US withholding Chilcot Inquiry docs as they may discourage future wars US is interested in

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The REAL Reason China’s Economy Is Crashing

China 2015 = U.S. 2008

We noted in 2009, in a piece titled “China 2009 = America 2001 = Rome 11 BC“:

One of the top experts on China’s economy – [economics professor] Michael Pettis – has a very long but interesting essay arguing that China is blowing a giant credit bubble to avoid the global downturn.

Pettis documents reports and statistics from modern China, of course. But he ends with a must-read comparison to ancient Rome:

Let me post here a portion of Chapter 15 from Will Durant’s History of Roman Civilization and of Christianity from their beginnings to AD 325

The famous “panic” of A.D. 33 illustrates the development and complex interdependence of banks and commerce in the Empire. Augustus had coined and spent money lavishly, on the theory that its increased circulation, low interest rates, and rising prices would stimulate business. They did; but as the process could not go on forever, a reaction set in as early as 10 B.C., when this flush minting ceased. Tiberius rebounded to the opposite theory that the most economical economy is the best. He severely limited the governmental expenditures, sharply restricted new issues of currency, and hoarded 2,700,000,000 sesterces in the Treasury.

The resulting dearth of circulating medium was made worse by the drain of money eastward in exchange for luxuries. Prices fell, interest rates rose, creditors foreclosed on debtors, debtors sued usurers, and money-lending almost ceased. The Senate tried to check the export of capital by requiring a high percentage of every senator’s fortune to be invested in Italian land; senators thereupon called in loans and foreclosed mortgages to raise cash, and the crisis rose. When the senator Publius Spinther notified the bank of Balbus and Ollius that he must withdraw 30,000,000 sesterces to comply with the new law, the firm announced its bankruptcy.

At the same time the failure of an Alexandrian firm, Seuthes and Son due to their loss of three ships laden with costly spices and the collapse of the great dyeing concern of Malchus at Tyre, led to rumors that the Roman banking house of Maximus and Vibo would be broken by their extensive loans to these firms. When its depositors began a “run” on this bank it shut its doors, and later on that day a larger bank, of the Brothers Pettius, also suspended payment. Almost simultaneously came news that great banking establishments had failed in Lyons, Carthage, Corinth, and Byzantium. One after another the banks of Rome closed. Money could be borrowed only at rates far above the legal limit. Tiberius finally met the crisis by suspending the land-investment act and distributing 100,000,000 sesterces to the banks, to be lent without interest for three years on the security of realty. Private lenders were thereby constrained to lower their interest rates, money came out of hiding, and confidence slowly re-turned.

Except for the exotic names … and the spice-bearing ships, this story has a remarkably contemporary ring to it, as do nearly all historical accounts of financial crisis, by the way. This story is not totally relevant to China today except to the extent that it indicates how difficult it is for banking systems flush with cash to avoid speculative lending, and how the very fact of their speculative lending then creates the conditions that can bring the whole thing crashing down. Hyman Minsky told us all about this kind of thing. There has never been a political or economic system in history that has been able to avoid the consequences of excessive liquidity within the banking system. Even the Romans learned this, and they learned it the hard way, as we always do.

America’s easy credit bubble started in 2001. Rome’s prior to 10 BC. We know the results of both.

Is China now blowing a huge credit bubble which will lead to a giant crash down the line?

Pettis thinks so …

Last week, economics professor Steve Keen explained:

[During the 2008 crash] private debt [in China] was effectively constant at 100% of GDP.

All that changed after the financial crisis. In just 6 years, private debt grew by over 80% of GDP—and that’s using official figures as submitted to the Bank of International Settlements (see Figure 2) when there’s every reason to expect that this particular figure is likely to understate the actual level.

Figure 2: Private debt in China exploded as it sidestepped the Global Financial Crisis

image004

Why does the level of private debt in China matter? If you believe conventional economics and finance theory, it doesn’t—which is why I find myself having to repeat the (expletive deleted) obvious so often that it does. [Background.]

***

From 2009 on, growth in private credit went into hyperdrive as a deliberate government policy to boost the economy.

Figure 3: China avoided the Global Financial Crisis by boosting credit growth

image006

***

In 2010, the increase in private debt in China was equivalent to 35% of GDP. That dwarfs the rate of growth of credit in both Japan and the USA prior to their crises: Japan topped out at just over 25% per year, and the USA reached a “mere” 15% of GDP per year—see Figure 4.

Figure 4: China’s credit bubble is the biggest ever

image008

As I have argued for a decade now, crises begin when the rate of growth of credit slows down in heavily indebted countries. China was not heavily indebted in 2008, which is why it could take the credit growth path out of the Global Financial Crisis. But now it is more heavily indebted than America was when its crisis began—even relying on official statistics which undoubtedly understate the real situation—and the momentum of debt may well carry it past the peak level reached by Japan after its Bubble Economy collapsed in the early 1990s (see Figure 5).

Figure 5: China is on course to reach Japan’s Private Debt to GDP peak

image010

***

So China is having its first fully-fledged capitalist crisis. To date its response to it has been to try to sustain the unsustainable: to transfer the bubble from housing to the stockmarket, and to keep the stockmarket rising like some production target for wheat from the bad old days before the fall of the Gang of Four. It can’t be done. At some point, the Chinese government is going to have to make the transition from generating a credit bubble to trying to contain its aftermath.

And economics professor Michael Hudson notes:

Most of the Chinese stocks went down because small Chinese investors were borrowing from, let’s say, the equivalent of payday loan lenders to buy stocks. There was a lot of small speculation in Chinese stocks pushing it up.

***

In China, it’s largely small borrowers who borrowed from intermediate lenders, that have borrowed from the big banks. So a lot of individuals in China that tried to get rich fast by riding the stock market all of a sudden find out that they have a lot of debt to intermediate, you know, non-bank lenders, insiders, people who banks will lend to. It’s like the British banks lending to real estate speculators to lend out to homebuyers. So this is essentially the attempt to get rich by riding the stock market in China went way overboard. Chinese stocks are still above what they were at the beginning of the year. This is not a crisis. This is not very much. It’s just that the artificial increase in the market has now ended some of the artificial push-up. And it’s still artificial, and it will still go down some more.

For confirmation that individual Chinese investors borrowed too much to buy stocks – leading to a bubble which inevitably had to burst – see this, this, this and this.

Posted in Business / Economics, Politics / World News | 7 Comments

Why Biden Would Be a TERRIBLE President

With Hillary Clinton falling on her face (thank goodness!), Joe Biden has become a real contender for the Democratic party nominee.

Problem is, he’d be a terrible president.

For example, Biden:

Postscript:  Biden would also be the oldest person EVER elected president.

And he could also be the first major presidential candidate ever to  call himself a “Zionist”.

Posted in Politics / World News | 7 Comments

Privatization Is at the Core of Fascism

Eric Zuesse, originally posted at strategic-culture.org

Privatizations are increasingly fashionable, such as in Greece, Ukraine, the U.S., and UK — and privatizations are a central feature of fascism.

The core of fascism is the idea that there is some elite, whether ‘Aryan’ or ‘chosen by God,’ or otherwise, who should run things, and that everyone else exists in order to serve that elite. Inevitably, this official elite consists of the people whom the powers-that-be assign as constituting the owners of almost everything that’s valuable. Increasingly, things become those people’s private possession — even what was formerly a public asset becomes now private. Beaches become private. Schools become private. Natural resources become private. It’s not just the art that was stolen by the Nazis and privatized to them and/or shown at museums that they control, which becomes private; it’s whatever the elite want to have, and to control: it’s all now private. That’s the fascist ideal.

The legal system accommodates the legal owners, in any fascist nation, just as the legal system accommodates the legal owners in any nation at all. And, in fascism, the legal owners are the aristocracy, which are the people who have helped bring the system into being as it now is. Typically, they are the aristocracy that already exists in the given nation, if it was formerly a democracy (aristocrats tend to hate democracy; so, they bring into being fascism to replace it), but they can also be a group that is partially new and that is also partially composed of merely the winning segment of the old aristocracy — the segment of the old aristocracy that had won the type of intra-aristocratic conflict that always exists, within any aristocracy. Whereas any aristocracy is always at war against the public, there are also competitions within any aristocracy to determine which aristocrats will be the dominant ones.

Any fascism is controlled by the nation’s aristocracy, and serves those people — not really the public, who receive nothing but propaganda from the aristocrats’ regime. Even in a dictatorship, not only in a democracy, the press or media are needed in order to sell the government’s policies to its public. If the press is privatized, it’s owned by members of the aristocracy. If the press is owned directly by the government, it still is propaganda. The great majority of the public have no way around propaganda. If aristocrats are in control, few people will even know that that’s the case.

Privatization thus replaces public, government-owned, assets, by privately owned assets, and so it transfers control from publicly elected (government) leaders (who are answerable to everyone at ballot-boxes), to private ones — to private stockholders who decide how those assets will be used — regardless of whether the asset happens to be schools, or hospitals, or land, or natural resources, or roads, or whatever. Anything can be privatized. Anything can be run by an elite, by an ‘owner.’ Fascism tries to maximize that: private ownership of what was formerly public property.

