Economic Blogs

Martin Armstrong "It's Not the Rich – It's The Total Cost Of Government That Is Killing The Economy"

Zero Hedge - Mon, 14/04/2014 - 22:15

Submitted by Martin Armstrong via Armstrong Economics,

QUESTION: Do you believe in a fairer system where there is a minimum income cap and a maximum asset cap? We live in an age where productivity has risen through the roof due to technological advancement. Don’t you think humanity is at the stage where it can afford to offer basic income to people so better checks and balances can be set in place to thwart the exploitation of people (see the third world).

A maximum asset cap would also act as a  positive filter in business ownership, don’t you think? The businessmen interested mainly in greed won’t fill those positions, but those who are driven more by other means, hopefully positive ambitions, will fill those roles (CEO,COO, managers, etc.)

Can you form a good argument against an asset cap of, say, $20mm? Can you think of a situation where 1 individual NEEDS more than 20 million, aside from using it to exploit others? If a cap isn’t set, that leads to the development of a tycoon, i.e., exploiter, of an industry. Increased capital permits the further increasing of capital at the accelerated rate. When left unchecked, greed and self-serving goals create a net loss, rather than a net gain.

Remember Martin, everything is connected. You can’t think on an individual level and expect it to not hurt evolution. This is what life is about. Evolution.

We’re headed towards doom, and the enemy is not just socialism, political cronies, and economic mobsters.

ANSWER: The standard of living has collapsed and it now takes two incomes to survive not one. That isn’t because of wages are not high enough. Do not forget, if you raise the wages you raise the cost of production and the consumer will pay that higher level in the end. There is no one-sided solution – you cannot raise wages without prices also rising. People would have more disposable income and would bid up prices by demand. If there was no 30-year mortgage, the price of houses would decline sharply because if people had to PAY CASH for a house, then the price of a house would fall to the point where the average income could afford it. Roosevelt created the 30-year mortgage to try to give people LEVERAGE to buy real estate to raise the price. That LEVERAGE has now impacted prices over the course of decades.

The answer lies in the consumption of wealth not that someone has more assets than another. Eliminate taxation and you will reduce the cost of labor, bring back jobs, and you will also eliminate the lobbying to escape taxes. Henry Ford invented the assembly line and brought the cost of cars down to the middle class at $240. He made a lot of money and expanded his business with it. If there was a cap on assets, you would destroy job creation. It REQUIRED the concentration of wealth to create innovation. If wealth is evenly distributed, you will not get enough people to agree to risk it all. Most small businesses fail after start-up. Some make it while a few really strike it big. That is the risk reward.

Big corporations die because they become eventually run by lawyers not entrepreneurs. I have been called in to many board meetings and watched the process first hand. As soon as a new company becomes public, the bureaucrats enter and the creativity vanishes. This is why they pay huge money for start-ups because they create what the big companies cannot – innovation.

It is not what an individual needs that is the issue. Take all the money away from Bill Gates. How will this improve your life at all? The issue is HOW MUCH is government consuming. But as long as they point to the “rich” they get to waste your money.

Social Security has altered society in ways people do not respect. Previously, family units were stronger because the system was the young took care of the old. Introducing Social Security changed everything. What children today save to take care of their parents?  That’s the state’s job. Welfare altered the system by rewarding women not to get get married. New Zealand nearly went bust on its program that sounded nice that if a woman had no idea who the father of the child was, the state took care of everything and gave her a house. They ended up with the highest percentage of women who had NO IDEA who the father of their child was. What woman does not know that except victims of rape?

China’s one child rule has seriously altered society there as well. Couples are now offering their estate to females to come in from SE Asia if they will take care of them. You cannot create these types of changes without seriously impacting society.

Pictured above at the beginning is the tax burden upon society back in 1988. Even currently, the top 1% pay about 33% of all income taxes. At the start of 2000, the total amount of revenue collected by federal and state government in the USA exceeded 40% of GDP. This is outrageous and this is why the economy is slowing declining. This has nothing to do if somebody earned $100 million or $50 million as a CEO. That has ZERO impact upon your life – but what government takes out of your pocket REDUCES your standard of living – DIRECTLY.

The solution is NOT to raise taxes on the rich, for government will still spend more than it takes in regardless of who pays. This is like fining your wife because the guy next door did not sort his trash for recycling. This is indirect. It is taxes that we must address – not how much someone else makes.


Categories: Economic Blogs

To the 34% of American Adults Who Are "Worried a Great Deal" about "Global Warming"

Zero Hedge - Mon, 14/04/2014 - 21:44

Preface:  A recent Gallup poll showed that 34% of American adults worried “a great deal” about “global warming”.  This essay is written for that 34%.

Many well-intentioned people are desperately trying to stop climate change …

And yet they are proposing things that will put more C02 and methane into the air and otherwise do more harm than good.

Frack That

Many propose nuclear and fracking as a way to reduce carbon emissions.

In reality, scientists say that fracking pumps out a lot of methane … into both our drinking water and the environment.

Methane is a powerful greenhouse gas: 72 times more potent as a warming source than CO2.

As such, fracking actually increases – rather than decreases – global warming.

Are Nukes the Answer?

It turns out that nuclear is .

Mark Jacobson – the head of Stanford University’s Atmosphere and Energy Program, who has written numerous books and hundreds of scientific papers on climate and energy, and testified before Congress numerous times on those issues – notes that nuclear puts out much more pollution (including much more CO2) than windpower, and 1.5% of all the nuclear plants built have melted down. More information here, here and here.

Jacobson also points out that it takes at least 11 years to permit and build a nuclear plant, whereas it takes less than half that time to fire up a wind or solar farm. Between the application for a nuclear plant and flipping the switch, power is provided by conventional energy sources … currently 55-65% coal.

