed and restricted press and media coverage in a way that allowed all this to unfold.

Sadly, what I have written is a very watered-down version of what was presented in the Viable Opposition piece linked at the beginning of this article which I strongly urge you to read. To be quite frank I was appalled at the allegations levied against America but knowing how facts are twisted and propaganda is used by governments I should not have been. In no way is it my intention for you to think I'm soft on North Korea, however, if any validity at all exists to the claims made in the 1952 IADL and the 2001 Tribunal reports some of North Korea's fear and distrust of America becomes more understandable.

Bond Market Stability Must Again Be Questioned

Is The Bond Market A Bubble?

The idea that the bond market is a bubble about to pop is a subject not to take lightly. This matter has been scrutinized many times in recent years and little has really changed except debt has grown much faster than the economy in general. Still, we hear many predictions of interest rates remaining low forever and a day as it appears the whole world is trapped in an easy money low-interest rate environment with no way out. This is a sign that in the future a massive problem is developing which holds a great deal of risk. To those of us who think the bond market is a bubble and when it pops it will leave a massive path of destruction in its wake it is clear the general public is totally unaware of the ramifications such an event. These even extend down to reduced payouts on pensions. A lot of money has rushed into government bonds in a flight to safety, and this has sent yields lower and lower. This is again part of the conundrum created by too much freshly printed money floating around and people needing someplace to stash it.

Investors look for large markets to park their money because it implies a degree of liquidity that insures a quick exit if necessary. More attention should be focused on what happens if a popping of the bond market bubble occurs. The idea of money quickly leaving the bond market should be a big concern to all governments and central banks. Bonds are not just issued by America but by countries and companies all around the world. While some forecasters predict America is now set to grow at the fastest pace in a decade debt investors are signaling their skepticism as problems in Europe and talk of trade wars threaten the U.S. recovery. Investors’ expectations for consumer-price increases have diminished as the Federal Reserve debated how soon to raise its benchmark interest rate which has been held close to zero in an effort to support demand in the economy. It is hard to know if this is an indicator the marketplace feels comfortable that inflation is going to remain tepid or if concern for safety is driving this market, but I contend it is the later coupled with an influx of foreign capital and a strong dollar.

Many of us have a problem lending hard earned money out for a long period of time and we should be wary. Rates are based on predictions of future government deficits and events around the world that may or may not unfold as expected. It is not reassuring to know these forecasts are often formed and made on assumptions based on rosy scenarios or politically skewed to benefit those in power. Knowing of the effect that interest rates have on the value of bonds in the secondary markets, one might deduce that the 30-year bull run on bonds will have to come to an end the moment rates clearly signal they are about to rise. To give you a sense of what this may mean to U.S. Treasury Bond investors a 10-year treasury bond issued at a 2.82% interest rate could see a 42% loss in value from a mere 3% rise in interest rates. This means if you’d held $100,000 in these bonds prior to the rise in rates, you would only be able to sell those bonds for $58,000 in the secondary market after the 3% rise. Please note the $58,000 you get back would be before factoring in the loss of purchasing value lost from inflation.

A theory I have put forth in the past is that in light of rapidly growing global debt it might soon become apparent that storing your wealth in any kind of  "paper promise" is a bad idea. The term "liquidity trap" that has been used by Allen Greenspan and others can be difficult to understand. The result of such a trap can be that all the additional money poured into the system, even when coupled with lower rates, can no longer drive the economy forward. This would most likely happen when people realize the return on loaning money is simply not worth the risk!  Why do you want to loan money if most likely you will never be repaid or repaid with something that is totally worthless? When this happens the only safe place to store wealth will be in "tangible assets" and other than those who print the money that nobody wants the only lenders will loan money for very short periods at super high rates. When this happens we are at the end game, the collapse of the economic efficiency of credit has powerful implications because credit is the lubricant that greases the wheels of commerce.