Consequently, the first group of privatizations occurred in the first fascist nation, Italy, in the 1920s; and the second group of privatizations occurred in the second fascist nation, Germany, in the 1930s. Privatizations started under Mussolini, and then were instituted under Hitler. That got the fascist ball rolling; and, after a few decades of hiatus in the wake of fascism’s embarrassing supposed defeat in WW II, it resurfaced and then surged yet again after 1970, when fascist forces in the global aristocracy, such as via the CIA, IMF, Bilderberg group, and Trilateral Commission, imposed the global reign of the world’s main private holders of bonds and of stocks: the world’s aristocrats are taking on an increasing percentage of what were previously public assets.

Privatizations, after starting in fascisms during the pre-WWII years, resumed again in the 1970s under the fascist Chilean leader Augusto Pinochet; and in the 1980s under the fascist British leader Margaret Thatcher (a passionate supporter of apartheid in South Africa) and also under the smiling fascist American leader Ronald Reagan (who followed the prior success of Richard Nixon’s “Southern Strategy” of White domination in the by-then resurgent-conservative U.S., and might even be said to have been America’s first fully fascist President); and in the 1990s under several fascist (formerly communist) leaders throughout the former Soviet Union, under the guidance of Harvard University’s fascist economics department, which transferred control from the former nomenklatura, to the new (Western-dependent) “oligarchs.”

And, privatizations are now all the rage throughout the world, such as in today’s fascist United States, and today’s fascist United Kingdom.

Mussolini was the man-of-the-future, but — after Franklin Delano Roosevelt died, and finally Thatcher and Reagan and other ‘free-marketeers’ came into office — Mussolini’s “future” has increasingly become our own “now”: the Axis Powers’ ideology has actually been winning in the post-WW-II world. Only, this time, it’s called instead by such names as “libertarianism” or “neo-liberalism,” no longer “fascism,” so that only the true-believing fascists, the aristocrats, will even know that it’s actually fascism. It’s their Big Con. It’s their Big Lie. Just renaming fascism as “libertarianism” or “neo-liberalism,” has fooled the masses to think that it’s pro-democratic. “Capitalism” has thus come to be re-defined to refer to only  the aristocratically controlled form of capitalism: fascism. The ideological battle has thus apparently been won by a cheap terminological deceit. That’s all it takes for dictatorship to be able to win.

The democratically controlled form of capitalism, such as in some northern European countries, has commonly been called “socialism”; and, of course, it’s opposed to all forms of dictatorship, both communist and fascist. Socialism is the democratic form of capitalism. It’s the form of capitalism that serves the public, instead of the aristocracy, at any point where the two have conflicting interests. It subordinates the aristocracy to the public. Fascism instead subordinates the public to the aristocracy, which is the natural tendency (because the “World’s Richest 0.7% Own 13.67 Times as Much as World’s Poorest 68.7%,” and the “World’s Richest 80 People Own Same Amount as World’s Bottom 50%”).

(Thus, recognizing those just-linked-to shocking realities, the basic decisions for the future of the world can actually be made by perhaps as few as only a hundred or so people, whose representatives at forums such as Bilderberg can coordinate things in private, and so can provide a sort of global supra-government, with those representatives serving as ministers to their principals, who, of course, will then carry out the details of whatever has been agreed upon between their agents, on their behalf. Payments then can be made in the normal way, between their respective corporations, and this arrangement can include payments to lobbying firms, etc., as well as to media companies, for advertisements, both of a commercial, and of a political, nature, in order to keep everything in line with the mutually-agreed-upon global-aristocratic plan.)

Within recent decades, the international aristocracy, with America’s in the lead, has, in fact, set into motion a plan to privatize an emerging world government, so as to prevent it from being democratic: instead of socialist, this would be a fascist world government. Its origins can even be found in the writings by Mussolini himself. (If he might be said to have had a “Plan ‘B’,” then this could have been his, and the plan’s ultimate adoption seems now to be only a matter of time. The present informal fascist system, via Bilderberg meetings etc., as was just summarized, would then operate only around the fringes of that more formal system, which would destroy national sovereignty and any trace of democracy, regarding many currently governmental matters, such as regulating the environment and product-safety. In a sense: virtually the whole world would then be a prison containing the public, and only aristocrats would have keys to unlock it, if and when and where they wish to let someone out into their tiny luxurious free world.)

Mussolini, incidentally, did not create fascism; he learnt it from his personal teacher, Vilfredo Pareto, who was one of the founders of the microeconomic theory that exists to this day and that is intrinsic to all cost/benefit analyses in capitalist economics. (It’s actually fascist economics, neither socialist nor communist economics. No microeconomic theory for a democracy — no socialist microeconomics — has yet been put forth, or else none has survived that was.) Aristocrats liked Pareto’s theory, so it became embodied in what’s called “welfare economics,” which is designed to fit with his political theory, which is fascism. Pareto was even rightly called “the Karl Marx of fascism.” For example: According to Pareto, freeing a slave from his or her master would be wrong unless the master accepts it as part of a transaction in which the slave is being sold and the master is satisfied with the payment that is being offered in the transaction. If the master isn’t satisfied, then the transaction would be “inefficient,” in the terminology of fascist microeconomic theory, which is the foundation of the existing type of capitalist economics — the type of economics that is being taught around the world.

America’s President Abraham Lincoln was one of the first people to advocate coherently for socialism. Whereas, to Pareto, property came first; to Lincoln, persons came first. To Pareto, property-rights were supreme. To Lincoln, human rights came first.

Lincoln was tragically shot by a conservative, and the political Party that he had helped to found (the Republican Party) was then quickly taken over by America’s aristocrats (and it, too, is described at that last link, making clear that Lincoln would have despised the Republican Party that followed after him; he would repudiate it).

Although the America of today is opposed to socialism, America’s two greatest Presidents, Lincoln and Franklin Delano Roosevelt, were both socialists: they both placed human rights above any property rights; they both favored democratic capitalism. Unlike FDR, Lincoln existed before fascism did; so, in his era, the equivalent was feudalism, and he was determined to end that in the U.S. South — thus, the Civil War.

Even an ordinary American scholar has argued that both Lincoln and FDR were “socialist,” and in the case of Lincoln he lists the actions this President took, as being the reasons for calling him a “socialist.” Lincoln wasn’t merely a pioneering socialist; he was, indeed, a very bold one.

America did not become fascist until recent decades. At the end of an analysis of polling-data in 2012, I had concluded: “The danger of outright fascism coming soon in Washington is real – the culmination of Reagan’s rightward thrust. It’s shown not just in the polling data, but in each day’s news, especially when viewed in the light of history. Everyone should be made aware of it.” But now I would say: We are already there.

And the last U.S. President before Ronald Reagan, which was Jimmy Carter, has recently said, in a startling outburst of honesty, reflecting upon what has happened to the United States after he left office:

Now it’s just an oligarchy with unlimited political bribery being the essence of getting the nominations for president or being elected president. And the same thing applies to governors, and U.S. Senators and congress members. So, now we’ve just seen a subversion of our political system as a payoff to major contributors, who want and expect, and sometimes get, favors for themselves after the election is over. 

He just described fascism: the privatization of the government itself.

—————

Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

Posted in Business / Economics, General, Media, Politics / World News, propaganda, Science / Technology | Tagged , , , , , , , , , , , , , , , , , | 17 Comments

Blue Chip Stocks Suffer Biggest 3-Day Loss In HISTORY

CNBC notes:

The blue-chip index posted its biggest 3-day point loss in history of 1,477.45 points.

Today was also the largest one-day swing of the Dow Jones in history, and last week was the largest ever increase in stock volatility.

Posted in Business / Economics | 5 Comments

The Rise of the Permanent Prisoners of War

If someone has had the good fortune not to encounter the world of U.S. police and prisons, and the misfortune to learn about the world from U.S. schools, entertainment, and “news” media, a great place to start understanding one of the worst self-inflicted tragedies of our era would be with James Kilgore’s short new book, Understanding Mass Incarceration: A People’s Guide to the Key Civil Rights Struggle of Our Time, followed up by Radley Balko’s longer Rise of the Warrior Cop: The Militarization of America’s Police Forces.

Both books tell a story of gradual change over the past half-century that has resulted in the police going to war against people they were supposed to serve (call it a war on crime, a war on drugs, a war on terror, it’s always in fact a war on people). And what do you do with people captured alive during a war? You lock them away as prisoners of war until the war ends. And if the war never ends? Well, then you bring back the death penalty, create life sentences for lots of crimes including for kids, impose mandatory minimums and three-strikes, and transform parole and probation from rehabilitation to reincarceration services.

The story of this gradual change is one of legal changes (court rulings and legislation), behavior, and popular belief — with each of these influencing the other two in a vicious cycle. You can’t quadruple a prison population in 40 years without instituting a different belief system. You can’t ship black prisoners to be guarded by rural whites employed by for-profit companies, or lock up immigrants indefinitely while they await hearings, and not alter the belief system further. You can’t run several successive election campaigns as contests in meanness and not see changes in policy and behavior. You can’t give police military weapons and not expect them to adopt military attitudes, or give them military training and expect them not to want military weapons. You can’t give crime 10 times the coverage on the “news” and not expect people to imagine crime is increasing. You can’t start smashing in doors without alienating the police and the people from each other.

Kilgore reminds us that the popular movements of the 1960s had an impact on popular thought. Opposition to the death penalty peaked in 1965 and was over 50% from 1957 to 1972, dropping to 20% in 1990. In 1977 only 37% of people polled rated police officers’ ethics as high, a number that rose to 78% in 2001 for no apparent substantive reason. As late as 1981 most Americans thought unemployment was the main cause of crime. We’ve since learned of course that crime is caused by evil demonic forces that possess the bad people of the earth.