Scam and Trade

One of the main solutions to climate change which has long been pushed by the powers that be – cap and trade – is a scam. Specifically:

  • The economists who invented cap-and-trade say that it won’t work for global warming
  • Many environmentalists say that carbon trading won’t effectively reduce carbon emissions
  • Our bailout buddies over at Goldman Sachs, JP Morgan, Morgan Stanley, Citigroup and the other Wall Street behemoths are buying heavily into carbon trading (see this, this, this, this, this and this).

As University of Maryland professor economics professor and former Chief Economist at the U.S. International Trade Commission Peter Morici writes:

Obama must ensure that the banks use the trillions of dollars in federal bailout assistance to renegotiate mortgages and make new loans to worthy homebuyers and businesses. Obama must make certain that banks do not continue to squander federal largess by padding executive bonuses, acquiring other banks and pursuing new high-return, high-risk lines of businesses in merger activity, carbon trading and complex derivatives. Industry leaders like Citigroup have announced plans to move in those directions. Many of these bankers enjoyed influence in and contributed generously to the Obama campaign. Now it remains to be seen if a President Obama can stand up to these same bankers and persuade or compel them to act responsibly.

In other words, the same companies that made billions off of derivatives and other scams and are now getting bailed out on your dime are going to make billions from carbon trading.

War: The Number One Source of Carbon

The U.S. military is the biggest producer of carbon on the planet.

Harvey Wasserman notes that fighting wars more than wipes out any reduction in carbon from the government’s proposed climate measures.

Writing in 2009 about the then-proposed escalation in the Afghanistan war, Wasserman said:

The war would also come with a carbon burst. How will the massive emissions created by 100,000-plus soldiers in wartime be counted in the 17% reduction rubric? Will the HumVees be converted to hybrids? What is the carbon impact of Predator bombs that destroy Afghan families and villages?

The continuance of fighting all over the Middle East and North Africa completely and thoroughly undermines the government’s claims that there is a global warming emergency and that reducing carbon output through cap and trade is needed to save the planet.

I can’t take anything the government says about carbon footprints seriously until the government ends the unnecessary warsall over the globe.

So whatever you think of climate change, all people can agree that ending the wars is important.  (War also destroys the economy.)

Anyone who supports “humanitarian war” by the U.S. is supporting throwing a lot of carbon into the air.

Dumb as a Mongoose In Hawaii

Many scientists suggest “geoengineering” the Earth’s climate. But that could actually worsen climate change. It could also increase the risk of drought.

Moreover, geoengineering would increase ocean acidification and decrease available sunlight for solar power.

And once we started, we could never stop.

Some of the geoengineering proposals are downright nuts.  For example, “government scientists are studying the feasibility of sending nearly microscopic particles of specially made glass into the Earth’s upper atmosphere to try to dampen the effects of ‘global warming.’ ” Others are currently suggesting cutting down trees and burying them. Other ways to geoengineer the planet are being studied and tested (and see this and this), involving such things as dumping barium, aluminum and other toxic metals into the atmosphere.

Remember, the mongoose was introduced to Hawaii in order to control the rats (which were eating the sugar cane used to make rum). It didn’t work out very well … mongeese are daylight-loving creatures while rats are nocturnal. So the mongeese trashed the native species in Hawaii, and never took care of the rats.

Similarly, the harm caused by many of these methods have not been thought through … and they could cause serious damage to our health and our ecosystems.

So – whatever you think about climate – you can obviously agree that we should approach climate change from the age-old axiom of “first, do no harm”, making sure that our “solutions” do not cause more damage than the problems.

So What’s the Answer?

If nuclear, fracking, cap and trade and geoengineering aren’t the answer, what is?

There are 3 main strategies which both climate activists and climate skeptics can agree on, because they have big upsides whether or not the Earth is warming:

(1) Reducing soot will quickly reduce melting of ice and snow. Reducing soot will be cheaper than the “decarbonation” which many policy-makers have proposed. And it would increase the health of millions of people worldwide


(2) Use specific smart combinations of solar, wind and geothermal energy


(3) Decentralize power generation and storage.  That would empower people and communities, produce less carbon, prevent nuclear disasters like Fukushima, reduce the dangers of peak oil (and thus prevent future oil spills like we had in the Gulf), and have many other positive effects

We don’t need fascism to make this happen …  We just need a sound plan.

Categories: Economic Blogs

The 7 Biggest Tax Scams and How to Avoid Them

The Daily Reckoning - Mon, 14/04/2014 - 21:42

Getting caught up in a tax scam can occur at any time of year. But your chances of getting scammed peak during that jolly season when you dutifully file your taxes. This is why, leading up to April 15, the IRS releases a list of the top tax scams they see being perpetrated around the nation.

It’s important that you be aware of these and take precautions to protect yourself. Failing to do so can result in not only significant penalties and having to pay interest but even possible criminal prosecution.

With that, let’s go through them one by one.

1. Identity Theft

At the top of this year’s list is tax fraud through identity theft. This occurs when someone obtains your personal information and then uses it to commit some crime. One of the more typical examples is when a thief uses your information to file a tax return on your behalf and then claims your refund for themselves.

What to do: You can mitigate against this by filing your taxes as early as possible. A fraudster can’t claim your refund if you’ve already received it. But if you believe you’ve been the victim of identity theft, you should contact the IRS immediately. In fact, they have a special section on their website dedicated to protecting your identity and what to do if you think it’s been stolen.

2. Pervasive Telephone Scams

The IRS has witnessed a huge rise in telephone scams. What happens is you receive a call from someone claiming they’re from the IRS and they’ll tell you either that you’re entitled to a large refund or that you owe the IRS money. Don’t be fooled. The objective in both cases is to steal your personal information and/or money.