If we consider the possibility that inflation has been kept in check primarily because we as a society have invested a large percentage of our wealth into intangible products or goods such as stocks, bonds, and even currencies a new danger emerges. If faith drops in intangible "promises" and money would suddenly flow into tangible goods seeking a safe haven inflation would soar driving interest rates upward. Like many of those who study the economy I worry about the massive number of promised being made and the debt being accumulated by governments, this all ties into the pace at which central banks have expanded the money supply.

Interest Rates Could Soar Again!

The timetable on which economic events unfold is often quite uneven and this supports the possibility of such an inflation scenario.  The current subsidizing of the auto, housing, and financial industry with an ad hoc disregard for basic economics produces a very flawed kind of growth. For years the ECB has manipulated bond rates lower for countries undeserving of such, as a result, Italy, and others have kept their debt service cost in check, but the fact is artificial rates from central banks mask and perpetuate a debt problem that will come back to haunt them. Bond buyers should never forget how in 1980 the Fed turned bonds on their ear by rapidly jacking interest rates to 20% to stop inflation. That acted as a reset for the economy that had broad ramifications. If this were to happen again such an event would not only affect bondholders but would test the economic foundations of both the country and the world.

The idea that markets are always efficient is a myth manufactured by so-called experts such as Paul Krugman in the ivory towers of academia. In many ways, they pose one of the greatest threats to the stability of our economic system. Disconnected from the real world those responsible for guiding our banking institutions often fail to see potential second and third order effects of debt monetization. A policy of blindly trusting anyone who claims to be an expert has disaster written all over it. If the bond market is indeed a bubble the implications of its collapse will be massive. Not only will bondholders be stripped of wealth but soaring interest rates will magnify the nations debt service and rapidly impact our deficit in a negative way. It should never be forgotten that debts can go unpaid and promises are often left unfilled, the general impression that many people hold that things are different this time will surely be tested.


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Footnote;. As usual please feel free to explore the blog archives and as always your comments are encouraged. The two posts below are related to this article.
 http://brucewilds.blogspot.com/2015/04/interest-rates-inflation-and-debt-matter.html
 http://brucewilds.blogspot.com/2018/05/liquidity-traps-wild-potential-to.html

Economic Reality Will Soon Be Knocking On The Gate

Among all the recent news about euphoria and a market "melt-up" several reasons exist to be cautious. During the last two and a half years central banks and countries around the world have added more fuel to the fire which has postponed the day of reckoning. This has made all of us thinking the market was about to turn south looking rather silly and underscores the fact that trying to time economic events is both confusing and complex. Still, many problems give credence to the argument that like so many times over the decades economic reality is again about to come knocking on the gate. Clearly, the numbers don't work whether we are talking about pension funds or government debt. When reality does arrive we should not be surprised if it is accompanied by its good friend chaos.

Central banks can stack the deck but when it gets too high and begins to fall they may not be able to control the direction or who it will crush. The article below is a look at the unfolding story and questions the idea that thinking the economy will adjust and grow its way out of many problems we have tried so hard to ignore. We put ourselves at risk when we ignore the obvious fact that the numbers simply do not work. Developed economies across the world are struggling with sustainability and demographic issues which are putting great pressure on their less developed brethren. It is very important people understand that economic growth does not necessarily equal economic strength and that not all economic growth is equal. Efforts to fudge the numbers and bend reality can only mask the truth for so long.

Corporate Debt Is A Problem As Interest Rates Rise

Moody's recently warned of a global problem brewing in the corporate bonds. This follows the International Monetary Fund cautioning a year ago that companies had taken on far too much debt and that some 20%, or $3.9 trillion, of the total global corporate debt is in danger of defaulting once rates rise. Concern is growing over the possibility of a huge number of junk bond debt defaults. This will be a windfall for those bankers involved in restructuring, but will not bode well for the average investor. Daniel Pinto of JPMorgan investment-banking said that a 40% correction, triggered by inflation and rising interest rates, could be looming on the horizon.

If Thing Turn Ugly, Will You Be Able To Walk Away?