The creation of the world’s largest ever collection of permanent prisoners of war — a trend that would translate perfectly to the war “on terror” abroad — developed through cycles, including partisan cycles. That is to say, Nixon had a horrible impact, Carter briefly slowed the mad rush to prisonville, and Reagan and Bush built on Nixon’s policies. The war on drugs was created as a means to militarize the police and involve the federal government in more local law enforcement, not the other war around. Reagan’s attorney general announced early on that, “the Justice Department is not a domestic agency. It is the internal arm of the national defense.” The end of the Cold War saw the military looking for new excuses to exist, and one of them would be the war on drugs.

When Clinton came along it again made a difference to have a Democrat in the White House, only this time for the worse. Bill Clinton and his would-be president wife and allies such as would-be president Joe Biden accelerated the march to suburban Siberia rather than slowing it. Under Clinton it became possible to throw people out of public housing for a single drug offense of any kind by anyone in the house. And yet Clinton was never evicted from his public housing despite the near certainty that someone in the White House used some kind of drug. Clinton brought us huge increases in incarceration, war weapons for police, and the shredding of social supports.

When the War on Terra began in 2001 whole new pathways to profit and police militarization opened up, including the beloved Fatherland’s Department of Homeland Security, which has handed out tens of billions of dollars in “terror grants” that fund the terrorizing of the U.S. public. In 2006 the Buffalo, NY, police staged a series of drug raids they called “Operation Shock and Awe.” Adding truly military grade incompetence to meanness, the New York Police Department raided an elderly couple’s home over 50 times between 2002 and 2010 because their address had randomly been used as a placeholder in a computer system and remained in any report that had failed to include an address.

The arrival of Captain Peace Prize at 1600 Pennsylvania Avenue continued the trends and added an escalation of the war on immigrants, as well as of the war weapons for the police programs.

But the partisan cycles are more subtle as well. As Balko recounts, Congress members and others opposed police militarization when the president was of the other party and supported it when he was from theirs, or opposed it when the discussion focused on drugs but supported it in matters of gun-control (or vice versa). Yet, each acceptance was two steps forward and each resistance one step back, so that what was outrageous one decade became the norm in the next.

National partisan tides and vicious cycles of ever increasing militarization interacted over the years with local advances. Los Angeles, and the leadership of Darryl Gates, brought SWAT teams to U.S. policing. The name originally stood for Special Weapons Attack Teams and the tactics were literally a bringing of the war on Vietnam home as Gates consulted with the military to learn what was supposedly working in Vietnam.

Let me close with the question with which Balko begins his book: Are police constitutional? The police, prisons, parole, and probation did not exist when the U.S. Constitution was created any more than did drones or the internet. The first thing in the United States like police was the slave patrol. The first modern police force in the United States was begun in New York City in 1845. I’ve argued at length elsewhere that drones are incompatible with the Bill of Rights. What about police?

The Third Amendment grew out of resistance to allowing soldiers to engage in any of the abuses that constitute the work of police. Need we accept those abuses? I think we can at the very least radically reduce them. To do so we will have to declare an end to the wars abroad and the wars at home. Balko quotes former Maryland police officer Neill Franklin on what changing police attitudes will require:

“Number one, you’ve signed on to a dangerous job. That means that you’ve agreed to a certain amount of risk. You don’t get to start stepping on others’ rights to minimize that risk you agreed to take on. And number two, your first priority is not to protect yourself, it’s to protect those you’ve sworn to protect.” But that would mean not being at war with people.

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The Dow Just Made the Largest One-Day Roundtrip EVER

It’s not your imagination …

Dow

The U.S. stock market just took the largest roundtrip ever.    Specifically, in the first 3 hours and 40 minutes of trading today, the Dow posted the largest intraday swing in history:

 

Intraday

The initial 1,000 point crash in the Dow today was also the largest intraday point drop in history.

This came hot on the heels of the largest weekly increase in volatility in history.

Posted in Business / Economics | 2 Comments

Which U.S. Senators Really Want War on Iran — An Update

This is an update to “Which U.S. Senators Want War on Iran.”

I’ve found there isn’t really any way to touch on this topic without misunderstanding, but here’s a try. Iran has never had a nuclear weapons program or threatened to launch a war against the U.S. or Israel. Many opponents of the Iran deal in the U.S. Congress and nearly every, if not every single, proponent of the agreement in the U.S. Congress has proposed war as the alternative. Some examples are here. The White House is even telling Congress that the agreement will make a future war easier — as a selling point in favor of the deal.

Of course, war is NOT the only alternative to the agreement. The threat of war comes from the U.S. An alternative to that would be to simply stop threatening it. No deal is actually needed. The purpose it serves is to slow down a U.S. push for war.

Of course, many ordinary supporters and opponents of the agreement do not want a war. But with Washington offering two courses of action toward Iran: a deal that imposes tougher inspections than anyone else has to deal with, or bombs, one has to choose the inspections.

That is, a moral person does. The “I want a better deal” argument is cynically put forward by people who want no deal at all, even if supported by well-meaning people who have the misfortune to own televisions or read newspapers.

Of course, the Iranian government can be criticized in many areas, none of which are subject to improvement by bombing.

Here are people who have said they oppose the agreement or can’t make up their mind about it yet:

Every Republican in the U.S. Senate plus these Democrats (the first two have said No, the rest Undecided):
Menendez (NJ)
Schumer (NY)
Wyden (OR)
Bennet (CO)
Booker (NJ)
Cantwell (WA)
Cardin (MD)
Casey (PA)
Coons (DE)
Heitkamp (ND)
Mikulski (MD)
Murray (WA)
Peters (MI)
Stabenow (MI)
Warner (VA)

This is a much shorter list than what it was when I previously wrote on this topic. In fact, it’s at 15, which is almost down to the 13 needed to kill the agreement. Get it down to 12 and the agreement survives. That means two more Democratic senators can come around to the Yes position on the Iran deal and the deal still die. Almost certainly at least those two will. Whether a third does, or more do, is the real question.

When measures voted on are popular with funders but unpopular with the public, they very often pass with no more than exactly the votes needed. Sometimes word leaks out about the deals that have been cut. Senators and House members take their turns giving the unpopular votes demanded by funders and “leadership.” The trick here is that the “leadership” is split between Obama’s and Biden’s YES and (would be Senate leader) Schumer’s NO.

The fifteen people named above have had PLENTY of time to conclude that many of their colleagues want to risk a war and to understand that the agreement is preferable to that. It’s time for us to let them know we will not stand for them getting this wrong and will never forget it if they do. Here’s what I’m asking about my senator, Mark Warner:

Here’s what World Beyond War is doing to try to correct the myth that Iran is the origin of the threat of war in this affair:

iranthreatSITE

We must uphold the Iran agreement, but upholding it while pretending that Iran has a nuclear weapons program, or is threatening anyone, will not create a stable and lasting foundation for peace. Upholding an agreement with both proponents and opponents threatening war as an alternative is perilous as well as immoral, illegal, and — given the outcome of similar recent wars based on similar recent propaganda — insane.

You can spread the above message on Facebook here, Twitter here, Instagram here, Tumblr here, and Google+ here.

In the U.S. sign these petitions: one, two, and join these events.

More events all over the world, and tools for creating your own are here.

Outside the U.S., people can contact the nearest U.S. Embassy.

Posted in General | 2 Comments

Is It Time to Get into Crash Positions?

With stock markets diving around the globe, a pressing question arises: is it time to get into Crash Positions?

In case you forgot how to get into Crash Positions, here’s a reminder:

After a dizzying 500+ point drop in the Dow on Friday, should we brace for impact? There are plenty of fundamental and technical reasons to view the swoon this week as the initial downturn that presages a crash landing.

But if we look at the last equivalent spike down in October 2014, we’re not so sure. Both spikes (October 2014 and August 2015) smashed through the lower Bollinger band, but the volume in last week’s plummet was nothing special compared to the 2014 swoon.

Big moves have a bit more credence if they’re accompanied by massive volume.

This leaves the door open to a sharp rebound, i.e. what followed the spike down last October.

The Put-Call Ratio (CPC) has actually exceeded the spike of October 2014, suggesting fear and panic are at higher levels now than back then. Sharp peaks in the CPC typically signal market bottoms.

But even if the market rebounds sharply, that doesn’t necessarily signal the return of higher highs. Recent lows in the CPC signaling extremes of complacency did not result in new highs; the market has been range-bound for months. This suggests the Bull is tiring–even if price pops back up.

The SPX MACD has worked its way down to the neutral line, threatening to punch through to negative territory. Bad things tend to happen when MACD stumbles below the neutral line, and that suggests the next decline might be different from the spike-down-snapback pattern of last year.

Is it time to get into Crash Positions? It never hurts to be prepared, but if the market pulls another October 2014 snapback here, the market could enter a glide path rather than a tailspin.

Keep an eye on the fuel gauges. Maybe this flight won’t go into a tailspin; perhaps it simply runs out of fuel.

Posted in General | Tagged , | 24 Comments

Environmentalist Writer Claims Military Saves Lives

Jeremy Deaton seems to be a fine writer on the subject of climate change right up until he stumbles across the propaganda of the U.S. military. I highlight this as the latest example of something that is so typical as to be nearly universal. This is a pattern across major environmental groups, environmental books, and environmentalists by the thousands. In fact, it’s in no way limited to environmentalists, it’s just that in the case of environmentalism, blindness to the damage done by the U.S. military is particularly dramatic in its impact.