“Do not open emails that appear to be from the IRS, as they will never attempt to contact you by email.”

Victims of this scam report being threatened with hefty fines, loss of driver’s license, and even arrest.

The fraudsters perpetrating this can be quite sophisticated. They may be able to tell you the name of your employer and even your Social Security number. They’ve been known to use fake caller ID numbers, too, so that it appears they’re calling from the IRS. And sometimes they will follow up their call with an email that looks it’s from the IRS, to further convince you they’re legitimate.

What to do: Never disclose your Social Security number to someone who calls you. If you know you owe the IRS money, you can call them directly at 800-829-1040 to arrange payment. If you know you don’t have any taxes outstanding, you can call the IRS to report a phone scam at 800-366-4484.

3. Phishing

With this particularly sneaky scam, fraudsters send you an unsolicited email that appears to be from the IRS. The email will typically contain a link directing you to a website that looks legitimate — but it’s a fake. Once there, you’re directed to hand over your personal and financial information.

What to do: Do not open emails that appear to be from the IRS, as they will never attempt to contact you by email (or through text message or social networks).

4. Do Not Hide Income Offshore

There are many opportunities today for people to hide income overseas. But the IRS is unequivocal. If you try to evade taxes by using such a strategy, you can face substantial penalties and even criminal prosecution.

What to do: You must declare to the IRS if you are using overseas bank accounts, brokerage accounts, or any other kinds of foreign entities. If you have one of these accounts and not disclosed it to the IRS, you should consult a tax attorney about your options.

5. False Promises of Free Money

It’s common during tax time for criminals to pose as tax preparers. They attempt to lure you in with promises of big tax refunds and rebates. Often, these scammers will get the word out about their services at churches and community groups, where there is a high level of trust. They’ve even been known to set up fake storefronts!

What to do: Take care when choosing who prepares your taxes. The IRS holds you legally responsible for what’s on your tax return. A few signs of a legitimate operator: They enter a Preparer Taxpayer ID Number, sign returns as the preparer, and provide you with a copy of your return.

6. Return Preparer Fraud

Some unscrupulous accountants claim nonexisting deductions and tax credits to fool you into thinking you have a terrific tax preparer. I met one person who raved about his accountant because he gave him $5,000 more in charitable deductions than they paid for. If and when the IRS finds out about such deceitful accountants, though, it will go back and audit every one of their clients.

What to do: Similar to the advice in No. 4, be sure to exercise good judgment when choosing a tax preparer.

7. Fake Charities

It’s not uncommon for scam artists to impersonate legitimate charities and attempt to solicit money or personal information from potential victims, particularly after major disasters.

What to do: Never give away your personal information to someone who’s cold-calling you seeking money. If you donate to a relief effort, do not give cash. Instead, for security and tax purposes, donate by writing a check or using a credit card.


Sandy Botkin, C.P.A., Esq.
for The Daily Reckoning

Ed. Note: Sandy recently ran a free tax summit which detailed:

  • Tax implications of a gift or inheritance
  • Tax deductions on weekly meetings
  • How to handle the sale of a hard asset
  • Which tax software to use
  • Taxation of foreign currency exchange
  • How to avoid AMT
  • Writing off college expenses… and more!

And in today’s issue of the Daily Reckoning, readers were given a unique chance to grab all this great info, completely free. Don’t miss out on another great opportunity like this. Sign up for the Daily Reckoning email edition, for FREE, right here.

Categories: Economic Blogs

Monday Humor: So You Want To Be A Trader...

Zero Hedge - Mon, 14/04/2014 - 21:39

Months of BTFD momo mentality lost in days... so we thought this was appropriate



Source: TradingMemes

Categories: Economic Blogs

Could the Markets Be Setting Up For an Autumn Crash?

Zero Hedge - Mon, 14/04/2014 - 21:32

The market appears to currently be tracing out a pattern that we have seen multiple times. That pattern is:


1)   A spring mini-crisis (usually March)

2)   A summer rally

3)   An autumnal collapse


This pattern played out in 1907, 1929, 1987, 2000 and 2008.


The most recent example we can point to is 2008. In that year, the market experienced a mini-crisis in March with the collapse of Bear Stearns.


However, the Fed stepped in, merging Bear with JP Morgan. The relieved markets rallied into the summer on low volume. But come July, when Fannie Mae and Freddie Mac failed, it became clear that the summer rally would not be exceeding the previous market top.


Then AIG failed, and the markets nosedived, collapsing into an autumnal crash.


Could the markets experience another similar autumnal collapse in 2014?  It all hinges on #2 in the list above: the summer rally.


The markets usually stage some kind of summer rally/ dead cat bounce following spring crises. The key issue is the volume and force of the move. If the market rallies hard on heavy volume during the summer, this negates the pattern.


However, if the market rallies on weak volume after a spring crisis, and fails to exceed its previous top, then LOOK OUT.


Here’s the market’s current chart:



This time around, the spring crisis involved political and geopolitical instability in Ukraine. As you can see, the market bounced off of its trendline and is now  trending sideways.


Provided we hold this line, we should see a summer rally back up to the 1,900 area on the S&P 500.


However, if we take out the trendline, then the market is in more serious trouble.


This concludes this article. For a FREE Special Report on how to protect your portfolio from a bear market collapse, swing by


Best Regards

Phoenix Capital Research




Categories: Economic Blogs

Behind The Fed's Monetary Curtain: Wizards? Or Scarecrows Who "Do An Awful Lot Of Talking"

Zero Hedge - Mon, 14/04/2014 - 21:06

Submitted by Joseph Calhoun via Alhambra Partners,

The Wizard: I AM OZ…the Great and Powerful! Who are you?

The Wizard: Pay no attention to that man behind the curtain! The Great Oz has spoken!