This should make investors question the idea the economy will simply be able to adjust and grow its way out of many problems we have tried so hard to ignore. The simplistic idea we can just muddle along and thrive in the process defies what history has taught.  It is based on a view of history that often overlooks the many who have "lost it all" in prior periods of economic chaos. As we focus on the fact the system always moves forward we tend to forget how it has a way of sacrificing many investors for the "better good", this is fine if you are not one of those being sacrificed.

We should not be blind when it comes to recognizing a slew of less optimistic scenarios exists concerning our economic future. A key assumption of the current mantra that we have reached "escape velocity" is based on the false assumption that we have all the time in the world to deal with our problems. By adopting the scenario that all is well we discount the notion that forward progress may at any time be fouled by events often beyond our control. It is important to note the feeling all is well is strengthened by the government's optimistic projections and numbers that fail to recognize how another recession could skew future tax revenue and cause spending to soar.

Computer Screen Showing Inaccessible Sites!

Off to the right is the image of a computer screen showing inaccessible sites. This is what investors saw come up on their computer screens during the time when fears of a default by Greece ran high. In many ways, it warning that investors should heed. It shows dozens of servers as being "inaccessible" and is an indication of how fast markets lock-down when things turn ugly. Take this as a warning and solid reminder that we must not allow ourselves to become complacent and think we have plenty of time to take action. In our modern world of instant communication, it is becoming increasingly common that options can vanish in a blink of an eye. If we wait too long we may find all doors closed and there is no place to hide.

When it comes to economics, it is best not to have a great deal of faith in our economic system which is severely flawed when it comes to dispensing pain. It is the average Joe (or Jo) will get crushed in the coming collapse. Without a doubt some wealthy people will take a hit, however, overall the pain will fall squarely on the shoulders of the masses. Do not be deceived into thinking the elite .01% play by the same rules as you and I. Those who have worked and saved will see their wealth vanish and at the same time be surprised to find how resilient debt and obligations can be.

Looking across the world to places like Europe we see yields on Italian debt soaring and the populist and separation movement heating up in both there and in Spain. The rumblings of war and trade issues fill the news. These events should sound as a warning and an indication that we have become far too complacent considering the risk before us. While few people think so, Italy's collapse could become the catalyst that fuels the fire that finally brings down the house. If it does not, the light from its flames should surely illuminate and expose the fact that similar flaws and massive debts exist in many other countries across the world.



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Billions And Trillions Of Dollars Are Hard To Comprehend

It has been said that when skyscrapers are being planned and built everywhere it is generally a sign the market is topping and about to crash. I would like to suggest another sign the economy is no longer linked to reality is when those covering financial matters begin to mix up the amount of money they are reporting in news stories and nobody notices or cares. Today the confusion is between billions and trillions, years ago it was millions and billions but we have moved on. The link between what is real when it comes to the cost of living and the numbers we see and hear is becoming strained.

Trillions and billions are numbers that both represent huge quantities, however, we hear them so often we forget the difficulty of internalizing the true magnitude and massive amount of money they really represent. Adding to the confusion is that many of the stories we see still refer to far lesser amounts such as millions. Please don't get me wrong, a million still represents a very large number but pales next to its much larger brethren a billion which in fact is a thousand times larger. This is all linked together by the fact it is insane to think governments spending far more than they take in each year sooner or later will not affect the value of assets.

Real Assets At All-Time Lows Relative To Financial Assets

Debt and inflation have an interesting relationship and share an almost elastic sort of bond with the perceived value of tangible assets. I remember being appalled to see what I considered to be an outlandish and massive number as to the cost to rebuild New Orleans after Hurricane Katrina. Over the years the cost to repair damage from natural disasters has skyrocketed in relation to the actual damage. The chart to the left shows real assets at an all-time low relative to financial assets at the end of 2015 and I contend things have only gotten worse.