“Forget About Saving Energy. This Is About Saving Lives.” That’s a fine title for an article about anything other than the military, which is of course designed to destroy lives, or as Republican Presidential Candidate Mike Huckabee honestly put it in a recent debate: “to kill people and break things.” In fact, this is brought out by Deaton’s sub-headline: “Energy efficiency is making the Navy a leaner, meaner fighting machine.” What does a meaner fighting machine do better? Kill people and break things.

But Deaton, who as a good environmentalist is supposed to care about the earth, reveals that, as is typical, under the spell of military propaganda, he only actually cares about 4% of the humans on the earth. The other 96% can be damned:

“Fossil fuels are a huge liability for American soldiers. Marine convoys loaded down with gas are sitting ducks for enemy bullets and roadside bombs. Using less energy means shorter supply lines: fewer targets, fewer casualties, more American soldiers making it home to their families.”

What do those supply lines supply exactly? The instruments of mass killing, of course. The idea that a killing machine is “saving lives” turns out to be the idea that while engaged in massive killing it hopes to lose fewer of its own: “It’s about tightening the gears on the war machine.” Of course if it ceased occupying the world’s oceans and shores, stirring up trouble, and fighting wars, it would save every single one of its sailors (or soldiers or Marines). An agressive global military with a few windmills save lives in the same way that buying an enormous ice cream sunday that you didn’t want saves money when it’s on sale.

Deaton quotes the Secretary of the Navy, whether copied and pasted straight off a press release or not, as saying, “Sailors and Marines come to grips with the fact that these programs help them become better warfighters.” And what do war fighters do? They fight wars. They kill huge numbers of people and create huger numbers of injuries and trauma-victims and refugees. Deaton repeatedly stresses that energy efficiency improves the ability to commit mass murder, because he clearly sees this as preferable to actually giving a shit about the planet. He quotes a Wilson Center think tanker (n., one who thinks tanks): “Their desire for energy efficiency is completely mission driven. There’s nothing ideological about it, and it’s very, very practical.” Right. God forbid they should ideologically care whether the planet maintains an inhabitable climate.

Even if you love or tolerate wars, an environmental military is like a diet coke. As World Beyond War points out, the military fights its wars for fossil fuels and consumes more of them in the process than anyone else does doing anything else. Oil can be leaked or burned off, as in the Gulf War, but primarily it is put to use in all kinds of machines polluting the earth’s atmosphere, placing us all at risk. Some even associate the consumption of oil with the supposed glory and heroism of war, so that renewable energies that do not risk global catastrophe are viewed as cowardly and unpatriotic ways to fuel our machines.

The interplay of war with oil goes beyond that, however. The wars themselves, whether or not fought for oil, consume huge quantities of it. One of the world’s top consumers of oil, in fact, is the U.S. military. The U.S. military burns through about 340,000 barrels of oil each day. If the Pentagon were a country, it would rank 38th out of 196 in oil consumption.

The environment as we know it will not survive nuclear war. It also may not survive “conventional” war, understood to mean the sorts of wars now waged. Intense damage has already been done by wars and by the research, testing, and production done in preparation for wars. Wars in recent years have rendered large areas uninhabitable and generated tens of millions of refugees. War “rivals infectious disease as a global cause of morbidity and mortality,” according to Jennifer Leaning of Harvard Medical School.

Perhaps the most deadly weapons left behind by wars are land mines and cluster bombs. Tens of millions of them are estimated to be lying around on the earth, oblivious to any announcements that peace has been declared. Most of their victims are civilians, a large percentage of them children.

The Soviet and U.S. occupations of Afghanistan have destroyed or damaged thousands of villages and sources of water. The Taliban has illegally traded timber to Pakistan, resulting in significant deforestation. U.S. bombs and refugees in need of firewood have added to the damage. Afghanistan’s forests are almost gone. Most of the migratory birds that used to pass through Afghanistan no longer do so. Its air and water have been poisoned with explosives and rocket propellants. A few solar panels will not fix this.

If militaries were made green in terms of their operations, they would lose one of their main reasons for war. (Nobody can own the sun or the wind.) And we would still have a long list of … More reasons to end war.

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Making Sense Of The Sudden Market Plunge

The global deflationary wave we have been tracking since last fall is picking up steam.  This is the natural and unavoidable aftereffect of a global liquidity bubble brought to you courtesy of the world’s main central banks.  What goes up must come down — and that’s especially true for the world’s many poorly-constructed financial bubbles, built out of nothing more than gauzy narratives and inflated with hopium.

What this means is that the traditional summer lull in financial markets has turned August into an unusually active and interesting month. August, it appears, is the new October.

Markets are quite possibly in crash mode right now, although events are unfolding so quickly – currency spikes, equity sell offs, emerging market routs and dislocations, and commodity declines –  that it’s hard to tell for sure.  However, that’s usually the case right before and during big market declines.

Before you read any further, you probably should be made aware that, at Peak Prosperity, our market outlook has been one of extreme caution for several years.  We never bought into so-called “recovery” because much of it was purely statistical in nature, and had to rely on heavily distorted and tortured ‘statistics’ to be believed.  Okay, lies is probably a more accurate term in many cases.

Further, most of the gains in financial assets engineered by the central banks were false and destined to burst because they were based on bubble psychology, not actual returns.

Which bubbles you ask?  There are almost too many to track. But here are the main ones:

  • Corporate bond bubble
  • Corporate earnings bubble
  • Junk bond bubble
  • Sovereign debt bubble
  • Equity bubbles in various markets (US, China) and sectors (Tech, Biotech, Energy)
  • Real estate bubbles, especially in the commodity exporting countries
  • Central bank credibility bubble (perhaps the largest and most dangerous of them all)

What’s the one thing that binds all of these bubbles together?  Central bank money printing.

Passing The Baton

Operating in collusion, the world’s major central banks passed the liquidity baton back and forth between them, first from the US to Japan, then from Japan to Europe, then back to the US, then over to Europe again where it now resides.  Seemingly endless rounds of QE that didn’t always do what they were supposed to do, and plenty of things they were not intended to do.

The purpose of printing up trillions and trillions of dollars (supposedly) was to create economic growth, drive down unemployment, and stoke moderate inflation.  On those fronts, the results have been dismal, horrible, and ineffective, respectively.

However, the results weren’t all dismal.  Big banks reaped windfall profits while heaping record bonuses on themselves for being at the front of the Fed’s feeding trough. The über-wealthy enjoyed the largest increase in wealth gains in recorded history, and governments were able to borrow more and more money at cheaper and cheaper rates allowing them to deficit spend at extreme levels.

But all of that partying at the top is going to have huge costs for ‘the little people’ when the bill comes due.  And it always comes due.  Money printing is fake wealth; it causes bubbles, and when bubbles burst there’s only one question that has to be answered: Who’s going to eat the losses?

The poor populace of Greece is just now discovering that it collectively is responsible for paying for the mistakes of a small number of French and German banks, aided by the collusion of Goldman Sachs, in hiding the true state of Greek debt-to-GDP using sophisticated off-balance sheet derivative shenanigans. As a direct result, the people of Greece are in the process of losing their airports, ports, and electrical distribution and phone networks to ‘private investors’ — mainly foreigners harvesting the last cash-generating assets the Greeks have left to their names.

Broken Markets

As we’ve detailed repeatedly, our “markets” no longer resemble markets.  They are so distorted, both by central bank policy and technologically-driven cheating, that they no longer really qualify as legitimate markets.  Therefore we’ve taken to putting double quote marks around the word “”market”” often when we use it.  That’s how bad they’ve become.

Where normal markets are a place for legitimate price discovery, todays “”markets”” are a place where computers battle each other over scraps in the blink of an eye, ‘investors’ hinge their decisions based on what the Fed might or might not do next, and rationalizations are trotted out by the media for why inexplicable market price movements make sense.

Instead, we view the “”markets”” as increasingly the playgrounds of, by and for the gigantic market-controlling firms whose technology and market information have created one of the most lopsided playing fields in our lifetimes.

Signs of these distortions abound. One completely odd chart is this one, showing that the average trading range of the Dow (ytd) was the lowest in history as of last week (before this week’s market turmoil hit).  And that was despite Greece, China, QE, Japan, oil’s slump, Ukraine, Syria, Iran and all of the other ample market-disturbing news:

(Source)

Based on the above chart, you’d think that 2015 up through mid-August was the most serene year of the last 120 years.  Of course, it’s been anything but serene.

The explanation for this locked-in trading range is a combination of ultra-low trading volume and the rise of the machines.  There have been times recently when practically 100% of market volume was just machines playing against each other…no actual investors (i.e, humans) were involved.

As long as there was ample liquidity, then the machines were content to just play ping pong with the “”market””. Which they did, crossing the S&P 500 over the 2,100 line 13 times before the recent sell-off took hold.

But that’s not the most concerning part about having broken markets.  The most concerning thing centers on the fact that things that should never, ever happen in true markets are happening in todays “”markets”” all the time.

One measure of this is how many standard deviations (std dev) an event is away from the mean. For example, if the price of a financial asset moves an average of 1% per year, with a std dev of 0.25 %, then it would be slightly unusual for it to 2%, or 3%.  However it would be highly unusual if it moved as much as 6% or 7%.

Statistics tells us that something that 3 std dev movements are very unlikely, having only a 0.1% chance of happening.  By the time we get to 6 std devs, the chance is so small that what we’re measuring should only happen about once every 1.3 billion years. At 7 std dev, the chance jumps up to once every 3 billion years.