Dorothy: How can you talk if you haven’t got a brain?

Scarecrow: I don’t know. But some people without brains do an awful lot of talking, don’t they?

All lines from Frank Baum’s The Wizard of Oz

The last few years the underlying theme of the markets is one of central bank omnipotence. Don’t worry about X, the Fed or the ECB or the BOJ has your back and will do whatever it takes to make sure nothing bad happens. The acceptance of this meme by market players has pushed all manner of assets to prices that in more normal times would make no sense whatsoever. It has been a wholesale rejection of safety and prudence in favor of the risk taking the central banks believe is necessary for the global or local economy to improve. The BOJ has convinced not only themselves but the world that currency devaluation and inflation will cure what has ailed Japan’s economy for over two decades. The ECB has somehow convinced the world that Greece is a worthy borrower for 5 years at less than 5% per annum. And the Fed has convinced themselves and the entire world that a rising stock market is evidence that their policies are working in the real economy. No matter that the economic data doesn’t support that conclusion and that it gets the causation backward.

Of course, it hasn’t just been empty headed scarecrow talk that has produced this effect. The BOJ and the Fed (and maybe soon the ECB) have been buying assets in the open market to back up their talk and create the illusion of activity, the equivalent of the Wizard of Oz’s smoke and mirrors. In the case of the Fed, it is almost all illusion as the cash produced by QE has largely ended up back at the Fed in the form of excess reserves. The BOJ has been more aggressive, buying not just JGBs but also stocks and REITs on the stock exchange, something the Fed is prevented from doing (sarcasm alert) only by their strict adherence to the statutes that govern their behavior. For the ECB the threat of intervention has so far allowed them to avoid having to do much but recent emanations from the Draghi hint at a Yen to join the party. Leave it to the Europeans to be fashionably late and arrive just as the lampshades have become party hats.

The ability to talk markets into doing what he wanted without saying much that was comprehensible was a talent that Alan Greenspan had in spades and earned him the nickname of The Shy Wizard of Money. Ben Bernanke, even though he looks more like a garden gnome than a wizard, spent years building up something resembling credibility that he used to extend Greenspan’s powers of persuasion even through a financial crisis largely of his own making. Bernanke got the party going and like a lot of men, left the mess for a woman to clean up. So far, it seems Janet Yellen’s words don’t carry quite the same weight as her wizard predecessors and the market Toto has a firm grip on the curtain hiding the levers of monetary policy.

When language and illusion become so important to market outcomes it doesn’t take much to upset the market applecart and Yellen started her tenure with what at the time seemed a minor faux pas. Until her first press conference the accepted scenario for monetary policy was that QE would wind down and at some point in the far future, the Fed would start to normalize interest rates (whatever normal is in this economy). Her faux pas was to provide unusual clarity for a Fed chair about what the phrase “considerable period” actually means. It turns out that for Yellen that unspecified epoch of Fed tightening could be as little as six months, something the market obviously wasn’t expecting. Except for a head fake breakout in the S&P 500, it has been downhill for stocks – especially the high beta, NASDAQ momentum darlings – ever since.

Yellen has spent the intervening time trying her best to convince the market that she didn’t actually say what she so obviously did. At a Chicago event on unemployment she said the Fed’s “extraordinary commitment” to “improving the labor market is still needed and will be for some time and I believe that this view is widely held by my fellow policymakers at the Fed.” Unfortunately for Yellen, the market, at least for now, isn’t buying it and once the momentum shifts in a market driven exclusively by that ephemeral emotion it is hard to reverse. For the traders who have moved this market for years now – HFT or actual human – momentum is momentum whether it is up or down and once they get something moving in one direction they’ll push it that way as hard as they can. For the last few weeks that direction has been down and so far Yellen hasn’t been able to change that. Or maybe she doesn’t really want to – yet. After all, there has been some angst on the FOMC recently about “financial stability” or what everyone else calls bubble behavior.

As the Fed continues to wind down QE to its inevitable conclusion, the markets will be left with the reality of our current circumstances. That reality is one that is very hard to read right now with the economic data still mixed after the winter weather distortions. The problem for Yellen and the Fed is that the only thing that will be kind to the stock market is data that is not too good but also not too bad. Data that is too strong will be seen as hastening the day of reckoning while data that is too weak will raise the fears of recession and a Fed with no policy levers left to pull. Only data that continues to show an economy growing slowly but below potential keeps the Fed in the game and the stock market going higher. And that is assuming the market continues to believe Fed policy is actually effective.

Right now, I see some indications that could push the Fed to tighten even sooner than now expected and also some indications that the economy is slipping into recession. Recent data on credit indicates that banks are finally ramping up lending. Commercial and Industrial loans are rising at a double digit annual rate of change although it is unclear whether this is an indication of business optimism or stress. After all, we did see a big jump in these loans leading into the last recession. Total bank credit has also accelerated, the annualized pace roughly doubling since the beginning of the year. Again, though it is hard to say why credit is rising other than that there is obvious demand and banks are meeting it with supply.

On the flip side, the bond market and the US dollar index seem to be flashing some warning signs about future growth. I wrote a post yesterday that covers this in more detail, but the gist is that it seems highly unlikely that the long end of the bond market would be rallying so furiously if the market was expecting a burst of growth. Similarly, if the nation’s currency is a reflection of growth expectations – and I think that is certainly one thing it reflects – then the fall in the dollar index indicates that expectations for growth are, at a minimum, better outside the US than in.

So the outlook for the economy is decidedly uncertain right now and I think so is the confidence in Janet Yellen. I think the more dire outcome for stocks would be if Toto fully pulled back the curtain on monetary policy and revealed it to be nothing more than a bunch clueless economists sitting in a conference room with no ability to control the economy or the markets. If US growth disappoints after all the Fed has done, how could anyone continue to view the Fed wizards as omnipotent? That would send the stock market back over the rainbow to the reality of an economy with big structural problems that can only be solved through political negotiation, something that has been notable only by its absence over – at least – the last 6 years. Are we headed back to Kansas?