One million dollars (100 packets of $10,000)

These visual aids are from an article several years ago titled; "An Ugly Math Primmer On American Debt" where I attempted to show the relationship between these numbers and the amount of money each represents.  At one time a billion dollars was a massive amount of money and it still is. Most people that have not thought about it might not think so considering how modern media and politicians throw the "B" word around. On several occasions, I have heard a billion dollars accidentally confused with its much smaller sister the million marker. This drives me crazy. When someone misspeaks and says " the cleanup effort for Superstorm Sandy may run as much as 60 million dollars."  With a billion dollars being a thousand times larger this confusion is undefendable.

Believe it or not, the little pile next to the man on top is $1 million dollars (100 packets of $10,000). You could stuff that into a grocery bag to walk around with it. Start talking about a $1 BILLION dollars... now we're really getting somewhere...

A Billion Dollars Is A Great Deal Of Money!

Internalizing the magnitude of the difference!

A million is a large number. To put it in perspective think in terms of someone working every year from the age of 20 until they are 60 making $25,000 a year. Their total income over their life would be one million dollars. The magnitude of the difference between billion and million is important. Another way this difference can be illustrated is with the example below that uses time as a scale or measuring stick:

• A million seconds is 12 days.
• A billion seconds is 31 years.
• A trillion seconds is 31,688 years!

Now back to our topic. Making these numbers real so we can understand how it interrelates with our economy is no easy task, but let's have a go at it. In an effort to keep this simple I have chosen to focus on America. A similar formula can be created for almost any country. To make things easy lets us do a bit of rounding off and work with easier to manage numbers. Not lying about the numbers to arrive at a clear picture of reality is important.

We will start by placing the population of the United States at 333 million people, (this number is reasonably close) and includes every man women and child. What makes this important is that it includes infants, children, teenagers, the nonworking both self-sufficient and those on government assistance, the retired, and the elderly in nursing homes. How marvelously simple and convenient that this number goes into 1 Billion dollars roughly 3 times.

This means that every 1 billion dollars spent by our government represents an outlay of roughly $3 for every person in America!

Taking the number of people and placing them into other groups is more challenging. Those groups can include; households or families--- for ease we will call the average household  3.4 people. When we look at "workers" we are looking at according to government figures in 2008, 120 million people were employed out of an estimated 330 million citizens. However, unemployment increased after that date. Last but not least how many taxpayers exist in America? This is very complicated,  many taxpayers get back more in a refund than they pay in and there is a huge difference in the amount people pay, also do we consider a joint return as two payers? Bottom line, whatever it means,  nearly half of households do not pay taxes. This we must remember!

Back to simplicity: So $100 billion represents or equals $300 per person and $1,020 per family,

Unfortunately, we are not talking about a $100 billion federal deficit but six or eight times that amount. One trillion dollars is ten times the $100 billion multiplied out above. That would represent a staggering $3,000 per person and $10,200 per family being spent each year, year after year, it adds up very fast! Again we must remember nearly half of American households do not pay taxes, and if they don't this means someone else must pay their share for them.

Sadly, these are the numbers propelling the economy forward, and it is not sustainable when compared to wages and incomes. Please note; Massively compounding the problem is the realization that most people such as infants, children, the disabled or unemployed could not pay their share if their life depended on it, this transfers the burden to the remainder of society. The bottom-line is that the numbers we see and hear are mind boggling and crazy. When you start talking about these numbers in multiples of thousands, tens of thousands, and even more the task of comprehending and understanding them becomes nearly impossible.

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Footnote; If you found this post interesting or informative please look at my recent posts. Also, nothing is as sobering as looking at the National Debt Clock, that link is also below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged,
http://www.usdebtclock.org/

Mankind's Struggle Viewed Through The Peter Principle

Have We Hit Our Level Of Incompetence?

The Peter principle is a concept in management theory formulated by Laurence J. Peter in which the selection of a candidate for a position is based on the candidate's performance in their current role, rather than on abilities relevant to the intended role. Thus, employees only stop being promoted once they can no longer perform effectively, and "managers rise to the level of their incompetence." It can be difficult to reconcile how an intelligent person can also be very incompetent. To an advanced species examining Earth, the search for intelligent life might not be as easy as we think. 