Why take it to such a ridiculous level? Because those sorts of events are happening all the time in our “”markets”” now. And that should be deeply concerning to everyone, as it was to Jamie Dimon, CEO of JP Morgan:

‘Once-in-3-Billion-Year’ Jump in Bonds Was a Warning Shot, Dimon Says

Apr 8, 2015

JPMorgan Chase & Co. head Jamie Dimon said last year’s volatility in U.S. Treasuries is a “warning shot” to investors and that the next financial crisis could be exacerbated by a shortage of the securities.

The Oct. 15 gyration, when Treasury yields fluctuated by almost 0.4 percentage point, was an “unprecedented move” that would have serious consequences in a stressed environment, Dimon, the New York-based bank’s chairman and chief executive officer, said in a letter Wednesday to shareholders. Treasuries are supposed to be among the most stable securities.

Dimon, 59, cited the incident as he waded into a debate about whether bank regulations implemented after the 2008 financial crisis exacerbate price declines by limiting the ability of Wall Street banks to make markets. It’s just a matter of time until some political, economic or market event triggers another financial crisis, he said, without predicting one is imminent.

The Treasuries move was “an event that is supposed to happen only once in every 3 billion years or so,” Dimon wrote. A future crisis could be worsened because there “is a greatly reduced supply of Treasuries to go around.”

(Source)

While Mr. Dimon used the event to suggest that bank regulations were somehow to blame, that explanation is self-serving and disingenuous.  He’d use any excuse to try and blame bank regulations; that’s his job, I guess.

Instead what happened was that our “”market”” structure is so distorted by computer trading algorithms, with volume so heavily distorted by their lighting-fast reflexes, that one of those ‘once in 3-billion years events’ resulted.

This simply wouldn’t have happened if humans were still the ones doing the trading, but they aren’t. All the colored jackets have been hung up at the CME, and human market makers on the floor of the NYSE are rapidly slipping away into the sunset as algorithms now run the show.

The good news about computers is that they allow our trading to be faster and cheaper, presumably with better price discovery.  The bad news is that nobody really understands how the whole connected universe of them interact and that, from time to time, they go nuts.

As Mr. Dimon hinted, they have the chance of taking the next financial downturn and converting it into a certified financial meltdown

How common are these ‘billion year events’?

They happen all the time now. Here’s a short list:

(Source)

All of this leads us to conclude that the chance of a very serious, market-busting accident is not only possible, but that the probability approaches 100% over even relatively short time horizons.

The deflation we’ve been warning about is now at the door. And one of our big concerns is that we’ve got “”markets”” instead of markets, which means that something could break our financial system as we know and love it.

From The Outside In

One of our main operating models at Peak Prosperity is that when trouble starts it always begins at the edges and moves from the outside in.

This is true whether you are looking at people in a society (food banks see a spike in demand well before expensive houses decline in price), stocks in a sector (the weakest companies decline first), bonds (junk debt yields spike first), or across the globe where weaker countries get in trouble first.

What we’re seeing today is an especially fast moving set of ‘outside in’ indicators that are cropping up so fast it’s difficult to keep track of them all.  Here are the biggest ones.

Currency Declines

The recent declines in emerging market (EM) currencies is a huge red flag.  This combined chart of EM foreign exchange shows the escalating declines of late.

(Source)

Since last Monday, here’s the ugly truth:

Many of these countries have been using precious foreign reserves to try and stem the rapid declines of their currencies, but I fear they will all run out of ammo before the carnage is over.

What’s happening here is the reverse part of the liquidity flood that the western central banks unleashed.  The virtuous part of this cycle sees investors borrow money cheaply in Europe, the US or Japan, and then park in in EM countries, usually by buying sovereign bonds, or investing in local companies (especially those making a bundle off of the commodity boom that was happening).

So on the virtuous side, a major currency was borrowed, and then used to buy whatever local EM currency was involved (which drove up the value of that currency), and then local assets were bought which either drove up the stock market or drove down bond yields (which move as in inverse to price).

The virtuous part of the cycle is loved by local businesses and politicians.  Everything works great.  The currency is stable to rising, bond yields are falling, stocks are rising, and everyone is generally happy.

However when the worm turns, and it always does, the back side of this cycle, the vicious part, really hurts and that’s what we’re now seeing.

The investors decide that enough is enough, and so they sell the local bonds and equities they bought, driving both down in price (so falling stock markets and rising yields), and then sell the local currency in exchange for dollars or yen or euros, whichever were borrowed in the first place.

And thus we see falling EM currencies.

To put this in context, many of the above listed currencies are now trading at levels either not seen since the Asian currency crisis of 1997, or at levels never before seen at all.  The poor Mexican peso is one of the involved currencies, which has fallen by 12% just this year, and almost made it to 17 to the dollar early this morning (16.9950).  Battering the peso is also the low price of oil which is absolutely on track to destroy the Mexican federal budget next year.

Stock Market Declines

In concert with the currency unwinds we are seeing deep distress in the peripheral stock markets.  There are now more than 20 that are in ‘bear country’ meaning they’ve suffered declines of 20% or more from their peaks.

Here are a few select ones, with Brazil being in the worst shape:

All of these signs reinforce the idea that the great central back liquidity tsunami has reversed course and is about to create a lot of damage and suck a lot of debris out to sea.

The Commodity Rout

A lot of EM countries are commodity exporters.  They sell their minerals trees and rocks to the rest of the world, by which we mean to China first and foremost.

Commodities are not just doing badly in terms of price, they are absolutely being crushed, now down some 50% over the past four years.

(Source)

Commodities tells a number of things besides the extent of EM economic happiness or pain – they tells us whether the world economy is growing or shrinking.  Right now they are saying “shrinking” which is confirmed by all of the recent Chinese import, export and manufacturing data, along with the dismal results coming out of Japan (in recession), Europe and the US.

Conclusion Part I

As we’ve been warning for a long time, you cannot print your way to prosperity, you can only delay the inevitable by trading time for elevation.   Now, instead of finding ourselves saddled with $155 trillion of global debt as we did in 2008, we’re entering this next crisis with $200 trillion on the books and interest rates already stuck at zero.  We are 30 feet up the ladder instead of 10 and it’s a long way down.

What tools do the central banks really have left to fight the forces of deflation which are now romping across the financial landscape from the outside in?

If the computers hiccup and give us some institution smashing or market busting 8 sigma move what will the authorities do?  Shut down the markets?  It’s a possibility, and one for which you should be prepared.

Where are we headed with all this?  Hopefully not the way of Venezuela which is now so embroiled in a hyperinflationary disaster that stores are stripped clean of basic supplies, social unrest grows, and creative street vendors are now selling empanadas wrapped in 2 bolivar notes because they are, literally, far cheaper than napkins.  Cleaner?  Maybe not so much.  I wouldn’t want to eat off of currency.

(Source)

But make no mistake, the eventual outcome to all this is captured brilliantly in this quote by Ludwig Von Mises, the Austrian economist:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

The credit expansion happened between 1980 and 2008, there was a warning shot which was soundly ignored by ignorant central bankers, and now we have more, not less, debt with which to contend.

Venezuela has already entered the ‘total catastrophe’ stage for its currency, but Japan will follow along, as will everyone eventually who lives in a country that finds itself unable to voluntarily abandon the sweet relief of booms enabled by credit creation.

In Part 2: Prepare Now! we discuss how time is now running short to make adequate preparations in the event the long-overdue market correction arrives in force. Which one should you focus on most?

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

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Bernie Sanders versus Obama & the Clintons: The Big Difference

Eric Zuesse

I state here why I have come to support Bernie Sanders for President: Whereas Hillary Clinton, Bill Clinton and Barack Obama — the modern Democratic Establishment — have been so conservative they might as well have called themselves “conservative” (and they didn’t say it because they needed to be able to win Democratic Party primaries), Sanders’s record shows that he isn’t like that at all; he’s an authentic democrat, and always has been, even when he didn’t call himself one (but only a “Progressive,” and a “socialist — like in Scandinavia”). I don’t care what a politician calls himself or herself, only what the person actually is, as the person has proven to be by the actual record as a public official.

The entire careers of Bernie Sanders, versus Barack Obama and both Bill and Hillary Clinton, display a stark difference. Whereas Obama and the Clintons were trying to win the votes of Democrats while secretly supporting Republican policies to redistribute even more wealth upward from the public to the aristocracy (and they did so) (and how!), Sanders has consistently been trying — and helping — to do the exact opposite: to redistribute wealth downward, from the aristocracy to the public. Taxes, and all of government policies, are inevitably  wealth-distributional (who pays how much, and who gets how much of the benefits; and what benefits pay needs, versus what benefits pay mere wants). Any politician who says that government isn’t largely about the distribution of wealth, knows that what he is saying is false — he or she is lying about government. (Only their suckers can believe it.) The question isn’t whether  government should redistribute wealth; it’s how. That’s reality, and every public official knows it.

THE VIEW HELD BY OBAMA & THE CLINTONS:

Lawrence Summers was the leading economist for both of the Clintons, and also for Obama; and one of the reasons they chose him was that he agreed with them that the richer a person is, the better the given person tends to be. Summers shared their money-elitist values. (They secretly despise the poor.)