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Categories: Economic Blogs

Guardian, WaPo Win Pulitzer For Proving Millions Of Conspiracy Theorists Right

Zero Hedge - Mon, 14/04/2014 - 20:34

After years of being mocked by the establishment and the majority of the herd, today millions of "conspiracy theorists" can pat themselves on the back because this Pulitzer's for you. Well, technically it is for the Guardian and WaPo, since these were the media outlets that Edward Snowden picked to release his trove of whistleblowing treasures, which the Pulitzer committee decided were "worthy" of the prize for their "revelation of widespread secret surveillance by the National Security Agency, marked by authoritative and insightful reports that helped the public understand how the disclosures fit into the larger framework of national security."

And while Edward Snowden did not directly win anything, he did comment from his new residence - where he is not wanted for three felony counts filed by the US Department of "Justice" - a few hundred miles from the unfolding events in the Ukraine, and from the CIA director's secret weekend visit:

“Today's decision is a vindication for everyone who believes that the public has a role in government. We owe it to the efforts of the brave reporters and their colleagues who kept working in the face of extraordinary intimidation, including the forced destruction of journalistic materials, the inappropriate use of terrorism laws, and so many other means of pressure to get them to stop what the world now recognises was work of vital public importance.”

Things got a little more awkward when the media whose sole purpose is to serve the statist masters - and to lie whenever the facade of the status quo is threatened - had to chime in: "It’s clear to me that we are all better off knowing the extent of government surveillance—-even the President has, reluctantly, admitted that,” David Remnick, the editor of The New Yorker, told POLITICO. “It’s a prize well-earned, and it seems to me the Pulitzer committee came to the right decision. It’s precisely because a different kind of society—-Putin’s Russia, say—-could never imagine this kind of journalism that we should value and honor it.”

The president may indeed have reluctantly admitted that. Which perhaps explains why his response was to unreluctantly make the NSA even bigger.

As for Mr. Remnick's comment about Putin's Russia, perhaps he should check what country the person who is responsible for today's Pulitzer win is currently living in.

Others dared to suggest that had Obama made a phone call here and there, that the credibility of the Pulitzer prize would have been diminished: "There are times when a nominee is bigger than a prize. This was such a time,” Mitchell Stephens, a Professor of Journalism at New York University’s Carter Institute, said. “The Pulitzer Prizes would have been diminished had they not recognized the Snowden revelations. Fortunately, they did."

Others were outright angry such as republican neocon Peter King who tweeted that "Awarding the Pulitzer to Snowden enablers is a disgrace." Luckily nobody cares what King thinks. 

Bottom line: as lie after lie falls to the wayside, and as factual evidence disproving what had been decades of engrained, institutionalized fraud is disclosed by disgruntled whistleblowing cogs of a corrupt, bloated government that is is cracking and falling apart under its own unsustainable weight, the winner, as the lies that have kept the broken system together for so long are revealed to all, is the average person. And, of course, all those what were formerly known as "conspiracy theorists" and knew all along just how deep the rabbit hole goes.

Categories: Economic Blogs

Unrigged Market Soars On 3:30 PM Fundamental Bullish Catalyst

Zero Hedge - Mon, 14/04/2014 - 20:05

The US open was enough of an event to decouple stocks (up) from USDJPY (down) but as we approached the crucial 330ET "fundamental" stocks had caught down to USDJPY weakness (worth noting that USDJPY tagged 102 in the pre-open and plunged). The 330 Ramp - JPY and VIX driven - was right on time getting S&P to VWAP and up to its 100DMA and Nasdaq back above 4000. Away from the roller-coaster ride in hope, faith, and BTFD charity in stocks, Treasuries leaked higher in yield all day (with 5Y underperforming and 30Y unch). The USD was bid (+0.3%) led by EUR weakness. USD strength pressured commodities but Gold was bid (closing above $1325 at 3-week highs).  All major equity indices remain red year-to-date (and negative from 3/19's FOMC). All "normal" and full of unriggedness.

V-shaped recovery on the 330 Fundamental...


Year-to-date, Stock indices all remain red...


S&P futures were ramped to VWAP...


By selling JPY and buying USD...


and selling the shit out of VIX...


Biotech bounced (as did Momos) closing just in the red...


Stocks appeared to play catch up to TSYs early weakness...


But credit markets were nothing like as exuberant about the desperate buying panic...


FX markets were volatile with the USD ending up 0.3% (on EUR weakness mostly)...


and USD strength weighed on commodities - except gold...


"Hanging on" seems to be new Bullish news...


Charts: Bloomberg

Categories: Economic Blogs

Strange But Legitimate Tax Deductions

The Daily Reckoning - Mon, 14/04/2014 - 20:01

Tax season is in full swing and people are trying to deduct all that they can. The United States tax code allows for many unusual but legitimate tax deductions, tax credits, and exemptions. For example, hot tubs and swimming pools are not just for the rich and famous. If you have a medical condition that a good soak or swimming regimen could help—you could write off the expense of a new pool… as long as you’ve got a doctor’s note. Here is a sampling of some of the more noteworthy unusual tax breaks that have been successfully claimed. Some of these might even apply to you.

- The state of South Carolina gives you a $50 tax credit for every butchered deer you donate to charity.

- Bodybuilders spending money on body oil to grease up for competitions are allowed to deduct the expense from their taxable income.

- A man who felt he was a woman trapped in a male body was diagnosed with gender-identity disorder. In the U.S. Tax Court’s view, the costs of the hormone therapy and the sex-change operation – a total of $14,500 – qualified as deductible medical expenses because those procedures helped treat a disease.