Humans may sport some of those traits attributed to intelligence but a short-sighted view of the future and the desire to continually shoot ourselves in the foot brings into question man's ability to reach the next level. With this in mind near the beginning of 2014, I penned a piece questioning how so many people were able to think the world's surging population would not become a problem because of new energy sources. While such faith can be sighted as a beacon of inspiration it hardly is justification for mankind to rapidly move towards the point of no return thinking everything will be fine.

Man Tends To Destroy What He Creates

I pointed out that anyone with even the slightest mechanical knowledge will tell you that solar panels, windmills and such take a lot of energy to build and often are maintenance intense. Both these complicated systems have a short lifespan and require a great deal of energy to be expended in just keeping them up and running. This includes all the BTUs being burned in producing parts that need to be constantly replaced. This was one of my arguments years ago when I expressed concern the optimism surrounding ethanol was being overhyped.

At some point, you are not creating enough "net gain" in energy from the total energy produced minus energy expended to claim a major victory in resolving your energy problem. This means the energy we produce in the future may very likely be very expensive. If so, that cost will slow economic growth and remove much of the plentiful bounty we have come to expect and have enjoyed during what I call man's "golden age" or roughly the last 200 years.

Carry no illusions the days of cheap energy are behind us and not only has the low-hanging fruit been picked it has been eaten. Sadly, if we look back we will see much of this energy was allowed to go to waste. America has adopted the same attitude towards its buildings. In our fast-changing world, we have made everything disposable.  A remove and replace mentality tends not to maximize gains or resources and creates a huge amount of waste. Often there is no way to reclaim much of this and even recycling is inefficient. This acceptable lifestyle and way of doing business has extended down to the point where most consumer goods have become non-repairable. With fast growth, we often see a lack of quality. I contend this is about to catch up with modern society.

Mankind Has Failed To Plan For Sustainability

Why should we think that we are immune to the rules governing the universe?  When we look at fast-growing cities where we see buildings erected and ripped down and replaced after only two or three decades we should ask if this is sustainable or our best use of resources. The reasoning behind remove and replace is often that it is far less expensive to just rip it down than to repair or upgrade a structure with labor being the determining factor. Ironically, this is in a world where the number of people in many developed countries choosing to work is declining and those being supported by government programs have risen dramatically.

As the noose of reality and finite resources begins to tighten around the neck of mankind do not expect to hear those in charge to scream out warnings from the rooftops. The few mutterings we hear will be from people tagged as "gloom and doomers" who only see the glass as half empty and are incapable of seeing it is really half full. When we approach the tipping point promises of easier, cheaper, and ever better ways of postponing the inevitable will prove to be an illusion. This means new problems will begin to materialize on a daily basis and the reality our options are evaporating will be both abrupt and harsh. As I ponder our fate is it possible the collective human race is also governed by the "Peter principle" and if so, how will humanity escape this trap?

Little Remains Of Mosul

An example of man's collective incompetence recently arose with the clumsy destruction of Mosul in northern Iraq. Much of the world chose to ignore what happened there when a coalition of anti-ISIS forces retaking Mosul rapidly reduced the proud city to rubble. Upon seeing the pictures of the city in ruins it is not difficult to imagine 100,000 or more of the innocent people trapped within the city killed as troops seeking to eradicate some four to six thousand ISIS fighters went about their task. Little praise can be shed upon those who allowed and enabled a few extremists to take their weapons from them and then wreak havoc upon this peaceful city.

As previously mentioned, the Peter Principle is based on the notion that employees will get promoted as long as they are competent, but at some point will fail to get promoted beyond a certain job because it has become too challenging for them. Employees rise to their level of incompetence and stay there. The question here is whether mankind will be halted by the same dilemma. I'm not saying that we should stop moving forward or should erect barriers to our progress, but it would be wise to give the issue of creating a more sustainable future a bit more thought. This should be a priority because it appears we are already sowing the seeds for a less than compelling future?


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