He was an economist and not a politician, and so he wasn’t as careful as Obama and the Clintons to hide his money-elitist belief from the public. A politician’s chief economist shows where he or she really stands, on this crucial matter — aristocracy versus democracy. This is a matter that’s basic not only to economics, but also to politics.

For example, the leaked “Summers Memo” from 12 December 1991, when Larry Summers was Chief Economist for the World Bank, instructed his staff that, “a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a wad of toxic waste in the lowest wage country is impeccable and we should face up to that. … I’ve always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City.” When this staff-memo was leaked to environmental organizations, he said that he had only been joking, but this is not the way his staff had interpreted it. Indeed, they had no reason to interpret it in any other way than as constituting guidance from their boss. The view that he expressed in this staff-memo was consistent with other views he’s known to have expressed in the course of his career, right up to the present time. It’s his view. It’s the Clintons’ view. And it’s Obama’s view. And it’s not funny at all — no more than a vicious comment about a deceased person would be that’s made at his funeral. And Summers isn’t so stupid.

On 15 June 2012, Bonnie Kouvassi at Huffington Post, bannered “Larry Summers: We Need To Focus On Inequality of Opportunity,” and she presented video of him teaching at Harvard, saying, “I think we can accept, I think we should accept, inequality of results, recognizing that those who earn more are in a better position to contribute more to support society.” He attacked those (this would include Bernie Sanders) who criticized America’s extreme inequality of wealth, and he praised at length “those who are in a better position to contribute more to support society.” Summers’s aristocrat-enhancing view was that, even in a nation of such extreme wealth-inequality as America, inequality of opportunity can be reduced without also reducing inequality of wealth. It’s not just false, but absurdly false: In a country with such extreme wealth-inequality (one of the world’s highest), inequality of opportunity is largely the result  of inequality of wealth. Addressing the former without also addressing the latter is doomed to fail. As a reader at a blog well-phrased the matter, on 29 September 2013: “The privileges of wealth grow exponentially with each generation in no small part because of the greater educational opportunities the children of the rich have – with less distraction from needing to work their way through school and less debt with which to begin the ‘rat race’.” If anyone should know about that, it’s the former Harvard president Summers.

However, Summers routinely displayed enormous respect for wealthy people, and contempt for the poor. He was quoted in Ron Suskind’s 2011 Confidence Men  as saying in 2009 (p. 197), “One of the challenges in our society is that the truth is kind of a disequalizer. … One of the reasons that inequality has probably gone up in our society is that people are being treated closer to the way they’re supposed to be treated.” This was the economist preferred above all others by Obama and the Clintons. He hadn’t contributed anything important to economics, but he called himself a ‘Democrat,’ and he pleased America’s aristocracy; so, he got the top ‘Democratic’ appointments, from the top ‘Democrats.’

Obama himself has said essentially the same thing, such as, “while we don’t promise equal outcomes, we have strived to deliver equal opportunity.” It’s fake, no matter which liar is using the rationalization for spreading economic inequality.

The report in Politico on 18 March 2014, “The Rich Strike Back,” cited Summers as assuming (as Adam Smith did; e.g., “Wherever there is great property there is great inequality” — something that’s proven false in some of the world’s wealthiest and  most-equal countries) a supposed natural tension between wealth and equality. Summers alleged there that progressives’ desire for more economic equality is merely “envy”: he said, “‘Reducing inequality is good, but it’s 50 times better to do it by lifting those up who are low than by tearing those down who are high,’ said Larry Summers. … ‘The politics of envy are the wrong politics in America. The better politics are the politics of inclusion where everyone shares in economic growth.’” He called this aristocratic, anti-democratic, position “the politics of inclusion.” He implied that democracy is the politics of exclusion; aristocracy the politics of inclusion.

Barack Obama endorses that viewpoint (even though Summers’s having stated it in public became an embarrassment to the President and was then quietly punished by him); Obama himself had even endorsed it subtly in an article by David Leonhardt in The New York Times, 24 August 2008, “Obamanomics,” where Obama, late in the U.S. Presidential campaign, had stated his Hayek-Friedman-Posner positions, the (University of) “Chicago School of Economics” views (which his colleagues there said that he accepted), which were called “postpartisan.” Leonhardt wrote: “‘The market is the best mechanism ever invented for efficiently allocating resources to maximize production,’ Obama told me. ‘And I also think that there is a connection between the freedom of the marketplace and freedom more generally.’” Obama simply ignored that in fascism, there is both capitalism and  dictatorship. A ‘free market’ does not necessarily mean a free country. Obama only pretends to be ignorant of this fact. And, similarly, socialism does not necessarily mean a lack of democracy: Scandinavian countries are both socialist (as socialist welfare states) and democratic, without there being any contradiction.

In other words: Obama denied the entire question of wealth-redistribution upward or downward; he simply denied the entire issue of economic classes — the public versus the aristocracy. He denied that “freedom more generally” can maximize either for the aristocracy, or else for the public, but not for both simultaneously. (Aristocrats compete among themselves for dominance within the aristocracy, but they all compete collectively against  the public, such as to lower their wages for employees, and to reduce safety-regulation of products for consumers; and government is the vehicle that makes such essentially redistributive decisions — on behalf of either the public, the voters; or else the aristocrats, the big political campaign donors.) He had said this in a country that had actually gone from being one of the most-equalitarian in the world in 1975, to becoming one of the least-equalitarian in the world in 2007. And inequality kept soaring after Obama became President — he placed into practice his actual beliefs (though he never stated these beliefs publicly in any clear manner, because then he would have lost Democratic primaries, never become President).

On 19 September 2011, the anti-Summers former Clinton-Administration economist, Brad DeLong, blogged “Obama Develops His Own View of the Jobless Recovery,” and pasted in some excerpts from the just-published devastating take-down of the Obama Administration, Ron Suskind’s Confidence Men. DeLong being a professional economist, he included the most revealing passage concerning Obama’s view of the nation’s economy as the new President had entered office and during his first years in office, the passage that actually explained Obama’s entire economic policy. This passage (p. 353) referred to the President’s two leading economic advisors, Summers being number one, and Christina Romer being second:

Both … were concerned by something the president had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy [i.e, that because of increased worker-productivity, those workers simply were no longer needed]. Summers and Romer were startled.

‘What was driving unemployment was clearly deficient demand,’ Romer said. ‘We wondered where this could have been coming from. We both tried to convince him otherwise. He wouldn’t budge.’

Summers had been focused intently on how to spur demand, and on what might drive a meaningful recovery. Since the summer, in meeting after meeting, he’d ticked off the possible candidates, and then discussed them – ‘it won’t be construction, it won’t be exports, it won’t be the consumer.’ But without a rise in demand, in Summers’s view, nothing else would work. What’s more, in such a sluggish, low-demand environment, Summers felt that banks probably shouldn’t be lending. ‘No one wants banks to offer credit to people who shouldn’t be taking on more credit.’ [In other words: the idea that interest rates were low in order to increase bank-lending was fake, mere PR; interest rates were low in order to increase the spread, the profits, between their low borrowing costs from the Fed, and their much higher interest rates on credit cards and other existing lending. Obama chose Fed chairs who aimed, above all, to keep bank-profits high, by keeping the Fed’s interest rate low.]

But productivity? The implications were significant. If Obama felt that 10 percent unemployment was the product of sound, productivity-driven decisions by American businesses, then short-term government measures to spur hiring were not only futile but unwise.

The two economists strained their shared memory of dozens of meetings: had they said something he’d misconstrued? At one point, Summers had mentioned how Keynes once wrote in a 1938 letter that the labor movement depressed productivity, and maybe Obama saw that the disruptions in the economy from the Great Panic gave employers an opportunity – an excuse, essentially – to harvest latent productivity gains.

After a month, frustration turned to resignation. ‘The president seems to have developed his own view,’ Romer said.

Obama was more conservative even than Summers was.

In other words, as the first of the many reader-responses to this posting said – and DeLong’s blog was regularly read by large numbers of Democratic economists, so these comments were mainly from professional economists who were on the liberal side of that very conservative profession: “Obama is now on record as to the right of Larry Summers on stimulus vs. deficit reduction. At that point, we are beyond ‘Obama as Rubinite’ or ‘Obama as blue dog’ and well into ‘Obama as GOP mole’ territory. This disgraceful shill for global capital has destroyed the Democratic party for a generation.”

Another said: “And I was always joking about Obama as the ‘Manchurian Candidate’ from the U of Chicago [a notoriously right-wing faculty]. Productivity? Really?”

Another said: “Law and economics [the associated far-Right UC viewpoint in political theory] background. Depressing.”

Another said: “I’m totally blown away. … To read that he espouses crank nonsense like this is frightening.”

Another said: “Omigod. Larry Summers looks good [by comparison to the President he advised].”

The only economists who still thought (and publicly expressed) that high unemployment was the result of increased economic productivity, were people like Glenn Hubbard, who had headed George W. Bush’s Council of Economic Advisors. One of Harvard’s prominent champions of aristocracy, Niall Ferguson, also publicly defended this view on 2 November 2011, when Yahoo News headlined an interview with him, “Poor Public School Education Not Wall St. to Blame For American Inequality.” In other words: (democratic) government was to blame; kleptocratic aristocrats who financed political commercials (and financed scholars like Glenn Hubbard’s and Niall Ferguson’s and Lawrence Summers’s careers) were not  to blame.