- A swimming pool can be deductible if it’s necessary for medical care. Get a doctor to recommend swimming for health reasons and you may be able to deduct the installation, chemicals, heating costs and the insurance as legitimate medical expenses.

- Does you child have an overbite? If so, you might want to enroll them in clarinet lessons. Both the clarinet and music lessons are tax deductible thanks to a 1962 provision added after orthodontists argued that playing the clarinet helps with a child’s overbite and may qualify as a medical expense.

- A gas station owner offered free beer as part of a promotion to entice customers. The Tax Court allowed the write-off as a legitimate business expense.

- One woman managed to get a prescription for three bottles of Evian water a day, allowing her to deduct $1,095 of bottled water from her taxes.

Deductions That Were Denied:

- One woman tried to deduct her gambling losses as a charity donation.

- The owner of a failing furniture store paid an arsonist $10,000 to burn down his store, then tried to write it off on his tax return as a “consulting fee.”

Categories: Economic Blogs

Nasdaq Re-Loses 4,000

Zero Hedge - Mon, 14/04/2014 - 19:23

Just a few short hours ago we were treated to a plethora of talking-heads proclaiming "see, this is it... the dip to be bought." But now, led by Biotechs as well as more 'growth' weakness, the Nasdaq has piled back below the critical 4000 level and broken to new cycle lows... we anxiously await the 330 Ramp to see just how much damage they can do (though stocks did catch perfectly down to USDJPY's early weakness)

New cycle lows for the Nasdaq


and violent catch-down for the S&P...

Categories: Economic Blogs


Zero Hedge - Mon, 14/04/2014 - 19:13

Submitted by Simon Black of Sovereign Man


Two bright white eyes looked at me inquisitively through the small hatch in the nondescript metal door.

I quickly glanced around the dark, empty streets of the Palermo district in Buenos Aires and whispered the password.

The door clanked open, revealing a small antechamber and a phone booth. I picked up the receiver and punched in a 4-digit code, and a second door opened.

Now I could begin to see the interior of “Frank’s”.

It was lit with elaborate chandeliers and accented with ornate leather seats, and Sidney Bechet was in full swing on his saxophone.

It was amazing, it looked just like a New York City speakeasy from the 1920s back in the days of prohibition and bootleg moonshine.

And that’s exactly what the proprietor intended—a nod to a time when an entire population was constantly having to outsmart destructive government policy.

Just to do something as simple as having a beer, people had to come up with elaborate schemes, passwords, and secret locations on nondescript streets.

Coincidentally, Frank’s is the perfect illustration, not only of New York in the 1920s, but of all of Argentina today.

Argentina is one of the places where debilitating capital controls are the rule.

The government has its ‘official’ exchange rate, and they’ve outlawed unofficial transactions with foreign currency.

But like prohibition-era bootleggers, an entire cottage industry has emerged with legions of street dealers trading currency far beyond the law.

Capital controls are only the start. This government has tried just about everything—price controls, credit controls, even people controls.

They’ve nationalized private assets. They’ve thrown dissenting economists in jail.

Now they’re going around collecting everyone’s fingerprints. They’ve just added another 100 products to the list of controlled prices.

And yet, inflation still rages. People’s standards of living are being destroyed.

The pesos that they earn are buying less and less. Despite the controls, prices are still rising much faster than wages.

All of this has led to mass poverty returning in a big way. Beggars once again line the streets in Buenos Aires. There’s been a noticeable increase just since I was here two months ago.

This is a familiar story. Argentina has spent the last several decades stumbling from crisis to crisis.

Like many countries in the West, Argentina has had a long trend of political incompetence. This once-rich nation has been ruled by those who thought that universal economic laws simply did not apply.

They thought that Argentina could live beyond its means forever… that they could borrow money to pay interest on what they’ve already borrowed.

The Argentina of today shows that there are serious consequences for nations that follow this approach… and for people who do not heed the writing on the wall.

It’s easy to pretend like everything is OK. Sometimes we’re surrounded by grandeur and opulence, and it’s easy to mistake this veneer for wealth.

It’s not. Real wealth comes from freedom, production, savings, and technology… not debt, spending, and money printing.

And though even I got lost in all the splendor of Frank’s speakeasy, I was immediately thrust back into reality when they refused to accept my credit card to settle the bill.

The difference between the official rate and black market rate is so vast, in fact, that many establishments are now refusing to accept credit card payments altogether.

The staff apologized to me profusely, embarrassed at what their country had become.

We joked about it as I pulled out a wad of cash I had recently procured from a street broker—

  • Cocktails: 175 pesos
  • Appetizers: 210 pesos
  • Capital controls: Priceless

It turns out there really are some things money can’t buy. Especially in worthless currency.

Categories: Economic Blogs

Russian Fighter Jet Flies Repeatedly Within 1000 Yards Of US Warship In The Black Sea

Zero Hedge - Mon, 14/04/2014 - 18:46

As we reported last Friday, a second US warship, the destroyer Donald Cook, crossed the Bosphorus last week and entered the Black Sea at precisely the time when NATO was arguing that its encroaching presence around Russia should not spook anyone. Apparently it spooked someone, namely Russia, which over the weekend decided to give the Americans a warm welcome. As AP reports, "A U.S. military official says a Russian fighter jet made multiple, close-range passes near an American warship in the Black Sea for more than 90 minutes Saturday amid escalating tensions in the region."

From AP:

The official says the fighter flew within 1,000 yards of the USS Donald Cook, a Navy destroyer, at about 500 feet above sea level, saying this prompted ship commanders to issue several radio warnings. The fighter appeared to be unarmed and the passes ended without incident.


In the first public account of the incident, the official said the Russian Fencer flew within 1,000 yards of the USS Donald Cook, a Navy destroyer, at about 500 feet above sea level. Ship commanders considered the actions provocative and inconsistent with international agreements, prompting the ship to issue several radio queries and warnings.


The fighter appeared to be unarmed and never was in danger of coming in contact with the ship, said the official, who was not authorized to talk publicly by name about the encounter so spoke on condition of anonymity. The passes, which occurred in the early evening there, ended without incident.


The official also said that a Russian Navy ship, a frigate, has been shadowing the U.S. warship, remaining within visual distance but not close enough to be unsafe.


The USS Donald Cook has been conducting routine operations in international waters east of Romania. The ship, which carries helicopters, was deployed to the Black Sea on April 10, in the wake of the Russian military takeover of Ukraine's Crimea region and ongoing unrest there.

It is unclear if Russia was simply marking what is clearly considers its own expanded territorial waters, or if the Su-24 pilots were just being friendly.

Curious where the ship is now? It is currently at anchor in the Romanian port of Constanca where it welcomed the country's president Basescu:

The forward deployed guided-missile destroyer USS Donald Cook (DDG 75) welcomed aboard Romanian President Traian B?sescu while the ship was in port in Constanta, April 14.



President B?sescu was met by members of the U.S. Embassy and Donald Cook’s commanding officer Cmdr. Scott Jones. He was then given a tour of the ship, including the Navigation Bridge, Combat Information Center and Engineering Control.




Donald Cook, the first of four Arleigh Burke-class destroyers to be forward-deployed to Rota, Spain, is serving on a scheduled patrol in the U.S. 6th Fleet area of operations as part of the President's European Phased Adaptive Approach (EPAA) to ballistic missile defense in Europe.



U.S. 6th Fleet, headquartered in Naples, Italy, conducts a full range of maritime security operations and theater security cooperation missions in concert with coalition, joint, interagency, and other parties in order to advance security and stability in Europe and Africa.

And to confirm that military overflights are hardly an isolated event around the Ukraine, moments ago photos were taken of a military helicopter flying over downtown Donestk in the east Ukraine, which as is widely known, is largely in the hands of "pro Russian separatists."

Military helicopter that just flew over downtown Donetsk. #Ukraine

— Alexander Marquardt (@MarquardtA) April 14, 2014

Categories: Economic Blogs

White House Admits CIA Director Brennan Was "Secretly" In Kiev

Zero Hedge - Mon, 14/04/2014 - 18:46

Late last night we asked if, as the Russian media had reported and only the Russian media, CIA director John Brennan had secretly visited Kiev over the weekend: "Brennan landed in Ukraine on Saturday under an assumed name and held a "series of secret meetings" with the country's "power bloc" Interfax reported, citing an unidentified official in the Ukrainian parliament.  The person who said this to Interfax in a phone talk added that John Brennan came to Ukraine not under his real name.  According to some yet unconfirmed information, the decision to suppress protesters in Slavyansk, a city in Ukraine's east, with force was advised to Ukraine's authorities by Brennan."

One can further admit the meeting was "secret" - if only in initial intent - not only because of Brennan's assumed fake name (why the secrecy?) but because until Russian Interfax- of all places - had reported about what is certainly a key meeting in a nation in which disinformation and counterpropganda is not only rife but the last thread the current Kiev regime is hanging by - Brennan's meeting was completely unmentioned by the US press.

Until today, when moments ago White House speaker Jay Carner confirmed that indeed the CIA director was in Kiev last weekend.

From Reuters:

"We don't normally comment on the CIA director's travel but given the extraordinary circumstances in this case and the false claims being leveled by the Russians at the CIA we can confirm that the director was in Kiev as part of a trip to Europe," White House spokesman Jay Carney told reporters.


According to media reports, Russia has urged Washington to explain what Brennan was doing in Ukraine.


"Senior level visits of intelligence officials are a standard means of fostering mutually beneficial security cooperation including U.S.-Russian intelligence collaboration going back to the beginnings of the post-Cold War era," Carney said.


"U.S. and Russian intelligence officials have met over the years. To imply that U.S. officials meeting with their counterparts is anything other than in the same spirit is absurd," he said

You know what's absurd? Iraqi weapons of mass destruction. Or YouTube clips "proving" an Assad chemical weapons attack... which was organized and executed by NATO member Turkey with the blessing of rht US. Or the same CIA director showing up in a Kiev hotel under a fake name. Or for Interfax to have more credibility than US media outlets. 

You know what isn't absurd? Speculation that just like the CIA organized the overthrow of the Yanukovich regime, which has been confirmed courtesy of the Russian secret services leaking Victoria Nuland's very inconveient recording, so the recent escalation in east Ukraine is indeed the work of the CIA.

You know what won't be abusrd? If and when the Russians release another recording, this time of Brennan, proving that all the latest "Russian" propaganda is once again in fact, fact.

Categories: Economic Blogs

Guest Post: How To Get A Job Despite The Economy

Zero Hedge - Mon, 14/04/2014 - 18:21

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

An entire new feedback loop of accreditation is necessary in the economy we have, and fortunately that feedback is within our individual control.

To paraphrase Donald Rumsfeld, we work in the economy we have, not the economy we might want or wish to have at a later time. And what characterizes the economy we have?

It's bewildering because nothing works like it's supposed to. For example, getting a college degree was supposed to guarantee a good job and an 80% lifetime wage premium over people without college degrees.

But in the economy we have, getting a college degree no longer guarantees a good job, or indeed, a job of any kind: 53% of recent college graduates under the age of 25 are unemployed or doing work they could have done without going to college.