Elsewhere, I had excerpted from Suskind’s book the description Suskind gave (p. 234) of Obama’s private meeting in the White House with Wall Street CEOs, on 27 March 2009, in which Obama told them that, “My administration is the only thing between you and the pitchforks. … I’m not out there to go after you. I’m protecting you. … I’m going to shield you.” And he did: zero prosecutions of them, and record-low financial prosecutions.

Hillary and Bill Clinton are also like that. Different people, same views.

THE VIEW HELD BY BERNIE SANDERS:

Bernie Sanders is not like that. He’s not trying to fool anybody. And that’s why he’s widely loved in Vermont, where, as a Mayor, he had helped to produce perhaps the nation’s most progressive state, even though it used to be the most Republican state (and the only state, other than Maine, never to have voted for FDR).

Vermont newspaper Seven Days  has the best reporting about Sanders’s actual record. Reporter Nancy Remsen headlines in a recent issue, “What a 1987 Tax Battle Says About Bernie Sanders,” and she provides typical details about Sanders’s early battles against the aristocracy in Burlington Vermont (which is the state’s largest city, and of which he had become the Mayor in 1981). The city’s ‘non-profit’ hospital (the administrators actually received all of its profits) was transferring its tax-liabilities off onto Burlington’s other residents (and thus driving up their property-taxes), and Bernie Sanders didn’t think that this was fair.

He argued that seeking taxes from the medical center was about fairness for taxpayers. The hospital had a $100 million budget, he said, but paid “nothing in taxes, nothing in lieu of taxes and nothing for the services they receive,” meaning fire, police and other municipal protections.

He threw jabs about the hospital trustees meeting behind closed doors and administrators’ salaries: “There are a heck of a lot of people up there making a heck of a lot of money,” he said pointedly.

The hospital responded:

“The effects of stripping the hospital of its tax-exempt status are far-reaching. The first to suffer would be patients. The finance office estimated the cost of the average patient stay would increase by about $300.”

The Mayor got turned down repeatedly, but he kept on fighting.

He tried, without success, to force the medical center to match a city grant to support the Visiting Nurse Association. He asked the Vermont attorney general if it was legal for the hospital trustees to meet behind closed doors. He set up another task force — this one to look at health care — and gave them a mission, found in written form among his papers: “It seems to be that the question that must be debated in our community is a very fundamental one and that is, ‘Should the practice of medicine, and the whole health care system, be run as a corporate business generating huge profits and incomes to higher-ups in that profession, or should health care be a right to which all Americans are entitled at the lowest possible cost?'” 

“We took the view they didn’t provide enough charitable care to qualify” for a tax exemption, Joseph McNeil, then city attorney, said in a recent interview. The hospital had provided $1.5 million in free care, but “much of what they were calling charitable care was really uncollectable debt,” McNeil said. Translation: hospital bills that people couldn’t pay.

Superior Court Judge John Meaker issued his decision on September 22 [1987], ruling against the city on all counts.

“For Judge Meaker, essentially, the hospital is charitable because it is a hospital,” Sanders complained in statement he released at the time. … In its appeal of the tax case, the city challenged the judge’s reliance on the hospital’s assertion about its open-door admission policy. The city argued that it could have provided testimony from patients who were denied admission because of their inability to pay. [That testimony was blocked.]

The judges were determined not to tax a ‘non-profit.’ The City lost its appeal. But the fight that Sanders waged as Mayor was continued by him in Congress, and by his friends back in Vermont. He (and they) have made progress for the whole nation:

Today, the medical center provides about $9 million in charitable care, not including uncollectable debt. [That’s a big change] The quarterly board meetings have been open to the public since at least 1995, according to medical center spokesman Mike Noble. [That’s another big change.]

That’s real improvement, not just Obama-type “change.” It wasn’t achieved by compromising with conservatives (as Obama does). It was achieved by constantly battering them, and winning bit-by-bit as time passes, never giving up. That’s the only way progress is ever achieved.

And that’s why the aristocrats are financing Hillary Clinton’s campaign, and the campaigns of Republican candidates — but not Sanders’s.

After all of President Obama’s blather about ‘equality,’ how well have Blacks fared under this black President, Obama’s, Presidency? They’ve fared worse than any other ethnic group. (Black Agenda Report even headlined “The Expansion of Black American Misery under Barack Obama’s Watch.”) Yet Blacks still support him more than any other ethnicity does. That’s really a scandal (about both Obama, and the Blacks who admire him after he has thus screwed Blacks). Sanders isn’t aiming to appeal to some racial or gender group; he’s aiming to appeal to — and to serve — the American public. This isn’t a nationalist campaign. It’s a patriotic campaign, in the country that was founded by a Revolution that was waged against the aristocrats in their own era and place. (The aristocrats then happened to be British.) Instead of the mere spouting by some aristocrats, of noblesse oblige, which gets buildings or hospital-wings named after them, it’s: You need less, now pay more to the public that makes this wealth possible for you.

CONCLUSION:

If Sanders is a modern revolutionary, then politicians such as Obama and the Clintons (and all Republicans) are today’s version of the Redcoats — America’s enemies, the aristocracy that our Founders tried to outlaw but couldn’t. That’s the real difference between Bernie Sanders versus Obama & the Clintons — and all Republicans (since conservatism is the declared, and not only  the real, ideology of that Party).

Bernie Sanders is aiming to return  the Democratic Party to its FDR roots, which was when the Party had the most reason to be proud of what it stood for. Here is how Franklin Delano Roosevelt put it:

            We know now that Government by organized money is just as dangerous as Government by organized mob.

            Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.

            I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.

It’s a heritage that Bernie Sanders can proudly, and honestly, claim to be his own. Today’s Democratic Party Establishment, such as Robert Rubin’s Hamilton Project, and Bill Clinton’s Democratic Leadership Council or New Democrats, cannot. (In fact, to the exact contrary: both Rubin and Clinton ended FDR’s Glass-Steagall Act, and thus prepared the way for George W. Bush to crash the U.S. economy.)

There’s a problem in this country that goes deeper than ethnic bigotry, and it’s economic bigotry — the belief that a person’s net worth reflects his or her moral worth. When President Obama said to Wall Street’s CEOs, on 27 March 2009, “My administration is the only thing between you and the pitchforks,” he was telling them that the Occupy Wall Street demonstrators were today’s version of the old KKK who had lynched Blacks — and that those CEOs who kept the fortunes they had made from bilking MBS investors were today’s version of the Blacks who had been lynched. FDR wouldn’t agree with any of that. Nor would Bernie Sanders. That’s what we need again, inside the White House.

—————

Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

Posted in Business / Economics, Energy / Environment, General, Media, Politics / World News, propaganda, Science / Technology | Tagged , , , , , , , , , , , , , , , , , , , , | 24 Comments

Introducing the Gigantic and Dangerous Wall Street Loophole You’ve Never Heard of

Submitted by Mike krieger via Liberty Blitzkrieg blog,

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This spring, traders and analysts working deep in the global swaps markets began picking up peculiar readings: Hundreds of billions of dollars of trades by U.S. banks had seemingly vanished.

The vanishing of the trades was little noted outside a circle of specialists. But the implications were big. The missing transactions reflected an effort by some of the largest U.S. banks — including Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, and Morgan Stanley — to get around new regulations on derivatives enacted in the wake of the financial crisis, say current and former financial regulators.

The trades hadn’t really disappeared. Instead, the major banks had tweaked a few key words in swaps contracts and shifted some other  trades to affiliates in London, where regulations are far more lenient. Those affiliates remain largely outside the jurisdiction of U.S. regulators, thanks to a loophole in swaps rules that banks successfully won from the Commodity Futures Trading Commission in 2013.

Many of the CFTC employees who were lobbied in these meetings went on to work for banks. Between 2010 and 2013, there were 50 CFTC staffers who met with the top five U.S. banks 10 or more times. Of those 50 staffers, at least 25 now work for the big five or other top swaps-dealing banks, or for law firms and lobbyists representing these banks.

The lobbying blitz helped win a ruling from the CFTC that left U.S. banks’ overseas operations largely outside the jurisdiction of U.S. regulators. After that rule passed, U.S. banks simply shipped more trades overseas. By December of 2014, certain U.S. swaps markets had seen 95 percent of their trading volume disappear in less than two years.

– From the excellent Reuters article: U.S. Banks Moved Billions of Dollars in Trades Beyond Washington’s Reach

The following story is guaranteed to make you sick. Once again, we’re shown that following trillions in taxpayer funded bailouts and backstops, TBTF Wall Street banks immediately went ahead and focused all their attention obtaining loopholes in order to transfer risk and make billions upon billions of dollars in the financial matrix, as opposed to adding any benefit whatsoever to society.

From Reuters:

NEW YORK – This spring, traders and analysts working deep in the global swaps markets began picking up peculiar readings: Hundreds of billions of dollars of trades by U.S. banks had seemingly vanished.

“We saw strange things in the data,” said Chris Barnes, a former swaps trader now with ClarusFT, a London-based data firm.

The vanishing of the trades was little noted outside a circle of specialists. But the implications were big. The missing transactions reflected an effort by some of the largest U.S. banks — including Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, and Morgan Stanley — to get around new regulations on derivatives enacted in the wake of the financial crisis, say current and former financial regulators.

The trades hadn’t really disappeared. Instead, the major banks had tweaked a few key words in swaps contracts and shifted some other  trades to affiliates in London, where regulations are far more lenient. Those affiliates remain largely outside the jurisdiction of U.S. regulators, thanks to a loophole in swaps rules that banks successfully won from the Commodity Futures Trading Commission in 2013.