The payoff for getting a college degree is declining while the risks of becoming a debt-serf due to crushing student loans is rising. The big premium that once accrued to college graduates is eroding for reasons of basic supply and demand: there are far more people with college degrees than there are high-paying jobs for people with degrees--even law degrees, MBAs and PhDs.

The entire notion that a college degree "signals" something valuable to employers is breaking down. In the good old days, earning a college degree proved that a student was hard-working and conformist--just what hierarchical corporations and government agencies want in employees. (The "signaling" value of a diploma is based on work by economist Michael Spence in the 1970s. In general, the signal indicates an attribute whose value is correlated with the difficulty and cost of the signal: the harder it is to get a degree, the greater the value of the signal it sends.)

But in an economy in which education credentials are in over-supply, that signaling mechanism is running up against a basic reality: a degree accredits very little about the student's knowledge, problem-solving skills or professionalism. A degree is simply a proxy of knowledge, not evidence of knowledge or useful skills.

Indeed, the study Academically Adrift: Limited Learning on College Campuses concluded that "American higher education is characterized by limited or no learning for a large proportion of students."

Signaling an ability to grind though four or five years of institutional coursework is no longer enough; the signaling needed to indicate an ability to create value must be much richer in information density and more persuasive than a factory model diploma.

A resume is equally thin on information that accredits a worker's knowledge, useful skills and professionalism. A resume is a public-relations summary that everyone knows has been tailored to present the candidate in the best possible light. And precisely how useful and trustworthy is PR in any setting?

Put yourself in the shoes of a hiring manager or potential collaborator: there is precious little useful information in either a diploma or a resume. As a result, human resources departments have been tuned to eliminate as many candidates as possible by signal-based winnowing rather than by the collection of useful information on the skills, knowledge and professionalism of the potential employee/collaborator.

Conforming to social behavioral norms and being able to grind through mind-numbing work used to be enough to create value in the economy--but this is no longer the case for high-value (i.e. well-paid) work. The "signaling" camp holds that a degree showing the student sat through four or five years of classes is sufficient to justify hiring the person. That the student learned essentially nothing useful doesn't matter; the entire value of college is in the last class needed to get the diploma.

This was true in the long postwar boom when the number of well-paid jobs expanded at a faster rate than the number of college graduates. This is simply no longer true.

In contrast to the "signaling" theory of value, the "human capital" camp holds that working knowledge is what creates value. If the student learns little critical thinking, real skills or practical knowledge, then a college degree has little value.

What if conformity and being able to navigate formal systems/bureaucracies no longer creates value or helps people solve real-world problems? In the economy we have, the "signal" value of a college degree has sharply declined. This is why college graduates can send out hundreds of resumes and not even receive a single reply, much less an interview or job offer.

Systems analysis teaches us that changing the parameters of a system (for example, adding another line to your resume or getting another degree) does not change the system; only adding a new feedback loop can change the system.

Clearly, an entire new feedback loop of accreditation is necessary in the economy we have, and fortunately that feedback is within our individual control: it's a process I call accredit yourself. The most powerful feature of accredit yourself is the process is open to anyone: recent college graduates, those without degrees, those re-entering the workforce, those seeking to launch their own enterprises--everyone who wants an income stream in the economy we have.

I outline the process of accrediting yourself in my new book Get a Job, Build a Real Career and Defy a Bewildering Economy which is on sale through Tuesday evening (Pacific Standard time) at a 20% discount for my regular readers ($7.95 for the Kindle edition, 20% off of the list price of $9.95. The print edition is $20).

Categories: Economic Blogs

Morning Euphoria Fizzles As Biotechs Turn Red Again

Zero Hedge - Mon, 14/04/2014 - 18:04

So much hope, so much faith, so much euphoria that the early bounce in high beta crap, which sent biotechs by more than 3%, would finally stick... All for nothing.

Categories: Economic Blogs

San Fran Fed Asks How Important Are Hedge Funds In A Crisis

Zero Hedge - Mon, 14/04/2014 - 17:49

Finds the answer is: "very"

Before the 2007–09 crisis, standard risk measurement methods substantially underestimated the threat to the financial system. One reason was that these methods didn’t account for how closely commercial banks, investment banks, hedge funds, and insurance companies were linked. As financial conditions worsened in one type of institution, the effects spread to others. A new method that more accurately accounts for these spillover effects suggests that hedge funds may have been central in generating systemic risk during the crisis.

It also draws a bunch of boxes with arrows between all of them:

Naturally this should come as a complete shock to those who failed kindergarten or to all those who still don't understand that Hedge Funds are merely leverage-facilitating counterparties that allow Primary Dealers to net out trillions in gross margin positions (via repo, reverse repo, securities re (and re-re-re-re) pledged as collateral vs securities received as collateral and though all the other shadow banking leverage and rehypothecation conduits that virtually nobody seems to understand even though Matt King explained it all in September 2008) to zero, even though same Primary Dealers are really on the hook for about $4 trillion in exposure at last count, none of which is reflected on their balance sheets and the clueless regulators continue this epic, undercapitalized charade to continue.

More importantly, US taxpayers just spent a few tens of thousands of dollars (fresh just created by the Fed itself so think of this as fiat recycling) on this cutting edge research: surely this will generate at least one government jobs in the next NFP report, and boost Q2 GDP by at least 0.01%.

Full San Fran Fed paper for the frontally lobotomized can be found here.

Categories: Economic Blogs

China Moves Against Shadow Banking

RGE Analysts' EconoMonitor - Mon, 14/04/2014 - 16:54
China is slated to release its latest estimates for banking lending and aggregate financing in the coming days. Over the past 12-months bank lending accounted for about 53% of the total financing, the remainder comes from the shadow banking sector. In China, shadow banking often refers to the trust companies, which are non-bank lenders. At the [...]
Categories: Economic Blogs
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