For large investors, the products are an important tool to hedge risk. But in times of crisis, they can turn toxic. In 2008, some of these instruments helped topple major financial institutions, crashing the U.S. economy and leading to government bailouts.

After the crisis, Congress and regulators sought to rein in this risk, and the banks fought back. From 2010 to 2013, when the CFTC was drafting new rules, representatives of the five largest U.S. banks met with the regulator more than 300 times, according to CFTC records. Goldman Sachs attended at least 160 of those meetings.

Many of the CFTC employees who were lobbied in these meetings went on to work for banks. Between 2010 and 2013, there were 50 CFTC staffers who met with the top five U.S. banks 10 or more times. Of those 50 staffers, at least 25 now work for the big five or other top swaps-dealing banks, or for law firms and lobbyists representing these banks.

The lobbying blitz helped win a ruling from the CFTC that left U.S. banks’ overseas operations largely outside the jurisdiction of U.S. regulators. After that rule passed, U.S. banks simply shipped more trades overseas. By December of 2014, certain U.S. swaps markets had seen 95 percent of their trading volume disappear in less than two years.

While many swaps trades are now booked abroad, some people in the markets believe the risk remains firmly on U.S. shores. They say the big American banks are still on the hook for swaps they’re parking offshore with subsidiaries. 

Still, the banks’ victory on the swaps loophole leaves a concentrated knot of risk at the heart of the financial system. The U.S. derivatives market has shrunk but remains large, with outstanding contracts worth $220 trillion at face value. And the top five top banks account for 92 percent of that.

In 2009, President Barack Obama tapped Gary Gensler, then 51 years old, to chair the CFTC. Liberals grumbled about Gensler’s résumé. The son of a cigarette and pinball-machine salesman in working class Baltimore, Gensler, at 30, had become the youngest banker ever to make partner at Goldman Sachs.

Among other jobs, he oversaw the bank’s derivatives trading in Asia. Later, as an undersecretary of the Treasury, Gensler helped push through the 2000 law that had banned regulation of derivatives markets.

Kenneth Raisler, a former Enron lobbyist representing JP Morgan, Citigroup, and Bank of America, argued in a letter that the CFTC should allow U.S. banks to do things overseas “even if those activities were not permissible for a U.S. bank domestically.”

Kenneth Raisler, a former Enron lobbyist representing JP Morgan, Citigroup, and Bank of America.”

You just can’t make this stuff up. Gold Jerry, gold.

Meanwhile, Obama was hard at work as always proving himself to be a capable banker coddler in order to ensure his payday upon leaving office.

In his place, Obama nominated a long time aide to Democratic Senator Harry Reid, Mark Wetjen. Gensler and other pro-reform allies assumed that the veteran Democrat would vote with the Democrats on the commission.

Wetjen, a derivatives newcomer, was not a conventional liberal. He came with an endorsement from the U.S. Chamber of Commerce, an opponent of the Dodd-Frank Act. As his policy adviser, Wetjen hired Scott Reinhart, former in-house counsel at the structured credit products division at Lehman Brothers – the bank whose collapse in 2008 set off the financial crisis.

Rosen, the banks’ lead lawyer, discussed Wetjen often on calls with his bank clients. The newcomer, Rosen told them, was key to swinging the commission in the banks’ favor.

Banks got dramatically more face time with commissioners after Wetjen’s appointment. In 2010, Gensler had met with the top five U.S. banks 13 times, and in 2011, 10 times. That was still more than any other staffer or commissioner at the CFTC.

In the year after Wetjen’s appointment, Wetjen aide Reinhart met with the top five banks 36 times, more than anyone else at the CFTC. Wetjen himself met with the top banks second-most often, 34 times. Gensler met them less than half as frequently, as did nearly every other commissioner and staffer, according to the records. 

In June, Reinhart left the CFTC to join Rosen’s practice at Cleary Gottlieb.

Gensler had little patience for the bank-friendly Wetjen, former CFTC officials say. As their disagreements sharpened, Wetjen’s pro-bank views seemed to harden, these people said.

“Mark was struggling a little with the substance,” one former CFTC official said. “Gary treated Mark like he was a moron, and then Mark refused to budge.”

“The fight over this provision was one of the biggest policy fights in all of Dodd Frank,” said Kelleher, of the think tank Better Markets. “Once the banks got that loophole, then a lot of that predatory behavior migrated overseas to wherever there was less regulation.”

Goldman had already started moving to restructure its trading operations to get around Dodd-Frank. In March 2012, it sent out a four-page letter to its derivatives clients with an unusual demand. Goldman wanted clients to sign off on giving the bank standing permission to move a client’s swaps trades to different affiliates around the world, whenever and wherever the bank saw fit.

Goldman called the letter the “Multi-entity ISDA Master Agreement.” It meant that a client might strike a derivatives deal with Goldman in New York in the morning, and that afternoon, with no disclosure, a Goldman office in London or Singapore or Hong Kong could take over the deal. With each shift, the trade could fall under different regulators.

Perhaps I should ask John Hilsenrath whether it is “anti-Semitic” to point this out.

Just in case you need a reminder of how incredibly putrid and corrupt Banana Republic America has become…

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The global inter-dealer market for interest rate swaps in Euros is one of the largest derivatives markets in the world. U.S. banks’ monthly share of the market had plunged nearly 90 percent since January 2013, from over $1 trillion to $125 billion, according to ISDA. 

The data were misleading. U.S. banks were still trading as vigorously as ever. But their trades, booked through London affiliates, without any credit guarantees linking them back to the U.S.,  were now showing up in the data as the work of European banks.

In mid 2014, the Securities Industry and Financial Markets Association, a banking lobby in Washington, circulated a private memo to its members. The memo consisted of talking points banks could use to justify the de-guaranteed contracts and shifting of trades if questioned by regulators and lawmakers. 

Where have you heard about the Securities Industry and Financial Markets Association, or SIFMA, before? Recall the following from the post, Ex-NSA Chief Keith Alexander is Now Pimping Advice to Wall Street Banks for $1 Million a Month:

So what is Mr. Alexander charging for his expertise? He’s looking for $1 million per month. Yes, you read that right. That’s the rate that his firm, IronNet Cybersecurity Inc., pitched to Wall Street’s largest lobbying group the Securities Industry and Financial Markets Association (SIFMA), which ultimately negotiated it down to a mere $600,000 a month. In case you need a refresher on how much of a slimy character this guy is, I suggest you read the following posts…

What would we have done without the bailouts…

Posted in Business / Economics, Politics / World News | 10 Comments

Plunge Protection Teams of the World, Unite!

Central bankers are watching Marx’s dictum all that is solid melts into air play out in global stock markets with a terror informed by the scalding memories of 2008’s global financial meltdown.

Once the trap-door opens, there is no bottom without prompt action by the world’s Plunge Protection Teams–the plausible-deniability action heroes of the hyper-speculative status quo who leap into action when global stock markets threaten to melt down.

After half a decade of ceaseless saves, we all know the mechanics of Plunge Protection.

Since the majority of trading is now done by software programs (trading bots, algorithms, etc.), the first step is to create positive momentum so the bots will detect an “up day” and buy, buy, buy.

The easiest way to generate positive momo is to buy a truck load of S&P 500 futures in a time of low volume, where the impact will be the greatest. usually this is pre-market open.

If this fails, the next step is to send a central bank Talking Head out to discuss more quantitative easing. Announcing the central banks’ readiness to do more of what has goosed markets higher for six years will generally spark a buying frenzy, as those who have bet against central banks over the past six years have had their heads handed to them on a platter.

If this fails, grandiose but purposely vague claims of “doing whatever it takes” are issued. there is no need to actually have a plan, or to lay out a plan in public; the open-ended announcement is generally enough to reverse a trap-door decline.

If this fails, it’s now serious. The Plunge Protection Team must start buying equities. This is usually done by private proxies via dark pools or offshore accounts or by state agencies–investment funds, retirement funds, etc.

When things get very serious, the central bank can buy assets directly, and in such massive quantities that the markets are forced to respond appropriately.

If this fails, the last resort is a coordinated buying campaign by all the central banks, acting in concert. This last stand has a rallying cry: Plunge Protection Teams of the World, Unite!

Of course the PPTs of the world monitor key technical support levels, but what the PPTs are really monitoring is the dangerous sentiments of fear and panic. When the trap-door opens and the herd turns to selling, the entire six-year prop-job will crumble.

The herd must be turned away from selling by any means available, and at this point, that means coordinated buying by all the world’s Plunge Protection Teams.

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Stock Market Volatility Skyrockets Most In HISTORY

MarketWatch reports:

The CBOE Volatility Index jumped Friday to levels not seen since December 2011, logging its largest ever weekly percentage jump as stocks sold off for a fourth straight session. The VIX, or so called “fear index,” surged more than 47% to 28.21 right after the close. For the week, the index is up nearly 120%, making it the largest weekly percentage jump in the VIX’s history, according to FactSet data. The previous largest surge was back in early May 2010, when the VIX jumped nearly 86% on the week. For the week, the Dow Jones Industrial Average and S&P 500 Index both dropped 5.8%, and the Nasdaq Composite Index fell 6.8%.

CNBC notes:

The CBOE Volatility Index, known as the VIX, has doubled in August. If it finishes the month here, it would log the largest monthly gain ever (using data going back 1990). That beats out the 91 percent advance seen in September 2008.

Wikipedia explains:

VIX is … a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period.

Posted in Business / Economics | 5 Comments